Wipro Ltd (WIT) 2010 Q3 法說會逐字稿

Ladies and gentlemen, good morning, good evening and welcome to the Wipro Technologies earnings conference call.

This is Rochelle, the Chorus Call conference operator.

(Operator Instructions).

At this time I would like to turn the conference over to Mr.

Rajendra Shreemal.

Thank you and over to you Mr.

Shreemal.

Thank you Rochelle and thanks everyone for joining us today.

Good morning, good afternoon from Team Wipro to all the people joining in from different parts of the world.

As the operator just mentioned, my name is Rajendra Shreemal.

I head up the Investor Relations & Treasury at Wipro.

Along with Sridhar in the US and Rishad and Arvind in Bangalore, we handle the investor interface for Wipro.

We thank you for your interest in Wipro.

It is with great pleasure we welcome you to Wipro's conference call to post our results for the fiscal quarter ended December 31, 2009.

We will begin with a short address by Mr.

Azim Premji, Chairman, followed by the financial highlights from Suresh Senapaty, CFO of Wipro Limited, and follow it up with a Q&A session with the management team.

We have Girish Paranjpe and Suresh Senapaty -- Suresh Vaswani, the Joint CEOs and other senior leadership team members of Wipro.

Before Mr.

Premji starts his address let me draw your attention to the fact that during the call we might make certain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995.

These statements are based on the management's current expectations and are associated with uncertainty and risk 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 of US.

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

Ladies and gentlemen, Mr.

Azim Premji, Chairman, Wipro.

Good day to all of you all and a very happy New Year.

On a broad basis Wipro had another strong quarter with 5% year-on-year growth in revenue and a 20% -- 21% year-on-year growth in profits.

Overall macro environment continues to stabilize and that's also very positive.

Let me just focus on the IT business at the start.

We had a good quarter.

Our IT Services business grew in line with guidance at 5.8% on a reported basis and 4.9% on a constant currency basis.

Demand environment has improved and we have seen broad--based sequential growth across all, I repeat, all service lines, all verticals and all geographies.

Growth has been volume-led with an uptick in volume of 4.7%.

We achieved strong growth in healthcare.

We have seen strong growth in BFSI, energy and utilities, in communication, media and technology -- communication and media, and reasonably strong growth in telecoms for the first time after a long time in terms of sequential growth rates.

And we have seen strong growth in service lines like BPO and TIS.

Our expectations are of flat to marginally stronger IT budgets with greater share of offshore strength.

Our customers remain focused on cost reduction and we continue to drive more large-scale integrated projects where we play more of a partner than a vendor role.

Margins have been flat but we remain committed to driving operational efficiency across all businesses.

We continue to drive non-linearity with complete focus within the organization which has contributed more than 8% of our revenues.

And we expect a significant uptick in this going forward quarter-to-quarter.

We continue to globalize and localize our capabilities.

Of the people we hired overseas 63% were local and our local delivery centers continue to gain traction in Atlanta, in Chengdu etc.

We continue to invest in consulting and the sales organizations.

We have hired 31 partner-level people year-to-date and continue to make sales investments in emerging economies which is reflected in the sales growth we have seen in the first nine months of this year.

Let me speak a little bit about our Consumer Care & Lighting business.

Our India household business continues to outperform the market, with Santoor, our flagship brand growing almost twice as fast as the market.

In our international business, some of our smaller developing markets like Vietnam, Indonesia and China have seen phenomenal growth.

We have also consolidated our Yardley acquisition as of December 9.

We think the acquisition is very interesting and has very interesting future possibilities of brand extensions.

Our commercial business of switches, furniture and lighting have been challenged due to the downturn but are now beginning to recover.

Wipro infrastructure engineering has seen robust recovery in India with business reverting back to the best years, though Europe still is a major challenge.

But however we find Europe has bottomed out and we can now be hopeful of growth going forward, however, moderate growth.

We have grown our market share in the hydraulics business, both in India and overseas and we will continue to grow this market share because we have become much stronger as an organization.

With eco-energy we continued to make big strides in this start-up business.

The business model is that of consulting-led multi-technology solutions for renewable energy and energy efficiency.

We won the first contracts for consultancy and implementation of utility-scale solar voltaic plants.

Our confidence in our business model has increased significantly validated by the market.

The Wipro brand continued to set high benchmarks in the industry.

Wipro was ranked eighth in India's most valuable brand study carried out by the Brand Finance, a global brand valuation firm for the Economic Times.

I will now hand over the mike to Suresh Senapaty, our CFO, who will share the financial results with you.

Good afternoon ladies and gentlemen.

Our IT Services revenues for the quarter ending December 31, 2009 was $1,127m, a sequential growth of 5.8% and a year-on-year growth of 2.4%.

On a constant currency basis our IT Services revenue was $1,117m.

As we had suggested last quarter, we are seeing broad-based growth resulting in sequential growth rates in all our verticals, geos and service lines.

The momentum was driven by financial services, with 6.7% sequential growth.

Energy and utilities and healthcare and services both posted double digit sequential growth rate, and communication and media and services providers posted 8% sequential growth.

Even our most challenged verticals like telecom and technology posted positive sequential growth in the current quarter.

We are seeing significant traction in our IT infrastructure and BPO business reflected in our strong sequential growth of 9% and 7% respectively.

Our product engineering service line also posted strong sequential as development spends stabilized.

Europe continues to be an exciting market for us characterized by 5% sequential growth in the quarter.

Our investments in emerging markets continue to pay rich dividends.

