Wipro Ltd. 2Q/F14 result review. Good quarter, sustaining momentum is the key. Financial Summary. Institutional Equity Research.

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1 IT India 2Q/F14 result review HOLD Wipro Ltd Good quarter, sustaining momentum is the key Institutional Equity Research WPRO IN; WIPR.BO October 22, 2013 Current price Rs 515 Target price Rs 550 Upside/(downside) % 7 Earning estimate Revised Market data Mkt capitalisation Rs bn Average daily vol ' week H/L Rs 520 / 263 Shares O/S mn Free float mn Promotor holding % 73.5 Foreign holding % 8.8 Face value Rs 2.0 Price performance (%) 1m 3m 6m 1yr Nifty (abs) Stock (abs) Relative to Index Performance (Rs) Oct-12 Jan-13 Apr-13 Jul-13 Oct-13 Wipro Source: Bloomberg, SSL (%) Rel. to CNXIT (10) Wipro s 2QF14 IT Services revenue grew 2.7% QoQ to US$1,631.1mn (cc grew 3.2% QoQ), tad lower than SSLe of US$1,638mn. The growth in the quarter was broadbased across verticals and service lines driven by improvement in demand environment and discretionary spending. The growth continues to be driven by top 10 clients (up 4.1% QoQ). Despite incremental two months impact of wage hike (wef June), IT Services operating profit margins improved 250bps QoQ to 22.5% on the back of rupee depreciation, higher utilization and other operational efficiencies. Net profit grew 19% QoQ to Rs19,321mn despite 220bps increase in ETR to 22.9%. Outlook for Q3 shows continuing growth momentum, albeit along expected lines: The company has guided IT Services revenue of US$1,660mn-1,690mn for 3QF14, implying QoQ growth of 1.8% to 3.6%. Broad-based improvement in demand environment, pick up in discretionary spending, improved deal win rates and closures gives management confidence to guide relative healthy growth rates in a seasonally weak quarter. The pricing environment is stable for outcome based projects, and remains competitive for traditional outsourcing deals. The management hopes to get back to industry average growth rates by end F14/start F15. Strategic accounts continue to drive growth: Top client grew 5.5% QoQ and Top 2-10 clients grew 3.8% QoQ. The company s strategy to focus on top clients is showing clear signs of progress and company intends to increase investments in other major accounts which would accelerate growth momentum in coming quarters. Client satisfaction scores have also improved 4.1% QoQ. Top125 clients grew 3.6% QoQ. The company continues to focus on mining its top 125 clients through cross selling and up-selling its services. Growth driven by GMT, HLS and BAS: The company reported broad based growth across industry verticals, service lines and geographies in Q2. Healthcare, Life Sciences & Services (HLS) and Global Media & Telecom (GMT) led growth, up 5.9% and 5.0% QoQ respectively. Amongst service lines, Business Application Services (BAS) and Product Engineering & Mobility faster than company average, up 4.7% and 4.1% QoQ respectively. APAC & Emerging Markets, Americas and Europe grew 6.8%, 2.9% and 2.4% respectively. India & ME declined 3.1% QoQ on reported currency but grew 5.5% QoQ on constant currency. Valuation: Q2 performance has shown few positives - (i) pick-up in growth momentum (2.7% QoQ vs. 1.1% CQGR over 2QF12-1QF14), (ii) broad-based growth, (iii) healthy guidance for a seasonally weak Q3, and (iv) improvement in margins. However, we would like to see consistency in performance with broad-based growth and stable margins to turn positive on the stock. We have tweaked our EPS estimates by 5.5%/4.5% for F14/15 after factoring H1 performance. We maintain a HOLD recommendation with a revised target price of Rs550 at 16x F15e earnings. Dipesh Mehta dipesh.mehta@sbicapsec.com Neerav Dalal neerav.dalal@sbicapsec.com Financial Summary Y/E Mar (Rs mn) F 12 F 13 F 14e F 15e Sales 318, , , ,540 Growth YoY (%) * EBIDTA margin (%) Net profit (mn) 52,325 61,362 76,303 84,676 EPS (Rs) Growth YoY (%) * P/E (x) EV/EBIDTA (x) * * Dividend yield (%) RoE (%) * * e * not calculated as comparable historical data not available SBICAP Research on Bloomberg SBICAP <GO>, Please refer to our disclaimer given at the last page.

