Rising rupee, buyouts dent Wipro profits

Q4 net up 3%, three executives get board slots.

Caught in the whirlwind of an appreciating rupee and a slowdown in the US, the $5-billion Wipro reported a tepid 3 per cent growth rate in its net profit to Rs 880 crore for the quarter ended March 31, 2008, over the corresponding quarter of the previous financial year.

When adjusted for one-time tax reversals in the fourth quarter of 2007, the company's profit growth becomes 11.3 per cent.

The company also announced top-level changes today. Girish Paranjpe, who was heading the banking, financial services and insurance vertical, and Wipro Infotech President Suresh Vaswani have been made joint chief executive officers.

Paranjpe, Vaswani and Wipro CFO Suresh Senapathy have been co-opted on the company's board. In addition, Wipro sources said, Azim Premji's eldest son, Rishad, is likely to head a new service line in the BFSI segment.

Talking about the first quarter of the current financial year, Wipro Chairman Azim Premji said the global IT business will grow by around 3 per cent.

"We are witnessing some re-think on the IT spends by the clients. The first two quarters will be muted. However, the third and fourth quarters will be bright," he added.

Though the company renewed a large number of contracts at 4-6 per cent increase in January this year, Wipro executives said they do not see any mid-term increase going forward.

The company's revenue for the fourth quarter of 2007-08 was up 32 per cent to Rs 5,700 crore compared to the corresponding quarter of the previous financial year. 
 

SLOWDOWN AHEAD?
	Q4FY08 (Rs cr)	YoY (% growth)	QoQ (% growth)	FY08 (Rs cr)	% growth
Net profit	880	3	3	3282	12
Revenue	5700	32	7.50	19957	33
PBIT	993	18	5.30	3518	16
Global IT Business
Revenue	3833	26	6	13641	23
PBIT	803	10	3.70	2940	9

However, sequentially (as compared to the trailing quarter), too, the company posted only 3 per cent growth in net profit, while its revenue grew just 7.5 per cent.

The effect of the rising rupee was compounded by two large acquisitions which Wipro executed during the financial year, which cost it close to $1 billion (around Rs 4,000 crore) and impacted its profit margins.

The company had acquired US-based InfoCrossing, an infrastructure management firm, for $700 million (around Rs 2,800 crore) and Singapore consumer care firm Unza for nearly $250 million (around Rs 1,000 crore).

Wipro's global IT business (handled by Wipro Technologies, which brings in major revenues for the company) has grown 26 per cent to Rs 3,833 crore for the quarter. Sequentially, this division has grown by 6 per cent.

The operating profits for the global IT business grew 10 per cent to Rs 803 crore for the quarter as against the corresponding quarter of 2006-07, while it inched up 3 per cent sequentially.

Senapathy said: "We hiked salaries by 3-4 per cent for our onsite employees, which had an impact of 100 basis points on our margins. We improved utilisation, margin expansion in acquisitions and other operating margins, which significantly offset the adverse impact of onsite salary increase."

Wipro added that the company has made 14,000 campus offers as against 10,000 during last year.

The net profit of the company grew 12 per cent to Rs 3,282 crore for 2007-08, while the top-line grew 33 per cent to Rs 19,957 crore. The global IT business increased 23 per cent to Rs 13,641 crore, while the profit before interest and tax was up 9 per cent to Rs 2,940 crore.