Wipro has simplified the organizational structure and made significant people changes including on boarding external hires to energize growth. External hires are for geo/country heads. Large deal momentum will likely continue in 4Q FY21. The company seems to be making the right moves to improve growth prospects although the disappointing Capco acquisition will lead to weaker transmission of turnaround gains into near-term earnings. Wipro share price today is Rs 404.5, down Rs 6.5 or 1.6%.

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Positive steps on turnaround, Capco acquisition a dampener:

Kotak Institutional Equities retains Add rating with price target of Rs 450 on Wipro. Wipro’s turnaround effort has started off on a good note with the exception of Capco acquisition. The new CEO has outlined a credible turnaround plan with clear strategic priorities which address shortcomings of the past organization. Execution has been strong, especially with fast-paced changes on the people front. Wipro has hired several experienced leaders from Tier-1 organizations to augment the senior leadership.

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Kotak Institutional Equities are reasonably confident that reset of ambition, focused approach to investments, simplified organizational structure that prioritizes client centricity, tighter performance systems and momentum in large deal wins will help capture low-hanging fruits and aid in closing the gap in growth rates versus peers. Wipro aspires to achieve industry-leading growth rates, a challenging task that requires multiple tailwinds to growth. Execution will matter a lot. At present, focus will be on integration and synergy benefits from the Capco acquisition and sustenance of large deal momentum.

Wipro has onboarded several external hires in senior management positions in recent months. The leadership changes are in line with strategic imperatives pursued by the CEO.

New hires reflect a couple of trends which Kotak Institutional Equities highlight below:

Focus on local leadership for country/geo heads. Wipro has hired quite a few leaders for roles of country/geo heads to complement shift to a geography-based operating model. P&L ownership, driving growth through account mining and large deals are key mandates for new hires. New leaders have been hired in Europe, Brazil (part of LATAM in Americas 1) and Japan.

Wipro has hired local leaders in these regions to leverage better understanding of the market and drive deeper client relationships. Europe in particular has been a key area of focus. Kotak Institutional Equities note that Europe CEO and country/region heads for three out of six sub-geos in Europe are external hires. Hires are from global Tier-1 companies. Wipro has hired experienced personnel from global Tier-1 organizations; interestingly, none are from Capgemini, ex-organization of the CEO.

Leadership roles in Americas 1 and Americas 2 seem to have been largely filled up internally, not a surprise given that most of the leadership team was based out of the US under the previous organization setup. Wipro has onboarded Stephanie Trautman from Accenture for the key role of Chief Growth Officer and will be responsible for driving new market momentum and large deal focus, strengthening sales capability and sharpening Wipro's market positioning. Wipro has also hired for a couple of leadership roles within the service line organization.