使用警語:中文譯文來源為 Google 翻譯,僅供參考,實際內容請以英文原文為主
Operator
Ladies and gentlemen thank you for standing by and welcome to the Wipro Technologies first quarter results conference call for quarter ending June 2006.
At this time all lines are in a listen only mode.
Later there will be a question and answer session and instructions will be given at that time. [OPERATOR INSTRUCTIONS].
As a reminder, today’s conference is being recorded.
At this time I’d like to turn the conference over to Sridhar Ramasubbu.
Please go ahead sir.
Sridhar Ramasubbu - IR
Thanks Kent.
Thanks everyone for joining us for Wipro’s first quarter results and earnings call for the quarter ended June 30, 2006.
I have with me Jatin and Rajesh from the IR team, who join me in sending a very welcome 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 business unit heads.
I hope you all have had 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 thoughts on our performance and prospects.
And Suresh will take you through the financial highlights of the quarter.
As a reminder when we discuss the 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 subject to known and unknown risks and uncertainties that could cause actual results to vary 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.
The call is scheduled for an hour.
The entire earnings call proceedings are being archived and transcripts will be made available after the call at wipro.com.
As most of you are aware, I’m taking this call from India and have communicated both my Indian and U.S.A. cell numbers.
I am on my own Blackberry and if you have any specific questions which you are unable to ask, please send me a mail and we’ll answer those questions 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.
Azim Premji - Chairman
Good morning to all of you.
By now you would have seen the results for the quarter ended June 30, 2006.
While the management team would be happy to answer your queries, I would like to take some time before that to share some of our thoughts on our performance and prospects.
The results for the quarter is a reinforcement of our approach, a fine balance between long term and short term goals, consistency in delivering results and focus on operational improvement.
For the quarter revenue from our Global IT Services at $539m were ahead of our guidance of $533m.
The IT Services business continued to witness broad base growth across verticals, across geographies and across service lines.
Our differentiating services such as testing and technology infrastructure management continued to grow ahead of the overall growth rate.
Our top 10 clients grew ahead of our overall Company growth rate instilling confidence to our account management efforts.
In line with our expectations, our Business Process Outsourcing business witnessed a small decline in revenues, but significantly improved profitability for the fifth consecutive quarter.
Our wins in the Transaction Processing Business during the quarter and improvement in operational metrics give us confidence that we are on the right track.
Our India, Middle East and Asia-Pac IT business recorded strong year over year revenue growth of 29%, and profit before interest and tax growth of 37%, expanding operating margin by 50 basis points year on year.
Wipro Consumer Care and Lighting business also grew well with 25% year on year revenue growth and 24% year on year profit growth.
During the quarter we launched the Spirit of Wipro.
This is a contemporary articulation of the never changing core values that Wipro practices.
It is rooted in current reality and at the same time it is aspirational.
We also kicked off new initiatives in our innovation journey called the Quantum Innovation.
Our global command center, which offers a unique delivery model for outsourced infrastructure services, won the Innovation for India Award under the Business Model category in June 2006.
Wipro is the only Indian company to figure in Business Week IN 25 Champions of Innovation listing in June 2006.
We have in the last six months announced six acquisitions.
These acquisitions are a combination of discussions and due diligence over the last 12 months.
While these acquisitions definitely have long term strategic value, we’re equally confident that we will drive significant value from these acquisitions in the medium term as well.
Overall, our experience in terms of early wins and business integration so far gives us confidence that we are progressing well and with the right strategy.
To sum up, we’re confident that investments we made in organic and inorganic side to enhance our capabilities and initiatives have been well kicked off.
And will enable Wipro to achieve its vision of global leadership.
I would now request Suresh Senapaty, our CFO, to comment on financial results before we take questions.
Suresh Senapaty - CFO
A very good morning to all of you ladies and gentlemen and good evening to those of you in Asia.
I’ll touch upon the areas in our performance and financials that will be of interest to you all.
Let me comment by highlighting the fact that for the convenience of the readers our U.S.
GAAP financial statements have been translated into dollars at the noon buying rate in New York City on June 30, 2006 as certified by the Federal Reserve Bank of New York, which is $1 is equal to be INR45.87.
Accordingly, revenue of our Global IT Services segment that was $539m, or in rupee terms INR24.5b, appears in our earnings release as $534m based on the [dominion] translation.
Global IT Services revenue for the quarter of $539m included about $45.6m from BPO services and $12m from acquisition.
Acquisition revenue improved $3.2m from a number which has been complemented effective June 1, 2006.
We had sequential revenue growth of 1.3% in our Global IT Services business driven by a 5.5% growth in the volume of business, an increase of 0.8% in realization for work performed on site and 0.5% increase in price realization for off-shore projects.
On the ForEx front our realized rate for the quarter was INR45.43 versus the rate of INR45.10 realized for the quarter ended March 2006.
At the year-end, after assigning to net foreign exchange denominated assets on the balance sheet, we had about $410m of hedges at rates between $44.90 to $46.
This quarter we made incremental investment in sales and marketing and account management.
The margins for the quarter were also impacted by low profitability in acquisition.
However, the official improvement in terms of high utilization and improved realization helped us mitigate some of these pressures.
Continuing on a transformation journey our BPO business expanded operating margins for the fifth consecutive quarter.
For the quarter ending September 2006 we expect volume led growth with broadly stable price realization.
In line with our plan, we have granted restricted stock unit effective July 2006.
The issue of this restricted stock unit will result in a non-cash charge in our income statement of approximately INR3.4b over five years.
In line with the earlier years, we plan to implement competition increase in a standard fashion starting from September 2006.
