Wipro Q2 Profit Rises 24 pct, Beats Estimates

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November 2, 2012 3:19 PM EST

Wipro Ltd, India's No. 3 software services provider, topped quarterly profit estimates and forecast modest revenue growth on hopes of rising demand for outsourcing, as its clients look to cut costs in an uncertain economic environment.

India's $100 billion outsourcing sector has seen its growth slowing sharply in recent quarters as western clients held back on spending on information technology amid economic uncertainty in Europe and sluggish corporate earnings growth in the United States.

Profit for the three months ended September rose 24 percent to 16.11 billion rupees from 13.01 billion rupees in the year-ago period, well above analysts' estimates of 15.37 billion rupees, according to Thomson Reuters I/B/E/S.

The company forecast IT services revenue for the three months ending December would rise 1.3-3.2 percent from the September quarter to $1.56-$1.59 billion, in line with analysts' expectations of 1-4 percent growth.

Total revenue for July-September rose 17 percent on a year earlier to 106.57 billion rupees, while Wipro added 53 clients for its IT services during its fiscal second quarter.

The IT sector index has lagged the broader market this year, but has rallied more than 11 percent since a July low as investors became more optimistic about some stability in the global economic environment.

India's outsourcing sector gets more than 90 percent of its sales from providing services, including setting up IT networks and developing software applications, to overseas clients and counts the U.S. and Europe as its biggest markets.

Wipro said on Thursday it will fold all its non-IT services including consumer care and medical diagnostics into a new firm to focus on outsourcing, which accounted for 86 percent of its revenue in the fiscal year ended March.

The move was seen as an effort to boost growth amid cutthroat competition from local rivals Infosys Ltd and Tata Consultancy Services as well as global majors such as IBM and Accenture.

Bangalore-based Wipro's billionaire chairman Azim Premji had replaced the two co-CEOs of its IT business early last year with another company veteran T.K. Kurien in a bid to bolster growth that had lagged peers.

Last month, India's top IT services company Tata Consultancy and fourth-ranked HCL Technologies beat expectations for their second-quarter earnings, while No. 2 Infosys posted profit that was in-line with estimates.

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Copyright 2012 Thomson Reuters. All rights reserved.

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