Wipro Ltd (WIT) 2005 Q2 法說會逐字稿

Ladies and gentlemen, thank you so much for standing by and welcome to the Wipro Technologies second quarter results and earnings call for the quarter ended September 2005.

Now at this time, all phone lines are muted or in a listen-only mode. Later there will be an opportunity for questions. Instructions will be given at that time. (OPERATOR INSTRUCTIONS).

As a reminder, this conference call is being recorded. I'd now like to introduce Mr. Sridhar Ramasubbu. Please go ahead, Sir.

Thank you, Christina, and thank you, everyone, for joining us for Wipro's second quarter results and earnings call for the quarter ended September 2005.

I have with me Dr. Lan Rao (ph) joining me in conveying warm welcome greetings to all of you. With us today we have Mr. Azim Premji, Chairman, Mr. Suresh Senapaty, CFO and other members of senior management team including the (indiscernible) under the new structure. I hope you have an opportunity to review the press release we issued today, morning, under U.S. GAAP.

Let me give you quickly the agenda for today's call. Azim Premji will share his perspective, beginning with an overview of our results and Suresh will take you through our financials for quarter 2 in more detail.

As a reminder when we discuss our results in today's call, some of the issues we discuss may be forward-looking; and I would like to advise you that these statements may be subjected to known and unknown risks and uncertainties that will cause actual results to differ materially. Such risks and uncertainties are discussed in detail in our filings with the SEC. Wipro assumes no obligation to update the information presented during today's call.

For your information, the call is scheduled for an hour. The entire earnings call proceedings are being archived. And a transcript will be made available after the call at www.Wipro.com.

I am on line on e-mail and if you have any specific questions which you are unable to ask, please send me an e-mail or you can call my cell phone and we will discuss this as well at the end of the Q&A.

So with that let me turn over the call to Mr. Azim Premji, Chairman of Wipro.

Good morning to all of you. By now, you would have seen our results for the quarter ended September 30th, 2005. While the management team will be happy to answer your queries, I would like to take some time before that to share some thoughts on our performance and our prospects.

In terms of financial performance, all our major business segments recorded robust growth rates in revenues. Revenues in our global IT business had dollars for 30.7 million, ahead of our guidance of dollars for 22 million. The IT services business continued to witness broad-based growth across verticals, across geographies and across service lines.

Our financial solutions business delivered its fourth consecutive quarter of double-digit sequential growth. Our differentiated services, such as testing and technology infrastructure management, continued to grow ahead of overall growth rate.

Our investments in account management began to pay off as we sold a number of our million dollar customers across 200 for the first time. In line with our expectations, our business process outsourcing business witnessed flat revenues with significantly improved profitability. Even though revenue growth in this business will be muted in the near-term, our wins in the transaction processing business during the quarter give us confidence that we are on the right track.

(indiscernible) India, Middle East and Asia Pac IT business recorded revenue growth of 26% and profit before interest and tax growth up 43% (ph). Our businesses, other businesses also turned in good performance.

The quarter was also unique for a few other distinctions. This was the first quarter where the quarterly operating income crossed the rupees 5 million mark. The quarter saw us crossing the landmark of over 200 customers with dollars 1 million or more annualized revenue in our global IT business.

In the IP services business, the quarter also witnessed the highest ever quarterly people addition of over 5,600 people. In what is probably a world record Wipro and Wiproites (indiscernible) initiative, along with government and local authorities, planted over 250,000 saplings in the tsunami hit area of Tamil Nadu state in 24 hours as a tribute to the people who perished and as a possible protection for the future.

Finally, this was also the first quarter with the new management structure. Our experiences and success so far have reinforced our confidence in our leadership team, as well as in the current organizational structure.

Looking ahead, the prospects for growth look exciting. We exited the quarter ended September 2005 with a strong (indiscernible) of business momentum. The challenge we have is to sustain this and build upon it. I am confident that our leadership team has the hunger and the passion to make this happen.

I will now turn it over to Suresh Senapaty to comment on financial results before we take questions.

A very good morning to all of you in the United States and a good evening to all others in Asia.

