Wipro Records 10% YoY Growth in Profit After Tax in Q2 FY11; YoY Growth for H1 at 19%

Results for the quarter ended September 30, 2010 under IFRS

Oct 22, 2010, 01:02 ET from Wipro Limited

BANGALORE, India and EAST BRUNSWICK, New Jersey, Oct. 22 /PRNewswire-FirstCall/ -- Wipro Limited (NYSE: WIT) today announced financial results under International Financial Reporting Standards (IFRS) for its second fiscal quarter ended September 30, 2010.

Highlights of the Results:

Results for the Quarter ended September 30, 2010

  • IT Services Revenue in dollar terms was $1,273 million, a sequential increase of 5.7% and YoY increase of 19.5%.
  • IT Services Revenue on a constant currency (Non-GAAP) was $1,261 million, compared to our guidance range of $1,253 million to $1,277 million.
  • Total Revenues were Rs. 77.31 billion ($1.73 billion(1)), representing an increase of 12% over the same period last year.
  • Net Income was Rs. 12.85 billion ($288 million(1)), representing an increase of 10% over the same period last year.
  • Non-GAAP Adjusted Net Income (excluding impact of accelerated amortization of stock based compensation) was Rs. 12.76 billion ($286 million(1)), representing an increase of 10% over the same period last year.
  • IT Services Revenues were Rs. 57.47 billion ($1,290 million(1)), representing an increase of 15% over the same period last year.
  • IT Services Earnings Before Interest and Tax (EBIT) was Rs.12.75 billion ($286 million(1)), representing an increase of 7% over the same period last year.
  • IT Services recorded a 6.6% volume growth in the quarter.
  • IT Services added 29 new clients in the quarter.
  • Net addition of 2,975 employees in the current quarter in IT Services.
  • IT Products recorded sequential growth in Revenues of 29% in the current quarter.
  • Consumer Care and Lighting Revenue grew 20% over the same period last year and EBIT grew 13%.

Performance for the quarter ended September 30, 2010 and Outlook for the quarter ending December 31, 2010

Azim Premji Chairman of Wipro, commenting on the results said –

"We saw strong momentum in demand as customers tried to catch up with the under-investment in IT in the previous years. We continue to enhance our investments in Transformational Capabilities, Client Partners and Domain Solutions. While the macro-economic environment continues to remain uncertain, there is higher degree of confidence at the micro level. For the quarter ended December 31, 2010, we expect Revenues from our IT Services business to be in the range of $1,317 million to $1,343 million, a sequential increase of 3.5% to 5.5%*"

Suresh Senapaty, Executive Director & Chief Financial Officer of Wipro, said –

"We saw a strong volume growth of 6.6% driven by higher offshore mix. The Operating Margins for IT Services declined during the quarter due to the impact of employee progressions, Restricted Stock Units grants and lower foreign exchange realizations."

* Guidance is based on the following constant currency exchange rates: GBP/USD at 1.56, Euro/USD at 1.29, AUD/USD at 0.94, USD/INR at 46.31

Wipro Limited

Total Revenue for the quarter ended September 30, 2010 was Rs. 77.31 billion ($1.73 billion(1)), representing an increase of 12% over the same period last year. Net Income for the quarter ended September 30, 2010 was Rs.12.85 billion ($288 million(1)), representing an increase of 10% over the same period last year. Non-GAAP Adjusted Net Income (excluding impact of accelerated amortization of stock based compensation) for the quarter ended September 30, 2010 was Rs. 12.76 billion ($286 million(1)), representing an increase of 10% over the same period last year. Earnings Per Share for the quarter ended September 30, 2010 were Rs. 5.28 ($0.12(1)). Non-GAAP Adjusted Earnings Per Share (excluding the impact of accelerated amortization of stock based compensation) for the quarter ended September 30, 2010 were Rs. 5.24 ($0.12(1)), representing an increase of 9% over the same period last year.

