Wipro Ltd (WIT) 2012 Q4 法說會逐字稿

Ladies and gentlemen, good day and welcome to the Wipro Ltd earnings conference call for the period ending March 31, 2012. As a reminder all participant lines will be in the listen-only mode, and there will be an opportunity for you to ask questions at the end of today's presentation. (Operator Instructions). Please note that this conference is being recorded.

I would now like to hand the conference over to Mr. Sridhar Ramasubbu. Thank you, and over to you, sir.

Thanks, Marina. Good day to all of you. This is Sridhar, and I am joined by Manoj and Arvind, from IR team in Bangalore and on behalf of the entire Wipro team, a very warm welcome to all of you.

We are pleased to host Wipro's 4Q FY 12 earnings call. Regarding the materials for this call, we issued the press release yesterday late night EST and we will have time for Q&A at the end.

Before we start the call, an announcement, we are holding our Analyst Day event on May 18 in New York Midtown, and invites have been sent to all investors in our data base. If any of you have not got the invites please reach out to us. We are looking forward to seeing you on May 18 in New York.

The format for today's earnings call is as follows. Azim Premji, Chairman, will give us an overview of our Wipro business. T.K. Kurien, T.K. as he is known, will share his perspectives on the IT business side. Suresh Senapaty, CFO, will comment on the IFRS financial results for the quarter ended March 31, 2012. They are joined by BU heads and other senior members of the Wipro management team who will be happy to answer your questions.

As always, elements of this call and the management's view may be characterized as forward-looking under the Private Securities Litigation Reform Act 1995 and 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 Securities and Exchange Commission in the US. We do 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 4Q FY12 results will be followed by Q&A. The operator will walk you through the Q&A process. The entire earnings call proceedings are being archived and transcripts will be made available after the call at our Company's website. A replay of today's earnings call proceedings will also be available via telephone post the call.

During this call I am also 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 to all of you. Just let me swiftly summarize some financial results of Wipro Corporation consolidated results. We recorded revenues in quarter four financial '12 of INR99b, a year-on-year growth of 19%.

For financial year '12 Wipro recorded revenues of INR375b, a year-on-year growth of 21%. Net income for the quarter at INR14.8b, a year-on-year growth of 8% and net income for the year at INR55.7b, a year-on-year growth of 5%. IT Services Business delivered sequential growth in line with our guidance.

A quick summary on our assessment of the macro environment, overall macroeconomic environment continues to be volatile. While we have seen signs of positivity in the environment in the last three months, customers continue to be cautious. In our discussions with business leaders we are seeing customers focus on globalization and productivity.

Since clients want to identify newer growth opportunities, what they seek from us as a service provider is collaborative innovation and solutions which can change the way they do business, bring in more revenue and improve customer insight.

This approach is changing the nature of demand we are seeing, and it is reflected in our stronger pipeline. However, these programs have a long cycle time for closures.

Some highlights on our Wipro Consumer Care and Lighting business. In Consumer Care and Lighting we saw another quarter of 20% (sic -- see presentation) plus growth.

Santoor revenues have crossed the INR10b milestone, coinciding with the completion of the 25th year of its existence. UNZA business continues to do well, with Enchanteur brand crossing the milestone of $100m of revenues.

Wipro Infrastructure Engineering, we continue to see a strong growth in the Wipro Infrastructure Engineering business, with India doing well and Europe stabilizing, successful entry into two key growth markets. Brazil integration is on track, strong signs of synergy from the global OEMs and sourcing from the low cost country. We have set up a manufacturing base in a second location in China. We have successfully completed a joint venture agreement with Kawasaki, production to start by second half of financial year '13.

Some highlights of our initiative on sustainability, we recently released our fourth sustainability report titled The Imperative of Hope. The report provides strategic insights into our vision, goals and progress on our sustainability initiatives. Based on an independent assurance by DNV, the report has been awarded a A+ rating for the fourth year in succession, a clear reflection of the quality and strength of our sustainability disclosures. We were recognized by the Ethisphere Institute, a leading business ethics think tank as one of the 2012 World's Most Ethical Companies.

I would now request Senapaty to give you a brief overview about our IT Business -- about our financial results, followed by T.K. Kurien on our IT Business.

Good day, ladies and gentlemen. Before I delve into our financials please note that for the convenience of readers, our IFRS financial statements have been translated into dollars at the noon buying rate in New York City on March 30, 2012 for cable transfers in Indian rupees, as certified by the Federal Reserve Board of New York which was $1 equal to INR50.89. Accordingly, revenue for our -- of our IT Services segment that was $1,536m or in rupee terms INR76b appears in our earnings release as $1,491m based on the convenience translation.

