Wipro beats market expectations

Our Corporate Bureau
19 October 2001

This shows the apathy investors have developed towards IT stocks. While sales increased to Rs 874.30 crore as compared to the Rs 740.40 crore in the corresponding period last year, the net profit rose to Rs 215.70 crore as against the Rs 154 crore in the corresponding period last year.

The profit before tax margin, as a ratio of sales, improved to 27.03 per cent in comparison to the 23.47 per cent in the corresponding period last year. Similarly, the net profit margin, as a percentage of sales, increased to 24.67 per cent in comparison to the 20.80 per cent in the corresponding period last year.

Despite growing above the industry average and achieving better margins, Wipros share price declined to close at Rs 1,091.65 in comparison to the previous days closing price of Rs 1,177.90.

The major hurdle perceived by investors is the future growth of Wipro, which is now expected to decline to less than 30 per cent. Wipro has always maintained that its growth will be more than that of the industrys. Prior to 11 September, the software industry was expected to achieve a growth-rate of anything between 40 and 45 per cent. However, post-terror attacks, its growth is expected to be in the range of 30-35 per cent, according to Nasscom.

One factor that continues to work in Wipros favour is that its revenues from Europe have been growing at a healthy pace, so its dependence on the US does not affect much. Thus, Europe accounted for as much as 39 per cent of its second quarter revenues in comparison to the 27 per cent recorded last year and the contributions from North America stand declined to 55 per cent as compared to the 65 per cent in the corresponding period last year.

Wipro Infotech, India and Asia-Pacific IT services arm of Wipro, has contributed 21 per cent to the topline. Higher margins for the company as a whole came about due to higher billing rates, which, the company claims, has been possible due to value-added services like data warehousing, infrastructure services, e-commerce and package implementation.