JOIN USRunning on large deals in the application and infrastructure space, India’s third largest IT services exporter Wipro on Thursday reported 29.5 per cent growth in consolidated net profit at Rs 2,103.2 crore for the first quarter of 2014-15 ended June 30.
The Bangalore-headquartered firm had posted a net profit of Rs 1,623.3 crore in the same period a year earlier. On a quarter-on-quarter basis (or sequential) the company posted 5.8 per cent decline in net profit due to pressure exerted by wage hikes and restricted stock options given to some employees during the Q1 period.
Wipro CEO T K Kurien said, “The demand environment continues to hold steady. In North America, we see a return of discretionary spending. Continental Europe continues to have significant potential for outsourcing IT services.”
Kurien said that the comfort level for Wipro would be a steady 4 per cent sequential growth. Operating margins were comfortable at 22.8 per cent during the first quarter compared to 20 per cent a year ago and 24.5 per cent during the previous quarter ended March 31, 2014.
“We continue to drive operational efficiency and invest in our strategy. Operating margins for the quarter was on expected lines, impacted largely due to wage hikes,” Wipro’s Chief Financial Officer Suresh Senapaty said.
“The decline in profit and margins is mainly due to the wage hikes. We gave average 8 per cent wage hikes to offshore employees and 2 per cent to onsite employees. About 80-90 per cent of the decline in profits and margins has been due to the wage hikes,” Senapaty added.
Consolidated net sales rose by 15.5 per cent to Rs 11,245.5 crore in the first quarter of the current fiscal from Rs 9,733.2 crore in the same quarter of 2013-14. Wipro had last week inked a 10-year deal to manage IT outsourcing for Canadian energy and utilities firm Atco.
"We continue to win large deals particularly in the application and infrastructure space. We recently announced our largest ever total outsourcing deal," Kurien said. These wins demonstrate client confidence in Wipro's transformational capabilities and reaffirm their faith in its client engagement strategy, he said.
The company’s IT services revenues during the first quarter were Rs 10,510 crore, an increase of 18 per cent year-on-year, though flat on a quarter-on-quarter basis."We continue to drive operational efficiency and invest in our strategy. Operating margins for the quarter was on expected lines, impacted largely due to wage hikes," Wipro CFO Suresh Senapaty said.
In dollar terms, revenues from IT services stood at $1.74 billion, a quarter-on-quarter increase of 1.2 per cent and year-on-year increase of 9.6 per cent. Wipro had guided this to be in the range of $1.715 billion-$1.755 billion. For the July-September quarter, the IT services revenue is forecast to be in the range of $1.77 billion-$1.81 billion.
The IT services segment had 147,452 employees as of June 30, 2014. The firm added 1,399 people on a net basis after a year of declining numbers in overall employee strength. Attrition went up marginally by one per cent for the quarter to touch 16.1 per cent driven by seasonality and a sign of reviving demand.
Thirty-five new customers were added during the quarter.
The Wipro stock closed at Rs 576.80 showing a gain of 1.31 per cent on Friday on the Bombay Stock Exchange.
In terms of geographic growth during the first quarter, Wipro’s largest market, Americas, remained flat sequentially at 0.8 per cent and Europe dropped marginally to 0.3 per cent. However, the India and Middle East business grew by 5.3 per cent while for APAC and other emerging markets it was 3.5 per cent.
The BFSI segment, which is the largest revenue generator for Wipro showed flat growth for the quarter.