Let me start by saying that the Board of Directors have proposed a final dividend of INR4 per share, taking the overall dividend for the year to INR6 per share.

Moving on to the quarter performance, our IT Services revenue for the quarter ending March 31 was $1,536m on a reported basis, a sequential growth of 2% and a year-on-year growth of 10%. For the full year we delivered revenue of $5,921m with year-on-year growth of 13.4%.

For the quarter, growth was led by Energy and Utilities with sequential growth of 6.8% and retail of 5.9%. We saw weakness in Telecom vertical, particularly on the OEM side. BFSI was impacted by weakness in investment banking in the current quarter.

From a service line perspective, we saw strong growth in Infrastructure Services at 6.4% sequential growth and Business Analytics at 5.4% sequential growth.

We moved a little further on our focus area of brand engagement in the current quarter. On a trailing 12 months, we have seven accounts which are more than $100m in revenue up from three a year before. We are happy with our progress and we continue to make investments in this area.

We saw improvement in revenue productivity in the quarter. Offshore realization improved by 1.4% and onsite realization improved by 0.4% sequentially. We continue to characterize the pricing environment as largely stable.

Sequential volume growth in the current quarter was 0.8%. Operating profit drop was limited to 10 basis points despite the strong appreciation of the rupee in the quarter. As of March 31, 2012 our days of sales outstanding showed marked improvement and was at 70 days, down from 71 in the previous quarter.

Our IT products business showed EBIT growth of 32% year on year in the current quarter. Consumer Care and Lighting business continued to see good momentum with revenue growth of 25% year on year and operating profit growth of 30%.

On the foreign exchange front, our realized rate for the quarter was INR49.43 versus a rate of INR50.53 realized for the last quarter. On a quarter-on-quarter basis, ForEx gave us a positive impact of 10 basis points to operating margin. Our OCA reduced from INR5.5b to INR1.6b as of period end and we had about $2b of ForEx hedges outstanding.

The effective tax rate for the quarter is 21.2%. We generated a free cash flow of INR16b in quarter four of FY12, as against only INR8b in the quarter three, which was 109% of the net income.

Operating cash flow was INR18b in quarter four as against INR11b in quarter three. Operating cash flow was 121% of the net income. Our net cash balance on the balance sheet was [INR69b], an increase of about INR16b.

Now, let me hand over to T.K. Kurien for giving an update on the IT Business.

Good morning, ladies and gentlemen. In the last few quarters we have made significant investments in making sure that we really kind of approach the market in two ways.

Our belief is that the market is kind of very strictly kind of pole righting itself to a high degree of differentiation in the front, and a significant level of standardization in the back. And all our investments in the past couple of quarters have really been focusing on maximizing the advantage that we'd like to get from this move.

We entered quarter four with challenges, and macroeconomic volatility, and despite these challenges we have been able to deliver in the guidance range that we have committed.

Our pipeline is robust but given the nature of deals and the proactive engagements, closure in the last quarter has taken time. The nature of our pipeline has changed, and today a healthy part of our pipeline is proactive. As we look ahead we see signs that closures will pick up in Q1, and growth will come back in the next couple of quarters.

But let me just give you a sense of the highlights. The focus in account mining and alignment of accountability at the account level are beginning to show results. Our top 10 accounts contributed immensely to our revenue growth. We now have seven of these relationships crossing the $100m revenue mark compared to just three a year ago. The top 10 accounts grew faster than company average growth with the average size of the top 10 accounts having gone up from $111m to $123m year-on-year.

Our customer satisfaction across accounts continues to improve with a 20% improvement in the top two [boxes]. In fact, the improvement trend is across all outcome measures, loyalty, advocacy and overall satisfaction.

The other pillar of our strategy has really been around employee satisfaction. Our quarterly annualized employment -- employee attrition fell quarter on quarter between quarter four of last year and quarter four of this year by 6.5% to 14.4%, a clear reflection that our engagement measures are working.

In the last few quarters we have basically focused on four themes that we see broadly reshaping our future. One of them is variablization of technology. The second is consumerization of technology for business value. The third is business performance improvement through analytics. And the fourth is innovation to win in a world of constraints. We see these four trends driving the next technology disruption, which really would be at the intersection of cloud analytics and mobility. And here is what we've achieved in these three areas, and together.

The analytics business continues to show impressive growth, registering a 5.6% quarter-on-quarter growth. We have added 35 new accounts this year. Our customers are investing a significant portion of their IT budgets in analytics, and we expect this to increase further.