Please see the table on page 9 for a reconciliation between (i) IFRS Net Income and non-GAAP Adjusted Net Income (excluding the impact of stock-based compensation) and (ii) IFRS IT Services Revenue and IT Services Revenue on a non-GAAP constant currency basis.

IT Services (74% of Total Revenue and 91% of Operating Income for the quarter ended September 30, 2010)

Our IT Services business segment recorded Revenue of Rs. 57.47 billion ($1,290 million(1)) for the quarter ended September 30, 2010, representing an increase of 15% over the same period last year. EBIT for this segment was Rs. 12.75 billion ($286 million(1)) for the quarter ended September 30, 2010, representing an increase of 7% over the same period last year.

Our Operating Income to Revenue for this segment was 22.2% for the quarter ended September 30, 2010.

We had 115,900 employees as of September 30, 2010, an increase of 2,975 people this quarter.

Wipro's capability to be a transformational partner to our clients coupled with global domain expertise helped us secure several large deals this quarter.

In the Energy & Utilities space, Wipro has entered into a  multi-year strategic partnership  with a  major electricity distribution network owner and operator in UK  to deliver transformational services including enhancing and consolidating the business applications landscape and transitioning the IT systems to an end-to-end managed services framework.

Wipro has entered into a contract with an electricity network owner and major supplier within Northern Ireland. Wipro will upgrade and implement the market registration, customer care and billing solutions across the client's businesses.

Wipro won a multi-year contract with a global banking major. Wipro's engagement includes management of  IT and BPO services for the customer with a goal to transform the current services model to a shared services model and deliver the ITO BPO synergy benefit beyond the cost savings.

Wipro entered into a multi-year engagement with a leading global ship classification society for deploying next generation services through business-IT alignment and implementing a future-ready IT architecture in accordance with industry standards and global best practices. As part of this engagement, Wipro will manage IT applications catering to the requirements of surveyors, engineers, business users, business owners and end customers of this society with a goal to make their business more efficient.

During the quarter, the India, Middle East & Africa regions continued to post robust growth and had a good set of wins including two large multiyear outsourcing deals with the Central Bank of India and UCO Bank for their Regional Rural Bank roll outs.

We entered into a multi-year strategic multimillion dollar outsourcing deal from one of the largest global telecom service providers to create and manage their enterprise networks in India. Other key deals secured in the quarter include projects from the UID authority for the critical enrolment process for 2 states in India. In the African region, Wipro secured a multiyear contract as a strategic partner with a wireless telecom player in West Africa to manage their core IT systems.  

Awards and Recognition

Our continued focus on Cloud Computing technology gained momentum with Wipro winning engagements in this space with two large utility companies and a global insurance company. Wipro also launched "Comprehensive Cloud Services Portfolio for ISVs" (Independent Software Vendors), an integrated framework that can help companies to strategize and accelerate the Cloud / SaaS transformational journey. The highlight of this offering is the patent pending 'Quick SaaS Enablement' which helps in faster time to market. Apart from Enablement, it also provides Engineering, IT & Hosting Services making it a 'One-Stop' SaaS offering.

As testament to our continued focus on productized services, Network Products Guide, a leading information technology research and advisory guide named Wipro's Enterprise Data Masking Solution and Software Assurance Center, as winners of the 2010 Best Products and Services Award. 

Wipro's commitment to continuous innovation and driving business value for its customers in the consumer packaged goods industry received further acknowledgement when two of its solutions – Sub-Daily Planning and Scheduling (iSDPS) and Third Party Ordering (iTPO) – became SAP endorsed business solutions.

Wipro's dominance and authority in the independent Testing Services space was further reflected in recognition from IDC Research Inc., an independent research firm, as a leader among Tier-1 Testing Services Providers in a July 2010 report titled "IDC MarketScape: Global Testing Services, 2010 Vendor Analysis". Wipro was ranked among leaders in both the enterprise application testing views and in the product engineering testing services assessment.