These combined with a low profitability on acquisition will impact our operating margin for the quarter ended September 30, 2006.
We will endeavor to maintain our operating margin in a narrow range, excluding foreign currency calculation through positive levers like G&A, volume improvement, productivity gains, etc.
We’ll now be glad to take questions.
Sridhar Ramasubbu - IR
Kent?
Operator
Yes sir.
Sridhar Ramasubbu - IR
We are ready for Q&A.
Operator
I’m sorry sir.
I didn’t catch that.
Were you ready for questions?
Sridhar Ramasubbu - IR
That’s right.
Operator
Okay, very good. [OPERATOR INSTRUCTIONS].
And our first question comes from the line of Moshe Katri with Cowen & Company.
Please go ahead.
Moshe Katri - Analyst
Hello, thanks.
I wanted to congratulate you on some of the operational improvements on your BPO side of the business.
I want to start first focusing on the six acquisitions that you’ve made so far.
And I want to -- I’m curious, what was the revenue generation for the quarter from those six acquisitions?
And also, Suresh, you’ve indicated that you’ve had a dilutive impact from these acquisitions on EBIT margins.
It will be really helpful if you can quantify the impact on margins from these acquisitions.
Suresh Senapaty - CFO
Right, I think the dilution we had on EBIT margin on account of acquisitions for the quarter one on a sequential basis, if I take this it will be about 50 basis points.
But base it on a YOY basis, it will be about 100 basis points.
And your other question was?
Moshe Katri - Analyst
The revenue contribution from those acquisitions.
Suresh Senapaty - CFO
Yes.
That is about -- what I talked about.
It’s about $12m, a little under $12m.
Moshe Katri - Analyst
Okay.
And then for the September quarter that’s coming up, are we also talking about a -- on a sequential basis what impact could we expect from these acquisitions?
Suresh Senapaty - CFO
Sequential.
Moshe Katri - Analyst
May be we’re going to be flat or we’re going to be higher?
Suresh Senapaty - CFO
For the quarter ending September it will be higher.
It depends.
Let me explain it.
This is the first [segment] coming from the acquisition.
So, the total revenue that will come from acquisition bucket that we show tactically will be higher in quarter ending September, because A. there are two more acquisitions to be consummated.
Plus we expect a better revenue in quarter two from the existing acquisitions than we have had in quarter one.
Azim Premji - Chairman
So, out of the six acquisitions, four have been consummated and two more to be consummated in September.
Moshe Katri - Analyst
Understood.
Suresh Senapaty - CFO
And as the margins are concerned, yes, we have posted a loss far about the acquisitions are concerned.
But as of now in terms of overall integration process we are on target.
We are let’s say on track is the right word to use.
So for -- and there is an acquisition that we will take, which will have some impact on the IT sales.
And that will take a little more time in terms of getting into a bigger [inaudible] and I think it will take another one or two quarters.
But that is the scope for getting into some of the non-linearity.
But if you adjust for that acquisition, our operating margin in the acquisition is in excess of 15%.
So, while this overall bucket of acquisitions concerns us to be negative, once it falls back, the operating margin will be in excess of 15%.
That’s what I’ll leave with you this data point also.
Moshe Katri - Analyst
Okay, moving over to a different topic of wage hikes.
Can you remind us on an annual basis when they -- which quarter -- when do you actually go through the wage hikes?
And in that context what -- at what magnitude are we expecting to see these this year?
Suresh Senapaty - CFO
Yes, last year -- can I request Pratik to answer the question?
Pratik Kumar - Head of HR
Yes, hello this is Pratik.
Our -- the wage hikes I told for offshore employees typically are third quarter and for on site employees it’s fourth quarter beginning.
And what Senapaty in his initial remarks what he commented, is that we will be staggering the increase, which means that we will be identifying a section of employees where we think need to be considered for hike perhaps a month earlier than the start of quarter three.
And that is for offshore employees.
Moshe Katri - Analyst
Okay.
And what magnitude are we talking about do you think in terms of wage hikes?
Suresh Senapaty - CFO
It’s -- we have not articulated the exact increase that was to be given.
But I can give you a possible impact in the quarter two, because of the restricted stocking that has been granted, about 6.8m units.
Like we said INR3.12b will have to be taken just about over a 16 month period covering about 3,200 employees and also, the account increase that it will give, especially for September.
The combined impact of that will be about 1.5% in the quarter two operating profit.
Also it’s what --
Moshe Katri - Analyst
[Inaudible].
Unidentified Company Speaker
1.5%.
Suresh Senapaty - CFO
1.5%.
Moshe Katri - Analyst
Okay 150 basis points.
And then --
Suresh Senapaty - CFO
Indeed.
Moshe Katri - Analyst
Okay.
And then moving over to the currency impact, you had a -- did you have a currency benefit on EBIT margin this quarter?
Suresh Senapaty - CFO
No, we had the big benefit in the EBIT margin last quarter.
Moshe Katri - Analyst
Okay.
And then finally, can we talk briefly about pricing?
I think there’s been some concern about pricing or some comments that you made in your earlier conference call about pricing.
Suresh Senapaty - CFO
Yes, that is what I communicated to you is about, on a blended] basis we had our figure on pricing was 1.4% on 5.8 and also 0.5.
I will get [inaudible] who has run the financial business, to comment about the pricing outlook.
Unidentified Company Representative
Moshe, this is [Shaker] here.
In terms of pricing for the new business that we are getting we continue to get increased prices.
But the overall impact will still remain in the range that we have had in the past.
This is true for both the U.S. and the European market.
