Wipro revenue growth continues to slide as Indian outsourcers struggle

Wipro revenue growth continues to slide as Indian outsourcers struggle

Like its peers, Wipro has been affected by uncertainty in the market for offshore services

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Wipro announced this morning that its IT services business grew only 4.6% in US dollar terms in the quarter ending September 30, a much slower rate of growth reflecting a weak global economy.

The Indian outsourcer said revenue from IT services in the quarter was $1.54 billion. The Bangalore-based outsourcer had posted revenue growth of 16% for the same quarter a year prior. It forecasted revenue for the next quarter to be closer to $1.6 billion.

Wipro's Indian competitors have also been affected by slow growth in the market for outsourcing services. Infosys, the second largest outsourcer, blamed continuing global economic uncertainties for a slide in year-on-year revenue growth in US dollar terms in the quarter, which declined to 2.9% from 16.7% a year earlier.

India's largest outsourcer, Tata Consultancy Services, did better, with growth only falling to 13% in the quarter compared to 26% in the same period last year.

Wipro said yesterday that its board decided to demerge its non-IT businesses such as in consumer care, lighting, hydraulics and medical diagnostics into a new company to provide more focus for its IT business. Infosys and TCS are pure-play IT services companies.

The demerger will help improve profit margins, said Suresh Senapaty, Wipro's chief financial officer.

But analysts think that moving out the small non-IT businesses from the company will alone not help. The company needs to focus on using technology to solve business problems, rather than just emphasise on technology, cost-cutting, and increased productivity, said Sudin Apte, principal analyst and CEO of research firm Offshore Insights.

IT services accounted for 79% of Wipro's total revenue in the quarter. The company added 2,017 employees in its IT services business in the quarter, taking the total number of staff to 140,569.

IT services revenue grew 23% in rupee terms from the same quarter a year earlier, largely because of the depreciation of the Indian rupee against the dollar. The company's revenue growth in rupee terms was 17%.

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