Financial Daily from THE HINDU group of publications
Friday, Apr 18, 2003
Corporate Results - Software
Wipro net drops despite strong revenue growth
`WE ARE IN STRONG INVESTMENT PHASE': Mr Azim Premji, Chairman, Wipro, and Mr Vivek Paul, Vice Chairman, at a press conference announcing the company's results in Bangalore on Thursday.
BANGALORE, April 17
WIPRO Ltd's net profit for 2002-03 slipped by seven per cent to Rs 820.5 crore but revenues were up 24.2 per cent at Rs 4,338.3 crore. The company has announced a dividend of Re 1 per share (50 per cent on face value of Rs 2).
Net earnings for the fourth quarter ended March 31, 2003 decreased by 2.5 per cent to Rs 225.4 crore, as a result of which the market was in jitters and fears of slowing profitability dragged the stock down.
However, revenues for the quarter increased by 31.6 per cent to Rs 1,237.7 crore, the company said in a statement to the Bombay Stock Exchange.
Wipro expects revenues from its software efforts to be close to $172 million in the April-June quarter, while its BPO subsidiary - Wipro Spectramind - is likely to contribute $16 million. It has already factored in price cuts in the current quarter's guidance.
The company added 44 new customers in global IT services during the quarter, including 16 captive customers who came on board after the acquisition of AMS.
Wipro's consumer care and lighting division signed a pact with Hindustan Lever Ltd to acquire glucose health drink, Glucovita.
The transaction is likely to be completed in the current quarter. The cost of acquisition is equivalent to the sales of one year. "We continue to evaluate other brands as potential acquisitions as well," Mr Azim H. Premji, Chairman, Wipro, said.
Mr Suresh Senapaty, Corporate Executive Vice-President, said: "Our profits for the year were lower by Rs 37.1 crore on account of our share of losses in Wipro GE Medical Systems Ltd."
He added: "For the quarter, profit before interest and tax to revenue in Wipro Technologies was lower at 25 per cent. The results for the quarter include revenue of Rs 22.8 crore and a loss of Rs 7.3 crore by our energy and utilities consulting division acquired from AMS."
According to him, this contributed to a two per cent drop in PBIT margin compared to the previous quarter. "The losses were primarily due to the provision for integration bonus."
Wipro Technologies accounted for 66 per cent of the company's revenues in the last year, while Wipro Infotech accounted for 19 per cent.
"Margins expanded in the BPO business but came under pressure in IT services, as we absorbed acquisition costs and pricing pressures along with a rising rupee," said Mr Vivek Paul, Vice-Chairman, Wipro.
There was a sustained growth in IT, R&D and BPO business. The Enterprise Solutions Practice contributed 61 per cent of Wipro Technologies's revenues, up from 50 per cent a year ago, while the remaining 39 per cent came from R&D practice.
North America accounted for 63 per cent of the company's revenue while the top customer contributed eight per cent to the annual top line.
Onsite revenue was 54 per cent of services, wherein fixed price projects accounted for 34 per cent of the revenue.
The company added 3,848 employees during the year and currently employees 13,474 persons.
The Wipro management feels that volume growth this fiscal will be distributed across the verticals it operates in, though the telecom sector has seen a growth in three straight quarters after sliding for the five previous quarters.
"Our consumer care and lighting business has generated positive cash flows for decades with consistent margins. We have invested in building a retail distribution network reaching out to over a million outlets," Mr Premji said.
Spectramind signed a letter of intent with three new customers in the last quarter and currently services 15 clients.
Though the BPO outfit operates under a cramped pricing environment, pipeline visibility is very robust, according to Mr Raman Roy, Vice-Chairman, Wipro Spectramind.
`Wipro GE to turn around this year'
Wipro expects its joint venture, Wipro GE Medical Systems, to turn profitable by the end of current fiscal.
"Historically, Wipro GE has been a profitable entity, and we can see the current trend reversing by the year-end with the introduction of new products," Mr Suresh Senapaty said.
According to Mr Vivek Paul, the company has not been impacted by the Iraq war or the SARS scare.
"Only 18 of 40 prospective clients have cancelled their visits since March 15, which is less than half of the promised visits. The short duration of the war has not impacted us immediately."
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