UPDATE 1-Indian IT outsourcing firm Wipro upbeat on growth prospects

Thu Apr 17, 2014 11:41am EDT

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By Anannya Pramanick and Nivedita Bhattacharjee

BANGALORE/MUMBAI, April 17 (Reuters) - Wipro, India's third-biggest IT services exporter, posted forecast-beating quarterly profit on Thursday and said it expects a stronger year ahead on increased spending by overseas clients.

The company is part of a $100 billion-plus Indian outsourcing sector that generates about 90 percent of its sales from providing services such as IT network installation and the development of software applications for overseas clients that are finally beginning to loosen their purse strings.

Rivals Tata Consultancy Services, Infosys and HCL Technologies have already signalled a pick-up in client spending this month, and Wipro says it will also benefit.

"The way our trends are ... growth in full-year 2015 will be better than growth in full-year 2014," Chief Executive T.K. Kurien said on Thursday after Wipro reported a 29 percent rise in fourth-quarter net profit.

Global IT spending is projected to total $3.8 trillion this year, up 3.1 percent on 2013, according to the latest forecast by research firm Gartner. That marks a significant upturn from the modest 0.4 percent increase a year earlier.

"Discretionary spending at clients had almost dried up since the recession, and companies cannot go on postponing that for ever," said Ankita Somani, a sector analyst with Mumbai brokerage Angel Broking.

"I think this year some of that spending will come back, and that will help IT companies."

India's export-driven software services sector has thrived by tapping a large pool of cheap skilled labour, but rising wages and high staff turnover rates remain a challenge.

SEASONAL WEAKNESS

Wipro gave a muted revenue forecast for the June quarter, but CEO Kurien attributed that to a traditionally weak season and said it is not a precursor to the year.

Revenue from IT services are expected to be between $1.72 billion and $1.76 billion in the current quarter, the company said, representing quarter-on-quarter growth of as much as 2 percent.

For the quarter to March 31, Wipro said net profit rose to 22.27 billion rupees ($368.98 million) compared with 17.29 billion rupees a year earlier. Analysts polled by Thomson Reuters had forecast 21.06 billion rupees in net profit.

HCL Technologies also beat market expectations with a 59 percent rise in quarterly profit, it said on Thursday, helped by rising demand for outsourcing services.

On Wednesday Tata Consultancy Services said it expects a further rise in revenue growth this year, citing its improving deal pipeline and order book.

Shares of Bangalore-based Wipro closed up 2.4 percent at 585.85 rupees ahead of Thursday's earnings announcement, while HCL Technologies gained 0.9 percent in a Mumbai market that rose 1.6 percent. ($1 = 60.3550 Indian Rupees) (Additional reporting by Aradhana Aravindan; Editing by Sumeet Chatterjee and David Goodman)

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