Wipro booted as Q1 price realisations disappoint

BANGALORE: Shares of Wipro Ltd, India’s third-biggest computer-services provider, wiped out their gains for the year after the company reported lower price increases than Infosys Technologies Ltd.

The average price Wipro charged clients in the fiscal first quarter rose 1.4% from the previous three months, the Bangalore-based company said on Wednesday.

That compared with a 1.8% increase at Infosys, India’s second-biggest computer-services company. Wipro and Infosys provide services including software development and processing of insurance claims.

India’s software-services companies need to raise prices to counter wage increases caused by a shortage of skilled labour and rising competition from companies including International Business Machines Corp.

Wipro made three acquisitions since May in a bid to win higher-paying orders from clients such as Nokia Oyj, the world’s largest cell-phone maker.

“If companies are not able to raise pricing materially when the environment is good overseas, they will obviously face a problem when the business cycle turns,” Girish Pai, an analyst at East India Securities Ltd in Mumbai, told Bloomberg.
Pai is the only analyst among 25 tracked by Bloomberg who has a “reduce” rating on Wipro shares.

Shares of Wipro closed 5.51% lower at Rs 458.30 on the Bombay Stock Exchange. The stock is already the second-worst performer among India’s four biggest software companies this year.

Meanwhile, more customer wins and increased business from top clients helped Wipro post a higher-than-expected 45% jump in profits at Rs 620.4 crore and 39% increase in revenues at Rs 3,142 crores for the first quarter ended June.

The Bangalore-based IT major added 62 new clients, the highest in any quarter, including 20 it got from the six-technology and service companies acquired by the company over the last six months.

Wipro posted a net profit of Rs 428 crores on revenues of Rs 2,261 crores between April and June last year. “Our top 10 clients grew ahead of our overall company growth rate instilling confidence to our account management efforts,” Wipro chairman Azim Premji said on Wednesday.

Wipro’s revenue from global IT business for the quarter was $539.3 million, more than the forecast in April of $533 million. Wipro expects revenue from global IT services business between July and September to be $577 million.

“Our global IT services business continued to witness broad based growth, across verticals, geographies and service lines. The external environment remains buoyant. We see offshoring at the centre-stage of IT strategy of global corporations,” Premji, who owns 84% of the shares in the NYSE-listed company, said.

Wipro recorded income of Rs 14.2 crores from its acquisition of the European retail solutions provider Enabler Informatica in the quarter. Wipro also would look at more and bigger buys in the future while aiming at higher faster business growth in Europe, Premji said. Chief financial officer Suresh Senapaty said nearly 40 of the 62 clients added were long-term.

Wipro added 2,693 employees, including 409 people from three acquired overseas firms, taking its total strength to 56,435. The BPO arm employs 15,939 people, while nearly 40,500 people are deployed in the IT services business that earns 78% of the revenues and nearly 98% of the pre-tax profits for the company.

Senapaty said that salary for offshore employees would be increased in a staggered manner from September, which could have an impact of 1.6% on the total revenues.

“The results for the quarter were quite satisfying; we enhanced our strategic investments to sustain long-term growth even as we continued solid execution leading to improvements in operating performance,” Premji said.

The company will begin its BPO operations in Romania this month, while adding new centres in Goa and Vishakapatnam, Premji said.