* Sees Q1 IT revenue $1.39 bln-$1.42 bln vs $1.4 bln in Q4
* Q4 net up 14 pct to 13.75 bln rupees vs consensus 13.79 bln
* Added 68 new clients; 2,894 staff in Q4
* Exec says wage hikes will hurt operating margins
* Shares down 4 pct in flat market (Recasts, adds share price)
By Bharghavi Nagaraju
BANGALORE, April 27 (Reuters) - India's Wipro Ltd on Wednesday forecast muted growth for its mainstay information technology services business and said wage hikes would hurt operating margins this year, sending its shares down four percent.
Wipro, India's No. 3 software services exporter, has been struggling to win large outsourcing contracts amid intense competition with local and global rivals such as Tata Consultancy Services (TCS) and IBM .
Bangalore-based Wipro, which met forecasts with a 14 percent rise in fourth-quarter net profit, said it expected IT services revenue of $1.39 billion to $1.42 billion in the fiscal first quarter.
The IT revenue forecast reflects a decline of 0.4 percent at the low end to a rise of 1.6 percent at the top end when compared to the fiscal fourth quarter that ended March 31.
"I am disappointed by their guidance. They have forecast flattish growth in the first quarter compared to expectations of about 2.5 to 3 percent growth," said Shradha Agrawal, a sector analyst with Batlivala & Karani Securities in Mumbai.
"It will make the task of matching the growth rates of rivals tougher for them."
Wipro's IT business, which develops software applications, integrates IT systems and manages call centres for clients such as Citi , Cisco and Credit Suisse , accounts for about three-quarters of its revenue.
Earlier this month, India's No.1 outsourcing firm TCS beat net profit estimates but said wage hikes and currency moves could threaten its full-year margins while No. 2 Infosys forecast lower-than-expected annual sales growth on slower client spending.[ID:nL3E7FF0IU][ID:nL3E7FL18Q].
Intensifying competition from global rivals IBM and Accenture has forced Indian technology firms to hike wages, seen as much as 15 percent higher this year.
"We have announced wage hikes, effective June 1, 2011, which would have an impact on the operating margins," Chief Financial Officer Suresh Senapaty said in a statement. No details on the wage hike were immediately available.
TCS has said it planned to raise wages 12 to 14 percent for India-based staff this fiscal year. Infosys has said it would raise wages by 10 to 12 percent for India-based staff.
The rupee's rise is another concern for the near $60-billion outsourcing sector, which exports a large chunk of its services to the United States but chalks up expenses in rupees.
Wipro said its IT revenue forecast was based on an exchange rate of 44.29 rupees to a dollar, in line with current rates.
Mumbai and New York-listed Wipro in February reorganized its key IT outsourcing business in an effort to win more clients, barely three weeks after it surprised markets by removing the joint chiefs of the business and naming company veteran T.K. Kurien as the new chief executive.
IN LINE WITH ESTIMATES
Bangalore-based Wipro said net profit for the fiscal fourth quarter rose to 13.75 billion rupees ($309 million) under international accounting standards, up from 12.09 billion a year ago.
This compares with a Reuters poll forecast of 13.79 billion rupees for Mumbai and New York-listed Wipro , which counts Citigroup , Cisco and Credit Suisse among its clients.
The firm said revenue rose 18 percent to 83.02 billion rupees, compared with a forecast of 82.54 billion rupees.
Wipro said it added 68 clients in the quarter - its strongest pace of addition in at least three years - while adding 2,894 employees. Operating margins in its IT services business were at 22.1 percent in the quarter.
Wipro shares fell 4 percent in opening trade on Wednesday, in a Mumbai market that was trading slightly higher.
The stock, which the market values at about $26 billion, have fallen 5.4 percent this year, compared with a 9 percent fall in the sector index and the wider market's 4.3 percent loss.
($1=44.5 rupees) (Writing by Sumeet Chatterjee; Editing by Jui Chakravorty and Lincoln Feast)