Wipro net rises 10%, falls short of expectations

Hit by currency volatility, wage hike, investment in marketing.

Wipro on Friday reported a lower-than-expected 9.7 per cent rise in second-quarter net profit at Rs 1,285 crore, as currency volatility, pay rises and increasing investment in sales and marketing weighed.

The street took exception to this, especially when its rivals, Infosys and Tata Consultancy Services, comfortably beat expectations. Shares closed 4.54 per cent down at Rs 448.40 on the Bombay Stock Exchange, while the 30-share sensitive index, or Sensex, was down by a modest 0.4 per cent.

Revenue for the July-September quarter rose 12.73 per cent to Rs 7,731 crore, compared to the year-ago quarter, driven by a volume rise of 6.6 per cent by the company’s information technology (IT) services business. Operating profit jumped 6.8 per cent to Rs 1,356.4 crore.

But on a sequential basis, net profit fell by 2.56 per cent, while revenues rose a tad below seven per cent. The Bangalore-headquartered consumer care to IT services company said salary rises and currency volatility affected the sequential numbers. It posted a forex loss of Rs 41 crore, as operating margins slipped to 18.1 per cent from 20 per cent in the previous quarter of this financial year.

Wipro’s flagship IT services business, which contributes around 74 per cent to its overall revenues, posted a 15 per cent rise in revenues at Rs 5,747.1 crore ($1,290 million), compared to a year ago. Earnings before interest and tax rose seven per cent to Rs 1,275 crore.

Chairman Azim Premji was quick enough to acknowledge the company’s lower-than-expected performance. "The industry has seen much stronger volume and revenue growth for the quarter and we recognise and acknowledge this. We want to assure you that we’ll rise to this occasion and challenge, and ensure that we return among the industry, leading both in terms of growth and operating margins," Premji said at the company’s earnings conference. "We are putting the entire muscle of the operation and our organisation behind this."