Wipro Ltd (WIT) 2007 Q2 法說會逐字稿

Good day, ladies and gentlemen, and welcome to the Wipro quarter two results and earnings conference call.

At this time, all participants are in a listen-only mode.

Later, we will conduct a question and answer session and instructions will follow at that time.

(OPERATOR INSTRUCTIONS).

At this time I'd like to turn the call over to your host, Mr.

Sridhar Ramasubbu.

Sir, you may begin.

Thanks, [Ram], and thanks everyone for joining us for the first -- second quarter results and earnings call for the quarter ended September 30, 2007.

Jatin, Lalit and Rajesh from the IR team join me in having a very warm 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 new heads.

We also have Zach Lonstein from Wipro IFOX team.

I hope you 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 this quarter.

As a reminder, when we discuss our results in today's call, some of the issues we discuss may be forward-looking and I'd 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 SEC.

Wipro assumes no obligation to update the information presented during today's call.

This call is scheduled for an hour.

The entire earnings call proceedings are being archived and transcripts will be made available after the call at www.wipro.com.

I'm online on email and if you have any specific questions which you are unable to ask, please send me a mail and we'll address 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, Wipro.

Good morning to all of you.

By now you will have seen our results for the quarter ended September 30, 2007.

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 our prospects.

The results for the quarter demonstrate strong execution by Wipro and Wipro teams on all fronts.

Revenue growth, profitability management, large deal wins, inorganic initiatives, geographic expansion, alliances and partnerships and, finally, applied innovation.

The revenues from our Global IT Services, at $796.5m for the quarter, including revenues of $6.4m from Infocrossing, were ahead of our guidance of $777m.

We saw broad-based growth across verticals, across service lines and across geographies.

Notable among verticals were Financial Solutions, Telecom Service Providers and TMTS, which grew double digits sequentially.

Among our service lines, Accounting Infrastructure Services, Testing and BPO clocked in excellent growth rates.

Among geographies, Europe and Japan posted 15% and 26% sequential growth respectively.

On the profitability front, we not only fully absorbed the impact of offshore salary increases but also expanded operating margins by 90 (sic - see press release) basis points.

This demonstrates the resilience of our business model.

In fact, due to our relentless focus on quality improvement, our average offshore per-person salary has remained in the very narrow range of last year's levels despite the 12% to 13% wage increase given this year.

We will continue to drive this in the future also.

Large deal wins were the highlight of the quarter.

These were across verticals and service lines and demonstrated the resonance Wipro's 360-degree engagement model has been finding in the marketplace.

Wipro signed an agreement whereby all radio access R&D activities currently performed in Berlin by Nokia Siemens network are planned to be provided by Wipro in the future.

During the quarter Wipro acquired Infocrossing Incorporated, a U.S.-based provider of IT infrastructure management, enterprise applications and business process outsourcing services.

The acquisition is very strategic to us as it helps us to position ourselves as a strategic player in the next orbit of large total outsourcing deals.

Demonstrating its strength in the Healthcare vertical, Infocrossing recently won a $275m contract to provide fiscal agent services to Missouri HealthNet Program into 2014.

Wipro also announced a strategic partnership with OKI Electric Company Limited and signed a definitive agreement to acquire OKI Techno Centre Singapore Pte Limited, including its own intellectual property rights.

In line with our strategy of creating a seamless global delivery footprint, we announced our plans to open a center in Atlanta, Georgia in the United States and a near-shore center in Monterrey, Mexico.

The near-shore center's [already become operated].

Expanding our reach through alliances and partnerships, we've signed up as one of the few global partners of SAP AG during the quarter.

As part of the agreement, Wipro will establish a solutions lab in Bangalore to showcase the benefits of Enterprise SOA, industry best practices and innovative service delivery models.

Lockheed Martin, the world's largest defense contractor and the United States government's number one information technology provider, announced the opening of a Network Centric Operation Center in Gurgaon, India in partnership with Wipro, known as Amar Jyoti.

