Wipro Q2 net profit rises 7.9 per cent at Rs 2,085 cr

Even as India’s third largest IT services exporter Wipro on Wednesday missed market forecasts by a whisker as it registered net profit after tax of 7.9 per cent at Rs 2,085 crore during the second quarter of 2014-15 ended September 30 (Rs 1,932 crore in the corresponding period last year), the firm said that it saw stronger sales growth into the last three months of calendar year 2014.

IT services margins were 22 per cent, including profit from sales of a strategic investment during the quarter.Wipro Chief Executive Officer TK Kurien  said the technology landscape is undergoing change and the company sees multiple areas of opportunity to gain market share.

“Overall, the demand environment continues to hold steady. In North America, we see discretionary spending returning. In Europe, we see opportunities for growth given lower levels of outsourcing penetration. We also see temporary cutbacks in discretionary expenses from certain industry segments, as they adjust to structural changes,” he said.

Sales hold up against headwinds

He said that the company sees emerging opportunities in continental Europe, where outsourcing has yet to expand to US levels, despite Wipro’s share of revenues from Europe declining sequentially by 4.3 per cent in the second quarter.

Sequentially, the company’s net income during the July-September period declined 0.9 per cent to Rs 2,098.3 crore compared to Rs 2,118 crore in the previous quarter ended June 30. Kurien added that he expects the "headwinds" in some of the company’s key accounts to continue till December this year, even though it would not impact sales significantly.

Net sales of the Bangalore-headquartered IT major for the year ended September 30 increased 7.5 per cent at 11,816 crore compared to Rs 10,990 crore in the corresponding period last year.

In dollar terms, the IT services revenue was $1,771.5 million, a sequential increase of 1.8 per cent  and YoY increase of 8.6 per cent.

Net sales were up 5 per cent in the July-September period compared to Rs 11,245.5 crore in the first quarter.During the quarter ended September 30, IT services registered 8 per cent growth to Rs 10,923 crore, though IT products declined 2 per cent to Rs 915.2 crore. From a vertical perspective, Wipro witnessed year-on-year growth of 20.1 per cent in healthcare, life sciences and services, while energy and utilities, and global media and telecom grew 15.4 per cent and 8.5 per cent year-on-year.

Global Infrastructure Services saw sequential growth of 8.1 per cent.

The Americas contributed 51 per cent of the company’s topline with 11.3 per cent growth, while Europe grew 4.6 per cent, and India and the Middle East grew 20 per cent on a year-on-year basis.

Non-linear strategy

"The firm continues to execute our stated strategy of leveraging platforms for non-linear growth and creating differentiated solutions around the new technology paradigms," Kurien said.

Wipro does not issue a yearly guidance, but on Wednesday guided revenues for the third quarter ending December 31, 2014 in the range of $1,808 million-$1,842 million.

Earnings before interest and tax (EBIT) saw marginal increase to Rs 2,402.3 crore from Rs 2,400.3 crore on a quarter-on-quarter basis. However, EBIT margins declined 84 basis points to 22 per cent during the quarter from 22.84 per cent in the previous quarter, lower than analyst expectations of Rs 2,428.5 crore and 22.4 per cent respectively.

Attrition inched down to 16.9 per cent during the July-September period as against 17 per cent a year ago. Wipro’s utilisation rates during the second quarter were far lower than peers TCS (86.2 per cent) and Infosys (82.3 per cent), despite improving to 70 per cent from 68.7 per cent at the end of the first quarter.  Wipro added 50 new clients during the quarter, and hired 6,845 people as headcount reached 1,54,297 people as of September 30, 2014.