Wipro Q1 net edges up, but clients are hard to come by

Bangalore: Wipro, India’s No. 3 software services exporter, on Wednesday said fiscal first-quarter profit rose 1.2 percent, beating estimates, as western clients increased spending on outsourced services to cut costs and boost efficiency and said revenue from IT services would grow.

[caption id=“attachment_44492” align=“alignleft” width=“380” caption=“Wipro, also listed on the New York Stock Exchange, in February reorganised its key IT outsourcing business in an effort to win more clients. Reuters”]  [/caption]

The Bangalore-based Wipro forecast revenue from its IT services unit, which accounts for three-quarters of its total revenue of $1.44 billion, to $1.46 billion in the fiscal second quarter, indicating a rise of 2.1-3.5 percent from the first quarter. Wipro’s forecast is based on a rupee exchange rate of Rs 44.9 to a dollar.

“We are seeing early signs of positive momentum after the reorganisation,” Wipro Chairman Azim Premji said in a statement.

Wipro, also listed on the New York Stock Exchange, in February reorganised its key IT outsourcing business in an effort to win more clients, barely three weeks after it surprised markets by removing the joint chiefs of the business and naming company veteran TK Kurien as the new chief executive. Wipro has been struggling to keep up with sector leaders Tata Consultancy Services and Infosys in winning large outsourcing contracts.

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The software giant has set a timeframe of 2-3 quarters to bounce back. It’s optimistic that it may catch up with the growth rate of rivals like TCS and HCL Technologies on the back of a strong deal pipeline and organisational restructuring that it undertook at the beginning of the year.

“We have messaged consistently from the time we started this whole process that it is going to take us 2-3 quarters to get back to industry leading growth rates,” Kurien said. “Some of the other numbers that we have produced around hiring, deal wins, I would look at those as indicators of what we believe the future will look like,” he added.

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Wipro said it added 49 new clients in the first quarter, and increased its workforce by 4,105 employees. Intensifying competition from global rivals IBM and Accenture has forced Indian technology firms to hike wages as much as 15 percent this year. The rupee’s rise is another concern for the $60-billion outsourcing sector, which exports a large chunk of its services to the United States but chalks up expenses in rupees.

Wipro, which develops software applications, integrates IT systems and manages call centres, said consolidated net profit rose to Rs 1,335 crore ($300 million) in the June quarter under international accounting standards, from Rs 1,319 crore a year ago. This compares with a Reuters poll forecast of Rs 1,316 crore for Wipro, which counts Citigroup, Cisco and Credit Suisse among its clients.

Earlier this month, Tata Consultancy beat estimates, but flagged concerns about global economic uncertainty. No. 2 software services provider Infosys reported quarterly profit that missed expectations and warned it could face slow client spending. Wipro’s shares, valued at about $23 billion, have fallen 15.5 percent this year, in line with a 15 percent drop in the sector index and an 8.5 percent fall in the wider Mumbai index.

Reuters