Wipro Ltd (WIT) 2008 Q4 法說會逐字稿

Good morning, my name is Niva and I will be your conference operator today.

At this time I would like to welcome everyone to the Wipro fourth quarter earnings call for the period ending March 31, 2009.

Niva, there is some feedback.

Right.

It's from the Indian conference room.

Okay.

At this time I'll turn the call over to your speaker Mr.

Sridhar Ramasubbu.

Thank you.

Thanks, Niva.

Good morning, ladies and gentlemen, and good evening to the participants across the globe.

Rajendra, Lalit, Arvind join me from Bangalore in extending a very warm welcome to all the participants to Wipro's fourth quarter results and earnings call for the period ended March 31, 2009.

We have with us today Mr.

Azim Premji, Chairman; Suresh Senapaty, CFO; who will comment on the US GAAP results for the period ended March 31, 2009.

They are joined by joint CEOs of IT Business Suresh Vaswani, Girish Paranjpe and other senior members of the Wipro management team who will be happy to answer questions.

During the call we might make certain forward-looking statements within the meaning of the Private Securities Litigation Reform Act 1995.

These statements are based on management's current expectations and are associated with uncertainty and risks which could cause the actual results to differ materially from those expected.

These uncertainties and risk factors have been explained in detail in our filings with the Securities Exchange Commission in the US.

Wipro does not undertake any obligations to update forward-looking statements to reflect events or circumstances after the date of filing thereof.

The call is scheduled for an hour.

The presentation of the first quarter results will be followed by -- the fourth quarter results will be followed by a question and answer session.

The operator will walk you through the procedure for asking questions.

The entire earnings call proceedings are being archived and transcripts will be made available after the call at our website.

I am available on email and through mobile, as well, to take any questions and table it to the Wipro team in case you are unable to ask questions for any technical reasons.

Ladies and gentlemen, over to Mr.

Azim Premji, Chairman, Wipro.

Good evening and good morning to all of you depending on where you are located.

Thank you for joining our call.

Financial year '09 ending March 31, '09 saw the most severe economic meltdown the world has seen in this generation, unmatched both in its geographical spread as well as in its severity.

The crisis battered the financial sector and moved on to the real sector of the economy with total freeze in credit markets, significant downturn in profit -- corporate profitability, loss of confidence in business prospects and tapering off consumer spending.

This resulted in the world economy and trade almost coming to a standstill.

Coordinated central government action and fiscal stimulus by key nations helped bring back some confidence in the last quarter.

But the emerging economic indicators lead one to believe that the world economy will take some time to recover from the aftermath of this crisis.

Our customers across geographies and industries have been affected.

They want cost take-outs, capital conservation and optimizing business processes.

This should lead to increased engagements with us in their transformation journey.

In spite of this, it has not been all gloom and doom.

In these turbulent times our results have been robust, resulting in Wipro Limited posting 29% growth in revenue.

We've had good deal wins and generated a robust pipeline.

IT Services business delivered a strong year on year-on-year revenue growth of 18.5%, adding $676m to the top line, highest in the industry.

PBIT grew 23% year on year, a considerable achievement in these tough times.

In crises like this come opportunities to refuel and re-pipe -- revitalize for the next phase of growth.

We have taken a close assessment of customer requirements and have focused on operational excellence and delivering more than promised to customers.

Successful organizations use these challenging times to gear themselves for the future.

And this year has been one of internal focus for Wipro as the external world became unpredictable.

Beginning early in the year we identified and made changes in three key focus areas.

We reconfigured our sales engine to better align it to developments in business environment.

And we continued to strengthen the sales engine with focus on deal conversion and demand generation.

Second, customers are looking for partners with consultants -- consultative approach, with competencies in program management, transition management and systems integration.

We have created the Global Programs Team beginning of last year with these capabilities, and we saw some excellent deal wins in the current year.

We are confident that our capabilities here will be unique and differentiative and help convert our large deal pipeline to wins.

Thirdly, we've streamlined our operations.

FY'09 has been a year of operational excellence.

We had solid operational performance with increased focus on productivity and realignment of cost structures in our global delivery model.

We moved the lever on fixed price projects, productivity, utilization and offshore mix significantly over the past one year.

This has given us the operational flexibility to offer multiple models to give better price to the customer and least impact on realization for Wipro.

This also sets us for a robust performance going forward.

The lack of overdependence on either a customer or a vertical or a service line or a geo has also come as a great advantage to Wipro.

This further reinforces our view that business portfolio should deliver in both in good and bad times and not just in one environment.

Overall, while the demand generation looks good, conversion to wins remains challenging.

And we will continue to invest in our front end and regain customer proximity.

As part of the global delivery model we have also been investing in near-shore centers including the US and UK and we have plans of scaling them substantially.

There is a strong push to hire and deploy locally when competitive local talent is available.

We will globalize the spread and localize the talent.

We've expanded our service portfolio to tackle situational concerns.

The slowdown into a one-source introspect and [trust] several service lines such as Consulting, Technology Infrastructure Services, Package Implementation, Testing Services, Business Process Outsourcing and Product Engineering Services, which have been our key engines for growth and now accounting for 55% of our revenue.

