Wipro profit beats forecast, but not enough for investors

By Harichandan Arakali

BANGALORE (Reuters) - IT services exporter Wipro Ltd posted quarterly profit which beat analyst estimates, but that was not enough for investors who sold off its stock on stronger earnings reports from rivals.

Wipro, which has restructured itself over the past two years to catch up with Tata Consultancy Services Ltd and others, had seen its shares rise nearly 50 percent in 2013. That was in line with a rally for a sector fuelled by improving demand for outsourcing from clients in the United States and elsewhere.

That improvement saw Wipro on Tuesday set a revenue growth forecast for the quarter ending December to 1.8-3.6 percent in dollar terms from the previous quarter, slightly above analysts' forecast of 1.5-3.5 percent.

 

In the September quarter, Wipro reported net profit growth of 28.5 percent, but that lagged the 34 percent gain recently posted by market leader TCS and 64 percent for HCL Technologies Ltd .

Consolidated net profit was 19.32 billion rupees, exceeding analysts' estimate of 18.6 billion rupees, Wipro said on Tuesday after markets closed.

Wipro shares fell as much as 6.3 percent in trade and ended down 4.34 percent to 492 rupees on Wednesday, halting a rally that recently saw the stock rise to its highest since 2000.

Goldman Sachs, which has a sell rating on Wipro, cited as concerns weak growth in revenue from maintenance and business process outsourcing - the industry's bread and butter - and said it expects Wipro to continue to underperform rivals.

Barclays also pointed to growth lagging that of its peers.

Wipro is looking to regain momentum in part by seeking more business from its biggest existing clients.

Revenue from its top 10 clients rose 4.1 percent from the previous quarter, faster than its overall IT services sales growth of 2.7 percent. The latter was the best performance for seven quarters.

That strategy has "started to pay off, it is doing so, although a little belatedly," said Harit Shah, analyst at Nirmal Bang Institutional Equities in Mumbai.

Wipro has been looking to build its presence in the financial services industry, which is the biggest consumer of IT services but where it lags rivals TCS and Infosys. Wipro said it won a big contract during the quarter from a large U.S. bank that it declined to identify.

STRONG INDUSTRY QUARTER

TCS and HCL also beat analyst estimates for September quarter profits, though profit at Infosys was weighed down by a one-off provision.

Infosys adjusted its full fiscal year revenue growth forecast range to 9-10 percent from 6-10 percent when it released its results earlier this month. TCS last week said it would hire more people this year than initially planned.

India's $108 billion IT outsourcing industry is likely to post revenue growth of 12-14 percent for the year ending March 31, the National Association of Software and Services Companies said earlier this year.

(Additional reporting by Tony Munroe, Sumeet Chatterjee and Abhishek Vishnoi; Editing by Christopher Cushing)