Wipro became the first Healthcare IT Services organization to be certified for IEEE 11073 (x73) based software reference system for 5 certified device classes. Wipro's x73 Manager USB Reference System was certified by Continua Health Alliance, a non-profit, collaborative industry organization dedicated to defining technology standards for healthcare solutions.  This solution will enable and simplify the needs of clinical diagnostic applications to collect vital medical data from homecare devices and bed-side monitors through application programming interfaces (API's) thereby forming a critical enabler for customers in the fast growing remote patient monitoring system, home healthcare and e-health markets.

During this quarter, Wipro eEnabler, a prescriptive Service Oriented Architecture (SOA) has been granted a notice of allowance for issue of patent. eEnabler is a complete SOA solutions Kit – including SOA Platform, prescriptive architecture and framework for rapid development of SOA applications. It has been applied in many large SOA implementations for our global clients.  

IT Products (14% of Total Revenue and 4% of Operating Income for the quarter ended September 30, 2010)

Our IT Products segment recorded Revenue of Rs. 10.69 billion ($240 million(1)) for the quarter ended September 30, 2010, representing a decline of 10% over the same period last year. EBIT for this segment was Rs. 533 million ($12 million(1)) for the quarter ended September 30, 2010, representing a decrease of 13% over the same period last year.

The ratio of our Operating Income to Revenue for this segment was 5.0% for the quarter ended September 30, 2010.

Return on Average Capital Employed (ROCE) for the IT Services and Products segment was 40% on an annualized basis for the quarter ended September 30, 2010

Consumer Care and Lighting (9% of Total Revenue and 6% of Operating Income for the quarter ended September 30, 2010)

Our Consumer Care and Lighting business segment recorded Revenue of Rs. 6.65 billion ($149 million(1)) for the quarter ended September 30, 2010, representing an increase of 20% over the same period last year.  EBIT for this segment was Rs. 831 million ($19 million (1)) for the quarter ended September 30, 2010, representing an increase of 13% over the same period last year.

Operating Income to Revenue for this segment was 12.5% for the quarter ended September 30, 2010. ROCE for this segment was 16% on an annualized basis for the quarter ended September 30, 2010, compared to 16% for the same period last year.

About Non-GAAP financial measures

This press release contains non-GAAP financial measures within the meaning of Regulation G and Item 10(e) of Regulation S-K. Such non-GAAP financial measures are measures of our historical or future performance, financial position or cash flows that are adjusted to exclude or include amounts that are excluded or included, as the case may be, from the most directly comparable financial measure calculated and presented in accordance with IFRS.

The table on page 8 provides Adjusted Net Income for the period, which is a non-GAAP measure that excludes the impact of accelerated amortization in respect of stock options that vest in a graded manner, and IT Services Revenue on a constant currency basis, which is a non-GAAP measure that is calculated by translating IT Services Revenue from the current reporting period into U.S. dollars based on the currency conversion rate in effect for the prior reporting period.

These Non-GAAP financial measure are not based on any comprehensive set of accounting rules or principles and should not be considered a substitute for, or superior to, the most directly comparable financial measure calculated in accordance with IFRS, and may be different from non-GAAP measures used by other companies. In addition to these non-GAAP measure, the financial statements prepared in accordance with IFRS and the reconciliation of these non-GAAP financial measures with the most directly comparable IFRS financial measure should be carefully evaluated.

We believe that the presentation of this Non-GAAP Adjusted Net Income, when shown in conjunction with the corresponding IFRS measure, provides useful information to investors and management regarding financial and business trends relating to its Net Income for the period. We consider a stock option award with a graded vesting schedule to be in substance a single award not multiple stock option awards. Further, we consider the services of the employee in each year covered by the stock option award to be equally valuable and accordingly believe that the straight line amortization reflects the economic substance of the stock option awards. However, we record the related stock compensation expenses on an accelerated amortization basis for IFRS reporting. Therefore, we believe that making available an adjusted net income number that excludes the impact of accelerated amortization from Net Income provides useful supplemental information to both management and investors about financial and business trends.