We will be investing and strengthening current offerings, and also incubating new verticals, penetrating new markets, focusing on new technologies which will give us a sustainable competitive advantage.

Our engagement level at CXO level has increased significantly, giving new insight to their business problems and how we can be a partner in their transformational journey.

Simultaneously, we are bringing a much -- building a much stronger brand with them.

Our other business units have not been immune to the challenges posted by -- posed by the crisis, but they have shown increasing resilience.

Our early focus and investments in emerging economies, which have been relatively less impacted through organic and inorganic measures, have held us in good stead.

Santoor brand continues its journey of increasing market share.

And in January/February '09 became the biggest brand in rural South India as measured by AC Nielsen.

Unza continues to grow ahead of the market growth rates for South East Asian markets.

Our financial stability coupled with the highest order of corporate governance and commitment to ethics and transparency, gives us tremendous confidence in our ability to ride out this wave of uncertainty and emerge much stronger than before.

In line with our commitment to the idea of a triple bottom line, focusing on three parameters of people, planet and profits as a means of sustainable profitability, we adopted GRI, the Global Reporting Initiatives Framework for reporting on three aspects, ecological, social and economic performance for the year -- from the year 2008.

Our first sustainability report was released recently after a detailed internal exercise of over nine months.

We see this initiative as part of a continuous process of organizational development that reinforces sustainability in every aspect of our operations.

And which commits us to a five year timeline for becoming carbon neutral by the end of 2013.

We, as an organization, are aware of our responsibilities to the environment and are on our way to becoming an ecological surplus organization.

We are entering uncharted territory in the global economy and the IT sector.

While the environment is challenging, the value proposition of outsourcing in general and offshoring in particular, has only strengthened.

Our anchor on such times is rooted in providing strong business value to customers.

We are confident that we are making the right investments for a bright future.

I will now request Suresh Senapaty, our CFO, to share the financial highlights of the quarter, following which the management team will be happy to take questions.

Good morning to all of you in the United States, and good evening to those of you in Asia.

Prior to taking you through some of our performance highlights for the quarter, let me draw attention to the fact that for the convenience of readers our US-GAAP financial statements have been translated into dollars at the noon buying rates in New York City on March 31, 2009, for cable transfers in Indian rupees, as certified by the Federal Reserve Bank of New York, which was $1 equal to INR50.87.

Accordingly, revenues for our IT Service segment that was $1,046m or in rupee terms INR49.28b appears in our earnings release as $969m based on the convenience translation.

Let me take you through some of our performance highlights for the quarter.

Our IT Services revenue, based on constant currency of quarter ending December 31, 2008 was $1,058m ahead of our guidance of $1,045m.

On a reported basis our IT Services revenue was $1,046m.

We had strong growth in challenging times in the manufacturing and healthcare verticals, with constant currency sequential growth of 2%.

Retail and transportation continued to have strong deal traction and exhibited YOY growth in constant currency of 33%.

Our differentiated service line of Package Implementation and Testing Services showed strong growth in the quarter with YOY growth of 19% and 15% respectively.

We have always identified opportunities in emerging markets and aggressively invested in them.

Our India and Middle East business grew strongly in the quarter with 31% year-on-year growth on constant currency basis.

Our other emerging markets also showed a robust growth of 33.5% on constant currency terms, and we will continue to invest in newer geographies.

Our customer relationships continue to be strong.

Our accounts with revenue greater than $20m increased from 52 in quarter ending December 31, 2008 to 53 in the quarter ending March 2009.

Our accounts with greater than $50m have increased to 17, up from 16 the previous quarter.

We have two accounts with revenues greater than $100m for the year ending March 31, 2009.

This was a quarter of strong operational performance.

Our mix of revenues from fixed price projects increased further by 210 basis points sequentially to 38.1%.

Over the last four quarters we have moved the lever on fixed price projects by 8.9%.

The productivity benefit from fixed price projects reflects in the movement of our rate realization.

Our onsite rates have moved up 2.6% on a year-on-year basis, while the offshore rates have moved up 3.1% on a year-on-year basis.

We have been able to mitigate the impact of pricing pressure substantially in the current quarter, sequentially our onsite rates moved up by 0.9% while offshore rates declined marginally by 0.1%.

The offshore mix moved up 195 basis points sequentially in the quarter.

(Technical difficulty) the strong operational performance has resulted in a good performance on margins in the current quarter.

We have sequentially improved margins by 80 basis points, and adjusted for one time PDD, provision doubtful debt impact in last quarter, the margins have moved up by 20 basis points, despite the pressures caused by steep volume drops.

Our IT Products business showed year-on-year growth of 27% in the current quarter, despite the reduction of capital expenditures and investments by Indian corporates.

Wipro Consumer Care and Lighting business continued to see good momentum with improved margins sequentially by 160 basis points and our PBIT growth sequentially is 12%.

On foreign exchange front our realized rate for the quarter was INR47.11 versus a rate of INR46.03 realized for the quarter ended December 31.

On a quarter-on-quarter basis ForEx gave a positive impact to the -- to margins by 40 basis points net of cross currency.

