Wipro ER&D division to grow by 30% in FY25

Wipro Engineering Edge, which is India’s fourth largest IT company’s ER&D unit, is expected to get almost $300 million in incremental business in FY25, the executive said, adding that the unit contributed nearly $1 billion, or 10% of the Bengaluru-headquartered company’s $10.8-billion revenue in FY24, at a growth rate of about 9%.

To be sure, Wipro reported a 4% decline in annual revenue in FY24, making it the only company in Indian IT’s big four to end the financial year on a revenue decline.

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Much of ER&D’s $300-million incremental revenue in FY25 will be fuelled by hardware, semiconductors, Industry 4.0, wireless networks and cabling, the executive, who requested not to be named, added. Industry 4.0 refers to the integration of digital technologies into manufacturing and industrial processes.

“The ER&D division’s growth in FY24 has largely come from the Americas region, which contributes a tad lesser than $1 billion to the Engineering Edge unit," the executive said.

What is Wipro ER&D

According to the executive, Wipro Engineering Edge has more than 25,000 employees and is headed by Harmeet Chauhan, who previously served as vice-president of Noida-based HCL Technologies Ltd’s ER&D division. He joined Wipro in April 2023, when Wipro’s ER&D business unit was carved into Wipro Engineering Edge.

Wipro reorganized itself into four global business lines (GBUs) on 1 April 2023, namely Wipro FullStride Cloud, Wipro Enterprise Futuring, Wipro Engineering Edge, and Wipro Consulting, to serve customers in the domains of cloud, artificial intelligence (AI), ER&D and consulting, respectively.

While the engineering unit is expected to grow by one-fourth in the coming financial year, the revenue per employee in Wipro Engineering Edge is lower than its overall value for the company.

As per Mint’s calculations, Wipro Engineering Edge with at least 25,000 employees and $1 billion in FY24 revenue, would have its revenue per employee amount to $40,000, which is lower than Wipro’s overall revenue per employee of $43,868, as revealed in a Mint report on 7 May.

Wipro does not publicly disclose its revenue from the Engineering Edge arm. An email sent to Wipro seeking comments went unanswered until press time.

Indian IT’s ER&D Opportunity

Over the past few years, Indian IT companies have been trying to build new technologies that could design and produce a product better, which has come to be known as ER&D. Subsequently, Indian IT companies are also looking to digitize business operations across industries such as banking, healthcare, retail, and manufacturing to name a few, as part of their ER&D offerings.

India’s IT industry body National Association of Software and Service Companies (Nasscom) in February 2024, outlined annual growth numbers for India's IT industry. As part of its findings, Nasscom had stated that ER&D was at the forefront of growth for India’s $254-billion IT sector.

According to Nasscom data, Indian IT companies’ ER&D revenues grew 7.4% from the financial year ended March 2023 to $43.3 billion for the 12 months through March 2024. This growth is almost double that of the Indian IT sector overall, which grew by 3.8% in this time to touch $254 billion in revenue. Robust ER&D revenue growth comes at a time when Indian IT companies recorded their lowest yearly growth since the Covid-19 pandemic.

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“Post covid, many industries witnessed large-scale digitization, which drove focus on engineering. Additionally, some verticals like Aerospace and Defense and Automotive are undergoing major disruptions due to factors like sustainability, efficiency, autonomous tech, electrification, etc., which are driving innovation through heavy engineering investments," read the Nasscom report explaining the ER&D boom.

Sanjeev Hota, vice president and head of research at brokerage firm Sharekhan, attributed Indian IT’s ER&D growth to its relative newness as compared with other offerings like consulting and business process management.

“The base is low for ER&D compared to other services, so that is why the growth may be higher for IT companies on the ER&D front. If you look at other service lines, they have been around for a while but ER&D has gained steam recently, which is why growth is higher," said Hota.

Out of all Indian IT companies, Noida-based HCL Technologies Ltd has had the highest concentration on engineering research and development services. ER&D services made up 16%, or $2.1 billion of HCLTech’s $13.2 billion FY24 revenue, which is twice the revenue generated from Wipro’s ER&D wing.

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HCLTech further boosted its ER&D services with the acquisition of German automotive engineering firm, ASAP Group, in July 2023.

Wipro’s cross-city rival Infosys Ltd, has been the latest to show intent towards boosting its ER&D offerings. The Bengaluru-based company announced two ER&D-centric acquisitions in 2024. First was of semiconductor design firm InSemi in January 2024 and most recently, a $480-million buyout of German engineering research and development firm, in-tech, in April 2024.