Large infra, app deals raise Wipro Q1 net profit 29.5% to Rs 2,103 cr

Bangalore: IT services major Wipro today reported a 29.5 percent growth in its consolidated net profit at Rs 2,103.2 crore for April-June period, helped by largedeals in the application and infrastructure space.

The city-headquartered firm had posted a net profit of Rs 1,623.3 crore in the year-ago period, it said in a BSE filing.

Consolidated net sales rose by 15.5 per cent to Rs 11,245.5 crore in April-June quarter of the current fiscal from Rs 9,733.2 crore in the same quarter of 2013-14.

The figures are in accordance with International Financial Reporting Standards (IFRS).

Wipro Chairman Azim Premji said: “We see a significant rise in business confidence in developed markets as well as India.”

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The new government at the Centre has brought about hope and confidence in the minds of all stakeholders through reform pronouncements with fiscal prudence, he added.

In US dollars, Wipro reported a net profit of $351 million and revenue of $1.9 billion.

Revenue from IT Services stood at $1.74 billion, a quarter-on-quarter increase of 1.2 per cent and year-on-year increase of 9.6 per cent. Wipro had guided this to be in therange of $1.715 billion-$1.755 billion.

For the July-September quarter, the IT services revenue is forecast to be in the range of $1.77 billion-$1.81 billion.

“We continue to win large deals particularly in the application and infrastructure space. We recently announced our largest ever total outsourcing deal,” Wipro CEO T K Kurien said.

These wins demonstrate confidence of clients in Wipro’s transformational capabilities and re-affirm their faith in its client engagement strategy, he added.

IT Services revenue in rupee terms was Rs 10,510 crore, an increase of 18 per cent year-on-year.

The IT services segment had 147,452 employees as of June 30, 2014 and the firm added 35 new customers for the quarter.

“We continue to drive operational efficiency and invest in our strategy. Operating margins for the quarter was on expected lines, impacted largely due to wage hikes,” Wipro CFO Suresh Senapaty said.

Analysts said the April-June quarter has been lukewarm for the country’s third largest IT services firm.

“Its been a lukewarm period overall for the IT industry at large, including Wipro. That said, few contracts over the last quarter has helped Wipro get access to more high-profile deals at a time when outsourcing demand looks stronger as compared to previous years,” Greyhound Research CEO Sanchit Vir Gogia said.

Wipro shares today rose by 1.31 per cent to close at Rs 576.80 apiece at the BSE.

Wipro’s IT products segment delivered revenue of Rs 770 crore, registering a decline of 6 per cent over the year-ago period, after Wipro’s strategy to focus on services business by engaging in selective transformational deals where products form an integral part of the solution.

Segment wise, BFSI contributed the most towards Wipro’s revenues in the first quarter followed by Manufacturing & Hi-tech, Energy, Natural Resources & Utilities, Global Media & Telecom, Retail, Consumer, Transport & Government and Healthcare & Life Sciences.

Geography wise, the US was the main revenue generator followed by Europe, Rest of the World and India.

Last week, Wipro had announced that it had entered into a multi-million dollar dual pact with ATCO through which the company will provide a complete suite of outsourcing solutions to the Canadian firm as well as acquire its IT services arm.

Wipro signed a series of Master Services Agreements with ATCO under which it will acquire ATCO’s IT subsidiary for an all-cash consideration of CAD 210 million ($195 million or over Rs 1,176 crore).

Besides, Wipro also secured a 10-year IT deal with ATCO for providing outsourcing services, that will result in annual revenues of over CAD 120 million ($112 million or over Rs 675 crore) for Wipro for the next 10-years.

Gogia said ATCO deal will definitely add to Wipro’s overall growth, particularly in the Utilities vertical.

“However, currently it is early to comment on the actual benefits and outcomes will only be visible once all formalities have been completed,” he added.

Going ahead, Gogia said the company is expected to gain substantially if it manages to crack the Rs 1,200 crore call centre deal from Reliance Communications.

Separately, its active conversations with the government on various pending issues like taxation and allotment of new SEZ are clear signs of the expected growth in the near future.

Wipro is also planning to invest in upcoming software firms, a clear sign of their intent to also sell software to their customer base, Gogia said.

Attrition still remains one of the key issues that the management needs to address, he added.

Gogia said attrition still remains one of the key issues that the management needs to address.

Wipro Senior VP Human Resources Saurabh Govil said: “We have RSUs, and salary increases so we expect to see impact of that in the coming quarters.

“Also, we are seeing that among the high performers at Wipro, attrition rates have fallen drastically, which makes for about 25 per cent of our total workforce.”

Last week, Wipro had announced that it signed a series of Master Services Agreements with ATCO under which it will acquire ATCO’s IT subsidiary for an all-cash consideration of CAD (Canadian dollar) 210 million (USD 195 million or over Rs 1,176 crore).

Besides, Wipro also secured a 10-year IT deal with ATCO for providing outsourcing services, that will result in annual revenues of over CAD 120 million (USD 112 million or over Rs 675 crore) for Wipro for the next 10-years.

Gogia said ATCO deal will definitely add to Wipro’s overall growth, particularly in the Utilities vertical. Going ahead, Gogia said the company is expected to gain substantially if it manages to crack the Rs 1,200 crore call centre deal from Reliance Communications.

Separately, its active conversations with the government on various pending issues like taxation and allotment of new SEZ are clear signs of the expected growth in the near future.

Wipro is also planning to invest in upcoming software firms, a clear sign of their intent to also sell software to their customer base, Gogia said.

PTI