Wipro Profit Up 8%, Growth Outlook Muted

MUMBAI, India (AP) — Wipro’s quarterly profit rose 8 percent, but the Indian outsourcing company forecast muted growth, sending the stock into a nosedive Wednesday.

Wipro Systems and Technology Vice President Ashok Tripathy, right, smiles with a Wipro e.go Alpha notebook as Intel South Asia Sales and Marketing Managing Director Debjani Ghosh holds a Wipro e.go Aero Ultra notebook in this file photo. WiPro’s quarterly profit has risen, although forecast for the outsourcing industry is bleak. (AP Photo/Aijaz Rahi)

Net income for the January to March quarter was 14.8 billion rupees ($291 million). Sales rose 19 percent from a year earlier to 98.7 billion ($1.9 billion) as its global clients turned to the company to cut costs amid economic uncertainty.

The company said revenue in its mainstay information technology services business could fall slightly this quarter, to between $1.52 and $1.55 billion. IT revenue was $1.54 billion for the March quarter, up 9.7 percent from a year earlier.

The lower outlook for revenue sent the stock down 7.2 percent in Mumbai.

Global economic uncertainty has cast a shadow over India’s outsourcing sector, which also faces political headwinds in the United States — its largest market — in the run up to the U.S. presidential election. The industry has proven resilient in times of economic trouble by helping its global clients cut costs, but with each downturn outsourcing companies must fight harder to maintain prices, win new deals and speed up frozen decision making.

Market leader Tata Consultancy Services defied the gloom, posting a 23 percent rise in quarterly profits. It also forecast solid growth for the year ahead. But Infosys Technologies, long considered the industry bellwether, disappointed investors despite a 15 percent rise in profits, because it said revenues would grow less than the industry average of 11 to 14 percent this year.

Wipro’s results were helped by strong demand from retail and energy companies. Revenue from media and telecom and finance declined from the prior quarter. Revenue from the Americas, which accounts for over half of sales, rose 1.1 percent, compensating for an 18.4 percent plunge Japan sales.

“Corporations globally are focused on leveraging technology to drive revenues and productivity,” chairman Azim Premji said in a statement.

The results were in line with expectations.

Analysts surveyed by FactSet had forecast earnings of $288 million on sales of $1.9 billion.

“The guidance they’ve given is disappointing,” said Dipen Shah at Kotak Securities. “We need to get more clarity on how sustained this will be.”

He said he was looking for more clarity on Wipro’s comment that its muted growth outlook was due to a one-off issue in India and that growth would pick up next quarter.

Shah said global uncertainty is hitting Indian companies more than expected. Amid strong cost pressures, particularly in the U.S., some have chosen to chase high margin deals, hurting volume growth, while others have been willing to take on lower margin work with higher volumes, he said.

“The industry is slowing more than what we’d thought,” he said.

Erika Kinetz, Associated Press