As at period end, after assigning the assets on the balance sheet, we had about $1.3b of ForEx contracts, $1.9b on a gross basis at a rate between INR39.50 to INR50.51.

As of March 31, 2009 our DSO was 60 days as against 67 days in the same period previous year.

And our net cash balance on the balance sheet was INR13b.

We generated a free cash flow of INR20.6b during the year, a year-on-year increase of 98%.

From June '09 we will migrate into IFRS reporting.

IFRS reporting is closely aligned to India GAAP except for accelerated expensing of stock compensation.

For the benefits of investors and analysts we will provide US GAAP numbers also for sequential and YOY comparisons for a quarter.

We will be glad to take questions from here.

Niva, we go for Q&A.

Very well.

(Operator instructions).

And our first question is from Mark Marostica of Piper Jaffray.

Please go ahead.

Thank you.

It's actually Mark Zgutowicz for Marostica.

I was hoping you could remind us again what your visibility typically has been on a quarter-over-quarter basis as well as over next 12 months.

And then comment on what it looks like today.

Hi, this is Girish.

We don't give guidance on a full year basis, so I can only give you quantitative comments but I can't give any numbers.

Our current visibility is really based on the pipeline that we see, the type of conversations we are having with clients and the number of clients with this we are having to our facilities in India and abroad.

So, based on what we are seeing today the sense that we have is that while some sectors continue to have -- be impacted, in many of the -- those sectors like Tech and Financial Services, in many of the other sectors there has -- there is a degree of kind of business as usual which is kind of getting back, and we see that in the deal pipeline, the conversations that we have with clients and the client visits.

So based on that our sense is that we should see some kind of normalization taking place post summer, and this is based on the assumption that there will be no external kind of impact or any of that issue that may crop up.

And even in Tech and in Financial Services our view is that, while we cannot say that all the pain has gone we are seeing that a lot of the pain is behind us.

And hopefully over the next, maybe one quarter, maximum two quarters, we should see most of it kind of going away.

Okay.

I guess what I was trying to get a sense of is sort of how, if any, the backlog has been building over the last couple quarters or shrinking for that matter.

So I am just trying to get a sense if you look at your overall business pipeline over the next 12 months, how does -- how much visibility do you have on that, if you can quantify it just in percentage terms.

And then also if you could -- I think you had mentioned on a -- the Indian call some stabilization on the Consulting side.

Just curious how you look at sales cycles and looking at the widening, I guess, that we've seen on sale cycles and sort of compare that to the stability you are seeing on sales -- on the Consulting side, which is sort of a better indicator of future stability?

This is Suresh Vaswani here.

I'll comment on the first part of your question in terms of what the visibility is and what is our sense in terms of next year versus the previous year.

So, clearly going into this year we are going in with a fairly robust healthy pipeline, and certainly a pipeline which is more than what we entered into in the previous year, so that's the first point.

The second point is that it's not very sectorially focused.

So we have a healthy pipeline across all our SBUs, so whether it is Telecom, whether it is TMT, whether it is [vehicle] side, whether it is energy and utilities, we are seeing a fairly healthy pipeline across all our SBUs.

[Trend] is -- and these discussions are serious to the pipeline, is the discussions that we are having with customers are fairly intensive.

And like Girish said, there is much more customer activity that is happening now in context of deals, in context of transformation deals that were happening versus three or four months back.

The only issue is how many of these will we close, so that's a variable.

And how fast each segment or each customer in each segment will close is what will determine the relative performance of each SBU.

So all in all getting into this year from tough times last year where there were severe economic challenges and where we've had challenges in terms of our Q3 performance and Q4 performance, but we are going -- getting into this year with fairly strong, I would say, cautious optimism.

So when I mention -- so I was talking about, all the comments that I made was related to the funnel that we currently have.

Okay.

And then in terms of sales cycles are you continuing to see those widen or shorten or what?

Can you give some color on that?

Well, I am just -- again history can be an indicator because we did finalize a fairly strong system integration and transformation type of deals last year.

And typically it's a cycle -- I mean if there is a $100m deal the customer certainly gets into a lot more depth, gets into visiting India and so on and so forth.

So those type of deals the cycle is anywhere between six to nine months.

But broadly speaking there is the -- we are not seeing any major lengthening or shortening of cycles it is more or less on the historical pattern of sales cycle.

On Consulting side you had a question saying that what is it that we are seeing, and I think me and one of my colleagues had mentioned earlier that as compared to last year, and maybe even January of this year, we are seeing more traction on Consulting in the last one or two months, which is -- which are typically lead indicators of how the business is going.

Okay, great.

Just one quick final one, headcount can you just talk about how you are managing headcount and maybe just some color on net hires this year or in fiscal '10?

The quarter just past we had net additions of about 700 people across our businesses.

And -- but our endeavor is really to continue to [ratchet up] our utilization levels and not allow that to fall.

And as kind of demand picks up we will be able to bring in folks -- people from the market or we have a pipeline of (inaudible) grads who are waiting to join us.

And we have a plan to take them in on a [sales] basis starting from May, so that as and when demand picks up we have ability to start the projects and make them deliver.

