Wipro reports 18% jump in Q3 net profit

Software-to-soap company Wipro Ltd showed an 18 per cent rise in net profit for the third quarter of this fiscal, but gave a muted guidance for the next quarter for its information technology services business, sending its stocks hurtling down by 8 per cent to hit a four-year low.

The last of India's top software firms to report third-quarter earnings, Wipro was under pressure to outperform expectations based on results from Infosys, HCL Tech and TCS, but it proved to be steady rather than spectacular on the way to meeting its revenue estimate.

Wipro said its forecast for the fourth quarter is expected to be between $1.59 billion and $1.63 billion (flattish to 3 per cent), keeping in view the uncertainty over the US fiscal cliff as well as on shaky demand for IT services.

While it remains positive about the demand environment in the next quarter, there was still some uncertainty about execution as well as expansion of new projects.

Earnings from its IT services (pre-tax) which contributed 92 per cent of operating income for the December quarter grew 13 per cent to Rs1,791.7 crore while revenues grew at the same level to Rs8,601.8 crore year on year.

On a sequential basis, IT services grew 2.4 per cent while operating margin expanded 20.8 per cent. The attrition rate went down 1.6 per cent to 12.9 per cent. The IT services added 2,336 people in the quarter.

The company said it will not hike salaries in the near term as it had already declared a hike earlier.

Wipro added 50 new customers in the quarter and one $100-million client. Six quarters ago it had only one $100-million client, against 10 at present.

On a consolidated basis, Wipro Ltd's net profit grew nearly 18 per cent to Rs1,716.4 crore while total income grew 10 per cent to Rs11,025 crore for the October-December quarter year on year. Earnings per share (EPS) were at Rs7. The company has declared an interim dividend of Rs2 per share.

''We have seen broad-based growth in the quarter with all our verticals growing sequentially. Our improvement in customer and employee engagement is reflected in client mining with 10 customers contributing more than $100 million and lower attrition,'' T K Kurien, executive director and chief executive officer, IT business for Wipro, said.

Wipro Chairman Azim Premji said the overall mood on economic growth continues to be muted but global corporations continue to leverage technology to drive revenues and productivity.

He said that the US economy was showing some improvement backed by increase in retail as well as consumer demand.

Global leaders he had spoken to are now more confident of the business environment than they were a quarter ago.

Kurien said while there was a 3 per cent plus pricing increase, volumes decreased by 1 per cent. He said the company has no clear sight of fiscal cliff talks which are still continuing. This would mean there is no clarity about when the budgets will come in.

Talking on the issue of the demerger of the non-IT businesses, Premji said that if necessary some stake will be sold to comply with Securities & Exchange Board of India norms on promoters' stake not exceeding 75 per cent in a listed entity.