Applied Innovation remains the core theme that binds our strategy and execution together.

This quarter Wipro launched the first ever global awards that will recognize best practices in co-innovation and global sourcing.

12 innovations that have resulted in measurable business transformation through co-innovation or global sourcing will be honored at the awards night in end October in New York.

Wipro also launched its Applied Innovation Council, a high-level forum comprising of Wipro customers, industry experts, analysts and thought leaders.

We continue to see a solid traction in our India, Middle East and Asia Pac IT business.

It recorded strong year-on-year revenue growth of 76% and EBIT growth of 41%.

We continue to grow significantly ahead of the industry growth rate, driven by a comprehensive service portfolio and the compelling value proposition delivered to customers.

Wipro Consumer Care and Lighting business also grew well with year-on-year growth and EBIT growth of 90% and 72% respectively, including the results of our acquisition, Unza.

We are driving multiple initiatives to improve operational efficiencies and to increase non-linearity in our business model.

We're investing in SOA, platform BPO, consulting and other such initiatives, which should help us drive the non-linear growth significantly.

The global environment continues to offer opportunities.

We are preparing ourselves and investing ahead of time to make the most of these opportunities.

I will now request Suresh Senapaty, our CFO, to comment on financial results before we take questions.

A very good morning to those of you in the United States and good evening to those of you in Asia.

Let me commence by highlighting the fact that for the convenience of the readers our U.S.

GAAP financial statement has been translated into dollars at the noon buying rate in New York City on September 28, 2007 for cable transfers in Indian rupees, as certified by the Federal Reserve Bank of New York, which was US1 is equal to INR39.75.

Accordingly, revenues of our Global IT Services segment was $796.5m, but in rupee terms INR32.4b (inaudible) earnings release as $816m based on [the convenient] translation.

I will now touch upon areas in our performance and financials that would be of interest to you all.

Global IT Services revenue for the quarter of $796.5m included $720.1m from IT Services, $70m from BPO Services and $6.4m from Infocrossing.

Pursuant to successful completion of the tender offer, results of Infocrossing have been consolidated from September 20, 2007.

Excluding Infocrossing, the sequential revenue growth of 8.8% in Global IT Services segment comprised of 8.7% growth in revenues of IT Services and 9.7% growth in revenues of BPO Services.

We achieved 8.7% sequential revenue growth in IT Services, with 7.7% volume growth and 1.9% and 1.6% improvement in our onsite and offshore realizations respectively.

On a year-on-year basis, our volume growth is up 32% and our onsite and offshore realizations are up 3.2% and 1.8% respectively.

During the first half of the financial year 2008 we have added 9,660 employees on a net basis, 50% higher than the net addition in the same period last year.

On the ForEx front, our realized rate for the quarter was INR40.75 versus the rate of INR40.51 realized for the quarter ended June 30, 2007.

As at period end, after assigning to the assets on the balance sheet we have about $750m of hedges, and on a gross basis approximately $1.1b of hedges.

During the quarter we added 59 new customers, six of which were Fortune 1000 customers.

We improved the mix of services rendered from offshore by 100 basis points.

We improved our gross utilization by about 20 basis points in spite of adding more than 2,800 employees from campus.

Approximately 80% of the organic net additions for the quarter were from campus.

Attrition dropped by about 220 basis points during the quarter.

Our BPO business delivered an EBIT margin of 22.4%, driven by strong operational improvement and reduced attrition.

We affected wage hikes for our offshore-based employees from August 1 by about 12% to 13%.

And this had an impact on our operating margin by about 160 basis points.

Improved price realization, utilization, benefits from proactive hedging and greater proportion of younger employees in the organization pyramid helped us not only mitigate this adverse impact but also improved the margin by 90 (sic - see press release) basis points.

During the quarter, we have used up to $850m of cash for acquisitions.

This will reduce our other income in future quarters.

As of September 30, 2007 we have approximately [$755m] of debt on the balance sheet.