Okay, great.

Thanks very much.

Thank you, and the next question comes from Joseph Foresi of Janney Montgomery.

Hi, gentlemen.

I wonder if you could just expand a little bit on what you said about Consulting sort of showing signs of up ticking.

What particular type of Consulting are you doing, and what -- is there an area where you are seeing some improvement?

First, I must say that we are compared with global peers our Consulting practice is relatively small.

And it is not only by their size but even the deals we closed -- overall business is a relatively small one.

But we are focusing on some of our big clients and this is why it is of interest to us, because if we start the engagement with clients or discussion about projects it is a good indicator that things maybe can be a little bit turning around.

And I think that's really the comment that we made that as compared to last quarter, or even the beginning of this quarter, the kind of discussion that we are having with some of our big clients where the Consulting teams are focused, are starting to be constructive and about [real] engagements.

But just building on that and giving a perspective of the sort of deal inflow that we've had this year, many, many of the deals that we've finalized this year have been "system integration type" or business transformational type.

So the Origin Energy customer in Australia where we are doing a full-fledged architecting and implementation of SAP ISU, which is both the front end in terms of [retail] transformation as well as the back office.

Likewise Morrisons is an opportunity we finalized in UK where we are doing a full-fledged Oracle retail and Oracle back office implementation.

So it's truly end to end and truly transformation.

So the deal inflow that we've had this year, including one very large deal that we finalized in India from ESIC, is much more end to end, much more transformational, a lot of system integration, and really getting in all the capability that we have across all our service lines to driving strong transformation for our customers.

Okay.

And just kind of moving onto the pricing, pricing seems to have held in a little bit better for you guys than some of your competitors.

What do you attribute that to, is that the movement to more fixed price?

Are you seeing a change in the velocity of the renegotiation of deals or the pricing on those deals?

And what does pricing look like on new deals?

So again let me reflect on the last [chance] some of the approaches that we took.

Clearly we drove a lot more fixed priced projects in our business mix last year.

So the fixed price projects mix has gone up by as much as 650 basis points on a year on year comparison.

Second is if you get fixed price projects together you have a lot of flexibility in terms of delivery model, tools usage, and if you execute well you are really able to ratchet up margins or ratchet up price realization which is what we've been able to do for most of last year.

Our onsite pricing -- or price realization has improved by 3%, and offshore price realization has improved by 3% and clearly the fixed price projects and the drive we've had on productivity has helped that.

Now going forward we are pretty much going to do the same, because at the end of the day the idea is to give the customer a win in terms of cost transformation, and to also give ourselves a win in terms of making sure that we use the right levers and the right delivery model and the right execution for closing out on projects or for implementing projects.

Having said that, from a [next year] perspective, while we've been able to do a 3% price realization uptake -- uptick in tough and challenging times, looking at next year there is a lot of price discussions taking place with customers.

And -- but we do believe that the range at which our price realization could move on account of pricing pressure, would be between zero to 5%.

And we have -- and we still have all the levers and the wherewithal so to speak, so that we at least sustain our margins at the current levels.

Okay.

And then just one last question.

It sounded like you were expecting Financial Services to maybe start bottoming, and it sounds also like your commentary about your deal pipeline is relatively positive going forward.

I wonder if you could just comment on where you think we are in the cycle.

Are we getting closer to a bottom base line number here?

Or are you expecting it to take some time, maybe even a full 12 months before we start to see recovery?

Hi, Girish here.

This is again based on early conversations.

The sense is that in the Financial Services while some of the difficulties are still to be resolved especially the stress test with some of the big banks there is also the fall out on consumer lending.

At least in some parts of the sector we should start seeing stability come back by end of summer.

Okay, thank you.

Our next question comes from Ashish Thadani from Gilford Securities.

Please go ahead.

(Technical difficulty) indeed at 21%.

Excuse me, Mr.

Thadani, we (multiple speakers) the first part (multiple speakers.

Can you repeat, Ashish (multiple speakers).

Yes.

My question is on operating margin in the IT Services business, which has been very consistent at the 20% to 21% range over the last six quarters.

Are you deliberately managing it to this target or can it be expected to vary a little bit more in the future?

Well, clearly our focus is [soft] like we said, our objective is to invest in the long term and make sure that short term manage -- make sure that the short term profitability is ensured.

So from that point of view we are continuously investing into growth, and whatever cash flow that gets generated is going to be invested.

And it is not [as if] we want to cap our operating margin at this level.

You've seen that we haven't been the beneficiary of the foreign exchange gain much in '08/'09.

On a total basis we would have just got a benefit of only 20 basis points with the cross-currency impact [hopefully].

And perhaps we will also not get too much of a benefit as far as '09/'10 is concerned.

But there are a lot of tightening that has happened in terms of the utilization and the use of the outsourcers, of contractors costs, a lot of G&A efficiency has been brought in out of investments that we made.

So from that point of view it is an overall strategy how we are able to invest and generate [some ultimately] to be able to make sure that as we go along it's -- but it is not as if one is capping the operating margin at that level.

Great, that's very helpful.

