Financial Daily from THE HINDU group of publications
Saturday, Jul 19, 2003
Corporate - Outlook
Wipro sees pressure on margins easing
Bangalore , July 18
WIPRO Ltd has said the rate of slippage of operating margins is seen stabilising even as it reported a 2.3 per cent sequential margins contraction in April-June, the first quarter of the current financial year.
Operating margin was at 22.2 per cent in the June quarter, a drop of 8.7 per cent year on year. ``There could be a slight recovery in operating margins next year,'' the company Chairman, Mr Azim H. Premji, said.
Intellectual properties (IP) and products sales accounted for 1.5 per cent drop in the margins in the last quarter coupled with a 1.6 per cent dent due to a dip in realisations and 0.4 per cent hike in selling and general expenses, but these were offset by improving utilisation by 1.4 per cent to 76.8 per cent on the net level.
"We had no negative impact on rupee-dollar fluctuations", the Chief Financial Officer, Mr Suresh Senapaty, said.
Meanwhile, Wipro plans to effect close to eight per cent salary hike in October across certain sections, and the increment is delayed till October as the company aims to ease its pressure on margins to some extent in the current quarter.
Onsite prices fell by 1.4 per cent in the June quarter to $9,959 per person per month, while offshore rates softened by 2.6 per cent to $3,900 per person per month. However, the Vice-Chairman, Mr Vivek Paul, said, "We are seeing a reduction in pressure on pricing". Though pricing pressure would continue to be negative, margins should be stable, as prices were not going to drop as fast as they did, Mr Paul added.
New clients, added during the quarter, came at higher billing rates than the current average offshore rates, he added. "It has been a steady quarter and the sixth consecutive quarter of volume growth," Mr Paul said.
Wipro's exposure to the battered telecom sector has often been cited as a dampener for growth. However, according to Mr Paul, business from telecom box-makers grew by as much as 10 per cent in the last quarter sequentially, though business from telecom services providers had declined as two clients had rampdowns.
Embedded engineering segment, still under pressure, reported a five per cent sequential growth. "Research and development continues to be drag on overall growth," Mr Paul said, adding that "gap" between contribution from enterprise clients and R&D customers was "diminishing". Enterprise business accounted for 59 per cent to Wipro Technologies' June quarter revenue while 32 per cent came from the technology business and the remaining nine per cent from IT-enabled services business.
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