Software-to-soap conglomerate Wipro Ltd’s net profit rose 18 per cent for the third quarter this fiscal, beating street expectations, but gave a muted guidance for the next quarter for its IT services business sending its stocks hurtling to a four-year low.
Wipro stocks tanked nearly 8 per cent to close at Rs 397.15, the lowest since January 2009, shaving off Rs 8,364 crore in market value.
Projects flat3 per cent growth
Wipro said its forecast for the fourth quarter is expected to be between $1.59 billion and $1.63 billion (flattish to 3 per cent) which was largely based on the uncertainty over the US fiscal cliff as well as on wobbly demand for IT services. While it remains positive about demand environment in the next quarter, there was still some uncertainty about execution as well as expansion of new projects.
“We see guidance of low-single digit a dampener to the consensus expectation. We expect revenue momentum to get better in FY14,” Prabhudas Lilladhar in a note to the investors said.
For Wipro, earnings from its IT services (pre-tax) which contributed 92 per cent of operating income for the December quarter grew 13 per cent to Rs 1,791.7 crore while revenues grew at the same level to Rs 8,601.8 crore year on year.
No salary hikes
On a sequential basis, IT services grew 2.4 per cent while operating margin expanded 20.8 per cent. The attrition rate went down 1.6 per cent to 12.9 per cent. The IT services added 2,336 people in the quarter. The company said it will not hike salaries in the near term as it had already declared a hike earlier. Wipro added 50 new customers in the quarter and one $100-million client, now totalling 10. Six quarters ago it had only one $100-million client.
On a consolidated basis, Wipro Ltd's net profit grew nearly 18 per cent to Rs 1,716.4 crore while total income grew 10 per cent to Rs 11,025 crore for the October-December quarter year on year. EPS was at Rs 7. The company has also declared an interim dividend of Rs 2 per share.
Broad-based growth
“We have seen broad-based growth in the quarter with all our verticals growing sequentially. Our improvement in customer and employee engagement is reflected in client mining with 10 customers contributing more than $100 million and lower attrition,” T. K. Kurien, Executive Director & Chief Executive Officer, IT Business for Wipro, said.
Wipro Chairman Azim Premji said the overall mood on economic growth continues to be muted but global corporations continue to leverage technology to drive revenues and productivity. He said that the US economy was showing some improvement backed by increase in retail as well as consumer demand. Global leaders he had spoken to are now more confident of the business environment than they were a quarter ago.
Kurien said while there was a 3 per cent plus pricing increase, volumes decreased by 1 per cent. He said the company has no clear sight of fiscal cliff talks which are still continuing. This would mean there is no clarity about when the budgets will come in.
Talking on the issue of the demerger of the non-IT businesses, Premji said that if necessary some stake will be sold to comply with SEBI norms on promoters’ stake not exceeding 75 per cent in a listed entity.