The Hindu Business Line : Wipro Q3 net profit rises 41 pc, revenues up 45 pc

Wipro signed 37 new clients and added 4,997 employees on a net basis to increase its overall headcount to 66,176 and saw its attrition rates decline to 16.1 per cent from 17.6 per cent in the previous quarter.

Mr Azim Premji

Bangalore, Jan. 17

A broad-based growth across all its business units helped Wipro Ltd report better-than-expected profit growth of 41 per cent even as its revenues rose 45 per cent for the quarter-ended December 31, 2006 over the last quarter.

Wipro recorded a net profit of Rs 765 crore on revenues of Rs 3,979 crore for the third quarter of the fiscal year 2007 compared to a net of Rs 543.5 crore on a revenue of Rs 2,743.9 crore in the corresponding quarter in the previous year.

Revenues

Revenues from Global IT business grew ahead of the company's guidance at Rs 2,875.5 crore registering a 35 per cent growth. On a sequential basis, the revenue growth in rupee terms was at 8.8 per cent, while volumes grew by 9.3 per cent. Earnings from domestic and Asia Pacific IT business were up 76 per cent to Rs 700 crore. The consumer care and lighting business grew 36 per cent to Rs 211 crore.

Software earnings

Wipro said growth in global software services revenue is expected to continue in Q4, while its margins are expected to be range-bound due to strong rupee and wage pressures as the company is implementing a salary hike for its onsite employees.

Post results, on Wednesday, the Wipro stock opened high on the BSE to touch an intra-day high of Rs 651, but reversed early gains on concerns on the Q4 margin outlook to close lower at Rs 634.

`Satisfying quarter'

"We have had another satisfying quarter," said the Wipro Chairman, Mr Azim Premji, at a post-earnings press conference. "Our global IT business delivered good volume growth, primarily driven by robust performances by energy and utilities vertical, technology infrastructure services and enterprise application services," he said.

Wipro signed 37 new clients during the quarter and added 4,997 employees on a net basis to increase its overall headcount to 66,176. Wipro saw its attrition rates decline to 16.1 per cent from 17.6 per cent in the previous quarter.

"We are not seeing any slowdown in global demand. So far as demand for our services is concerned, it continues to be what it has been in the last nine months," Mr Premji said. Wipro expects IT services exports to increase to $685 million in the fourth quarter-ending March 31, up seven per cent on the third quarter.

Lower attrition coupled with improvement in other operational metrics helped Wipro to largely offset the profitability pressures from wage increase and rupee appreciation.

An improvement in BPO margins and the acquisition portfolio also helped Wipro to offset the impact on margins. The operating margins dropped 20 basis points to 24.2 per cent from 24.4 per cent in the previous quarter, said the Wipro Chief Financial Officer, Mr Suresh Senapaty.

Wage hike

A 12 per cent average wage hike for offshore employees impacted third quarter margins by 180 basis points while a 3.8 per cent gain in rupee against the dollar squeezed margins by 60 bps, Mr Senapaty said. This was offset by 60 bps expansion in BPO margins, 50 bps through improved sales, general and administrative expenses and four per cent contribution from acquisitions, he said.

Further, Mr Senapaty said he expects fourth quarter operating margin to move in a "narrow band". Wipro is effecting a 2-4 per cent salary hike for its onsite employees during Q4, which is expected to impact its OPM by 1.2 per cent. But, the company expects to offset the impact through better manpower utilisation and increased profitability from acquired companies, he said.

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