Wipro Q2 profit seen growing 75-90%

By : |October 30, 2000 0

Y P Rajesh

BANGALORE: India’s diversified technology firm Wipro Ltd. is expected to post
a net profit rise of 75 per cent to 90 per cent in the second quarter, led by
higher income from its key software service business.

Analysts said Wipro’s earnings would ride on a continued improvement in the
billing rates of its software services business that accounts for nearly half
its total revenues.

The good results would however not boost Wipro’s share price as it is
considered over-valued compared with other leading software firms, they said.

“Their utilization (of employees) rate has improved compared with last
year…their billing rates are also higher as they are offering high-end
technology solutions,” said Khandwala Securities analyst Gurunath Mudlapur.

Wipro, one of India’s largest information technology firms by revenue, is
scheduled to announce on October 31 its financial results for the three months
ending on September 30, 2000.

The Bangalore-based company, which also makes computer hardware, soap,
vegetable oil, electric bulbs and childcare products, listed on the New York
Stock Exchange by issuing American Depositary Shares on October 18.

On the Bombay Stock Exchange, the Wipro share closed at Rs 2,321.30 on
Friday, up 0.89 per cent, while the bellwether Bombay index closed 0.75 per
cent, down at 3,729.12 points.

The Wipro ADR ended at $49-3/4, up $1-1/2, on Friday on the Nasdaq.

Stock overvalued
Wipro surpassed expectations during the first quarter to post a 129 per cent
jump in net profit to Rs 1.08 billion ($23.3 million) over the year-ago quarter.
Sales grew 47.6 per cent to Rs 6.22 billion during the period.

A Reuters survey of nine brokerages published in early October had forecast
that Wipro’s first half net profit would rise 103.2 per cent to Rs 2.42 billion,
while sales are forecast to grow 38.3 per cent to Rs 13.48 billion.

Sundaram Newton Asset Management analyst Srividya Rajesh said there was some
concern about a possible slowdown in Wipro’s hardware business that accounts for
a third of total revenues.

“The stock remains overvalued compared with Infosys or Satyam,”
Rajesh said. “It needs to come down a bit to be realistic.”

She said Infosys was cheaper than Wipro on parameters such as market
capitalization-to-sales and price-to-earnings.

On market capitalization to 2000-01 (April-March) software revenues, Infosys
is discounted 26 times, while Wipro’s discounting is 35 times, she said.

On price-to-earnings ratio, Wipro discounts its 2001 March earnings by 100
times, while Infosys’ discounting is 77 times, she said.

Infosys Technologies and Satyam Computer Services are leading Indian tech
firms that are focused on software services.

The Wipro share has gained 57.46 per cent from its year-low of Rs 1,474 on
May 26 but is off 76.31 per cent from its year-high of Rs 9,800 reached on
February 21. ($1 = 46.74 rupees).

(C) Reuters Limited 2000.

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