BANGALORE (Thomson Financial) - Wipro Ltd's third-quarter results were
lacklustre compared to its peers as India's third-biggest software company was
hit by wage hikes and posted a third-quarter net profit lower than market
estimates.
"Wipro's results, especially the guidance, relatively, are muted as its IT
spending is flat. We are worried as the company has disappointed us on the
margin front," Vikas Jadhav, IT analyst at Motilal Oswal.
The third-quarter net profit of the IT major, which also makes toilet soaps,
rose 4 pct over the previous quarter, driven by strong growth in all businesses
and improved price realisation for its services.
Analysts said Wipro has not been getting high realisation whereas its
competitors have managed to do so, adding they are unsure about the company's
bargaining power with its vendors.
"Fundamentally it (Wipro) is weaker compared to its peers and its attrition
rates continue to inch up," Jadhav added.
Wipro has an annualised attrition rate of 18 pct, which compares to Infosys
Technologies' 13.7 pct and Tata Consultancy Services' 12 pct.
The NYSE-listed company said its fourth-quarter margins will also be
adversely affected by wage hikes implemented in January.
"We have made a 2-4 pct hike in offshore salaries in January and this will
further impact margins by 1 pct in the current quarter. We expect operating
margins in the period to be in the narrow range," chief financial officer Suresh
Senapaty said.
The company also said its global IT margins in the third quarter fell by 100
basis points due to the Infocrossing acquisition.
Wipro's operating margins in the quarter remained flat with a positive bias
without the acquisitions, which have diluted its margins.
Its EBIT margin, including acquisitions, in the December quarter was 21.4
pct against 22.4 pct in the previous three-month period.
For the quarter to end-December, its net profit rose 4 pct to 8.54 bln
rupees from 8.23 bln in the preceding quarter as revenues rose 11 pct to 53.39
bln rupees from 47.84 bln earlier.
Analysts polled by Thomson Financial had expected net profit of 8.67 bln
rupees on revenue of 50.52 bln.
Global IT revenue for the third quarter came in at 910.1 mln usd, higher
than the company's expectation of 905 mln usd.
Chairman Azim Premji, however, was upbeat about the IT bellwether's
prospects, saying he sees continued momentum in all its businesses.
Analysts agreed with Premji and said Wipro's long-term prospects look
attractive and the acquisitions will start paying off soon.
Karvy Stock Broking Ltd's IT analyst, R Ravi, said he sees no negativity for
the company going forward and that the US slowdown is not going to impact it
much.
Commenting on the US economic slowdown, Senapaty said: "We have not seen the
slowdown affect us yet as all our businesses continue to hold good."
The third-quarter net profit of IT major Infosys came in at 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' 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.
The benchmark Bombay Stock Exchange (BSE) index closed 687.12 points lower
at 19,013.70.
Wipro's shares closed 1.11 pct down at 455.25 rupees on the BSE, while
Infosys' shares fell 1.78 pct to 1464.35 rupees, and Tata Consultancy Services'
shares slipped 1.98 pct to 904.40 rupees.
tresa.sherin@thomson.com
tsm/ukn/am
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