Wipro net up 14%, but tepid outlook disappoints street

After a lacklustre third-quarter performance, Wipro investors had a lot to cheer about, with the company announcing a 14 per cent rise in its fourth-quarter net profit at Rs 1,375 crore.

Its flagship information technology (IT) business logged 9 per cent growth in profit before interest and tax at Rs 1,388 crore. It added a record number of clients, 68, for its technology business, and saw a price rise of 1.2 and 1.8 per cent in its offshore and onsite billing, respectively.

But a tepid growth forecast for its mainstay IT services business, which accounts for more than three-quarters of the company’s total revenue, dampened enthusiasm for the stock on the Bombay Stock Exchange. Its shares closed 2.86 per cent down at Rs 450.75.

The Bangalore-based soaps-to-software company said it expected IT services revenue of $1,394-1,422 million in the first quarter of 2011-12.

“The result is in line with our and street expectation. The current quarter performance was ahead of its peers. But guidance is also lacklustre when compared to Infosys,” said Shashi Bhusan, a senior research analyst (Institutional Equities) at Prabhudas Lilladher, in his report.

According to Wipro, the muted guidance was a result of the reorientation at the organization, initiated a quarter ago. It expects these changes to take some time till it is reflected in its balance sheet.

“Traditionally, the first quarter tends to be a weaker quarter. Besides, after the reorganisation, we are trying to become proactive, which means we need to make a change, and when we do a change, it has an impact in the short-term, as we are investing for the future,” said Wipro’s Chief Financial Officer, Suresh Senapaty.

Revenue during the three months to March jumped 18 per cent from a year ago to Rs 8,302 crore, while earnings from IT services advanced 20 per cent to Rs 6,289 crore. Sequentially, revenue from IT services rose 5.71 per cent, indicating the positive changes taking shape in the market place with increase in demand.

Wipro also announced a wage rise of 12-15 per cent for offshore employees and 2-4 per cent for onsite employees, effective from June.

PREMJI GETS RICHER BY Rs 1,340 CRORE
Wipro declared a final dividend of Rs 4 for each share of Rs 2 par value, amounting to 200 per cent for 2010-11. “With an interim dividend of Rs 2 per share or 100 per cent, the total dividend for 2010-11 is Rs 6 per share, or 300 per cent,” said the company. Accounting for 32 per cent of the company’s net profit of Rs 5,298 crore, the total dividend payout will be Rs 1,696 crore. With a 79 per cent stake, Wipro Chairman Azim Premji will receive Rs 1,340 crore as his share of the total dividend.