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Wipro Q3 net up 8.7%, meets forecast

Wipro Q3 net up 8.7%, meets forecast
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First Published: Wed, Jan 21 2009. 02 10 PM IST
Updated: Wed, Jan 21 2009. 02 10 PM IST
Bangalore: Wipro Ltd met expectations with an 8.7% rise in quarterly profit, but gave a muted forecast due to the global economic downturn and growing pressure from Western clients to cut its fees.
The company forecast its information technology services revenue, including revenue from its acquisition of Citi Technology Services, at $1.05 billion in the March quarter, down 7% from $1.13 billion in October-December. Wipro, which counts Citigroup, Credit Suisse and Cisco among its clients, said net profit rose to Rs898 crore ($183 million) in October-December under US accounting rules, up from Rs826 crore a year ago.
A Reuters poll had forecast a net profit of Rs899 crore for Wipro, which provides IT solutions and services such as system integration, software application development and maintenance and research services.
“Our price realisation improved sequentially in constant currency through higher productivity, while absorbing impact of lower working days during the quarter,” Executive Director and Chief Financial Officer Suresh Senapaty said in a statement.
Total revenue rose 25% to Rs654 crore, as its IT services business added 31 clients during the December quarter.
Its margins during the quarter were impacted by 60 basis points due to one-time provision of receivables from a large customer, he said.
Revelations of overstated profits and fictitious assets at fourth-ranked Satyam Computer Services have cast a shadow over India’s outsourcing sector, which was already struggling with slowing growth due to global financial turmoil.
Analysts say recession in the United States, which accounts for more than half of India’s $52 billion IT and back-office services revenue, and financial sector turmoil have significantly dented the outlook for the once-booming outsourcing sector.
Wipro said last week the World Bank had barred the company from direct contracts until 2011, citing a conflict of interest, adding to the glum outlook.
A bankruptcy filing by Canada’s Nortel Networks last week is also a concern, though Wipro has said the firm accounts for less than 1.5% of its IT revenue and it expects a major portion of its business with North America’s biggest telephone equipment maker would continue.
Wipro’s earnings follow results from No. 2 exporter Infosys Technologies, which beat profit expectations but still trimmed its annual revenue forecast, while sector leader Tata Consultancy Services’ profit lagged forecasts.
Both Infosys and Tata Consultancy have said they were not trying to poach clients from smaller rival Satyam, whose founder and chairman quit earlier this month after revealing overstated profits and fictitious assets.
Shares in Wipro, which has a market value of about $7 billion, fell 31% in the December quarter, while the sector index slipped 28% and the main Mumbai index dropped by 25%.
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First Published: Wed, Jan 21 2009. 02 10 PM IST
More Topics: Company Results | Wipro | IT | Outsource | Azim Premji |