Wipro net up a tad, outlook drags scrip

Soap-to-software maker Wipro Ltd today reported first-quarter numbers that met the earlier expectation, but a glum outlook sent its shares down by nearly four per cent.

It forecast revenue from its flagship information technology (IT) services business at $1.44-1.46 billion in the second quarter.That included revenue from SAIC’s oil and gas business, which it acquired in the last quarter, indicating a rise of 2.1 to 3.5 per cent from the first quarter.

India’s third-largest software firm, Wipro posted a marginal one per cent growth in net profit at Rs 1,335 crore, compared to a year earlier, on the back of weak volume growth and negative growth in the US for its IT services business. Revenue rose 18 per cent to Rs 8,564 crore.

Shares closed 3.95 per cent down at Rs 398.60 on the Bombay Stock Exchange. The IT services business, which contributes 75 per cent to the company’s total revenue, posted a four per cent rise in operating profit at Rs 1,407 crore.

On a q-o-q basis, net profit fell three per cent due to increase in wages and the effective tax rate. “A wage hike of 10-12 per cent and increase in the effective tax rate had a sequential impact on our net profit in the first quarter. We see a similar impact on the operating margin in the second quarter from these twin factors,” said Suresh Senapaty, chief financial officer of Wipro Ltd. According to the company, its effective tax rate has gone up almost 3.1 per cent to about 19 per cent due to the withdrawal of the Software Technology Parks of India tax holiday.

Though the company added 49 new clients during the quarter, its volume growth came down to 1.8 per cent from 1.9 per cent in the previous quarter. Wipro added two large customers in the banking, financial services and insurance space in the US, which would fetch revenues of about $500 million over the next three-five years. This, however, did not reflect in its business growth in America, which dropped 1.2 per cent, compared to the previous quarter.

Wipro chairman Azim Premji said, “The macro environment continues to be volatile and give some amount of uncertainty to the business…Customers are prepared for a longer period of economic uncertainty and are looking for avenues for growing their business in such an environment apart from just reducing costs.”

The company said the pricing environment had either remained stable or was slightly negative. In the June quarter, it saw a drop of 0.4 to 0.8 per cent in its offshore and onsite billing rates.

During the quarter, the company added 4,105 employees. The attrition rate continued to be high at 22.6 per cent.