India's third largest software exporter Wipro beat street expectations to record a 29 per cent increase in net profit to ₹2,226 crore during the fourth quarter of FY14.
However, the company gave a weak guidance for the first quarter of FY15 cautioning investors that certain India deals as well as slowdown in the retail sector in the US could impact its earnings during the period.
The company reported revenues of ₹11,703 crore, a 22 per cent growth when compared on a year-on-year basis and 3 per cent growth on a sequential basis.
Wipro does not give a full-year guidance but said that it sees demand for its outsourcing services in the second and third quarter.
“First quarter tends to be seasonally a weak quarter and we have guided for that,” said TK Kurien, Executive Director and CEO, Wipro. The way we are exiting the fiscal 2014 and our deal pipeline points to a growth ahead, he added. However, he did not give details of the deal pipeline.
Key reasons One of the reasons for issuing a weak guidance, Kurien pointed out was because of the impact their India business might have as the Government has stalled some of the deals this year.
Additionally, poor retail business also added to the company’s woes as severe weather in the US and a change in shopping pattern this holiday season impacted the company’s deal pipeline, a fact which others software exporters faced too.
For the whole year, Wipro reported revenues of ₹43,762.8 crore, a 16 per cent growth when compared with fiscal 2013. Net profits came in at ₹779.6 crore, a 27 per cent increase over 2013 fiscal.
Final dividend The company also reported a final dividend of ₹5 per share, taking the total dividend to ₹8, which translates to 30 per cent, lower than Infosys’ 40 per cent payout for 2014 fiscal.
In the fourth quarter, the company saw its operating margins go up to 24.5 per cent, higher than Infosys which the company said is highest in the last three years.
Wage hike plan This partly has to do with low employee additions. The company had a total employee headcount of 146,053, which translated into an increase of a mere 241 employees for the whole year. Cross town rival Infosys added 3,717 employees for the whole year.
While the company is still working on wage increases, Saurabh Govil, head of HR said the company is planning to give hikes in the range of 6-8 per cent for India employees and 2-3 per cent for onsite employees.
Ankita Somani, research analyst with Angel Broking, said while the fourth quarter numbers came in well ahead of expectations, the revenue growth outlook for the next year disappointed. “Wipro has recovered strongly from lower levels after posting better than expected results in the last two quarters but we believe it will still lag other larger peers such as TCS and HCL Tech in terms of revenue growth rates in FY2015,” Somani said.
Wipro shares closed at ₹585.55 which was 2.4 higher than the previous closing price.