Wipro profits dip, bad news for markets

Jolting investors already shaken by a tepid outlook from sector bellwether Infosys Technologies, software services major Wipro Ltd. reported...

Jolting investors already shaken by a tepid outlook from sector bellwether Infosys Technologies, software services major Wipro Ltd. reported an unexpected drop in quarterly earnings and warned of sliding profit margins on Thursday. Falling below market expectations, Wipro has reported a 7 per cent dip in its net profit at Rs 820.5 crore for 2002-03 over Rs 885.4 crore in the previous year.

But the Bangalore-headquartered, New York Stock Exchange listed company reported a 24 per cent rise in its revenue at Rs 4,338.3 crore in 2002-03, up from Rs 3,492.6 crore during the previous fiscal.

Blue-chip stocks take another hit

Mumbai: The overnight rally in Indian markets was shortlived as blue-chip stocks came under heavy pounding from domestic funds and operators. The benchmark Sensex fell by 48 points on the BSE as Wipro results fell below expectations. The sell-off was fuelled by tech major Wipro’s announcement of a 7 per cent dip in the fourth quarter net profit that fell significantly short of expectations as well as a slowdown in FII activity.

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The BSE Sensex opened sharply down at 3,002.68 and gradually moved downwards to the intra-day low at 2,971.94 before ending at 2,984.50 as against yesterday’s close of 3,032.32, netting a fall of 47.82 points or 1.58 per cent. The broad-based BSE-100 Index dipped by 23.28 points to 1,475.19 from the previous close of 1,498.47.

“Wipro’s results further confirm that tech is no more a growth sector,” said a dealer. “There are increasing signs of the business getting commoditised. Intense pricing pressure is here to stay.” Wipro fell 8.25 per cent to Rs 884.40, its lowest close in nearly four years. Infosys Technologies dropped 1.97 per cent to Rs 2,965.75. Infosys’ conservative earnings growth estimate last week had triggered a sell-off in the sector.

Satyam Computer Services, the fourth-biggest exporter, shed 8.4 per cent to end at Rs 144.20, its lowest closing level in 16 months. The company is scheduled to release quarterly results ENS

The company’s shares initially slumped 14.4 per cent to their lowest levels since September 2001, worsening the sector’s woes after Infosys warned last week of slowing profit growth. The stock finally closed 8.25 per cent down at Rs 884.40, its lowest close in nearly four years.

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Wipro attributed the lower profit to loss in Wipro GE Medical Systems, investment in sales and marketing and lower price realisation contributing to decline in the operating margin.

Wipro Corporate Executive VP Suresh Senapathy said the company lost Rs 37.1 crore on account of its share in losses in Wipro GE Medical Systems Ltd, its joint venture in medical systems. Losses of Rs 7.3 crore in energy and utilities consulting division acquired from AMS Inc, increase in sales and marketing expenditure and a minor loss due to rupee appreciation added to fall in profits, Senapathy said.

It reported a revenue of Rs 1,237.7 crore in the fourth quarter ended March 2003, a 32 per cent rise over Rs 927 crore reported during corresponding quarter of last year. Net profit stood at Rs 225.4 crore, up by 2.5 per cent over Rs 220 crore recorded during fourth quarter of 2001-02. ‘‘We expect our revenue from Wipro Technologies and Wipro Spectramind to be approximately $172 million and $16 million respectively,’’ Wipro Chairman Azim Premji said on the outlook in the first quarter between April and June 2003.

‘‘Today’s customers want higher value at lower price,’’ Premji said while talking to media persons. ‘‘This is a trend we saw that began in 2001, and we believe it will only accelerate.’’

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It posted a five-per cent drop in net profit to Rs 225 crore ($47.5 million) in the fiscal fourth quarter ended March 2003 despite a revenue growth of 33 per cent to Rs 1,238 crore.

Wipro forecast global IT revenue of $172 million for the current April-June quarter, up 4.2 per cent from the preceding quarter. Vice Chairman Vivek Paul said 90 per cent of price reductions Wipro offered were to existing customers to retain business relationships. But the fear of competition also kept the company under pressure, he added.