By Sankalp Phartiyal and Samantha Kareen Nair
MUMBAI/BENGALURU Wipro, India's third-largest software services exporter, forecast muted revenue growth for its third quarter as clients in its biggest market, the United States, await clarity on business policies under the Donald Trump administration.India's $150 billion information technology (IT) industry struggled through most of 2016 as western clients delayed spending ahead of the U.S. presidential election and after Britain's shock move to leave the European Union.Clients are likely to remain uncertain about discretionary technology spending until the Trump administration takes key policy decisions on tax, healthcare and trade, Wipro's chief financial officer, Jatin Dalal, told Reuters on Wednesday. "Whether there is a pick-up in decision-making because the elections are behind, the answer is no, because clearly people don't see it as a continuation of the earlier administration," Dalal said.Wipro expects revenue from its IT services business to be in the range of $1.92 billion to $1.94 million, the company said.The company's IT services revenue grew to $1.9 billion in the quarter to Dec. 31, up 3.5 percent year on year.Wipro has acquired four businesses, including cloud services company Appirio, in the past two years, but analysts expect revenue growth to remain muted.
"Despite its acquisitions, Wipro's revenue growth lags the industry's and we believe it is likely to remain in the mid-single digits over FY17-19 due to a faster than expected deceleration in its legacy services revenue," UBS said in a research note this month.Indian IT revenues are likely to increase by a slower than expected 8 percent to 10 percent in constant currency terms in the year to March 31, a local lobby group said late last year.The prospect of higher costs also looms as IT companies, which fly engineers to the U.S. to service clients, may have to have to hire more local staff in a more protectionist technology visa programme expected under Trump."Across the United States and many other geographies, such as the UK, Singapore and South Africa, we have been aggressively localising," Wipro Chief Executive Abidali Neemuchwala said.
"There may be certain cost implications, but in the past we have been able to absorb the increase in visa fees."Wipro's bigger rivals Infosys Ltd and Tata Consultancy Services also say they are preparing for a more restrictive U.S. visa regime.Wipro also expects headwinds in its "healthcare and lifesciences business because of lack of clarity" around the Affordable Care Act in the United States, Neemuchwala added.Wipro's consolidated net profit fell 5.6 percent to 21.09 billion rupees ($309.6 million) for the three months to Dec. 31.
That compared with a profit of 22.37 billion rupees a year ago and topped the 20.87 billion rupees expected by analysts, Thomson Reuters data showed.Gross revenue rose 6.3 percent to 137.65 billion rupees.Wipro also announced a fifth acquisition, with an $8.7 million deal for Brazil-based Infoserver.Before its earnings announcement, Wipro shares closed 1.62 percent lower in a Mumbai market that was up 1.5 percent.($1 = 68.1300 Indian rupees) (Additional reporting by Rishika Sadam in BENGALURU; Editing by Elaine Hardcastle and David Goodman)
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Updated Date: Jan 25, 2017 22:33:11 IST