Wipro profit, margins top expectations; shares rise

BANGALORE Fri Nov 2, 2012 2:10pm IST

1 of 4. An employee walks pass a billboard in the Wipro campus in Bangalore June 23, 2009.

Credit: Reuters/Punit Paranjpe/Files

Related Topics

Stocks

   

BANGALORE (Reuters) - Wipro(WIPR.NS), India's No. 3 software services provider, topped quarterly profit estimates and forecast modest growth, sending its shares up more than 3 percent and easing fears that global economic woes will curb outsourcing spending.

India's $100 billion IT services sector has seen a sharp slowdown in growth in recent quarters as western clients hold back on spending amid Europe's economic struggles and sluggish corporate earnings growth in the United States.

Wipro, which has invested in sales and marketing to boost orders, posted better-than-expected margins and its revenue forecast for the current quarter met market estimates, a relief to investors worried that its growth has lagged rivals in recent quarters.

"Growth is slightly subdued in comparison with peers, but they are taking all the steps in the right directions," said ICICI Securities analyst Kuldeep Koul, who has an "add" rating on the stock.

Profit for the three months ended September rose 24 percent to 16.11 billion rupees from 13.01 billion rupees in the year-ago period, well above analysts' estimates of 15.37 billion rupees, according to Thomson Reuters I/B/E/S.

The company forecast IT services revenue for the three months ending December would rise 1.3-3.2 percent from the September quarter to $1.56-$1.59 billion, in line with analysts' expectations of 1 to 4 percent growth.

Operating margins at its IT services business fell by a smaller-than-expected 30 basis points to 20.7 percent from the previous quarter.

"Margins coming down by not even 100 basis points is definitely a positive," said Ankita Somani, an analyst with Angel Broking in Mumbai. She had expected operating margins of 19.3 percent due to wage hikes in June.

For a graphic on Wipro results, click: link.reuters.com/bek73t

Shares in Wipro, which has a market value of $16.5 billion, rose as much as 3.2 percent after the earnings announcement, before paring gains to trade up 1.0 percent. The benchmark Mumbai market index was up 0.8 percent.

The result follows a move early last year by the company's billionaire chairman Azim Premji to replace the two co-CEOs of its IT business with another company veteran, T.K. Kurien.

POSITIVE ON SECOND HALF

"We expect the second half to be better in terms of growth rate, we are already seeing some momentum," Chief Financial Officer Suresh Senapaty said.

Total revenue for July-September rose 17 percent on a year earlier to 106.57 billion rupees, while Wipro added 53 clients for its IT services during its fiscal second quarter.

"I think the pipeline has remained more or less the same. It has gone up a bit, but what we're hoping for is that after the (U.S.) elections, closures (of deals or orders) will start," Kurien told reporters.

India's IT sector index has lagged the broader market this year but has rallied more than 12 percent since a July low as investors became more optimistic for stability in the global economic environment.

India's outsourcing sector generates more than 90 percent of its sales from providing services, including setting up IT networks and developing software applications, for overseas clients and counts the United States and Europe as its biggest markets.

Wipro said on Thursday it will fold all its non-IT services including consumer care and medical diagnostics into a new firm to focus on outsourcing, which accounted for 86 percent of its revenue in the fiscal year that ended in March.

The move was seen as an effort to boost growth amid cutthroat competition from local rivals Infosys Ltd (INFY.NS) and Tata Consultancy Services (TCS.NS) as well as global majors such as IBM (IBM.N) and Accenture (ACN.N).

Last month, India's top IT services company Tata Consultancy and fourth-ranked HCL Technologies (HCLT.NS) beat expectations for their second-quarter earnings, while No. 2 player Infosys posted profit that was in line with forecasts. (Reporting By Harichandan Arakali; Additional reporting by Sumeet Chatterjee; Writing by Aradhana Aravindan; Editing by Richard Pullin)

FILED UNDER:
We welcome comments that advance the story through relevant opinion, anecdotes, links and data. If you see a comment that you believe is irrelevant or inappropriate, you can flag it to our editors by using the report abuse links. Views expressed in the comments do not represent those of Reuters. For more information on our comment policy, see http://blogs.reuters.com/fulldisclosure/2010/09/27/toward-a-more-thoughtful-conversation-on-stories/
Comments (1)
Adveith_P wrote:
Wipro shares are trading at 470 now. It would be better with the demerger and the results

Nov 02, 2012 11:15am IST  --  Report as abuse
This discussion is now closed. We welcome comments on our articles for a limited period after their publication.

  • Most Popular
  • Most Shared

Sino-Indian Ties

REUTERS SHOWCASE

India-China Relations

India-China Relations

India and China look to put knotty relations on new footing.  Full Article 

Importing Iron Ore

Importing Iron Ore

As mining curbs bite, India offers market to glut-hit iron ore.  Full Article 

Lower Output

Lower Output

IOC cuts refinery output as rains hit fuel demand - source.  Full Article 

Drug Approval

Drug Approval

Epirus, Ranbaxy win India approval for arthritis drug copy.  Full Article 

Farming and Technology

Farming and Technology

Climate smart farmers get tech savvy to save India's bread basket.  Full Article 

Rajan Speaks

Rajan Speaks

RBI chief Rajan says limiting reliance on foreign debt.  Full Article 

India-Vietnam Ties

India-Vietnam Ties

India tightens Vietnam defence, oil ties ahead of China Xi's visit.  Full Article 

Debt & Equity Deal

Debt & Equity Deal

KKR to lend $175 million to GMR Infrastructure - source.  Full Article 

Preparing for IPO

Preparing for IPO

Alibaba boosts IPO as demand strengthens.  Full Article 

Reuters India Mobile

Reuters India Mobile

Get the latest news on the go. Visit Reuters India on your mobile device.  Full Coverage