Wipro(WIT) - 2023 Q2 - Quarterly Report

Interim Condensed Consolidated Financial Statements Statement of Financial Position As of September 30, 2022, Wipro's total assets increased to ₹1,141,870 million from ₹1,079,182 million at March 31, 2022, primarily driven by a significant rise in Goodwill from acquisitions, while total equity grew to ₹717,885 million and total liabilities remained relatively stable at ₹423,985 million Consolidated Statement of Financial Position (₹ in millions) | Account | As at March 31, 2022 (₹ million) | As at September 30, 2022 (₹ million) | | :--- | :--- | :--- | | Total Assets | 1,079,182 | 1,141,870 | | Goodwill | 246,989 | 302,608 | | Total Current Assets | 620,752 | 618,599 | | Total Equity | 658,673 | 717,885 | | Retained Earnings | 551,252 | 603,002 | | Total Liabilities | 420,509 | 423,985 | | Total Current Liabilities | 308,329 | 306,386 | Statement of Income For the six months ended September 30, 2022, revenues increased by 16.2% year-over-year to ₹440,683 million, but increased costs, particularly in employee compensation, led to a 15.6% decline in profit for the period to ₹52,080 million, and diluted earnings per share decreased to ₹9.52 from ₹11.25 Statement of Income Highlights (₹ in millions, except per share data) | Metric | Three months ended Sep 30, 2021 (₹ million) | Three months ended Sep 30, 2022 (₹ million) | Six months ended Sep 30, 2021 (₹ million) | Six months ended Sep 30, 2022 (₹ million) | | :--- | :--- | :--- | :--- | :--- | | Revenues | 196,674 | 225,397 | 379,198 | 440,683 | | Gross Profit | 59,112 | 61,562 | 114,069 | 121,248 | | Profit for the period | 29,306 | 26,491 | 61,681 | 52,080 | | Diluted EPS (₹) | 5.35 | 4.85 | 11.25 | 9.52 | Statement of Comprehensive Income For the six months ended September 30, 2022, total comprehensive income was ₹56,753 million, a decrease from ₹67,038 million in the prior year period, partially offset by a significant positive impact from foreign currency translation differences amounting to a gain of ₹8,658 million Comprehensive Income Summary (₹ in millions) | Item | Six months ended Sep 30, 2021 (₹ million) | Six months ended Sep 30, 2022 (₹ million) | | :--- | :--- | :--- | | Profit for the period | 61,681 | 52,080 | | Foreign currency translation differences | 140 | 8,658 | | Total comprehensive income for the period | 67,038 | 56,753 | Statement of Changes in Equity Total equity increased from ₹658,673 million on April 1, 2022, to ₹717,885 million on September 30, 2022, driven by the profit for the period of ₹52,080 million, other comprehensive income of ₹4,673 million, and additional contributions from other transactions Movement in Total Equity (₹ in millions) | Particulars | Six months ended Sep 30, 2022 (₹ million) | | :--- | :--- | | Balance as at April 1, 2022 | 658,673 | | Profit for the period | 52,080 | | Other comprehensive income | 4,673 | | Other transactions (share issuance, compensation, etc.) | 2,510 | | Balance as at September 30, 2022 | 717,885 | Statement of Cash Flows For the six months ended September 30, 2022, net cash generated from operating activities decreased to ₹49,793 million, while investing activities consumed ₹56,496 million, largely due to business acquisitions, and financing activities used ₹24,565 million, resulting in a net decrease in cash and cash equivalents of ₹31,268 million Cash Flow Summary (₹ in millions) | Cash Flow Activity | Six months ended Sep 30, 2021 (₹ million) | Six months ended Sep 30, 2022 (₹ million) | | :--- | :--- | :--- | | Net cash generated from operating activities | 57,416 | 49,793 | | Net cash used in investing activities | (109,343) | (56,496) | | Net cash generated from/(used in) financing activities | 24,527 | (24,565) | | Net decrease in cash and cash equivalents | (27,400) | (31,268) | | Cash and cash equivalents at end of period | 142,017 | 73,021 | Notes to the Interim Condensed Consolidated Financial Statements General Information and Basis of Preparation These interim financial statements comply with IAS 34 and are prepared on a historical cost basis, with management exercising significant judgment in areas like revenue recognition, impairment testing, and income taxes, and the company adopted amendments to IAS 37 (Onerous Contracts) effective April 1, 2022, resulting in a ₹51 million reduction in opening retained earnings - The company is a global information technology (IT), consulting, and business process services (BPS) company[16] - The financial statements have been prepared in compliance with IAS 34, "Interim Financial Reporting"[19] - Effective April 1, 2022, the company adopted amendments to IAS 37 regarding Onerous Contracts, which resulted in a reduction of ₹51 million in opening retained earnings[32] - Management applies significant judgment in key areas including revenue recognition, impairment testing of goodwill, income taxes, and business combinations[27] Asset Details and Business Combinations Goodwill saw a substantial increase to ₹302,608 