Wipro Ltd (WIT) 2014 Q3 法說會逐字稿

Ladies and gentlemen, good day and welcome to the Wipro Limited Earnings Conference Call.

As a reminder, all participants' lines will be in the listen-only mode.

There will be an opportunity for you to ask questions after the presentation concludes.

(Operator Instructions) Please note that this conference is being recorded.

I now hand the conference over to Mr. Aravind Viswanathan.

Thank you and over to you, sir.

Thank you, Inba.

Good evening and good morning to all of you.

Wish you all a very happy and prosperous new year.

A warm welcome to all of you to our quarterly earnings call.

We will begin the call with business highlights and overview by T.K. Kurien, Executive Director and CEO followed by the financial overview by our Executive Director and CFO, Suresh Senapaty.

Post that, the operator will open the bridge for question and answers with the management team.

We have the senior management team of Wipro present here to answer all your questions.

Before Mr. Kurien starts, let me draw your attention to the fact that during this call we may make certain forward-looking statements within the meaning of Private Securities Litigation Reform Act 1995.

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

The uncertainties and risk factors have been explained in the detailed filing with SEC of USA.

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

The conference call will be archived and the transcript will be available on our website, www.wipro.com.

Ladies and gentlemen, let me now hand it over to Mr. Kurien.

Happy new year to all of you.

Good evening to all the folks in India and good morning to all the folks who are calling in from North America.

It's a pleasure to talk to you.

I'm happy to announce the results for the third quarter of fiscal 2014.

We have achieved a sequential revenue growth of 2.9% in reported currency and 2.3% in constant currency.

We continue to see a healthy pipeline of customers, especially in the US, who were previously sitting in challenged sectors are more amenable to making discretionary investments.

While clients are still in the process of finalizing their 2014 technology budgets, we expect budgets to remain stable or to increase marginally.

Within the technology spend, we see increases in change-the-business budgets and pressure on the run-the-business budgets.

Account management continues to be a key area of focus.

Our top five customers grew 4.7% and the top 10 grew 3.8% sequentially.

We saw good growth in healthcare and life science, 7.6%; financial services, 3.1%; and energy and utilities, 4.8%.

From a geography perspective, we also saw strong growth from developed markets with US growing at the rate of 3.2% and Europe growing at the rate of 5.4%.

We see continued momentum in our global infrastructure business which grew 5.6% sequentially.

Given the quality of the pipeline and the order book, we expect the global infrastructure business to grow faster than Company average.

This quarter, our BPO business also turned substantially positive and we grew 4.1% sequentially.

Overall, all the service lines, including product engineering service [at] 3% fired fairly well for us.

Along with this business growth, our customer satisfaction also has been improving.

Last quarter, we've improved our customer satisfaction index by 4% compared to the same period last year.

As of this quarter, I am happy with the progress and we continue to make investments to position ourselves for the future.

I'll talk a little bit about the key themes we'll be focusing on at the enterprise level.

An evolved digital strategy to deliver consistent user interaction has become increasingly critical for both acquiring and managing end-to-end customers.

We are making investments in consulting platforms and intellectual property to better leverage our investing capability in accounting customer experience, analytics and mobility.

This holistic approach has delivered desired outcomes with four new accounts this quarter.

On the back end, we see customer demand for process simplification, standardization and automation.

Our proprietary service mix platform addresses application management, infrastructure management, cloud and security operations in an integrated fashion.

This is delivered through a combination of machine learning and hyper automation.

Last quarter, two customers signed up for this and they are seeing savings up to 40% beyond the labor arbitrage savings.

As we drive these fundamental changes, our employees remain engaged.

The latest employee survey conducted last month indicated the employee satisfaction has improved almost across the board compared to our 2011 survey.

Thank you very much for your time.

And I'll now hand it over to Senapaty.

Thank you.

Good day, ladies and gentleman.

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 rates in New York City on December 31, 2013 or cable transfers in Indian rupees as certified by the Federal Reserve Board of New York which was $1 equal to INR61.92.

Accordingly, revenues of our IT services segment that was $1,678 million or in rupee terms, INR103.27 billion appears in our earnings release as $1,668 million based on the convenience translation.

Total revenues for the quarter were INR113.3 billion, an increase of 18% year-on-year.

Total net income for the quarter was INR20.15 billion, an increase of 27% year-on-year.

Excluding the impact of non-recurring expenses related to cessation of Wipro branded IT products, net income grew 28% year-on-year.

In IT services, our revenue for the quarter, 31 December, 2013 was $1,678 million, sequential growth of 2.9% on a reported basis.

We had strong growth in healthcare, life sciences and services business units.

The revenues in the business units grew by 7.6% sequentially.

Operating margins for the IT services segment continued the strong improvement.

Our efforts towards increasing operational efficiencies in the business yielded a margin improvement of 54 basis points.

We see a stable pricing environment.

Our newer deals are competitive.

Coupon rates are not in the pressure, but customers are seeking more value for money.

