Wipro Report Revenue (Gross Profit)

Wipro Report

Revenue

(Gross Profit) 20,621 23,259

Operating margin 16,594 9,011

Profit growth

IFRS Financials, 2010, Wipro website)

How fast did Wipro grow in the last year?

Wipro Ltd. posted a 31 per cent growth in net profits during its first quarter of 2010, totaling $72. 36 billion, according to a company press release. This was partially driven by a stronger demand for cost-saving IT outsourcing. "The strong growth came on the back of a 16 per cent vault in total revenues…in the same period last year" (Wipro, 2010, Telegraph). "Wipro forecast that revenues from IT services would be in the range of $1.25 billion to $1.28 billion for the quarter ended September 30, [2010] a sequential rise of 4.1-6.1 per cent. 'We are seeing strong demand across verticals despite macro challenges. We added the highest number of billable employees ever in this quarter. Our guidance reflects this momentum,'" chairman Azim Premji said (WIPRO, 2010, Telegraph). Operating Income to Revenue showed a healthy 24.5% growth for the quarter ending June 30, 2010 (Press release, 2010, Wipro, p.2).

Q2. What are some of the limitations on this growth in the next five years?

Despite its strong performance, if the overall growth and development of the United States and other major industrial powers such as the European Union continues to lag, demand for WIPRO's IT services may contract. A "key highlight of Wipro's performance was the surge in margins by 30 basis points to 24.5 per cent," which the company attributed to better operational efficiency (Wipro, 2010, Telegraph). But one of the major reasons behind the marginal expansion was a strong showing by its subsidiaries. This could indicate that Wipro stratospheric growth may be at least partially attributed to recently-acquired subsidiary acquisitions, rather than on demand for company services alone (Wipro, 2010, Telegraph).

Much of the company's growth has been subsidiary-related, indicating that once the company has acquired the maximum amount of operations it can possibly manage, financial growth on paper may stagnate. Companies can inflate their state of financial health by acquiring subsidiary companies, but this does not point to a pattern of future long-standing steady profit-making. For example, during the 2010 quarter, Wipro Technologies and the major banking operation Citibank signed an agreement for Wipro to take over the ownership and management of Citibank's data center in Meerbusch Germany (Press release, 2010, Wipro, p.2-3).

Questions remain if Wipro can afford to grow at such a pace while still providing a quality product. Wipro has "signed a multi-year transformation deal with Magyar Telekom (MT)," and a "multi-year deal with one of the largest oil and gas companies to provide managed services across the global functions application landscape" (Press release, 2010, Wipro, p.3). Wipro even has plans to expand to Korea, and there is a question as to whether such rapid international expansion at such an early juncture of the company's history is wise and being done for the right purposes.