Our India-Middle East business grew 16% sequentially while other emerging markets grew 20% sequentially.

We are seeing particularly strong traction in Australia.

We saw a strong volume pick up in the current quarter with 4.7% sequential growth.

We continue to drive productivity and non-linearity.

Our proportion of fixed price projects increased by [two basis points] to [42.5%].

Our realizations were impacted by lower working days and shutdowns in the current quarter.

Our offshore realizations dropped by 2.4% while onsite realizations dropped by 0.3%.

Our focus on operations helped us maintain margins in the current quarter despite headwinds of rupee appreciation, impact of progression and impact on realizations due to lower working days and shutdowns.

As of December 31, 2009, our days of sales outstanding for the IT Services business was at 60 days.

Our IT Products business showed year-on-year growth of 20% in revenue and operating profit growth of 54% (sic - see press release).

We improved margins sequentially by 0.8%.

Wipro Consumer Care & Lighting business continued to see good momentum with revenue growth of 14% year-on-year and operating profit growth of 21% on a year-on-year basis.

On the foreign exchange front our realized rate for the quarter was INR45.83 versus a rate of INR46.9 realized in the -- realized for the quarter ended September 30, 2009.

On a quarter-on-quarter basis ForEx gave a flat impact to margins including the benefit of cross currency.

As at period end, after assigning to the assets on the balance sheet we had about $1.3b of ForEx contracts.

$1.8b is on a gross basis at rates between INR40 and INR50.

Our net cash balance on the balance sheet was INR36b.

We generated a free cash flow of INR7.6b during the quarter.

For Wipro Limited under IFRS our revenues grew 6% year-on-year and profit after tax grew 19% for the quarter ended December 31, 2009.

We will be glad to take questions from here.

Rochelle?

Thank you very much sir.

Ladies and gentlemen, we will now begin the question and answer session.

(Operator Instructions).

Our first question is from the line of Vihang Naik of Motilal Oswal Securities Limited.

Please go ahead.

Good afternoon sir.

Good quarter.

I just wanted to understand your dip in realization in offshore by 2.4% is because of the lower billing days during this quarter, right?

That is correct.

Just curious, the lower billing days would be there on the onsite business also.

So why the utilization -- the realization is really flat there?

Did we have an uptick in our billing rate for onsite?

There also is a lesser number of working days onsite but we had got some benefit of the cross-currency advantage and therefore it was, the decline was muted.

Okay.

And secondly, you've added more than 4,000 people in this quarter.

I just wanted a break-up.

Are most of these employees really freshers and how many of them are laterals?

It is a combination of both laterals and campus.

Deb, you want to throw some more light?

So we added -- hi, this is Deb.

I am the Head of Delivery.

We added 3,000 people in from campus and the rest from laterals and contract.

Okay, good.

Also you also spoke about your salary revision in next quarter.

Could I -- could you please tell me this revision would be effective from what date and what will be the magnitude of the revision?

Hi, this is Pratik here.

We had shared in the last quarter that it would be during the course of this quarter.

The salary hike will be made effective from February 1 for all our employees both offshore as well as onsite.

Okay.

And what would be the offshore hike and onsite hike?

We haven't yet processed the number, Vihang, but it's largely going to be in line with what we have seen from the other players who have had salary hikes recently or they have announced.

It's going to be in line with what we see happening in the market.

Right.

And we have seen utilization increases across the board in this particular quarter.

Only in BPO we have seen a dip of almost 300 basis points.

Any particular reason for this and what has been the hiring in BPO in this quarter?

We hired approximately 3,000 people in BPO this quarter and there's no very specific reason for the drop in utilization.

It is the availability of again the number of days that are there because in some cases there is a shutdown and some cases it is not.

The 24/7 doesn't shut down but some of the other schemes will reduce.

Now what happens there is that the utilization drops rather than the rate dipping.

Okay, understood.

Thanks.

Thank you Mr.

Naik.

Our next question is from the line of Kunal Sangoi of Edelweiss.

Please go ahead.

Thanks for taking my question.

My question is with regards to the hiring only.

Could you help us with the gross hiring figure for the quarter?

Kunal, this is Rajendra here.

We normally give net additions.

We don't give the gross hiring numbers.

Sure, okay.

So basically in this quarter what we've seen is that over the last four quarters we've seen involuntary attrition continuously rising.

How is the management looking at that?

Certainly I understand that salary hikes effective next month is going to help that, but what are the other measures that the Company is looking to bring back the attrition to 10%, close to 10% levels?

Yes, did you say involuntary attrition initially?

Yes, sorry.

I meant voluntary attrition.

You meant voluntary attrition.

Yes, it was my error.

So I'll just correct that.

So voluntary yes, it's gone up.

But I think we need to understand Kunal that it's not something which we didn't anticipate.

We have had, as you remarked as well, we have had some very, very quiet quarters on the attrition front.

And we have seen there is movement as far as hiring is concerned.

All players big or small are beginning to hire and therefore some spike in hiring which we are seeing is a result of that, which is expected.

But since we actually, we end up comparing numbers or rather you all would like to compare numbers I thought I'll just clarify that our numbers are annualized numbers.

And if you look at our trailing 12-months attrition number, that's at 9.9%.

So that's pretty much there.

But our annualized number is at 13.4%.

So is it, as I answered is it something which we did not completely anticipate?

We did.

So what are we actually thinking of doing about it?

One of course, what we just now shared, we will be having the salary hike effective February.