million as of September 30, 2022, primarily due to two key acquisitions, CAS Group and Rizing, which contributed a combined ₹41,341 million to goodwill, while intangible assets also grew, driven by customer-related assets from these combinations, and Property, Plant, and Equipment remained stable - Goodwill increased from ₹246,989 million at March 31, 2022, to ₹302,608 million at September 30, 2022, with acquisitions contributing ₹41,399 million[39] - The company completed two business combinations: CAS Group for a total consideration of ₹5,587 million and Rizing for ₹44,622 million[42][46] - The goodwill of ₹41,341 million from the acquisitions comprises the value of the acquired workforce and expected synergies and is allocated to the IT Services segment[43] Movement in Key Assets (₹ in millions) | Asset | March 31, 2022 (₹ million) | September 30, 2022 (₹ million) | | :--- | :--- | :--- | | Property, plant and equipment | 90,898 | 91,253 | | Right-of-Use assets | 18,870 | 19,308 | | Goodwill | 246,989 | 302,608 | | Intangible assets | 43,555 | 48,307 | Financial Instruments The company actively uses derivative instruments to manage foreign currency and interest rate risks, with the fair value of these instruments representing a net liability as of September 30, 2022, and the majority of financial instruments are valued using Level 1 and Level 2 methods, while Level 3 assets stood at ₹19,487 million and Level 3 liabilities were ₹4,994 million - The company uses derivative instruments to hedge exposures to currency fluctuations and interest rates on its assets, liabilities, and forecasted cash flows[57] Fair Value of Outstanding Derivative Instruments (₹ in millions) | Derivative Type | Fair Value as at March 31, 2022 (₹ million) | Fair Value as at Sep 30, 2022 (₹ million) | | :--- | :--- | :--- | | Designated Instruments (Hedges) | 1,943 | (786) | | Non-designated Instruments | 462 | (897) | | Total Net Fair Value | 2,405 | (1,683) | Fair Value Hierarchy (Level 3 Instruments) as at Sep 30, 2022 (₹ in millions) | Instrument | Fair Value (₹ million) | | :--- | :--- | | Assets | | | Equity instruments | 19,487 | | Liabilities | | | Contingent consideration | (4,994) | Revenue and Segment Information For the six months ended September 30, 2022, total revenue reached ₹440,683 million, primarily driven by the IT Services segment, with the Americas and Europe as the largest geographical markets, and the BFSI sector as the largest industry vertical, with no single customer accounting for more than 10% of total revenues Segment Results for Six Months Ended Sep 30, 2022 (₹ in millions) | Segment | Revenue (₹ million) | Segment Result (Profit) (₹ million) | | :--- | :--- | :--- | | IT Services | 436,477 | 65,633 | | IT Products | 3,195 | (158) | | ISRE | 3,102 | 319 | IT Services Revenue by Geography for Six Months Ended Sep 30, 2022 (₹ in millions) | Geography | Revenue (₹ million) | | :--- | :--- | | Americas 1 | 127,052 | | Americas 2 | 136,643 | | Europe | 122,960 | | APMEA | 49,822 | Revenue by Major Countries for Six Months Ended Sep 30, 2022 (₹ in millions) | Country | Revenue (₹ million) | | :--- | :--- | | United States of America | 247,799 | | United Kingdom | 54,359 | - No single customer accounted for more than 10% of revenues during the period[111] Commitments and Contingencies As of September 30, 2022, the company had capital commitments of ₹9,145 million for property and equipment and faces significant contingent liabilities, including disputed income tax claims amounting to ₹93,668 million and other tax and duty demands of ₹11,966 million, though management believes the ultimate resolution is not likely to have a material adverse effect on the company's financial position - Capital commitments for property and equipment totaled ₹9,145 million[94] - Outstanding guarantees provided by banks on behalf of the company aggregated to ₹17,402 million[95] - The company faces income tax claims of ₹93,668 million which are not acknowledged as debt and are pending before various appellate authorities[98] - Contingent liabilities for other disputed matters (excise duty, sales tax, etc.) amount to ₹11,966 million[99] Subsidiaries and Other Notes This section provides a comprehensive list of Wipro's direct and step-down subsidiaries across the globe, detailing the corporate structure, and highlights a key future uncertainty regarding the Indian Parliament's approval of the Code on Social Security, 2020, noting that the potential impact on Gratuity liability could be material once the rules are finalized and effective - The report provides a detailed list of the company's subsidiaries and their countries of incorporation, including entities like Capco, Designit, and Rizing[114][115][116] - The Indian Parliament has approved the Code on Social Security, 2020, which is yet to be implemented, and the company notes the likely additional impact on its Gratuity liability could be material, and it will be evaluated once the rules are notified[121]