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Wipro replays infotech dirge

Mumbai, April 17: The company that once made its founder the richest Indian on the planet is struggling to make money.

Wipro capped a dreary quarter with tame numbers that showed its net profit inch up 2.5 per cent to Rs 225.4 crore even as sales grew 31.58 per cent to Rs 1237.7 crore.

Azim Premji’s company’s notched up a smarter topline, but that could not stop it from joining the ranks of technology titans that have seen prices of their software plunge and customers haggle for better deals.

Wipro, like software big daddy Infosys, settled for more orders at rates that barely covered its cost of producing solutions and, in the bargain, lost out on profits.

The firm that makes things from software to soaps to edible oil, said its full-year net profit at Rs 813.2 crore was 6.10 per cent lower than Rs 866.1 crore in 2001-02.

The group net profit of Rs 820.5 crore for the year ended March 31, 2003 marked a decline of 7.33 per cent compared with Rs 885.4 crore in the year ended March 31, 2002; total revenues increased 25 per cent at Rs 4338.3 crore.

That the thrust of the business strategy was to ramp up volumes was apparent in statements made by Premji. “Last year was one of bold initiatives. We successfully integrated and acquired three entities, Spectramind, Global Energy Practice of AMS Inc and Ericsson’s R&D labs. Looking ahead at the quarter ending June 2003, we expect revenues from Wipro Technologies and Wipro Spectramind to be approximately $ 172 million and $ 16 million respectively.”

Vice-president (finance) Suresh Senapaty said profits at Wipro Limited fell Rs 37.1 crore on account of share losses in Wipro GE Medical Systems — a medical systems joint venture with American giant GE.

Analysts already sceptical of the forecasts dished out by infotech companies this earnings session took comments from Wipro bosses with more than a pinch of salt. “Pressure is clearly felt on pricing. Margins are thinning and volumes are growing at a slow pace,” said Nihar Shah of ASK Raymond James, a Mumbai brokerage.

“We should slowly get used to slower topline growth in the coming days in the software sector than we are used to in the previous years,” another analyst added.

Wipro’s murky forecast left a trail of unhappy investors, who slammed its share 8 per cent to Rs 884 on Dalal Street. The stock, which has already surrendered a whopping 39 per cent and stripped Premji off the richest Indian badge, has been under pressure for some time. Analysts who had expected it to determine the market’s direction were left counting losses.

Premji dubbed last week’s dramatic drubbing, now the subject of a probe by regulators and bourses, as an over-reaction and said markets were on a correction course.

“My assessment is that people have built models based on assumptions, and when a model does not meet assumptions, there is a overreaction,” he said.

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