Wipro Joins Infosys, Tata Consultancy With Strong Growth As Indian IT Industry Booms

People walk in the Wipro campus in Bangalore June 23, 2009. Goldman Sachs counts the lack of quality education as one of the 10 factors holding India back from rapid economic growth.
Electro-mechanical projects firm Voltas Ltd is in advanced talks to buy the water purification and treatment business of India's No.3 software services exporter, Wipro Ltd, The Times of India said, citing unnamed sources close to the development. Reuters

Wipro, India’s third-largest IT services exporter, posted strong order wins during its fiscal first quarter, joining larger rivals Infosys and Tata Consultancy Services in signaling stronger growth ahead.

During the quarter, Wipro won large contracts from companies including stainless steel maker Outokumpu, European media company Sanoma and Japan's Takeda Pharmaceutical Co. Earlier this week, Wipro agreed to buy the North American and Australian subsidiaries of ATCO Ltd in a $195 million deal and provide IT services to the Canadian company in an order worth $1.1 billion over the next 10 years.

"The demand environment continues to hold steady ... we saw major deal wins," chief executive T.K. Kurien said in a conference on Thursday. American clients, especially, were returning to "discretionary spending," and continental Europe has "significant potential for outsourcing IT services," Kurien said. Discretionary projects are typically good-to-have, but not critical to day-to-day operations and therefore investments in such projects indicate a pick up in business.

The Indian IT companies sense opportunity as their biggest customers across verticals continue to seek both productivity improvements in operations and new ways of reaching their end consumers in an increasingly digital and mobile world. Infosys, Wipro and TCS are winning orders to manage datacenters as well as build mobile apps, provide data analytics and help clients move more work onto cloud networks.

"We see, increasingly, there is focus on innovation, there is a focus on growth," Forrester Research vice president Frederic Giron said in a phone interview on Thursday, ahead of Wipro's results. "Companies are looking for ways to better engage with their customers, but also with their employees and partners, as their end consumers are more empowered" in a digital world.

Strong Pipeline

Tata Consultancy, India’s biggest software services provider, said it had won seven large contracts during the three months ended June 30 and four of those were in the U.S. TCS didn’t provide the value of individual contracts, but typically such contracts tend to be in the order of $50 million or more over three to five years.

TCS gets about half its revenues from the U.S. where sales rose 5.5 percent versus the previous quarter, the company said in a statement on July 17, after reporting its June-quarter earnings. “U.S. pipeline is strong ... we’re off to a good start, a strong start” to the fiscal year that ends March 2015, TCS chief executive N. Chandrasekaran told reporters in a conference on July 17.

At Infosys, chief operating officer U.B. Pravin Rao said, “We saw positive trends in our large deal wins during the quarter. We believe that this momentum will hold us in good stead.” Infosys reported its earnings on July 11 and said sales rose 2 percent over the three months ended March 31.

Infosys won five large contracts during the June quarter worth a total of $700 million and three of those were in the Americas, chief executive S.D. Shibulal said in a statement.

Outsourcing contracts worth $3.86 billion were handed out in the first six months of calendar 2014, which is more than 25 percent higher than in the same period in 2013, according to the Information Services Group, which compiles a database of outsourcing contracts worth $5 million or more and publishes a quarterly index of related trends.

Forecast

Consolidated net profit for the three months ended June rose 30 percent to 21 billion rupees ($351 million) versus the year-earlier period, said Wipro, whose customers include Cisco Systems, BT Plc, Microsoft and Citigroup. That was largely in line with street expectations. Sales rose 14 percent from the year earlier period to$ 1.9 billion.

Wipro said IT services revenue for the current quarter is expected to rise between 1.7 percent and 4 percent to between $1.77 billion and $1.81 billion, compared with the June quarter. MayBank Kim Eng analyst Urmill Shah was expecting Wipro to provide a range of 2-4 percent. Typically, IT services represents more than 90 percent of Wipro's revenues and the rest comprises sales of IT products.

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