Moshe Katri - Analyst
Great, thanks very much.
Operator
And your next question comes from the line of Joseph Foresi from Janney Montgomery Scott.
Please go ahead.
Joseph Foresi - Analyst
Hello my gentlemen here I know you talked about margins in the last quarter.
Could you give us some idea where you expect them ending up in the back half of the year, in other words in 3Q and 4Q?
Do you expect them to increase?
And do you expect year over year to be flat?
Suresh Senapaty - CFO
Yes, actually our own position has been that given the scenarios, given the areas on which there could be pressures and there are multiple levers based on which we could achieve some efficiencies.
On a medium term to long term we think these are sustainable margins.
However, on a quarter to quarter basis, depending on some of the ForEx and depending upon the competition increases that it could have driven it could move -- it will move in narrow margin.
For example, if you look at our last quarter the positives were that we think are there is in terms of utilization, in terms of our budgeting, in terms of our offshore/onsite mix and also trying to get better profitability out of our acquisition, which we have considered a loss in effect, and perhaps even looking at improving other operational parameters.
And so that is the pressure out there, the pressures out there with the competition, that’s what we would navigate.
Joseph Foresi - Analyst
Okay.
And sticking with that theme there, what lever do you see as having maybe the biggest impact?
Are you planning on maybe shifting work from on site to offshore?
Or are you -- does utilization look attractive to you, SG&A leverage?
Just where -- maybe where do you see those levers moving and which one do you look to pull in the back half of the year?
Suresh Senapaty - CFO
I think we look at all the levers.
For example, like last quarter we did improve the operational efficiencies on utilization.
We did take a hit on the offshore onsite ratio.
Like you said, we took the hit on the acquisition.
So, going forward we would look at opportunities to be able to get a better balance mix, because many more rupee hiring will be done in the second quarter.
Also, we will expect in some form the mix on the offshore/onsite to improve over the next three quarters, next three quarters.
So, I think all the areas we would look for opportunities to be able to get benefits to be able to counter the pressures on the competition that we have and had.
Joseph Foresi - Analyst
And just two more really quick questions, one on the BPO front.
Obviously it’s become a little bit more profitable, but going through the back half of the year, do you see growth of the business sequentially or is there some lumpiness in the back half?
What can we maybe model in on the revenue side of things?
Unidentified Company Speaker
Well, from a guidance perspective what we have commented is that next half to be instigate an [interim arbitrary] deal.
Joseph Foresi - Analyst
Yes.
Unidentified Company Speaker
From a guidance perspective, what we have given is the fact that next quarter we are going to show growth.
Azim Premji - Chairman
And in current quarter.
Unidentified Company Speaker
And in the current quarter.
I’m sorry, I keep thinking of quarter two.
The current quarter we are going to see growth.
We expect -- in terms of our business last quarter we churned our portfolio a bit in terms of moving out some of the services that were not that profitable.
And that really reflected in part in our profitability improvement.
Going forward, our focus will be profit again and growth.
So, I guess you will see some of it coming up in the -- in future quarters.
Joseph Foresi - Analyst
Okay.
And just one last question and that’s on the labor front.
Are you foreseeing any wage inflation at the fresher level?
And what are you doing to maybe -- and maybe on that level?
Pratik Kumar - Head of HR
Well, is your question specific to BPO or on the IT Services?
Joseph Foresi - Analyst
It’s more of a general question, but if you guys want to break it out that would be great too.
Pratik Kumar - Head of HR
At the fresher level there is no immediate pressure, but you must know the context that for the last three years we have seen virtually no wage inflation on the campuses where we do bulk of our fresher signing.
We have announced a salary hike for the campus recruit in the range of about 10 to 15%, which will depend on the colleges they come from.
But this is for the people who will be joining Wipro next year.
That is in year 2007/2008.
And typically they’re joining quarter three of the year.
Joseph Foresi - Analyst
Okay, thanks.
Operator
And your next question comes from the line of Brian Keane from Prudential.
Please go ahead.
Brian Keane - Analyst
Yes, hello.
I noticed that the attrition rate jumped up a point to 17%.
I would have thought that would have come back down.
Can you just comment about what happened there and what we should expect going forward?
Suresh Senapaty - CFO
The attrition rate of 17% was almost 2% point of attrition is accounted for in voluntary separation.
As we have said in the last quarter some of it was part of the clean up which we were doing for -- on the issue of the [inaudible], which we had shared last time.
Some of the residual clean up continued in the last quarter as well.
Last quarter was also the quarter where we finished with our annual appraisal title and therefore people who were belonging to the lower quartile of performance, some of them exited because of that as well.
Outside of that the voluntary attrition has moved up by about 2 percentage points and some of the things, which we shared earlier in terms of the measure that you taken on account of RSU or on account of the salary increases which we have advanced slightly for a section of employees should help us in addressing it in the coming quarter and going forward.
Brian Keane - Analyst
Okay.
Is the targeted range still in the lower double digits?
Is that where you’re trying to get that attrition down to?
Suresh Senapaty - CFO
That’s true.
Brian Keane - Analyst
Okay.
I also saw that active customers really jumped off the page, 565.
Was there anything -- any one timers in that number that helped increase it?
But that just seemed like a big sequential increase than we’ve seen in the past.
Suresh Senapaty - CFO
Yes, I think the -- one was we had because of the acquisition that we have a number.
There were 42 customers as it happened because of the acquisition.
But otherwise the new customer add has been about 16.
Yes, some of them have been in our -- the manual on the new logic as well as in our Engineering Services which has other monitor IT sales that tend to be one time and then not necessarily repeat after.
