Wipro anticipates lower gross margins in short-term amid COVID-19 pandemic

Image Source : FILE Wipro anticipates lower gross margins in short-term amid COVID-19 pandemic

IT major Wipro anticipates a decrease in its gross margins in the short-term due to lower demand for IT products and delay in customers’ purchasing decisions, resulting from the ongoing COVID-19 pandemic, as per a regulatory filing.

The Bengaluru-based firm noted that the conditions caused by the COVID-19 pandemic can affect the rate of customer spending, including through cancellations or ramp-downs of existing projects, increased requests for furloughs and price discounts.

Such a scenario could “adversely affect our future revenues, operating results and overall financial performance,” Wipro said in its 20-F filing to the US Securities and Exchange Commission (SEC).

“In the short term, there may be a decrease in gross margins due to any decrease in technology spending, lower demand for IT products, lower rate of customer spending, delay in customers’ purchasing decisions resulting from the ongoing COVID-19 pandemic,” it added.

The coronavirus outbreak has disrupted businesses across the world. Like many of its peers, Wipro has also refrained from providing a revenue outlook citing uncertainty on account of COVID-19 outbreak as the reason for the decision.

In response to COVID-19, the company is focusing on various cost optimisation initiatives, Wipro said.

This includes re-skilling and re-deployment of its workforce from its existing pool of talent, and new hiring will be done only for business-critical reasons.

The company is optimising costs relating to travel, facilities and other discretionary spends like marketing events, as well as deferring annual increases in salary and progression cycles.

It is also optimising its variable workforce (ie sub-contractors), including replacing them with its existing internal pool of talent, Wipro said.

The filing noted that Wipro CEO Abidali Z Neemuchwala saw his pay package rise 11.8 per cent to USD 4.42 million (about Rs 33.38 crore) in fiscal 2020 from the previous year.

This included USD 1.07 million in salary and allowances, USD 1.29 million in commission/variable pay, USD 2.04 million (others) and USD 4,800 in long-term compensation (deferred benefit).

Neemuchwala , who announced his resignation in January this year, had drawn a package of USD 3.95 million (about Rs 27.32 crore) in fiscal 2019.
Wipro has named Capgemini veteran Thierry Delaporte as the CEO and MD of the company, who will take over the role at Wipro on July 6.

Rishad A Premji received USD 683,496 (about Rs 5.15 crore), while Azim H Premji received USD 135,772 (about Rs 1.02 crore) in fiscal 2020, the filing said.

Wipro Chief Financial Officer Jatin Dalal’s pay package was at USD 5,90,016 (about Rs 4.42 crore) in fiscal 2020.

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