Of this, approximately $125m of debt is assumed from our acquisitions less our short-term working capital loans that we have taken.

Retaining cash on the balance sheet provides us with a greater flexibility to meet strategic needs.

For the quarter ending December 2007, we expect volume-led growth with stable price realization.

We will have one-month impact on margins due to the wage hikes effected in quarter two in IT Services and salary increases in BPO from October 1.

We will also have lower number of billing days and dilution on account of Infocrossing consolidation.

On an organic basis we expect margins of Global IT business to be in a narrow range, excluding the impact on account of exchange fluctuation.

We will now be glad to take you questions.

Ram?

Thank you, sir.

Yes, we can take the Q&A now.

Thank you.

(OPERATOR INSTRUCTIONS).

Our first question comes from Joseph Foresi.

Question, sir?

Hi, guys.

I know you talked about this on the earlier call but I was wondering if you could briefly discuss the demand environment heading into 2008, specifically in reference to discretionary spending and what you're seeing on that front.

Hi.

Girish here.

You know, with most of our clients' budgeting processes currently on, but we have some sense based on what has gone in so far into the first proposal for budget making and some feedback on that.

So broadly we are seeing a neutral budget for 2008, which is in some ways remarkable given the growth in IT budgets that has taken place over the last two years for many of our clients.

So, given the fact that there is no major change in the IT spend level, I would imagine that the level of discretionary spend will remain more or less similar.

But we'll get a better sense maybe a month or two down the line, once the budgets have been signed off.

By neutral, do you mean flat with what you saw last year?

Yes, flat as compared to last year.

And just switching gears, I know obviously with the Infocrossing acquisition that you're doing an asset-intensive approach to infrastructure services.

Some of your competitors do asset light.

I wondered if you could give us a little more color on why you decided to take that type of path.

If you don't mind, this is Zach Lonstein, I'd like to take that question.

(Technical difficulty) the fact that you see us (technical difficulty).

Rajesh, I think Zach's voice is not clear.

Maybe he has to pick up the phone that is in the conference room.

We're not able to hear very clearly.

Hello, can you hear me now?

A little better but still your voice is a little bit echoing.

How about on this line?

Slightly better.

We have a very asset-light business model.

We have two main lines of business within our [data center].

One is open systems, in which invariably we bring our clients' servers into our data centers; we do not provide a service.

And the other is mainframe systems in which, while we do provide the mainframes, they are shared systems and so the CapEx component is very tiny.

In fact, our CapEx budget for 2007 was between $6m and $8m on revenues of $275m [to $300m].

So it's not the classic EDS model, where you would engage in an outsourcing engagement where we would buy our clients equipment, rebadge them and replace them and so forth.

We do not rebadge the equipment.

We do not buy the equipment.

So it's a very CapEx light environment.

Okay, thanks.

And just real quickly, a last question here on telecom.

I know you guys talked about this again on the earlier call.

I wonder if you could just give us some feel for what you're seeing there with the mergers that have taken place and how you expect the trajectory of that business to grow in the upcoming quarters.

Thanks.

Thank you.

Our next question comes from Mark Marostica.

Question, please.

Yes, Mark Marostica of Piper Jaffray.

Thanks.

A question regarding your R&D mix.

I noticed that this quarter it was close to 25% of revenue compared to about 30% a year ago.

And I'm curious, as you think about the business, where do you expect that mix to bottom out?

And tied to that, does the Nokia agreement basically baseline that or help baseline that mix shift?

In other words, do you expect to continue to position yourself to get more business in that vertical of handset manufacturers?

And then lastly, just tied to the revenue mix, perhaps your relative margins on the R&D business versus your average margins.

Hi, Mark.

This is Ramesh Emani.

Coming to your first question, we have been (inaudible) the ratio of (inaudible) overall gross margin business which is coming down (inaudible).

It is in line with the R&D, in line with the worldwide market, so (inaudible) the market for IT services is about 10 times the market for the (inaudible) services.

