Wipro disappoints in spite of high earnings
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Shares in Wipro, India’s third-largest IT services and software exporter, fell on Wednesday in spite of a 44 per cent jump in quarterly income.
Recent results from Infosys, TCS and Wipro, India’s top-three outsourcing companies, demonstrate strong appetite for services such as software development, systems integration and business process outsourcing.
But shares in Wipro yesterday fell 5.5 per cent to Rs458.30 in afternoon trade in Mumbai after the company reported a decline in operating margins for the first quarter.
Wipro bought three companies in the quarter and expects investments to pay off in the third quarter. Azim Premji, chairman, yesterday hinted Wipro would continue to look for acquisitions.
“The external environment remains buoyant – we see offshoring at the centre-stage of IT strategy of global corporations,” said Mr Premji.
Wipro’s recent purchases include Enabler Informatica, a retail solutions provider based in Europe; Saraware Oy, a European engineering and design services group; and Quantech Global Services, a mechanical design services company based in US and India.
Net income for the first quarter reached $134m, and revenues rose 37 per cent to $683m compared with the same period last year.
Tata Consultancy Services, India’s largest IT services company, on Tuesday said wage increases, rising visa costs for employees working outside India and integration expenses related to acquisitions hurt operating margins by 1.7 per cent.
A research note from Morgan Stanley said that, while TCS’s June quarter margins were “seasonally weak because of annual wage increases and higher visa charges, margins should improve through the rest of fiscal 2007”.
TCS’s first-quarter net income was $187m, an 8.39 per cent increase over the previous quarter. Revenues rose 11.31 per cent quarter-on-quarter to $900m.
The company added 4,698 employees in the quarter, bringing its total workforce to 71,190. Its attrition rate of 10.6 per cent is the lowest in the industry. Non-Indian nationals formed 7.3 per cent of the total employee base.
While demand trends for IT outsourcing remain strong, some analysts see margin pressure as an ongoing concern.
Strong earnings from Infosys, the second-largest IT outsourcing company, last week helped lift India’s benchmark stock index a day after terrorist bombings in Mumbai.
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