Wipro Q3 profit up 17.5 pc,but sees a tough period ahead

Soaps to software major Wipro Ltd has reported a 17.5 per cent rise in consolidated net profit of Rs 1,003.9 crore...

Written by ENS Economic Bureau | Bangalore/mumbai | Published:January 22, 2009 12:34 am

Soaps to software major Wipro Ltd has reported a 17.5 per cent rise in consolidated net profit of Rs 1,003.9 crore for the quarter ended December 2008,as against a net profit of Rs 854 crore in the third quarter of financial year 2007-2008.

However,Wipro shares fell 3.6 per cent to Rs 219.75 after it gave a muted forecast as its Western clients clamoured for a cut in prices because of a global economic downturn. For the last quarter of the current fiscal,Wipro has projected a lower IT services revenue over the $1,100 million earned in the third quarter giving an outlook of $1046 million.

The total income was up 25 per cent at Rs 6,773 crore for the December quarter of the current fiscal,whereas it was at Rs 5,433.2 crore a year ago. The dollar term IT services revenue of $1,100 million was marginally behind projections of $1,121 million made at the end of September 2008. At a constant currency rate,the IT services revenue registered at $1,126 million.

“2009 will be a tough year. Consumer confidence is down significantly and leading indicators suggest that the bottom is not in sight. This will impact every economic activity leading to capital conservation and opex reduction,” Wipro chairman Azim Premji said.

As on December 31,2008,the company has recognised mark-to-market losses of Rs 1574.9 crore (2008: Rs 109.7 crore) relating to derivative financial instruments that are designated as effective cash flow hedges in the shareholders’ fund.

Premji categorically refused to reply questions on the World Bank ban on partnerships with Wipro. “We have nothing more to add on that. We have built this company with 40 years of unyielding commitment to integrity and we are going to stay committed to that forever,’” he said.

In the light of the Satyam fiasco,Wipro will provide enhanced accounting details regarding the cash reserves and assets of the company,he said. “I can assure you the accounts will be tallying,” Premji quipped.

Following in the footsteps of Infosys,Wipro has also revealed its cash and bank balances. It has disclosed that an amount of Rs 3,838.3 crore is desposited in various banks as on December 31,2008. It has deposited Rs 634 crore in HDFC Bank,Rs 572 crore in SBI and Rs 485 crore in HSBC Bank.

On the human resources front,the company has put the brakes on recruitment and is focused on improving productivity and utilisation of existing resources for its IT business,corporate vice president for HR Pratik Kumar said. The company has scaled down its campus offers outlook for the next year from 13,000 to 8,000. For the current fiscal the company made 18,000 offers.

Involuntary attrition in the company’s IT services business on account of poor performance and other related issues has over the last two quarters risen to the 2 per cent range from the 0.5 per cent range prevalent earlier. The company as of December 31,2008 had 96,965 employees in the IT services business.

Premji however expressed confidence in the Indian economy. “I am optimistic about India because it has not been ravaged by the financial crisis and there has been a good monsoon,” Premji said.

whither wipro

• Consolidated net profit up 17.5 pc,revenue rises 25 pc

• Projects lower IT services revenue in Q4

• Puts brakes on recruitment,campus offers scaled down

• Mark-to-market loss of Rs 1,574 cr in derivatives

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