BANGALORE (Thomson Financial) - India's third biggest software company,
Wipro Ltd, is expected to post a higher third-quarter net profit over the
preceding quarter on strong revenue growth with contribution from its acquired
businesses, especially Infocrossing, as well as overcoming the currency
"threat".
"We expect a rise in the company's topline, as well as net profit with the
components of Infocrossing coming in this quarter," Vikas Jadhav, IT analyst
with Motilal Oswal said.
"We don't see rupee (appreciation) as a major devil this quarter as it
already appears to be priced in," he added.
The rupee ended at 39.4 against the dollar on Dec 31, up 0.8 pct on the rate
at end-September, making the movement against the dollar relatively stable.
The NYSE-listed company is expected to post a 8-12 pct rise in its net
profit and an 11-14 pct growth in total revenues for the quarter ended Dec 31,
compared with the September quarter.
Analysts polled by Thomson Financial expect Wipro to report a third-quarter
net profit of 8.67 bln rupees on revenue of 50.52 bln.
The company is also expected to show an improvement in its margins despite
wage inflation, as billing rates have risen considerably along with turnover
from its IT business and offshoring services.
"Even if you don't assume contribution from Infocrossing, we are confident
of a double-digit growth in profits on higher billing rates. There will be a 7.5
pct growth in its global IT sales, excluding Infocrossing revenue," Ravi R, IT
analyst at Karvy Stock Broking said.
According to analysts, the top-tier IT companies will report continued
strong sequential topline growth in the traditionally slow third quarter, which
has fewer billing days due to the holiday season.
Wipro's billing rates are also anticipated to continue with the upward
trend, driven primarily by a consistently improving business mix.
"With the ever-increasing trend of output-based pricing catching on with
Indian IT companies, billing rates could get a further boost going ahead, as
Indian vendors show greater willingness to share risks with their clients,
resulting in better pricing," Angel Broking said in its research note.
This is clearly a strong lever that software companies have, to offset the
pressure exerted by an appreciating rupee and wage inflation, noted the
brokerage firm.
The Global IT Services revenue, which account for most of the company's
total business, might rise by 9-14 pct in rupee terms. Wipro had forecast Global
IT revenue of 905 mln usd, including revenues of around 60 mln usd from
acquisitions, for the third quarter, which is up 13.6 pct from the second
quarter.
However, the key issues to watch out for the quarter include the performance
of its product engineering vertical and the company's attrition rates, which is
way above peer group averages, research firm, Prabhudas Lilladher said.
The company's product engineering vertical could witness lower growth due to
slowdown in telecom OEM and semiconductor customers, analysts said.
"Although, Wipro is now very focused on the engineering and R&D side
especially of its telecom business, we still see some issues related to its
telecom clients," Jhadav of Motilal Oswal said.
Wipro's competitor and IT bellwether Infosys Technologies Ltd reported a
third-quarter net profit of 12.31 bln rupees on revenues of 42.71 bln rupees, up
from profit of 11.0 bln rupees on revenues of 41.06 bln rupees in the preceding
quarter.
Tata Consultancy Services Ltd's third-quarter consolidated net profit rose
to 13.27 bln rupees from 12.52 bln rupees in the second quarter and total sales
grew to 59.23 bln rupees from 56.40 bln rupees.
tresa.sherin@thomson.com
tsm/ukn/rw
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