Wipro posts 24% jump in Q2 profit; optimistic on future growth

Wipro Thursday posted a 23.8 percent jump in consolidated net profit at Rs 1,610.6 crore for the second quarter of this fiscal amid the software powerhouse remaining cautiously optimistic about the future growth.

Bangalore: Wipro Thursday posted a 23.8 percent jump in consolidated net profit at Rs 1,610.6 crore for the second quarter of this fiscal amid the software powerhouse remaining cautiously optimistic about the future growth.

The country's third largest software exporter had earned net profit of Rs 1,300.9 crore in the same quarter of 2011-12.

Wipro, which follows international accounting standards, saw its share on BSE register a smart gain of three percent post results.

"... What's running more distinct for the overall economy in the US is IT demand is still holding out. It is not the bumper demand which was there three years back and two years back, but it’s reasonably strong," company Chairman Azim Premji said at a press conference here.

Total income rose 17 percent to Rs 10,657 crore for the second quarter of 2012-13. Earnings from the IT services, which contributed 79 percent of Wipro's total revenues for the quarter, stood at Rs 8,373 crore, up 23 percent year-on- year.

Wipro said its IT services revenue met its guidance for the quarter under review and stood at USD 1,535 million in dollar terms. The guidance range for the three-month period, given in the first quarter of the year, was USD 1,520 million -USD 1,550 million, it said.

For the third quarter, the company expects the revenues from IT services business to be higher in the range of USD 1,560-1,590 million.

"We have chartered a new course for Wipro by demerging our diversified Non-IT businesses. I am confident that the demerger will enhance value for all our stakeholders and provide fresh momentum for growth for each of our businesses," Premji added.

Wipro has announced demerger of its non-IT businesses like Consumer Care & Lighting into a new company.

Wipro Executive Director and Chief Executive Officer (IT Business) T K Kurien said: "The demand estimate has not really changed too much over the past quarters for us, but in the end of Q2 we saw an uptick coming in, in terms of just deal closures, so to that extent again cautiously optimistic."

"I would not say that I see a blowout future ahead of us", he said, adding he sees more optimism than in the last quarters.

Kotak Securities Head of Private Client Group Research Dipen Shah said: "Wipro's results and 3Q guidance were almost in line with our estimates... Wipro has given a slightly optimistic outlook as far as decision making by client is concerned".

On the global business environment, Kurein said, "If one looks at large outsourcing deals, there were quite a few of them out in the US".

"Hopefully, after the elections, we see that trend kind of accelerating. Because the reality is that in the US growth is coming back, so again cautiously optimistic about the US," he said.

The US and Europe together account for over 85 percent of Indian IT industry's revenues.

Kurein added: "As far as Europe is concerned, there are again plenty of opportunities, but primarily opportunities driven by large term cost plays...Pipeline in both these geographies are looking pretty strong. What we are waiting for is closure. We are hoping to see that in the next couple of quarters".

The domestic IT services sector, pegged at USD 100 billion, has seen a slowdown in growth in recent quarters mainly due to cuts in client budgets and delay in deal closures on uncertain economic environment.

The company's IT products and Consumer Care and Lighting (CCL) businesses contributed 9 percent each to the overall revenues.

While IT product business declined 10 percent to Rs 899 crore, CCL grew 26 percent year-on-year to Rs 1,008 crore.

Last month, Wipro's larger rivals TCS and infosys had posted a growth of 49 percent and 24.3 percent in net profit for the second quarter of FY13, respectively.

HCL Technologies, which also announced its first quarter results last month, posted a strong growth of 78.1 percent in profits.

Wipro Executive Director and Chief Financial Officer Suresh Senapathy said: "In the India market, interest rates are higher, currency is an issue, telecom is not spending money, no capital investments are taking place.

"But recent past developments that have happened with the new Finance Minister and a cabinet reshuffle, definitely, there is much more hope than before. We are also banking on it to be able to get back some of those growth rates as we go forward".

Wipro's IT services segment had 1,40,569 employees as of Sept 30, 2012, an increase of 2,017 people in the quarter. It also added 53 new customers, including a multi-year, multi-million IT infrastructure transformation deal from one of the largest non-profit healthcare providers in the US.

"The company added one client in the USD 100 million plus revenue bracket which is a positive indication of company's improving client mining capabilities," Angel Broking, Research Analyst IT Ankita Somani said.

Wipro scrip closed at Rs 364.95 on the BSE, up 0.98 percent from its previous close. Meanwhile, the broader market ended at 18,738.92, higher by 177.22 points or 0.95 percent.