So in that respect I do expect in the long run (inaudible) of our business, the (inaudible) business, to go down.

It may [go down 10% or 15%], I don't know.

It depends much more on how much IT business will grow rather than how much the productivity in the business grows.

In terms of the margin, the margins and the productivity in the business traditionally have been higher, mainly because we have much higher offshore content.

And that has not changed in the last [year].

So we still maintain relatively high margins in the product engineering business.

Coming to the third question, in terms of will the Nokia Siemens determine what we find in terms of (inaudible), it's a small center so in that sense relatively it will have a very high impact.

I don't know.

But definitely we will see the impact in terms of our relationship with Nokia Siemens, as well as in terms of our ability to take on more complex projects.

So if there is anything else I need to answer?

Just switching gears a bit, your fixed price mix has moved up modestly this quarter and certainly year over year.

Can you help us understand perhaps what the impact on your margins were this quarter relative to the uptick in the fixed price percentage?

Hi, Mark.

This is Pratik.

Can you hear me?

Yes.

Okay.

Yes, there's been an increase in our [quota of] fixed price projects.

It's a part of our strategy to increase those lines of businesses that will deliver (inaudible) in building significant gains in productivity.

At this point of time, we do not have great (inaudible) in profitability between fixed price projects and the other projects.

But the potential is there and we feel that we can realize the opportunities as we go forward.

And we think that as we go ahead and we bring more and more (inaudible) to the business, we will get the value of those going in in future periods of time.

But relative to last quarter (inaudible) material difference to our total profitability for the quarter.

Great.

The last question and I'll turn it over.

What are your hiring plans for the remainder of this year, and maybe if you could talk about the mix of people with less experience versus more experienced lateral hires?

Thanks.

Could you repeat that?

Excuse me, I'll repeat that one more time.

I'm curious about your hiring plans for the remainder of the year.

And then perhaps if you could qualify that in terms of mix of people coming in as newer hires with less experience versus lateral hires.

Thank you.

Okay, I'll take that.

Pratik here again.

Hey, one minute.

See, whenever you people are speaking it's got a lot of echoes coming.

Speak 50% slower and use some pause because the people are not able to hear, please.

I understand.

Thank you.

Okay.

First of all, as far as our hiring plans are concerned, we've said that we've made 14,000 offers on campuses in the current year.

That's what we expect to hire as far as (inaudible) is concerned.

The balance, which is a natural (inaudible) function of the business growth and the mix of laterals versus freshers has been (inaudible) and that's not something that we've been guiding on in the past six months.

(inaudible) As far as the proportion of people with less than [three years experience] is concerned, we're at 45%, which is pretty similar to the number we had at the end of last quarter.

Hello?

Hello?

Can you hear me?

Yes.

Yes.

The only point that I just wanted to also add is that at this point in time (inaudible) making despite the fact that every quarter there's a shift of people who have less than three years to more than three years.

And we have (inaudible) 15,000 people who have moved from less than three years to more than three years.

In spite of that we maintain a 45% attrition.

We've actually improved [the ratio number].

And we'll continue to focus and do that further as we go along.

Can we have the next question, operator?

Thank you.

Our next question comes from Abhishek Gami.

Question, please?

Hi, it's Abi Gami, Banc of America.

A quick follow up on a commentary from earlier.

You mentioned that your conversations with clients indicate flat IT budgets.

Is that their overall IT spend that they're talking about or is it the amount that they expect to spend on outsourcing or more specifically offshore outsourcing?

So what -- hi, it's Girish here.

I just wanted to say that the flat IT budget is the overall IT budget and at this stage that's all the indication that we have.

As they finalize their budgets we'll get a better sense of which programs are being run, what's the mix between hardware and software and services, so that kind of feel is, I would say, still a number of weeks away.

Okay, great.

Thanks.

And then another follow up on the offshore wage hikes.

I believe you said earlier that during the quarter you effected 12% to 13% increases.

First, that number is a little bit lower than what we've seen across the industry and what you've paid in the past.

