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Wipro's first-quarter profit rises 13% on better-than-expected margins

But muted revenue growth outlook underscores demand slowdown

MUMBAI (NewsRise) -- Wipro reported a 13% rise in first-quarter net profit, helped by better-than-expected margins, even as a muted revenue growth outlook for the current quarter indicates that India's fourth-largest software exporter is grappling with a demand slowdown.

The Bengaluru-based company predicted its dollar-denominated revenue will sequentially grow 2% at best or not grow at worst, in line with analysts' expectations. The dollar revenue contracted 1.3% in the quarter ended in June.

The guidance is based on "what we see right now," Abidali Z. Neemuchwala, the chief executive of Wipro, told reporters. The macroeconomic uncertainties have resulted in "our customers taking slightly longer time to take decisions," Neemuchwala said. "Customers are being watchful."

Wipro, backed by billionaire Azim Premji, has been struggling to snap out of low-growth mode over the past few years as insolvencies at clients and slowing spending on core information technology services cast a pall over the company's financial performance.

For the quarter ended in June, Wipro's net profit rose 13% to 23.88 billion rupees ($347 million). Analysts were expecting a net income of 23.24 billion rupees, according to Refinitiv data. Revenue grew 5.3% to 147.16 billion rupees.

Margins contracted 60 basis points weighed by the partial impact of wage hikes and a stronger rupee. Still, they exceeded expectations, said ICICI Direct Research.

Wipro's results come close on the heels of the stellar financial performance of crosstown rival Infosys, which last week raised its dollar revenue growth outlook, citing strong demand across its business segments.

Infosys said it expects constant currency revenue to grow 8.5% to 10% in the fiscal year that began on April 1, compared with the 7.5% to 9.5% it had forecast in April. India's largest outsourcing company Tata Consultancy Services, too, reported a better-than-expected profit earlier this month and said it remains focused on posting double-digit revenue growth this year.

The industry's prospects have been clouded by contrasting views from global outsourcing advisory firms such as Gartner and ISG, which had over the past one week raised concerns about businesses tapering IT investments. Last week, Gartner cut its growth outlook on worldwide IT spending to 0.6% from 1.1%.

An escalating trade row between the U.S. and China and fears of Britain exiting the European Union without a trade deal have now stirred fears of a global slowdown that will cap technology spending by clients. In February, India's National Association of Software and Services Companies held back its annual forecast for the nation's $137 billion software exports industry, citing the uncertain global economic environment.

A slow pace of transition to new digital technologies such as artificial intelligence and cloud computing and declining investments in traditional software maintenance business deepened Wipro's woes over the past few years. Last month, the company said its septuagenarian founder Premji will step down as the executive chairman and managing director by the end of July.

Wipro appointed Neemuchwala as the new managing director and appointed Premji's son Rishad Premji as the new chairman.

Ahead of the results, Wipro shares lost 0.1% in Mumbai trading, while the benchmark S&P BSE Sensex gained 0.2%.

--Dhanya Ann Thoppil

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