Financial Daily from THE HINDU group of publications
Thursday, Jan 22, 2004
Corporate Results - Software
Wipro beats expectations; net up 19 pc at Rs 274 cr in Q3 `Rupee appreciation putting pressure on profitability'
Bangalore , Jan 21
WIPRO Ltd overtook its guidance and market expectations to post its highest-ever quarterly profit of Rs 274 crore for the third quarter ended December 31, 2003 - a 19 per cent jump over the corresponding period's Rs 231 crore in the previous year .
Quarterly revenues totalled Rs 1,521 crore (Rs 1,108 crore), a 37-per cent jump, buoyed by the growth in the telecom sector, volume growth and stable pricing. The company issued a guidance of $269 million for its global IT services business, up from $250 million during the quarter.
``Offshoring continues to gain momentum. We expect the volume growth across businesses to sustain and expect pricing environment to be stable. However, continued appreciation of the rupee continues to put pressure on business profitability,'' said the Wipro Chairman, Mr Azim Premji.
Wipro expects greater customer spend and the telecom sector revival to positively impact future revenue flows: ``Customers are willing to spend more and the offshoring option and Wipro's global delivery model have come to be accepted,'' said the Vice-Chairman, Mr Vivek Paul.
The Wipro Ltd stock which rose by as much as 2.4 per cent on the BSE during the day's trade to Rs 1,765 fell to Rs 1,650.30 at the day's close, a 3.7 per cent decline
Global IT and services product revenues increased 41 per cent year-on-year to Rs 114.7 crore with operating margins of 22 per cent, a slight increase over the 21 per cent over the previous quarter. The business added 24 new customers, two by the ITES business, Wipro Spectramind. The business accounted for 75 per cent of total revenues during the quarter.
``New customers are coming in at higher rates," said Mr Paul, adding the Wipro had found scope for renegotiating contracts with existing clients too at higher rates.
The global IT services business added 24 new customers during the quarter, while over there has been scope for cross-selling the ITES to existing customers.
``Over 26 per cent of Wipro Spectramind's customer base were existing customers,`` Mr Raman Roy said. Further, over 75 per cent of pursuit of new business was with existing customers, he said.
Wipro Infotech, the India, Middle-East and Asia Pacific business, recorded revenues of Rs 24 crore, a 28 per cent rise year-on-year. ``Service revenues grew by 53 per cent year-on-year, fuelled by growth in infrastructure management services, system integration and software solutions and consulting business, in a shining quarter for India,'' according to Mr Paul. The business accounted for 15 per cent of the revenue during the quarter. ``There is a strong demand in the Indian market across all service offerings,'' said Mr Suresh Vaswani, President, Wipro Infotech.
The global IT services and products business added a net of 2,872 people during the quarter, including 964 in the ITES, taking its total to 27,137 at the end of the quarter. Campus hires went up significantly, said Mr Paul, adding that about 30 per cent of the net hires were from various campuses.
Attrition, averaging 17 per cent is higher among junior employees - in part because of a lower pay hike during the quarter - than in the middle-manager level, said Mr Paul.
Telecom OEM spend is up and ``we expect to see a significant part of that to be offshored to India and Wipro," Mr Paul said. Customers looking to offshore want to fully establish processes and scale, a good thing for us, he said.
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