Is that the full picture, or are there additional wage increases coming offshore that have not yet been effected?

No, that's the entire increase of 12% is effective August 1.

And while I'm saying average is 12%, the range goes as high as 25%, 30% on the upward side.

Great.

Do you have indication or any thought yet on the direction of that figure into next year?

Yes, I think (inaudible) feeling we have been experiencing over the last few years an increase of about 12% to 13%.

It is effectively all over.

[There will be some more] moderation but we think this will (inaudible) off the people coming out the campus.

More and more [mid-range] students are coming out this year.

We expect about 1,000 immigrants coming out.

And then one (inaudible) that companies are making to be able to improve (inaudible) the supply is going to be better.

And we think as we go forward there will be moderation that we will be seeing.

Great.

Thank you very much.

Thank you.

Our next question comes from Trip Chowdhry.

Question, please.

Thank you.

First, regarding the large deal size you guys are being very successful at, I was wondering what are the key components of those large deal sizes?

And also, how should we be thinking in terms of the ramp-up of a large deal and the margin impact it may have?

Then, I have a follow-up question.

Trip, can you just repeat the question once again?

(Technical difficulty).

Trip?

Yes.

Could you repeat the question for (inaudible) again?

Sure, sure, sure.

My question was, suppose you win a $100m kind of a deal, how does the product -- how does the project ramp up in terms of people and the components of a project, like what services you provide?

And as the time of -- like for this three-years project, and as the project is ramping, how do you see the margin dynamics being played out?

Okay.

Maybe [why you do that], maybe we should start with a specific example.

And, Zach, if you could just talk about (inaudible) deals on (inaudible) course of the project.

Well, in our kind of project, as we -- our models, recurrent revenue models, the clients typically sign agreements with us that are three to five years in length, although those terms have been increasing so now we're seeing clients signing for six and seven years.

Initially, the projects are [least profit] and get more profitable as we go on, as we continue to process our clients' work because we've become better at it.

We automate as much as we can.

And so the profitability each year on a typical engagement increases in profitability and margin.

Well, as far as this year, let me add some color as far as a typical application type of large deal is concerned.

And what we see there is differences within the model, similar as you would have on a traditional offshore deal.

There is a period of about three to six months when the ramp-up happens although the scale of the ramp-up is much higher.

What also happens is that we will be extra careful about handling some of the onshore teams and creating some contingency plans to make sure that there is no business interruption of any sort.

So there is much more detailed planning and contingency planning that goes on and much more scale planning that goes on but, other than that, we see the process very much the same as a regular project.

As far as the margins are concerned, I wouldn't say that they're necessarily dilutive.

The experience of the last six months has been that some of the large deals have come roughly at the same margins that we are used to in our regular business.

Perfect.

The other question I had was regarding the various activities that various IT shops are doing.

Are you seeing any trends or shifts, like certain pieces of technology what's very important, very critical, say, last year, and this year you are seeing some shifts in that?

Thank you.

Hi, Trip.

Girish here again.

Most of the application development type of work is shifting to the newer technologies on [EBIT].

So we are seeing much more use of SOA technologies, much more work around business intelligence and data warehousing because it's ultimately coming to the point about either integrating disparate systems or getting value out of all the data that is stored in clients' systems.

And very often these are [high load] or in stockpiles, and clients want to use the data and use it for either cross-selling or for getting more knowledge out of it than letting it remain in the current model.

So we see a lot of interest around the work in the business intelligence area, as well as at the SOA area.

Thank you.

Thank you.

Our next question comes from Ashish Thadani.

Question, please.

Yes, good evening.

At Infocrossing, what sort of operating margin expansion are you envisioning over the next couple of years or so, from the roughly 9% in the [stub] period?

Yes.

Ashish, so far as Infocrossing is concerned, like we said that we were looking at synergy with respect to doing - getting more and more deals together, looking at increasing the capacity, what it is today, the utilizations are at around 50%, looking at as the business goes up trying to do some of the managed services offshore.

