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Wipro's muted guidance disappoints analysts

The company positively surprised the street with a 150 basis point expansion in operating margins that came in at 24.5 per cent - the highest the company could muster this year and far higher than the 20.7 per cent the firm reported in 2012/2013. 

twitter-logo Goutam Das        Last Updated: April 17, 2014  | 20:02 IST
Wipro’s muted guidance disappoints analysts

India's fourth-largest IT services exporter Wipro on Thursday reported March quarter numbers that were broadly in line with market expectations but the company disappointed analysts with its muted guidance for the first quarter of 2014/2015.

For the fourth quarter, Wipro pulled in IT services revenues of $1.72 billion, a sequential rise of 2.5 per cent - this is against the three per cent growth HCL reported , 1.9 per cent by TCS and 0.4 per cent de-growth by Infosys. Wipro's growth during the quarter was led by BPO that grew 12.5 per cent over the December quarter. Media and Telecom, BFSI and Healthcare and Life Sciences led growth from a vertical perspective.  

The company positively surprised the street with a 150 basis point expansion in operating margins that came in at 24.5 per cent - the highest the company could muster this year and far higher than the 20.7 per cent the firm reported in 2012/2013.  

However, the company's outlook for the June quarter disappointed the Street, so much so that some analysts now doubt if the company can match up to the annual average industry growth in 2014/2015. The company said it would rake in revenues between $1.71 billion and $1.76 billion in the first quarter - at the lower end, it implies a sequential shrinkage in topline.  

Wipro's management, however, put up a brave front at a press conference organized in Bangalore. CEO T K Kurien said the first quarter was not a precursor to the full year. "The first quarter will be impacted by seasonality in the India business. It is always our weakest quarter," he said, adding that the firm will bounce back in the second quarter because its order book was good. "The demand is stable in North America and Europe. We have booked orders. As the execution cycle follows, the topline would grow," he said.  
 
Analyst with brokerage house Sharekhan Sanjeev Hota said he was both disappointed with the topline as well as the guidance. "The margins were the only surprise. I had expected the company's topline to come in well above 3 per cent. I think the company is having ramping up challenges," he said.  

Wipro ended the day on the BSE at Rs 585.55, up 2.39 per cent. The Sensex was at 22,628.84, up 1.58 per cent.   

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