Wipro Q2 net up 8% at Rs 2,085 crore

IT services firm Wipro reported a 7.9 per cent growth in consolidated net profit at Rs 2,084.8 crore (Rs 20.85 billin) for the second quarter ended September 30, 2014, helped by infrastructure services.

The city-headquartered firm posted a net profit (after tax, minority interest and share of profit of associates) of Rs 1,932.1 crore (Rs 19.32 billion) in the year-ago period.

Net sales of the country's third largest software services exporter rose by 7.5 per cent to Rs 11,816 crore (Rs 118.16 billion) in July-September quarter this fiscal from Rs 10,990.7 crore (Rs 109.91 billion) in the same quarter of 2013-14 fiscal.

However on quarter-on-quarter (q-o-q) bases, Wipro's net profit declined marginally by 0.9 per cent from Rs 2,103.2 crore (Rs 21.03 billion) in April-June quarter. Revenue was up by 5 per cent in July-September compared to Rs 11,245.5 crore (Rs 112.46 billion) in the first quarter.

Commenting on the performance, Wipro Chairman Azim Premji said: "Business leaders in the US continue to exhibit increased confidence on growth prospects. Clients are increasingly looking to drive business value from their technology investments."

But, analysts feel that the firm's performance has failed to meet market expectations.

Greyhoune Research CEO Snachit Vir Gogia said: "With a sequential growth of 1.8 per cent q-o-q, we believe that this quarter has been poor and far from industry standards. Their business continues to be a well balanced portfolio between Infrastructure and application services, but BPO, product engineering and ADM continue to decline."

While, Wipro continues to have strong focus on cloud services, they need to increase their focus on Cloud-delivered managed services, he added.

Revenue from IT services stood at $1.77 billion, a quarter-on-quarter growth of 1.8 per cent and year-on-year of 8.6 per cent.

In July, the firm had said it expected IT services revenues in the July-September quarter to be in the range of $1.77-1.81 billion.

The company said in the October-December quarter it expects revenues from IT services business to be in the range of $1.808-1.842 billion.

Wipro CEO T K Kurien said: "While the industry landscape is still undergoing change, we see multiple opportunity spaces for growth and gaining market share."

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

The IT Services segment had a headcount of 154,297 as of September 30, 2014. The firm added 50 new customers during the second quarter.

Wipro CFO Suresh Senapaty said: "In Q2, we continued to build on our leadership position in Infrastructure Services and continued the momentum of deal wins."

During the quarter, the benefits of rupee depreciation were negated by the US dollar's appreciation against other major currencies, he added.

"We continued to drive productivity and improving operating levers even as the effect of salary hike on this quarter's Operating Margin was on expected lines," Senapaty said.

Speaking to reporters, Kurien said the second half of the 2014-15 fiscal will be better than the first half.

"Overall the entire demand environment continues to hold steady. In North America, we see discretionary spending return. In Continental Europe, we see opportunities for growth given lower levels of outsourcing penetration," he added.

Kurien said that Wipro is also seeing a temporary cutback in discretionary expenses from certain industry segments, as they adjust to structural changes.

"We continue to see good deal momentum in large deals lead by Infrastructure services," he said.

In terms of strategic bets, Kurien said the firm sees great potential in Digital and Open Source.

"We have launched an open source practice and intend to make significant investments in building advisory capability and creation of IP to gain industry leadership in this space.

This targeted attention is paying off - we scored 8 major wins in this quarter," he added.

On deal pipeline, he said the pipeline is pretty much steady with a marginal improvement. "I think what has improved over last quarter has been our win rate...."

"In our business last time we had very clearly messaged that some of our key accounts is going to have headwinds till December and that situation has not changed, it will continue.

We are going to have headwinds in some of our key accounts till December quarter.

"We expect that to come back in Q4 of current year. Over all I would say, in terms of demand, much better than last year...," he added.

On completion of four years in office and performance since taking over, Kurien said the best thing about working in Wipro is every day one meets a great number of people who are absolutely outstanding in what they do, delivering their best to the organisation.

"If I had to look at myself as a person outside looking in-what we have done over the last four years is we have brought in aggression and cohesion into the organisation...," he said.