Our cloud business continues to make rapid progress in the current quarter. We have had 40 new wins across various industry segments and types of engagements. We see a completely -- the complexity of cloud deals increasing rapidly, suggesting that cloud is now seen as a part of the enterprise IT strategy by most of our customers.

On mobility we continue to see traction in the mobility space, and have added over 50 new customers across different industry verticals during the year. Wipro AppLife, the Wipro enterprise app store for Wipro, which was launched last quarter, has seen traction with over 50 apps developed by employees which are now commercially viable.

All I would do is I'd like to conclude by saying that the last five quarters have been exciting. We have lots -- seen lots of changes and wins. I believe we are on the right track, and expect [to get] new wins. Thank you.

Shall I hand this over to Sridhar for questions?

Yes. Marina, you can start the Q&A.

Sure, so thank you very much. (Operator Instructions). The first question is from Joseph Foresi from Janney Montgomery Scott. Please go ahead.

Hi. T.K., I think you talked about in your initial commentary that you had a pretty strong pipeline and you expected to see that. But the guidance for next quarter actually is from negative to a positive. Maybe you could help reconcile those two comments. Is there something that's quite specific that's going to affect next quarter? And why you feel confident about the future.

So, Joe, I'll quickly give you a little bit of color on that one. There are two parts to it. If you look at the India business, our India business in quarter one is showing a negative growth vis-a-vis the last quarter. That's primarily driven by two segments, one is telecom and the other one is government. Now we had a decent growth of 7% last quarter in quarter four, so it's really coming off that.

In quarter two we expect to see the India business come back, not necessarily driven by these two verticals but driven by other businesses that we expect that we will close and bill in quarter two.

If you look at -- that's one part of the problem that we've had, which is reflected in the guidance. And the story in India with telecom and government is a fairly well-known story, so I won't go into the details.

As far as the regular or global business is concerned, we saw some delays in order closure in quarter four of our -- this -- our year, which is quarter one of the calendar. And that has been deferred really to quarter one of our fiscal. And we are right now seeing some of those deals closing. So to that extent, it gives us a little more confidence as we go through the quarter that closures will be reflected in top-line growth in quarter two. That's fundamentally what's driving that.

Okay. What was causing the delays and why have they started to close now?

You know it's kind of strange, I think it's a combination of two things. One is that a lot of the deals that we are now closing are proactive deals. The other one was the whole cycle of contracting, which has still kind of dragged in a lot of cases. But we see that coming to a closure. In our business, both in the BPO business as well as the IT business typically what happens from the time we contract till the time we close, it's a three month -- typically a two-month cycle and then the billing happens three months after that.

We have seen clear issues in terms of contract closure, because I think the kind of deals that are out there have a risk element to it that we have to necessarily talk through before we go and sign.

Okay. Can you talk about any plans for wage increases this year? And just how you're looking at [BM] at the headcount at this point with attrition coming down further.

See, here is what it is, we have messaged very clearly that our wage increases were going to be on the June 1st every year. There is nothing that we are doing right now that makes us believe that we need to change that view. So we will continue to give a wage increase on June 1st.

The percentage of wage increase we haven't yet closed, but it will be in the range that we would need to be competitive in the marketplace. But broadly, if you look at the market scenario, we really believe that we can't head for the hills just because we've got a quarter's guidance, which is not exactly in line with what we expected. So I think that's not a reason for doing that.

But I think the bigger thing is long term we would like to remain invested in this business. We'd like to really kind of bring in superior talent into the company, and that's the driver. So for us we are playing this game from a slightly longer-term perspective rather than a quarter to quarter perspective.

And last question from me, I wonder if you could just characterize what any you think you all would be the changes over at Wipro. Are you in (inaudible) setting, are the changes (inaudible) alluded to see the benefits of that. Maybe you could just characterize that for us. Thanks.

So here's what we are seeing, the operational structuring and the organizational alignment is pretty much kind of complete. We have, of course, changed. Like everything else it's never static it's always ongoing, but having said that, the big, big changes that we had to do at the organizational level are all complete.

I think fundamentally now we have to kind of realize the benefits of what we have done. We are seeing early signs of that. But we think it's going to be -- this year is going to be a defining year for us to make sure that we are able to kind of realize the impact of what we have done during last year.

Okay, thank you.

Thank you.

Marina, before you start there is -- the people are complaining about volume, so can you try to increase the volume of the call? And also a request to the Bangalore team to speak a little bit louder, so that the analysts can hear well. Thank you.