For internal budgeting process, our management also uses financial statements that exclude the impact of accelerated amortization relating to stock options that vest in a graded manner. Management of the Company also uses Non-GAAP Adjusted Net Income, in addition to the corresponding IFRS measure, in reviewing our financial results.

A material limitation associated with the use of Non-GAAP Adjusted Net Income as compared to the IFRS measure of Net Income is that it does not include costs which are recurring in nature and may not be comparable with the calculation of Net Income for other companies in our industry. We compensate for these limitations by providing full disclosure of the effects of this non-GAAP measure, by presenting the corresponding IFRS financial measure and by providing a reconciliation to the corresponding IFRS measure.

We believe that the presentation of IT Services Revenue on a non-GAAP constant currency basis, when shown in conjunction with the corresponding IFRS measure, provides useful information to investors and management regarding financial and business trends relating to IT Services Revenue.  As noted above, IT Services Revenue on a non-GAAP constant currency basis is calculated by translating IT Services Revenue from the current reporting period into U.S. dollars based on the currency conversion rate in effect for the prior period. We refer to growth rates in constant currency so that business results may be viewed without the impact of fluctuations in foreign currency exchange rates, thereby facilitating period-to-period comparisons of our business performance.

Results for the quarter ended September 30, 2010, computed under IFRS, along with individual business segment reports, are available in the Investors section of our website at www.wipro.com.

Quarterly Conference Calls

We will hold conference calls today at 02:00 p.m. Indian Standard Time (04:30 a.m. US Eastern Time) and at 6:45 p.m. Indian Standard Time (9:15 a.m. US Eastern Time) to discuss our performance for the quarter and answer questions sent to email ID: rajendra.shreemal@wipro.com or sridhar.ramasubbu@wipro.com. An audio recording of the management discussions and the question and answer session will be available online and will be accessible in the Investor Relations section of our website at www.wipro.com.

About Wipro Limited

Wipro provides comprehensive IT solutions and services, including systems integration, information systems outsourcing, package implementation, software application development and maintenance, and research and development services to corporations globally.   Wipro Limited is the first PCMM Level 5 and SEI CMM Level 5 certified IT Services company globally.  Wipro's IT Services business was assessed at Level 5 for CMMI V 1.2 across Offshore and Onsite development centers.

Wipro also has a strong presence in niche market segments of Infrastructure Engineering and Consumer Products & Lighting.  

Wipro's American Depositary Shares (ADSs) are listed on the New York Stock Exchange and equity shares are listed in India on the Stock Exchange - Mumbai, and the National Stock Exchange.  For more information, please visit our websites at www.wipro.com, www.wiprocorporate.com and www.wipro.in

(1)  For the convenience of the reader, the amounts in Indian rupees in this release have been translated into United States dollars at the noon buying rate in New York City on September 30, 2010, for cable transfers in Indian rupees, as certified by the Federal Reserve Board of New York, which was US $1=Rs.44.56. However, the realized exchange rate in our IT Services business segment for the quarter ended September 30, 2010 was US$1=Rs.45.15

Contact for Investor Relations

Contact for Media & Press

Rajendra Kumar Shreemal

Sachin Mulay

Vice President Head - Corporate Brand & Communication

Phone:  +91-80-2844-0079

+91-80-2505-6110

Fax: +91-80-2844-0051

+91-80-2844-0350

rajendra.shreemal@wipro.com

sachin.mulay@wipro.com

Sridhar Ramasubbu

Vice President

Phone:  +1 408-242-6285

sridhar.ramasubbu@wipro.com

Forward-looking and Cautionary Statements

In addition to historical information, this press release contains certain "forward-looking statements" within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. The forward-looking statements contained herein represent Wipro's beliefs regarding future events, many of which are, by their nature, inherently uncertain and outside Wipro's control.  Such statements include, but are not limited to, statements regarding Wipro's growth prospects, its future financial operating results, and its plans, expectations and intentions.

