Outsourcer Wipro’s profit growth down on higher wages

Indian outsourcer Wipro reported a 32 percent increase in revenue, but profits were hit by higher salaries and reduced margins after its acquisition of Infocrossing

India's third largest outsourcer Wipro reported a 32 percent increase in revenue in the quarter ending December 31, but profits grew by only 11 percent over the same quarter last year, reflecting higher salaries in India, and reduced margins as a result of its acquisition last year of U.S. IT services provider Infocrossing.

Infocrossing's margins were lower than that of Wipro even before the acquisition, although the company said last year that it hoped to increase utilization at its datacenters by offering the option of hosting in the U.S. to some of its outsourcing clients.

Wipro's revenue for the quarter was 52.36 billion rupees ($1.33 billion) at the exchange rate on the closing date of the quarter, while its profits were 8.26 billion rupees. Wipro's revenue from its export business, Global IT Services and Products, was 36.14 billion rupees, up by 26 percent over the same period last year.

The U.S. economy, which is the largest market for Indian outsourcers, is facing challenges, but there has not been any impact yet on Wipro, Azim Premji, chairman of the company told analysts.

Indian largest outsourcer, Tata Consultancy Services, and second largest outsourcer, Infosys Technologies, both reported strong revenue growth for the quarter, despite concerns that the Indian outsourcing industry was likely to be hit by the weakening of the U.S. dollar. The U.S. is the largest market for Indian outsourcers, accounting for about 66 percent of export revenue, and the rupee has appreciated by about 12 percent against the dollar from the beginning of this year.

The appreciation of the rupee against the U.S. dollar pushes down rupee realizations for revenue earned in the U.S. by Indian companies, even as staff costs in India are going up.

Wipro got better prices for its services during the quarter, and added 39 new clients, which helped push up its top line. Improved price realizations and productivity also helped counter the impact of the weakening dollar, said Suresh Senapaty, Wipro's chief financial officer. "We have a healthy pipeline of large deals going forward," Premji said.

The company had 79,832 employees as of December 31, which included 59,925 employees in its IT Services and products business and 19,907 employees in its BPO (business process outsourcing) services business.