But still, even if we were to modify that, the customer acquisition numbers are better than the experience we have had in the past seven quarters.
Brian Keane - Analyst
Okay, just --
Suresh Senapaty - CFO
And the investment that we have done over the last two quarters has been decent in terms of sales and marketing.
We have basically four major active teams on the sales and marketing investment point of view.
We have good customer events in the U.S. where big [inaudible] in the U.S.
We had a sales conference, again, outside of India where we had the entire sales team and the marketing team presenting, along with some of the [inaudible] guys.
And similarly, we have added about in the sales front about 30 people over the last two quarters in the sales force.
And all that has strengthened our sales news and that’s how we see some big customer asset we’re seeing is that improved out of the investment that we have made and are making.
Azim Premji - Chairman
Yes.
And if I can just -- the addition to the field force the 30 people which Mr. Senapaty mentioned happened during the course of last quarter.
Brian Keane - Analyst
Great.
And so, just to be clear, did you say 42 of that total is from the acquisitions that got put into the quarter?
Suresh Senapaty - CFO
Yes.
Brian Keane - Analyst
Okay, great.
Suresh Senapaty - CFO
And get added to the total active customer base that we have given, which is about 565.
Brian Keane - Analyst
Okay.
Suresh Senapaty - CFO
We had an opening at this customer base of 494.
We had 16 new customers added.
We had 42 customers through acquisition.
With the net of attrition we have 565 closing active customers.
Brian Keane - Analyst
Okay, great.
That’s helpful.
And then just finally, if you back out the $12m in acquisitions this quarter and then the $3m last quarter, I get a sequential growth rate in the IT Services segment of 2%.
I just want to make sure that’s right.
And if so, it looks like a little bit of a slower growth sequentially than we’ve seen in the past, especially with some of the positive commentary that we’re hearing in India, just trying to make some sense of that.
Suresh Senapaty - CFO
Yes, I think that’s correct.
I don’t think the reading is right because $12m is our total revenue from acquisition is correct.
And acquisition here has been defined as the acquisition that we have consummated effective quarter three of last year.
So, from a Q on Q basis it is -- it was there and it continues to be there.
There is only one deal that we have taken and it has $3.2m of revenue from Enabler, which was in spite of the guidance we had given on $533m.
So, in addition to the guidance we have given on $533m last quarter, for last quarter the incremental revenue that has come out in the acquisition is Enabler.
This is $3.2m, which means if we have booked it at the $539m, [$536m] is the number comparable to our guidance of $533m
Azim Premji - Chairman
At the 6% [inaudible] or 5.3% [inaudible].
Brian Keane - Analyst
Okay, great.
That’s very helpful.
Thank you very much.
Operator
And your next question comes from the line of Trip Chowdhry from Global Equities Research.
Please go ahead.
Trip Chowdhry - Analyst
Thank you again and congratulations on good execution in again a very difficult global environment.
A few questions here and probably it could be the Head of your BPO unit.
I was thinking if you can help us understand how the market is shaping.
Let me comment what we are seeing and I’d like to say how we should as analysts think about it.
We see there were three types of BPO companies which are evolving.
One is the companies who have their own BPO operations in India and now they are spinning off, for example, [WLF Kemby] and maybe GE.
GE also had a BPO unit which they have independently spun off.
Then other set of BPO units are something which are IT services led BPO companies in which you are a player with Spectramind, [Progion] and BCS has it, and so on.
And the last one is still a captive BPO like HP runs its own back office for their customers in India.
I was wondering from your experience and your professional vision, what are the positives and negatives of these various models that are evolving and why do you think your model is a better model?
T. K. Kurien - CEO of BPO
Well, let me start the last question first.
This is T. K. Kurien.
Yes, why we think our model was best.
Two reasons behind that, first is that if you look at the model that we go to market with customers with, it’s basically a combined IT and BPO proposition.
So, not only do we tell customers that we’ll take over their process, but ultimately at the end of the day if you have process improvement that has to be embedded in the system that drives the profit itself.
That is extremely critical for you to have an integrated IT and BPO play to get a long term sustained advantage.
And I think that’s the space that we play in.
That’s the space that some of our competition play in and I think that’s the space that’s clearly evolving and growing in terms of new deals as we look at the pipeline.
So, that’s the second piece.
The first pieces as far as Capex is concerned who are going -- who have now become the third party providers too, you’ve seen the recent filings of some of the companies that are in this space.
I would say to you have a look at the operating margin that those companies have and compare them with what we have and you’ll get a fair sense of what their business model is like.
I don’t want to name the companies, but they’re pretty much -- it’s one of the companies that you named.
I think those companies primarily have skill today.
And they use that skill, they expedite to grow in the space that they are in.
It’s a model that’s primarily a wedge.
It’s a model that still has some more runway in front of it.
But until two companies can avoid situation with IT players at some point of time or the other, that play in our view is going to get commoditized.
Trip Chowdhry - Analyst
[Inaudible] regarding the acquisitions I would say from a strategic perspective they are very insightful, especially the companies that have a very good customer base.
I was wondering when you go for acquisitions are you also thinking of acquisitions from human capital point of view and seeing the acquiring company also good enough, I would say inventory of H1 visas also, because it has capital or probably does not any criteria that you think about?
Azim Premji - Chairman
No, we don’t do acquisitions from the point of view of acquiring H1 visas.
I think we are certainly good at. [Inaudible].
Trip Chowdhry - Analyst
Last question I have on --
Azim Premji - Chairman
View of visas vis-à-vis look at that from the Court point of view of the authority of their country and its ability to integrate with our culture.
