BANGALORE (Reuters) - Wipro, India’s No. 3 software services exporter, forecast muted revenue growth for its main IT services business, highlighting the turbulence software exporters face due to a fragile global economy and sending its shares down 8 percent.
The company and larger rivals Infosys and Tata Consultancy Services are part of India’s $100 billion software and back-office services sector that earns about three quarters of its revenue from the United States and Europe.
Worries about the health of the world’s largest economy and the euro zone staying in a recessionary phase longer than expected could curb spending on outsourcing services by western clients of Indian companies.
Bangalore-based Wipro, which also makes computer hardware, soaps and toiletries, said it expects June quarter revenue of $1.52 billion to $1.55 billion at its IT services unit, a rise of up to 0.6 percent from January-March.
Most analysts were expecting Wipro, which roughly met expectations with a 7.7 percent rise in quarterly net profit, to forecast a 2-4 percent rise in the IT services revenue, which contributes about three-quarters of the group’s sales.
“The guidance is clearly weak and it is consistent with our view that the industry is still facing challenges,” said Bhavin Shah, chief executive officer of Equirus Securities, referring to Wipro’s forecast.
“The offshore model has reached a point where incremental growth is going to be lower, and there are eight to 10 established players competing for the same growth opportunities.”
(For a graphic on Wipro results, click link.reuters.com/fuz77s)
Tata Consultancy, Infosys and Wipro are also facing stiff competition from global rivals such as IBM and Accenture for a bigger share of the outsourcing business.
Wipro shares, valued at nearly $20 billion, fell as much as 8.2 percent to 405.80 rupees, their lowest level since January 19, while the Sensex was up 0.1 percent and the sector index was down 1 percent.
The results and growth outlook of Wipro came after Infosys’s worse-than-expected forecast cast a pall on the export-driven outsourcing sector.
Consolidated net profit at Wipro, whose clients include Citigroup Inc and Telenor ASA, rose to 14.81 billion rupees for the fiscal fourth quarter ended March 31 from 13.75 billion rupees a year earlier.
Analysts, on average, had forecast a net profit of 15.05 billion rupees, according to Thomson Reuters I/B/E/S.
Wipro, which is also listed in New York, said total revenue rose 19 percent to 98.69 billion rupees as the company added 41 clients in the quarter, including the National University of Singapore.
The company’s IT services unit posted sales of $1.54 billion in January-March, rising 2 percent from the December quarter.
Wipro expects prices for its services to remain stable in the fiscal year that started on April 1, Chief Financial Officer Suresh Senapaty told reporters.
Its billionaire chairman Azim Premji made a wide-ranging management shake-up last year that saw the removal of its joint CEOs, and named veteran T.K. Kurien as the chief executive to reverse the widening gap between Wipro and its larger rivals.
Premji quit Stanford to take over his father’s ailing vegetable oil business in the mid-1960s, before diversifying into hydraulic cylinders in the 1970s and information technology in 1980s.
Top-ranked TCS on Monday met market expectations with its earnings, and its CEO N. Chandrasekaran said the company would beat the 11-14 percent growth estimated by an industry group for the sector for 2012/13.
Writing by Sumeet Chatterjee; Editing by Ranjit Gangadharan and Muralikumar Anantharaman