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Business News/ Companies / Consumer care saves the day for Wipro
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Consumer care saves the day for Wipro

Consumer care saves the day for Wipro

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Bangalore: Wipro Ltd’s consumer care and lighting, and domestic information technology (IT) businesses served as a natural hedge against a slowdown in the US, the main market for Indian software firms, in the quarter ended March and will likely continue to protect both the company’s revenues and profit in the first six months of 2008-09.

Like its across-town rival Infosys Technologies Ltd, the company, which derived 68% of its revenues from its “global technology business" in 2008-09, said it expects the first six months of this fiscal to be difficult.

Unlike Infosys, Wipro does not issue an annual guidance, but it said that revenues would grow faster in the second half of the year, ending March 2009, offsetting slower growth in the first half.

On Friday, the company said it posted revenues of Rs5,700 crore for the March quarter, and Rs19,957 crore for the fiscal year. Net profit for the year was Rs3,283 crore, and for the quarter, Rs880 crore. Last quarter’s numbers represent a 33% increase in revenues and 12% increase in net profit over a year ago.

Revenues from consumer care and lighting business in the quarter, at Rs481 crore, were 10% higher than that in the quarter ended December. And profit before interest and tax for the business was 20% more.

For the year as a whole, revenues of the unit grew 86% to Rs1,521 crore, and profits before interest and taxes, 89% to Rs190 crore.

Wipro forecast a 3% growth in revenues for the three months ending June, and said it was signing contracts at higher rates. However, the company said it signed on only 29 new clients in the March quarter, the lowest in at least two years.

Still, the company’s forecast of a better second half is in keeping with the trend in the IT business. On Tuesday, Infosys announced that it expected revenues for the year to grow by up to 20% and net profit by up to 18%. On Thursday, outsourcing research firm TPI Inc. said US companies would outsource more work to India to reduce costs.

Although Wipro said that it has managed to sign the newer contracts at higher billing rates than it previously charged, Harit Shah, an equity analyst with the Mumbai office of Angel Broking Ltd said “the rate increases is not reflected in the actual numbers. The blended rate has fallen by 0.9%."

Wipro’s billionaire chairman Azim Premji said though he is optimistic about growth, he remains cautious. “Given the uncertainty in the environment, we remain cautious, but resilient."

Wipro’s operating profit margins in IT services for the year, a ratio of operating profit to revenues, declined 2 percentage points to 22% due to wage hikes for onsite staff. “The widening gap in margins of Wipro compared to its peers (such as) Infosys and TCS (Tata Consultancy Services Ltd) is a bit worrisome in the long run," said Apurva Shah, equity analyst with Prabhudhas Liladhar.

Wipro also announced the restructuring of its IT business by merging India and Asia-Pacific business and global IT services into one and brought in two joint chief executives— Girish Paranjpe, now president, finance solutions, Wipro and Suresh Vaswani, president, Wipro Infotech—to run it.

vishwanath.k@livemint.com

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Published: 18 Apr 2008, 11:18 PM IST
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