Wipro cautions readers that the forward-looking statements contained herein are subject to risks and uncertainties that could cause actual results to differ materially from the results anticipated by such statements.  Such risks and uncertainties include, but are not limited to, risks and uncertainties regarding fluctuations in our earnings, revenue and profits, our ability to generate and manage growth, intense competition in IT services, our ability to maintain our cost advantage, wage increases in India, our ability to attract and retain highly skilled professionals, time and cost overruns on fixed-price, fixed-time frame contracts, client concentration, restrictions on immigration, our ability to manage our international operations, reduced demand for technology in our key focus areas, disruptions in telecommunication networks, our ability to successfully complete and integrate potential acquisitions, liability for damages on our service contracts, the success of the companies in which we make strategic investments, withdrawal of fiscal governmental incentives, political instability, war, legal restrictions on raising capital or acquiring companies outside India, unauthorized use of our intellectual property, and general economic conditions affecting our business and industry.  Additional risks that could affect our future operating results are more fully described in our filings with the United States Securities and Exchange Commission, including, but not limited to, Annual Reports on Form 20-F.  These filings are available at www.sec.gov. We may, from time to time, make additional written and oral forward-looking statements, including statements contained in the company's filings with the Securities and Exchange Commission and our reports to shareholders.  We do not undertake to update any forward-looking statement that may be made from time to time by us or on our behalf.

WIPRO LIMITED AND SUBSIDIARIES

CONDENSED CONSOLIDATED INTERIM STATEMENTS OF INCOME

(` in millions, except share and per share data, unless otherwise stated)

Three months ended September 30,

Six months ended September 30,

2009

2010

2010

2009

2010

2010

Convenience translation into US $ in millions (Unaudited) Refer note 2 (iv)

Convenience translation into US $ in millions (Unaudited) Refer note 2 (iv)

Gross revenues

68,937

77,719

1,744

132,805

149,625

3,358

Cost of revenues

(47,522)

(53,270)

(1,195)

(90,769)

(101,917)

(2,287)

Gross profit

21,415

24,449

549

42,036

47,708

1,071

Selling and marketing expenses

(4,490)

(5,751)

(129)

(8,730)

(11,137)

(250)

General and administrative expenses

(3,976)

(4,251)

(95)

(7,528)

(8,090)

(182)

Foreign exchange gains/(losses), net

240

(414)

(9)

(1,166)

45

1

Results from operating activities

13,189

14,033

315

24,612

28,526

640

Finance expenses

(492)

(467)

(10)

(1,131)

(870)

(20)

Finance and other income

1,173

1,422

32

2,167

2,773

62

Share of profits of equity accounted associates

112

192

4

226

349

8

Profit before tax

13,982

15,180

341

25,874

30,778

691

Income tax expense

(2,217)

(2,183)

(49)

(3,957)

(4,528)

(102)

Profit for the period

11,765

12,997

292

21,917

26,250

589

Attributable to:

Equity holders of the company

11,707

12,849

288

21,810

26,035

584

Non-controlling interest

58

148

3

107

215

5

Profit for the period

11,765

12,997

292

21,917

26,250

589

Earnings per equity share:

Basic

4.82

5.28

0.12

8.98

10.69

0.24

Diluted

4.78

5.25

0.12

8.91

10.66

0.24

Weighted average number of equity shares used in computing EPS

earnings per equity share

Basic

2,428,113,467

2,435,417,820

2,435,417,820

2,427,566,155

2,434,528,098

2,434,528,098

Diluted

2,447,007,133

2,445,703,913

2,445,703,913

2,446,438,115

2,442,200,976

2,442,200,976

Additional Information

Segment Revenue

IT Services

49,981

57,471

1,290

98,246

112,473

2,524

IT Products

11,854

10,693

240

19,191

19,013

427

IT Services & Products

61,835

68,164

1,530

117,437

131,486

2,951

Consumer Care and Lighting

5,559

6,651

149

10,757

13,064

293

Others

1,783

2,490

56

3,445

5,119

115

Total

69,177

77,305

1,735

131,639

149,670

3,359

Operating Income

IT Services

11,865

12,746

286

22,632

26,318

591

IT Products

612

533

12

904

869

20

IT Services & Products

12,477

13,279

298

23,536

27,187

610

Consumer Care and Lighting

732

832

19

1,524

1,725

39

Others

(20)

