Wipro surged on Thursday after the company announced that it has acquired an American IT consulting firm in the finance domain.
The stock of the Bangalore-based IT major was up by over 3% at Rs 939 on the BSE in early-noon trades. It hit a high of Rs 948.70 earlier in the session. 110,000 shares changed hands on the counter.
A firm trend in the US bourses on Wednesday also helped the recovery in tech stocks in the local market. On the back of good corporate earnings, the Nasdaq composite index advanced by 14.80 points, or 1%, to 1466.16 - its highest level since 2 December 2002.
Thursday's recovery on the Wipro counter comes after a certain amount of stability was witnessed in the stock in recent sessions after a muted guidance for FY 2003-04 from IT bellwether Infosys Technologies on 10 April 2003, and Wipro's much lower-than-expected Q4 (ending March 2003) results on 17 April 2003
From Rs 1,232.40 on 9 April 2003, the stock plunged by 28.2% in just a few sessions to a low of Rs 884.40 on 17 April 2003. The slide on the counter was accompanied by volatility.
The fresh recovery in the Wipro stock was due to reports that the company has entered into a definitive agreement to acquire NerveWire, Inc., a Massachusetts based business and IT consulting company serving clients in the financial services business, for approximately $18.7 million (about Rs 89 crore) in cash, subject to adjustments. Wipro expects the transaction to be completed in the quarter ending June 2003.
NerveWire brings to Wipro more than 40 client relationships with over 20 active engagements. Commenting on the acquisition, Girish Paranjpe, president, financial services, Wipro Technologies, an arm of Wipro, said, "In the last 12 months we have built momentum in our financial services business through marquee client wins and demonstrated execution excellence. The team of 90 plus consultants from NerveWire brings in deep domain knowledge and strong customer relationships. We believe this acquisition will be a strong catalyst for growth by creating better customer value."
Wipro has adopted a strategy that includes organic and inorganic growth through acquisitions.
The IT industry is currently going through tough times with pressure on billing rates following the slowdown in the US economy. The billing rate pressure is expected to heighten further in the coming months, according to analysts. At the post-Q4 results conference, the Wipro management has indicated that the scenario on the billing front is still hazy and it would not like to hazard a guess on its reversal or stabilisation.
For Q4 ended March 2003, Wipro beat market expectations in respect of top line growth, while it disappointed on the bottom line front. The company posted 33% year-on-year rise in sales to Rs 1,230.99 crore (Rs 12.3 billion) as per Indian GAAP on consolidated basis. However, the profit after tax was up by only 5% at Rs 217.98 crore (Rs 2.17 billion). Pressure on billing rates, appreciation of the Indian rupee and increase in costs have taken its toll on the profit margins of IT companies.
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