New Delhi: Wipro, the Indian IT services company, has decided to merge its Indian state-run enterprises (ISRE) sector with its broader IT Services segment. This decision comes after a significant decline of 20.18% in revenue within the IT Services segment during the financial year 2022-23, mainly due to the completion, closure, or downsizing of large government contracts.
One of the challenges faced by Wipro was the collection of overdue accounts receivables from government-related businesses. The company operates across three segments: IT Services, IT Products, and ISRE. In FY23, IT Services accounted for 98.7% of Wipro’s revenue, while the IT Products segment contributed only 0.7%.
The ISRE segment represented a mere 0.6% of the total revenue during FY23, a decline from the 0.9% contribution in FY22. Notably, revenue from government-related businesses surpassed sales from the IT Products segment in both FY21 and FY22.
Wipro stated in a filing that the general and administrative expenses as a percentage of revenue from the ISRE segment decreased from (1.01)% in the year ended March 31, 2022, to (2.59)% in the year ended March 31, 2023. This decrease was attributed to increased write-backs in expected credit losses due to the collection of overdue accounts receivable. In absolute terms, the credit in general and administrative expenses rose by Rs 77 million. Consequently, the segment results of the ISRE segment declined by 851 basis points, from 16.08% to 7.57%, with an absolute decline of Rs 732 million.
Previously, the ISRE segment was carved out as a separate entity from Wipro’s global IT Services business in FY19. Wipro highlighted that historically, ISRE projects primarily involved system integration (SI) with complex deliverables, longer working capital cycles, and distinct downstream processes for billing and collections compared to the IT Services segment.
However, Wipro has now shifted its ISRE strategy to focus more on consulting and digital engagements. The company is becoming more selective in bidding for SI projects with extended working capital cycles. As a result of this shift, the ISRE and IT Services segments now share similar sales cycles, billing, and collection processes due to the emphasis on consulting and digital engagements.
By merging the ISRE sector with the IT Services segment, Wipro aims to streamline its operations and align its strategies to adapt to changing market dynamics. This move reflects the company’s focus on leveraging its strengths in consulting and digital services to drive growth in the IT services sector.
