Wipro Ltd (WIT) 2014 Q4 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 line will be in the listen-only mode and there will an opportunity for you to ask questions after the presentation concludes.

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

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

Thank you.

And over to you, sir.

Thank you, Sama.

Good evening and good morning to all of you.

A warm welcome 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 all the management team.

We have the senior management team of Wipro present here to answer 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 Reforms Act 1995.

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

The uncertainties and risk factors have been explained in 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 wipro.com.

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

Good evening to the folks in India, good afternoon to the folks in Europe and good morning to all those calling in from North America.

It's a pleasure to talk to you.

I am happy to announce our results for the last quarter of fiscal 2014 and for the full year.

Quarter four has gone off well for us as flat.

We have achieved a sequential revenue growth of 2.5% for the quarter in line with our guidance.

Our investments in the areas of automation, platform-based delivery and process simplification have helped us expand our margin by 430 basis points year-on-year to 24.5%, our highest margin in the last 15 quarters.

Our EBIT growth year-on-year for the quarter has been 51%.

In addition, we saw strong deal closures in the current quarter with our order book being one of the highest we've ever seen.

We also see this momentum continuing in quarter one.

We have a strong funnel in terms of deals coming up for closure.

There is seasonality in our quarterly performance and it's playing out in quarter one too.

We continue to be confident of the momentum that we've built over the last two quarters.

As we enter the year, we see the broad demand trends remaining stable, both in terms of volume and realization.

We also believe there are tremendous opportunities around digital transformation right through the network back into the front office.

Within industry segments, we see strong demand in healthcare, retail banking, utilities, process manufacturing, auto and pharma.

We see spending far more constrained in retail, insurance and hi-tech.

From a service line perspective, we see good traction in global infrastructure services and a revival of demand in the application space.

The proactive investments in Continental Europe is showing early signs of success in terms of deal wins.

US has grown ahead of Company average.

We see our customers' business environment change significantly in two key areas.

There is demand for leveraging new digital technologies for optimizing on technology spend and also [to] depreciate in the marketplace.

We've also launched a new business, Wipro Digital whose sole focus is the CMO.

As always, our employees are our greatest assets.

We continue to drive and focus on employee satisfaction.

Our salary hike and promotion would be effective June 1.

Thank you very much for your time and let me hand it over to Senapaty.

Very good day to all of you, 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 rates in New York City on 31 March, 2014 for cable transfers in Indian rupees as certified by the Federal Reserve Board of New York which was $1 equal to INR60.

Accordingly, revenue of our IT services segment that was $1,720 million or in rupee terms INR106.2 billion appears in our earnings release as $1,770 million based on the convenience translation.

Total revenues for the quarter were INR117 billion, an increase of 21.8% year-on-year.

Total net income for the quarter was INR22.3 billion, an increase of 41.3% year-on-year.

In IT services, our revenue for the quarter was $1,720 million, sequential growth of 2.5% on a reported basis.

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

Our efforts towards increasing operational efficiencies in the business yielded a margin improvement of 150 basis points on a quarter-on-quarter basis.

We see a stable pricing environment.

Our newer deals are competitive.

Coupon rates are not under pressure but customers are seeking more value for money.

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

As of period end, we had about $1.8 billion of ForEx outstanding contracts.

Our IT products business grew by 3.2% on a year-on-year basis.

The effective tax rate for the quarter was 22.6% as against 23% the previous quarter.

For the quarter, we generated operating cash flow of INR23.6 billion which was 105% of net income.

We generated a free cash flow of INR21.6 billion, which was 96% of net income.

We will be glad to take questions from here.

(Operator Instructions) Joe Foresi, Janney Montgomery Scott.

Hello.

This is Jeff Rossetti on for Joe Foresi.

I was just wondering if you could talk a little bit -- TK, I think you mentioned that deal closures were strong in the quarter and you see the momentum continuing in the June quarter.

Just wondering if you could reconcile that with your guidance.

It seems like it's -- for the next quarter, it seems like there is decelerating growth in the seasonally stronger June quarter.

And those that -- just wanted to see if you could talk also about your hiring plans.

I think headcount was about -- was slightly down for the quarter.

Just wanted to see what your -- how you're planning to keep the pickup in demand that you saw from deal closures?

Jeff, if you look at our history, you'll notice that every time our first quarter is weak.

And if you look at it last year, it's kind of interesting.

Last year, if you look at our June quarter and our year-on-year growth at the end of the June quarter was close to about 4% -- 4.7% to be precise.

If you look at this quarter at the lowest end of our guidance our growth rate year-on-year would be 8%.

So to that extent there is significant improvement in terms of year-on-year sales.

Number two, the reason for the seasonality that we face that many of our peers do not face is that our proportion of India business is pretty high and typically what happens is that India business tends to peak in quarter four, our quarter four and then dips in quarter one.

That's primarily because a lot of the orders, especially orders from government, do not necessarily -- we don't get it till the middle of the quarter or the end of the quarter.

When we guide we guide with confirmed orders that are due for execution at the end of March.

So I think that's the fundamental issue that we have in terms of both guidance as well as in terms of demand.

Our demand environment, very broadly, tends to be as being quite strong.

In fact, last quarter we had the highest orders we've ever had.

In the next quarter we expect, that is in quarter one, we expect the demand environment to continue and closures to be also strong.

So we really see the next quarter as the quarter when we are going to see pickup in demand and to that extent it translating into sales.