Our normal promotion cycle which is done in two rounds, that's in April and October, that will also kick in.

And we think with that we should be able to keep things in check.

Alright.

My second question is with regards to the technology and telecom verticals.

Here we've seen, almost after five quarters, we've seen an increase in revenues on an absolute basis.

Do you think this uptick is for real or there is no pent-up?

Or how do you see the trends, if the management can offer comments on that vertical, please?

I think the answer is -- this is T.K.

Kurien.

The answer is we're cautiously optimistic as far as telecom is concerned.

We think we've seen the bottom of the -- this is probably the bottom as far as we are concerned.

We'll probably see a marked growth going forward.

That's primarily where we are today.

Okay, sure.

So that may still may not grow much faster or maybe at the pace that BFSI or others are growing, but you see that recovery is happening gradually right?

Put it this way, we're going to get growth back.

Sure.

Okay, thank you.

Thank you Mr.

Sangoi.

Our next question is from the line of Srivatsan Ramachandran of Spark Capital.

Please go ahead.

Hi, I just wanted to get your comments on product engineering services.

That's another vertical service line that's shown quite a good improvement on a quarter-on-quarter basis.

But the traditional end market verticals, be it technology or manufacturing has not seen growth.

Is that that you are seeing product engineering services in newer spaces, something like energy and utilities and healthcare, or what's driving that growth?

I think there's some parts of product engineering which have a good pick up especially in the semiconductor space, which tend to be a little more cyclical than others.

So a lot of that growth is coming from that.

But your point is valid that we are consciously diversifying our capabilities beyond the tech vertical.

So engineering today is doing work in automobile, aerospace, healthcare as well as in energy.

Okay.

And then in terms of the -- just to drill further on the product engineering bit, what is the situation especially in the telecom OEM and related markets?

Is there any signs of any improvement in demand environment at all or it's still too early to call for a demand environment improvement?

I think I answered that question.

The demand environment is driven by two factors primarily.

One is supplier rationalization.

And the second thing is that rather than going after pure engineering services, we have diversified our base in the customers.

So while we're going -- now we're going after far more IT work and BPO work and also we're going after managed services work.

To that extent what's happened is our -- the breadth of what we can offer is primarily playing to our advantage.

My next question is relating to margins.

I just wanted to get your -- suppose, assuming we can maintain the kind of growth rates what we've see in this quarter, 4.5%, 5% and this kind of growth rate, do you think that provides a decent buffer for us to maintain margins in a narrow band, after wage hikes and other things also?

So Srivatsan hi, this is Manish here.

I think in spite of what we are expecting from the pay packet revision perspective, I think we are quite confident that we will maintain margins in a narrow range.

Okay, sure.

Thanks a lot.

Thank you Mr.

Ramachandran.

Our next question is from the line of Nitin Padmanabhan of Centrum Broking.

Please go ahead.

Yes, hi.

Thank you for taking my questions.

This was with regard to overall growth across the board.

With regard to the nature of spends that are happening today, is there anything that you think that there is a pent-up and it could loosen up a bit or do you think this is something that could last the year round in terms of the trajectory?

This is Suresh Vaswani.

I think your observation is right that the growth is overall across all the verticals and across all the service lines.

Two is I don't think budgets are going to go up or have gone up drastically, but what customers are definitely doing is spending the budgets that they have.

Three is customers are looking for more transformation out of the budgets that they have and therefore that plays into some of the strengths that we have, be it services or be it our vertical strengths, or be it our BPO strengths.

So basically really that's it, spend the money that you have, the budget that you have, for programs that can drive transformation whether it is process or whether it is business transformation.

Another thing would be with regards to margins.

The non-linear initiative that we have I think we have done quite a bit on that front.

So I just wanted to get a sense when do you see this really kicking in and really getting into the pricing that we see?

The average realizations improve, when would we likely see that?

Nitin, hi, this is Manish Dugar here.

Non-linearity is something that we have been driving almost eight quarters now.

And if you were to compare realizations eight quarters back to today, there has been a significant uptick.

And it continues to be a focus area and we will see it delivering results going forward.

Some of the benefits that we are seeing also get reported in the form of increased contribution from fixed price projects and increased ability to absorb freshers and work at lower utilization -- lower bench levels.

But yes, realizations we are already seeing benefit and we expect it to continue.

Okay.

And just finally, one with regard to financial services and retail.

Financial services, is there anything with regard to what the number of deals that we have won this quarter, or what are the kind of -- or what percentage of that would be M&A kind of spend and is that sustainable?

And second thing would be retail.

I think we saw very good growth last year and after that it sort of, the trajectory has sort of come off a bit.

So I was just wondering what's happening there.

Hi, Girish here.

So in financial services, while some of the growth is because of work related to mergers and acquisitions, first of all it is not a one-quarter phenomenon.

Typically these large integration projects run for 18 months to two years.

It is not (technical difficulty).

Secondly we are doing work in a lot of clients which is nothing to do with M&A, which is much more secular work for the sake of helping them either launch new projects or comply with regulations or enter new markets.

And we have signed up five important deals which will be helping us to drive revenue in the future.

On retail, actually the pipeline is good.

We have signed some good deals and Suresh will speak more about it.

Yes, retail becomes a part of what we call as RCPG SBU, so retail, CPG, transportation and government.

That SBU has done modestly well.

In terms of sequential growth rate we're on close to 3% and the growth in the past have been more.

So one has to look at a more YTD type of picture and it is one of the SBUs which has driven growth for us each year.

So that is one.