Sure, sir. The next question is from [Jeff Hewlings] from Pacific Crest. Please go ahead.

Hi, thanks for taking my question. A little bit more on pipeline, looking forward how do you see the mix in your business shifting between longer term annuity outsourcing contracts and shorter term more discretionary type contracts?

So just very quickly, let me give you a little bit of color on what's happening on the pipeline. So if you look at the environment around us one of the things that we are absolutely looking for is stability of business, because discretionary products as they come and go, it creates significant volatility in terms of top line. So we are kind of trying to make sure that we build our sales portfolio in a way whereby we have a significant portion of business that's fundamentally on an annuity, which really creates an annuity stream. And I think that's one big focus.

Having said that, it's important for us to make sure that annuity streams that may be bound by contract, ultimately you can be disintermediated from that particular game if you selling a monoline. So selling integrated deals is becoming one big focus area for all of us.

The third big thing that we are looking at is to make sure that we have enough of a bench to take on site. And we also have people who are sitting there who are actually able in front of a customer, like architecture program managers, who can pick up the discretionary projects around specific solution areas that they've articulated in every vertical and start deploying those solutions at quick notice.

So we have done all three. Our belief is that when discretionary budgets do come back we don't want to be caught on the wrong foot. So to that extent whatever investments we have to make in front of the customer that's one area that we will not downsize. We will continue to make sure that we remain investing in customers.

Thanks. And what is -- how do you describe the deal making environment? Do you find the majority of your wins are coming from RFP type situations, or are you winning more sole source types of deals?

I guess the problem that we have right now is that there is -- the number of deals which people are going out saying -- into RFP are kind of getting smaller and smaller. And it's not the quantum, it's -- just a number of deals. So we have our sales force and our solutions teams, and our consulting team have got a lot of work to do to remain proactive.

Traditionally that's an area that we have not done very well on, primarily because if you look at most of us we've been managing demand rather than creating demand. And that's the big shift that's happening right now with the sales force. Are we there yet? The answer is no, but that's right now work in progress.

Great. And last question, Financial Services down quarter on quarter was any particular geography strong or weak, or any particular segment weaker than the other?

So, I'll ask Soumitro Ghosh who runs our Banking and Financial Services segment to talk to that.

Hi, Soumitro here. See, out of the three segments which we address Insurance, Retail Banking and Securities Capital Markets, Insurance and Retail Banking are doing pretty strong. Securities Capital Markets, especially the IB segment is a little bit challenged, so that is where we see, where investment dollars are concerned, that is a little bit challenged.

Overall, I think Retail Banking is extremely strong. We are seeing a lot of money being spent in top line growth initiatives. A lot of money being spent in areas like regulatory and areas like analytics and the digital channel.

Insurance we see a fair amount of growth in terms of, again top line growth. Investment Banking although it is challenged, we believe that there are a lot of opportunities out there, specifically around cost take out, cost variablization as well as a lot of asset monetization. That's one. And the second is a lot of money is being spent, though perhaps the pace has slowed down a little bit in the regulatory space.

Excuse me, sir, do you have any further --

Thanks that's it from me.

Thank you. The next question is from Trip Chowdhry from Global Equities Research. Please go ahead.

Thank you. A three part question, you did mention that there is a lot of interest in cloud, mobility and analytics. I was wondering if you can, on each one of those, give us a sense like which products in each of those categories. How much is your -- that is Wipro's intellectual capital or intellectual effort on top of those. And the third aspect, how much is the services part on top of those, so just a general split among these various categories. Thanks.

So here is what it is, and, Trip, when I do it I'll answer the question with one example. And what I'll do is I'll start specifically with analytics and (background noise), because that may give you a sense of what we are seeing in the marketplace and how we are building intellectual capability in that area.

So, one of the big projects that we have executed last month was around this whole concept of around performance management for equipment, which really is all about machine data, interpreting machine data and doing auto-analysis behind that, using [expert] systems.

So this is the manufacturer [pitch] of computer equipment. And fundamentally what we did was that we put in sensors into pretty complex equipment, picked up data and make sure that warranty calls and performance management calls were done on an automated basis rather than kind of having human intervention of any sort.

We found that we were able to cut using just the data that we were getting from the systems; our effort to resolve was down by almost 80%, our time to resolve was almost down by 90%, as an example.

So the intellectual property that we've built on top was the business rules that actually impacted the performance of that particular equipment. And then our ambition would be long term to kind of link that back into the process knowledge. Because if that particular equipment is in a particular critical process then we can go back and say, hey listen, the process may get affected with a particular kind of failure, but we can do lots of leaps. So just failure management but we can also do proactive and preventative failure, as an example.

