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Wipro Records 25% Growth in Net Income; Results for the Quarter Ended December 31, 2005 Under US GAAP

Posted on: Wednesday, 18 January 2006, 00:00 CST

Wipro Limited (NYSE:WIT) today announced financial results under US GAAP for its third fiscal quarter ended December 31, 2005.

Highlights:

Results for the quarter ended December 31, 2005

-- Net Income grew by 25% over the corresponding period in the

previous year to Rs. 5.3 billion ($118 million)

-- Revenue increased by 33% over the corresponding period in the

previous year to Rs. 27.7 billion ($617 million)

-- Global IT Services & Products segment Revenue was Rs. 21.2

billion ($472 million), representing an increase of 33% over

the corresponding period in the previous year contributed

primarily by volume growth

-- Global IT Services & Products Earnings before Interest and Tax

(EBIT) was Rs. 5.2 billion ($115 million), a growth of 26%

over corresponding period in the previous year

-- Global IT Services & Products added 61 new clients in the

quarter -- the highest ever customer add.

-- The India, Middle East and Asia Pac Business Unit recorded 45%

growth in EBIT over the corresponding period in the previous

year; and Revenue grew by 19%

Outlook for the Quarter Ending March 31, 2006

Azim Premji, Chairman of Wipro, commenting on the results, said, "The results for the quarter signal the next phase in Wipro's growth. Revenues in our Global IT business were $473 million -- including $1.3 million attributable to acquisition completed during the quarter -- ahead of our guidance of $463 million. Apart from delivering solid Revenue growth, we improved our Operating Margins and increased our share of wallet from key clients, even as we made two strategic acquisitions. We believe that this combination of excellence in operations and strong execution of our strategy is critical to achieve our Vision, and we will continue to focus on both in future as well. Looking ahead, for the quarter ending March 31 2006, we expect Revenues from our Global IT services business to be approximately $510 million."

Suresh Senapaty, Chief Financial Officer, said, "Our differentiated services -- Technology Infrastructure Services, Testing and Enterprise Application Services -- delivered double digit Revenue growth sequentially, ahead of the overall growth rate. Finance Solutions and Technology businesses continued their robust performance, delivering yet another quarter of double digit sequential Revenue growth. Strong volume growth, higher proportion of Offshore projects and continued operational improvements helped offset the impact of lower price realization, lower utilization and the impact of compensation revision for our Offshore team and expand Operating Margins sequentially."

Wipro Limited

Total Revenues for the quarter ended December 31, 2005 were Rs. 27.7 billion ($617 million), representing a 33% increase over the corresponding period in the previous year. Net Income was Rs. 5.3 billion ($118.4 million), representing an increase of 25% over the same period last year. Earnings per share was Rs. 3.78 ($0.08) for the quarter ended December 31, 2005, representing an increase of 23% over the earnings per share of Rs. 3.07 for the quarter ended December 31, 2004.

Global IT Services & Products (76% of Revenues and 89% of Operating Income for Quarter Ended December 31, 2005)

Our Global IT Services & Products business segment recorded Revenue of Rs. 21.2 billion(1) ($471.7 million) for the quarter ended December 31, 2005, representing an increase of 33% over the same period last year. EBIT was Rs. 5.2 billion ($115.3 million) for the quarter ended December 31, 2005, representing an increase of 26% over the same period last year. Operating Income to Revenue for the quarter ended December 31, 2005 was 24.4%, representing a decrease of approximately 1.6% from the quarter ended December 31, 2004. This decrease was primarily due to currency appreciation, lower realization and utilization levels. Return on Capital Employed (ROCE) for the quarter was 64% compared to 68% for the quarter ended December 31, 2004.

We had 51,024 employees as of December 31, 2005, which includes 36,626 employees in IT Services business and 14,398 employees in BPO business. This includes a net addition of 5,189 employees of which 3,770 were in IT Services (including 471 attributable to acquisitions) and 1,419 in BPO business.

During the quarter, we added 61 new clients, including 1 new client in BPO services. In terms of Verticals, the Product Engineering Services business led the customer addition with 20 new clients. Customer addition was strong in North America, where we added 37 clients during the quarter. Some of the key project wins during the quarter include an order from a European Tier 1 automotive vendor for designing car navigation system for the Chinese market and a multi million, multi year contract for complete migration of legacy Banking and Asset Management System to a new platform for a major bank in Continental Europe. In addition, one of the Top 10 Mortgage companies in the US selected Wipro as its strategic partner for its Enterprise BPO work.

