Financial Daily from THE HINDU group of publications
Thursday, Jul 21, 2005
Financial Daily from THE HINDU group of publications Thursday, Jul 21, 2005 |
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Info-Tech
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Software Weak euro may hit Wipro Q1 margins Our Bureau
Bangalore , July 20 WIPRO, which will announce its first-quarter earnings on Friday, could see its margins taking a hit in the absence of any positive triggers such as hike in billing rates and due to factors such as weak European currencies and higher visa costs. Analysts expect the impact of a weak euro and pound on Wipro's margins to be a bit higher compared to its peers, as the company has a bigger exposure to the European region. Wipro, like other Indian IT firms, has been increasing its exposure to European region as part of its derisking strategy. Though the company derives close to 31 per cent of its revenues from the European region, the percentage of actual receipts in pound and euro is lower as some business is still billed in dollar terms. The euro and pound receipts account for around 20 per cent of Wipro's total revenue receipts. During the quarter ended June, the rupee has appreciated by 0.14 per cent against the dollar compared to the previous quarter. The pound has depreciated by 3.17 per cent and the euro by 4.74 per cent. "It is highly unlikely that Wipro will have a great first quarter," an analyst said, adding that the company could have hardly seen any significant improvement in pricing during the quarter. Most Indian IT firms are trying to maintain their profit margins by reducing their selling, general and administrative (SG&A) expenses and also by leveraging on improved utilisation. Wipro has already leveraged SG&A expenses significantly and there's very little scope to improve it further, according to analysts. Infosys and TCS reported negative impact of Rs 14.9 crore and Rs 20 crore respectively in the quarter ended June due to currency fluctuation and translation losses. Wipro, like Infosys and TCS, may also say on Friday that it had incurred a higher visa cost during the quarter due to the increase in visa fees. It is during the first and second quarters that IT firms apply for the required number of H-1 visas, which are usually allotted in October.
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