Wipro profit up, meets expectation

Revenues from IT services to grow between 1.7 % and 4 % in Q2

July 25, 2014 01:35 am | Updated November 16, 2021 05:33 pm IST - BANGALORE:

IT services major Wipro, on Thursday, announced a net profit of Rs. 2103.2 crore for the quarter ended June, registering a growth of 29.5 per cent compared to the year-ago quarter.

Sequentially, however, net income is down by 5.6 per cent in a quarter where the company saw revenues rise 15.5 per cent year-on-year to Rs. 11245.6 crore.

Barely a week after announcing that it has landed one of its largest-ever outsourcing deals with Canadian energy and utilities firm Atco, and a bundled $195 million acquisition, Wipro announced that it expected revenues from IT services to grow between 1.7 and 4 per cent in the quarter ending September. IT services revenues grew sequentially by 1.2 per cent in the current quarter, meeting the company’s quarterly forecast for the period. These revenues grew year-on-year by 9.6 per cent, compared to the 4.5 per cent growth the company reported in the same quarter last year.

Wipro CEO C.T. Kurien said that the numbers show “substantial improvement in growth rates”, adding that though positive he felt the company “had a long way to go” to reach a consistent 4 per cent quarterly growth rate.  The year-on-year growth for services was 18 per cent, while products saw a degrowth of six per cent in the quarter.

The company attributed the sequential decline in incomes to wage hikes – 8 per cent offshore, 2 per cent onsite -- effected June 1 and restricted stock options given to some employees during the quarter. At 22.8 per cent, operating margins were down by 150 basis points. A good 80-90 per cent of this decline is due to the wage hikes, Wipro CFO Suresh Senapathy said. 

Combating attrition

The wage hike measures, however, were imperative given the company saw quarterly attrition rise by a percentage point to 16.1 per cent. Mr. Kurien said that there was headspace in employee utilization, which stood at 68.7 per cent, lagging industry peers. “Our attrition rates are down by half when it comes to the top 25 per cent (in terms of performance) and that is what we want to hold on to. Efforts are on to stem overall attrition in the next quarter,” he said. On increasing headcount, HR head Saurabh Govil said that local hiring [onsite] was going to be a big component of the company’s hiring plans. Other hires would be based on business needs, he explained.

Among verticals, global media and telecom performed best, registering a growth of 4.3 per cent. Geographies-wise, the company saw grew 13.8 on a year-on-year basis in India and Middle East, a figure that Wipro hopes will continue to grow given “recent changes in government” in India. He added that discretionary spending was coming back in the U.S., despite some pockets of weakness that were largely industry-led or client-led. He held that Europe continued to be “hot” in terms of outsourcing deals, and the company was focused on the potential market there.

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