On the exchange front, our realized rate for the quarter was INR61.53 versus a rate of INR61.73 realized last quarter.

As of period end, we had about $1.5 billion of outstanding foreign exchange contracts.

Our IT products business grew by 2% on a year-on-year business.

IT Products revenue and margins were impacted by the cessation of manufacturing of Wipro branded desktops, laptops and servers.

The effective tax rate for the quarter was 23% as against 22.9% in the previous quarter.

For the quarter, we generated operating cash flow of INR14 billion, which was 70% of our net income.

We generated free cash flow of INR12.5 billion, which was 62% of our net income.

We will be glad to take questions from here.

(Operator Instructions) Joseph Foresi, Janney Montgomery Scott.

Hi.

I was wondering if you could talk a little bit about client behavior over the last couple of weeks.

Any thoughts on IT budgets and spending for 2014 versus 2013?

Overall what we are seeing is that, Joseph, what we are seeing is that broadly steady to, I would say, marginally positive, is what we are seeing right now.

Again, we don't have all the data points because we are still collecting them.

We expect to have a clearer picture by the end of January.

But if you look at our customer base in about -- we've covered about 35% to 40% of our customer base, that's we are hearing from them.

And does that translate into a better potential outlook for this year versus last year some of your competitors out there?

Absolutely, no question about it.

That is, if I look at the demand environment, the demand environment is clearly better.

There is going to be pressure in terms of pricing and value clearly on the commoditized services.

We're going to see more and more of that as we go forward.

But discretionary budgets have started coming in.

The only problem with discretionary budgets are that they are typically for two quarters.

We don't see any of those long-term projects that we used to see in the old days coming back.

So to that extent, we just have to remain kind of agile.

Our bench strategy has to be a little different, especially for on-site so that we can kind of be flexible when customers need it.

But other than that I am not seeing any other change in the market, but clearly the demand environment is up from last year.

Are you seeing any shifts from the traditional AD&M work to SaaS and how is that impacting your model as people make that transition because I know the recovery or the potential recovery this year is going to be different than in the past, but I am wondering how that fits into the [full mix]?

So for us it's extremely critical that the application management business that we have, we haven't yet seen a secular decline in that business because of the cloud.

We haven't yet started seeing big impact of that.

We are seeing it [on the edges], we are seeing it in HR, we are seeing it a little bit on CRM, but we are not seeing a secular trend.

But what we are clearly seeing is we are seeing opportunities which are coming up where people want to variablize their cost with or without the cloud and that's a fairly big [threat].

So to that extent, I would assume that from our perspective the challenge that it poses for companies like us is that our risk profile changes quite a bit.

But if that's the way the market is growing, we have no choice but to kind of embrace that.

Got it.

Okay.

And then the last one from me, maybe you could just give us an update on how you feel like you're progressing towards returning to industry growth rates at this point.

I know you've put some targets out there before, but maybe you could just give us an update on sort of your move in that direction.

So we're fairly positive about our movement.

If you look at the past couple of quarters, we've been performing above average as far as the industry is concerned.

To that extent we are kind of pretty happy about what we have done over the past couple of quarters.

Our quarter four guidance also is with you.

So to that extent you can see where we are going to land up.

Going forward, our ambition would be to make sure that with a changed demand environment, better execution and a share gain we expect that next year would certainly be better.

Thank you.

Sandip Agarwal, Edelweiss.

Yes, I have a couple of questions from Kurien and then probably one question from Senapaty.

First question is about what is the different trend which you are seeing in the IMS space?

We have always been very strong in this space, but probably our focus on emerging markets and Africa has not let us a lot of benefit in past few quarters, but I think that is catching up now.

So what is definitely happening there?

And secondly, if you can please throw some more light on the digital space.

I understand you're saying that customer interaction is becoming critical.

But I am a little worried on the side that whether the current architectures which are there in place will they support the big data going forward and whether the client is mentally prepared to spend that kind of money again.

So that is -- and probably if I can pitch on more, is privacy still a big concern because when we are rating a lot of technology reports, there has been still mention about privacy advocates being very aggressive.

So if you can answer these three questions.

Okay.

There were three questions they way I understood is one is on the infrastructure space, what's different, second question was on privacy and the third was in digital.

Am I right?

Yes, yes.

So, GK Prasanna, who's taken over the leadership of this particular business is right here with us.

And since he's the [lion] of the infrastructure space, he can give you a sense of what has changed over the past couple of years.

Thanks, T.K. Firstly, it's a very large space.

Infrastructure services globally is a very large space.

It continues to be very large and it's been fairly secular for us in terms of various sectors where it is growing.

But particular to this quarter, we have really had good growth in health care life sciences as our vertical and Europe is strong now, right, so we see quite a lot of traction in Europe.

What has changed and apart from the usual pressure on cost, all the transitions that we have now are all transformation related.

So there's a very strong transformation component in them, process transformation, technology transformation, a lot of consolidation and an integrated delivery right now, including private and public cloud and on-premise segment.

