Increased closures of outsourcing deals has boosted Wipro Ltd’s net profit for the first quarter this fiscal 11 per cent to Rs 1,623 crore on a year-on-year basis.

The country's third largest IT outsourcer also maintained its 2-4 per cent forecast to $1,620-1,650 million for the second quarter, surprising analysts who expected a downward revision of the guidance.

Chief Executive Officer and Executive Director of Wipro T.K. Kurien told a news conference on Friday that as expected demand environment was picking up with discretionary expenses returning in specific pockets.

“The US economy continues to show signs of strong macroeconomic recovery. We have seen a pick up in deal closures in Q1 and we are hopeful that the momentum will continue in the coming quarters,” he said.

Wipro, which is now a pure play IT services company after it de-merged its non-IT business, reported revenues of Rs 9,735 crore, an increase of 5 per cent year-on-year.

IT service revenues increased a mere 0.2 per cent on a sequential basis to Rs 8,936 crore, and 4.9 per cent on a year-on-year basis, signalling lower growth when compared with TCS and Infosys. But pickup in large deal closures is expected to lead to strong order book in the current quarter, Kurien said.

With better-than-expected results in quarter one, Wipro joins TCS and Infosys, both of whom posted higher profits signalling better times for the domestic IT service companies.

But Ian Marriott, Research Vice-President Gartner, said that sustaining this growth momentum could be a challenge as competition from its peers was intense.

Effect of wage hike

The company’s CFO Suresh Senapaty admitted that the operating margins in the quarter were impacted because of wage hike for both offshore and onsite employees.

Wipro added 28 new clients during the quarter, much lower than rival Infosys, which added 66 new clients. However, this growth has been lopsided as growth in some geographies like the US has come down from 50.1 per cent in the fourth quarter to 49.7 per cent in this quarter. Also, revenues from India and West Asia, which contributes to 8 per cent of its revenues, have come down from 9.4 to 8.8 per cent.

Kurien said the company’s focus on account management has borne results with top 10 accounts growing at 2.8 per cent sequentially. There was also strong traction in retail banking, energy & utilities and the international business of healthcare and life sciences but there was softness in investment banking and the R&D businesses in telecom and hi-tech. Wipro also said it is carrying out certain ‘cultural’ changes in its company by realigning its culture to results and de-layering the organisation. It is also focusing on de-linking revenue growth from headcount via-non-linear initiatives and leveraging processes and tool to raise productivity and agility.

venkatesh.ganesh@thehindu.co.in

giriprakash.k@thehindu.co.in

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