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Wipro Ltd ADR WIT

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Morningstar’s Analysis

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Wipro’s Third Quarter Falls Within Expectations but Lags Peers’ Growth; Shares Overvalued

Julie Bhusal Sharma Equity Analyst

Analyst Note

| Julie Bhusal Sharma |

Broad-based growth and pandemic-related cost-cutting led to third-quarter results within narrow-moat Wipro’s outlook. The IT services company brought in revenue toward the high end of its guidance and achieved margin expansion. Boosted profitability was a result of higher offshore mix and employee utilization and reduced headcount attrition, all brought on by the COVID-19 pandemic. Peers TCS and Infosys have shown similar benefits. As fourth-quarter guidance is within our former expectations, we are maintaining our fair value estimate for Wipro of INR 260 ($3.60 for the U.S. ADR) per share. With shares trading at INR 460 ($6.50 for the U.S. ADR) upon results, we still believe Wipro to be significantly overvalued, especially when considering our high uncertainty rating for the name--given the risk of Indian wage inflation. This risk does not take away from our belief that Wipro is well deserving of its moat.

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Company Profile

Business Description

Wipro is a leading global IT services provider, with 175,000 employees. Based in Bengaluru, the Indian IT services firm leverages its offshore outsourcing model to derive over half of its revenue (57%) from North America. The company offers traditional IT services offerings: consulting, managed services, and cloud infrastructure services as well as business process outsourcing as a service.

Sarjapur Road, Doddakannelli
Bangalore, 560035, India
T +91 8028440011
Sector Technology
Industry Information Technology Services
Most Recent Earnings Dec 31, 2020
Fiscal Year End Mar 31, 2021
Stock Type
Employees 180,000