So there's a fairly strong component of transformation that we see in most of the contracts that we do now.

Pipeline is healthy and is growing.

We're confident of the space we're in and our results are showing that at this moment.

Back to you, T.K.

So on the digital space, I'll give you a quick view of what's going on in the digital space.

Fundamentally, we see the opportunity as, if you look at three phases of customer acquisition and retention being building a pipeline, executing and converting the pipeline and post-sale experience, ultimately what we see is is that we see both the physical channel and the digital channel kind of merging and data from one being used in the other.

That's really the big play that we see in this particular segment.

Fundamentally, what we're doing is building intellectual property around this and offering this as a service.

Now, the top line from that segment is not going to kind of move the Wipro meter very significantly over the next couple of years but we clearly see there's an opportunity whereby we address a completely new class of buyers and that's important for us.

So as we address a new class of buyers and the new class of buyers starts investing more and more in technology, we believe we're in a pole position to really exploit that segment.

So that's the play there.

Is privacy going to be an issue, absolutely yes.

But before we have privacy issues there are many other companies who play on the net who are far bigger who have far bigger issue than we do.

So to that extent, I think what's going to happen is there are going to be rules that are going to come out as far as privacy is concerned.

It's not going to be immediate.

There's too much of vested interest in that one, but over a period of time clearly privacy will become an issue and that will challenge some of the standard models that we see today.

And the last question was on the architecture side.

Do you think that kind of spend because most of the systems and applications which we see which support, I think, particularly on the architecture side there may not support the big data which is coming in.

So are clients ready for that kind of spend?

So I will ask K.R. Sanjiv to kind of answer that question.

Sanjiv is an expert in the analytics space and he can kind of take a view on that.

Yes.

So, you are right.

The architectures which are currently in place in most of the organizations will undergo a change, primarily because of the kind of data volumes and the kind of real-time nature which is creeping into the applications space.

So you'll definitely see a much more multi-tiered architecture replacing the existing single-tier architecture which exists in the typically the data space.

And this multi-tier would be consisting of the conventional tiered standard historical data layer.

It will also consist of a lot of appliances which will speed up the data processing which is required in a real-time environment and a third layer would obviously the unstructured data, the data which is in a large volume which needs to be stored and analyzed.

You will see a migration of this current architecture into this kind of a multi-tiered architecture to handle all these digital and the data volumes which are creeping in.

And since Sanjiv is already there so I will quiz a quick question, one more question, I am sorry for that, but do you see artificial intelligence also spreading beyond robotics?

The rate was pre-Lehman time, but post-Lehman actually it all went away, particularly in the financial services time.

So do you see artificial intelligence becoming more and more relevant other than robotics or it is still mainly robotics?

Sandip, can we do one thing?

At the end, if there are -- if other peoples have asked the question and there is time, we can always answer that, if you don't mind.

Yes, sure.

Go ahead.

Sorry.

Thank you.

Moshe Katri, Cowen.

Thanks.

This is a question for Suresh.

Margins were up sequentially in IT services.

Can you talk about some of the pluses and minuses that kind of drove the change on a sequential basis and then in that respect, can you give us any sort of kind of big-picture statement about the outlook for margins for the next 6 to 12 months?

Thanks.

Moshe, quite simple so far as last quarter is concerned because deltas we had on currency or offshore were 10 basis points here and there.

Largely all of it has been basically productivity improvement.

When you are talking about standardization [and decode] and putting in a lot of productivity tools to be able to make sure that the deployment does not have to be as much as it was in the past, we have been able -- or automation, hyper automation as is called, I think all this has led to this kind of margin improvement.

It has been a journey for quite some time and still much more to be accomplished.

So as you go forward, our expectation is while in the shorter term there can be some kind of plus and minuses where on the medium to longer term, we would expect that to have a positive bias on an organic basis.

Okay, great.

And then can you talk about some of the large deals or maybe quantify the number of large deals that you won during the quarter?

How does that compare to the last quarter or two and then maybe talk about which verticals were you seeing the most success in terms of winning some of these large deals and then in that context comment on your proposal or deal pipeline for the next 6 to 12 months?

Thanks.

Yes.

Moshe, if you look at the [grant] of deals, we haven't shared the number of deals or the order book et cetera, but it has been as decent as it was in the past few quarters and it is looking good as we go forward.

I think the pipeline is also good and most of the drivers as we have seen has coming from life sciences healthcare, it has come from global infrastructure services, it has come from financial services, and also E&U verticals.

So these are the verticals which has given us a lot of kickers and as you go forward some of these particular verticals will continue to be the growth drivers.

So we have already seen traction on the GIS piece of the business this quarter.

We also got good growth from the BPO.

We saw America coming back because we had some kind of a mutedness in the growth and we have got some positiveness in US.

We are investing clearly in the Continental Europe as you know that we have a leadership established from a local leadership.

And from that point of view we are investing for the future in all new geographies where we are under penetrated today.