I will touch upon areas and (indiscernible) in financials that would be of interest to you all. Let me start with giving the composition for growth. During the quarter ended September 30, 2005, we had a sequential dollar revenue growth of 8.1% in our global IT services business, which comprised of 9.3% revenue growth in the IT services partially offset by a 2.4% decline in the revenue from (indiscernible).

The 9.3% growth in the services company was driven by 11% growth in the volume of business, offset by a 2.1% and 0.8% decline in the (indiscernible) performed offshore and onsite projects, respectively.

(indiscernible) and IT services was impacted by the non-recurring project performance-based (technical difficulty) in the quarter ended June 2005. Including this, the decline in price realization will be under 1% within the quarterly movement to due to mix of customer and services.

I would like to clarify that we have not seen any material change in the pricing environment.

On (indiscernible) front, our realized rate from the quarter was 43.93 rupees at dollars (indiscernible) 43.38 realized for the quarter ended June 2005. There presently is an increase of about 1% (indiscernible). This had a favorable impact of around 40 basis points in our margins. With a view to provide increased information, effective quarter ended September 2005, with stock providing (indiscernible) today on our BPO business.

For the quarter ended December 2005, we expect volume-led growth be broadly stable (indiscernible). Revenue growth will be impacted by the lesser number of working days and this has been factored into our guidance. While that was supposed to stagger our competition division across quarter 3 and quarter 4 of the current fiscal year.

Currently, operating margins for the next quarter will be impacted by the (indiscernible) increase in competition. We will endeavor to mitigate this to deliver this onsite offshore mix and operational improvement, and keep the operating margins within (indiscernible). We will now be glad to take questions.

+++ q-and-a.

Christina, we will now begin to answer questions.

(OPERATOR INSTRUCTIONS) Anthony Miller with Erat (ph) Research.

A couple of things if I may on the broader picture? Firstly in terms of your opportunity for megadeals. Obviously your peers, TCS and (indiscernible) have hit the headlines recently both at ABN Amro and only yesterday with TCS with Pearl. I'm interested in understanding how you see your opportunity for those large-scale deals?

Secondly, if you could also talk a little more about your proposed (indiscernible) center in eastern Europe? If you could give us an idea as to when that is going to be initiated? How many people you are going to have, what sort of investment that will need? And also maybe some idea of how the cost space of operating in eastern Europe is likely to compare with your cost space in India, please?

I will request Giresh Paranjpe, who is the President of our Financial Solutions business to answer the first part of the question.

Thank you.

Girish Paranjpe here. Clearly, there is a certain pipeline of large deals and as you know, the time over which you get decided and also (indiscernible) binary in nature. So while nobody looks at a gift horse in the mouth we can clearly bank on the big deals to run our business. So we have kind of played both sides. We have tried to focus on the (indiscernible) we have and grow that on our (technical difficulty) business. At the same time try to build up a pipeline of the big deals which hit the headlines.

Next we will move to the line of -- .

Christina, we have the question still to answer on the Eastern Europe centers.

Very good.

Just hold on.

(MULTIPLE SPEAKERS)

Point of opening a center in Europe in Bucharest, in Bulgaria -- in Romania. We expect costs there to be maybe about 15% to 20% more than India. But it has a strategic advantage in being able to cater to our European customers. Plus, we believe that we should be able to hire people there, with German-speaking and French-speaking skills, which could also be an advantage to us in terms of proximity to German and French culture as well as being in a position to do product support work in terms of voice calls.

Can you give me an idea of how many (MULTIPLE SPEAKERS)

We intend to make that center very large. We intend to get our feet wet there, learn from experience and then depending upon how much traction we are actually winning with customers, scale it up.

So it sounds like, what, fewer than 100 people? Can you give an idea of how many people you will have there, please?

Well it is too early to say but I think it will be perspective to say that it could be a couple of hundred people initially.

Sorry, when did you say you are likely to open that?

Within the next three months.

Moshe Katri with S. G. Cowen.

Congratulations for a solid quarter. I wanted to focus on a couple of things. One maybe, Suresh, you can talk about the trends in price realization during the quarter. That's No. 1. I'm curious whether we did invest more in the BPO operation during the quarter with potentially impacted margins. And then maybe you could also provide us with an update on the restructuring initiatives -- initiative that is going on with the BPO segment as well. Thanks.

