Wipro sees sustaining operating margins

Wipro Ltd (WIPRO.NS : 649.75 -4.55), India's third-largest software services exporter, will be able to sustain its operating margins in the near term as the business environment improves, a top executive said.

We don't expect margins to go down, we don't expect margins to go drastically up, Suresh Vaswani, joint CEO of the company's IT business, said at the Reuters India Investment Summit held in Bangalore.

Wipro's operating margins have risen over the last couple of quarters. Its IT services division posted operating margins of 23.8 percent for the second quarter ended September 30, up from 22.3 per cent for the prior quarter.

Analysts say the worst seems to be over for India's $60 billion outsourcing sector, as bigger firms win large deals and pricing pressures ease.

The pipeline certainly looks better. It has looked better and better over the last couple of quarters, Vaswani said.

Manish Dugar, CFO of Wipro Technologies, said while the market looked very competitive, pricing seemed to be stable.

Wipro recently said clients were coming back to the table with new projects, which, coupled with easing pricing pressure, could help improve margins.

PINC Research analyst Rohit Kumar Anand said fiscal 2010 margins for Wipro, majority owned by billionaire Azim Premji, might be higher than fiscal 2009, mainly because of extreme cost reductions over the last three or four quarters,

Kumar, however, expects fiscal 2011 margins to come under pressure because of salary increments.

Wipro shares were trading up about half a per cent at 649.55 Indian rupees Wednesday morning on the Bombay Stock Exchange (^BSESN : 16026.47 -15.71).

Wipro's shares have almost tripled in the last 12 months. The Indian IT index has almost doubled in the same period, slightly outperforming the broader Mumbai index, which is up 93 per cent.