Wipro Net Income Exceeds Analyst Estimates on Orders

July 22 (Bloomberg) -- Wipro Ltd., India’s third-largest software exporter, reported profit that exceeded analyst estimates after the company won more orders and froze pay.

Net income, according to U.S. accounting standards, rose 31 percent to 10.7 billion rupees ($221 million) in the three months ended June 30, from 8.14 billion rupees a year earlier, Bangalore-based Wipro said today. Profit beat the 9.2 billion- rupee median of 26 analyst estimates compiled by Bloomberg. Sales gained 6 percent.

Wipro joins larger rivals Tata Consultancy Services Ltd. and Infosys Technologies Ltd. in surpassing analyst expectations, signaling demand for India’s software services may be returning as the global recession eases. Billionaire Chairman Azim Premji, who pared costs by freezing pay for Wipro’s almost 100,000 employees, has acquired businesses to boost sales and aims to increase revenue from markets such as the Middle East and Brazil.

“What we are seeing is that things are better than expected,” Gopal Agrawal, head of equities at Mirae Asset India Investment Co. in Mumbai, said by phone. “Even the U.S. results in the IT space are actually much better than expected, that is why this sector will remain attractive to investors,” said Agrawal, who oversees $50 million including technology shares.

Wipro fell 1.6 percent to close at 451.5 rupees in Mumbai trading, after gaining as much as 4.4 percent. The Bombay Stock Exchange’s Sensitive Index declined 1.5 percent. The stock has climbed 93 percent this year, outpacing the benchmark index’s 54 percent advance.

Sales in the quarter rose to 63.2 billion rupees, lagging behind the analysts’ 64.2 billion rupees projection. Wipro reported profit of 10.1 billion rupees on revenue of 63.9 billion rupees in the period as per International Financial Reporting Standards.

Pricing Pressure

Wipro still faces some pressure from clients to lower rates for its computer services and pricing will continue to have a slightly negative bias, Suresh Vaswani, joint chief executive officer of the information-technology-services unit, said in a televised interview on CNBC-TV18 network.

“We are cautious” about the economic environment, Wipro’s Chief Financial Officer Suresh Senapaty said today. “There has been demand from multiple customers for price changes. So far most of them have gone through; part of it could get impacted in the current quarter.”

Infosys, India’s second-biggest software provider, in April forecast its first annual decline in sales after clients delayed orders. Chief Executive Officer Senapathy Gopalakrishnan in May said India’s biggest technology companies won’t see a rebound in demand until the middle of next year.

“The quarterly numbers are good but I don’t think that it’s entirely correct to say that the clouds have gone away from the sector,” said Apurva Shah, head of research at Mumbai-based Prabhudas Lilladher Pvt. which has a “reduce” rating on Wipro. “The IT services business continues to remain under pressure.”

‘Signs of Stability’

Wipro, which also makes hydraulic equipment and soaps, earned 77 percent of revenue from its information-technology- services business in the quarter. The unit manages computer networks, operates call centers and provides back-office support for clients including Cisco Systems Inc. and Boeing Co.

“We are starting to see the first signs of stability in the business as ramp-downs start to taper off and volumes start to stabilize,” Premji said in a company release today.

The software exporter said sales at its IT-services business declined to $1.03 billion in the quarter, from $1.07 billion, and matched Wipro’s April projection of between $1.01 billion and $1.03 billion. The company forecast revenue at the unit will drop to between $1.04 billion and $1.05 billion in the three months to Sept. 30, from $1.11 billion a year earlier.

New Contracts

Wipro said it added 26 clients in the quarter and won two multimillion dollar deals in the period.

The company said in May it won a nine-year order from Unitech Ltd.’s wireless unit in India to build and maintain the mobile-phone operator’s computer network, without specifying its value. The same month, Sunoco Inc. renewed a contract worth $34 million over four years with Wipro’s Infocrossing unit.

Wipro in March received an 11.8 billion rupee order to create an online user system for the Indian government’s Employees’ State Insurance Corporation, the company said.

Tata Consultancy Chief Executive Officer Subramanian Ramadorai said on July 20 Citigroup Inc. is helping lead a recovery in demand from financial clients, the Indian software- services company’s biggest contributors to revenue.

The Mumbai-based industry leader, last week, reported profit rose 23 percent to 15.2 billion rupees in the first quarter, beating analysts’ 12.9 billion rupee projection.

International Business Machines Corp., the world’s biggest computer-services provider, on July 16 reported second-quarter earnings that topped analysts’ estimates and raised its full- year forecast.

The U.S. economy will expand faster than previously forecast in the second half of this year and in 2010 as a revival in consumer spending signals an end to the recession, a Bloomberg News survey of economists earlier this month showed.