The Hindu Business Line : Wipro sees margins in narrow range

Wipro Ltd expects operating margins for the December 2006 quarter to move in a "narrow range". Mr Suresh Senapaty, CFO, Wipro, said the OPMs would see a two per cent impact in Q3 due to wage hikes. The company has effected a 12-13 per cent salary hike for some offshore employees starting September 1 and will be raising the salaries for some more, effective November 1.

On the pricing front, Mr Senapaty said he expected a stable environment going forward with an upward bias. Wipro is charging 8-10 per cent more for its new clients, while the billing rates for existing clients rose 2-5 per cent during the September quarter. The overall realisations saw an improvement of about 1 per cent during the quarter, where volumes grew by 7.9 per cent, he said.

Revenues

Wipro has bought forward cover worth $377 million to reduce risks from foreign exchange volatility, Mr Senapaty said. In the second quarter, Wipro earned 51 per cent of its revenue from the US, unchanged from the same period last year. Revenue from Europe increased to 23 per cent from 22 per cent a year ago. Revenues from Japan, which account for 4 per cent of the total revenues, grew 54 per cent from a year go.

Wipro saw a 3 per cent drop in utilisation to around 64 per cent from 67 per cent in the previous quarter. The drop was attributed to some large project closure during the quarter.

Mr Sudip Banerjee, head of enterprise business, said demand continued to be strong. Of the five major deals won during the quarter, three were over $100 million and two over 50 million. Further, the company was in the race for over a dozen deal with sizes ranging from $50-150 million.

Mr Suresh Vaswani, President, Wipro Infotech, said that his division signed some 65 contracts of which long-term total outsourcing deals in India totalled $100 million covering application and infrastructure provisioning and management. Wipro Infotech saw its margins expand by 1 per cent during the quarter. The services business, which accounts for 40 per cent of revenues, grew by 46 per cent year on year during the quarter.

Expansions

Wipro also said that it would expand its operations in China. "We are evaluating the possibility of opening a third centre there," said the Chairman, Mr Azim Premji. Wipro currently has two centres in China - at Shanghai and Beijing, employing around 100 people.

"At an appropriate stage, we will evaluate whether we need to go to a third location which is not such a large city because probably it will give more stability and better cost,'' he added.

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