So far as the pricing is concerned, I guess I have -- actually, there is no significant change in the pricing environment. In the quarter 2, we had a difficult -- we had a rich reward we did in quarter 1 for which we had done that benefit in that which got corrected in quarter 2. But going forward we say much more stability in the pricing. So, so far as pricing head-on, compared with other pretty good service from the customer is concerned, there is no change that we will see. So where the new customers are concerned we are seeing fairly encouraging prices there. So that as fixed-price of parties are concerned we are continuing to do well there.

So all in all, we are doing very well on the pricing front. It has plenty of correction because of the one-time longer Korean transaction that we had done in the quarter 1.

So far as (MULTIPLE SPEAKERS)

Investment in BPO.

Yes. Based on the last two quarters, we had a lot of questions on BPO and a lot of which we thought it would be better useful to give BPO as a separate segment and therefore not (indiscernible) in the report that we have released this quarter. We have given the revenue as it is offered in (indiscernible) separately. So any kind of an investment in the BPO will show up there and it would, in fact, be the IP services part of the business.

So in the BPO we have actually seen an expansion of the operating margins by about 400 basis points. And that has been achieved through various productivity improvement, including in terms of slashing the cycle time and the training and also in terms of the utilization, and so and so forth.

Going forward, we think -- actually last quarter also, we saw an improvement in the non void services by about 1 percentage point. We hope to (technical difficulty) quarter and in the next two or three (indiscernible) months we want to include the non void part of the business fairly significantly. We continue to focus on the technical helpdesk part of the business, which is primarily in the A1 and A2 level services because that is very significant to the L3 and L4 services that we offer in the competitive circle so (indiscernible) IP services part of the business.

So all in all, I think we are progressing pretty well in that part of the device plan that we are working on.

Great and can you talk a bit about what we have seen in trend in terms of revenue growth or lack of revenue growth from your top 5 and top 10 clients? Was there anything unusual there during the quarter?

Yes if you look at the (indiscernible) top 10, grown about more than the Company average. There is one where we had an amount of hired mix in the offshore and the (indiscernible) overall revenue numbers were a little bit lower. But there isn't volume growth there because they ship to the offshore. Then another case where we had (indiscernible). Therefore, it didn't show up in terms of growth. But overall, I think the performance of the top 10 has been fairly decent.

Finally, can you give us a feel on when we can actually start seeing margin trends, maybe more on the uptick side just going back to where we have seen them a year ago, maybe two years ago?

Yes. (technical difficulty) like we have been talking (indiscernible) so many levels on which the margins have less impact on some (indiscernible) revenues could pull it up. To mitigate. In the last quarter, we have seen a fully based (indiscernible) fully based (indiscernible) expansion in the margin and in the current quarter we are looking forward to a very feeble or a very narrow range of opportunity margin.

And despite the fact that we really give a competition increase, which is effective as of November, for all of our employees in that associate services business in fact in offshore. (indiscernible) increase will happen in the quarter 4 which we have (indiscernible) employees' look at (technical difficulty) outside (indiscernible).

But we've made the increases, will be over quarter 3 and quarter 4. Our initiative is to say that we have (indiscernible) in the form of utilization in the form of one side offshore and rapidly improvement, including the mix of people that we deploy in the latest project. And combination of this, we hope to sustain this margin in a very very narrow range.

Mayank Tandon with Janney Montgomery.

I had one more question on margins. Suresh, could you comment on the implications for margins, both short-term and long-term as you first view larger opportunities like the large multi-million dollar type transactions? What kind of margins would you be looking for, relative to your other businesses?

I think while the function stage represented as a Phase II relative -- relevant, I think the other (indiscernible) more and more also we are getting into is what is the big proportions we make on the various deals.

So particularly some of the largest deals that you could talk about, it could be possible that, to start with, there could be of a lower margin as a percentage of sales but to every person it could still be accretive. So we would look at those deals under three platforms in terms of on a longer-term or a medium-term basis, what is the (indiscernible) big to sell. And also what is it looking like in terms of every proportion.

