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Wipro results disappoint market

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CIOL Bureau
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BANGALORE: Wipro reported an unexpected drop in quarterly profit on Thursday, and warned increased competition and a strengthening Indian currency is slicing profit margins. "It is a horror show, no one was expecting such a low net profit," said Pramod Gupta, software analyst with Enam Securities. "The IT services margins have disappointed a lot," he added.

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Analysts were worried about U.S.-listed Wipro"s outlook after rival Infosys shocked the market last week with a tepid forecast and warned that sliding profit margins would slow profit growth this year, sparking a sell-off in stocks.

"What we"re seeing is sustained pressure on pricing," said Wipro Vice Chairman Vivek Paul in an interview. India"s third-largest software exporter posted a five-percent drop in net profit to



225 crore in the fiscal fourth quarter ended March 31 on revenue growth of 33 percent to Rs 123.8 crore.





The results came in below a median profit forecast of Rs 244 crore in a Reuters poll of analysts. The poll"s median of forecasts for revenue was 12.39 billion rupees. Wipro forecast global IT revenue of $172 million for the current April-June quarter, up 4.2 percent from the preceding quarter.

Wipro, like its main Indian rivals Infosys and the privately held Tata Consultancy, has benefited from an influx of software services outsourcing from the U.S. and Europe where wages of software engineers are often three times higher. Shares of Wipro have fallen about 39 percent in the past three months, underperforming both Mumbai’s Infotech index and Infosys by nearly five percent over the same period.

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The New York-listed firm has lagged Infosys in earnings growth because of its higher exposure to battered telecom clients, but is leading a pack of companies betting on back-office services and large outsourcing deals to boost growth.

Wipro is 84 percent-owned by 58-year-old Azim Premji, India"s richest man, who took over his family-run edible oils firm nearly four decades ago and transformed it into a software giant.



Wipro has 300 clients including General Motors and Nortel Networks with more than 14,000 employees, mostly based in India.

© Reuters

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