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Wipro Q1 FY2013 Result Fails to Meet Expectations

Wipro Limited has announced its financial results under International Financial Reporting Standards (IFRS) for its first quarter ended June 30, 2012, reporting total revenues of $1.92 billion (INR 106.53 billion), a Year-on-Year (YoY) increase of 24 percent.

Analysts feel that changes at the top may have affected the company's performance.

"Wipro has been restructuring its business and this, along with the uncertain demand scenario, has impacted revenue growth," said Dipen Shah, Head of PCG (Private Client Group) Research, Kotak Securities.

Ankita Somani, Research Analyst-- IT, Angel Broking concurred with Shah's view stating, "Wipro is still in the process of realigning its capabilities and positive results from organization restructuring exercise are yet to be seen."

The non-GAAP adjusted net income for Wipro stood at $284 million (INR15.80 billion), a YoY increase of 18 percent. IT Services Earnings Before Interest and Tax (EBIT) saw a 24 percent increase YoY, totaling $314 million (INR 17.44 billion).

"Wipro's results were below expectations. The volume growth of about0.8 percent came in line with the guidance but was lower than peers. EBIDTA margins also disappointed," said Shah.

Somani shared Shah's view on the results, saying, "Wipro's IT services revenue growth disappointed by coming in at -1.4 percent Quarter-on-Quarter (QoQ) as against our expectation of it remaining flat."

The company claims that the IT Services revenue in dollar terms, which stands at $1,515 million, representing a YoY increase of 8 percent, was affected by $25 million cross currency impact.

"We have seen high levels of volatility in currencies globally. We have improved profitability, while continuing to invest for growth," said Suresh Senapaty, ED & CFO, Wipro.

The company also said that its non-GAAP constant currency IT ServicesRevenue of $1,540 million was within their guidance range of $1,520 million to $1,550 million. "We have delivered revenues in line with our guidance in a volatile environment. We will continue to build differentiation and invest in technology driven business transformationsfor our customers as well as rewarding our talent," said T K Kurien, ED& CEO, IT Business.

While Wipro securing a single multi-year engagement may not seem startling, especially when considering that competitors Infosys and TCS added 51 and 29 clients respectively in the same period, Somani pointed out that "the company added one client in the $100mn plus revenue bracket which is a positive indication of company's improving client mining capabilities."

In its guidance for the next quarter ending September 30, 2012, the company expects revenues from its IT Services business - which accounts for 78 percent of total revenue and 93 percent of operating income for the quarter ended June 30, 2012 - to be in the range of $1,520 million to $1,550 million.

"The guidance for 2Q also reflects the macro uncertainty and the limited revenue visibility for the company," said Shah.

"Wipro's guidance for IT services for 2QFY13 of 0.3-2.3 percent QoQ growth looks decent though lower than our expectation of 1-3 percent QoQ, especially after continuous disappointments since last couple of quarters in terms of guidance," added Somani.

Commenting on the results, Azim Premji, Chairman of Wipro, said, "In today's complex business environment, global corporations are increasingly investing in transformational technology initiatives to improve competitiveness. We see this shift as an opportunity for us to lead this change and help customers differentiate in this fast evolving market."


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