We certainly look at acquisitions, particularly in Europe.
And we can get good content people both in architecture and domain knowledge to give us a good foot on the ground in Europe of very high caliber people, but certainly not in terms of trying to hire H1 Visas.
It would be similar to do that in Asia.
Trip Chowdhry - Analyst
Beautiful.
A question on Testing. [In respect of the] detail if you don’t have a person on line that’s fine, I will go off line.
Testing business is growing phenomenally while the Testing Vendors business themselves are not doing well.
I was wondering is it because two things.
Suppose I am a customer in U.S. and I want to outsource my testing to India, do I transfer my licenses to you?
That is to the Indian outsourcers, number one.
Or what do -- or do I let Indian IT companies define their own testing methodologies and their own favorite cost vendors?
Are the customers in U.S. dictating test software with this tool?
How is it being played out?
Suresh Vaswani - President Technology Infrastructure
Okay, this is Suresh Vaswani here.
Typically testing lends itself very nicely to a lot of outsourcing and offshoring and the customers tend to see a lot of advantage by offshoring both in terms of cost.
We tend to use our own frameworks.
We tend to use our own point solutions and we also work through with the licenses of customers.
So, we are basically using customer’s license in terms -- but using a global delivery model to execute test cases for customers.
So --
Trip Chowdhry - Analyst
The last question I had is on package implementations, very good production like all on title thing.
You guys do a phenomenal job on both SAP implementations as well as Oracle implementation.
Now, I was wondering are these maintenance projects or incomplete projects are getting completed, or what level of depth of implementations are you currently involved?
And what do you see happening, say six to eight months down the future?
And thanks again and really good execution and very, very difficult environment.
Suresh Vaswani - President Technology Infrastructure
So, again, this is Suresh Vaswani here.
In so far as package, our Package Implementation business is concerned and we call that EAS, we do both package implementation and do application management and so forth, the package support.
We do pretty complex implementations in terms of SAP and Oracle.
We do -- actually coming out today globally in terms of Indian offshore vendors as one of the best implementers when it comes to SAP implementations, SAP roll outs, and we come out pretty strong when it comes to new generation products like CRM and supply chain management.
So, the answer is we’re doing both pretty complex implementation roll outs, as well as application support.
Trip Chowdhry - Analyst
Thank you.
Operator
Thanks.
And we have a question then from the line of Julio Quinteros with Goldman Sachs.
Please go ahead.
Julio Quinteros - Analyst
Hello, good morning guys.
I wanted to go back to the question with regards to the BPO, in particular around competition.
I understand -- I think some of the points that you tried to make about the scale issues on some of the competitors.
I’m wondering as you look at the landscape with companies like Genpack, DXL and WNS and your own requirements to grow your business and to improve your profitability, how does the landscape evolution with more competitors increase the pressure for you guys?
Or how do you think you’ll be able to tackle an increased competitive environment?
T. K. Kurien - CEO of BPO
So, let me just -- T. K. Kurien, let me answer that question.
In the BPO space our view is that ultimately the BPO space would evolve into very sharply focused verticals and very sharply focused horizontal services, which different companies would specialize in.
So, if you look at us as a company, what we have done is that we have chosen eight different spaces on the vertical area and five different horizontal offerings that we believe that we can productize and we can sell more effectively to customers, and deliver to in more or less off -- more or less off a standard platform.
So, that’s the way we are going in our business.
So, we believe that the late arbitrage scheme, as far as BPO is concerned, is a game that [inaudible] in there.
It could continue, of course, but it would probably -- but over a period of time after the first year of benefit the customers would typically ask in terms of what they’re going to get in year two.
And at that stage the IT integration pieces have to kick in.
The process efficiency pieces have to kick in.
And that’s why we believe that if you were looking for long term sustainable advantage in this market, IT integration is a key component of your automation.
Julio Quinteros - Analyst
That’s good.
And anybody in the space right now in terms of the pricing on BPO?
Do you feel that the pricing approach is generally stable or are there guys out there that are being more aggressive on the pricing front?
T. K. Kurien - CEO of BPO
I think there are always going to be.
The entry barriers for BPO aren’t too high if you’re a small shop.
The problem is in getting a repeat customer for the same type of service.
So, we’re going to find a bunch of people coming in with specific point solutions, who always going to be very, very price competitive.
From our perspective what we are doing is we are trying to bundle more in, trying to look at end to end processes and thus, at least give -- and rather selling to consumer and have your pricing exposed, we’re trying to move into a pricing model that more and more gets bundled and thus, we are able to get higher pricing.
That’s the approach we are taking.
Julio Quinteros - Analyst
To headcount plans for the rest of the year, do you guys provide the gross and net headcounts plans for the remainder of a fiscal year?
Azim Premji - Chairman
Senapaty?
Suresh Senapaty - CFO
No, we give guidance for the quarter in terms of our revenue in dollar terms.
And typically the forecast has been to [hire per] department.
And consequently, we have not so far shared our headcount additions in many, many years.
Julio Quinteros - Analyst
Thank you.
And then Senapaty, if you could just go back to the question about the impact expected in the next quarter from the acquisitions?
I -- just looking back on the notes I wasn’t sure if you actually answered the question specifically about how many basis points of margin impact acquisitions are expected to have in the next quarter in -- I’m sorry, in the current quarter.
And then related to that, can you just walk through the related margin impact that you expect to have from wage increases in the current September quarter?
Suresh Senapaty - CFO
Right, the impact of the acquisition [all fell] last quarter and consequently, we do not expect a significant difference in the current quarter.
