India’s third largest software exporter Wipro Ltd beat street estimates to post better profits during the second quarter while forecasting modest growth.

Wipro said its consolidated net profit for the quarter grew 24 per cent year on year, and 1.9 per cent sequentially, to Rs 1,610 crore — clearly indicating that the IT outsourcer had steered itself back to the growth path.

“Right now, we are comfortable with the steps we have taken. For us, it is heads down into execution right now,” Wipro IT business executive director and chief executive officer, T. K. Kurien, told newspersons here on Friday. The IT business contributes more than 80 per cent of Wipro’s total revenues.

The soap to software group also issued revenue guidance for the October-December quarter for its IT services business, which is expected to be in the $1,560-1,590 million range — a 1.3-3.2 per cent increase over the second quarter.

Wipro’s total revenue was, however, flat at Rs 10,657 crore on a sequential basis, while year on year, it grew 17 per cent. Wipro’s IT services added 53 clients in the second quarter. The company added four more $100-million clients during the quarter, making a total of nine. The top 10 clients grew 8.2 per cent on a sequential basis.

Wage hikes

Wipro’s PBIT (profit before interest and taxes) from IT services grew 27 per cent to Rs 1,731 crore, year-on-year, while revenues increased 23 per cent to Rs 8,373 crore. But the IT products division, which does most of its business in India, showed a decline in PBIT, which decreased 40 per cent to Rs 27 crore, and revenues, which fell 10 per cent to Rs 899 crore. The decline was attributed to higher interest rates and delays in decision-making in government contracts.

The total headcount in IT services grew 1.5 per cent sequentially to 140,569 while the attrition rate slowed to 14.6 per cent from 15.6 per cent in the June quarter. This was largely because of stable salaries, promotions and increased hiring. The company had announced an onsite wage increase of 2 -3 per cent and offshore wage hike of 8 per cent from June.

Kurien said the company expects retail demand to pick up again in the US. “Whoever comes to power there, he will obviously be a little different from the previous one. But the government will try very hard to get back growth,” he pointed out.

US market

Stating that he remains cautiously optimistic about the company’s prospects in the US market, he pointed out that it is unreasonable to expect lower economic growth for a long stretch of time. “I think there will be a bump up some time next year. The question is whether that bump up can be sustained. I think it is still a big question mark,” Kurien said.

Wipro chairman Azim Premji said that during his recent visit to the US, it was clear that there was no cause for worry and that the IT demand was still holding out. “Irrespective of the elections, there will be some demand coming up. Therefore, one has to be proactive in the quality of selling,” he said.

On the BSE on Friday, the Wipro share gained 1 per cent at Rs 365.

(This article was published on November 2, 2012)
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