Wipro will emerge winner: Analysts

YP Rajesh

BANGALORE: India's diversified information technology firm Wipro Ltd. is

likely to post profit growth of 70 to 80 per cent on the year for the first

quarter to June 30, analysts said on Tuesday. Earnings would be largely driven

by a strong increase in its software services revenues as Wipro had improved its

efficiencies, they said.

"I am looking at a very good jump in their operating margins as they

have increased their (employee) utilization and billing rates," Sundaram

Newton Asset Management Co Ltd. analyst Srividya Rajesh told Reuters.

"Their bottomline should grow by 70 per cent this quarter," she

said. The company is will announce its results on Thursday.

Wipro is one of India's leading computer software services exporters. It also

has a computer hardware division and consumer goods divisions that make electric

bulbs, soap, childcare products and vegetable oils.

Wipro posted a net profit of Rs 480 million ($10.7 million) during the year

ago quarter, on net sales of Rs 4.22 billion.

Wipro's shares were down 3.97 per cent at Rs 2,191.00 in Tuesday morning

trade, after it lost 10.2 per cent on Monday when the overall market slumped.

The 30-share Bombay index was down one per cent at 4,146.49 on Tuesday after

plunging 6.17 per cent the previous day on a combination of higher interest

rates, sales by foreign funds and disappointing results from some key "old

economy" firms.

Analysts said Wipro's revenues from its non-software services business

normally flow during the last two quarters of the year, as they are more

cyclical in nature.

Revenues during the first and second quarters are largely generated by the

software services business, they said.

Besides the global opportunity to help traditional firms establish online

arms and launch eCommerce operations, Wipro was focusing on grabbing a slice of

the emerging mCommerce or mobile-phone enabled commerce segment, they said.

"They are going strong on mobile commerce which is getting them better

rates," said Dil Vikas Finance Ltd. analyst Sanjay Puthran.

"Besides, most of their projects are large as they have taken a stand

that they will accept only contracts that are worth a million dollars or

more," Puthran said.

Little upside seen for shares



Analysts, however, said that the strong earnings would have little impact on
Wipro's share price as there was little buying interest in the market.

They also said the share was priced high at current levels when compared to

other tech firms fully focused on software services, unlike Wipro.

"Results seem to be having less and less impact on software share prices

these days," said an analyst at a European securities firm.

"Though Wipro shares have fallen along with the other stocks in the

sector, I would be comfortable if it were 20-30 per cent cheaper...but that may

not happen," he said.

Wipro's share price fell 85 per cent from a year-high of Rs 9,800 on February

21 to a year-low of Rs 1,474 on May 26 following a dip in the valuations of tech

stocks on the US Nasdaq. It has recovered 49 per cent since then.

Analysts said they were comfortable with a price range of Rs 1,700-2,000.

(C) Reuters Limited 2000.