But CPG is where we are seeing I would say relatively more growth than what we are seeing in retail.

And some of the wins that we've announced, out of the six wins some of the wins are from this space, are from the RCPG space.

And the last point that I would like to add here is if one looks at the pipeline of deals going forward, one, the pipeline is across the board, but two there is a significant pipeline on the retail and the CPG side.

Sure, thank you.

Thank you Mr.

Padmanabhan.

Our next question is from the line of Anthony Miller of TechMarketView.

Please go ahead.

Yes, hello there gentlemen.

I wonder if you could give a little bit more color on movement on the European scene please.

You said that the -- I think the sequential growth was 5%.

Can you give us an idea of what that was in constant currency?

And also perhaps give some of the highlights of the major country markets in Europe?

So we'd -- okay, one yes Europe.

It's 4.6% in constant currency.

So --

Say again, please.

The constant currency growth in Europe is 4.6%.

Quarter-on-quarter.

Quarter-on-quarter.

You are talking about sequential growth.

So that is point number one.

Point number two, yes, Europe has done well for us and it has done well for us consistently over the last couple of quarters.

Third point is we're seeing business coming in not only from our traditional UK market but also from Continental Europe.

And again I would say it is -- most of the verticals in Europe is where we've got the business from.

So some of the deal announcements that we've made, some of these six business announcements we've made I think it would be three not from Europe.

Right.

Of the major Continental European markets, which have been -- seem to be coming out of the depression the fastest?

See it's difficult to say which one is coming out from a market.

I think the overall markets are recovering, the overall markets in Continental Europe.

And most of the countries or organizations within the countries are beginning to look very actively at outsourcing to players like us who have a fairly strong global delivery model.

So it is Germany, it is France, it is Switzerland.

It is really all of Continental Europe.

Right.

Okay, thanks very much.

Thank you Mr.

Miller.

Our next question is from the line of Subhashini Gurumurthy of Ambit Capital.

Please go ahead.

Hi.

Congrats to the management on the good numbers.

My question actually relates to what Mr.

Premji mentioned in his opening remarks.

I wanted to understand more about the partner-led sales model if you could throw more light on that.

I also wanted to know would this actually mean increased S&M spend going forward and if so what could be the target we could look at.

Hi, this is Girish Paranjpe.

What we are referring to is that in large -- there are two parts.

One is that typically in large change programs, it requires significant advisory capabilities and also deeper client relationships.

So what we have done on a kind of planned basis is to upgrade the level of client engagement managers that we have in some of our bigger and longer relationships.

Secondly, we are also inducting high level consulting people who we have hired as client partners into those accounts either on a full time basis or on a semi full time basis.

And the idea is to help shape deals in those accounts so that we not only help the client on an advisory basis but hopefully when that advice leads to execution, we can help them executing those projects as well.

Just to maybe give it a little bit more, what we are clearly doing is we are strengthening our client engagement structure even further.

Our client managers are really the eyes and ears of all of Wipro accounts.

They are virtually the CEOs of the accounts that they manage.

And we have completely aligned our pre-sales and our service lines and all the various business units of Wipro behind these client engagement managers in terms of growing our business here.

Sure.

So this would mean increased S&M spend going forward as such right?

Yes.

Yes, it would mean increased S&M spend going forward and we will invest more on the S&M side as we go forward.

Sure.

Is there a level we can look at over the next two years which we intend to take it to?

We can't give you a number off the head.

But clearly if there is one place where we are certainly going to focus on in terms of investments it will be on customers and therefore consequently it will be on S&M.

Sure, that was helpful.

Just a couple of more questions.

Subhashini before you go there, Manish here.

I just wanted to add to what Suresh said.

If you look at the financials, our S&M expenses have already gone up this quarter.

Yes, that's right.

Go ahead.

Okay.

The other question was relating to manufacturing.

What's your outlook there?

And in fact Wipro was the first one to sound off an improving environment within manufacturing vertical and we were probably more positive than our peers.

So what is our outlook?

We continue to be positive on manufacturing and manufacturing in the last couple of quarters was ahead of some of our SBUs in terms of growth.

The problem is this quarter everybody has grown and maybe there has been some pent-up growth in some of the other SBUs.

Manufacturing, just looking at manufacturing on a standalone basis, has done reasonably well this quarter.

It's grown around 2.5% sequential growth which is below what Wipro has grown, but if you look at it on an overall YTD basis it has been one of our leading SBUs in terms of growth.

If you peel that onion within manufacturing, I think the pharma sector and the industrial automation sector is doing well.

And a lot of the European wins over the last couple of quarters has been from the manufacturing sector.

Sure.

Just one last question.

You mentioned that attrition on an LTM basis was 9.9%.

How has this moved sequentially?

The quarter before it was roughly 9.7%.

Sure.

Thanks a lot.

Thank you Ms.

Gurumurthy.

Our next question is from the line of Pinku Pappan of Nomura.

Please go ahead.

Hi and thanks for taking the question.

My question is on the infrastructure services.

What kind of demand trends are you seeing there and what kind of services are clients really asking for there?

So we're seeing fairly healthy demand trends there.

So let me just answer it from two or three different angles.

Number one is last quarter.

Last quarter that business, the infrastructure services business, has grown 9.1% for us sequentially, which is significantly ahead of the overall Wipro growth.

Two is, particularly in the US we've won quite a few deals over the last couple of quarters.

And one of the deals that we've spoken about in our press release is really the infrastructure combined with our Infocrossing proposition that we have on US deals.

