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| Wipro numbers leave market glum |
| Wednesday, 25 July 2012 | |
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The June quarter results for Wipro, disappointed the market and showed a demand environment still under pressure. The company, which is also in the businesses of consumer care, lighting and infrastructure engineering, reported a net profit of Rs 1,580 crore in the quarter, a year-on-year growth of 18 percent. Revenue at Rs10,653 crore grew 24 percent over the corresponding quarter last year. The IT services business, which accounted for 78 percent of total revenue, saw 24 percent year-on-year growth in operating profit, at Rs1,744 crore. IT services revenues grew 30 percent to Rs 8,314 crore when compared with the same quarter a year before, backed by a foreign exchange gain of Rs170 crore. On a sequential quarter basis, operating profit went up 11 percent, while revenues increased 9.5 percent. Wipro said its IT services revenues were expected to be Rs 7752-7905 crore (USD 1,520-1,550 million), an increase of 0.3 to 2.3 percent for the second (July-September) quarter, traditionally a boom one for the company. It said the revenue expectation reflected the softness of its India business, which declined 9.9 percent in the first quarter over a year. According to analysts, the performance of the key divisions and regions, and the management outlook indicates the company might have to wait a bit longer to see the positive results of the restructuring it did last year. In the quarter under review, Wipro improved its operating margin by about 30 basis points (bps) to 21 percent, despite getting a 300-bps gain from forex. Suresh Senapaty, chief financial officer, said the forex gain got offset because of the impact of increase in personnel costs, sales and marketing and the pricing decline in certain segments. Offshore pricing declined about 100 bps. The pricing decline is limited to clients in investment banking, according to the company. An issue of concern for it is the volume (person-months billed in a quarter) growth of just 0.8 per cent, lower than its bigger competition, Tata Consultancy Services and Infosys. Senapaty, however, said the company was not much worried on volume growth, as the “focus is on increasing the wallet share from existing clients”. On the divisional areas, banking and financial services continued to be a laggard, with a sequential decline of two percent, though the company claimed to have added clients in consumer and retail banking. Retail and transportation, which accounts for 15 percent of its IT business’ overall kitty, declined 3.9 percent sequentially. The company saw a marginal growth in Europe and a 2.2 percent sequential decline in the Americas. Wipro’s consulting, application development and maintenance practices, which have high dependency on discretionary spending, declined about 15 percent and 6.3 percent, respectively. In the quarter under review, Wipro added 2,632 employees on a net basis, which took its headcount to 138,552. The attrition rate came down to 15.6 percent, as against 17.5 percent in the previous quarter. The company has given a wage rise of eight per cent to all offshore employees and three per cent to onsite ones, with effect from July 1. –Communications Today Bureau |
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