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Wipro: Powered by global performance

Krishnan Thiagarajan

THE global IT services segment continued to power the earnings performance of the diversified Wipro, contributing 75 per cent of overall revenues and 87 per cent of profit before interest and tax (PBIT) for the quarter ended December 31, 2004. The sequential (quarter-on-quarter) growth in revenues at 5.7 per cent was encouraging, though lower than 11.6 per cent in the July-September quarter, partly a reflection of holiday season in the US.

To some extent, this is also seen in lower client additions at 26, compared with 34 in the previous quarter. The PBIT growth on a sequential basis has, however, remained flat, compared withrobust improvement seen in the previous quarter. The PBIT margin also declined by 1.5 percentage points to 26.1 per cent over this period. The improvement in price realisation by 1 per cent from both offshore and onsite projects and productivity improvements have helped Wipro lessen the impact of rise in employee compensation and appreciating rupee on PBIT margins.

Looking ahead, there are two variables that may work in favour of Wipro.

One is the uptick in billing rates, which have been under pressure in the past. Since Wipro enjoys a diversified customer base, rangingfrom telecom, manufacturing and technology infrastructure, its ability to enhance billing rates stands improved. Two, its integrated solution, which aims to leverage on its presence in IT services and BPO, may place it at an advantage over its software peers.

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