Wipro expects a stronger year ahead on increased spending by overseas clients
Mumbai: Wipro India's third-biggest IT services exporter, posted forecast-beating quarterly profit on Thursday and said it expects a stronger year ahead on increased spending by overseas clients.
The company is part of a $100 billion-plus Indian outsourcing sector that generates about 90 percent of its sales from providing services such as IT network installation and the development of software applications for overseas clients that are finally beginning to loosen their purse strings.
Rivals Tata Consultancy Services Infosys and HCL Technologies have already signalled a pick-up in client spending this month, and Wipro says it will also benefit.
Global IT spending is projected to total $3.8 trillion this year, up 3.1 percent on 2013, according to the latest forecast by research firm Gartner. That marks a significant upturn from the modest 0.4 percent increase a year earlier. "Discretionary spending at clients had almost dried up since the recession, and companies cannot go on postponing that forever," said Ankita Somani, a sector analyst with Mumbai brokerage Angel Broking.
"I think this year some of that spending will come back, and that will help IT companies." India's export-driven software services sector has thrived by tapping a large pool of cheap skilled labour, but rising wages and high staff turnover rates remain a challenge.
SEASONAL WEAKNESS
Wipro gave a muted revenue forecast for the June quarter, but CEO Kurien attributed that to a traditionally weak season and said it is not a precursor to the year. Revenue from IT services is expected to be between $1.72 billion and $1.76 billion in the current quarter, the company said, representing quarter-on-quarter growth of as much as 2 per cent. For the quarter to March 31, Wipro said net profit rose to 22.27 billion rupees ($368.98 million) compared with 17.29 billion rupees a year earlier. Analysts polled by Thomson Reuters had forecast 21.06 billion rupees in net profit.
HCL Technologies also beat market expectations with a 59 per cent rise in quarterly profit, it said on Thursday, helped by rising demand for outsourcing services.
On Wednesday Tata Consultancy Services also said that it expects a further rise in revenue growth this year, citing its improving deal pipeline and order book. Shares of Bangalore-based Wipro closed up 2.4 per cent at 585.85 rupees ahead of Thursday's earnings announcement, while HCL Technologies gained 0.9 percent in a Mumbai market that rose 1.6 per cent.
( Source : reuters )
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