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Wipro reports sluggish Q3

The company said net profits of its software business rose 32% in Q3, which is lower than its peers.
None | By Pankaj Mishra, Bangalore
UPDATED ON JAN 17, 2007 05:31 PM IST

Wipro Ltd, India's third largest tech services company, said net profits of its software business rose 32% to Rs 696 crore in the quarter to December, a growth lower than peers, as pressures from wage increases and a rising rupee against the dollar weighed it down.

Sales rose to Rs 2,876 crore in the three months, an annual growth of 35%.

Tata Consultancy Services, India's largest software company, on Monday said its profit rose 45% to Rs 1,116 crore on sales of Rs 4,873 crore in the October-December months, the first Indian tech vendor with quarterly revenues topping $1 billion, improving margins by moving more work offshore and reducing sales costs.

Last week, Infosys Technologies, industry No. 2, took advantage of better staff productivity and lower office costs to unveil a 51.5 % annual growth in profit at Rs 983 crore on sales of Rs 3,655 crore in the quarter.

Software services and products account for 72% of Wipro's revenues and 88% of profit before interest and tax. Other business in energy, consumer care and lighting contribute the remaining share.

Wipro's software operating margins declined 0.8% in the latest quarter. "Even the margins in Wipro's BPO business have declined by 140 basis points," said Anantha Narayan, equity analyst with Mumbai-based unit of investment bank Morgan Stanley. "The only positive aspect is that the company has been able to bring down its attrition rates."

Wipro increased staff salaries by 15% from October, a month when the rupee started rising against the U.S. dollar, the currency most Indian software service vendors bill their clients in. The rupee strengthened 3.6% in the October-December quarter. Infosys and TCS paid wage hikes for employees offshore in April in an environment when the rupee lost 3.5% against the dollar.

"It is just bad timing that Wipro had to pay salary hikes in an environment when rupee is appreciating," R Ravi, equity analyst with Karvy Securities in Mumbai, said in an interview ahead of the results.

Wipro chairman Azim Premji forecast $685 million (Rs 3,014 crore) revenues from software services and products in the quarter to March.

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