IT players disappoint stakeholders with Q1 results

IT players Wipro and Polaris today disappointed stakeholders by posting unimpressive first quarter earnings, impacted by a range of global economic glitches and rising wage costs.

While the country's third-largest software exporter Wipro reported a marginal 1.23% growth in its consolidated net profit at Rs 1,334.9 crore in Q1 FY12, Polaris' net profit declined 4.37% at Rs 44.56 crore.

Another IT firm Infotech Enterprise posted disappointing numbers with 18% drop, year-on-year, in net profit (at Rs 26.85 crore) for Q1.

With the exception of industry leader Tata Consultancy Services and a few others, the $75 billion Indian IT-ITeS industry has been witnessing the impact of uncertainties in the European region and rising unemployment rates in the US.

"The macro environment continues to be volatile. This continues to give some kind of uncertainty...," Wipro Chairman Azim Premji said.

Besides, domestic factors like increasing wage costs and withdrawal of tax sops under the Software Technology Parks of India (STPI), or exports zone scheme, have added to the woes of the sector.

Country's second-largest IT firm Infosys Technologies had opened the Q1 earnings season with 16% increase in net profit, but gave a conservative outlook of the global business environment for the rest of the year.

Following the economic meltdown in 2008, demand for IT services is on the upsurge as companies look to optimise costs by improving efficiencies and building a robust deal pipeline.

However, the sovereign debt crisis in some parts of Europe and high unemployment rates in the US have triggered fears that the rise in demand may be slower than anticipated.

IT results have thrown up some exceptions as well. MindTree, which announced Q1 results today, reported a more than two-fold growth in net profit.

Overall, although IT companies say they are confident of clocking good growth, they are maintaining a cautious outlook for the quarter ahead.