For the third quarter ending December, the Azim Premji-led firm projected IT services revenues in the range of $1,560-$1,590 million, a growth of 1.1-3.1%. Analysts had expected a revenue growth guidance of 2-4%. The stock market did not seem particularly enthused, rising marginally by 0.98% to close at Rs 364.95 on the BSE.
For the July-September period, Wipros consolidated net profit rose to R1,611 crore from R1,580 crore, up 2% sequentially. Year-on-year profit was up 24%. Revenue growth during the quarter was almost flat, sequentially, reaching R10,657 crore from R10,653 crore. On a year-on-year basis it rose 17%.
Wipro showed an improvement on the pricing front with offsite price realisation up by 1.9% and offshore by 1.5%. But its 0.2% volume growth for the second quarter was below par, with rival Infosys posting a 3.6% growth.
IT services revenue, its flagship business, was up 23% year-on-year to R8,373 crore, while in dollar terms revenue was up 4.6% at $1,541. Sequentially, profit from IT services was down marginally by 0.74% to R1,731 crore from R1,744 crore in Q1. Y-o-y it was up 27%.
Wipro chairman Azim Premji pointed out that the company had a decent quarter, but not a great one. TK Kurien, CEO, IT business, said retail demand was coming back in the US. We have delivered revenues in line with our guidance and are continuing to see consistent improvement in our engagement with customers and employees, Kurien said. In Q2 of next year we are likely to see growth coming back in the US, he said, adding that whoever comes to power in that country, there is some likelihood of policy changes.
Suresh Senapaty, CFO, Wipro, said that they were able to realise higher pricing as larger number of their IT contracts were being delivered through outcome and fixed price models. Under these models, the IT company has had greater flexibility in deploying resources helping them in keeping costs down, he said.
The operating margins of Wipros IT services business also remained stable at 20.7% despite the impact of wage increase and currency movement. However, it is very unlikely that the company would see an increase in margins in the near future as it is still in an investment mode in areas such as sales and marketing, new technology areas, standardisation of processes, etc.
Commenting on Wipros results, Dipen Shah of Kotak Securities said, The focus on non-linear initiatives has yielded results for the company in the second quarter with average realisations rising by one percentage point Wipro has given a slightly optimistic outlook as far as decision making by clients is concerned and we expect growth rates to trend higher over the next few quarters.
Wipro said there has been significant improvement in its attrition levels, which was down to 14.6% from 15.6% in the preceding June quarter. The company witnessed a net addition of 2,017 employees during the quarter. The IT services segment had 140,569 employees as of September 30.
Wipro added 53 new customers in its IT services business, taking its total number of active base to 939 as compared to 919 in the sequential quarter. The company is looking at ways to mine deeper with customer accounts by forming a strong sales force to get new accounts.