Credit Suisse downgrades Wipro to neutral, shares tank

MUMBAI: Credit Suisse on Monday downgraded India's third-largest outsourcer, Wipro, to neutral from outperform and cut its target price to Rs 475 from Rs 489 earlier.

"We were pretty surprised by the weak revenues, as peers have been rather bullish," Credit Suisse said in a note. It said Wipro' performance has lagged Infosys in topline growth both in the near term and also in the longer term, despite nearly a dozen acquisitions by the company in the past seven years.

Last week, Wipro missed quarterly profit estimates as higher wages cut margins, underperforming rivals and sending its shares down.

Wipro was the first among peers to hint at a recovery earlier this year as the $50-billion IT sector was coming out of the worst recession. Now, even as both TCS and Infosys have regained double-digit growth rates, and surpassed market expectations, Wipro’s earnings have failed to cheer investors and analysts.

While an appreciating rupee and rising wage costs continue to mount pressure on profitability, Wipro will need to work harder to achieve the pre-recession growth rates.

Shares in Wipro, India's third-largest outsourcer, fell more than 1 percent on Monday morning after Credit Suisse downgraded the stock to neutral from outperform.

Wipro's joint CEOs Girish Paranjpe and Suresh Vaswani said growth of peers has surprised the company.