EUR 850.00 For Business Accounts Only

Morningstar | We Think Wipro's Position in the IT Services Industry Remains Secure

Wipro, which started as a vegetable oil manufacturer in 1945, has grown to become India’s third-largest IT services exporter behind TCS and Infosys. We think Wipro will increase revenue in line with other Tier 1 Indian IT service vendors, given the firm's commitment to top-line growth. We believe its offshore mix and product relevance will appeal to organizations, given increasing budgetary pressures, time constraints, and internal IT quality concerns. In addition, the company's solid profitability, coupled with limited reinvestment needs and the spin-off of its non-IT businesses, is expected to drive strong free cash flow, which will support its growth.Despite a highly competitive and rapidly changing marketplace, Wipro hasn't been shy in averting away from legacy services and we think Wipro's position in the IT services industry remains secure. The firm has a well-entrenched position in the market because of its significant global presence, industry expertise, proprietary intellectual property, and established client relationships. The company’s end-to-end service capabilities have led to some significant integrated deals and recent multiyear wins with clients that exemplify Wipro's service relevance and depth across varying industries.Wipro’s number-one priority will be top-line growth. The company will target investments that boost its geographic presence, vertical specialization, and productivity and platforms. Continental Europe continues to hold significant potential for Wipro, given outsourcing's infancy in the region and the market's increasing adoption of an outsourcing model. We think Germany is an area of focus for Wipro and believe management will look for inorganic growth opportunities in the country (Wipro's Cellent AG acquisition is a good example of this strategy). In a similar vein to Wipro’s development of its market-leading energy and utilities segment, we expect the company to supplement its organic growth in banking, insurance, healthcare, and manufacturing via acquisitions that broaden its scale and deepen its specialization (Wipro's HealthPlan Services acquisition is another good example here).