Today if you look at a big proportion was (indiscernible) topical company are about 15, $16,,000 per person per year as compared to the global companies which are about 20, 22, $23,000 per person per year. So from that perspective we -- our business would be to make sure that it is protected or improved.

Even if there were to be a shotgun dilution in the (indiscernible) proportion sales.

So, longer-term you would first view opportunity that can at least provide you with corporate-type margins you are running right now? Or do you stay like that kind of tight band?

That is right.

But you can also simultaneously drive growth and profit year-to-year. That is what Suresh was saying in terms of profit per person. I think it is becoming just as important a parameter that not only should you make profit percentage in terms of what you do, but how you drive growth and profits year-to-year, which is attractive from an investor point of view and a share value point of view.

Suresh, also could you just repeat once again what the margin bump was in the quarter? I think you mentioned that from currency appreciation or depreciation rather of the rupee versus the dollar?

Yes. We had about 40 basis points expansion in quarter 2 in the margin. And the remarkable impact of that we had the exchange gain. We had the (technical difficulty) and we are coming downsized in terms of lower utilization because we had the highest headcount addition of the 4,575 people which is in the largest, so far as you are concerned. And that has therefore (indiscernible) utilization but very small, very -- these are expenses right away to invest and to be able to be with the requirement of our customers for the whole financial year.

So some of that where -- even though the net net (technical difficulty) basis point expansion in the margin.

Finally I want to ask questions on the headcount additions. As you surveyed the landscape in India right now, obviously you had a great quarter in terms of recruiting some campuses. As you look forward what is the level of competition you are seeing from the centers and IBM's other multinationals that are now beginning to ramp up aggressively in India? Any change in the dynamics?

I will request Sudip Banerjee of -- President of Enterprise Business to take this question.

Hi this is Sudip. In terms of the people and their ability, we think that there is still enough number of people available. In India we are graduating enough number of engineers in the last few years and that number has been slightly going up. Plus, many companies like us also have an in-Company program where we take BSCs and then they go through a whole year program. And that gives us an additional number of people to recruit from. Currently, we have approximately 800 such people who are being trained.

So these sort of pools help us get our people in to -- meet the requirement of our peoples. As far as Extension and IBM are concerned, they are recruiting the much from the same place. But we find that we are able to attract people as an employer of choice and we are able to also attract people from competition as it pertains to the recruits that we are taking during each quarter.

So we are quite comfortable with the current situation.

In the last two quarters, the number of people we have hired from global companies in India, much higher than the number of people we lost to.

But the interesting thing is we give recognition to the fact that Accenture and IBM are serious competition with their presence in India, or their presence in other low-cost locations. But the flip side of that is -- which is very positive -- is there are more and more embossing (ph) and legitimizing the global delivery model. And that in terms of trend and in terms of prospective business are getting generated for India, including from European countries. It is very positive. And it should really keep the (indiscernible) growth of the domestic export market very, very strong.

Lou Miscioscia with Lehman Brothers.

I guess as you look out over the next 12, 24 and even 36 months, what do you see as the main things you are going to have to tackle to continue to, say, grow at the pace you are growing at? Do you look at it to be the sales force in the U.S., the management team in India, or let's say worldwide, adding headcounts? Maybe if you could just highlight some of the bigger challenges you might have here?

I think one of the challenges which we are starting to work on now is, how do you improve productivity to nonlinear opportunities? Have revenue and profit growths a little out of proportion or significantly out of proportion to headcount growth. And the other challenge which we face is, a people force of 40,000 plus. Happily keep growing at 30%+ per year and still maintain the continuity of our culture.

It is easy to scale and recruit, induction, quality processes, delivery systems. I think the biggest challenge is to maintain continuity of culture.

As we grow, as we add more people in the (indiscernible) centers as we acquire more companies, the first challenge which we will face is continuous seamless integration for a global workforce. We have had some experience with that with two acquisitions. EMS in Washington and Novi (ph) in Boston but some area continues to be always, continues (indiscernible) depending upon the size of the acquisition which we do.

The fourth area which we see as a challenge is always to fine new emerging areas, which can be good turbocharged (ph) to keep up growth. If we do that very successfully over the past three, four years in terms of technology and infrastructure business in terms of testing business, four or five years back in terms of enterprise application services business, and some of the more specialized horizontal growth service areas which we have built up, I think we have a continuous search to find scalable areas of opportunities so we can build a new profit center which either is a stand-alone or serves in very well with our other customer requirements.

