Wipro registers a muted growth

Wed, 20 Jan 11:30 am

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After witnessing a strong start today, the Indian stock markets remained somewhat choppy during the previous two hours of trade. However they managed to trade above the dotted line on account of buying activity in the index heavyweights lead by power, healthcare, telecom and metal sectors. However select stocks from IT and oil & gas sectors have failed to garner investors' interest.

The BSE Sensex and NSE Nifty traded in the green, up by 55 point and 14 points respectively. The BSE-Midcap and BSE-Smallcap are trading up by 0.6% and 1% respectively. The rupee is trading at 45.92 to the dollar.

Wipro declared its 3QFY10 results today. The company's topline registered a marginal increase of 0.3% QoQ, primarily on account of muted performance from its IT services and IT product segments. Its consumer and lighting business registered a growth of 3% QoQ during the quarter. The operating margins expanded by 0.6% QoQ on the back of cost containment measures and improved volumes. Wipro's net profits grew by 5% QoQ during the quarter on the back of lower interest and depreciation charges, coupled with higher share of gains from associates. The company's IT services segment added 31 new clients during the quarter. The appreciation in the rupee during the quarter affected its margins and realisations for IT business. Though the company reported a decent performance during the quarter, it is a tad lower than what its IT peers like TCS and Infosys have reported. We believe that the next few quarters will be very crucial for the IT companies as the clients will finalise their annual IT budgets and plenty of deals will come to table. The stock with other peers in the IT space is trading in the red.

According to leading business daily, Indian power equipment major, BHEL is scouting acquisition or joint venture (JV) opportunities with the companies from the US and Europe. With the aim of competing more efficiently with the Chinese companies and upcoming JVs formed among Indian manufacturers, the company plans to partner with companies engaged in new transmission as well as ultra super critical technologies. Such deals are also expected to aid BHEL is gaining access to foreign markets. However, the actual investment planned for this purpose is yet to be finalised.

With BHEL's networth of around Rs 120 bn, it is well placed in funding and absorbing such acquisitions. It may be noted that BHEL which is an integrated equipment manufacturing company has a manufacturing capacity of 15,000 MW. It is expected to grow at 20-25% annually in the next five years with a manufacturing capacity expansion to 20,000 Mw by 2012. It has entered into partnerships with companies like NTPC and Nuclear Power Corporation among others to strengthen execution capabilities through effective sharing and sourcing critical inputs. We believe that such strategic alliances will go a long way in enabling the company to remain market leader in the power equipment segment in the domestic market. BHEL is currently trading in the negative.