Wipro on the fast track with new R& D facility. - Views on News from Equitymaster

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Wipro on the fast track with new R& D facility.

Mar 27, 2000

Wipro is setting up a R& D Centre at Pune at a cost of Rs 300 m Wipro with an approximate market capitalisation of Rs 1,000 bn is one of India’s largest Info-tech companies with a presence in all IT related areas.

This centre will concentrate on providing design and development services for global communication, computer and embedded systems. Wipro’s global R&D division plans to add 1,200 professionals this year in areas of embedded systems market, blue tooth and wireless application protocol(WAP).

Making such an investment shall enable it to develop cutting edge technology to consolidate it’s premier position in the IT Sector. This is of paramount importance in a sector where newer and better technologies are emerging more quickly than ever before.

The company already has ten existing centres and one more is to follow in Gurgaon shortly. This move by the company is bound to endow itself with the edge over it’s nearest rivals such as Infosys, TCS etc in this fiercely competitive industry. It will also add considerably to the turnover and thereby boost the bottom-line.

The company can also hope to claim income tax benefits that have been instituted under the Income Tax Act. It can thus amortise the expenses over a period of time.

Market View:
Analysts have rated the stock as a ‘BUY’ on account of the fact that the stock price has gone down by at least 40% over the last two months and is due for an upward correction. This is because of the expected 50% growth in net profits for the current financial year, the recent move to set-up a R& D Centre and the recent decision by the government to permit knowledge based companies to make overseas acquistions to the extent of ten times of export earnings. This will enable WIPRO to tap the overseas markets more efficiently, where the profit margins are significantly higher.

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