Bangalore: India’s third largest software company, Wipro Ltd, said third quarter profit rose 21% to Rs1,217 crore, according to Indian accounting standards, on improved business from customers, but slower growth and lower price gains than its two larger peers in the three-month period disappointed investors who punished the stock.
Business in volume terms grew 4.7% between October and December, lower than the 6.57% growth registered by Tata Consultancy Services Ltd, India’s largest technology vendor, and 6.1% by Infosys Technologies Ltd, the number two.
Pricing for projects, key to determining customer demand, dropped 1.5% at Wipro, which blamed fewer working days and the ramping down of business from customers. The third quarter has a lesser number of working days due to the holiday season in the US and Europe.
“Hopefully, we will get a decent part of it back in the fourth quarter,” said Suresh Senapaty, chief financial officer. Operating margins remained flat at 23.8%.
Reviving market: Wipro chairman Azim Premji says a positive demand environment has driven broad-based sequential growth. Hemant Mishra / Mint
On 12 January, Infosys said pricing was almost flat and customers were much more comfortable with rates now.
The Wipro scrip lost Rs12, or 1.6%, to close at Rs725.40 on the Bombay Stock Exchange on Tuesday. The bellwether Sensex index was little changed at 17,474 points.
“People are booking profit. The pricing decline was factored in the valuation of the Wipro stock,” said Gaurav Dua, head of research at brokerage Sharekhan Ltd. “Wipro’s guidance is ahead of the growth projected even by Infosys.”
Wipro beat its own guidance and street estimates as revenue increased to Rs6,966 crore in the October to December quarter, an annual growth of 5%. A Mint poll of seven brokerages had estimated Wipro to post average profit of Rs1,137 crore on sales of Rs6,802 crore.
“We have seen a positive demand environment which has driven broad-based sequential growth across all our verticals, service lines and geographies,” said Azim Premji, Wipro chairman.
The soaps-to-software company, which counts on technology services for more than two-thirds of its business, joins peers such as TCS and Infosys in showing higher growth amid a recovery of the Indian information technology (IT) services industry.
The IT services business contributed 74% of Wipro’s revenue and 90% of its profit before tax in the third quarter.
Global customers such as General Electric Corp., BP Plc and Goldman Sachs are increasingly moving their technology application development and maintenance work to India to lower costs and improve efficiencies.
Wipro reported strong December quarter results that back up previous fireworks from peers TCS and Infosys, Analysts Bhavtosh Vajpayee and Nimish Joshi at CLSA Asia-Pacific said in a note to clients.
The budgets of customers will be flat in 2010, said Girish Paranjpe, joint chief executive at Wipro.
Wipro added 31 clients and 4,855 employees in the December quarter.
Banking, financial services and insurance, or BFSI, a key business segment that contributes one quarter of Wipro’s revenue, grew 7% from the preceding quarter. Healthcare and services grew 14% and energy and utilities grew 12% over the same period.
“Our order booking has been good and BFSI, or banking, financial services and insurance, has bounced back strongly,” Senapaty said.
Wipro has forecast global IT services revenue to grow marginally in the three months to March, in the range of $1.16 billion (Rs5,336 crore) to $1.18 billion.