Wipro Tech top line up 35%

Wipro Technologies, the global IT services arm of Wipro Limited, surprised the markets by coming in with a 10 per cent growth sequentially, while year-on-year it grew 35 per cent. The management is also bullish going forward.

Its enterprise business contributed around 67 per cent of the top line. The remaining 33 per cent was contributed by its technology business.

Wipro Technologies has been able to deliver this kind of growth mainly due to its series of acquisitions.

Said an analyst, "Wipro, on its own is not able to match the scale of Infosys organically, and they are shelling out cash to buy growth." Not a bad strategy though.

The business process outsourcing (BPO) business too added its weight to the growth by around 21 per cent year-on-year, while it grew by 10 per cent sequentially to touch the Rs 278 crore mark.

This business witnessing a sea change in its approach has been showing good results since the past two quarters. Operating profits surged by 19 per cent YoY to Rs 62.5 crore, which is a growth of almost 9 per cent.

The other key lever which in moving into top gear in Wipro's India, West Asia & Asia-Pacific IT services and products business, under Wipro Infotech.

While Infosys has been shying away from focussing on India as a market and MNCs such as IBM and HP increasingly tapping into the Indian markets to derive over a $1 billion in revenues, Wipro's strategy to have a separate business unit dedicated to explore opportunities in the Indian markets as well as some key Asian markets has been paying good dividends.

In fact this business, currently accounts for 19 per cent of its revenue and 8 per cent of the operating profit.

This business for the second quarter ended September 30, 2007, has recorded revenues of Rs 931 crore, a growth of 72 per cent YoY and profit before interest and tax of Rs 69 crore, a growth of 48 per cent YoY. According to information available, this business unit within the next few quarters is expected to be a $1 billion unit.

Its services business contributed 31 per cent to total revenue during the quarter and grew by 40 per cent YoY. Wipro officials further added that the funnel for large outsourcing contracts and integrated deals is very healthy across India and West Asia.

Raising debt for acquisitions

Wipro Ltd, which has been gobbling companies during the past two years by shelling out close to $1.2 billion, is now looking at raising money through debt or equity to continue its inorganic growth.

The company, now left with a cash reserve of $300 million, was planning to raise funds to finance possible acquisitions, which might be of different sizes, according to Suresh Senapaty, chief financial officer, Wipro.

The company generates cash of about $200 million every quarter, which it adds to the existing cash reserve.

Wipro already has a debt burden on $700 million, which it had raised from different banks at different points of time. It had made two large acquisitions, including Unza and Infocrossing in the current financial year. The acquisition of Unza contributed significantly to Wipro Consumer Care & Lighting's bottom line in the current quarter.