(78)

(2)

(448)

(387)

(9)

Total

13,189

14,033

315

24,612

28,525

640

Reconciliation  of adjusted Non-GAAP profit to profit as per IFRS

Profit for the period attributable to Equity holders of the Company

11,707

12,849

288

21,810

26,035

584

Adjustments :

Accelerated amortization of stock options that vest in a graded manner

(72)

(88)

(2)

(130)

(211)

(5)

Non-GAAP adjusted profit

11,634

12,760

286

21,680

25,824

580

Reconciliation  of Non-GAAP Constant Currency IT Services Revenue to IT Services Revenue as per IFRS ($MN)

IT Services Revenue as per IFRS

1,273

Effect of Foreign currency exchange movement

12

Non-GAAP Constant Currency IT Services Revenue based on previous quarter exchange rates

1,261

IT Services Revenue as per IFRS

1,273

Effect of Foreign currency exchange movement

(9)

Non-GAAP Constant Currency IT Services Revenue based on previous year exchange rates

1,281

WIPRO LIMITED AND SUBSIDIARIES

AUDITED CONDENSED CONSOLIDATED INTERIM STATEMENTS OF FINANCIAL POSITION

(Rupees in millions, except share and per share data, unless otherwise stated)

As of March 31,

As of September 30,

Notes

2010

2010

2010

Convenience translation into US$ in millions (Unaudited) Refer note 2 (iv) 

ASSETS

Goodwill

4

53,802

54,660

1,227

Intangible assets

4

4,011

3,784

85

Property, plant and equipment

3

53,458

55,235

1,240

Investment in equity accounted investees

12

2,345

2,694

60

Derivative assets

11

1,201

2,873

64

Non-current tax assets

3,464

3,465

78

Deferred tax assets

1,686

1,640

37

Other non-current assets

8

8,784

13,233

297

Total non-current assets

128,751

137,584

3,088

Inventories

6

7,926

8,391

188

Trade receivables

50,928

58,221

1,307

Other current assets

8

21,106

23,398

525

Unbilled revenues

16,708

22,082

496

Available for sale investments

5

30,420

51,273

1,151

Current tax assets

6,596

7,174

161

Derivative assets

11

2,615

1,373

31

Cash and cash equivalents

7

64,878

37,844

849

Total current assets

201,177

209,756

4,707

TOTAL ASSETS

329,928

347,340

7,795

EQUITY

Share capital

2,936

4,904

110

Share premium

29,188

29,064

652

Retained earnings

165,789

181,752

4,079

Share based payment  reserve

3,140

1,753

39

Other components of equity

(4,399)

(2,224)

(50)

Shares held by controlled trust

(542)

(542)

(12)

Equity attributable to the equity holders of the company

196,112

214,707

4,818

Non-controlling Interest

437

649

15

Total equity

196,549

215,356

4,833

LIABILITIES

Long - term loans and borrowings

9

18,107

24,932

560

Deferred tax liabilities

380

340

8

Derivative liabilities

11

2,882

3,041

68

Non-current tax liability

3,065

2,963

66

Other non-current liabilities

10

3,233

3,188

72

Provisions

10

100

141

3

Total non-current liabilities

27,767

34,605

777

Loans and borrowings and bank overdrafts

9

44,404

30,693

689

Trade payables and accrued expenses

38,748

43,882

985

Unearned revenues

7,462

8,071

181

Current tax liabilities

4,850

5,560

125

Derivative liabilities

11

1,375

1,079

24

Other current liabilities

10

6,499

5,802

130

Provisions

10

2,274

2,292

51

Total current liabilities

105,612

97,379

2,185

TOTAL LIABILITIES

133,379

131,984

2,962

TOTAL EQUITY AND LIABILITIES

329,928

347,340

7,795

SOURCE Wipro Limited



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