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Wipro benefits from larger flow of contracts to India

John Ribeiro | Oct. 22, 2010
Other Indian outsourcers have also reported strong revenue and profit growth

BANGALORE, 22 OCTOBER 2010 - Wipro said its IT services business had posted strong revenue growth in the quarter ended Sept. 30, as customers tried to catch up with under-investment in IT during the recession.

The growth in revenue for Indian outsourcing firms comes even as some analysts are reporting a drop in global outsourcing in the third quarter.

The company said on Friday that IT services revenue in the quarter was US$1.27 billion, an increase of 19.5 percent over the same quarter last year. Revenue growth in rupee terms was lower at 15 percent because of the appreciation of the rupee against the U.S. dollar. The rupee has appreciated 3.6 percent against the U.S. dollar in the quarter.

Wipro's results are in accordance with International Financial Reporting Standards (IFRS).

The company, which has other businesses in lighting and consumer care, does not report net profits separately for its IT services business. However, the company said its operating margin in IT services fell to 22.2 percent in the quarter, compared to 23.7 in the same quarter last year, and 24.7 percent in the previous quarter, because of lower rupee realizations, and higher compensation for employees.

The company added 2,975 employees in the quarter, taking the total number of staff to 115,900 employees as of Sept. 30.

Other top Indian outsourcers like Infosys Technologies and Tata Consultancy Services (TCS) have also reported strong revenue and profit growth in the quarter.

As Indian outsourcers start hiring again in large numbers, staff attrition rates and salaries have also gone up. Voluntary staff attrition at Wipro was 23.5 percent in the quarter from 10.5 percent in the same quarter last year. TCS reported on Thursday that staff attrition for the quarter was 14.1 percent up from 11.4 percent a year earlier.

Indian service providers have improved their market share over multinational service providers so far this year both by number and value of contracts won, according to data from TPI, a sourcing data and advisory firm. TPI tracks contracts with a value above $25 million.

Indian vendors are benefiting even as there is a pause in the recovery of the global outsourcing market. In the third quarter, total contract value was $14 billion, down by over 20 percent from the last quarter and from the same quarter last year, said Siddharth Pai, a partner at TPI.

Close to $7 billion of business in the quarter came from restructurings, which are defined as renegotiations, renewals or extensions of existing contracts, Pai said.

While the third quarter was weak, TPI data and feedback from service providers suggest a more active fourth quarter is under way, Pai added.

 

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