And I also wanted to just switch subject for a second, could you quantify the business with Delta that might have been lost?

The point is that are there -- were there any factors in this client's decision that could apply to other clients as well?

Okay, this is Suresh Vaswani here.

I don't think Delta impacts any of our other customers.

And just in terms of a perspective on Delta over the last year the customer has been ramping down on the "call center" type of business and ramping up with us on the back office type of business.

So, while something has been ramping down the back office has been ramping up, and that really is our big first area in terms of transaction processing.

There have been some reports in terms of customer satisfaction, etc., and those are misplaced.

We have consistently been at the high end in terms of CSAT ratings from Delta.

In fact most of the months we've been voted as best city of the month, and that has been -- and they have multiple delivery centers and our locations in Bombay and Pune are some of those.

And we've consistently come out as best city of the month.

In fact, last year we've come out as the best city of the year as well.

So you -- that is the perspective of Delta.

While something is ramping down in terms of one type of business, something is ramping up in terms of the transaction processing business.

Ashish, bottom line here is they continue to be a customer with similar kind of revenue except the revenue profile has changed, and continue to be satisfied customers.

That's very helpful too.

And final question could you comment a little bit on the profitability outlook in the other segment that is the Infrastructure and Engineering business, it appears that the fourth quarter loss was about $8m.

What can we expect going forward, and when might a turnaround be in the offing?

I think on the IT Services we saw some expansion on the IT product side, we had a marginal decline on the -- the inaudible) Care side we had an expansion.

And in the [BPO] Infrastructure Engineering, because there is a strong piece of the business which gets linked to infrastructure both in India as well as in Europe, and you saw what has happened it has got significantly impacted.

I think we did very well so far as quarter one of '08/'09 is concerned.

We did the same as far as quarter two is concerned but quarter three has been drastically impacted and so has quarter four.

And going forward we will see some of that impacting first half of the current year.

We are only seeing so far in India - there are two pieces, the India piece and the Europe piece - the India piece we are seeing some amount of revival.

I hope it is sustainable as [just] we are seeing the April month better than the March month kind of situation.

So we expect the quarter one to be superior to that of quarter four, so far as the Indian operations are concerned.

And however, so far as Europe is concerned I think it is another two quarters away.

Thank you very much.

Good luck.

Thanks.

Our next question comes from Julio Quinteros of Goldman Sachs.

Please go ahead.

Hi, great.

This is actually Vincent sitting in for Julio.

My first question is on the sequential volume decline that you saw during this quarter.

Maybe you can just provide some more color on that.

And specifically utilization looks like it trended down pretty materially on a sequential basis.

So just wondering when we should expect to see the utilization rate picking up again over the next few quarters.

Hi, Girish here.

So the volume decline was really led by sectors which have been fairly strongly affected by the slowdown.

So High Tech and Financial Services (inaudible) led that, and it was primarily that when January came there came a [research] point for many projects, and the clients chose not to renew the project or put it on hold or put it back for the second period that project.

So as a result of which we had a kind of sequential volume decline.

And some of it happened immediately and some of it is planned to be done over the next one or two quarters.

So we would see further impact of that continuing in the next one or two quarters.

But having said that broadly speaking it seems like much of the kind of ramp downs have already been factored in.

And unless the environment weakens further there is reason to believe that at least the decline will be arrested.

And in other sectors where the volume growth is still pretty good we'll start to see the benefit of that coming through in our overall results.

Got it, that's helpful.

And then in terms of the [effort] mix it looks like offshore mix had been stable over the last three quarters, but actually increased prematurely to 72% this quarter, just wondering if you can provide some color in terms of your expectations for effort mix going forward.

Should we expect to see the -- more mix coming from the offshore side and how does that impact your margin profile going forward?

So there has been a strong drive from our side to move work to offshore because it provides tremendous value to the clients and is margin accretive to us.

And it has -- we have been successful wherever we have been either able to persuade the clients to see the value or where he has signed a multiyear fixed price contract that gives us the flexibility to move the work offshore on a program basis.

So we think what we achieved this year is beginning and there is more to come in the current year as well.

May I request my colleague Manish Dugar who is Head of our Finance for the IT business to talk about it?

Yes, so one of the things that we have consciously tried to do is whenever the clients have come back with requirements on looking at lower prices, our discussion has always been to motivate them to look at lower costs.

And that has happened primarily through taking different steps, one of them being trying to move more to an outcome base or fixed rate projects or to look at more and more offshoring.

And as you would have seen in the numbers reported on the realization this has -- one, offshore mix increase has been one of the significant drivers for us to be able to do a win-win situation where the customer has had lower cost while we have not only retained but improved our -- retained our prices but improved our profitability.

Got it.

And just last one for me in terms of your -- in terms of the campus offers can you make some comment on how many offers you already made for campus next year.

And then what are you expectations in terms of the expected ramp up in terms of the campus freshers coming on board over the next few quarters.

Hi, this is Pratik here.

So we made offers for graduates who were passing out in year 2008 and we were intending to take them on board before the last fiscal got over, which was not the case, so we had some spillover from the offers which we had made last year.

So just in terms of order of priority, our first priority would be to ensure that they come on board.

