Wipro profit fuelled by recovering outsourcing demand

By Harichandan Arakali

BANGALORE (Reuters) - Wipro Ltd , India's third-largest IT services exporter, beat quarterly profit expectations as revenue in its core business grew at the fastest rate quarter-on-quarter in almost two years, thanks to higher spending by its biggest clients.

Wipro followed its rivals in India's showpiece IT services industry with robust results and forecast December-quarter revenue in its main business would grow in a range of 1.8-3.6 percent in dollar terms from the previous quarter, slightly ahead of analyst forecasts for 1.5-3.5 percent growth.

"Wipro basically confirms the demand recovery that the industry is witnessing," Kuldeep Koul, an analyst at ICICI Securities, said in a note.

 

India's IT services sector is enjoying a brightening demand outlook from clients in the United States, its biggest market, as well as in Europe, where companies looking to cut costs are increasingly turning to outsourcing.

"Client confidence is on the uptick and we see it reflected in our results," Wipro's billionaire Chairman Azim Premji said in a statement.

Bangalore-based Wipro said consolidated net profit rose an annual 28.5 percent in the three months ended September 30 to 19.32 billion rupees, from 15.04 billion rupees a year earlier. That compares with the 18.6 billion rupee mean estimate of 29 analysts surveyed by Thomson Reuters I/B/E/S.

Revenue from its 10 biggest customers rose by 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.

Wipro is looking to regain momentum after its growth lagged that of Indian rivals Tata Consultancy Services (TCS) and HCL Technologies Ltd as well as U.S. based Cognizant Technology Solutions Corp , in part by seeking more business from its biggest existing clients.

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.

"There are certain signs that the turnaround is happening, it's not happened yet, but it's getting there."

India's IT sector index <.CNXIT> is up 48 percent this year, in line with Wipro's gains of 48.5 percent and far ahead of the broader Mumbai market's <.NSEI> 5 percent rise. Wipro shares ended up 1.7 percent at 514.80 rupees before the results.

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 Ltd . Wipro said it won a big contract during the quarter from a large U.S. bank that it declined to identify.

Wipro's clients include Apple Inc , Cisco Systems Inc and Citigroup Inc .

STRONG INDUSTRY QUARTER

TCS and HCL Technologies also beat analyst estimates for September quarter profits, although profit at Infosys Ltd 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 Sumeet Chatterjee in Mumbai; Editing by Christopher Cushing, Tony Munroe and Mark Potter)