Momentum good despite margin pressure: Wipro

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Wipro Ltd increased its quarterly profit by a smaller-than-expected 11 per cent, its slowest growth in four years, and said higher billing rates should help offset rising costs from wage hikes and a firm local currency.

Wipro, the No. 3 software services exporter, said it expects its global IT services business revenue to rise to about $955 million in the current end-March quarter, up nearly 5 per cent from the December quarter, despite prospects of a recession in its key US market.

"In terms of the business environment, the US economy in general and the financial services sector worldwide in particular are facing challenges," Chairman Azim Premji said.

"However, we have not seen any impact on our business so far. We continue to see good demand for our services."

Shares in New York-listed Wipro, which has a market value of $17 billion, ended down 1.1 per cent at Rs 455.35 in a Mumbai market that fell 3.5 per cent.

"Of the IT companies, Wipro's numbers are weaker and its guidance for the next quarter is also a bit muted," said Vikas Jadhav, IT analyst at Motilal Oswal Securities.

"But no one's negative and at least the frontline firms will be able to command higher billing rates."

Wipro said net profit rose to 8.26 billion rupees ($210 million) in its fiscal third quarter ended Dec. 31 under US accounting standards, up from 7.45 billion a year earlier -- its slowest annual pace of growth since the September 2003 quarter.

October-December revenue grew nearly a third to 52.36 billion rupees, helped by large outsourcing contracts, including five multi-year, multi-million dollar deals.

A Reuters poll had forecast quarterly net profit of Rs 8.65 billion on revenue of Rs 52.78 billion.

Comparatively lower wages and competent English-speaking workers have helped Indian services firms grab outsourcing deals from overseas firms, but a strong rupee, soaring salaries and prospects of a US recession are worries going forward.

"During the quarter, improved realisations and rationalisation helped us fully mitigate the pressure on profitability on account of the foreign exchange impact," Wipro Chief Financial Officer Suresh Senapaty said.

He said global IT services margins fell by 100 basis points from the previous quarter on the acquisition last year of US firm Infocrossing, which was completed in the last quarter.