'Rupee appreciation impacts Wipro'

On a day when India’s third largest software company Wipro Limited announced its results which failed to meet the analyst expectations and its shares fell by over 1 per cent, Cybermedia News caught up with Sourabh Kaushal, Industry Manager, ICT Practice, Frost & Sullivan, South Asia and Middle East.

Prasad Ramasubramanian listened to Kaushal as he explained the reasons for Wipro’s lackluster performance and the Indian IT entities heading northwards (Russia). Excerpts:

What made Wipro’s profit margin lag?

Maybe this is one the major impacts of rupee appreciation. If you look at the same quarter scenario last year, they showed a profit growth of 41 per cent and a revenue growth by 45 per cent growth quarter-on-quarter (QoQ) for the quarter ending December 2006, and in this quarter ending December 2007, we are talking about 5.7 per cent increase over previous quarter and that (rupee appreciation) has had its impact.

Wipro is the only company that has offered a salary hike in the IT domain. Do you think the hike in salary affected its margins?

Yes, it would have had its impact. The reason being that realization per employee gets reduced and this can impact your results. Though they have added about 39 clients this quarter, they have not been to generate the revenue as that they should have been.

Wipro has only one $100-m client while companies such as TCS and Infosys are ahead in this respect. Please comment.

It (Wipro) has not been able to attract large customers but this is not the case with companies such as Infosys.

Wipro's guidance for the next quarter is not too encouraging. What could be the reason? Wipro usually gives guidance for Wipro Technologies. Wipro's current billing for its global IT services and products division is around $910-m. The firm has given the guidance of achieving around $955-m. This is a marginal increase. Any specific reasons?

They have a very good idea of what is going to happen and they are getting businesses from repeat businesses. If you look at the United States market, lots of decisions have been put on hold and this is one of the reasons why it is impacting.

Companies such as TCS have already begun investing majorly in countries such as Russia and other nations. Do you see this scenario continuing in the future?

Companies are looking at non-US avenues for growth and it is important to dilute some of your revenues in other parts too.

What advantage do you foresee in country like Russia and what are the challenges?

For Russia, the biggest challenge would the language and that, according to me, plays a big role. Also, it’s a kind of a closed market and not too sure about it. There is a huge potential, no doubt about that.

The cost of setting up business is going to come down in Russia.

Absolutely and that goes without saying.

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