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Wipro Quarterly Profit Rises 2.5% on Outsourcing Demand

Wipro Ltd. (WPRO), India’s third-largest software exporter, reported first-quarter profit rose 2.5 percent as demand for information-technology services increased.

Net income rose to 16.2 billion rupees ($275 million) in the three months ended June, matching the median of 38 analysts’s estimate compiled by Bloomberg. The Bangalore-based company posted sales of 97.3 billion rupees, that missed the 99.3 billion-rupee median of analysts’ estimates. Wipro’s revenue from information-technology services matched the forecast range it provided in April.

Billionaire Chairman Azim Premji said the company is seeing higher confidence among its customers amid “positive macroeconomic developments,” particularly in the U.S. -- its biggest market. Wipro joins larger rival Tata Consultancy Services Ltd. (TCS) in signaling higher demand for outsourced software work by forecasting revenue from the business to rise as much as $1.65 billion in the quarter ending September.

“The guidance is a significant jump over this quarter’s expectations,” said Amar Mourya, a Mumbai-based analyst with India Nivesh Securities. “That could lead to a re-rating and revision in the full-year stock price” target, he said.

The forecast for IT revenue in the second quarter is based on 57.24 rupees to a U.S. dollar, the company said in a statement yesterday.

Meeting Forecast

Its revenue from IT services increased to $1.59 billion in the quarter ended June, in line with its April forecast of $1.575 billion to $1.61 billion for the period.

Shares of Wipro rose 1.5 percent to 381.95 rupees at the close in Mumbai trading before the earnings announcement yesterday. The stock has climbed 8.6 percent this year, compared with a 1.7 percent advance in the S&P BSE Sensex.

Salary increases to its employees squeezed operating margins in the quarter, according to Chief Financial Officer Suresh Senapaty.

“We continue to maintain our sector underperformer call on Wipro owing to its dismal performance and sustained underperformace,” Rahul Jain, an analyst with Mumbai-based Dolat Capital Market Pvt. said in a note yesterday. “We believe that stock would deliver lower growth compared to peers.”

The company added 28 new customers in the quarter, it said. Wipro added 1,469 people in the period, bringing the total number of employees to 147,281.

“We are seeing a pickup in large deal closures which has reflected in strong order book in the current quarter,” T.K. Kurien, chief executive officer, said in the statement.

To contact the reporter on this story: Kartikay Mehrotra in New Delhi at kmehrotra2@bloomberg.net

To contact the editor responsible for this story: Michael Tighe at mtighe4@bloomberg.net

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