And therefore we think as we go forward the optimism continues to hold good.

So Moshe it's pretty clear, if you look at the segments that have performed last quarter, health care we had an outstanding quarter.

Banking and financial services has done well.

If you look at our [hunting] pipeline, our hunting pipeline and our hunting wins in this year compared to last year has doubled, it has absolutely doubled in terms of new logos.

And if you remember the approach we laid out a couple of years ago when we started this was that we only go after accounts that we want which are going to give us a runway for growth.

To that extent it's been harder than we planned [it out to be].

But clearly the ambition is clearly there to and the hope is that we'll be probably more successful.

So that's broadly the kind of strategy that we are following here.

And then just last question on financial services, I know this is a vertical that Wipro has been trying to expand into.

Can you talk about the progress on that strategy in your view?

And then how much of that success down the road is going to be attributed to your success in terms of penetrating some of the European -- some of the countries in Europe, especially in Northern Europe?

Thanks.

So I'll hand it over to Shaji Farooq here to take that question.

Hi, Moshe.

This is Shaji.

As you know it really goes back to T.K.'s comment earlier that one of the secular trends we're seeing is the shift of spending from run-the-business into change-the-business in our projects and what we have done are several things.

One is we have a renewed focus on driving capabilities and domain knowledge and creation of artifacts around about 10 or 12 different themes which we think are extremely germane in the current context.

Examples are things like risk and compliance or simplification, resilience, payments of course, wealth management.

So these are areas that we intend to invest in and drive our competency in, and we believe this will support our growth.

We are also looking at how we should realign our delivery engine to deliver very successfully and repeatably as we move into increasingly towards the change-the-business kind of projects.

Great.

Thanks for the color.

Operator, can we have the next question please?

Sure.

Sandeep Muthangi, IIFL.

Hi.

Thanks for taking my question.

Congrats on a good execution.

I was wondering if you could give us a similar color that you have already given on BFSI on the other verticals and cover some of the challenges and the demand trends that you are seeing in these verticals and probably summarize it up with the verticals where you are most positive on and where you are a bit more cautious?

So what I'll do is that I'll hand it over to Sangita to talk a little bit about healthcare and life sciences and then what I'll do is (technical difficulty) and then what I will do is I will go to Ayan Mukerji of telecom and if you are kind of happy with those two then -- if you want more we can always have Bala on the line.

Sure.

Thanks.

But I (inaudible) talk to Sangita and Ayan.

Hi, Sandeep.

Happy new year.

Happy new year to you too.

And a very good evening.

So in the healthcare and the life sciences in line with Wipro's strategy, we continue to see momentum around mining of our large accounts.

The second big growth momentum has really come from our differentiated domain solutions that are largely around four themes; one which is patient-centric consumerization; second which is digitization, building digital marketing platforms for our customers; third which is compliance; and fourth which is innovation around R&D.

We believe our twin strategy around mining our existing accounts as well as our differentiated domain solutions that provide relevance to our customers would be the basis for our growth.

Ayan?

As far as global media and telecom is concerned, I will give you the color across the three segments that we operate in.

If you look at the communication service providers, we continue to show strong order book and strong revenue growth.

And our deals are essentially in the areas of transformation which is almost 50% of our deals and the balance across cost savings and customer experience.

We are also seeing a lot of convergence between IT and networks.

As far as media is concerned, we continue to show strong growth too across the sectors of media, cable and satellite and our focus continues to be on digital marketing, online education, media analytics and studios.

And last and not least, as far as our telecom equipment vendors are concerned, that industry is stressed at the moment.

We are seeing considerable stress as far as R&D is concerned.

But on a holistic basis, we continue to see as far as global media and telecom concerned, we continue to be optimistic and stay with similar run rates with the rest of the Company.

Bala, can you go ahead?

Happy new year to you, Sandeep.

From a manufacturing perspective, the tech sector which has been traditionally a problem for us has bottomed out.

I would say that what we are now seeing is improved account mining.

We've had increased market share in some of our top accounts.

We have at least one account in the $100 million segment now and we have accounts that are more than $75 million for us.

So the account mining strategy has paid off quite significantly for us.

Where we see the opportunities going forward is in terms of our enterprise customers wanting to move to the cloud as part of their variabilization journey.

There is a significant push towards manufacturing companies wanting to be more agile in the current environment and we see that as an opportunity and that is being reflected in the pipeline.

We have a fairly robust pipeline and this time around in the US as well.

The US has been traditionally not strong for us in the last eight quarters or so, but we see a recovery in that space as well.

So overall, it is looking better than it was in the past.

We still have some ground to cover in terms of catching up with industry growth rates.

But with the tech sector returning to at least a flat to marginally positive growth, we're a little bit more optimistic about the coming quarters.

Thanks so much for that.

Just one question on the kind of demand commentary that you mentioned, we've seen quite a few companies talking very positive about the demand conditions for the next year, including discretionary spending and the digital stuff.

Just one quick question on that.

