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

   
Rajalakshmi (C), 28, smiles after winning the Miss Wheelchair India beauty pageant in Mumbai November 26, 2014. REUTERS/Danish Siddiqui

Miss Wheelchair India

Seven women from across India participated in the country's second wheelchair beauty pageant, which aims to open doors for the wheelchair-bound in modelling, film and television, according to organisers  Slideshow 

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:

REUTERS SHOWCASE

E-Commerce Boom

E-Commerce Boom

Online grocers come up trumps in India's e-commerce boom   Full Article 

GDP, RBI Preview

GDP, RBI Preview

GDP growth set to weaken, business wants reforms more than rate cut  Read | Related 

Jaitley to Rajan

Jaitley to Rajan

Jaitley likely to meet Rajan on Monday to urge rate cut  Full Article 

Hughes Dies

Hughes Dies

Australia's Phil Hughes dies after being hit by ball  Full Article 

OPEC Meeting

OPEC Meeting

Low expectations for oil output cut  Full Article 

Jamini Roy

Jamini Roy

Photo Gallery – Bengali household name Jamini Roy’s paintings  Full Article 

Google in Europe

Google in Europe

Insight - Behind Google's Europe woes, American accents  Full Article 

India-focused Funds

India-focused Funds

India-focused hedge funds up over 40 pct YTD - HFR  Full Article 

Reuters India Mobile

Reuters India Mobile

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