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Robust volume growth to continue: Premji

Fakir Chand in Bangalore | October 17, 2003 15:40 IST

Wipro Ltd, India's leading IT bellwether, which exceeded its guidance and market expectations by improved performance during the second quarter of the current fiscal (2003-04), is expected to continue its robust volume growth in the next two quarters of the year.

Wipro czar Azim Premji declared in Bangalore on Tuesday that its flagship company, Wipro Technologies, would post a revenue of Rs 1,085 crore ($241 million) during the third quarter of the current fiscal.

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"Though we have projected a revenue of $210 million for the second quarter, we have exceeded the guidance by posting a revenue of $222 million from our global IT services and products business," Premji told rediff.com.

Analysts expect the Bangalore-based global IT major to exceed the guidance even during the third quarter of the current fiscal in view of the estimated robust volume growth across business segments.

As a result of robust sequential growth in each business sector, geography and service line, Premji claimed that the company had crossed an annualised revenue rate of $1 billion in its IT business.

"Customer interest in the use of offshore services continues to be high. The pricing pressure is not only easing, but also stabilising, making the business environment encouraging.

In fact, we have witnessed a modest rise in pricing during the second quarter and the trend of better pricing for new customers continues," Premji asserted.

At the same time, Premji admitted that the rising rupee and a mix of customers and service lines would have an impact on the operating margins.

"The continued appreciation of the rupee puts significant pressure on business profitability, even as the mix of customers and service lines can impact quarterly realisations," Premji added.

During the second quarter, the company has claimed that it managed to offset the impact of rupee appreciation with improved utilisation and increased cost efficiencies. As a result operating margins remained at the same level as in the first quarter of the current fiscal.

Wipro vice-chairman and CEO Vivek Paul said the company had seen a rebound in technology spending by its clients, leading to sustained volume growth even sequentially.

"For the seventh quarter in a row, the company has been posting higher revenues and improved margins due to rebound in tech spending and price stabilisation. The US market continues to be our engine of growth," Paul told rediff.com.

Stabilisation of technology stocks on the Nasdaq also indicates that IT spending would continue to grow during the rest of the second half, benefiting the company.

During the quarter under review, Wipro Technologies witnessed a sequential growth of 16 per cent, with telecom segment growing by 14 per cent, infrastructure services by 36 per cent, BPO by 22 per cent and package implementation by 19 per cent respectively.

On account of aggressive marketing and brand promotion, the flagship company bagged 35 new clients, including six belonging to Fortune 1000 list. Out of these, 20 accounts are for enterprise services and 15 for R&D.

"Half the clients (17) are from the US, nine are from Europe, six from Japan and three from the rest of the world. Three of the existing Wipro clients have also started outsourcing their IT-enabled services (BPO) from its subsidiary Spectramind," Paul disclosed.

Keeping in view its robust growth, the company has added a whopping 3091 employees during the quarter, comprising 1061 software professionals for IT services and 2030 people for BPO. It had an attrition rate of 12 percent in the second quarter.

The company is expected to maintain its hiring spree during the next two quarters (third and fourth) of the current fiscal.

Premji also clarified that the US move to cap H-1B visas would not have any immediate impact on its onsite operations, as the company has 2500 visas and sufficient L-1 visas. The number of L-1 visas has not been disclosed.

Interestingly, revenue from onsite operations continues to be higher at 58 per cent, with offshore operations generating the remaining 42 per cent.

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