I think one basic factor which we are getting driven by more and more now clearly over the past three months is, how do we continue to merge as a leader in everything which we go after?

Okay. To follow up on your growth areas, do you think that you've got enough visibility to -- or maybe if you comment also on the industry that -- yourself or the industry can maintain a top and bottomline growth around 30%, let's say, for two or three years into the future?

If you had to walk out in the (indiscernible) analysis or what they expect to be the last key (indiscernible) from India for the next 5 years and you take the entry goal which they have given for I think for 2009, the number which is coming out is about a 30% growth of the industry including IT and cable services.

The figures of NAS (ph) form, which have been articulated for the current year, is a figure around 32% and from the reportings which are therefore half year one, probably the numbers will end at a little above 32% for the industry exposed for the year.

I think it is realistic to assume that exports from India to builder markets should grow at about 30% per year for the next three to four years. Based primarily on the NAS form analysis of what has been done. As you think that comes about I think industrial leaders should be starting growth rates which are a little higher than this.

Last question, you had a great hiring quarter, obviously, and any comments I guess for the December and March quarters? And thank you for taking my questions

You must appreciate that a lot of our campus recruits really come in in the July and October quarter. But I think what has been very satisfying for our July and August, September quarter has been the fact that our billable headcounts have gone up probably the largest ever in the history of Wipro. And there is a good clear wind behind that and there's a good momentum behind that. So irrespective of the extra holidays which are there because of Christmas and Easter coming up, I think we are confident that we will be able to perform on the guidance which we have given.

Trip (ph) Chowdry (ph) with FTN Securities.

Congratulations on a very solid execution here. A few questions probably, Premji, for you. Regarding IT infrastructure outsourcing or IT infrastructure management, your competition from Accenture IBM, are really setting up huge (indiscernible) centers in India. I was wondering what is Wipro's strategy to, No. 1, continue gaining share in the IT infratructure outsourcing? And No. 2, to increase its lead among the new entrants? Who is thinking about this right now?

Let's have a request for Suresh Vaswani who is our President of IT infrastructure management business. He handles the question.

This is Suresh Vaswani here. On the IT infrastructure management side, I think over the last couple of years we've clearly established ourselves as a leader in so far as award delivery is concerned. And as far as infrastructure management services is concerned.

Going forward -- and you know we are quite aware that our model now is also been replicated by the global players like you just mentioned. Going forward, what we are focusing on is in terms of leveraging more tools, more technology, more process to actually drive a nonlinear delivery model for infrastructure services. So what we want to do is to leverage our global command center, out of which we had -- out of which we delivered to seven customers today, more in terms of investing in technology, creating a differentiator of delivery model going forward.

The second question I have is regarding there's a lot of interest especially from the sellside analyst and they are keeping an eye on the upcoming General Motors IT outsourcing the bid and some indications of that Vipro is in the short list of probably hitting some portion of that deal. I was wondering if you can provide some color to where we stand with GM? Who are the provincial players? What is the current thinking of and how big is this total deal size, measuring anything from $15 billion to probably 2 to $5 million every year kind of a deal? I mean if you can give some color on that, it would be great.

I will request Suresh Banerjee who is President of our Enterprise business.

In the -- General Motors continues to be a strategic customer for us. And that's one of the 2006 RFP is concerned. That (indiscernible) on. Our current understanding is some time in the end of December 2005, they are going to take a decision on some of the RFPs. Now they are assured a total of 43 RFPs which covers the complete spend. And that spend is between 2.5 to $3 billion a year.

So out of those RFPs, a few are going to be decided in December is the indication that we have. We are in their strategic vendor list and we have participated in those. Beyond this, how much decisions will be actually taken in December is difficult to comment on at this stage. But I think we (indiscernible) on the size is going to be what they indicated which is the total spend that they have which is approximately between 2 and $3 billion a year.

Last question, we have been hearing a lot of noise of third party maintenance companies which are mushrooming here in the U.S., companies like Tomorrow Now now who just what's to provide third party maintenance services to PeopleSoft customers and recently another company mushroomed with the name called (indiscernible) Street which is trying to provide third party support for civil customers.

