Tough time ahead for Wipro as currencies stay volatile

As India’s third largest IT bellwether, Wipro too is battling to grow in a volatile currency market with uncertainty writ large due to global slowdown and sovereign debt crisis in Europe.

Though the global software major grew its topline and bottomline in double digits on annualised basis in rupee terms, its net income and revenue from its IT services business slipped sequentially in dollar terms in the first quarter (April-June) of this fiscal (2012-13) from previous quarter (January-March) of last fiscal (FY 2011-12).

As a result, the company Tuesday projected a flat growth of $1.54 billion revenue from its global IT services for the second quarter (July-September) of this fiscal (FY 2013).

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[caption id=“attachment_388721” align=“alignleft” width=“380”]  Azim Premji. Reuters[/caption]

“Revenue from our IT services business is expected to be $1.54 billion in second quarter (Q2) and marginally higher (1.3 percent) from $1,496 million ($1.5 billion) posted in first quarter (Q1) of this fiscal (FY 2013) under the International Financial Reporting Standards (IFRS),” the company said in a statement here.

The company posted net profit of Rs 1,580 crore in first quarter, registering 18 percent year-on-year (YoY) growth and 6.7 percent sequentially (quarter-on-quarter) as per the Indian accounting system.

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Similarly, consolidated revenue for the quarter under review (Q1) rose 24 percent YoY and 7.9 percent sequentially to Rs 10,653 crore, including Rs 8,314 crore from its global IT services.

Under the IFRS, net income for first quarter is $284 million and total income $1.92 billion, including $1.5 billion from IT services.

In dollar terms, net income, however, declined 2.4 percent sequentially from $291 million from previous quarter.

“We have seen high levels of volatility in currencies globally,” Wipro chief financial officer Suresh Senapaty said in the statement.

Unlike its peer Infosys, Wipro does not give annual revenue guidance.

“IT services revenue in dollar terms was impacted by $25 million due to cross-currency volatility,” Senapaty pointed out.

IT services business accounts for 78 percent of the company’s revenue and 93 percent of its operating income, which at 21 percent in first quarter was one percent lower YoY but fractionally (0.3 percent) higher sequentially from 20.7 percent in previous quarter.

“It today’s complex business environment, global corporations are increasingly investing in transformational technology initiatives to improve competitiveness. We see this shift as an opportunity for us to lead this change and help customers differentiate in this fast evolving market,” Wipro chairman Azim Premji said in the statement.

The IT services business added 37 clients during first quarter, taking the total number of clients to 919 as against 943 quarter ago and 937 a year ago.

“We have delivered revenues in line with our guidance in a volatile environment. We will continue to build differentiation and invest in technology driven business transformations for our customers as well as rewarding our talent,” chief executive TK Kurien said.

The global IT services division added 2,632 people in the quarter, taking the total headcount to 138,552 employees as on 30 June.

IANS