Do you think we will see the usual demand pattern where the first half is much better than the second half in the sense that we'll see a front ended kind of a year for FY15 or what do you think the initial indications are?

Is that question to me Sandeep or to T.K.?

Sandeep, yes, I'll take that question.

It's a little too early to call right now.

So to that extent I prefer to wait.

We've just finished half of the first month and to that extent it's a little too early to call which way it would go.

In the April time frame when we have this call, I think we will have a fair idea of which way we are heading.

Okay, fair enough.

Thanks, guys.

All the best for the year ahead.

Thank you.

Manish Hemrajani, Oppenheimer.

Thanks for taking my call.

Good quarter, guys.

In your guidance how much contribution have you baked in from Opus acquisition and what contribution do you expect from Opus in 2014?

So last year Opus top line was roughly in the region of about $40 million.

$43 million.

$43 million, to be precise.

And that's what we estimate that we are going to do in the full year.

For the quarter, we don't specifically guide what we have baked in.

But that's what we did last year and you could use your own estimates to figure out how much is included as part of that guidance.

Got it.

BPO showed good growth this quarter versus recent trend, but ADM challenges seem to be continuing.

Can you dig a little bit deeper into ADM on the discretionary side and the maintenance side and how do you see this piece of business playing out over the next year or so, especially as we see a shift to the SaaS model?

So we see ADM business long term going back to the Company growth rates.

We don't see that kind of dragging the Company growth rates by too much.

So to that extent, I guess we would see the turnaround in the next couple of quarters.

And again, if you look at the ADM growth, it's dragged the Company average by roughly about 1 percentage point.

Got it.

Your headcount levels [were down sequentially] this quarter.

We haven't seen this in the last eight quarters or so.

What would you attribute that to and can you throw some light on your hiring plans for the March quarter and maybe for the rest of the calendar year?

Also in the past, you've talked about an attrition range of 13% to 15% that you've been comfortable with, but this quarter was above that.

How are looking to address that?

So as far as attrition is concerned, let me answer the three questions.

Number one is, in terms of headcount, given the levels of utilization that we have we're fairly comfortable that we can kind of meet future demand.

Our hiring for last year continued on plan.

We haven't changed a single number as far as hiring is concerned.

We haven't deferred our hiring.

We continue to hire exactly as per plans.

This year too we don't expect to see any change in our hiring pattern and our belief is that long-term secular high is far more important than short-term burst.

So we would continue to hire in the same levels that we hired last year.

We don't expect a big change there and we're communicating the dates to all the colleges we're hiring from and we expect to kind of remain with those dates.

As far as the absolute headcount is concerned, the key is this.

And for us it's important that as we drive productivity, the mix of the work forces change.

We need more people in front of the customer, more architectural skills, more people with more integrating abilities.

And to that extent the number of people that'd be required just to back who are doing regular coding is not going to be the same number as we have seen in the past.

So there is a shift in workforce.

So the traditional pyramid that we see, especially for change-the-business projects is moving into some kind of a -- it's more like a (technical difficulty) it's more heavy on the top.

Got it.

That's all I have.

Thank you.

Edward Caso, Wells Fargo.

Just on discretionary demand, I think you talked about the US being relatively strong, but didn't mention anything on Europe.

What are you seeing particularly in Europe on the discretionary side?

On the discretionary side, Ed, what we're seeing is two things.

If you look at the demand environment, US is, like you said, strong and UK kind of tends to lag US by roughly about three to six months.

That's typically the way it works.

Continental Europe, we are seeing bits and pieces of activity driven primarily by industry [segments].

So some industries come fast on manufacturing which remains challenged where discretionary spend is still very, very tight yet others which are kind of opening up their wallets a little bit.

Great.

Thanks.

And then the next one just on BPO, I was wondering if you could talk a little bit more about the success, particularly in the BPO area, that you've had this quarter where you've seen the strength and what's been driving it?

I think there are a couple of areas where we've seen clear -- back office processes, we are clearly seeing a significant level of strength there.

But again, having said that, Ed, we really like to kind of grow BPO at an extraordinary rate.

We think it's a little too early to kind of declare success out there.

We've had one quarter of performance.

Going forward we expect to see this performance continuing, but I'd rather watch and wait before I declare success (inaudible).

Fair enough.

Then just on M&A, can you remind us what your strategy is there, particularly after you did your first transaction I think in a little while?

So what are you looking to get out of your M&A program?

Well, it's pretty simple, Ed.

Fundamentally, what we're looking as far -- our M&A program is pretty clear.

There are three areas that we're looking at.

One is new capabilities, number two is new geographies, and number three would be new vertical areas.

Two out of three kind of come together, then it makes sense for us to do it.

If two out of three don't come together, it just doesn't make sense.

So if you look at Opus, the acquisition that we made recently, we consummated that only this month.

To that extent the last quarter's revenues doesn't include any Opus.

Fundamentally what happens is an extension of our go to market portfolio.