I was thinking, Premji, if you can talk about why is Wipro not thinking in those terms probably being a third party maintenance and support company similar to what Tomorrow Now (ph) now is? And if you are not thinking on those lengths why are you not thinking it? And are you leaving money on the table for somebody else to pick it up?

No we have not thought in those terms. And if there is an opportunity, we certainly would think in those terms but let me request Suresh Vaswani to complement my answer.

We are -- I'm not familiar with the examples you mentioned. But just to give you a perspective of what we do, we do application outsourcing and application maintenance work for PeopleSoft, for Siebel (ph) on an ongoing basis. So that is pretty much business mainstream for us.

In terms of managing civil applications, in a global delivery model for application maintenance assistance. So we are doing that anyway. It is a key part of our offering.

Suresh, from what I understand from you, you are saying to have local presence there to do it on site?

I don't know actually. There are a few companies that are very much taking the headlines here like Tomorrow Now. What they came up with is a service to deliver PeopleSoft customers -- by the way Tomorrow Now got acquired by SAP. And they intend to provide 50% cheaper support and services to PeopleSoft customers, what they say what Oracle would be providing. And just to this another company called (indiscernible), saying that we are ready to provide support -- maintenance support for Siebel at 50% cost what Siebel would be providing. And it seems like there is an increasing trend for what they name themselves as third party maintenance providers.

And probably you know we can talk about this off-line but I was thinking if you have heard about them, you run into these people yet on the scale of these companies so small it is meaningless to you?

You know, the issues -- look at this, (indiscernible) fairly multiple players and a lot of them play from India and a lot of them play local and U.S. (indiscernible). And for Wipro (indiscernible) revenue comes from a different process (ph) . We operate above 45 to almost 60%, 65% services being offered by engineers in India. The balance efforts are offered in (indiscernible) in the U.S., Europe, etc. So we are already very entrenched into this business.

(MULTIPLE SPEAKERS)

Look into those customers as well and we will have a conversation.

Julio Quinteros with Goldman Sachs.

Suresh, this question is for you regarding the recent -- I guess you are expecting -- sounded like you are expecting to pass through some wage increases in both the third and the fourth quarter. Can you just remind us, is this the first time for a wage increase for you guys in the year or is this an additional one?

This is the first time. Last time we gave was in October 2004.

Oh, okay, that's right.

This has been planned for since November, 1st of November 2005 for only the offshore employees.

I'm sorry. It's only going to affect the offshore component?

That is right.

(MULTIPLE SPEAKERS) next year, next calendar year last quarter of afterschool year, they are going to also (indiscernible) implement for on-site employees.

And then what is the expectation in terms of the wage increase that you are going to affect in the third and the fourth quarter?

The current quarter the wage increase is expected to be about 12% on an average.

10%?

12%

Okay great.

The on-site increases will be far lesser and as a percentage but we will be deciding that in the course of the end of this quarter.

Sure and I think somebody asked earlier but I just want to go back to the performance of the top five and top ten accounts. I guess the number that caught my attention was the largest account, I think it was down by my estimates and correct me if I am wrong -- down about 12%. Can you just talk about the ebbs and flows with the top account and what would have happened in that account?

Julio, Lan (ph) here. There has been (indiscernible) including the top and one of the reasons for that has been the little more that we topped off the additional building we did on the little ward (ph) increased the revenue from the stock customer in the last quarter. The absence of that meant that the same customer was not the number one customer this quarter. There is absolute (ph) information for that and that all explain the movement in top five. Other than that, like Senapaty said, the growth in (indiscernible).

So you are saying that the top client is actually different this quarter than what it was last quarter?

That's right. That's (MULTIPLE SPEAKERS)

I'm sorry?

That is toward confident.

Understood. Understood. And the top ten, the growth in the top ten on a sequential basis. What is the number that you are referring to?

Under the (indiscernible) Julio, it is about 1% or so that is -- excluding this (indiscernible) but if you adjust for the (indiscernible) eight of our top tend customers grew in excess of 9% sequentially. The two declines that we did help, one was because of the risk award, and the other was the offshore and restructuring that we've talked about in the past.

