Wipro Q2 net profit edges up as revenue rises 18%

Spurred by growing demand for IT services, Wipro beat estimates to post a one per cent growth in net profit to Rs 1,301 crore for the second quarter YoY on the back of an 18 per cent increase in revenues to Rs 9,094 crore.

The company also forecast better revenue growth for the third quarter, traditionally a soft quarter, with a guidance band of between $1,500 million and $1,530 million. In spite of a positive guidance, Wipro's shares, which rose nearly 3 per cent earlier in the day, closed lower at 1.70 per cent to Rs 366.45 on the BSE.

Strong US growth

Mr Azim Premji, Chairman, Wipro Ltd, said that contrary to what his competitors in the Indian IT industry felt, growth was strong in the US. “I was recently in Atlanta meeting American CEOs and I found the mood to be surprisingly positive. They have strong cash flows and good profitability and are looking for service partners.”

Some of this was reflected in the volume growth of six per cent that the company registered for this quarter. Its operating income to revenue for IT Services for the quarter stood at 20 per cent.

“We have settled in the new rhythm, expedited decision making, and have seen a significant drop in attrition,” Mr Premji said. Attrition in Wipro dropped 470 basis points to 18.5 per cent. The IT giant added 5,240 people, the highest in six quarters.

Mr T.K. Kurien, Executive Director and Chief Executive Officer, IT Business, pointed out that the growth was the best the IT outsourcer had in the last four quarters. “One year ago, we had just one client contributing over $100 million, but now we have five. We also have one $200-million client in our portfolio.”

He said that this quarter, the customer satisfaction had gone up by 18 per cent and the average deal size had grown from $78 million in the same quarter last year to $118 million this quarter.

Mr Sanjeev Hota, Associate Vice-President Institutional Equities at brokerage firm Sharekhan, said the company's growth was impressive and was driven among other things by the SAIC acquisition.

Interestingly, Wipro's bugbear for long, the BFSI segment accounted for 27.1 per cent of revenues this quarter as opposed to 26.9 per cent in the same quarter last year. “BFSI has outshone the rest and we are ahead of our peers in this segment,” Mr Kurien pointed out.

Organic volumes grow

He also said the restructuring in the company carried out recently had started showing results and his only worry was currency changes.

An analyst with Kotak Securities, Mr Dipen Shah, however, was not too enthused with Wipro numbers. “Wipro's results were marginally below estimates. Organic volumes grew by 4.6 per cent, but off-shore realisations were sharply lower by about 4 per cent QoQ. This is the second successive quarter of fall in realisation. While the management has indicated that, this is a temporary phenomenon, we are concerned by the same.”

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