Wipro net profit up 17% in March quarter

IT services' revenue expectation disappoints for June quarter

Wipro has disappointed with its business outlook for the information technology (IT) services business in the quarter ending June 30. The forecast was conservative, including a possible decline for the quarter, indicating a clear turnaround might take some time.

On a consolidated basis, Wipro, which is also into consumer care, lighting and infrastructure engineering, reported a net profit of Rs 1,729 crore in the March quarter, 17 per cent higher than the corresponding one of 2012-13. Revenues went up 12 per cent, to Rs 11,026 crore in the quarter, year to year. On the full year, overall net profit grew 19 per cent and revenue by 16 per cent, to Rs 6,636 crore and Rs 43,361 crore, respectively.

The flagship IT services business which accounted for 78 per cent of overall revenue, reported an operating profit of Rs 1,727 crore, a growth of 10 per cent over a year. The revenue at Rs 8,554 crore grew 13 per cent when compared with the same quarter in FY12, backed by strong performance by its India business, as well as infrastructure management services.

The IT services business posted a dollar revenue growth of a marginal 0.5 per cent at $1,585 million in the quarter. The company has said it expects $1,575-1,610 mn in the first quarter of FY14, indiating a decline of 0.6 per cent to a growth of only 1.6 per cent over the previous year.

“Clearly, recovery is still far away for Wipro and demand environment for the IT industry still needs to recover. Wipro’s guidance (forecast) does disappoint, as the first half of the financial year is much stronger in terms of growth than the second half, and it seems the company does not see much happening,” said Ankur Rudra of Ambit Capital.

However, T K Kurien, chief executive officer of the IT business, said the first quarter of every financial year was a seasonally weak one for the company. The fourth quarter is typically backed by strong support from the India and Middle East business that accounts for about nine per cent of Wipro’s IT services revenue.

Suresh Senapaty, chief financial officer, said the company was expecting to do better in FY14 that the previous year. "While we don't give a specific guidance and we're starting the year with a little weaker one... our expectation would of course be that we'll do better in the current fiscal than what we did last year," he added.

The company’s fourth quarter numbers were dragged by weak growth in the telecom and financial solutions (BFSI) verticals, which together account for 41 per cent of the overall IT services revenue. The Europe business, after showing some promise during the last couple of quarters, declined 3.4 per cent.

On the positive side, Wipro showed a volume (billable man-hours in the quarter) growth of 2.5 per cent, on the back of ramp-up by some of the new clients it added in the recent past. The operating margin declined by just 60 basis points to 20.2 per cent, despite a foreign exchange loss of Rs 582 crore in the quarter. The company added 53 new clients during the quarter and said the deal pipeline was healthy.

For the full year (FY13), Wipro’s IT business’ operating profit grew 18 per cent over the previous year at Rs 6,993 crore and revenues at Rs 33,843 crore grew 19 per cent over the previous fnancial year. “We have completed the demerger of the diversified business effective March 31, to make Wipro a pure-play IT company. We are confident that being a technology-focused company will provide a fresh momentum for growth,” said Azim Premji, chairman.

Premji also said that few of the clauses in the Comprehensive Immigration Reforms Bill as proposed by some of the Senators in the US might witness active lobbying in the House of Representatives to make these more practical. “There are one or two clauses for which there is going to be active lobbying in the House of Representatives to see that they are made more practical. We are confident that some of these conditions will be made more practical, otherwise it will affect the American companies just as much as the Indian firms.” he added.

In the quarter, Wipro added 2,907 people on a net basis, taking the headcount of its IT services business to 145,812. The company also said it would give its annual wage rise from June, as it does every year.

The stock market was closed today. The shares closed yesterday at Rs 368.65, down 1.7 per cent, ahead of its results.