Perfect, thank you.

Thank you. The next question is from Edward Caso from Wells Fargo. Please go ahead.

Good evening, thank you for taking my questions. Just a couple of quick ones that days sales outstanding what's that number?

Days sales outstanding, 59 -- 70, I am sorry 70.

Was at 71 in the earlier quarter.

70 versus 71.

And the tax rate, can you give us, it's been a little volatile, can you give us a sense for what kind of tax rate we should assume at the corporate level the next several quarters?

Yes. So we are expecting a tax rate for the coming period in the range of about 1% to 2% of the normalized rate of tax that you saw in FY12.

Okay. And can you give us your thoughts on your hiring plans within the context of increasingly difficult L-1 visa, the ability to get L1 visas. Thank you.

So I'll ask Bhanumurthy who is the Global Head of Delivery for us to talk to that. Bhanu?

Hi. So what we are continuing to do is that we look at the visa regime. Obviously, as we are seeing that, there are certain kind of delays that are coming up in terms of visa -- with issuances of visas because of multiple checks that continue to be there. What we have done is, over the period of time, we have built in processes internally so that we are compliant with the current regulations. And we continue to be improving those processes. Our focus continues to be on ensuring that we get the right visas for our teams. The new cycle for H1, the window has opened right now. We continue to use that route as well.

Can you talk a little bit about your plans to hire locals within both the US and the European markets?

Yes. Again, last year again we did -- we continued to focus on hiring the right skill sets that are required within the local market, and both the US, Europe and the Asian geographies where we operate in. Our focus has been to ensure that we bring in the right level of skill sets; we bring in the right level of leadership into our teams. Based upon that we have done the hiring. We've continued to do those hirings to match the skill sets that are required for our programs.

So, Ed, if I can just explain very quickly, our hirings will not be long-term (inaudible). We believe that ultimately we must build leadership in the local geographies. And the leadership must be also imbibed with the Wipro culture. So ideally what we are planning to do in the coming years, is basically hire folk who are freshers, bring them back to India, let them work here for some time, take them back into their own countries, be it in Europe or be the US, and then have them go through one more rotation in another country before we depute them full-time in the country of their origin. Because that is the only way we as a Company can build leadership in the country itself. Because having people fly in from India is not really a way by which we can really build a Wipro culture, nor can we have that client connect that is necessary and essential for us to survive in a geography long term.

Last question. Can you speak to the business process outsourcing marketplace and how your positioning is for that, where you see the market going? Thank you.

Ed, last year has been a tough year for us in the BPO business. And the good news is that if you look at it, I think one of the big shifts that we've taken this year is that we're going after specific industry processes. And -- because we believe that the level in terms of those traditional services which we were all strong in at one point of time like F&A and HR are slowing getting commoditized. So it's important for us to stay ahead of the commoditization curve. So more work around analytics, more work around industry processes are clearly the way we believe the market will head.

However, having said that, I think what we're now seeing is in specific places there would be platform place available. We are right now picking and choosing the place where we want to -- the areas where we want to invest in platforms because platforms by themselves would mean that there's got to be a high degree of standardization. And a high degree of standardization fundamentally means huge change management. So we're just picking and choosing the areas where we don't have to necessarily go through significant change management because in those areas we believe that we will be successful. In other areas we believe it's going to be much, much tougher for us to get there.

Right. Thank you.

You're welcome.

Thank you. The next question is from Moshe Katri from Cowen & Company. Please go ahead.

Yes. Hi. It's [Abhishek] here for Moshe. Thank you very much for taking my questions. First I want to talk a little bit about the BPO again. In the last few quarters you mentioned a strong pipeline and some -- a lot about wins in BPO. When do you expect BPO growth to accelerate on a sequential basis?

Moshe, here is what we expect to see. We expect to see the growth coming back in this quarter. And then, after that, we expect to see growth during the year too. However, having said that, the real impact of what we have done during -- in the past couple of quarters and what we will continue to do over the next quarter -- next few quarters, we will see the real impact in terms of going back to old industry growth rates only next year. We won't see that this year.

And which verticals seem to be driving growth in BPO? Which verticals seem to be stronger?

So banking and financial services continues to be strong. And the next area we see significant traction is in healthcare. These are the two areas. In fact for the healthcare side we have done -- we have had some very nice wins over the past couple of quarters in that particular area. And we see that clearly growing. I can ask Sangita to talk through specifically in what she's planning to do in that particular segment.

Hi.

Hi.

