Wipro net profit up 10%, guidance cheers markets

BANGALORE: IT major Wipro's financial results for the quarter ended December met analysts' expectations and the company provided a relatively cheerful guidance for the fourth quarter that pushed its stock price up on Friday.
The revenue for the IT services business in the quarter stood at Rs 7,608 crore, up 28% over the previous year and 11.4% sequentially.Net profit (including products and consumer care) was up 10.4% over the previous year and 12% sequentially. The operating margin for the IT services business, aided by the rupee depreciation, was up 80 basis points over the previous quarter at 20.8%. The pricing realisation was sequentially up 2.9% for onsite and 2.3% for offshore. However volume growth was lower than peers at 1.8%. "The improvement in average realisations was a surprise, though it was led by better efficiency in fixed priced projects and not absolute increases. Thus, this improvement may not sustain over the long term," said Dipen Shah, IT sector analyst at Kotak Securities.
Wipro gave a fourth quarter revenue guidance of $1,520-1,550 million, which translates into a sequential growth of 1% to 3%. This is better than the flat guidance for the fourth quarter that Infosys gave. Wipro's stocks closed 2.4% up at Rs 414 at close of trade.
Wipro CEO T K Kurien said that though things look uncertain, clients in major markets like the US and Europe are still investing. "European clients are beginning to realise the benefits of outsourcing ... leading to more business," he said. He, however, cautioned that though client budgets are looking flattish, the final allocation of budgets could be different.
Ankita Somani, associate (IT & telecom) at Angel Broking, said Wipro's guidance came as a positive surprise and looks better than Infosys.
ONE-ON-ONE
'If you treat employees with trust, they reciprocate'
Bangalore: Wipro CEO T K Kurien was visibly happy on Friday. Internal surveys show that the company's measure for customer satisfaction amongst key customers has risen by 9 percentage points in the last one year. Annualised voluntary attrition at 14.2% is the lowest in 8 quarters. Kurien tells TOI that he now wants to transform Wipro into a true-blue global player to which customers and employees would come on their own instead of the company going to them.
It's almost a year since you took over as CEO. How has the journey been?
It was a very hectic year, busy like crazy. But it seems like yesterday. We have done a fabulous job, thanks to our employees. The company itself has rallied around the issues that we had. Customers and employees are key to us. If you treat employees with trust they reciprocate. Be transparent with customers and you will win their trust. On a scale of 10 we have achieved 5 on the employee front, though there is a lot of room for improvement. On the customer front, internal and external surveys have rated us pretty high.
Still a large number of CVs of senior and mid-level Wipro professionals are floating in the job market.
Our attrition is constantly dipping quarter on quarter. There has been a 15% to 20% increase in the number of job applications we have received in the last year. We are hiring quite a lot of people on a regular basis. Lateral hiring accounts for 40% of our total hiring in any given quarter. We will not punish people for being ambitious or for taking risk. But we expect something in return. If you say you will do something, you better do it. We would like to be known as a place where people want to come, work and have their own freedom.
What freedom are you talking about?
If I report to a tough manager, my freedom to express my thoughts is limited. But things are different now. Employees are given freedom to speak up, suggest their ideas and express their thoughts. This has made employees to open up. Once you open up people's mind, what you get to see is amazing.
What's your vision for the company?
We should have solutions, skills and other differentiators that customers should die for. It would be like a Chinese phone versus an Apple phone. We want customers to come to us rather than we going to them. The business we have done in the last 12/13 years is going through a dramatic shift. Far more technologies will come to business than we have seen so far.
There are companies that are looking at volume growth and adding people every quarter. There are others who will see how this job can be done with the same number of people. We are among the latter. Going forward, architecture skills, domain skills and programme management skills will be critical for us.