The computer services provider, Wipro Ltd reported a 10% sequential increase in revenues of its global IT services and BPO business. Volumes of the organic IT services business grew by 7.7%, in line with Infosys Technologies Ltd and slightly lower than that of Tata Consultancy Services (8.2%). The revenue growth was higher than its peers, partly because of the integration of Infocrossing (in September) and to a large extent due to forex fluctuations. The net impact of the fluctuations was a contribution of Rs18 crore to revenue and profit last quarter, compared with a hit of Rs57 crore in the June quarter. Adjusted for the forex impact and the contribution from Infocrossing, revenue growth was lower at 6.6% in rupee terms.

Similarly, adjusted earnings before interest and tax rose just 1.9% quarter-on-quarter, implying a hit of over 100 basis points on margins. (Wipro includes gains from forex hedging in revenues and profit, based on its belief that it’s an integral part of its performance. By that measure, margins have improved by 90 basis points for the organic business.) Wipro gave its IT services employees wage hikes effective August, which hit margins by 160 basis points. This was partly offset by an improvement in pricing, higher utilization and an increase in the proportion of inexperienced (and hence lower cost) employees. As much as 80% of the net additions last quarter were freshers. Employee utilization increased by more than 400 basis points in the IT services business and by 500 basis points in the BPO division.

Analysts see little improvement possible from the utilization rate of 79.3% achieved in the IT services business. After all, much of this came from a sharp drop in employee addition. Net employee adds (excluding Infocrossing) last quarter were just 3,537, lower than last year’s levels by one-third.

But this doesn’t necessarily mean that the outlook for demand is bleak. Wipro expects organic IT services and BPO business to grow 7% in dollar terms in the December quarter. Not only is this target high by Wipro’s standards, it must also be noted that October-December is normally a lean quarter owing to a high number of holidays in the Western markets.

The key highlight of last quarter’s results was that average billing rates improved, after remaining flat for the previous five quarters. Blended offshore and onsite rates rose by 1.9% quarter on quarter, which came as a welcome relief for analysts, since Wipro’s peers have reported an improvement in realizations for some time now.

Wipro’s year-on-year performance demonstrates that the company is still playing catch-up. Earnings have grown just 9.1% on a year-on-year basis. (Both Infosys and Tata Consultancy Services Ltd grew earnings by around 20% on a y-o-y basis.) The consolation is that growth was slightly better than that recorded in the June quarter (5.7%).

But despite much lower y-o-y growth than its peers, Wipro shares trade at the same trailing valuations as TCS (23 times) and have almost tracked Infosys’ share price movement this year.

The profit after tax for the September quarter of 1,003 crore reported ICICI Bank Ltd easily beat the street. At the operating level, profits were up 38% to ,887 crore. The bank was expected to do well in the September quarter, since the impact of the large amount of capital raised last June was fully felt during the quarter.

And yet, operating profit growth at 38% has been lower than the 58% growth notched up during the June quarter. The more tepid rate of growth wasn’t on account of net interest margin—interest expended as a percentage of interest earned was 76.2% last quarter, compared with 78% for the half-year. It wasn’t on account of non-interest income (other than treasury income) either—this was up 43% year-on-year in the second quarter, compared with a growth rate of 39% in the first quarter.

Operating expenses too were contained. Lower treasury income was the spoiler, falling by 27% year-on-year during the quarter, compared with a substantial growth in the June quarter.

Growth in advances was at 33% during the quarter, lower than the rate of growth in the first quarter, but well above the growth rate for the sector. The proportion of low-cost current and savings deposits is increasing, especially with the acquisition of Sangli Bank.

Retail lending took a breather and the proportion of retail loans to the bank’s total advances went down to 63%, from 64% at the end of June. International branches now account for 17.9% of total lending, against 16.4% in June.

Each of the subsidiary businesses—ICICI Prudential Life Insurance Co. Ltd, ICICI Lombard General Insurance Co. Ltd and ICICI Asset Management Co.—considerably extended their franchise.

The problem is that asset quality continues to deteriorate, with the bank’s net non-performing assets at 1.4% of total customer assets at the end of September, up from 1.3% at end-June and 0.98% at end-March. This was despite a sharp rise in provisions. But with the economy continuing to do well and having already raised substantial resources, there’s no reason why ICICI Bank will not be able to leverage its relationships and balance sheet size to aggressively lend to the corporate sector. That should be the bank’s next growth driver.

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