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Wipro on track to meet growth targets, say analysts

NetScribes/Rajiv Banerjee

Repeat business from existing clients, better average realisation and cost control efforts have enabled Wipro Technologies to post a 150 per cent jump in net profit for the fourth quarter ended March 31, 2001. Analysts now expect the company to meet its 40-45 per cent growth target as new clients and a growing offshore business give it the required momentum.

For the fourth quarter of FY2001, Wipro has registered a net profit of Rs 2.17 billion, up from Rs 868 million in the previous corresponding quarter. Total income has risen to Rs 9.38 billion from Rs 7.42 billion. Total expenses rose to Rs 6.62 billion from Rs 5.48 billion mainly due to increased marketing costs.

On Friday, after the results were announced, the Wipro scrip touched an intra-day high of Rs 1,425 on the Bombay Stock Exchange before closing at Rs 1,385.35, up Rs 99.40 from its previous close.

"The results match expectations. Better average realisation as far as employee productivity is concerned and control on costs have enabled Wipro to post a healthy bottomline," said Gurunath Mudlapur, senior software analyst at Khandwala Securities. The company is on track to meet its target, he added.

Jigar Shah, senior software analyst at KR Choksey Shares & Securities, said it augured well for Wipro that most of its business had come from repeat orders. "This quarter has seen 32 new clients being added to the client pool. The revenues from them will be reflected in the next quarter. So, overall, the fundamental outlook for the company looks good," he said.

The telecom division, which made up 54 per cent of the company's total revenues this quarter, is expected to continue to do well in the next fiscal. "We do not expect any drastic fall in revenues from the telecom division in the coming fiscal. The pressure on margins, if any, would depend on a project-to-project basis," said Mudlapur.

Sheetal Manglani, software analyst at Renaissance Securities, said Wipro would continue to maintain its 8 per cent productivity growth in the coming fiscal. "The fear was that the telecom division would take a hit because of IT spending cuts by global telecom companies like Nortel. But we have not seen any cancellation of contracts by Nortel. Thus, we assume the telecom division will continue to do well," she said.

Wipro's offshore business is seen gaining as US companies cut onsite technological costs and outsource more work to Indian firms. "We remain extremely bullish on Wipro as technology development services will enable the company to pitch for more offshore business," said Priya Rohira, software analyst at Pranav Securities.

Manglani said the company would maintain its Q4 2001 offshore-onsite ratio of 50:48 in the coming quarters as well.

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