2 Result highlights and earnings call takeaways: The management is seeing pick-up in demand environment. The growth is currently driven by large deals won in the last couple of quarters. As per the management, the win rates for the company are improving as well as there has been increase in the number of deals closures. In terms of service lines, IMS, and business application services is witnessing good traction as compared to the traditional ADM services. The discretionary spending environment is also improving with focus more on digital, mobility and analytics. Amongst industry verticals, the company sees good traction in Retail banking, Energy & Utilities, GMT, and HLS. In the Finance Solutions vertical, Capital Markets has seen pick up in discretionary spends. Banking is witnessing spends towards cost take out and compliance and regulatory related spends. Retail Banking is seeing a mix of cost takeout to fuel CTB spends. The company is focusing on 5 areas: digital, payment systems, analytics, infrastructure services and compliance. Within the GMT vertical, Telecom OEMs which has seen sluggishness in IT spends has decreased from 40% of revenue earlier to 11%. The communication providers and media vendors are seeing steady spending. HLS led growth in the quarter mainly due to ramp up in deals won in the last few quarters and mining of top clients. As per management, the slower growth in Europe is a quarterly aberration. The company is witnessing strong demand in UK. Continental Europe is more focused on cost takeout with deals coming in areas of IMS and application maintenance. The company reported a decline of 65 employees in IT services business taking the headcount to 147,216 at the end of 2QF14. Voluntary quarterly annualized attrition increased to 15.4% from 13.0% QoQ and TTM voluntary attrition increased to 13.5% from 13.2% QoQ. Involuntary quarterly annualized attrition inched up to 5.6%, up 70bps QoQ and 210bps YoY. Utilisation excluding trainees improved to 74.3% vs. 73.3% QoQ. ETR for the quarter was 22.9% vs. 20.7% QoQ. ETR for F14/F15 is expected to be +/- 2% from the current levels. dipesh.mehta@sbicapsec.com I neerav.dalal@sbicapsec.com October 22,

3 IT Services revenues grew 3.2% QoQ in constant currency Quarterly Financials Particulars (Rs mn) 2Q/F14 1Q/F14 QoQ (%) 2Q/F13 YoY (%) 2Q/F14e Var. (%) IT Services (US$ mn) 1,631 1, , ,638 (0.4) Revenues 107,727 97, , ,891 (1.1) Cost of revenues 74,207 67, , , Gross profit 33,520 30, , ,697 (3.4) GPM (%) Selling & mkting exp. 7,605 6, , , General & admin. exp. 5,686 5, , ,108 (6.9) Forex gain/loss 2, Operating profit 22,422 17, , , OPM (%) Other income (net) 2,756 2,866 (3.8) 2, , Net profit before tax 25,178 20, , , PBTM (%) Provision for taxation 5,754 4, , , Non-controlling interest Discontinued operations - - 1,065 Net profit 19,321 16, , , NPM (%) EPS (Rs) e In constant currency terms QoQ, Global Media & Telecom, Finance Solutions, Manufacturing & Hitech, Healthcare, Life Sciences & Services, Retail & Transportation and Energy & Utilities grew 5.6%, 2.8%, 2.2%, 6.4%,2.2% and 1.7% respectively Vertical Composition Global Media & Telecom Finance Solutions Manufacturing & Hitech Healthcare, Life Sciences & Services Retail & Transportation Energy & Utilities Total In constant currency terms QoQ, Americas, Europe, India & ME and APAC & Other Emerging Markets grew 3.0%, 0.7%, 5.5% and 7.9% respectively Geographical Composition Americas Europe India & Middle East Business (3.1) 2.2 APAC and Other Emerging Markets Total dipesh.mehta@sbicapsec.com I neerav.dalal@sbicapsec.com October 22,

4 Practices Technology Infrastructure Services Analytics and Information Management Business Application Services BPO Product Engineering & Mobility (1.9) ADM (2.8) Total R&D Business (3.3) Consulting Customer Metrics Top customer Top Top Top Top Strong client addition at 45 vs. 28 QoQ. 3 clients shifts up from US$10mn+ basket to US$20mn+ basket Client Relationships No. of clients 2Q/F12 3Q/F12 4Q/F12 1Q/F13 2Q/F13 3Q/F13 4Q/F13 1Q/F14 2Q/F14 US$100mn US$75mn US$50mn US$20mn US$10mn US$5mn US$3mn US$1mn New clients Active clients dipesh.mehta@sbicapsec.com I neerav.dalal@sbicapsec.com October 22,

