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Wipro Meets Forecasts With 2% Profit Rise But Margins Hit

Wipro's net profit for the third quarter ended December 31 was Rs 2,234 crore, compared with Rs 2,193 crore a year earlier

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Wipro Ltd, India's third-largest software services exporter, posted a 2 per cent rise in quarterly net profit on Monday (18 January), in line with street estimates, as it added 39 new customers during the quarter.

The operating margins for its IT services business, however, fell to 20.2 per cent in the quarter ended December, from 21.8 per cent a year earlier, due to heavy flooding in Chennai city, where it employs about 13 per cent of its staff.

Wipro forecast its IT services revenue to be in the band of $1.88 billion to $1.91 billion for the March quarter, an up to 4 per cent rise over the preceding quarter, after it grew by a moderate 0.3 per cent in the December quarter over the July-September period.

Wipro earlier this month named Abidali Neemuchwala as its new chief executive, as it looks to regain market share from larger local outsourcing competitors. Neemuchwala will start in his new role from February 1.

The appointment at Bengaluru-based Wipro, majority owned by its founder Azim Premji, comes at a time when the firm is looking to boost business in high-margin new digital technology services.

India's export-driven software services sector has thrived by tapping a large pool of cheap skilled labour, but companies like Wipro have been facing cut-throat competition from global rivals and growing pressure on fees for routine IT services.

Wipro, also listed in New York, has been lagging the Indian IT sector's growth rate in the last couple of years as its financial and energy clients, who account for the bulk of its revenue, cut back on outsourcing spending.

Wipro's net profit for the third quarter ended December 31 was Rs 2,234 crore ($330.2 million), compared with Rs 2,193 crore a year earlier. Analysts had expected a profit of Rs 2,223 crore, according to Thomson Reuters I/B/E/S.

Revenue contribution from its energy, natural resources and utilities clients dropped to 14.4 per cent in the December quarter from 16.4 per cent in the year ago period, the company said in a statement.

Shares in Wipro were trading down 0.2 per cent by 0426 GMT, while the broader Mumbai market index was down 0.4 per cent and rival Infosys Ltd, India's second-largest IT services exporter, was up 1.2 per cent.


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