Outsourcer Wipro benefits from improved demand

Wipro achieved revenue growth in its IT services business in the quarter ended Dec. 31, indicating that demand for outsourced services is picking up but is not yet at levels seen before the recession, it said Wednesday.

The company, which is India's third largest outsourcer, said its IT services business had grown by 2.4 percent in U.S. dollar terms to US$1.13 billion in the quarter ended Dec. 31, in comparison to the same quarter in the previous year. The company's results for the quarter are in accordance with International Financial Reporting Standards (IFRS).

The company's IT services revenue in U.S. dollar terms had declined by 4 percent to $1.1 billion in the previous quarter ended Sept. 30.

Wipro and other Indian outsourcers are seeing improved demand for IT services. The company however said that it expects IT budgets to be flat to marginally positive during this year.

Indian outsourcers may sign some large deals by the second quarter of this year, but they are not likely to achieve soon the revenue growth levels they had before the recession, Sudin Apte, principal analyst at Forrester Research, said last week.

For the quarter ending March 31 this year, the company expects revenues from its IT services business to grow and be in the range of $1.16 billion to $1.18 billion.

Indian outsourcers are grappling with the appreciation of the Indian rupee against the U.S. dollar and other key currencies. Most of their revenue is derived from the U.S. market in dollars, but a significant part of their expense is in India in rupees. Wipro said it had maintained its margins despite the appreciation of the rupee and lower rates from customers.

The growth in Wipro's revenue from IT services in rupee terms was 2 percent, reflecting the appreciating rupee.

IT services account for 74 percent of Wipro's revenue. The company also has units handling its IT products, consumer care and lighting business businesses. The company does not report net profit separately for each of its businesses.

Indian outsourcers have also resumed hiring staff in large numbers in anticipation of improved business. Wipro's IT services business added 4,855 staff in the quarter taking the total number of staff as on Dec. 31 to 102,746. The company had cut staff by 630 in its IT services business in the previous quarter.

While reporting a revenue and profit growth last week, India's largest outsourcer Tata Consultancy Services (TCS) said it was planning to hire about 11,000 staff in the current quarter, including 8,000 trainees. TCS added 7,692 staff in the quarter to Dec. 31.

Wipro's IT services business added 31 new clients in the quarter. The U.S. accounted for 57.1 percent of the company's IT services revenue, with Europe contributing 26.3 percent.

Its business from the domestic and Middle East market has been steadily growing as a percentage of IT services revenue, and had a 8.9 percent share in the quarter ended Dec. 31. The share of the Japanese market in total IT services revenue has declined to 1.6 percent.

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