So the investments that we made in that space in the Infocrossing acquisition are clearly beginning to pay results.

And so that's the second perspective.

The third perspective is this business has a fair amount of presence for us in the emerging markets of India and the Middle East.

And the business is beginning to -- is getting even more traction in this market insofar as infrastructure services is concerned.

And fourth is, if you look at the funnel, a large part of our funnel, or a significant part of our funnel is on the infrastructure services side.

So clearly customers are looking at what their current infrastructure get-up is like, how they can transform the cost structure as it relates to infrastructure, and therefore beginning to look at players like us who have a fairly optimal mix of onsite presence, as in Infocrossing, as well as offshore presence.

And offshore not only as it relates to India, but we also deliver infrastructure services from all our global centers.

Could you talk about the utilization at your data centers?

And also whether you plan to invest in -- like you said there is a demand from emerging markets.

So will you plan to invest in data centers in India again or you think this is sufficient for the time being?

Sure, I'll come back to the utilization part.

But, yes, Infocrossing has data centers in the US and we will continue to invest in that business.

So if the demand picks up, if it means we have to invest in more capacity, and the demand is picking up, we will invest.

Then the next country or region where we're investing quite strongly in data centers is in India.

We already have two facilities set up here.

And we're planning to again invest in that business further because it fits in very well with our overall end-to-end infrastructure and systems integration strategy in India.

On the utilization bit I'm going to request Manish to speak about it.

Yes, hi, this is Manish here.

There is a gestation period for us to set up a data center.

When we start looking at the pipeline, we currently see that while the utilization may be not yet 100%, but most of the capacity we currently have is already sold out.

And as we see more demand picking up, pipeline coming in, keeping the gestation period in mind, we will start investing in so that we are having the capacity ready when it is required.

Another question is on virtualization.

Do you see that as being the primary demand from clients or is it more just managing networks?

Virtualization is a big demand from clients.

Clearly customers are looking to make sure that they sweat their assets completely and virtualization really helps them do that.

So virtualization is very, very key and a big part of our, actually, some of the systems integration business we're doing on infrastructure services.

Okay.

The final question is regarding could you tell us how you achieved the improvement in operating margins in that business?

Our IT Products business is largely focused on the domestic market.

When we do IT Products, increasingly we are doing IT Products much more as a part of our overall systems integration projects as against just standalone IT Products.

And consequently, when you're doing it as a part of the Systems Integration offering, you tend to make more margins.

That is one.

And two is when you're doing it as part of systems integration, you're doing a lot more higher-end product sales rather than commodity sales and that itself has higher margins.

So when I'm doing a networking project or when I'm doing a data center project, as against when I'm selling PCs, the margin tends to be higher.

Plus, of course, in the PC business we've driven more operating efficiency and even those margins have gone up.

Alright.

Thank you very much.

Thank you Mr.

Pappan.

Our next question is from the line of Rahul Jain of Angel Broking.

Please go ahead.

Good afternoon sir.

I basically am just seeing that a lot of growth is coming from the emerging market.

So I just need to understand if you can express more which verticals we are coming this and what is the normal ticket size we are seeing in this market.

This is Suresh Vaswani here again.

So when you look at emerging markets we have just split it into two.

One is the India and Middle East business.

And second is our AsiaPac and rest of the world business.

So India and Middle East you know, we've spoken about it in the past, very major investment and focus area for us, a place where we'll continue to invest given the fact that it is our home turf and where we've done well.

Last quarter the growth on India and Middle East was 15.9% sequential.

When one looks at year-on-year basis, it was roughly 21%.

And the business in India and Middle East came pretty much across the sectors.

But if one has to single out some sectors, it would be the telecom sector, the BFSI sector in India and Middle East, the government sector, the defense sector.

And last quarter we'd also announced a significant joint venture in the airport sector in India.

That is the story of India and Middle East, systems integration, large transformation projects, very, very differentiated proposition here which is driving our growth.

Stepping to the rest of the world and the AsiaPac market, this is excluding Japan, there the growth has been even more.

We've grown roughly 20% sequentially.

20% sequentially, and a lot of that growth has come from our relatively newer markets of Australia where we're building some traction and, of course, Singapore and Malaysia.

But really Australia has been the beachhead of our growth.

Okay.

Thanks.

That is explained on the emerging markets.

Yes, thanks.

Thank you Mr.

Jain.

Our next question is from the line of Sandeep Shah with ICICI Securities.

Please go ahead.

Yes.

Congrats on the good numbers.

Sir, just looking at the utilization in the BPO business in India and Middle East, despite being a double-digit not been higher growth versus the overall growth, the utilization rate was been down.

So is it fair to assume that most of the 5,000 odd net addition has happened in the BPO in India and Middle East business?

No, not so.

Both have had almost even growth.

And so there is a large growth in the IT side as well as there's a growth in the BPO side.

Okay.

But sir you said 3,000 employees being hired in the BPO out of the 5,000 net additions which you have done.

5,200 odd yes.

Okay, that figure was a gross number, Sandeep.

Okay, okay.

And if you look at the overall reported growth on the Global IT, excluding Infocrossing it's coming to roughly around 3.2%.

So it seems like the Infocrossing revenue growth has been a high double digit.

Is that a right assumption?

Not really.

Sandeep, if you could point out where you are getting that number from because our reported numbers, we don't give that data.

Because you give us the volume number and you give us the billing rates.

So if we do the math, the reported IT Services revenue growth, the reported number is [$830m] versus --

Okay.