We are having a dilution on the acquisition, like I said. [Inaudible] acquisition which is a high complement of IT sales, the acquisition would have an operating margin in excess of 15%.
So, we expect the next two quarters to be able to break even on the acquisitions we did, which has a complement of IT.
And eventually we will see an uptake in our operating margin on the acquisition in a going forward basis.
For the current quarter we would also be expecting significant difference with respect to what we have seen for margins on the acquisition.
We talked about the specific complement granted in July and also talking the competition increase that will happen on a staggered basis starting September 1.
And a combination of both these factors will -- and also competition skill, specialized skill, and that will impact about 1.5 -- 100 to 150 basis points in the current quarter.
But we think that other [inaudible] based on which we should be able to bundle the exchange if we do manage the -- maintain this margin in that range.
Have I been able to clarify?
Julio Quinteros - Analyst
[If I make sure] I’m understanding on my side, because in the current quarter looking at the Indian GAAP statements, it looks like acquisition on a PBIT basis was something like INR96m.
That’s actually in rupees -- INR96m.
So, are you saying that in the next quarter the impact is again INR96m or in the September quarter?
Or are you saying that it’s supposed to be breakeven?
Suresh Senapaty - CFO
I can’t [inaudible].
We will perhaps get around a similar range in terms of -- in connection to the total profits that the Company will deliver.
Julio Quinteros - Analyst
Okay, got it.
Thank you.
Suresh Senapaty - CFO
Thank you.
Operator
Thanks.
And we have a question then from the line of Alan Hellawell with Lehman Brothers.
Please go ahead.
Alan Hellawell - Analyst
Thank you very much.
Congratulations on the quarter guys.
I was hoping you may entertain just a few more questions on your R&D segment.
I believe, if I’m not mistaken, you reported maybe a 100 basis point decline in the Company’s R&D business.
I was just wondering are there any unique factors behind this decline?
Suresh Senapaty - CFO
I’m sorry I didn’t get your point.
You’re saying there is a decline in the total what?
Alan Hellawell - Analyst
In -- a 100 basis point decline in the margins on R&D.
And I’m wondering whether you could add a little color as to what may have been behind that?
Azim Premji - Chairman
I'm not too sure whether we can help because I don't think we have communicated what that amount was last year [inaudible].
We have always given the results for the typical Data Software Services as a whole and BPO.
But have never split the overall GAAP into R&D and supplied financial positions at all.
So I am actually not correct that we have any kind of -- in relation to the overall margins any significant drop in the operating margins of the R&D business.
Alan Hellawell - Analyst
Okay, I probably should tighten up my nomenclature.
I was I guess referring more to Telecom and Product Engineering Services.
Azim Premji - Chairman
So I appreciate that.
In that also we haven't given the operating margins separately.
So I won't be sure how well we will be able to take our.
Alan Hellawell - Analyst
Oh, I'm sorry.
Azim Premji - Chairman
That is factually incorrect.
Alan Hellawell - Analyst
Okay I'm actually referring to revenues.
I apologize for that.
Azim Premji - Chairman
Okay.
We have nothing more share of revenue from the R&D services to the total revenue of Wipro technologies.
Alan Hellawell - Analyst
Yes.
Azim Premji - Chairman
Right, it'll be half in comparative terms.
On a sequential basis, yes Alan your deliberation is right.
But it's a little better on a y-o-y basis.
The R&D business has delivered 40% growth.
So if we took Technology and put it on y-o-y, we would do the same with the R&D business has grown 40% y-o-y.
But it's not significant difference in what you saw in the average EBITDA.
Alan Hellawell - Analyst
Okay.
And if I'm not mistaken, and do correct me if I'm wrong, the -- we've heard messaging from senior leadership that there's an aspirational target for R&D revenues of 50% over the longer term.
Could you maybe add a little more color in terms of how we get from here to there?
Azim Premji - Chairman
[inaudible] again I don't think we have communicated additional, realistic, any kind of number.
We've only guided for the current quarter, which is about $577m, which includes BPO, it includes R&D, it includes Enterprise Solutions, as well as Financial Services and all geographies - U.S., Europe and Japan.
So we haven't specifically stated what the goals are we target or try to achieve, or will be achieving the current quarter.
But all we are saying is that I think R&D is based in an interesting space.
There are global opportunities.
Then right beside that we have a set amount of good customer base and presence in not only Telecom.
OEM Telecom services providers are a burgeoning area in terms of [inaudible] a journey from automotive electronics.
I think there are further opportunities that we have identified and have seen all these new acquisitions we have done in the form of the New Logic as well as Saraware which was consummated on June 30, which means we didn't have revenue but we had just the assets being consolidated.
So both these opportunities also will give us much more global opportunities and we are continuing to look at some of the space which we have still not been there.
And I therefore think it is an exciting area.
Our leadership is very committed to be wanting to take that part of the business into higher growth paths.
Alan Hellawell - Analyst
Okay.
I'm awfully sorry, clearly the news flow on the Company from the Indian press is about as reliable as meteorological forecasts in the New York City area these days.
One last question, I guess.
We've talked with Company about new initiatives in R&D such as aviation and other areas.
Are there any particular new segments within R&D that you're seeing a nice take off in business?
Azim Premji - Chairman
We're seeing an increasing opportunity in being a party to complement, to satisfying the offset requirements of a lot of particularly defense companies of the U.S. which are selling into India.
And the government has formulated an offset policy of that.
And we're quite active in our discussions with those companies.
Alan Hellawell - Analyst
Okay and -- I'm sorry.
Azim Premji - Chairman
The other area where the development is are [inaudible] area, and the other area is as a result of the recent acquisition of Quantech.