Hi. This is Sangita and I manage the Healthcare & Life Sciences business. So we've seen an energized growth engine in the last two quarters, quarter three and quarter four, largely around life sciences where customers seems to be investing around three areas, one which is around increasing productivity where we leverage our bread and butter business in the form of infrastructure and BPO. We also see our customers investing around accelerating growth and there everything around digital marketing, CRM is what we are making ourselves available for our customers. Finally in the innovations business, the new greenfield projects around big data, analytics and mobility is what's driving some of the growth in the Life Sciences business.

Come to the payer and provider, in which we are a relative upstart, we are leaning largely around the new greenfield areas, once again mobility and analytics; also the acquisition that we had made with the Infocrossing and the healthcare business of Infocrossing, we are able to leverage the platform that we have for Medicare and make it available for the some of the large payer clients of ours.

Largely on the success, or some of the feedback that we've had with our top customers, we hope to mine them much better and apply a dual strategy of mining and hunting to see the robustness in our growth.

Thank you. And should we expect any new offerings in the BPO in the near term?

Yes. We have -- we are seeing ourselves being able to offer very specialized services for life sciences, medical devices in the BPO space. Today we work with a large payer which we believe is really the mother ship as far as the payer business is concerned. And the work that we do in the BPO space over the last eight years is very unique to Wipro. And we should be able to leverage that to other customers as well. So it will be more around assetizing it and more around productizing what we've already done with our customers.

Great. My next question, I want to just gear to offshore pricing. Any notable trends in offshore pricing going into fiscal year '13?

I'll ask Jatin Dalal our CFO to talk to it.

Yes. So if you see this quarter our offshore pricing has improved 1.4% sequentially. And if you see last four quarters we are -- and if you see the range, we are trending at the higher end of that range. Going forward we believe that the pricing and realization, per person realization should remain in a stable environment. We don't see a significant uptick given the uncertainty in the market. As well as we don't see a significant negative one.

Thank you. And the last question is on China. Any changes on your China strategy or initiatives or how you perceive China?

I'll ask Bhanumurthy, who is our Chief Delivery Officer, to talk to that.

Our center in China continues to serve global customers. That has been our strategy. Our strategy has been to serve our global customers through our center, depending upon the skill sets required and the nature of support that is required. And we continue to grow that part of the center. Our investments in the center have increased in terms of getting the local talent into that place and also ensuring there is adequate training that is there in place, both the technical as well as soft skills and communication. So we continue to stay invested in China. And we are seeing certain categories of customers moving -- or we're moving certain categories' work to that center right now.

Thank you very much. Looking forward to Analyst Day.

Thank you.

Thank you.

Thank you. The next question is from Shashi Bhushan from Prabhudas Liladhar. Please go ahead.

Yes. Good evening sir and thanks for taking my question. We have seen a good investment uptick in our sales and marketing effort, in fact highest as a percentage of sales in the recent time. So I have two parts of question related to that. Do we further see acceleration in S&M effort in FY13? Or, second, is there a different approach to our sales effort that we are taking? You talked about hunting and farming in the morning conference call. So are we spending that extra dollar for hunting or for farming?

Good question Shashi, so let me answer that in two parts. First is that our S&M expenses would go up during FY13 because our belief is that again in hard -- in times which (technical difficulty) -- it's important for us to make sure that we're able to -- we have to stay invested in (inaudible). It's absolutely critical. So our S&M expenses would go up.

Second is where would the S&M expenses go up? Would they be allocated more to mining or to hunting? I think that's a question that I cannot answer with any degree of certainty because fundamentally what we're doing is we're going to create the hunting team. We're already had the farming teams created. We aligned all our 138 accounts across in terms of making sure everybody is aligned from a service line perspective and as far as the top management perspective on the part of the customer. And really our game would be, as far as the accounts that we are already in, our biggest focus would be to make sure that our breadth of calling changes and the calling on different stakeholders changes.

But, on the other hand, as far as hunting is concerned, we continue to go all out to make sure that more monolines and more integrated services continue to be sold, where we actually have to disrupt it to grab market share. That's really the ambition.

Sure, thanks. That's really helpful sir. All the best for FY13.

Thank you.

Thank you. The next question is from Swami Shanmugasundaram from Morningstar. Please go ahead.

Hi. Thanks for taking my question. I have a couple of questions. My first one is about the R&D business. It's been on a secular decline, if look at the number over the last eight quarters, coming down from close to 16% of revenue to 12.5%. It seems that it's a drag on the overall growth. So would you mind talking about your plans for this practice? How do you plan to reverse the trend and what kind of impact does this decelerating growth have on your margins?