During the quarter, Wipro was awarded the prestigious ASTD BEST Awards for 2005 by the American Society of Training & Development in recognition of Wipro's support for a learning culture, that build talent across the enterprise, and that demonstrate the results of their learning and development efforts.

During the quarter, Wipro made two acquisitions -- NewLogic Technologies AG, a European System on Chip design company, and mPower Software Service Inc., a company in the payments processing space. The operating results of mPower has been consolidated into Wipro's operating results effective December 1, 2005 resulting in additional Revenues of Rs. 58 million ($1.3 million) and PBIT of Rs. 16 million ($0.35 million) included in the segment results for the quarter. NewLogic has been consolidated into Wipro's operating results with effect from December 28, 2005.

India and Asia-Pac IT Services & Products (14% of Revenue and 7% of Operating Income for Quarter Ended December 31, 2005)

Our India and Asia-Pac Services and Products business segment (Wipro Infotech) recorded Revenue of Rs. 3.9 billion ($86 million) for the quarter ended December 31, 2005, representing an increase of 19% over the quarter ended December 31, 2004. EBIT for the quarter ended December 31, 2005, was Rs. 389 million ($8.7 million), representing an increase of 45% over the corresponding period in the previous year.

Operating Margin for the quarter ended December 31, 2005 was 10.1%, representing an increase of approximately 1.8% compared to the quarter ended December 31, 2004. ROCE for the quarter was 68% compared to 61% for the quarter ended December 31, 2004.

Consumer Care & Lighting (5% of Revenue and 4% of Operating Income for Quarter Ended December 31, 2005)

Our Consumer Care & Lighting business segment recorded Revenue of Rs. 1.46 billion ($32.5 million) for the quarter ended December 31, 2005, representing a 18% increase over Revenue of Rs. 1.23 billion for the quarter ended December 31, 2004. EBIT was Rs. 211 million ($4.7 million) for the quarter ended December 31, 2005, representing a 20% increase over EBIT of Rs.175 million for the quarter ended December 31, 2004. ROCE for the quarter was 80% compared to 97% for the quarter ended December 31, 2004.

Our results for the quarter ended December 31, 2005, computed under Indian GAAP and US GAAP, along with individual business segment reports are available in the Investor Relations section of our website at www.wipro.com.

For the convenience of the reader, the amounts in Indian rupees in this release have been translated into United States dollars at the noon buying rate in New York City on December 30, 2005, for cable transfers in Indian rupees, as certified by the Federal Reserve Bank of New York which is $1=Rs.44.95. However, the realized exchange rate in our Global IT Services & Products segment for the quarter ended December 31, 2005 is $1=Rs.44.79.

Quarterly Conference call

Wipro will hold conference calls today at 1:30 PM Indian Standard Time (3:00 AM US Eastern Time) & at 6:45 PM Indian Standard Time (8:15 AM US Eastern Time) to discuss the company's performance for the quarter and answer questions sent to email ID: sridhar.ramasubbu@wipro.com. An audio recording of the management discussions and the question & answer session will be available online and will be accessible in the Investor Relations section of the company website at www.wipro.com shortly after the live broadcast.

About Wipro Limited

We are the first PCMM Level 5 and SEI CMM Level 5 certified IT Services company globally. We provide comprehensive IT solutions and services, including systems integration, information systems outsourcing, package implementation, software application development and maintenance, and research and development services to corporations globally.

In the Indian market, we are a leader in providing IT solutions and services for the corporate segment in India offering system integration, network integration, software solutions and IT services. In the Asia Pacific and Middle East markets, we provide IT solutions and services for global corporations. We also have a profitable presence in niche market segments of consumer products and lighting.

Our ADSs are listed on the New York Stock Exchange, and our equity shares are listed in India on the Stock Exchange -- Mumbai, and the National Stock Exchange. For more information, please visit our websites at www.wipro.com and www.wiprocorporate.com

