Wipro net zooms 65% on outsourcing gains

First-half profits, too, skyrocket 76 per cent.

Wipro Ltd today reported a 65 per cent jump in profit to Rs 412 crore for the second quarter ended September 30 on growing business from Europe and increased outsourcing by telecom clients. Revenues for the same period went up by 44 per cent to Rs 1,979 crore.

On a sequential quarter-on-quarter basis, Wipro's topline and net profit increased by 15.4 per cent and 11.87 per cent, respectively.

Global IT services and products (Wipro Technologies) accounted for 76 per cent of the revenues, with an operating margin of 28 per cent. Wipro is owned by India's wealthiest person, Azim Premji, who has an 84 per cent stake in the Bangalore-based company.

The operating margins showed a 1 per cent increase over the previous quarter. Wipro Infotech, which deals with India, the Middle East and the Asia-Pacific IT business of the group, contributed 15 per cent of the revenues.

For the half year ended 30 September, the company registered a topline growth of 46 per cent and a bottomline growth of 76 per cent compared to the corresponding period last year.

"These are excellent numbers and are in line with the numbers from TCS and Infosys earlier, so it augurs well for the sector," said Nimesh Chandan, analyst with Stratcap Securities.

The Wipro scrip initially hit a three-year high before ending the day 1.4 per cent down at Rs 650.70.

As a result of "good volume growth" and "stable pricing environment", the global IT business has beaten its revenue guidance of $318 million to register $327 million in revenues (47 per cent year-on-year growth). For the third quarter ending December 31, 2004, the company has provided a revenue guidance of approximately $347 million for its global IT business.

"Wipro Infotech has invested in new geographies such as the Middle East and Australia, with a long-term perspective. During the last quarter, this business signed up its first multi-year, multi-million IT services contract with AXA, Australia," said Wipro chairman Azim Premji.

According to Vice-Chairman Vivek Paul, "We continue to sustain our growth across all our key verticals and service lines in our global IT business.

Excellent execution and continuing focus on improving productivity helped deliver operating margins expansion. In terms of service lines, our business process outsourcing business rebounded strongly by 20 per cent sequential growth."

Paul added the company was pleased with the recent acquisition of the TUI account, a leading travel operator. He said the deal was between "$25 million and 50 million" and spread over five years. It included server and data management and network support functions.

"Improvement in operating margins and in our global IT services business was driven by better price realisation for onsite projects, an increase in the proportion of revenues from offshore projects and continued operational improvements, partially offset by lower utilisation.

This was primarily due to the net addition of over 5,500 employees, including 3,300 in our IT services business," said Suresh Senapaty, corporate executive vice-president (finance).

The global IT services and products business added 34 new clients in the quarter, including three in the IT-enabled services business.