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Wipro net surges 125%; beats market expectations

NetScribes/Ganesh Ramamoorthy

Shares of Wipro surged nearly 8 per cent on Friday early trade after the company reported a 125 per cent jump in net profits for the quarter ended December 31, 2000. Analysts had estimated an earnings growth of 96-100 per cent.

Opening from its previous close of Rs 2639.80, Wipro scrip surged to hit the upper circuit limit of 8 per cent at Rs 2850.95, up Rs 211.15 on the Bombay Stock Exchange (BSE). At 11:22 AM, the scrip was trading at Rs 2825, with volumes of over 477,000 shares on the BSE.

"On the face of it, it's a very positive result from the company," said Priya Rohira, senior software analyst, Pranav Securities. The company recorded a net sales growth of over 35 per cent for the third quarter ended December 31, 2000, matching analysts' expectations of 34-38 per cent.

For the quarter ended December 31, 2000, Wipro reported net profits of Rs 1.88 billion, up 123.80 per cent from Rs 840 million a year back and net sales of Rs 7.73 billion, up 35.61 per cent from Rs 5.70 billion in the year-ago quarter.

Operating profit margins for the quarter improved to 25 per cent from 16 per cent in Q3 1999-2000. The rise in margins was mainly due to a 17 per cent rise in the billing rates during the quarter.

"This allays the long-standing fear that Wipro's billing rates are under pressure," said Rohira. The increase in billing rate was however partially offset by lower utilisation of professionals by 2 per cent and an increase in compensation costs.

The global R&D services contribution grew in line with analyst estimates, to about 50 per cent of total revenues during the quarter, up 3 per cent from 47 per cent in the year-ago period. "The global R&D services business is the high margin, higher-end business. The overall margins have also improved on this account," said an analyst at Asit C Mehta Brokerage. "Moreover, it is a good sign which somewhat de-risks the company from a global slowdown," he added.

During the quarter, clients with annualised billings in excess of $1 million increased from 65 during Q3 1999-2000, to 67. In terms of client concentration, Wipro's largest customer accounts for about 8 per cent of total revenues, while the top 5 and top 10 customers account for about 29 per cent and 44 per cent of the total revenue for the quarter. Wipro added 26 new clients in Q3 2000-01. These contributed to about 10 per cent of total revenues.

In terms of geography, North America accounted for 64 per cent, Europe -- 28 per cent and Japan -- 7 per cent of total revenues in the quarter. The company added a total of 912 employees during the quarter, taking the total number of employees as of December 31, 2000 to 9,490.

Wipro's Indian IT Services and Products business segment (Wipro Infotech) recorded revenues of Rs 1.6 billion for the quarter ended December 31, 2000. Earnings before interest and tax increased to Rs 172 million ($4 million) in the quarter, up from Rs 118 million in the same quarter last year.

The services component of Wipro's Indian IT services and products business segment was the main driver for an 11 per cent growth in EBIT, up from 6 per cent a year back. Revenues from the services component increased to 23 per cent of total revenues for the Indian IT services and products business segment, representing an increase of 5 per cent from 18 per cent in the same period last year.

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