Wipro ups IT revenue guidance on growth signs

Indian IT bellwether Wipro Ltd Friday projected higher revenue, albeit marginally, from its flagship IT services business for the third quarter (October-December) of this fiscal (2012-13) on signs of growth in the technology space.

"We expect revenue from our IT services business to be in the range of $1.56-1.59 billion or an average of $1.57 billion for this quarter (Q3)," the global software major said in a statement here.

In contrast to the flat growth the company projected and posted during the last two-three quarters, the outlook for the third quarter is 2.2 percent higher sequentially from $1.54 billion in second quarter (July-September) of this fiscal under International Financial Reporting Standard (IFRS).

"We have delivered revenue in line with our guidance and are continuing to see consistent improvement in our engagement with customers and employees," Wipro IT business chief executive T.K. Kurien said in the statement.

The company, however, does not give annual revenue guidance or for its non-IT business, which is being hived off into a separate entity from this fiscal.

In a regulatory filing earlier in the day, Wipro notified that it posted net profit of Rs.1,611 crore (Rs.16.11 billion) for second quarter (Q2) of this fiscal (FY 2013), registering 24 percent growth year-on-year (YoY) and two percent sequentially.

Similarly, total revenue rose 17 percent YoY to Rs.10,657 crore (Rs.106.57 billion) for the quarter under review, but remained flat sequentially from previous or first quarter (April-June) under the Indian accounting standard.

Under IFRS, net income is $304 million, up seven percent sequentially and total revenue $2.01 billion, up marginally 4.7 percent sequentially.

The IT business revenue, however, increased marginally to $1.54 billion, registering 4.6 percent YoY and 1.7 percent sequentially under IFRS and 23 percent YoY and marginal sequentially (0.7 percent) to Rs.8,373 crore (Rs.83.73 billion) under Indian accounting standard.

"Our focus on driving significant operational improvements has helped us mitigate the incremental impact of wage increases and currency volatility during the quarter," Wipro executive director and chief financial officer Suresh Senapaty said.

Earnings from IT business before interest and tax (Ebit) is up 27 percent YoY to Rs.1,731 crore (Rs.17.31 billion/$327 million).

Operating margin for IT services is up 20.7 percent YoY, but incrementally lower sequentially from 21 percent in first quarter.

The IT services business added 53 clients during second quarter as against 37 in first quarter and 44 the same quarter year ago.

"We have also won a multi-year, multi-million IT infrastructure transformation deal from one of the largest non-profit healthcare providers in the US," Senapaty noted.

With net addition of 2,017 techies during the quarter under review (Q2), the total number of employees for IT services went up to 140,569 from 138,552 quarter ago and 131,730 year ago.

Ahead of the financial results for second quarter, the company Thursday announced that it was hiving off its non-IT businesses into a separate entity or enterprise from this fiscal.

"We have chartered a new course for Wipro by demerging our diversified non-IT businesses. I am confident that the demerger will enhance value for all shareholders and provide fresh momentum for growth for each of our businesses," its IT czar Azim Premji said.

The company's board of directors Thursday approved the demerger of Wipro Consumer Care & Lighting, Wipro Infrastructure Engineering and Wipro Medical Diagnostic Product & Services into a separate company to be named Wipro Enterprises Ltd.

Post de-merger, Wipro Ltd will focus on IT services and remain listed while Wipro Enterprises Ltd will be an unlisted company.

Premji will, however, remain executive chairman of the Wiproboard, which remains unchanged. He will also be the non-executive chairman of Wipro Enterprises Ltd.

The demerger is expected to be completed by next fiscal year (2013-14) after judicial and regulatory approvals.

IT services business accounted for 79 percent of the company's total revenue and 93 percent of operating income during the quarter.

"As the businesses of Wipro Enterprises Ltd are diverse, this demerger gives them an opportunity to pursue their independent growth plans," Wipro chief financial officer Senapaty added.

The demerger will also have no impact on the management structure of the parent company or in the leadership of the new entity though both the entities will jointly own the Wipro brand.

The demerger will pave the way for Wipro Ltd to increase its public float for meeting the minimum public shareholding requirement under clause 40A of the listing agreement, as stipulated by the regulator - Securities Exchange Board of India (SEBI).