Active Stocks
Thu Mar 28 2024 15:59:33
  1. Tata Steel share price
  2. 155.90 2.00%
  1. ICICI Bank share price
  2. 1,095.75 1.08%
  1. HDFC Bank share price
  2. 1,448.20 0.52%
  1. ITC share price
  2. 428.55 0.13%
  1. Power Grid Corporation Of India share price
  2. 277.05 2.21%
Business News/ Opinion / Online-views/  Wipro results show all isn’t well with Indian IT sector
BackBack

Wipro results show all isn’t well with Indian IT sector

Wipro results show all isn’t well with Indian IT sector

Premium


In the past six months, Wipro Ltd’s shares had outperformed the CNX IT index by 25%, thanks to better-than-expected results in the September and December quarters, and the hope that it would catch up with the growth rate of its peers by the March quarter. But Wipro’s disappointing March quarter results and its weak guidance for the June quarter have just poured cold water on these hopes.

The guidance for the June quarter is particularly worrying. At $1.52-1.55 billion, it is even lower than the currency-adjusted guidance target for the March quarter. And even the higher end of the band represents a mere 10% y-o-y growth.

Wipro’s shares fell 7% after the results announcement, indicating that most analysts have given up the hope of it outperforming the industry in fiscal 2013 (FY13). According to the firm, the investment banking sub-segment within the financial services vertical is facing challenges. Besides, the India business is expected to see a drop in revenue, owing to lower demand from domestic telecom firms and the government.

Wipro’s commentary hardly inspired any confidence among analysts that things will get better later in the year. What’s more, in the March quarter, it reported a drop in its total number of employees. In the first nine months of the previous fiscal year, Wipro has added 14,349 employees, at a par with 14,268 for Infosys Ltd, despite the fact that the latter’s revenue base is around 20% higher. After the drop in hiring in the March quarter, the total net hiring number in FY12 stood at 13,535 for Wipro, an 11% addition to the FY11 employee base. Infosys increased its employee base by 14.5% last fiscal.

Endnote: Standard and Poor’s (S&P) Ratings Services revised the rating outlook on TCS, Infosys and Wipro, following the revision in the outlook for its sovereign rating on India. S&P’s release said that the rating of IT companies reflect the “transfer and convertibility" (T&C) assessment of India. A T&C assessment is the rating associated with the likelihood of the sovereign restricting non-sovereign access to foreign exchange needed for debt service. It should be noted here that all three companies are debt-free and are, in fact, cash-rich. A lack of access to debt will not affect their functioning. The change in outlook, therefore, is inconsequential.

Additionally, according to S&P, Indian IT companies are rated BBB+, two notches above sovereign (India: BBB-), and already reflect their low debt position and large export revenues.

mobis.p@livemint.com

Unlock a world of Benefits! From insightful newsletters to real-time stock tracking, breaking news and a personalized newsfeed – it's all here, just a click away! Login Now!

Catch all the Business News, Market News, Breaking News Events and Latest News Updates on Live Mint. Download The Mint News App to get Daily Market Updates.
More Less
Published: 25 Apr 2012, 11:53 PM IST
Next Story footLogo
Recommended For You
Switch to the Mint app for fast and personalized news - Get App