Wipro Ltd — India’s third-largest software exporter — saw its stock surge 2.7 per cent on a day the Sensex was down 80 points, mainly because of management expectations of an uptick from the first quarter (April-June 2009) of the current financial year.
Wipro's rivals TCS and Infosys, on the other hand, were categorical that the uncertainty would continue for two or three more quarters.
Meanwhile, aided by a rupee that depreciated about 4 per cent against the US dollar in the March quarter, Wipro’s fourth-quarter performance largely met market expectations to report a 15 per cent increase in net profit at Rs 1,010 crore for the fourth quarter ended March 31, 2009. It had posted a Rs 879 crore figure in the corresponding quarter a year earlier.
| Share price in Rs on BSE | |||
| Company | April 21,09 | April 22,09 | % chg |
| Wipro | 274.25 | 281.64 | 2.69 |
| Infosys Tech | 1363.5 | 1379.35 | 1.16 |
| TCS | 551.7 | 542.95 | -1.59 |
| HCL Tech | 138.4 | 125.05 | -9.65 |
| Source: BSRB | |||
The company’s top line increased 13 per cent to Rs 6,451 crore during the quarter from Rs 5,700 crore a year earlier. On a sequential quarter (QoQ) basis, however, net profit grew 0.5 per cent, and the top line was down 2.5 per cent (see table on Page 4).
The consulting business, according to the management, gives a good clue of how deals will flow during the year. The consulting business for Wipro, which till January was not looking up, has seen a significant rise in February-March, especially in the US.
The global IT business managed to meet its guidance for the fourth quarter in rupee terms, growing 20 per cent to Rs 4,932 crore. However, revenues dropped 2.9 per cent sequentially from Rs 5,079 crore in the third quarter. The company forecast a dip in revenues from its IT services business for the current quarter, amid a weakened outlook for outsourcing orders.
Overall operating margins in the January-March quarter were at 20.8 per cent — up from 20 per cent in the December quarter. They were buoyed primarily by the weaker rupee, which helped raise operating margins about 45 basis points.
The software and services business alone saw operating margins expanding to 21.8 per cent during the fourth quarter from 21 per cent a year earlier, even though business volumes were lower, Wipro's Chief Financial Officer Suresh Senapaty said.
"The IT services operating profits were up a healthy 24 per cent to Rs 1,073 crore," Senapaty said.
In dollar terms, net income for the January-March period was $178 million, up 4 per cent from the same period last year. The top line for the fourth quarter touched $1.29 billion, an increase of 17 per cent over the same period last year. Of this, IT services revenues were at $1.04 billion, declining sequentially 4.9 per cent, though growing year-on-year at 1.4 per cent. Operating margins of the IT business improved by 120 basis points year-on-year, Senapaty said.
Wipro's subdued dollar revenue guidance for global IT services has been placed in the range of $1-1.03 billion for the January-March quarter of fiscal 2010. This is lower than the $1.06 billion posted in the three months ended March 31.
Total revenues in dollar terms during fiscal 2009 increased 28 per cent from $3.9 billion last year as it breached the $5 billion mark during the quarter ended March 31, 2009. Total dollar revenues from IT services alone was $4.3 billion, a year-on-year growth of 18.5 per cent. The company increased its business outside the US, Europe and India by 91.9 per cent during the year. Revenue from the United States, which accounts for 45.7 per cent of total revenue, rose 32.8 per cent during the year ended March 31, despite the slowdown.
Accounts in the $50 million and above range grew to 17 in the fourth quarter of 2009 from 16 in the previous quarter. Revenues from fixed price projects improved sequentially by 210 basis points while the offshore mix rose 195 basis points sequentially. Onsite rates moved up 2.6 per cent on a year-on-year basis, while offshore rates moved up 3.1 per cent year-on-year.
"We will be investing in strengthening our current offerings and also incubating new verticals, penetrating new markets and focussing on new technologies which will give us sustainable competitive advantage," Chairman Azim Premji said, adding that the company has expanded its services portfolio and generated a robust deal pipeline to tackle situational concerns.
The IT business added 20 new clients in the January-March quarter, but the number of active customers came down to 863 from 882 in the previous quarter. Premji, however, said that the company would emerge stronger in the current quarter after going through a restructuring of its software business, which is now more or less an annual affair. "We have undertaken a close assessment of customer requirements and have focussed on operational excellence and delivering more than promised to customers," Premji said.
The IT products segment, which sells personal desktop computers, servers and notebooks, recorded 11 per cent growth to reach Rs 870 crore from Rs 784 crore a year earlier. Sequentially, there was a marginal increase of 4 per cent. Consumer Care and Lighting revenue increased 7 per cent to Rs 516 crore over last year's Rs 481 crore. The company trimmed staff by 401 in its IT services business, but added 1,246 people to its back-office business.
For the full year, Wipro's net income for the year ended March 31, 2009, was Rs 3,900 crore -- increasing 19 per cent from Rs 3,283 crore a year ago. Total revenue for the year was Rs 25,544 crore, representing a 27 per cent increase over Rs 19,958 crore in the previous year. The top line was driven primarily by 20 per cent growth in the IT services and the IT products domain, which grew at 11 per cent.