So specific dates have already been communicated to those students, and they will be roughly numbering around about 6,000 plus, which would from month of May starting over the next about five, six months they would come in.

In addition to that the graduates who are going to be passing out during the course of this year, we had made close to about 7,000 offers.

And once we are through absorbing all the graduates of previous year, we will begin to take them on board.

We are hoping that we would be absorbing as many during the course of this financial year as well.

But if we are not able to, there could be a possible spillover to the subsequent year as well.

And beyond that we are not looking at making any fresh campus offers currently.

You may have picked up the news item that as an industry body we've all agreed, in all the participating companies, that we would be visiting campuses for hiring only in the last semester which is essentially Jan, Feb, March quarter.

So we are still some distance away.

As we get closer to the date, we will get a more clear view in terms of the numbers we want to commit on campus.

And this one is I am talking about graduates who will be passing out in year 2010.

Got it.

That's helpful.

Thanks.

Thank you.

Our next question comes from George Stifel -- George Price's line of Stifel Nicolaus.

Hi.

Thanks.

George Price from Stifel Nicolaus.

I guess a couple of questions.

First, you've touched on this in your comments, and a couple of questions, but I guess I'm still not clear on something.

I'm surprised by your cautiously optimistic tone and outlook.

It stands in contrast, I guess, to what I've heard from recent reports, if you think about the tone and comments from Accenture and Infosys and TCS and even IBM recently.

And I know you mentioned strong pipeline.

A lot of people are saying that, but the conversion rates are slow and decision making is slow.

And I know you're talking about good conversations with clients, but it is just still not clear to me why you're expressing more confidence that things are likely to turn over the next one to two quarters.

Can you discuss that further?

This is Suresh Vaswani here.

So our cautiously optimistic sort of outlook is really based on what we see and the pipeline, what we are talking to customers.

And mind you, there's a couple of things that we've done last year which places us in the situation that we are in today.

We've been working very close with customers.

We've been working with them in terms of, you could say, generating demand which is quite different from, let's say, two or three years back when it was all about managing demand.

So the discussions that we've had are intensive.

The pipeline is real.

But I would still say that we're cautiously optimistic is in line with what you said.

It's very, very difficult to predict when would the opportunities close.

How fast they would close.

And, that builds in the cautiousness insofar as the optimism is concerned.

Hi.

Girish here.

I just want to add one of the things which is a little different for us as compared to many of our peers is that we have a better balance of business by industry verticals.

We are less dependent on one or two industry verticals for the bulk of our business.

We are more well balanced terms of geographic spread.

So we have significant chunk of business which comes from India and the Middle East which is still fairly robust.

And we are well spread by service lines because there are certain parts of our service lines, especially on business process outsourcing and infrastructure management, which are less affected by slowdowns there because they are annuity types of businesses.

So I think that may be the reason why you are seeing a little bit of difference in our kind of posture with what you've heard from others.

Okay.

Fair enough.

What was the acquired revenue contribution in US dollars in the fourth quarter?

And what are your expectations for the fiscal first quarter '10, June quarter?

George, the revenues -- the organic revenue on a sequential basis was minus 6.7% as against the minus 4.9% which was on a overall reported basis.

And similarly that number, organic revenue growth on a constant currency basis year-on-year was 6.8% versus 8.7% including acquisitions.

Okay.

And I guess last question is can you talk at all about how you think your tax rate is going to behave in fiscal '10 and in fiscal '11 given the growth outlook that you see and transition of new work into SEZs, assuming the STPI goes away next March.

Thanks.

Sure.

George, as far as our growth is concerned, we continue to have most of our growth going to the SEZ.

And the next year effective tax rate would be approximately 150 -- 100 to 200 basis points higher than what you have seen in the current year, where in US GAAP you would have -- we have had a very good ETR which is less than 14%.

Regarding FY '11 I think it is slightly too far away.

It would depend on the growth that we have in that financial year.

And we will be able to give a better sense on it maybe two, three quarters down the line.

But because we have been fairly ahead on the SEZ point of view, our [endeavor] would to be as close the number that we are going to see for the current year.

Okay.

But you still see the tax rate this coming year, fiscal '10 up 100 bps, 200 bps due to, what is that, STPIs rolling off?

Yes.

That's right.

Okay.

All right.

Thank you.

Our next question is from Ed Caso of Wachovia.

Please go ahead.

Hi.

Good morning.

This is Chris Whitman for Ed Caso.

Can you comment on --

Ed, this is Rajendra here.

Could you speak up please?

Yes.

This is Chris Whitman for Ed Caso.

Is that better?

Yes, it's slightly better.

Can you comment on the cost controls underway specifically on the SG&A because that looks like it's down sequentially both in dollar and rupee terms?

Can you just repeat the question please?

Yes.

Can you comment on some of the cost control measures that you're taking at the corporate level?

Cost control measures on G&A, that's what he's asking.

Yes.

Hi.

This is Manish here.

We have two kinds of primary activities when we look at cost.

One is what is being led by the businesses in terms of utilization, COGS reduction.

And the second one is what is led at the corporate level which is SG&A.

