Two of Indias key software exporters, Wipro and Satyam Computer, posted better than expected first quarter results yesterday, but gave cautious outlooks amid uncertain US economic conditions. The results come a week after the countrys top two software firms, TCS and Infosys, also reported net profit jumps for the first quarter.However, the countrys software companies announced cautious full year revenue forecasts this week, with several US based clients in the midst of a tough business cycle.
Wipro and Satyam posted higher quarterly profits, but said the business outlook was cloudy due to slowing Western economies, sending their shares lower.
Wipro, the countrys number three software services exporter, missed forecasts with a 15pc rise in quarterly profit, while its smaller rival, Satyam Computer Services, beat forecasts with a 45pc surge in earnings.
The current situation hasnt improved compared to last quarter, particularly in the financial services sector, Wipros chief financial officer Suresh Senapaty said.
Some of the US banks are in trouble, so the uncertainty has still not disappeared.
Wipro, majorityowned by chairman Azim Premji, forecast its IT services revenue this quarter would rise 2pc from AprilJune to USD1.09 billion, less than a 3.5pc sequential rise in the second quarter.
In the June quarter, Wipro received a quarter of its revenue from financial services companies.
But the firm expects prospects to improve in the second half of the financial year ending in March next year, as overseas clients look to cut costs and boost efficiency amidst slowing economies.
Wipro was also confident of maintaining or improving margins for the full year, despite an adverse impact from wage hikes in the September quarter, thanks to improved pricing and a strong pipeline of orders, Senapaty said.
The firm, which offers system integration, software application development and backoffice services, said net profit rose to 8.14bn rupees USD190m in its fiscal first quarter to last month, from 7.10bn rupees in the same period last year, under US accounting rules.
Profit was hurt by a drop of 272m rupees in other income, as compared to a gain of 991m rupees a year ago. Revenue rose 42.5pc to 59.62bn rupees, as it added 31 clients during the quarter.
Bangalore based Wipro added just 108 staff in the June quarter, compared with 3,811 in January March and 5,225 a year ago. Analysts said this was a sign of slowing outsourcing demand.
But Senapaty said Wipro was focusing on boosting efficiency of its existing staff and headcount additions were not a reflection on the earnings growth. Wipros earnings follow results from bigger rival Tata Consultancy Services, which narrowly missed forecasts, and secondranked Infosys Technologies, which beat estimates. The two larger rivals have also warned of challenging times ahead.
We are yet to see clear and consistent signals emanating from the banking and financial services sector, which continues to be fluid, Satyam chairman Ramalinga Raju said. The direction is not clear. We have not seen any cancellations, but decision making appears fluid.
New York listed Satyam, which specialises in business software and offers backoffice outsourcing services, said consolidated net profit for the quarter rose to 5.48bn rupees USD128m.