Wipro Q4 Profit Rises 7.7%, But Revenue Outlook Disappoints

Wipro, India's third largest information technology services provider, reported 7.7 percent rise in profit in the quarter ending March 31, but forecast slower growth in the next quarter with the global economy continuing to be weak.

Wipro reported a consolidated net profit of Rupees 14.81 billion ($281 million), with most of its revenue coming from clients based in the US and Europe. We have delivered revenues in line with our guidance in an uncertain environment. We have created better value for our clients, with 7 customers contributing more than $100 million in revenues, T K Kurien, executive director & chief executive officer, IT Business, said.

The company has projected revenue ranging between $1.52 billion and $1.55 billion for the first quarter of the current fiscal year, a marginal rise of about 0.6 percent from the current quarter.

The guidance is clearly weak and it is consistent with our view that the industry is still facing challenges, said Bhavin Shah, chief executive officer of Equirus Securities, according to Reuters.

Wipro shares fell more than 8 percent in the morning trade to their lowest levels since January 19.

Infosys Ltd and Tata Consultancy Services (TCS), Wipro's biggest Indian competitors, had announced their quarterly results earlier in the month. TCS, the largest IT services provider in India, met market expectations with a 30.5 percent increase in revenue and $558 million profit. Infosys reported a 27 percent rise in its fourth-quarter consolidated net profit but set a weak dollar revenue forecast for the current fiscal year.

The continuing debt crisis in Europe and the tentative US recovery have hurt the outsourcing sector in India. However, Wipro expects that overall demand for IT services will continue to grow in 2012 as productivity efficiencies from IT are now a well-accepted reality.

The outsourcing sector in India is faced with several challenges, including severe global competition, acute challenges in sourcing talent and increased expectation by customers for innovation in technology and business processes. Adding to these challenges are the stringent criteria to be in the basket of consideration by clients, increasing labor protectionism and increasing number of innovative mobile and tablet apps that reduce the relevance of traditional software systems.

However, Indian IT industry is uniquely positioned to grow rapidly compared to those in other countries. Its success derives from a combination of factors including volume of talent, diverse technology skills, proficiency in English language, the service mentality of its people and mature management systems in its IT companies.