Shaji can give you a little bit of color on the strategy behind that, but that's fundamentally what we're trying to do.

Yes, so the focus really is to provide a holistic set of services.

And if you look at the kinds of acquisitions we have made in the mortgage space, initially it was focused on building certain product capabilities and that's the story that has evolved very well for us and continues to evolve well.

Opus extends our capabilities when it comes to providing BPO services for mortgages.

And in fact raises the bar as well because it takes us into the space where the services are higher for higher value, focusing on risk management.

So I think that's a classic example.

Also something to keep in mind is that this is also the kind of business that can benefit from what Wipro brings to the table so we can automate things, we can do things differently and more efficiently and so the combination tends to be a winning combination, and that's why it made a lot of sense to do this particular deal.

Great, thanks.

Then just the last one is a clarification question on the IT products business, what should we be looking for from this segment?

Is this going to be wound down or are you going to keep a component of maybe the IT products and hardware that you deliver in systems integration type deals reported in that segment?

Thanks.

So as far as IT products are concerned, I'll give it to Soumitro to kind of handle -- to answer that question because most of the markets as far as IT products is really India and to a large extent the system integration deals that we do.

So Soumitro who runs our India and Middle East markets can [talk to that].

Hi, this is Soumitro here.

Our positioning and value proposition in India is very, very different from what it is globally.

So here we are providing to our customers a complete package of products which is hardware products and software products as well as software services and we are classically a system integrator.

So typically any hardware which gets sold will be services-led.

Classic examples are what we do for, say, banks in say core banking segment, especially in the public sector units where the customer is really looking at a turnkey solution, right.

So there typically what we are providing is a core banking platform, the infrastructure and all the other software products which [go down with].

So our positioning is very clear that we'll say, a site positioning, A. And B, on products, it will always be services-led product.

So you will still be reporting some revenue in the IT products business going forward even without you manufacturing the Wipro branded hardware?

Absolutely.

Absolutely.

What we have done is that we have exited the [CT] business but we continue to report some revenue in the IT products side as we do system integration deals.

Great.

Thank you very much.

Keith Bachman, Bank of Montreal.

Hi.

In your comments this morning you suggested that your growth rate will improve this calendar year versus last calendar year and I just want to confirm if that's true.

But as part of that, you're suggesting that ADM growth you think will pick up.

I'm not sure why it will pick up because the forces that you have identified including SaaS business models I don't think that changes.

So if you could just talk about the growth rate, why you think growth rates pick up this year, and in particular, why do you think ADM improves.

That's my first question.

Keith, it's pretty simple.

As far as ADM is concerned, we are really playing a share game there.

And as the bottom end of the pyramid gets commoditized what happens is we believe that both from a product perspective we talk about service mix.

We believe we have a unique proposition where we can really provide differentiated products at a completely new price point, and we think because of that we'll be winning share.

The second component of what you asked about the cloud, while cloud -- the cloud is coming and clearly eating up a lot of the applications on the edges, but fundamentally today it's restricted to two areas.

One is on the sales force side and other one is one the HR side.

This is where you are seeing big, big implementations going on.

In both these cases, even though the per-unit implementation for us the ticket sizes are not as big as the old deals that we used to get, we still see plenty of work happening on the front end in terms of integration.

So that's an area of opportunity for us.

So really what's happened is the pool has moved from one end which is typical application deployment in the path into more consulting on the front end when it comes to these two services.

To that extent we don't see overall the application management bucket actually coming down.

Okay.

And you talked about growth rates improving this year versus last year, would you anticipate being at market growth rate this year?

(inaudible) to comment on that because, number one, we don't give annual guidance; number two, all I can tell you is sitting where I am right now we're clearly more comfortable now than we were last year at the same time.

Okay.

Well let me ask a margin question because you said you anticipate some of the automation factors helping margins, but I want to press on two areas.

Number one, you said the clients are looking for more value from engagements which seemed that translates into better pricing per unit of work.

And then secondarily, you've also suggested that in terms of the hourglass analogy that in fact there needs to be more on-site work, I think, is the translation.

So why wouldn't those impact margins in a negative way?

We didn't say it would impact margins in a negative way.

I think what Senapaty basically said was that it will be a narrow range with an upward bias in the long term.

Yes.

Sorry, but I didn't suggest you had indicated it would, I am asking why wouldn't indicated if you've to put more on-site feet on the street and then clients are basically asking for pricing pressure in the near term, why wouldn't that translate into some margin pressure?

So I think there are a couple of reasons behind it.

Number one is, if you look at our fixed price percentages, they remain pretty high.

So to that extend, whatever money we make out of automation and everything else, we keep the gains.

That's one reason.

Second is on D&M projects again, our belief really is that ultimately what the customers look for is end-to-end -- the cost of the value that they get on end-to-end projects.

So, for example, if I am doing areas -- a work in areas which are cutting edge, the pricing that I get in that area is significantly higher than what I get in my average ticket size.

So overall, we are pretty confident that we have enough [experience] right now to make that comment.

