Indian outsourcing giant Wipro’s earnings for the first quarter of its current fiscal year fell below market forecasts as the current strength of the rupee hit margins.
In the three months to the end of June, Wipro made a net profit of INR 7.1bn ($176.4m), up 15.7% from INR 6.1bn ($152.5m) in the same period of the previous year, on revenue that grew 33.6% to INR 41.8bn ($1.0bn). A Reuters poll had forecast a mean net profit of INR 7.5bn ($186.5m).
Wipro’s foreign exchange losses in the quarter totaled INR 852m ($21.2m), up from INR 19m ($500,000) last year. The impact of rupee appreciation is fast becoming the main story of earnings season in India. Last week, Infosys announced it was lowering its full-year earnings guidance due to negative exchange rate impact, while TCS revealed it was using a hedging policy in an attempt to reduce losses due to currency fluctuations.
Revenue from Wipro’s global IT services business, which includes its business process outsourcing operation, was up 20.2% at INR 29.4bn ($730.3m). The division added 39 new clients during the quarter, including a five-year deal valued at $130m with an unnamed UK-based utility.
While IT services revenue growth is some way behind the 32.6% recorded for the three months to the end of March, Wipro’s senior vice president for Europe Kees Ten Nijenhuis told Computer Business Review that this was not a cause for concern. 40% growth on a lower basis is easier to achieve than 40% growth on a higher basis, he said. We are not expecting a slowdown in revenue growth. Overall, the results are very positive, very good, very strong.
This upbeat outlook echoed the view of Wipro’s chairman Azim Premji, who said in a statement that the results were satisfying considering the strong headwinds faced by us in the form of an appreciating rupee.
For the second quarter of fiscal 2008, Wipro has forecast revenue from its global IT services division of approximately $777m. This would represent sequential growth of about 6.5% on the first three months of the year.