So combination of this [has] some of this to decide.

We will be seeing expansion in the margin.

So we would expect it to be at least four to six quarters before it gets into north of 20.

As you know, they have been diluting their (inaudible) of about 12% so we expect in the shorter term it to be in those ranges soon.

Thank you, that's very helpful.

And one quick question on another subject, pricing.

What kind of year-on-year increase in price realization can we expect Wipro to sustain as a result of higher service mix and other items?

Specifically, do you envision a period where price realization can neutralize annual wage pressures, because this is beginning to occur at at least one of your peers?

Absolutely, Ashish.

If you look at -- we are trying to mitigate the cost [stipulation] on account of wages to two things - A, price increase and, B, budget mix.

So as of now, at this stage, we are at about 45% so we have been (inaudible) as compared to quarter one.

There have been 1500 people who have moved into the bucket of less than three years to more than three years and yet we were able to maintain it.

In the current quarter we will see more number of rookies joining and we would expect the budget to therefore improve.

And therefore, we will continue to drive the mix of people which will help us retain the cost per person offshore in a narrow range.

And as far as price increase is concerned, we have been getting different price increases with the customer on renewal, the new customers are coming at better prices.

Of course, when particularly some of the pricing gets linked to the experience profile of people and when you are increasing the bunch which has not been reflecting in exactly the similar way to the realization.

But -- so, but over a period of time, when you see a bunch being at its optimum level, we will be able to see the price increase that we get completely reflecting in the realization and operating margin.

Just to add that if you look at our performance this quarter, I think we have been able to neutralize [a vast] wage increase through a combination of operating efficiency and price stabilization improvement.

Excellent, that's most helpful.

And one quick housekeeping clarification.

Could you just describe for us what your different utilization categories are, because I think you've inserted one more, so the difference between gross and net?

Yes, one is the gross utilization, which would mean the total headcount bill depends on what the total headcount is being paid for.

And -- (Inaudible).

Yes, it's a total.

And so far as the net is concerned, excludes the support staff and (inaudible) is excluding these changes.

Got it.

Thank you.

Thank you very much.

Thank you.

Our next question comes from [Rama Rao].

Question, please.

Hi, guys, and thank you for taking the call.

How do you characterize the macroeconomic condition in terms of the future growth prospects for your Company?

Well, as you have seen, Indian IT, so this is an industry which has been growing very well.

There is a track record of growth in excess of 30% on a combined base, the IT service and the BPO.

There are several estimates that are available to (inaudible) says that Indian IT industry will be above $60b pretty soon.

The deliveries that Indian IT industry has been doing over the last 10 years have been completely in line with that and we see no reason why that $60b target wouldn't be achieved.

So, from that perspective, as you have seen over the last two quarters, the growth that the industry has been posting has been very good, and that has been reflected in our own growth.

We had guided for $777m.

We've delivered $797m.

And also, if you look at quarter three guidance of $905m, if you take out the acquisitions of about $60m, it's still a sequential organic growth of about 7%.

Very good, thank you.

There are two factors which are putting a lot of pressure on the stock.

One is the U.S.

mortgage industry, how this is going to impact the IT outsourcing companies in India.

And other is the currency devaluation.

You cannot do much for the currency factor but how much exposure do you have in terms of the sub-prime and other things, and how is this going to impact your future growth?

Hi, Girish here.

I head the Financial Services practice.

Let me try and answer that question.

The sub-prime has affected two sectors of the financial services industry.

It has affected mortgage processors, people who do origination, loan servicing and so on.

That is the most vulnerable sector and they have been most seriously affected.

The other sector which has got affected are investment banks, who typically package the loans which have been originated and then re-sell them to investors.

As far as the first sector is concerned, our exposure is very limited and I think we have stated that in other published documents as well that we have less than 1% exposure to the sub-prime segment when you look at mortgage processors.

If you look at the investment banks, we have significant business with them but most of them have seen it as financial exposure and have taken action in terms of writing down their reserves and it has really not affected operations.