5 Financials Income statement Balance sheet Y/E Mar (Rs mn) F 12 F 13 F 14e F 15e Y/E Mar (Rs mn) F 12 # F 13 F 14e F 15e Revenue 318, , , ,540 Net fixed assets 58,988 50,525 50,632 52,074 YoY (%) * Goodwill & intangible assets 72,166 56,470 56,394 55,929 EBITDA 69,131 79,885 97, ,488 Investments 41,961 69,171 90, ,000 YoY (%) * Cash & bank balance 77,666 84, , ,091 Depre. & amorti. 9,219 9,913 10,583 11,773 Debtors & unbilled revenues 110, , , ,807 EBIT 59,912 69,972 87,305 95,715 Other current assets 43,508 44,771 47,331 50,431 YoY (%) * Other non-current assets 31,359 25,332 27,051 28,551 Other income 5,611 8,624 11,622 14,800 Total assets 436, , , ,883 PBT 65,523 78,596 98, ,515 Provision for taxation 12,955 16,912 22,237 25,418 Equity 286, , , ,659 Effective tax rate (%) Borrowings 58,958 63,816 63,816 63,816 Profit for the period 52,568 61,684 76,690 85,096 Unearned & deferred revenues 9,569 10,347 13,084 14,566 YoY (%) * Other current liabilities 71,668 71,431 79,692 87,868 Non-controlling interest Non-current liabilities 9,643 9,153 9,474 9,974 Net Profit 52,325 61,362 76,303 84,676 Total liabilities 436, , , ,883 Financial ratios Cash flow statement Y/E Mar F 12 F 13 F 14e F 15e Y/E Mar (Rs mn) F 12 # F 13 # F 14e F 15e Profitability and return ratio (%) Profit for the period 55,986 66,696 76,690 85,096 EBITDAM Depre. & amorti. 10,129 10,835 10,583 11,773 EBITM Others (26,039) (7,109) (10,817) (8,769) NPM Operating CF 40,076 70,422 76,456 88,100 RoE * * Per share data (Rs) Purchase of fixed assets (12,203) (10,145) (10,613) (12,750) EPS Purchase of investments 4,057 (37,133) (20,829) (30,000) CEPS Other investing activities 90 (6,132) - - BV * Investing CF (8,056) (53,410) (31,442) (42,750) DPS Valuation ratios Issue of equity shares PE (x) Proceeds from borrowings , P/BV (x) * Dividends (incl. dividend tax) (17,229) (17,080) (23,091) (26,019) P/S (x) Others (902) (1,044) - - EV/EBITDA (x) * * Financing CF (17,397) (6,721) (23,091) (26,019) EV/Sales (x) * * Turnover ratios (days) Inc/(dec) in cash & bank bal. 14,623 10,291 21,923 19,330 DSO + unbilled revenues * Closing cash & bank bal. 77,666 84, , ,091 e * not calculated as comparable historical data not available # effect of demerger not given dipesh.mehta@sbicapsec.com I neerav.dalal@sbicapsec.com October 22,

6 Recommendation History BUY HOLD SELL 580 Stock Price Target Price (Rs) Apr-12 May-12 Jun-12 Jul-12 Aug-12 Sep-12 Oct-12 Nov-12 Dec-12 Jan-13 Feb-13 Mar-13 Apr-13 May-13 Jun-13 Jul-13 Aug-13 Sep-13 # Previous target prices not comparable due to demerger of non-it business Oct-13 Date Stock Price TP Rec. 9-Apr REDUCE 25-Apr REDUCE 12-Jun REDUCE 24-Jul ADD 24-Sep ADD 2-Nov ADD 18-Jan ADD Rating based on Current Rating System (Feb'13) Date Stock Price TP Rec. 20-Feb HOLD 5-Apr HOLD 19-Apr # HOLD 26-Jul HOLD 23-Sep HOLD 22-Oct HOLD SBICAP Securities Limited Corporate Office: Mafatlal Chambers, A-Wing, 2nd Floor, N. M. Joshi Marg, Lower Parel, Mumbai Tel.: /01 Fax: sbicapresearch@sbicapsec.com KEY TO INVESTMENT RATINGS (w.e.f. 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