So that number is also because of the India number and the BPO business that we have.

So it's a combination of all of that.

So it's not just Infocrossing.

Okay.

If you look at our India business it has grown sequentially 16%.

The BPO has shown a very good growth.

These are outside of --

Just to -- let me rearticulate that Sandeep in case it's got confused.

Yes.

The number that you are calculating is Wipro Technologies' with the volume and rate.

It does not factor in the numbers that we report for India, Middle East, the BPO and Infocrossing.

Correct.

So it is not just Infocrossing, but a combination of these three.

And if you see, we have reported 16% sequential growth so far as the India, Middle East business is concerned.

And that's a significant contributory to that incremental revenue.

No sir.

The Global IT doesn't include the India, Middle East business.

That's right.

Yes.

And it doesn't include even the Infocrossing and BPO because you gave a separate calculation for BPO and India, Middle East.

So my question was the only balance part was Infocrossing.

You know Sandeep, the way it works is that if you look at rates realization/utilization and all these parameters, they are given for Global IT business.

And if you look at -- we also share utilization numbers for India and Middle East separately, and Wipro Technology Global IT business separately and the BPO business separately.

Okay.

So revenue includes everything.

Yes, so the revenue includes --

The operating parameters --

Let me just clarify.

Global IT services includes revenue including India IT services, while some of the operating parameters that we are reflecting, we are reflecting separately for Global IT and separately for the India business and separately for the BPO business.

So revenue is all integrated.

Operating parameters have been shown separately.

Okay, okay.

And just if I heard correctly, after the February wage inflation we again said that in the month of April the wage inflation may be reconsidered in line with the market.

No, we didn't say that.

Okay.

So in that sense we will -- the next FY'11 wage inflation cycle will be coming on a seasonal basis which comes generally in Q3 or Q4 right?

We haven't even given it a thought so far, Sandeep.

Okay, okay.

Thanks.

Thank you Mr.

Shah.

Our next question is from the line of Dipesh Mehta of Khandwala Securities.

Please go ahead.

Employee (inaudible) in absolute terms has declined for last four quarters.

So around 4,800 odd employees what you added, that is largely during the end of the quarter or where we have added them?

Right through the quarter.

Right through the quarter.

Then why it is declining for last -- around INR100 crore we have seen lower than previous quarter.

Dipesh, it is primarily driven by the rupee appreciation.

So if you had a dollar (inaudible), a downside, which typically converted, when the rupee appreciates the absolute number shows a lower amount.

Okay.

And this is normalized, nothing like we have added in only December month?

No, no.

So the adding with the -- the additions in the quarter has been --

Spreaded.

Spread out.

Okay, thanks.

Thank you Mr.

Mehta.

Our next question is from the line of Rohit Anand of PINC Research.

Please go ahead.

Yes, hi sir.

Thanks for taking my question.

Your revenue contribution from FPP projects have increased almost 220 basis points.

In past we have heard the argument that it had supported the pricing result.

So any impact of this time of increase, this increase in FPP on the pricing?

And also do we see further headroom to -- what are the client's feedback in terms of do we expect FPP projects to move ahead, the contribution to growth of that from this point of time?

Rohit, hi.

This is Manish here.

As I mentioned some time back, non-linearity is also a lot to do with fixed price and we do believe that fixed price projects give us a leverage on improving our realizations.

The slight drop in realizations that we have seen this quarter is primarily due to either the impact of cross currency or it is due to impact of lower number of working days, which is also come from because of the shutdowns that we have had.

But if your question is has fixed price projects led to drop in realizations, it is the converse actually.

No, not drop in realization.

It has actually positively impacted in the past.

So this quarter as well, since FPP has grown around 220 basis points.

So I'm assuming it has also contributed something to the pricing.

And secondly what do we expect it can grow further, the FPP contribution?

So we have not kept a number target for ourselves.

But given the focus on SI and transformation and the focus on non-linearity, the assumption that one can make is it certainly will go up.

Okay sir.

Secondly on the client side, the client count has actually declined in this quarter.

We have seen either a stable number or increase in that number for the competitors.

So anything happened in this quarter, specific happened in this quarter.

These numbers are on the basis for last year's March [31], but if you look at annualized for the current quarter it's actually higher.

So it's just an aberration, not to be treated as any kind of -- considered as any kind of trend.

Sure sir.

Sir, lastly on the -- any color on the hiring for the next year, basically for the campus hirings once we have started going to the campuses?

So any color on that?

As you rightly mentioned we have started going to the campuses and our plan is to go to a select number of campuses in this round.

Unlike previous years we would not be visiting 250 campuses we used to traditionally.

So we would keep our focus on the top 100 campuses which, according to us, are the best of colleges, where we would target best of students and get them on board.

And remaining we would try to bring them as close to the demand needs, instead of building a huge inventory in anticipation.

Okay sir thank you and good set of numbers.

All the best.

Thank you Mr.

Anand.

Our next question is a follow up from the line of Nitin Padmanabhan of Centrum Broking.

Please go ahead.

Yes hi, thank you.

This is just a follow up from where I think Sandeep left it.

If you look at technology infrastructure services, as a whole it has contributed 33% of the incremental revenue of around $62m.

So and even if I look at the total IT services revenue numbers and add up the revenue numbers of the rest, which is BPO and India, Middle East, there is a number which is left out to the total revenue number.

So is that Infocrossing because that shows a 22% growth there?

Nitin could you just repeat -- Nitin this is [Lan].