Okay.

That's it from me.

Thank you.

Pankaj Kapoor, Standard Chartered Securities.

Hi, sir.

The first question actually on your India business where in the services side itself we have seen a good growth this quarter.

This is slightly contrary to what you and some of your peers have done in the quarter and outlook that's given, given the election year in the country.

So I was just trying to understand what [growth we gross] for us in the India business and how sustainable do you see that in the next two, three quarters?

So, Pankaj, I must clarify before I hand over to Soumitro that the way we classify India business, India and Middle East business.

So with that color, let me hand it over to Soumitro.

Thanks T.K. So from a geography aspect, as T.K. explained, one looks out at India as well as Middle East.

Now from a growth perspective, this quarter both Middle East as well as India have done pretty well.

And really the growth has come from -- if I look at Middle East, the growth has principally come from two verticals, so two segments.

So one is the oil and gas segments, the other is the engineering and construction segment where there is a lot of investment which is happening in that geography.

As far as India is concerned, financial services has been a growth driver and even in government we had couple of decisions happening our way.

In terms of the type of work, infrastructure services has been very strong.

Traditionally in India we have been very, very strong in infrastructure management services which continues.

But the good news is that there is a lot of opportunity on the applications side as well, and we've seen some good traction, especially in the financial services space around data warehousing and analytics as well as some of the applications which we've seen in the segment which is around production planning and control.

So broadly speaking, both India and Middle East have fired this quarter.

Sir, in terms of the sustainability do you think that the India business may [misuse it for sustaining through risk] because of the election year in the near term or do you think that because of our service mix, it will turn out to be more of a normal year for us?

No, I guess, especially in the government sector things will slow down.

It has slowed down.

So decisions are going to be challenged till such time the elections are over.

But I don't see that impacting so much in terms of the financial services segment which has been a growth driver.

Okay.

Fair enough.

And my second question is on the overall outlook.

I mean, you have been doing quite well in 2.5%, 3% kind of a sequential growth for the last two, three quarters.

I was wondering like which [metrics] should we be looking at or you internally could be focusing on to take a view about the sustainability of this growth or a possible pickup over the next few quarters if you can help me with that?

Pankaj, it's very simple.

Watch our guidance.

I think that will give you a sense of where we are going on a quarter basis.

So that is [unfortunately only for the] next quarter, but like if I have to [figure slightly] longer-term picture, because our head count as you know -- I mean, as you also mentioned it, it's really not the lead indicator anymore, and I take your point on that.

If you can share some other [methods] that you might be tracking internally this can give some comfort or some color to us in terms of where we are in terms of our movement?

Pankaj, it's a tough one.

I tell you why.

Because whatever data we share publicly, it's very difficult to based upon that to figure out long term where we are going.

At best you can kind of read into our commentary and you can read -- you can pick up from competition on where we are winning.

That's pretty much all that I can tell you.

And Pankaj, Jatin here.

Even in the past I think while hiring had been one lead indicator for everybody, but that also would have at best a [serious] correlation because the people used to adjust the utilization levels for demand versus supply.

So it is at best a story of intention.

So from that standpoint, I don't think we are giving any less or more data point than what we were giving in past.

As T.K. mentioned, our commentary can be a good indicator vis-a-vis the confidence into a longer-term growth.

Fair enough.

Thank you and all the success.

Trip Chowdhry, Global Equities Research.

Thank you and a very good quarter.

I have three very quick questions for you.

First, we talked about in the conference call a little bit about mix shift of your employees.

I was wondering, if I look at your business, I can categorize the employees into three very broad areas; functional skills, coding skills and maybe architectural skills.

Can you give us a trend about where there is more demand and what kind of skills between these three categories or if you want to put some more categories, that's fine?

Then I have two more quick questions for you?

First, on the skill metrics that we have within the Company is Saurabh Govil.

So I'll pass it onto him.

So, Trip, if I could get you right, you've mentioned about functional skills, architectural skills and coding skills.

I think as we see more and more demands are coming from architectural people, people who are more customer facing, so I would also look at domain, it is a very clear skill which is required.

And the base of the pyramid, the coding skills, I think there it's more and more of automation coming that's becoming less.

So that's the shift which is happening.

Function would remain the same it is, but the accent is more on customer-facing people and skills.

The second question I had was regarding the deals, in the commentary, in the conference call we are saying that large deal size are pretty much gone.

I was thinking, can you give us some sense about the duration of a deal, the time duration.

Trip, the large deals are not gone.

I don't think we've made that comment.

But I think I will go back to it.

I think, just to kind of give you a sense, the deal sizes typically still are sitting in three to five-year time frames.

Perfect.

Last question --

[Still in] commoditized work.

Perfect.

Last question I had was in the context of an industrial structure.

I think in the month of September, October time frame, IBM offloaded their BPO unit Daksh to some other company.

I was wondering, what did IBM get it wrong because it's done well.

BPOs could be a strategic differentiation and it could be a strategic weapon to decommoditize something which is a commodity.