So eight of the top ten grew 9% quarter over quarter if you exclude the churn.

(MULTIPLE SPEAKERS) 9.7 to be precise.

Can you talk a little bit about the BPO business, specifically, where will BPO compete as you go forward? Is this going to be focused on one or two specific processes or do you expect to have multiple processes? Can you just give us some color on where you think the BPO business will compete, once the transition is completed?

At this point in time, the (indiscernible) clearly as to capitalize on some of the strengths we have in terms of the (indiscernible) and some of the practices that we have set among those people that are already there which is in the procurement services and the order to cash cycle and the (indiscernible) services. So far as -- and the IT (technical difficulty). As you know, IT held the 11, three and fourth is services are (technical difficulty) part of the (indiscernible) services so 11 1 and 2 is one of our strong positions that BPO has been. So (indiscernible) leverage performance (indiscernible). At this point in time HR is something that is not on our (indiscernible).

So recovery services, order cycle, order to cash cycle and fiscal resources are the key areas we are working on.

Do expect the BPO business to actually gross sequentially next quarter? Or should we expect another sequentially down revenue quarter?

We would expect it to grow but limited growth.

Limited?

It will take two more quarters to get back to the growth trajectory.

Understood and then finally for me on the headcount additions for the current quarter, the net ads were obviously very significant. Is this a ramp up for a specific ontrack or is this -- a specific pipeline in the demand business environment looks strong enough for you guys that this is what you guys need to do to sort of keep up with what you expect to come from in terms of demand and revenue growth going forward?

We hope to have utilization end of Q3. Equal or better than our IT utilization which is their end of Q2 which basically means that the headcount, which we have added and the headcount which we will add this quarter, we expect to have them built up.

But that headcount I guess if you think about where it is going, is it going to one contract specifically or you're expecting to ramp up or is it just sort of across the entire portfolio work?

I think across the entire portfolio. Obviously some parts of the portfolio which are going faster than other parts of the portfolio. But there are no parts of the portfolio which are downsizing at all.

Ashesh Sudonie (ph) with Guilford Securities.

Good evening and congratulations on a solid quarter and the encouraging outlook, as well. Couple if quick questions, actually. Based on your client interactions, are you witnessing any signs of unbundling offshore work from existing outsourcing contracts?

Girish here and then I will request Sudip speak as well. What we are seeing is that there is a greater willingness to move more complex work offshore. Now whether that moves strong internal people who are doing work either for full-time employees or contract third parties, all that is more or less the same. So I think that if you ask me, (indiscernible) willingness to have more complex work than getting them offshore. And there's also more could come from any of these places.

Just to add on, I think a couple of important points here. One is that we moved from a stage where the customers who are dealing with us on an experimental basis and then on a tactical basis have started dealing with us on a strategic basis which means they involve us much more in terms of their overall IT plans and execution of those, which includes their offshoring. It includes their outsourcing to India. It includes getting us involved in consulting in the front end and also getting us involved in the various multiple services that we offer.

As a result of that, I think the general movement which is the propagation that we do global delivery model that is actually getting much more acceptance. That's the first point.

The second that we see is that customers have themselves experienced a lot of success with whatever projects they have done tactically with various India providers as well as with their global providers who had Indian operations. And that has actually expanded the market for offshoring.

Right but are you seeing or are you bidding more on work which is likely to be broken out from existing outsourcing contracts? Is there more activity on that front? Is that a subtrend that we should be prepared for?

One doesn't see any evidence of a trend in that. I think there are some companies who have decided that their large multiyear contracts which come up for renewal in the recent or in the immediate future, they are going to do a rebid of that by parts and there are other companies who have talked about rebidding the entire contract out.

So we are seeing both types of engagement models and there is no evidence of one being superior or one being more prevalent than the other.

A quick one for Mr. Senapaty. Could you explain how the other income of roughly $7 million came about in this quarter?

That is primarily the interest income on the fund set (indiscernible) mutual fund and also the exchange.

Mayank Tandon with Janney Montgomery.

