Bangalore: Software firm Wipro Ltd flagged on Friday a growth outlook better than sector bellwether Infosys Ltd's and met expectations with a 10.43 percent rise in quarterly profit, driven by a weaker rupee, sending its shares up 5 percent.
Wipro, India's No. 3 software services exporter, is also expected by industry analysts to catch up with its bigger rivals in earnings growth rates in the next few quarters after undertaking a wide-ranging restructuring.
"Wipro's guidance looks better in comparison to Infosys and that has come as a positive surprise given the current economic uncertainty," said Rohit Anand, a sector analyst with brokerage PINC Research.
Wipro shares rose as much as 5.1 percent after the results to their highest level in more than two weeks, while the main BSE index was up 0.6 percent. Infosys, the country's No. 2 software exporter, was down 0.2 percent.
Bangalore-based Wipro said it expects USD 1.52 billion to USD 1.55 billion revenue in the March quarter from its IT services unit, which contributes three-quarters of total sales, a sequential rise of nearly 1 to 3 percent.
Infosys last week said it expects its revenue in the March quarter to be in the range of USD 1.806 billion to USD 1.810 billion, unchanged from its October-December revenue of USD 1.806 billion, citing slower technology spending due to Europe debt crisis.
Wipro and larger rivals Tata Consultancy Services Ltd and Infosys are part of India's USD 76 billion software services industry that gets more than 90 percent of its revenue from the United States and Europe.
The eurozone sovereign debt crisis is a worry for the sector that has been looking to increase its sales to the region to hedge against excessive exposure to the United States, which brings in about half of Wipro's IT services sales.
Global spending on information technology will rise at the slowest pace in three years in 2012 as Europeans, worried about the region's debt crisis, are cutting back on investments, research firm Gartner Inc said this month.
Gartner predicted global IT spending would rise 3.7 percent in 2012, down from its earlier estimate of 4.6 percent. The forecast for Western Europe was slashed to a 0.7 percent drop in spending from a previously expected rise of 3.4 percent.
"The overall macroeconomic sentiments continue to be uncertain and we are monitoring it closely," said Wipro's chairman, Azim Premji, who quit Stanford to take over his father's ailing vegetable oil business in the mid-1960s, before diversifying into hydraulic cylinders in the 1970s and information technology in 1980.
Wipro Chief Financial Officer Suresh Senapaty said the company expects clients in the retail, investment banking and telecom sectors to delay spending on technology services because of global economic uncertainty.
The company, however, expects most other technology spending budgets to remain unchanged in 2012, he said.
Indian software services companies also face fierce competition from bigger global rivals, including IBM Corp and Accenture Plc in winning big technology outsourcing deals.
Wipro, whose clients include Citigroup, Cisco and Credit Suisse, said that it had received positive feedback from clients on its restructuring.
"The restructuring seems to be working well in their favour and the market concerns around it is easing now," said Anand of PINC Research. "The difference in Wipro's growth rates with the top two players may come down over the next few quarters."
Infosys last week trimmed its dollar sales forecast for the fiscal year ending in March while sector leader Tata Consultancy met market expectations with a 23 percent rise in quarterly profit this week.
"We have seen positive feedback from customers and employees on our restructuring approach," T.K. Kurien, chief executive of Wipro's IT business, said in a statement.
Kurien took over early last year after a management shake-up by billionaire Premji that saw the removal of its joint chief executives to reverse the widening gap between Wipro and its larger rivals.
Wipro's consolidated net profit rose to Rs 14.56 billion in its fiscal third quarter ended December 31 under international accounting standards from Rs 13.19 billion a year earlier.
Sales rose 28 percent to Rs 99.97 billion as the company added 39 new clients in its IT services business. Analysts polled by Reuters expected profit of Rs 14.81 billion on net sales of Rs 97.41 billion.
The weaker rupee, which fell nearly 16 percent against the dollar in 2011 to be the worst performer among Asian currencies, added 70 basis points to Wipro's profit margins in the December quarter over the previous quarter, Senapaty said.
IT services revenue climbed to USD 1.51 billion, up 2.2 percent from July-September.
Wipro's shares, valued at about USD 19.55 billion, fell nearly 19 percent in 2011, compared with a 16 percent drop in the sector index and a roughly 25 percent fall in the main Mumbai index.
First Published: Friday, January 20, 2012, 09:26