Forward-Looking and Cautionary Statements

Certain statements in this release concerning our future growth prospects are forward-looking statements, which involve a number of risks, and uncertainties that could cause actual results to differ materially from those in such forward-looking statements. The risks and uncertainties relating to these statements include, but are not limited to, risks and uncertainties regarding fluctuations in earnings, our ability to manage growth, intense competition in IT services including those factors which may affect our cost advantage, wage increases in India, our ability to attract and retain highly skilled professionals, time and cost overruns on fixed-price, fixed-time frame contracts, client concentration, restrictions on immigration, our ability to manage our international operations, reduced demand for technology in our key focus areas, disruptions in telecommunication networks, our ability to successfully complete and integrate potential acquisitions, liability for damages on our service contracts, the success of the companies in which we make strategic investments, withdrawal of fiscal governmental incentives, political instability, war, legal restrictions on raising capital or acquiring companies outside India, unauthorized use of our intellectual property and general economic conditions affecting our industry. Additional risks that could affect our future operating results are more fully described in our filings with the United States Securities and Exchange Commission. These filings are available at www.sec.gov. We may, from time to time, make additional written and oral forward-looking statements, including statements contained in the company's filings with the Securities and Exchange Commission and our reports to shareholders. We do not undertake to update any forward-looking statement that may be made from time to time by us or on our behalf. (1) Global IT Services & Products segment Revenues were Rs. 21.2 billion for the quarter ended December 31, 2005 under the Indian GAAP. The difference of Rs.20 million ($0.44 million) is primarily attributable to difference in Revenue recognition standards and accounting treatment for foreign exchange contracts under Indian GAAP & US GAAP. WIPRO LIMITED & SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF INCOME (in millions, except per share data) Three months ended December 31 ----------------------------------- 2004 2005 2005 Convenience translation into US$ (Unaudited) (Unaudited)(Unaudited) Revenues : Global IT Services and Products IT Services Rs. 14,084 Rs. 19,595 $ 436 BPO Services 1,706 1,933 43 India and AsiaPac IT Services and Products Services 1,209 1,490 33 Products 2,031 2,377 53 Consumer Care and Lighting 1,231 1,461 33 Others 642 878 20 ----------- ----------- ---------- Total 20,902 27,734 617 ----------- ----------- ---------- Cost of Revenues: Global IT Services and Products IT Services 9,030 12,429 277 BPO Services 1,238 1,402 31 India and AsiaPac IT Services and Products Services 659 834 19 Products 1,777 2,066 46 Consumer Care and Lighting 812 919 20 Others 438 656 15 ----------- ----------- ---------- Total 13,953 18,306 407 ----------- ----------- ---------- Gross profit 6,949 9,428 210 Operating expenses : Selling and marketing expenses (1,386) (1,713) (38) General and administrative expenses (896) (1,406) (31) Research and development expenses (70) (52) (1) Amortization of intangible assets (23) (11) - Foreign exchange gains / (losses), net 153 (407) (9) Others, net 24 14 - ----------- ----------- ---------- Operating Income 4,751 5,852 130 Loss on direct issue of stock by subsidiary (11) - - Other income, net 179 367 8 Equity in Earnings / (losses) of affiliates 71 94 2 ----------- ----------- ---------- Income before income taxes and minority interest 4,990 6,313 140 Income taxes (694) (990) (22) Minority interest (25) - - ----------- ----------- ---------- Net income Rs. 4,271 Rs. 5,323 $ 118 =========== =========== ========== Earnings per equity share: Basic 3.07 3.78 0.08 Diluted 3.02 3.74 0.08 ============================================== =========== ========== Additional Information Operating Income ----------------------------------- IT Services Rs. 3,835 Rs. 4,878 $ 109 Acquisitions - 16 - BPO Services 293 290 6 ----------- ----------- ---------- Global IT Services & Products 4,128 5,184 115 India & AsiaPac IT Services & Products 267 389 9 Consumer Care & Lighting 175 211 5 Others 124 142 3 Reconciling Items 57 (74) (2) ----------- ----------- ---------- Total Rs. 4,751 Rs. 5,852 $ 130 =========== =========== ========== WIPRO LIMITED & SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF INCOME (in millions, except per share data) Nine months ended December 31 ----------------------------------- 2004 2005 2005 Convenience translation into