I just had one follow-up question. As you look at your growth -- revenue growth, where is the fastest growth coming from? Is it from displacing the incumbents like the multinationals on outsourcing deals? Or is it more from new initiatives by customers to outsource and to go with offshoring rather than doing it with the multinationals?

Girish here. I think it is the combination that it is somewhat that they would traditionally (indiscernible) multinationals to do with (indiscernible) more open to giving it to companies like Wipro. The other is that what customers would have traditionally done in-house is they have local contractors which they have now -- they are preferring to giving to companies like Wipro.

So it is fairly evenly split between the two areas?

Yes, I would say that until it can add-on.

The only additional point is what Paranjpe earlier mentioned, that there is an increase in the market, because the global multinationals who were originally doing work in their local market have adopted this global delivery model and are executing a lot of their work out of India. And as a result of that we are seeing a larger trend towards getting a larger share of the work for in the marketplace. So that is really an expansion of a market because the global multinationals have adopted the global delivery model.

(inaudible) R&D services (indiscernible). That will come more from the latter activity more than is being done by the customers themselves is being outsourced and outsourced in a big way. Because the customers are looking for the higher bang for the poor bucket and therefore they are wanting a much more national addition of the R&D trend that they have and the only way they could get more services against the same value is (indiscernible) is getting higher level offshoring and that is what experiencing -- that is why we are being experienced (indiscernible).

On the last point Cisco today came out with an announcement about $1 billion investment in India and if I'm not mistaken Cisco is an existing customer of Wipro and other leading offshore providers. Is this an incremental opportunity the way you see it, based on the headlines today?

Yes I will mention that this billion dollar in groups offer additional opportunities for the outsourcing partners. We do expect some professional outsourcing opportunities to come into our (indiscernible) as part of this announcement.

But they are also investing in many more companies, on the stock companies and so on. So presumably that whole investment also includes that kind of an investment that they will be of value going forward.

(OPERATOR INSTRUCTIONS) Anthony Miller with Erat Research.

A couple of things. Firstly you alluded to consulting and sort of moving I guess up the value chain with your customers, but again if I've done my sums right, it actually looks like your consulting revenues as you break them out have actually gone down. I wondered if you could talk about that? And, secondly, again on recruitment, if you could give us some idea, please, of your recruitment plans for the next couple of quarters? And whether your existing buildout plans can (indiscernible) staff or whether you are anticipating any additional spend on new facilities, new infrastructure?

(indiscernible) will answer the first question on consulting. From a very small base, the consulting number for this quarter is a reduction but that should be treated as a more quarterly aberration because the type of work that we do, these projects, run numbers in the quarters and then by the time you get the next cycle of projects it takes a while. So while we have got a huge momentum build up and we've had several wins in consulting this quarter, but the actual bidding of the new work that we've won, has not happened this quarter is likely to happen in the next quarter.

I think it is important also to mention here that the way we have been looking at the consulting business is that it is getting us into a lot of new areas and giving us a lot of significant wins. And we are getting downstream business as a result of consulting. So in many cases, our consulting business is our entry point into certain organizations and certain new strategic customers, which was not there earlier.

So to that extent we are very pleased with the progress that we have made on the consulting front.

Can you say roughly how many people you have in the consulting group now, please?

We have roughly about 250 people.

(indiscernible) plan for hiring. We have not specifically shared the data because all we are saying is that there is a guidance that we have given and most of that would be through volume increase. And from that perspective, the hiding will be in line with that. Your next question was with the facility. Eight months from now, we would have about 4.7 million square feet of space buildout, which is about housing 46,000 people and currently about 2.6 million square feet of space is is under progress -- under construction which would house another 25,000 additional people.

This includes both IP services as low as the BPO operations.

I'm sorry I couldn't quite write that fast. You've got another 2.6 million square feet which you can take, sorry, how many?

Another 2.6 million under construction. Which would house about 25,000 more people.

And all these are -- these plans are accommodated in your existing capital expenditure plans?

That is right.

There are no further questions at this time. Please continue.

If there are no questions I think you ask for one more chance and at least we will close the call.

(OPERATOR INSTRUCTIONS)

Okay, I think we can close the call.

Ladies and gentlemen, that does conclude our conference for today. We thank you for your participation and for using AT&T's Executive Teleconference service. You may now disconnect.