Wipro - Assignment Of Rating

Wipro Ltd has informed that ICRA has assigned LAAA (pronounced as L Triple A) rating to Wipros long term credit. This is the highest credit quality rating assigned by ICRA to long term instruments. A copy of the Press Release by ICRA is enclosed below:

ICRA has assigned an LAAA (pronounced as L Triple A) rating to the Rs 34.24 billion Fund based limit and the Rs 6.61 billion Non Fund based limit of Wipro Ltd1 (Wipro). This is the highest credit quality rating assigned by ICRA to long term instruments.
The rating factors in Wipros leading position among Indian players in the Global Information Technology (IT) services outsourcing segment, its strong client base and wide range of services, and the low financial risk profile given its strong revenue growth, healthy recurring cash flows and low debt levels. The rating is supported by the continuing global trend towards outsourcing of IT services to low-cost countries like India. The rating also factors in the concentration of Wipros revenues on the US market, the vulnerability of profitability and the high, although declining proportion of low-value added services in the overall sales mix. While the US remains the largest market for the Indian IT services industry, the current slowdown in the US economy coupled with increasing competitive pressures, wage inflation, high attrition levels and the weakening dollar would exert pressure on profitability of Indian players.

Wipro Sets Up Global Service Centre In Malaysia

Bangalore: Wipro has unveiled its global service management centre (GSMC) in Cyberjaya, Malaysia. This centre will serve the infrastructure and application management service requirements of customers across the ASEAN region through a remote service delivery model. The key services rendered from this centre would include management of data centre, network, call centre technology, business service, managed security services and end user support services. Running the operations on a 24x7 basis, this centre will be the nerve centre for providing multilingual technical support to customers.

Wipro Expands Products Portfolio

The tremors of the US economy are now being felt in back offices in India where outsourcing has certainly lost its sheen and that is why aggressive players like Wipro are now clicking on products to salvage depleting margins. Wipro is all set foray into products business by expanding its R&D arm, which will include conceptualising, designing, prototyping and even manufacturing.

The product business launch is expected in next 6 months and Wipro is already in talks with local manufacturers in Taiwan, Korea and India for manufacturing tie-ups on a revenue share basis. The pilot projects are already underway in Wipro''s Bangalore labs.

Infosys and TCS on their part are looking to build a stronger product portfolio. TCS, for instance, is looking to develop platform based BPO and Infosys looking to strengthening its core Internet Banking Software - Finacle through acquisitions. The race amongst the Indian IT companies to establish presence in the product space is quite understandable given the current margins in 30 per cent bracket is on its way down.

Globally the margins for IT services are between 10-12 per cent but the product companies clock between 25 and 35 per cent. But the products also come at a huge cost, significant R&D investments have to be made upfront and the revenues will only kick in 2 to 3 years horizon.