We have opportunities in the CAD engineering and the PLM space, which we hope, will also provide us new avenues for growth in existing customers as well as new service offering where we can more aggressively target in new customers.
Unidentified Company Representative
There are always some initiatives and more initiatives will come forward to.
Alan Hellawell - Analyst
Excellent, thank you very much gentlemen.
Operator
Thank you.
And we have a question now from the line of Rama Rao with RR Capital Management.
Please go ahead.
Rama Rao - Analyst
Thank you guys for taking the call.
It's very impressive revenue growth you have.
Can you breakdown what percentage came from the volume growth, what percentage came from the price increase and the contribution, any contribution from the ForEx?
Azim Premji - Chairman
Yes, there was no contribution from ForEx.
There was volume growth of 5.5% in the IT Global Services.
And the pricing, as I said that's blended, we had about [1]% increase on a sequential basis in the business process.
Also think we had about a flattish growth which meant it translated into $139m.
Rama Rao - Analyst
How does this total revenue and its growth breakdown in terms of the various geographical regions like North America, Europe, Japan and Asia.
Azim Premji - Chairman
North America, 52.7% is North America. 22.6% is Europe and the balance is Japan and rest of the world.
Rama Rao - Analyst
If the U.S. economy slows down, how are you strategically positioning yourself to counteract this U.S. slow down?
Azim Premji - Chairman
Why don’t we Girish Paranjpe who's our President of Financial Solutions reply to that question.
Girish Paranjpe - President Financial Solutions
Yes, we have made an investment for addressing the European market, as well as giving us in the non-traditional markets.
But what we have seen is that the outsourcing doesn't slow down when there is slow down in the U.S. economy.
We only worry when there is uncertainty because that's when everything comes to a halt in a slow down significantly.
So U.S. development is a boom or whether is a slow down, I think outsourcing has been fairly perennial.
It's only in the uncertain environment do we need to worry about.
Rama Rao - Analyst
Thank you for that.
Operator
Thanks, then we have a question then from the line of Abi Gami with Banc of America.
Please go ahead.
Abhishek Gami - Analyst
Yes, thanks.
Can you break out how much of the $11.1m of other income was related to foreign exchange, either in losses on hedges or gains from marking to market?
Azim Premji - Chairman
I will get Suresh Senapaty to explain that one.
Suresh Senapaty - CFO
[inaudible] repeating now that number.
Abhishek Gami - Analyst
Sure, I'm looking at the $11.1m of other income, and I assume that within that number there might be some impact from FX?
Suresh Senapaty - CFO
It's negative INR37m, which is ForEx loss, which is embedded there related to business.
Abhishek Gami - Analyst
I'm sorry, was that negative 37m dollar or --
Suresh Senapaty - CFO
Rupees.
Abhishek Gami - Analyst
Rupees, okay.
And that's the net impact of marking to market plus any forwards or options?
Suresh Senapaty - CFO
That will be most of the forward gains and losses during the quarter as well as the mark to market as well in the quarter.
Abhishek Gami - Analyst
Okay, great, thank you.
Can you break those two components out?
Suresh Senapaty - CFO
I have a little [lag].
Considering the fact that we use GAAP US accounting on the platform to [anything] means we do not have a large number in the mark to market.
The hedgings we have are directly related to the outstandings we have and therefore what we have is essentially an account of what is then the attributable [inaudible] mark to market.
Abhishek Gami - Analyst
Okay great.
And then was there any impact above the line, within your expenses, from the currency movement during the quarter?
Suresh Senapaty - CFO
In quarter one there is currency related losses translated to 0.4% negative impact on your trading margin.
In Q1 versus Q4.
Abhishek Gami - Analyst
There was a 40 basis point reduction in margins, or improvement in margins?
Suresh Senapaty - CFO
Reduction in the margin, that's correct.
Abhishek Gami - Analyst
Okay, great.
One more question, did you have or did you incur any additional visa application costs during the quarter and if so how much?
Suresh Senapaty - CFO
There was a visa which we had normal and [inaudible] predict [inaudible].
Azim Premji - Chairman
Another additional INR41m of hedge on account of the [BPO] expensing, because of the resource that was granted in the previous years because that is the new law under FAS 123 under the U.S. GAAP.
So about INR41m came out of hedging in the P&L account under U.S.
GAAP, but not under Indian GAAP.
Indian GAAP is only related to the option which is almost similar to what is said in the U.S. GAAP.
Is only [inaudible] and market price which was granted in the previous years which dropped into the P&L under the U.S.
GAAP, INR41m.
Abhishek Gami - Analyst
Actually that's actually useful too.
I was asking about visa application expenses.
As I understand it the June quarter would be your -- the period in which you'd make the bulk of the H1 applications.
Azim Premji - Chairman
Yes, visa expenses I think there is a hit in the P&L account in the [program] in March, a little bit in June, therefore we gave our market [information].
Abhishek Gami - Analyst
Okay, great.
Thank you.
Azim Premji - Chairman
Thank you.
Operator
Thanks, and we have a question now from the line of Ashish Thadhani with Gilford Securities.
Please go ahead.
Ashish Thadhani - Analyst
Yes, good evening, nice quarter.
Just on the last question, the impact of quarter on quarter rupee depreciation above the line on the operating income, why is it a negative impact, I didn't quite understand?
Azim Premji - Chairman
Yes, I said the operating market is very complex in the sense that, as you know, we do hedging, cash flow hedging of the net foreign exchange.
So we have done a trade on that basis while the rupee has depreciated.
