Indian software maker Wipro`s quarter 1 profit rises 16 percent

India`s third-largest software maker, Wipro, posted a smaller-than-expected fiscal first-quarter profit Thursday as a rising rupee cut into sales billed in dollars.

Net income was 7.1 billion rupees (175 million dollars) in the three months ended June, up 16 percent from 6.1 billion rupees in the year-earlier period, Bangalore-based Wipro said in a statement.

Some analyst surveys had projected quarterly earnings of 7.5 billion rupees r more for the company, for which dollar sales make up about 60 percent of total revenue.

The Indian rupee has climbed 10 percent against the dollar since the start of the year and 14 percent in the past 12 months, stoked by foreign investment inflows into a rapidly expanding economy.

The appreciation reduces the rupee equivalent of every dollar earned overseas by software firms whose expenses are almost all incurred in the local currency.

"We haven`t seen this kind of appreciation for tens of years," Wipro chairman Azim Premji, who transformed the company from a maker of soaps and cooking fats into a software giant, told reporters in Bangalore.

The company faced "strong headwinds" from the strength of the rupee, he said, adding that 39 new clients had helped boost sales by 34 percent in the quarter to 41.83 billion rupees.

"Our new client additions continue to be robust and we have had a good set of wins during the quarter," including a 130-million-dollar contract from a European utility, he said.

Shares of the company closed up 0.95 rupees or 0.19 percent at 505.4 rupees on the Mumbai stock exchange.

Wipro`s global information-technology revenue was 726 million dollars in the quarter, ahead of the company`s forecast of 711 million dollars. In the quarter to September, Wipro expects revenue to climb to 777 million dollars.

"Operational improvements helped us in partially offsetting the pressure on profitability arising out of rupee appreciation," chief financial officer Suresh Senapathy said.

The rupee`s unbridled rise shaved up to four percentage points off Wipro`s profit margin in the quarter but the net impact was limited to 2.3 percentage points as the company improved its productivity and efficiency, Senapathy said.

India, which is sitting on record foreign exchange reserves of 200 billion dollars, should better manage the exchange rate to soften the impact of the rising rupee on exporters, Senapathy said.

The central bank has adopted a hands-off approach because the rupee`s strength makes imports such as edible and crude oils cheaper as it attempts to reduce inflation in an economy expanding at some nine percent a year.

"Today the situation is that no importer is hedging against foreign exchange fluctuations -- only exporters are," said Senapathy. "That shows the sentiment is for the rupee to strengthen further.

"We would like better management of foreign exchange so that the exporter community does not get destroyed," he added.

Wipro`s bigger rival Infosys earlier this month cut its annual profit and sales forecasts, citing the rupee`s strength. It raised its rupee exchange-rate forecast to 40.58 per dollar from the 43.10 rupees it assumed in April.

Indian software makers are also reeling from higher wages as they fight to hire and retain software talent while visa costs are rising for employees sent abroad to work on-site at client offices.

Wipro added 4,300 people in the quarter to June, raising its headcount to more than 72,000.

The company is considering expanding overseas and is evaluating potential acquisitions in Germany and Canada, Premji said, without giving details.(*)