Any thoughts on that, where did IBM go wrong?

Trip, I have no idea.

And frankly, I think it's a good question to ask on the IBM call because, frankly, I have no idea.

Okay.

Thank you.

All the best.

It would be more like a call center as opposed to the BPOs that you talk about, more associated with the IT companies have largely, in terms of end-to-end projects, which had pieces of voice, but largely non-voice, back office and much more value-adding stuff that they do.

Sandeep Shah, CIMB.

Yes, sir.

Congrats again in terms of a good execution second time in a row.

Just, T.K., as you have said that in the discretionary side, the demand trends are actually moving from the earlier trends of third-party software implementation, which were the large-size projects, to more a digital, which are smaller in terms of duration.

So it looks like that for us in terms of a growth recovery in FY 2015, it would be largely dependent in terms of our traction in the large outsourcing deals.

So can you throw some color?

What is the positioning of Wipro as of today in terms of those large outsourcing deals and that gives you a confidence that we can now move to an industry-level growth?

Sandeep, I think there are two questions.

Two questions, as I understood.

One is about digital.

See, digital ultimately what happens if you are going to be providing [the accounts] for digital, long term we are not going to succeed in that game.

It's really as a service that's of value.

So I think what we really are trying to do is build the components to create a service around digital, that's the first part of it, because really for us, we understand annuity revenue well.

For us, it becomes very difficult as an organization.

Our DNA is not tuned to handling short-term ramp-up and short-term ramp-downs [with IPOs].

That's the first part of it.

The second part of it is if you look at the deal sizes, our pipeline clearly reveals that our deal sizes have done well.

From whatever we see of large deals, we have seen a significant improvement.

When I say significant, it's a couple of [excess] in terms of our pipeline in that particular segment.

What we really have to improve, and that's something that we're working on right now, is our win rate in that particular segment.

If we improve our win rate in that segment, my own sense is that we are off on a trajectory which is going to be very, very different.

So do you -- because it looks like that the growth has started coming, as Pankaj was saying, in the last two to three quarters.

We have now 2.5% to 3%.

So what is it -- because the renewal rebid pipeline is also increasing, so what is the status?

How do you see this as a growth trigger going forward?

And do you still not believe that with the reorganization largely behind the win rate should have improved now?

So here's what it is.

If you look at our different segments that we have, infrastructure, I think, is now performing at market, if not a little ahead of market, in terms of wins.

We have to catch up at the same win rate at BPO.

Okay.

And just in terms of the sales and support staff if you look at for the last three quarters, it has been going down.

So at the same time, we also mentioned that we are investing at the front end.

So can you reconcile this?

[I don't think we're] really going down, Sandeep.

It last quarter has gone up by 0.2%, that's a -- it's a numerical kind of a number.

So sales -- S&M really hasn't gone down.

Okay.

Support, yes, it's clearly going down.

But that's part of driving efficiency to the organization, but not sales and marketing.

We will not cut our sales and marketing, we're very clear about that.

As, Sandeep, if you see that number, it is largely around average number of the last few quarters.

So to that extent, there's no material difference there, it's only quarterly (inaudible).

Okay.

Jatin, just the last clarity in terms of we said the productivity gains has led to a margin increase.

So just in terms of utilization, if you look at the last two quarters, we have a net decline with that we also had a robust growth of 2.5% to 3% QonQ.

So utilization has not improved in this quarter.

I do agree leave in this quarter is higher which could be one of the factor for the same.

But is it fair to say that we are stressing more in terms of productivity gains than the utilization as a headroom to move up in the immediate quarter with the guidance of 2% to 4%?

Yes, absolutely.

Sandeep your [assessment is] correct.

It is both which are happening simultaneously.

Number one, we are using automation to reduce the human component of (technical difficulty).

And on second, the utilization, while on our headline number looks flat but adjusting for leave is actually definitely improving.

So it is both which have played role in terms of overall contribution to operating [profit].

Okay.

So just to conclude --

(technical difficulty) headline number, out of the 0.5% improvement that we had in operating margin, 0.1% came from exchange.

And the rest was operations.

Rest was operations.

Okay.

So just to conclude, this productivity gains journey may continue going forward and there is a likelihood that the employee addition on a net basis even may not be very high in FY15?

Well, we don't guide on either hiring or closing headcount as you are well aware, Sandeep.

Fundamentally, you can look at the utilization number which is in a very, very comfortable territory for us to meet our demand growth.

And we will continue to hire as per our need in the market and as per our commitment to the campuses and that's all I can say.

Okay.

Thanks and all the best.

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

I now hand the floor back to Mr. Aravind Viswanathan for closing comments.

Ladies and gentlemen, thank you for joining the call.

If you have any questions that we could not take due to time constraints, please feel free to write to us and we'll be happy to answer them.

Thank you.

Thank you.

On behalf of Wipro Limited, that concludes this conference.

Thank you for joining us.

And you may now disconnect your lines.