Has ability to maintain operating margin though.
By R. Chandrasekaran
India’s third largest IT solutions provider Wipro failed to provide an upbeat growth either like the leader Tata Consultancy Services or in tandem with the industry body. But the strong point from its quarterly result is that it could maintain its operating margin in the challenging market conditions unlike the top two companies from the sector.
Though Wipro is not prone to offer annual guidance, its quarterly guidance for the period April to June indicates fall in revenue of 0.6 percent at the lowest and a growth of 1.6 percent at the maximum from the March quarter. This is in contrast to the analysts’ expectations of a 1 – 4 percent growth.
While National Association of Software Service Companies or NASSCOM expects annual revenues to grow 12 – 14 percent, the biggest company TCS is confident of outperforming the trade body’s estimation. However, the second largest IT company Infosys offered an outlook of below the NASSCOM expectations.
Wipro gave a below than predicted forecast for the first quarter, but expects growth to accelerate from the second quarter. The company has claimed that traditionally first quarter has been weak for it. However, analysts seem to be having a different view. Ambit Capital analyst Ankur Rudra has reportedly said that the first half of the fiscal year is better than the second half. This is probably due to the fact that most of the U.S. companies would have finalized their budget in the March quarter itself for the current calendar year.
Wipro has reported a net profit of Rs.17.29 billion for the fourth quarter representing an increase of 17 percent over the last year fourth quarter, but remained flat with the third quarter. Revenues jumped 12 percent to Rs.110.26 billion over the previous year and were flat with the previous quarter.
The strong point from the result is that it could maintain its operating margin of 20.7 percent for the fiscal year ended March 2013 compared to 20.8 percent last year, whereas the leaders in the sector have struggled. The company could also add 192 clients for the year than the last year’s 173 clients.
Commenting on the road ahead for Wipro, its chief executive officer for IT business T.K. Kurien said, “We continue to see improvement in our customer satisfaction and employee engagement. Our continued investments in the go-to-market organization positions us well for the future.”
The company has not dwelt upon the hiring thus indicating the weakness ahead. The soft guidance indicates the sluggishness in the sector and both Infosys and Wipro seem to be affected by uncertain market conditions on IT budget.