And I would like to split the whole thing into two parts keeping our future perspective and keeping our growth expectations in mind.

We are investing in S&M.

However what we have done is we have looked at significantly retooling our G&A structures which helps us reduce our overall SG&A in spite of having invested in the S&MPs.

And let me now touch upon some of things that we are doing on the G&A side which would typically revolve around re-looking at the way we have structured our internal processes.

And, for example, we have made significant investment now in automation which has helped reduce the overall support structure.

And that significantly reduces our cost while bringing in efficiency in the process.

And not just reducing the cost, it also helps us in significantly supporting the business in improving the operating matrices.

So in effect, while there are these small value items around travel costs, there are things around reducing the electricity costs which again is significantly driven by our green initiatives, but I think the more important thing is that while investing in sales and marketing, we have been able to reduce our overall G&A and have, in spite of that, been able to support our business in delivering the operating margin improvements that we have seen on the COGS line item.

Okay.

And also were there any additional reserves taken from Nortel in the quarter?

No.

We have stuck on to the $7.5m that we have provided in the last quarter.

Okay.

Thank you.

Your next question comes from Moshe Katri of Cowen and Company.

Please go ahead.

Thanks.

Your commentary and the guidance in terms of what you're seeing in the pipeline sounds a bit more optimistic and positive than some of your peers.

What do you attribute it to?

Is it lack of any specific customer exposure, lack of -- I mean the fact that you're a bit more diversified, the fact that you don't have a lot of exposure to capital markets.

Are you executing better?

It will be really helpful if you can kind of address that.

Thanks.

I'm tempted to say all of that, but let me just build on what you said.

It -- this is Suresh Vaswani here.

It certainly has got to do with the fact that we have worked very, very closely with customers all of last year.

Manish did speak about the fact that we have not scaled down or we have not cut down on S&M investments.

In fact we have been making those investments.

We have built up a fairly strong client engagement management structure on strategic accounts.

We've built up a fairly strong hunting force also, hunting sales force.

And therefore a lot of new opportunities have been created.

So that's one perspective.

The second perspective is really what Girish said, that we have a fairly wide portfolio of services right from -- we're strong in BPO, we're strong on IT infrastructure.

We've acquired Infocrossing that fits into our IT infrastructure story pretty strongly.

We're strong in package implementation.

We're strong in product engineering services.

So we have a fairly enviable list of services portfolio and fairly strong SBUs which basically cuts across virtually all the solid growth, or high growth industry segments and substantial industry segments.

Then of course, the spread of geography.

We have -- if you look at our revenue mix, and this I'm taking at an integrated IT level, 50% of our business is US, 30% is Europe, but 20% is the emerging market of India, Middle East and other emerging markets, so Australia and Asia Pac.

And those markets have been growing extremely well.

Our India and Middle East business has grown 28.5% on a dollar basis.

But on a real rupee basis, which is the currency in which we deal in in India and the Middle East, in India particularly the growth has been as much as 48%.

Asia Pac the growth has been 44%.

So I think it's a combination of all these factors, right, which is contributing to our outlook which, as we keep going through the day we keep hearing is more optimistic that our peers.

We've done a lot, we have a lot.

And we're fortunately placed in terms of the some of the strategic investments that we've made, including geography investments, which are resulting in our outlook, the way we've described it.

So should we conclude that most of your customers have finalized their budgets for this year and that's why you have that visibility?

So let me give you some perspective on budgets.

Again the picture is not consistent right through.

Some customers have actually enhanced their budgets.

Some customers are flat insofar as budgets are concerned.

And some customers have pruned down their budgets to maybe between 5% and 15% negative.

But the big thing really is to get more for less.

So I think customers have gone past the shock of the economic slowdown into now taking action for their future.

And really that is what the picture is.

Okay.

And then finally, just to confirm, we should expect some sort of a pick up during the second half of calendar '09, is that what you were saying earlier in the call?

Well, we speak about the immediate quarter in terms of guidance.

And the immediate quarter is a reflection of, I would say, what has happened in the last two quarters.

So that is the comment on that.

But to sort of be more explicit, we certainly believe in the cautious optimism.

We have a fairly strong, robust pipeline.

And therefore we are positive about our outlook in the coming quarters.

Thank you.

Very helpful.

Our next question is from George Price of Stifel Nicolaus.

Hi.

I just figured I'd circle back around for a couple of other questions.

First, I was wondering if you could talk about what happened in ADM versus package implementation.

It looks like the former was down as a percentage of revenue quarter-over-quarter, the latter actually up.

What do you attribute that to?

It has something to do with which sectors are more dominant in one than the other.

If you think about it, ADM is pretty dominant in the financial services.

So a lot of ramp down in financial services directly impacted ADM.

On the other hand we have seen significant growth in the manufacturing, packaged consumer goods.

And those are very package-driven, or kind of standard package-driven industries.

So the uptick that we've seen there has kind of led to the uptick in the package implementation.

Okay, okay.

And you mentioned also expansion in hiring plans onshore, particularly the US and the UK.

Is -- I guess a couple of questions related to that.

Is this a kind of a reaction to what's happening in the political climate in the US?

