Wipro, the soaps-to-software major, riding on operational efficiencies has reported a 19 per cent increase in net profit at Rs 978 crore for the second quarter of the current financial year compared with the previous corresponding period. Revenues were up 36 per cent to Rs 6,507 crore. However, the guidance of its flagship IT services business, Wipro Technologies, indicates it will move up marginally during the third quarter, indicating tough times.
This global IT business division grew by 36 per cent to Rs 4,750 crore. In dollar terms, this business grew by 29 per cent YoY to $1,110 million and a sequential growth of 4 per cent. Profit before tax for the IT services business grew by 30 per cent to Rs 996 crore.
In terms of US GAAP, Wipro has reported a 6 per cent dip in sequential net profit at $177 million for the second quarter as against $190 million reported for the first quarter of the current financial year.
Chairman Azim Premji said, "The global economic environment has deteriorated significantly over the past couple of months, and our outlook is cautious in the near term given the extent of strain on the global economy. However, we are confident about the resilience of our business model to tide over these challenging times. Looking ahead, for the quarter ending December 2008, we expect revenue from our IT services business to be approximately $1,121 million."
Operationally, the IT services business posted a PBT of Rs 996 crore, a growth of 30 per cent YoY. Suresh Senapaty, executive director & chief financial officer of Wipro, said, "Our performance for the quarter is a strong reflection on our ability to deliver operational efficiencies. Rate realisation and fixed price projects mix improved sequentially by 200 basis points and 100 basis points, respectively. Our continued emphasis on driving utilisation through an integrated delivery model resulted in utilisation going up by 240 basis points. Strong gains on operational front helped us improve our margins in the IT services business despite effecting salary increases."
Increase in gross utilisation pushed this parameter to an all-time high of 79.2 per cent during the quarter. In spite of the pressure from offshore wage increase of about 7-8 per cent with effect from August, operating margin got a benefit of 10 basis points sequentially though improved realisation, utilisation and other operational parametres.
Most of the growth in the second quarter came from India and West Asia business which grew by 48 per cent year on year and 14 per cent sequentially, when compared to a relatively sluggish growth in the US and Europe. Its US business grew by a little over than 3 per cent and Europe by 4 per cent on sequential basis, reflecting the uncertainties that lie ahead for the IT services companies.
The IT services and product business contributed Rs 4,750 crore and Rs 1,002.3 crore to the company's top line. Consumer care and lighting contributed 8.1 per cent at Rs 526,9 crore, up 42 per cent YoY. The financial services sector delivered a moderate 7.8 per cent sequential growth, whereas retail & transportation gave 9.2 per cent in terms of sequential growth. Manufacturing and healthcare which contributed 19.4 per cent to the company's top line, grew 6.7 per cent sequentially.
Wipro, which had hedged of $2.1 billion as of September at a rate varying between Rs 40 and 47 per dollar, recorded a forex loss of Rs 32.1 crore when compared with a mark-to-market loss of Rs 327.3 crore in the first quarter of the current financial year. Putting together the amount which has been assigned to the outstanding in the balance sheet, the company had a hedging of $2.7 billion on a gross basis. Overall, the forex exposure had a positive impact of 38 basis points in operating profit.
The company had a cash and cash equivalents of Rs 2,015 crore at the end of the second quarter, when compared with a cash reserve of Rs 2,026.6 crore in the same period a year ago.
