Thaindian News

Bangalore, Oct 31 (IANS) India’s third largest IT bellwether Wipro Ltd. remains upbeat on its growth prospects in the coming quarters despite a marginal increase in net profit for the second quarter and a flat revenue outlook for October-December third quarter of fiscal 2011-12.

“We are not finding any significant slowdown in the market. There is more stability among customers today than we experienced in 2008. The uncertain environment has not impacted business on the ground,” Wipro chairman Azim Premji asserted here Monday while releasing the results for the second quarter.

Though the global software major’s gross revenue grew 18 percent year-on-year (YoY) and 6.2 percent sequentially to Rs.9,094 crore (Rs.90 billion/$1.85 billion) for the July-September second quarter of FY 2012, net profit was just one percent up YoY to Rs.1,301 crore (Rs.13 billion), which is a decline of 2.5 percent sequentially.

Cautious in its outlook due to the macro-economic uncertainty, the global software major said revenue from its global IT business would be in the range of $1,500-1,530 million ($1.5 billion) in the third quarter, the same as in second quarter at $1,472 million ($1.5 billion), a sequential growth of 4.6 percent.

Undeterred by quarterly blues, Premji’s optimism stems from his recent interaction with American chief executives, who exuded confidence on strong cash flows and continuing good profitability ahead.

“The mood at the business council meeting of American CEOs in Atlanta last week was very positive, as companies are strong on cash flows and reasonably optimistic on continuing it going forward,” Premji said.

Noting that most of the US firms were looking for service partners to help them variabilise their costs in the transformation and linkage part of their expenditure to the outcomes, Premji said customers continued to look at IT strategically.

“Decisions are getting pulled up more and more at CEO/CFO level. They look at their business from a three-dimension point of view - investment, revenue and cost improvement,” the IT czar pointed out.

In spite of macro-economic sentiments remaining uncertain, the company’s global IT services business had seen growth momentum build up with healthy volume growth.

“We see an exciting future and I am confident we are on the right path as are settled well after restructuring the leadership and business strategy,” Premji observed.

As the company’s flagship business, IT services’ revenue grew 16 percent YoY and seven percent sequentially to Rs.6,829 crore (Rs.68.3 billion) and accounted for 75 percent of the total revenue and 92 percent of operating income for the quarter.

“We are continuing to see incremental progress in our client mining strategy with five customers contributing over $100 million and our top customer hitting a run-rate of $200 million,” Wipro chief financial officer Suresh Senapaty said.

Operating margins, however, declined two percent sequentially to 20 percent from 22 percent in the first quarter due to salary increases during the first two quarters of FY 2012.

Admitting that the company did not change to the market realities, Senapaty said the course correction undertaken early this fiscal would bear fruits in the remaining two quarters of this fiscal.

“We did the course correction from this fiscal. We promised certain things. It is not that some of those revenues have disappeared. It is just that growth didn’t happen as much we would have wanted to be because we did not empower our sales team as much as our customers would like it to be,” Senapaty said.

Allaying fears over the global fallout of European crisis, he the said IT spend continued to be good as IT revenue growth was more than the GDP growth in the advanced countries.

“We have not been impacted so far by the overall macro-economic situation. The feedback from our customers is stable. The IT spend continues to be looking good,” Senapaty added.

The company added 44 customers during the quarter as against 49 in first quarter of this fiscal and 29 a year ago and saw repeat business of 98.6 percent as against 99 percent a year ago.

IT services business added about 5,240 (net addition) engineers during the quarter, taking the total headcount to 131,730 from 126,490 in first quarter and 115,900 year ago.