As you are aware, the total revenue comprises of the various components that Manish ha sset out as also certain amount of pass-through revenues which are part of where we use external consultants.

I think this was confusing things.

So -- and that's been a constant number that's been there in our financials for past many quarters.

So to that extent there will never be 100% reconciliation you will get by multiplying headcount into -- man-month into rate.

That's something you might want to keep in mind.

And that does have minor variations from quarter to quarter.

Again that's something which has happened for many, many quarters.

Looking at this in the light of that you will find that's pretty much reconciled.

Sure.

Thanks.

Just to throw -- this infrastructure services number that you see as a part of our release, this includes global infrastructure services, it includes our infrastructure services in Wipro Infotech and it includes the Infocrossing offers.

So it's an integrated infrastructure services play that we have, of 21.3% in quarter three, which has consistently grown over the last couple of quarters.

Okay.

So this includes Wipro Infotech as well?

Wipro Infotech infrastructure services business, but not the products business and not the software business.

Just pure infrastructure services business of Infotech.

Fair enough, fair enough.

So in terms of is there any specific trend that you're seeing within the infrastructure services business abroad?

Because if we are closer to full capacity, is there anything with reference to specific verticals or specific kind of engagement that we're seeing there?

It is one of our very differentiated services, one of our business units that has done extremely well particularly last quarter.

We are having wins across the board.

So it is US, it is Europe, it is a lot of wins in India and Middle East.

And the Infocrossing business, which is part of our US infrastructure services business, is really helping us win larger and larger end to end outsourcing type of deals.

So in the past we would win deals which were largely managed services on a global delivery model.

Now we win deals which also includes data center footprint in the US, which also includes managed data center services that we deliver to a customer, and not only remote infrastructure services.

So our offering has become fuller.

Sure, sure.

But if you could just throw some light on the total deal wins that we have done this time in terms of which verticals, which verticals have been there and what is the number of deals for each of those verticals, it would be great.

So you know the deals -- okay.

Okay, a couple of angles.

One is in terms of new customer wins and second is in terms of deal wins.

So out of the 31 odd new customers that we won, a lot of the growth is broad based.

A number of wins in retail and CPG and transportation and government are high at 10 out of those 31.

But we've had wins in BFSI, CMSC, EMU, manufacturing.

So it's been broad based.

If you look at the six wins that we've announced, again the wins are across the service lines.

So there are infrastructure wins, there are package implementation wins, there are BPO wins.

And they are reasonably well spread across all the verticals.

Sure.

Thank you.

Thank you Mr.

Padmanabhan.

Our next question is from the line of Shradha Agarwal of B&K Securities.

Please go ahead.

Thanks.

My questions have been answered.

Thank you Ms.

Agarwal.

Our next question is a follow up from the line of Dipesh Mehta of Khandwala Securities.

Please go ahead.

Sir, can you share constant currency pricing changes offshore and onsite and blended?

It goes up.

The (inaudible) goes up by about (inaudible) basis points on the blended.

And what would be the onsite change?

So it is 1.1% for onsite and 2.9% for offshore.

2.9%, okay.

Thanks.

Thank you Mr.

Mehta.

Our next question is from the line of Diviya Nagarajan of UBS Securities.

Please go ahead.

Hi.

Congrats on the good question.

Diviya could you speak up please?

Is this better?

Yes.

Yes hi.

Congrats on a good quarter.

My question was first to Pratik.

Pratik, do we have any pending fresher offers that we are likely to bring on board in the next quarter?

Diviya, last time we had talked about the freshers who had passed out in year '08 and there were a few who were still left to be brought on board.

That we are through with, that lot.

So from that batch we have everyone who needed to be taken on board, we have completed.

Now for the batch which has passed out in '09, and that was about 7,500 in numbers, we will begin to bring them on board from this quarter onwards.

And we hope to complete significant part, significant chunk of it during the course of the quarter.

There may be a spillover to first quarter of next fiscal as well.

Right, right.

Just a follow up on the utilization questions, one thing that we have seen is that our ex-trainee utilization seems to have hiked this quarter.

Going forward I believe -- where are we looking at in terms of hiring in order to bring this down?

Do you think these kind of utilization levels are sustainable?

This is Deb.

I think these kind of utilizations are sustainable.

We have been able to hold it for the last two or three quarters and we are pretty much where we want to be right now.

Right, right.

And lastly again on Infocrossing, you did mention that all the capacity is almost sold out and I think somebody had also asked, does that mean we are looking at incremental CapEx there?

In addition to that, the CapEx question, what is your overall thoughts on how infrastructure margins could play out if we go into this more onsite centric approach for this sector?

So Diviya, hi.

This is Manish here and I had said that the capacity that we have is almost sold out.

And as you know there is gestation period for setting up a center and at the same time ramping up and starting to execute a new deal that we have won.

So there will always be a lag between when we win an order and when it gets fulfilled into capacity, and then when we need to start ordering for new capacity.

And given that we have reached a certain scale, beyond this point additional capacity does not necessarily bring down utilization at an overall level significantly.

And we are quite confident that -- the margin question that you had, and I'm assuming that you're talking about infrastructure services margins --

Yes.

Which is a combination of what we provide from Infocrossing plus SI capability plus the managed services capability because it is sold as a package.

And we have seen that our ability to get margins has actually improved with the overall package of services, rather than being selling only either managed services or hosting capability.

And we believe it can certainly be maintained, if not improved.

The only -- this is Suresh Vaswani here.

