Wipro pumps IT up with 18% higher net

BANGALORE: Technology blue-chips in India are in a buoyant mood, despite the rising rupee chipping away at margins. On Friday, India’s third-largest IT services exporter Wipro announced robust second-quarter numbers with its net profit rising 18% to touch Rs 824 crore.

For the quarter ended September 30, 2007, the consolidated revenue of Wipro stood at Rs 4,785 crore, showing a year-on-year (YoY) growth of 35%. Some of its recent acquisitions have started bringing in revenues for Wipro. The Wipro scrip closed at Rs 500.55 on BSE up 0.83%, while the benchmark Sensex fell 438 points.

Wipro Technologies, the global IT services and products division, which accounts for 68% of revenue, recorded a topline of Rs 3,249 crore showing growing 10% quarter-on-quarter (QoQ) and 19% YoY. Wipro’s recent acquisition Infocrossing brought $6.4 million (Rs 25.6 crore) revenues during the quarter. The quarter also saw Wipro Technologies bagging two multi-year deals worth more than $100 million (Rs 400 crore).

Wipro Technologies’ sequential organic growth was similar to the other two large Indian IT services giants — TCS and Infosys. TCS QoQ revenue growth stood at 8.4%, while for Infosys and Wipro it was 8.8%. Wipro’s business interests span IT services, products, consumer care and engineering.

Wipro chairman Azim Premji said, “There is a huge movement now to put leading Indian companies in the evaluation set for deals of size what has been announced by us... Going forward, you can see more share for large Indian service providers in the global outsourcing space.”

The second quarter, which is traditionally the strongest three-month period for the IT industry, saw Wipro Technologies expanding its operating margins by 80 bps despite a rising rupee, wage increases and acquisition costs. Wipro CFO Suresh Senapaty said, “Wipro Technologies’ margins expanded by 80 bps with higher pricing, utilisation and the bulge mix.”

For the third quarter of the fiscal, Wipro Technologies has projected a revenue of $905 million (Rs 3,620 crore) of which around $60 million (Rs 240 crore) will flow in from acquisitions, showing a 14% QoQ growth in dollar terms.

However, Wipro will be under further pressure during the third quarter as it will be effecting a wage hike for its BPO employees and the revenue from its acquisition (Infocrossing) will be coming in at lower margins. Infocrossing’s margins are in the range of 10-12% compared with Wipro’s 22-24%.

Mr Senapaty said: “It will impact (Infocrossing revenue) but we think that over the next 6-8 quarters, it will be in sync with Wipro’s margins.” During the second quarter, Infocrossing was awarded a multi-year $275 million (Rs 1,100 crore) contract to provide fiscal agent services to Missouri HealthNet Program.

Wipro does not expect any sharp upward movement in the rupee in the next few quarters, but expects the currency to rise in the medium to long term. Currently, it has a forex cover of about $730 million, with total gross cover being $1.1 billion.

Mr Senapaty said, “We would have made a notional gain of Rs 1,600 crore if the rupee appreciation was not so volatile in the current fiscal.” The cash balance at the end of second quarter stood at $300 million and $700 million of debt. The other business segments of Wipro also posted higher growth than its global technology division.