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India's Wipro First-Quarter Profit Rises 16%, Outlook Is Strong

Wipro, India's third-largest software services exporter, posted a lower-than-expected 16% rise in quarterly profit on Thursday, as a stronger rupee dented margins.

Wipro, which offers IT solutions such as system integration, software application development and back-office services, said net profit rose to $7.1 billion rupees (US$176 million) in April-June, up from 6.14 billion rupees a year ago.

A Reuters poll had forecast a mean net profit of 7.51 billion rupees for Bangalore-based Wipro, which counts telecoms gear makers Cisco and Nortel among key clients.

"The results for the quarter are satisfying considering the strong headwinds faced by us in the form of an appreciating rupee," Chairman Azim Premji said in a statement.

Wipro, which added 39 clients during the June quarter, forecast its IT services revenue would rise 32% to $777 million in July-September, its fiscal second quarter, up from $589 million in the year ago period.

New York-listed Wipro reported its earnings after industry leader Tata Consultancy Services and second-ranked Infosys Technologies unveiled quarterly numbers that exceeded analyst expectations

But a stronger rupee, which has risen more than 9.5% against the dollar so far in 2007, poses a big problem for software services exporters that get about 60% of their revenue from the U.S.

Every 1% rise in the value of the rupee against the dollar shaves 30-50 basis points from operating margins of Indian software services exporters, analysts said.

India's booming software services industry has been winning large business from overseas clients like ABN Amro, Airbus, and Qantas, but growth is expected to slow because of a stronger currency and rising competition with global players like IBM and Accenture.

Earlier this month, an industry body forecast software services exports would rise 26% to 29% to around $40 billion in the fiscal year to March 2008, slower than a 33% rise in 2006/07.

Shares of Wipro, which also has minor interests in computer hardware, consumer care and lightings, fell 7% in the quarter, while the sector index dropped 0.6% and the main BSE index rose 12%.