Rising rupee, wage hike hit Wipro profit

April 18th, 2008 - 3:59 pm ICT by admin  

(Lead)

Bangalore, April 18 (IANS) The net profit of global software major Wipro Ltd came under severe pressure in fiscal 2007-08 due to a mere three percent year-on-year (YoY) growth in the fourth quarter (January-March) to Rs.8.8 billion under the Indian accounting practice. As a result, net profit for the last fiscal 2008 grew by 12 percent YoY to Rs.32.8 billion from Rs.29.4 billion in the same period a year ago (FY 2007).

Under the American accounting practice too, net income for the fourth quarter (Q4) grew by only two percent YoY to $219 million, impacting the bottomline for the fiscal at $806 million.

“Fourth quarter results have shown the first effect of a difficult year ahead. Market situation is changing rapidly, which has a bearing on our immediate business dynamics. Prospects are, however, good in the medium and long-term,” Wipro chairman Azim H. Premji told reporters here Friday.

Sequentially too, net profit grew marginally from Rs.8.5 billion ($189 million) in the third quarter (October-December) of FY 2008.

“The single digit net profit growth in fourth quarter (Q4) had an impact on our net margin for the fiscal due to rupee appreciating by 11 percent during the fiscal,” Wipro chief financial officer (CFO) Suresh Senapaty said at a briefing on the financial performance for Q4 and FY 2008.

“Salary hikes of three-four percent to our onsite employees in January also had a negative impact of 100 basis points (one percent) on our margins,” he added.

On the revenue front, however, the IT bellwether maintained a healthy double-digit growth rate of 32 percent YoY at Rs.57 billion in Q4 and 33 percent YoY at Rs.200 billion for the fiscal under the Indian accounting practice.

Similarly, under the American accounting practice, top-line revenue grew by 29 percent YoY to $1.4 billion in Q4 and by 32 percent YoY to $4.9 billion for the entire fiscal.

Revenue from the company’s flagship global IT business grew by 39 percent YoY to $960 million in Q4 and by 38 percent YoY to $3.39 billion under the American accounting practice.

The IT business division surpassed revenue guidance of $955 million for the fourth quarter by $4 million.

Under the Indian accounting practice, global IT business grew by 26 percent YoY to Rs.38 billion in Q4 and by 23 percent YoY to Rs.136 billion for the entire fiscal.

“The global economic outlook has changed significantly since the beginning of this calendar year. It poses challenges and at the same time opens up newer opportunities. Given the uncertainty in the environment, we remain cautious but resilient of our prospects,” Premji noted.

For the first quarter (April-June) of the new fiscal (2008-09), Premji projected revenue of $1.06 billion (Rs.42.4 billion) from the combined IT services.

The global IT business division added 29 clients in Q4 and 166 clients for the fiscal under review. It also won three multi-year multi-million dollar deals during the fourth quarter.

“Challenges are a part of our job. Growth will be biased upwards by the fiscal-end. In view of this cautious optimism, we have drawn an aggressive plan to capitalise on the likely back-ended positive momentum for a profitable volume growth,” Premji pointed out.

Re-designated joint chief executive officer (CEO) Girish Paranjpe, who looks after Wipro’s global IT business, said clients were seen rolling back their IT budgets for the first two quarters of this year.

“Until they see some stability, IT spend will be less in the first-half than in the second-half,” Paranjpe affirmed.

Premji continues to retain majority holding (79 percent) in the group company.

The board of directors has recommended a total dividend of 300 percent at Rs.6 per share on par of Rs.2 per share for fiscal 2008, including a final cash dividend of Rs.4 per share (200 percent) and an interim dividend of Rs.2 per share (100 percent).

Revenue from Wipro Infotech, which does business in India, Middle East and Asia Pacific, grew by 41 percent YoY to Rs.11 billion in Q4 and by a whopping 51 percent YoY to Rs.37.5 billion for the entire fiscal under the Indian accounting practice.

“We are bullish on our India and Middle East geographies to deliver turbo-charged growth riding on the investment in these markets,” Premji added.

Similarly, Wipro Consumer Care & Lighting business posted a record revenue growth of 111 percent in Q4 to Rs.4.8 billion from the same period a year ago (Rs.2.3 billion) and by 86 percent YoY to Rs.15 billion from Rs.8.2 billion in the same period of FY 2007 under the Indian accounting practice.

The company also granted fresh restricted stock award to its employees from the new fiscal (FY 2009) as part of its long-term talent retention plan.

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