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Offshore projects to boost Wipro's margins - Views on News from Equitymaster
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  • Nov 8, 1999

    Offshore projects to boost Wipro's margins

    Wipro has identified offshore projects, fixed-time, fixed-cost projects to increase operating margins and manpower utilisation rate in line with its peers in the industry. This was reported by a leading business daily.

    Wipro Ltd., (of Wipro Corporation) is a conglomerate dealing in the businesses of information technology (IT), financial services, healthcare systems, consumer lighting and hydraulic products. Its IT division is the premier PC and peripherals supplier and the second largest software exporter in the country. It has bagged the SEI-CMM Level 5 accreditation for software development.

    Wipro's lower operating margins (vis--vis its peers) from its software development business is cause for some concern. Even its manpower utilisation rate at 61% is low compared to its competitors. Therefore the company has targeted more offshore, fixed-time and fixed-cost projects to boost operating margins. Currently, the offshore/onsite ratio stands 45:55.

    Other strategic areas that will receive added focus are e-commerce, systems software and telecom software. The company is open to acquisitions in these three areas, after due consideration. Its domestic acquisitions will be funded through fresh equity in local market. It will consider an American Depository Receipt (ADR) issue if the target company is located overseas.

    Wipro's competitors Satyam, NIIT, Aptech, Infosys, Pentafour have also identified the acquisition route to boost revenues. This allows them access to global markets. Moreover, they can leverage on the foreign partner's understanding of local market conditions.

    Wipro will have to undertake more value-added projects to boost margins. Its on the right track by identifying offshore projects for growth, as margins in the latter are higher than in onsite projects.



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