So a couple of things. I will speak to the first part of the question and then flip that question across to Ayan Mukherjee who runs the telecom business and who can throw a little bit of color on this.

But broadly as far as the R&D business is concerned, we are really changing our focus from simple sale of competency back to integrated systems here. That's one big change that we've made over the last year. The second big change that we're making is that traditionally if you look at our verticals that we were strong in, these were basically manufacturing and telecom. Telecom had its own stresses in terms of equipment vendors and the R&D business in general. Right now that is playing itself out in what we see here in terms of topline growth.

In manufacturing too, which is another big area for us, again, on the consumer electronics side we have seen -- we've not seen great growth. So those are the two areas which have been affected. Clearly we have four other verticals, SBUs. Our objective would be to make sure that the R&D business (inaudible) and gets more breadth rather than be restricted by these two verticals. But Ayan and Bala you guys can both add on from a manufacturing perspective.

Swami, my name is Ayan and I can give you a perspective from a telecom side. What we are seeing is with the change in market requirements of products, telecom products, that are moving from voice to data, the investment on the telco side is more on the radio access network side and on the optical side. The legacy products that the telecom industry had previously, the investments are moving from sustaining and maintaining the legacy products into cutting-edge technology. And these technology areas are extremely on the cutting edge and the investments that have been made by the industry would take at least 12 to 18 months for them to realize. As a result of which their expenses that they have on legacy products is being reduced.

So it's not necessarily that the outsourcing strategy for the telecom industry is undergoing a change. But it's a fact that the products that they build have to undergo to cater to the new requirements of data, video and voice. So we've continued to have strong presence within the R&D in the telecom industry, but the nature of work that we are doing is changing considerably.

And just to add to Ayan's comments. This is Bala. I run the Manufacturing and the Hi-Tech business unit. So within our segment obviously product engineering is a pretty significant proportion of what we do. To your point, I think there's definitely the fact that product lifecycle introduction has become much shorter now. There are many new models being introduced at a far higher pace and therefore the life cycle of product development has been shortened quite a bit in the last couple of years.

Having said that, the nature of work has definitely moved upstream, specifically in terms of what we do. We have currently engaged with a few customers in terms of designing entire products for emerging markets. And these products are not scaled-down versions of global products but products that will be designed for an emerging market and which is to be taken back to developed countries. So the base design itself would be completely different and it would cater to a completely new segment of the market. So those kind of upstream projects which are really more end-to-end and which have a significant design component in them are the focus areas that we are trying to do. So as you would imagine a lot of them has to do with an integrated hardware and software design and that's what we are focusing on right now.

Just to make another addition here. Other thing we are seeing in the R&D in the telco industry is significant model change. So as the -- as our customers redeploy their scarce dollars, they are wanting their partners to invest. So the business model which was previously more time-and-material and risk-reward -- time-and-material and fixed-price based, is changing to risk-reward and revenue linked. So we've got three or four fairly large deals that are following this business model where the product revenues -- where the revenues get realized two to three years down the line.

Okay. I think we should go to the next question as I think Swami's line got disconnected. Go to the next question; also announce for any further questions.

Sure, sir. (Operator Instructions). The next question is from Keith Bachman from Bank of Montreal. Please go ahead.

Hi. Thank you. You talked about the financial vertical in terms of the March quarter, but I'd like to hear some comments as you look out over the next couple of quarters. It is a growth market? Will it grow faster or slower than the Company average? Any kind of color there?

And then the second question is, relative to some of your comments, as you look forward, how do you compare it with say what TCS mentioned yesterday and why do you anticipate growing slower than TCS? And that's it from me. Thank you.

So I'll answer the second question first and then I'll hand over to Soumitro to throw some color on the banking and financial services sector.

Here's what we believe. At the end of the day we don't guide for the full year. We guide only for the quarter. To that extent what you're seeing is a quarter one guidance for us. We haven't given any guidance for the full year. So it's difficult for us to comment as to (background noise) TCS; how TCS is going to do and how we're going to do vis-a-vis TCS because fundamentally we don't guide.

The second part -- for the first part of your question I'll give it to Soumitro to throw some color on the banking and financial services area.

Yes, hi. So I'll give you slant in terms of the respective verticals as well as the geographies, right. So, as I said earlier, insurance and retail banking is showing robust growth. Investment banking is a little bit challenged and that is directly related to how the trading volumes are among all the investment banks and it is direct relation to the market. So we are seeing, in retail banking as well as insurance segment, customers spending a lot in terms of growth initiatives, how to launch new products, new geographies, new channels, etc. While in investment banking perhaps the focus is more in terms of taking cost out, variablizing the cost, asset monetization. And the other place where they're spending money is regulatory. So that's at a segment level.

