By IANS
Bangalore : Top-line revenue of global software major Wipro Ltd was adversely impacted by the rising rupee during the first six months of fiscal 2007-08, a top company official said here Friday.
“We have taken a hit of Rs.15 billion on an annualized basis during the first half (H1) of this fiscal due to over 11 percent appreciation of the rupee against the US dollar,” Wipro chief financial officer (CFO) Suresh Senapaty told IANS.
The CFO also affirmed the IT bellwether was, however, able to limit the impact on the operating margins by prudent hedging, better offshore mix and utilization rates during the second quarter (July-September) of this fiscal.
“The 3.5 percent forex impact on the operating margin has been reduced to 1.9 percent by taking cover (hedging) at a prudent exchange rate, better pricing and utilization of human resources,” Senapaty pointed out.
The impact of a strengthening rupee was more pronounced on the company’s global IT services and products business, as the 35 percent year-on-year (YoY) growth witnessed during the quarter under review (Q2) in dollar terms ($797 million) grew only by 19 percent YoY in rupee terms to Rs.32.5 billion from Rs.27.2 billion in the same period year ago.
Similarly, operating margin for the flagship division (IT services) declined to 22 percent from 26 percent in the same period a year ago, and in the business processing outsourcing (BPO) to 22 percent from 24 percent, and overall to 18 percent from 21 percent a year ago.
“We have designated forward contracts and options to hedge prudently on the principles of international accounting standard (ISA 39) on financial instruments. Till September, we had forward/option contracts to sell $201 million and $87 million,: Senapty said.
“The effect of mark to market of the contracts resulted in loss of Rs.27 million till September as against a gain of Rs.105 million in the fourth quarter of the last fiscal (January-March),” Senapaty recalled.
The 13 percent increase in wage bill for offshore operations eroded profitability during the Q2. Greater offshore mix, higher utilization and better pricing, however, enabled it to see the operating margin expand by 80 basis points.