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Wipro posts 31% jump in profit, lags peers in volume growth

Wipro posts 31% jump in profit, lags peers in volume growth
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First Published: Fri, Jul 23 2010. 10 32 PM IST
Updated: Fri, Jul 23 2010. 10 32 PM IST
Bangalore: India’s third largest information technology firm, Wipro Ltd, posted a robust 31% jump in first-quarter profit to Rs1,319 crore on improved business, beating estimates, but volume growth has lagged its larger peers Tata Consultancy Services Ltd (TCS) and Infosys Technologies Ltd.
Wipro, which won 22 customers in the April-June quarter, saw its business volume—a measure of how information technology (IT) firms are winning orders—grow by 4.7% over the preceding three months, against TCS’ 8.1% and Infosys’ 7.6%.
But Wipro, announcing its results on Friday, forecast that its core IT services revenue would grow sequentially by 4.1-6.1% in the second quarter to $1.25-1.27 billion (Rs5,875-5,969 crore).
The outlook, brokerage CLSA Asia-Pacific Markets wrote in a note to clients, “makes amends, and indicates that demand is firmly on an uptrend”.
Wipro sees growth coming from all regions in the next few quarters, including from the sovereign debt crisis-hit Europe, where business had slowed in the latest quarter.
“We are seeing traction, decision-making has increased, and there are reasonably good indicators. Discretionary spending is back,” said chairman Azim Premji. Wipro’s “not having any means of concerns. In fact, customers who were asking for price discounts are the one who are giving price increases.”
Wipro’s stock was up when the exchanges opened on Friday—the results came in pre-market—but ended slightly lower at Rs412.10 on the Bombay Stock Exchange in a flat overall market.
One analyst with a foreign brokerage said the response of investors to Wipro’s results was muted as the firm has been outperformed by its peers. “They have challenges to address, particularly in checking attrition,” said the analyst, who did not want to be named.
Premji said that as demand picked up from customers across verticals, the firm added the highest number of billable employees ever in a quarter.
Wipro’s attrition in the April-June period increased to 23%, from 8.4% a year ago and 17% in the previous quarter.
On 1 July, it promoted 20,000 people in the three to seven year bracket with hikes, and offered shares to some employees to retain them. The firm has also added 4,854 employees, net, to take its total staff strength to 112,925.
“Overall demand for IT skills has gone up with a rebound in the economy and uptake in technology spending,” said chief financial officer Suresh Senapaty. “The attrition has gone up also due to many employees leaving for higher studies or business schools.”
Indian IT firms are benefiting from an increasing number of orders from US clients as they outsource more to cut costs and stabilise their businesses.
Wipro said as demand picks up, it wants to replicate a business strategy of system integration and transformation deals it seeded globally during the downturn of 2008-09. Last year, Wipro won customers such as Unitech Wireless Ltd and British food retailer Morrisons for such contracts.
“We want to do exactly (the same) across other sectors, banking and energy. There is change happening across all industries, customers are looking at re-engineering either for cost or their business models for future growth,” joint chief executive Suresh Vaswani said in an interview after the results.
The focus on more such deals is also due to the increase in competition for commodity services such as application, development and maintenance.
Wipro’s revenue for the first quarter grew 16% to Rs7,236 crore over the year-before period.
A Mint analysis of forecasts by 10 brokerages had showed Wipro’s average profit at Rs1,210 crore on a revenue of Rs7,182 crore.
Infosys last week raised its revenue outlook and increased its hiring plans to 36,000 people for this year. It forecast an annual revenue growth of 16.3-18.2% for this year, up from its earlier projection of a 9-11% rise. TCS is looking to hire 40,000 people this year.
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First Published: Fri, Jul 23 2010. 10 32 PM IST
More Topics: Company Results | Wipro | Software | IT | Outsourcing |