Wipro may slow down in Q4

Wipro Technologies has managed to absorb the 1.2 per cent impact of salary hikes during the third quarter but is expected to feel the intensity of this heat during the fourth quarter. Volumes during the fourth quarter are expected to slim down.

According to Wipro Technologies guidance, the fourth quarter topline is expected to touch $510 million as against a registered topline of $473 million for Q3, representing a 7.5 per cent increase quarter-on-quarter. This figure is a dip from the 12 per cent reported sequential growth from Q2 to Q3.

"Of the 7.5 per cent growth, 1.5 per cent is expected to flow in from the two acquisitions Wipro effected during the third quarter. An additional one per cent is expected to flow in from more working days in the fourth quarter as against the third quarter, leaving effectively a 5 per cent Q-o-Q growth for Wipro Technologies, which is not that impressive," an analyst noted on the guidance.

He added that the margins would also be affected by the salary hikes, which Wipro is planning to effect from January 2006 for employees based in India.

For the quarter ended December 31, 2005, the return on capital employed in Global IT services was 64 per cent, India & AsiaPac IT services & Products was 72 per cent and consumer care & lighting was 82 per cent.

At the company level, the return on capital employed was 34 per cent, lower due to inclusion of cash and cash equivalents of Rs 350 crore in capital employed, which is 48 per cent of the capital employed.

Said Suresh Senapathy, CFO, Wipro Limited: "The utilisation is much lower than required. The onsite-offshore mix is dramatically changing and there is a systematic improvement in expenses. The pricing is stable and is expected to move in a narrow range."

Perhaps the answers to these may be found in this statement made by Azim Premji, chairman, Wipro. He said: "Looking ahead, the two questions that drive our business remain unchanged - how do we deliver superior solutions to our customers and how do we deliver sustainable value to our stakeholders. The answers to these questions lie in devising strategies that anticipate emerging challenges and opportunities, and relentless focus on execution, that converts strategies to business results while constantly improving operating productivity."

SUDDENLY SLENDER

Volumes during the fourth quarter likely to slim down

Fourth quarter topline is expected to touch $510 million as against a registered topline of $473 million for Q3, representing a 7.5 per cent increase quarter-on-quarter