The only point I would like to add to what Manish has said is, yes, while the demand for Infocrossing service is building up and the capacity utilization is going up because of more customers, we are also clearly looking at how to drive more productivity there or how to so-called sweat our assets more productively by utilizing techniques like virtualization and by optimizing energy consumption and so on and so forth, and utilizing (inaudible) more effectively.

So a lot of work is going on in that direction.

So it's not necessary that we will add capacity, but we may create more capacity within the same capacity.

Right thanks.

That was very helpful.

All the best.

Thank you.

Thank you Ms.

Nagarajan.

Our next question is a follow up from the line of Mr.

Anthony Miller of TechMarketView.

Please go ahead.

Yes, thanks again gentlemen.

Apologies if I've missed the points here, just a couple of things.

How come that your margins were flat in IT Services - I think I've got them down as 23.6% - yet your peers were able to expand margins sequentially?

Yes.

So Anthony, hi.

This is Manish here.

If you were to look at the numbers, there is an increase in our sales and marketing expense and there is impact of the progressions and the bonuses that we gave for the purpose of retention to our key employees last quarter.

And in spite of those headwinds, the good thing is that ForEx was flat this quarter.

And in spite of these headwinds, given the utilization improvement that we drove, and given the costs take outs we got in our G&A cost line, we were able to maintain the margins at a flat level.

Okay.

And just to clarify on IT budgets, you said you expected IT budgets to be flat or marginally positive.

Roughly what percentage of your clients have actually yet to firm up their budgets?

Difficult to say Anthony.

[Lan] here.

I think this is based on certain anecdotal discussions we've had with some of our key clients, the comment we made on the view on the budget.

We don't have a formal poll of all our customers to say how many of them have finalized or so.

When do you expect them to finalize their budgets?

We do expect that over the, in the course of the next four weeks most of our customers will finalize their budgets.

Over the next four weeks or slightly longer, but I think the bigger point is what you said in the beginning.

Budgets will be flat to mildly positive, but people will expand their budgets.

So if you have last year's budget indications, and what we're clear is at least it will be the same next year, but they will expand the budgets.

Got it.

Okay thank you once again.

Thanks.

Thank you Mr.

Miller.

Our next question is from the line of Ranjit Shinde of the Economic Times Intelligence Group.

Please go ahead.

Hi.

Thank you for taking my question.

I want to know why number of active clients has gone down in the December quarter.

It had gone up in the September quarter, but now I think it has gone down significantly.

I think Senapaty had answered that question earlier.

It would have gone down in context to the cutoffs that we had.

But if you really look at it on an annualized basis, looking forward, the number of customers above $1m has gone up by a number like 17 or 18 -- 16.

So number of customers on an annualized basis greater than $1m has gone up by 16.

So what you see here are numbers which are looking at it from the back.

Okay, okay.

Thank you.

Thank you Mr.

Shinde.

Our next question is from the line of [Radhika Vawan] of IFCI Financial Services.

Please go ahead.

Yes hi.

Good afternoon.

Just a couple of things.

I don't know whether I missed out.

On the Product revenue front we have seen a margin improvement, but in terms of revenue there's been a sequential decline.

Is it just because of the lumpiness of the Product business or there is something more to it?

Yes.

I think Product business, Radhika, you're aware it does have a peaking towards quarters ending September and March.

That trend is normal in India.

And there's nothing more to that.

And Radhika it tends to peak in Q4 which is the JFM quarter.

It tends to dip a bit in Q3.

It tends to peak a little bit in Q2.

So there are two cycles of growth of that Product business.

So nothing more to it than the cyclical nature of the business?

Absolutely.

Okay, great.

And another thing --

Radhika, just to add on.

Radhika, this is Rajendra here.

Just to add on, I think as to your specific question on margins, we did get the benefit of rupee appreciation in this case which led to incremental margins there.

How much would have been the benefit, the cross-currency benefit on the margin front?

Whatever you're seeing there is approximately -- the major chunk is rupee appreciation only.

Okay.

Okay, great.

And on the product engineering side, see after the sequential decline last quarter we have seen, last few quarters we've seen quite a robust growth this quarter.

So what is the scene like in the product engineering space?

So Radhika, I guess Girish responded to that question some time back, but broadly it is our strategy of diversifying from only supporting technology business on the embedded side to getting into industrial engineering to automobile etc.

And we believe this is watering out of what we have seen the worst is behind.

And certainly we expect the growth to be back.

Now a question on the Services line.

How is the -- how does on the testing and package implementation side, do we -- there's a slight lull this particular quarter.

Is there something specific in that particular segment?

No.

Those continue to be high growth businesses for us.

This quarter they've grown relatively less sequentially compared to some of the businesses which have picked up in terms of growth.

But we see both those businesses as very high potential businesses for us.

Okay, okay.

Okay sir, thanks a lot.

Thank you.

Thank you Ms.

Vawan.

Ladies and gentlemen due to time constraints that was the last question.

I now hand the conference over to the management for their closing comments.

Hi.

This is Rajendra here.

Thank you, all of you who are present in this call.

And should you have missed out anything during the call, the audio archive of this call will be available on our website.

And we would also put up the transcript of this call very soon.

And if you need any clarification from any of us with respect to the questions not answered, either myself or Arvind or Vishal will be happy to take your questions.

Thank you.

Thank you gentlemen of the Wipro management.

Ladies and gentlemen, that concludes this conference call.

Thank you for joining us on the Chorus Call conferencing service and you may now disconnect your lines.

Thank you.