Let's say we take $100 as our revenue. $45 are made in [June]. [inaudible] $55 is subsequently revenue as well as the cost of goods sold.
So the revenue number goes up.
Consequently, some [inaudible] trading is done currently on the margin.
Why did you realize the $45 rate was similar to the quarter rate?
Because the denominated change it does impact the overall operating margin.
Ashish Thadhani - Analyst
Okay, that is helpful.
Also there've been occasional tax write backs from time to time.
So keeping what happened in this quarter and a year ago quarter in mind, what would be the normalized tax rate let's say for the next year or two?
Azim Premji - Chairman
The effective tax rate that we are seeing in the current quarter that is quarter one, is about 14.5%.
And that's the normalized rate without any write back which we had in the previous year including quarter one.
So this year was around 14.5% with a normalized rate.
Ashish Thadhani - Analyst
And you expect that would hold for the next few quarters or so?
Azim Premji - Chairman
That is correct.
Ashish Thadhani - Analyst
Okay, and then one question on the environment.
As you're aware IBM indicated recently that in their revenue growth had exceeded 55% since the beginning of last year.
Based on your benchmarking insights can you offer clarity on whether you believe this is IT services revenue, which would then imply that IBM might be gaining market share?
Azim Premji - Chairman
[inaudible] could you answer that question?
Unidentified Company Representative
[inaudible] I'm sorry can you repeat please, I missed the question?
Ashish Thadhani - Analyst
Right.
It appears that IBM's India revenue growth has exceeded 55% over the last four or five quarters.
Was just wondering if you've done any benchmarking studies to see whether this -- if there's an overlap between Wipro and IBM on this revenue growth, which would then imply that they might be growing faster than the industry and perhaps gaining market share?
Unidentified Company Representative
No I don't think we -- it has not been material enough but I said I don't think we would be -- we can comment upon specifically for any other separate company.
I think the best answer you can have is from.
But we think our growth rate has been different.
There has been idle industry, plus when you look at comparisons of the growth levels you get [inaudible] differently.
And I'm sure there has been some [inaudible] activities that have happened.
But I'm not too sure I think you need to take with the company to get the right answer.
Ashish Thadhani - Analyst
Okay, thank you.
Operator
And could we have a question then from the line of Anthony Miller with Arete Research.
Please go ahead.
Anthony Miller - Analyst
Yes, hello again gentlemen.
I think I shall ask about utilization.
For the past few quarters it's been broadly around the low 70s, even I think below that a couple of quarters ago.
You're competitors are talking about utilizations in the high 70s and in effect the TCS just broached 80.
And if I look back in time over your own utilization, we go back a couple of years and your net utilization was also in the high 70s.
Can you give us a view as to whether you think you can rebuild your utilization up to those sorts of levels or is really capped at the low 70s now because this is just one of those fast growing company?
Pratik Kumar - Head of HR
Hello.
This is Pratik here.
This has been an area of focus for us and we are trying to do a couple of things.
One is the first, as you know our utilization goes through certain peaks and troughs depending on the campus joining timing.
One of the things which we are trying to address is making it more even spread right through the year, which gives us a better predictability on how the loading would be. [inaudible] from our own previous estimate, it takes about 10, close to about 14 weeks by the time we actually get a new person joining from campus, go through the induction training and before they get employed.
We have put some measure in place to see how we can get the deployment time reduced by about a couple of weeks or so.
Our target is just to focus on the people supply chain and be able to see that as we go along the way we organize across multiple service lines, multiple business lines, that we always have a view of people, where they would be with carrying certain skill sets which would be deployable.
These are the fungible resources, which would be deployable wherever the opportunity arises.
We do think that's one area where we have an opportunity to do more.
And our task teams which are working on that, they are trying to make sure that we get the maximum gain out of that.
Azim Premji - Chairman
And so broadly this is [inaudible] utilizations are broadly comparable with Inposts and they are probably about 3, 3.5 percentage points below TCS.
So you know there is an opportunity for us to raise them to more efficient levels.
Anthony Miller - Analyst
Okay, because the previous comment about pressures I understand, but I was talking about net utilization which excludes the effect of trainees.
The lag has been, as I said, pretty much in the [inaudible]
Azim Premji - Chairman
TCS as well as Inposts are reporting numbers which include trainees.
Pratik Kumar - Head of HR
And I'm sorry, the number which we report is also including the people who are undergoing training.
Some people who are freshers joining from campus.
Anthony Miller - Analyst
Okay.
I can see there maybe a slight difference in the way they're measured.
Both the other companies report both numbers.
But you are saying there is an opportunity to come up towards the Inposts, if not the TCS levels.
Azim Premji - Chairman
There is an opportunity to raise our utilization.
Anthony Miller - Analyst
Okay, thank you very much.
Operator
Thank you, and at this time I am showing no further questions in queue.
Azim Premji - Chairman
Yes, Kent will close the call and make an announcement [inaudible].
Operator
Alright then, very good, thank you.
And ladies and gentlemen, today's conference will be available for replay starting today, Wednesday July 19 at 9.45 a.m.
Pacific U.S. time and it will be available through Thursday August 3 at midnight Pacific time.
And you may access the AT&T executive playback service by dialing 1-800-475-6701 from within the United States or Canada.
Or from outside the United States or Canada please dial 320-365-3844 and then enter the access code of 835825.
Those numbers once again are 1-800-475-6701, from within the U.S. or Canada or 320-365-3844 from outside the U.S. or Canada again enter the access code of 835825.
And that does conclude our conference for today.
Thank you for you participation and for using AT&T executive teleconference.
You may now disconnect.