India's Wipro profit fuelled by recovering outsourcing demand

Reuters

* Revenue growth outlook slightly ahead of forecasts

* India IT services sector index up 48 percent this year

* Better demand outlook boosts Wipro, rivals

By Harichandan Arakali

BANGALORE, Oct 22 (Reuters) - Wipro Ltd, India'sthird-largest IT services exporter, beat quarterly profitexpectations as revenue in its core business grew at the fastestrate quarter-on-quarter in almost two years, thanks to higherspending by its biggest clients.

Wipro followed its rivals in India's showpiece IT servicesindustry with robust results and forecast December-quarterrevenue in its main business would grow in a range of 1.8-3.6percent in dollar terms from the previous quarter, slightlyahead of analyst forecasts for 1.5-3.5 percent growth.

"Wipro basically confirms the demand recovery that theindustry is witnessing," Kuldeep Koul, an analyst at ICICISecurities, said in a note.

India's IT services sector is enjoying a brightening demandoutlook from clients in the United States, its biggest market,as well as in Europe, where companies looking to cut costs areincreasingly turning to outsourcing.

"Client confidence is on the uptick and we see it reflectedin our results," Wipro's billionaire Chairman Azim Premji saidin a statement.

Bangalore-based Wipro said consolidated net profit rose anannual 28.5 percent in the three months ended Sept. 30 to 19.32billion rupees ($314.15 million), from 15.04 billion rupees ayear earlier. That compares with the 18.6 billion rupee meanestimate of 29 analysts surveyed by Thomson Reuters I/B/E/S.

Revenue from its 10 biggest customers rose by 4.1 percentfrom the previous quarter, faster than its overall IT servicessales growth of 2.7 percent. The latter was the best performancefor seven quarters.

Wipro is looking to regain momentum after its growth laggedthat of Indian rivals Tata Consultancy Services (TCS) and HCL Technologies Ltd as well as U.S. basedCognizant Technology Solutions Corp, in part by seekingmore business from its biggest existing clients.

That strategy has "started to pay off, it is doing so,although a little belatedly," said Harit Shah, analyst at NirmalBang Institutional Equities in Mumbai.

"There are certain signs that the turnaround is happening,it's not happened yet, but it's getting there."

India's IT sector index is up 48 percent this year,in line with Wipro's gains of 48.5 percent and far ahead of thebroader Mumbai market's 5 percent rise. Wipro sharesended up 1.7 percent at 514.80 rupees before the results.

Wipro has been looking to build its presence in thefinancial services industry, which is the biggest consumer of ITservices but where it lags rivals TCS and Infosys Ltd.Wipro said it won a big contract during the quarter from a largeU.S. bank that it declined to identify.

Wipro's clients include Apple Inc, Cisco SystemsInc and Citigroup Inc.

STRONG INDUSTRY QUARTER

TCS and HCL Technologies also beat analyst estimates forSeptember quarter profits, although profit at Infosys Ltd was weighed down by a one-off provision.

Infosys adjusted its full fiscal year revenue growthforecast range to 9-10 percent from 6-10 percent when itreleased its results earlier this month. TCS last week said itwould hire more people this year than initially planned.

India's $108 billion IT outsourcing industry is likely topost revenue growth of 12-14 percent for the year ending March31, the National Association of Software and Services Companiessaid earlier this year.

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