Wipro net up 27%, margins at 3-year high

Wipro net up 27%, margins at 3-year high

Wipro net up 27%, margins at 3-year high

In the form of a quarter that delivered, Wipro on Friday reported 27  per cent rise in net income from continuing operations to Rs 2,014 crore in the third quarter of 2013-14, ended December 31, 2013, in comparison with Rs 1,589.5 crore in the corresponding quarter of the previous year.

Net income from continuing operations includes a non-recurring expense incurred due to cessation of manufacture of Wipro’s branded desktop, laptops and servers.

The Azim Premji-led IT company posted revenues of Rs 11,330 crore from continuing operations during the third quarter, an increase of 18 per cent year-on-year (YoY). Commenting on the results Wipro Chairman Azim Premji said in a statement, “As the global economy is progressing towards stability, we see optimism amongst clients, especially in the West. Corporations are leveraging technology to reduce operational costs and investing resources in differentiating themselves in the marketplace.”

Revenues from the key IT services business were $1,678.4 million, an increase of 6.4  per cent compared to the same quarter of the previous year and 2.9 per cent sequentially. IT services earnings before interest and tax (EBIT) stood at $384 million, an increase of 33 per cent YoY.

Wipro’s IT services operating margins improved by 54 basis points to 23 per cent, the highest registered by the company in three years. The company had eleven accounts greater than $100 million, at the end of the quarter, an addition of one account over previous quarter.

The company’s net utilisation (excluding trainees) stood at 74.3 per cent, showing no change from the previous quarter.

“Our strategy of ‘standardization at the core’ is yielding results. Our investments in automation and productivity tools have driven efficiencies and helped us expand margins of IT Services by 54 basis points to 23 per cent,” Wipro Executive Director & Chief Financial Officer Suresh Senapaty said.The attrition rate increased 80 basis points to 14.3 per cent at the end of the third quarter from 13.5 per cent in the quarter ended September 30, 2013.

The total number of employees in the IT services business at the end of the quarter stood at 1,46,402, a decrease of 814 employees. Kurien attributed this to greater automation of some processes, resulting in lesser people requirement.

Utilisation remained almost flat sequentially at 66 per cent. For the next quarter, the management has given a dollar revenue guidance of  $1,712-1,745 million. “We believe that the initial signs of gains from restructuring initiatives have started showing and expect Wipro to do well in the quarters ahead,” Angel Broking analyst Ankita Somani said. 

‘Budgets to rise marginally’

Wipro expects client budgets to remain stable or increase marginally, and within the technology spend, the company sees increases in ‘change the business’ budgets and pressure on the ‘run the business’ budgets, the company’s CEO T K Kurien said on Friday. “We continue to see a healthy pipeline and customers in the US, especially in the previously challenged sectors, are more amenable to making discretionary investments,” Kurien said. 

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