Are you seeing any impact to your business from that one way or another?

And is -- that's kind of the first question.

The second question would be what impact do you see this shift having to your profitability, your operating margins over time.

Thank you.

So hi.

Girish here again.

So what we're talking about hiring is primarily in two, three different areas.

One is things like consulting where by design we have to hire in the respective countries because that's where it is easier to actually deliver the business.

Secondly, we are consciously trying to localize, which is why we're trying to hire locally to be able to increase the local content in many of the countries we operate in.

And that is really driving our local hiring plans.

And then from a -- just from a profitability standpoint, how does this -- if this trend continues over the next couple of years, what kind of impact to operating margin do you see this having?

Yes.

So I think you should know that when we have people that are sent from India or hired locally they are all paid comparable wages.

So hiring locally doesn't necessarily do anything to our margins.

It is just the ease of hiring talent that is different.

And given the fact that we already have a lot of locally hired people now, done multiple acquisitions, we have a better brand awareness.

And it gives us the confidence to do local hiring for the sort of talent that we really need.

Okay.

Fair enough.

Thanks very much.

Our next question comes from Joseph Foresi of Janney Montgomery.

Please go ahead.

Two quick follow ups.

First, I wonder if you can give us some idea of what the impact of the recent acquisition was on this quarter numbers and maybe what you're expecting over the next two quarters.

You mean the acquisition that we did in the month of January -- this January?

Yes, the most recent one.

Right.

We've not had a -- it sustained its revenue numbers.

It sustained its margins.

We had an intangible effect of about $1m for the quarter.

And going forward we would see, as quarter follows, a little bit of expansion in those numbers.

Any specific numbers you could wrap around that from a revenue perspective?

No.

I mean it's embedded into the quarter one guidance that we've given.

And we will keep talking about it for every quarter as we come closer.

But the outlook is good there.

Yes, okay.

Okay.

And then --

You had a second question, Joe?

Yes.

Just one last one.

I think we've been talking a lot about what -- sort of your relative stance versus the rest of the competitors.

I wonder if you could just talk a little bit about the pipeline and the realization of that.

And maybe you could talk about how it compares to where we were last quarter and the same quarter last year.

This is Suresh Vaswani.

So I've sort of answered the question earlier, but certainly the pipeline looks good, the funnel looks good.

And it looks better than what it was last year, entering into last year.

So that is the first point.

The second point is it's not necessarily very sectoral because the pipeline, the way we see it, looks pretty much robust across all the sectors, or across all the SBUs that we have in our structure.

On the deal signings, are the size of the deals smaller, bigger?

Is there a specific area where the deals are better?

I'd have to sort of reflect on the sort of deals that we've been winning last year.

We won a large number of deals.

Some deals are in the range of $300m plus.

We recently won a deal in India which is $300m plus.

We won deals in the US on the Infocrossing side which are $100m plus.

So I would say that a lot of our pipeline is between the range of $100m odd to $500m type of deals.

And that some of those deals are in the pipeline.

But, all in all, three points.

One pipeline looks good.

Good mix of more value added, more system integration type of deals.

Third is good mix of some deals which are IT, BPO type of integrated deals similar to what we did last year in terms of Origin.

And certainly a better pipeline entering this year than we were entering -- than we entered into last year.

Now I'll have my colleague Manish also comment on this.

Hi, Joe.

Manish here.

I think, just to add to what Suresh said, if we were to look at relative pipeline, like you asked, we certainly see the size of the pipeline bigger, our conversion ratios remaining similar.

And we see similar pipeline across geographies, so Asia Pacific, India, Middle East, US, Europe.

The second important thing is the kind of deals that we are getting into, transformational type with significant play in terms of delivery.

So that's another good news.

And I think the acceptance of the clients in the places that we're going, we certainly see that has gone up.

And that's kind of one of the reasons why we have more confidence in our ability to win the deals.

Thank you very much.

We have one final question that comes from Trip Chowdhry of Global Research.

Please go ahead.

Thank you.

I was wondering like something we are seeing different this year versus, say, the last year in terms of -- for the corporations for setting budgets.

I don't think any of the -- at least the financial sector, have really solidified their full year budgets, because what we're hearing is budgets are very much in flux and they're doing it on month to month basis.

Have you seen similar things, or probably there may be two segments where some customers are doing month to month budgets and other segment which are doing the whole year thing.

Any thoughts?

Thank you.

Yes, hi.

This is Girish here.

You are right.

With some clients within financial services there is still a lot of uncertainty and projects are being looked at on a month to month basis.

And some of the things are being reviewed even after they are kicked off.

So clearly there is some uncertainty there.

But on the other hand there is also a lot of annuity type of work that we do which is less affected by this flux that happens.

And our hypothesis is that if we see even some stability in financial services side in the next maybe few months, then the uptick that we have in other sectors will more than make up for the growth that we have planned overall.

Excellent.

Thank you.

Thanks very much.

Thanks for the participation.

We are available, the IR team is available offline for any further clarifications.

Thanks once again.

Niva, you can conclude the call.

Very well, thank you.

At this time this concludes your conference.

You may now disconnect.