Wipro admits to performing lower than industry peers (Second Lead)

BANGALORE - India’s third largest IT bellwether Wipro Ltd Friday admitted that its performance during the second quarter (July-Sept) of this fiscal was lower than industry peers TCS and Infosys Technologies sequentially and annually.

“We acknowledge and recognise the growth by the industry. We will rise to the occasion and the challenge by putting our organisation muscle behind efforts to return to higher growth and margins,” Wipro chairman Azim Premji told reporters here.

A day after India’s numero uno Tata Consulting Service (TCS) reported a record 11 percent volume growth on second quarter and 7.2 percent by Infosys Technologies a week ago, Wipro reported 6.6 percent only.

“Industry has seen much stronger volume growth than us,” Premji admitted.

Returning to double-digit growth rate, TCS net profit at Rs.2,169 crore (Rs.21.69 billion) is up 32 percent year-on-year (YoY) and 14 percent sequentially while Infosys posted net profit of Rs.1,737 crore (Rs.17.37 billion), registering 13.2 percent YoY and 16.7 percent sequentially.

In contrast, Wipro’s net profit at Rs.1,285 crore (Rs.12.85 billion) is 10 percent higher YoY but 2.7 percent lower sequentially from Rs.1,319 crore (Rs.13.19 billion) in first quarter (April-June) of this fiscal.

Comparative growth of the three biggies shows Wipro IT revenue at Rs.5,747 crore (Rs.57.47 billion/$1.27 billion) lagging behind TCS at Rs.9,286 crore (Rs.92.86 billion/$2 billion) and Infosys at Rs.6,947 crore (Rs.69.47 billion/$1.5 billion).

In percentage terms, Wipro’s IT revenue grew 19.5 YoY and 5.7 sequentially as against 25 percent YoY and 13 percent sequentially by TCS and 24.4 percent YoY and 12 percent sequentially by Infosys.

Noting that industry peers reported stronger volume growth than Wipro, Premji said his company’s operating margins were impacted by wage increase and currency volatility during the quarter under review.

“There was an impact of 1.3 percent from employee progressions (promotions to about 20,000 techies), 1.2 percent impact from rupee appreciation and restricted stock units grants resulting in operating margins dipping to 22.2 percent from 24.7 percent in first quarter,” Premji pointed out.

For the third quarter (October-December) too, Wipro said its IT revenue would grow in single digit (4.5 percent) to $1.33 billion.

“We expect revenue from our IT services business to be $1.33 billion in third quarter as against $1.27 billion in second quarter of this fiscal (FY 2011),” Premji said.

Unlike rival Infosys, Wipro does not give annual revenue guidance or for its other business divisions.

Total revenue for the quarter under review is Rs.7,731 crore (Rs.77.31 billion), an increase of 12 percent YoY and 6.8 percent quarter-on-quarter (QoQ) from Rs.7,236 crore (Rs.72.36 billion).

Under the International Financial Reporting Standards (IFRS), net income in second quarter is $288 million and total revenue is $1.73 billion.

The company suffered $15 million loss due to currency volatility, which was three percent during the quarter and 12 percent on annualised basis.

As flagship business of the group company, IT services added 29 clients during the quarter under review as against 22 in first quarter of this fiscal and 37 year ago.

Total number of active clients at the end of second quarter are 890 as against 858 and 840 a year ago.

The company added 2,975 employees during the quarter for IT services business, taking the total headcount to 115,900 from 112,925 at the end of first quarter and 97,891 year