US$ (Unaudited) (Unaudited)(Unaudited) Revenues : Global IT Services and Products IT Services Rs. 39,478 Rs. 52,249 $ 1,162 BPO Services 4,764 5,585 124 India and AsiaPac IT Services and Products Services 3,286 4,335 96 Products 5,607 6,845 152 Consumer Care and Lighting 3,367 4,142 92 Others 1,893 2,409 54 ----------- ----------- ---------- Total 58,395 75,565 1,681 ----------- ----------- ---------- Cost of Revenues: Global IT Services and Products IT Services 24,645 33,338 742 BPO Services 3,302 4,265 95 India and AsiaPac IT Services and Products Services 1,845 2,514 56 Products 5,027 6,052 135 Consumer Care and Lighting 2,160 2,623 58 Others 1,291 1,795 40 ----------- ----------- ---------- Total 38,270 50,587 1,125 ----------- ----------- ---------- Gross profit 20,125 24,978 556 Operating expenses : Selling and marketing expenses (4,003) (4,952) (110) General and administrative expenses (2,689) (3,839) (85) Research and development expenses (201) (141) (3) Amortization of intangible assets (122) (36) (1) Foreign exchange gains / (losses), net (288) (500) (11) Others, net 56 46 1 ----------- ----------- ---------- Operating Income 12,878 15,556 346 Loss on direct issue of stock by subsidiary (207) - - Other income, net 594 874 19 Equity in Earnings / (losses) of affiliates 133 233 5 ----------- ----------- ---------- Income before income taxes and minority interest 13,398 16,663 371 Income taxes (1,971) (2,367) (53) Minority interest (67) (1) - ----------- ----------- ---------- Net income Rs. 11,360 Rs. 14,295 $ 318 =========== =========== ========== Earnings per equity share: Basic 8.18 10.18 0.23 Diluted 8.12 10.07 0.22 ============================================== =========== ========== Additional Information Operating Income ----------------------------------- IT Services Rs. 10,576 Rs. 13,092 $ 291 Acquisitions - 16 - BPO Services 897 645 14 ----------- ----------- ---------- Global IT Services & Products 11,473 13,753 306 India & AsiaPac IT Services & Products 597 968 22 Consumer Care & Lighting 494 587 13 Others 382 375 8 Reconciling Items (68) (127) (3) ----------- ----------- ---------- Total Rs. 12,878 Rs. 15,556 $ 346 =========== =========== ========== WIPRO LIMITED & SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS (in millions, except share data and unless stated otherwise) As of December 31, ----------------------------------- 2004 2005 2005 ----------- ----------- ---------- Convenience translation into US$ (Unaudited) (Unaudited)(Unaudited) ASSETS Current assets: Cash and cash equivalents Rs. 3,215 Rs. 4,279 $ 95 Accounts receivable, net of allowances 13,143 19,026 423 Costs and earnings in excess of billings on contracts in progress 2,845 4,241 94 Inventories 1,619 1,909 42 Investments in liquid and short- term mutual funds 21,605 31,123 692 Deferred income taxes 343 91 2 Other current assets 3,625 4,460 99 ----------- ----------- ---------- Total current assets 46,395 65,129 1,449 ----------- ----------- ---------- Property, plant and equipment, net 12,251 16,157 359 Investments in affiliates 744 1,002 22 Deferred income taxes 234 231 5 Purchase price pending allocation - 1,929 43 Intangible assets, net 381 342 8 Goodwill 5,589 5,945 132 Other assets 663 1,168 26 ----------- ----------- ---------- Total assets Rs. 66,257 Rs. 91,903 $ 2,045 =========== =========== ========== LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Borrowings from banks Rs. 513 Rs. 1,054 $ 23 Convertible bonds issued by subsidiary - 272 6 Accounts Payable 3,248 3,169 71 Accrued expenses 3,741 5,821 129 Accrued employee cost 2,929 4,109 91 Advances from customers 1,242 1,837 41 Other current liabilities 1,976 4,290 95 ----------- ----------- ---------- Total current liabilities 13,649 20,552 457 ----------- ----------- ---------- Other liabilities 577 440 10 ----------- ----------- ---------- Total liabilities 14,226 20,992 467 ----------- ----------- ---------- Minority interest 519 - - Stockholders' equity Equity shares at Rs. 2 par value: 1,650,000,000 shares authorized; issued and outstanding: 1,404,241,862 and 1,420,739,099 shares as of December 31, 2004 and 2005 1,404 2,841 63 Additional paid-in capital 12,445 15,023 334 Deferred stock compensation (3,236) (2,386) (53) Accumulated other comprehensive income / (loss) 233 247 5 Retained earnings 40,666 55,186 1,228 Equity shares held by a controlled Trust(a): 7,891,560 and 7,869,060 shares as of December 31, 2004 and 2005. - - - ----------- ----------- ---------- Total stockholders' equity 51,512 70,911 1,578 ----------- ----------- ---------- Total liabilities and stockholders' equity Rs. 66,257 Rs. 91,903 $ 2,045 =========== =========== ========== (a)Equity shares held by a controlled trust Rs.(75,000)Rs. (75,000) $ (1,669)

Source: Business Wire

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