In terms of the geography spread, we are seeing specifically a lot more traction in UK and Europe as far as retail banking is concerned. At least three of the top UK banks we are working with, and there are big initiatives in all of them in terms of both revenue generation as well as cost take out.

Overall, from a portfolio perspective of the emerging markets, we believe that there is a lot of money being spent in the emerging markets. And the high focus area really there is in banking, and, within banking, the core banking space. So what we have done as part of the new year strategy, is to form a dedicated unit, focusing on the emerging markets, with a primary proposition around core banking. So we are building a team which focuses on core banking as a fundamental offering. And, in addition, also transformational initiatives outside of core banking in the insurance -- in the banking space.

In insurance, a lot of the global insurance companies are expanding their footprint into these markets. So we are also focusing on building solutions where there can be an insurance-in-a-box proposition which we are taking to these insurance companies.

Keith, this is Jatin here. Just adding to T.K.'s comment on guidance. So if you see last few years of Wipro's performance you will see that there is an element of seasonality in Q1 which flows in. So I think that has also contributed to our guidance for Q1.

Okay, fair enough. But just coming back to the question, would you expect the financial services vertical in aggregate to grow at below -- at or below the Company average growth in CY '12? And that either be from your, Wipro, perspective and/or the industry perspective. In other words you talked about the pipeline being good. Does the pipeline -- do you see some recovery in the pipeline that turns into growth as we look at the back half of the calendar year for the financial services vertical? Thank you.

Yes. Keith because we don't guide for full year, either for Company or for specific verticals, let me take you for the last year performance you will see that FS -- the banking and financial services has been in line with the Company. And we continue to see a robust pipeline for financial services as we enter the year.

Okay, thank you.

I think, Marina, Swami is the last one. That would be the last question. I think he's got some follow up. So after his question we will close the call. At the end give me the control, okay?

Sure sir. Ladies and gentlemen, we will take one last question from Swami Shanmugasundaram from Morningstar. Please go ahead.

Sorry for the drop and thanks for accommodating me again. My next question is about your oil and gas business. Looks like you guys have been showing a very good momentum on this and I assume some of it is from SAIC acquisition. So my question is can you talk about how integration is going and how does the client base look like; rough estimate on multi-million dollar accounts?

So, on the integration of the SAIC side I'll ask Rishad to talk to that.

So the integration is complete and the integration has actually gone very well. It's become an integral part of our oil and gas business. And if we see the traction that we're seeing relative to our overall plan at the time of closing the deal, we're very much on line with the plan. So it's going well.

Any --

Are there other -- go ahead, Swami.

Yes. Any inputs on your -- the client base, multi-million dollar accounts? I'm trying to understand -- how does the pipeline look like?

So the pipeline is strong. The beauty of that deal was we got a high number of clients who were highly complementary to our client base. And we're seeing good traction in terms of taking our services into that client base and taking the competency, on the upstream side of oil and gas, into our client base.

Sure. I think -- my last one is about the onsite/offshore mix. So I just wanted to know, how do I look at that going forward. Onsite contribution, if I look at that, it's gone up over 200 basis points over the year. Is this a temporary phenomenon as you invest in strengthening your (inaudible) and client mining? The reason I'm asking is it does look it does have an impact on the margin. The margins have come down from 22% to 20%, so just wanted to get your take on that.

So, Swami, this is really a reflection of two things; the kind of demand that we see and also the new project starts. Most tend to be more onsite centric to begin with. So I think the trend that you've seen over the last four quarters where the work has been more onsite centric, is really a reflection of the deals that have come through and is available in the marketplace.

And going forward we continue to see a little bit more onsite centric deals. And to that extent, I would say that there would be a little bit more bias towards onsite than it has been in past.

Sure.

Having said that, Swami, what I must add is this business or this industry has evolved over the years to move -- to continue to move work offshore. And as we mature into this account, I am reasonably confident that we will have a lot more offshore in future quarters.

Sure.

Swami, are you done with your questions?

Yes, yes. That's it from my end. Thanks again for taking my call.

Okay. Thank you so much. So, Marina, we will conclude the call. Thank you very much for your active participation. We -- the IR team is available for any offline questions. Remember May 18, Analyst Day in New York. Thank you so much.

Thank you, gentlemen of the management. Ladies and gentlemen, on behalf of Wipro that concludes this conference call. Thank you for joining us and you may now disconnect your lines. Thank you.