So I would say that if you look at the impact of sub-prime on our business and our reserves, it has been very, very small.

Thank you.

Our next question comes from [Cancun Vildianeta].

Question, please.

Thank you.

My first question is with respect to [deals].

If we were to look at your deal pipeline, could you help us understand what kind of deals are you seeing right now?

Where is the strength in terms of service offering and also in terms of verticals, as to where the strength is?

Hi, Girish here.

I'll try and answer that question about where we see business coming.

Actually, we are seeing both large deals and regular size deals coming across the industry verticals.

There are deals that we are seeing in Financial Services.

There are deals that we are seeing in the telecom service provider area.

We're seeing deals in manufacturing.

So it's across broad sorts of industries.

So I really see no reason for me to pick one particular area.

Okay.

This is where I see the deals.

Okay.

One question with respect to North America.

It seems that your growth -- sequential growth in this quarter was only 5.5%.

Any reason as to why this is still the Company average?

These kind of growth, so a quarterly variation, some quarters it's strong in one geography and in another quarter it is slightly weak.

But if I look at the overall picture, North America is still pretty strong for us.

In fact, if you look at the customer adds that we've had in North America, they were pretty strong.

Almost 60% of new customer adds that we've had this quarter have come from North America.

Okay, that is helpful.

And one final question.

I guess, with respect to your operating margin in the Wipro Infotech business and the Consumer Care and Lighting, it seems that it has been declining in the past two quarters.

Could you help us understand as to where do you think that it could possibly be sustainable for fiscal '08?

In the next two quarters should we expect that it should go back up, or is it going to remain where it is right now?

Thank you.

Yes, so far as our Infotech number is concerned, I think that it is a sustainable operating margin.

The last quarter we had this acquisition of Unza, which has a marginally lower operating margin and that is the reason you are seeing overall a little lower operating margin on a combined basis.

But without the acquisition the margin has been stable.

And so far as the Wipro Infotech is concerned, it has a little bit of cyclicality, particularly in the quarter two versus (inaudible) which tends to be a little higher.

And otherwise, if you look at the service lines of service businesses, the operating margin is (inaudible).

And particularly on the product and services mix some quarters there is still a lot of fluctuations that happen.

But otherwise, profitability that is there in the service lines and on the product side are fairly stable.

That's very helpful.

Thank you.

Thank you.

Our next question comes from [Ron Kissinger].

Question, please.

Yes, hi.

Good morning, good evening, guys.

I was a little bit confused about it sounds right now like Financial Services is hurting your business right now, the spending from there.

I'm curious over the next two to three quarters how you think the trend there might change, whereas right now they may not be impacting you.

Hi.

Girish here.

Let me try and answer that question.

As you have seen our track record over the previous few quarters, we have had been holding steady and this quarter has been particularly good.

How the next few quarters will go out is difficult to predict at this moment, but the current quarter is looking fairly strong.

So I'm not too worried about that.

And, as I have mentioned in an earlier question, that a lot depends on how the 2008 budget gets worked out.

The initial indications are that most of our large clients are looking at a flat 2008 budget or 2007 spend.

So unless something drastically changes between now and the beginning of next year, I should -- we should expect to see a similar growth going forward.

If you took a look at -- as a follow up, if you took a look at the sub-set of your customers that are Financial Services related, how might those -- are those budgets expected to be down, or are those also expected to be flat?

Yes, so I have three segments in Financial Services.

There are insurance companies, there are banks and there are capital market players.

So as far as the insurance companies and the capital market players are concerned, for them it's mostly business as usual.

On the banks there are one or two clients who have a little bit of a challenge because of the credit impact, but even then I'm not seeing a significant impact on their budgets or their spend, at least to the extent it affects us.

Okay, thank you.

Thank you.

(OPERATOR INSTRUCTIONS).

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You may continue.

Yes, if there is no questions, then we can wind up.

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I show no questions in queue.

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