Wipro's revenue soars, but profit growth can't keep pace

Wipro's revenue rises, but profit growth slows as Indian outsourcers grapple with a slow-down in demand from the U.S.

John Ribeiro (IDG News Service)
21 July, 2008 08:28
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Wipro, India's third largest outsourcer, reported soaring growth in revenue for the second quarter, but profit did not keep pace, growing more slowly than last year.

The company posted revenue of 59.62 billion Indian rupees (AUD$1.43 billion as of June 30, the last day of the period reported), up 43 percent over the same period last year. Profit was 8.14 billion rupees, up 15 percent over the same quarter last year, compared to a growth rate of 16 percent a year earlier.

Indian outsourcers are grappling with higher staff costs in the country, and a slow-down in demand from their key market, the U.S. The National Association of Software and Service Companies (Nasscom) has forecast that the country's software and services industry will post lower growth in revenue this year on account of rising oil prices and a global economic slowdown.

Oil prices are spiraling out of control, and there is a lot of economic uncertainty, Azim Premji, Wipro's chairman, said in an earnings call. Wipro has shown resilience by improving prices, depreciation of the rupee against the dollar, and higher utilization of resources including staff, said Suresh Senapaty, Chief Financial Officer of Wipro.

Wipro, of Bangalore, makes most of its money from IT services, but also sells soaps and lighting. Its IT services business posted revenue of 43.93 billion rupees for the quarter, up by 40 percent from a year earlier. The results are based on U.S. generally accepted accounting principles (GAAP).

The IT services business had 95,675 employees as of June 30, which included 74,838 employees in the company's IT business unit and 20,837 employees in its BPO (business process outsourcing) business unit. The IT services business added 31 new clients during the quarter.