In terms of absolute headcount, if you look at our headcount year-on-year, we've really been investing quite a bit in terms of productivity and tools.

So, overall, we don't expect our headcount to go up significantly in line with sales.

We continue to hire in terms of areas where we have lack of skill sets.

We continue to hire freshers from campuses which had continued to be at the same rate as last year, but fundamentally the objective would be to do more with less.

Okay, thank you.

Appreciate that.

And just as a follow-up, I believe you've mentioned that pricing you see it as stable and you expect it to continue to remain stable.

One of your multinational competitors has talked about some pressure on large deals within application services.

It seems like that application services was healthy for you.

I just wanted to see what you could -- what you are seeing in the environment broadly in pricing and particularly within application services.

Thank you.

So for us, we see realizations is more or less stable.

We don't see great pressure.

I guess the question about pressure comes in from where you are starting.

If you are starting too high then I guess the pressure is always going to be there.

Sitting where we are, we don't see pressure.

But I think the bigger issue which I just wanted to kind of talk about for a minute is that if you look at our entire model, our entire model is about driving efficiency through lower and lower headcount and is reflected in our margins.

Our margins from where we were, typically what we see is that if you look at our exit as of the end of last year to this year end, our margins have increased by approximately 410 basis points -- sorry 430 basis points, I am very sorry, 430 basis points.

So that has been the big jump and that's primarily because of productivity.

Moshe Katri, Cowen.

So T.K. given the significant, yes, increase in pipeline and deal activity, do you think Wipro will be able to produce sector like growth in fiscal year 2015 and then I have a follow-up on that?

Thanks.

So Moshe, we don't guide for the full year but clearly if you look at our exit to exit, the trajectory is better than where it was last year.

That's all I can say.

In that respect, I am assuming is there -- are you basing this on specific assumptions here?

Is it better traction with clients?

Is it better ability to convert bookings into revenues, better win rates, is it all the above?

I think any color on this will be helpful.

So here is what it is.

Our win rate has increased substantially over the past year.

In fact, I can't give you exact numbers but roughly if you look at a base, our win rate has almost improved by close to about 50% in terms of where we were to where we are now.

In terms of the absolute pipeline, the absolute pipeline has remained -- has improved, but fundamentally for us, we're really focused around conversions.

And going back to that our conversion in the first quarter has been the -- that is the first quarter of the calendar which is the last quarter of the fiscal for us, has been one of the highest that we've ever had, and we see that same momentum continuing into quarter one this year.

Okay.

And then as a follow-up to the last question about pricing and what IBM said yesterday about pricing pressure on their apps business which corresponds to what Accenture said about pricing pressure on their apps business, I mean from our point of view it seems that a lot of it is related to contract renewal activity for some of the legacy vendors and obviously this year is going to be a pretty big year for contract renewals.

Is that something that you're seeing as well where a lot of these contracts are getting renewed, a lot of these contracts were based on legacy, maybe onsite prices and everything has to convert now based on the global delivery network price?

And this is why I'm assuming the likes of Wipro and some of your peers are benefiting from that just given the fact that you have even kind of potential incremental market share here, especially as some of these deals are out there for renewals.

Absolutely.

In fact, what we -- Moshe, you are absolutely right.

That's why, if you look at pressure on realization, it really depends on where you are starting.

If you are starting high, there will always be pressure.

For us, we don't see the pressure of where we are sitting.

But we do clearly see one thing.

When deals get renewed and they go through a competitive bid process, it is common, at least from what we've seen over the past year, we've seen reduction in overall pricing of between 30% and 40% in terms of absolute value.

Now the challenge for us is that we have to bring in costs which are at a level which can kind of match the new pricing and you cannot do that long term without having significant focus around automation and I think that's the whole thrust as far as we are concerned.

Okay.

And then the last question on my side, one of your large peers implemented the pretty significant wage hikes in India, I think close to 10%.

Is that something that we should worry about in terms of kind of intensifying wage inflation pressure in the domestic market?

Thanks.

So the way we see it is if you look at us as an organization we have announced that our wage increase would happen on the 1 of June as it always does.

We've not changed from that date and we continue to do that this year.

On site our salary increase would probably be between 2% to 3% for the eligible population and similarly offshore it would be between 6% and 8% for the eligible population.

So that's the band that we're looking at.

Right.

Thanks for the color.

Nitin Mohta, Macquarie.

Thanks and excellent quarter for margins.

I have two questions.

Firstly, T. K. I did catch your comments on TV about retail vertical being hurt by our absence in maintenance projects.

As you look out for fiscal 2015, would you like to call out any such other vertical or a geography where you think your footprint versus peers could put you at disadvantage?

So Nitin I think I called that out also very specifically in my opening remarks.

I see retail clearly as an issue because just from an execution perspective based upon the demand that we carry [it's typically been the seasonal] demand.

We see similar issues happening in insurance and also in hi-tech.

These are the three verticals where we expect to see some pressure going forward if there is a cut in budget.

But really if you look at it, insurance is not really an industry problem, it's our problem because we are too small in insurance in terms of overall size.

To that extent we have to play the role of an aggressor.

In terms of both hi-tech as well as in terms of retail, we are big but a significant part of our portfolio sits on the chain side of the business and not on the run side of the business and that's affecting us.

Got that.

And the second question which I had was on utilization, a smart uptick over there but still the utilization ex trainees appears to be lower as compared to where the peers are.

So what's the thought process there and where do you expect it to kind of [finish] by the end of this year?

I mean that's a guess that I can't [miss really].

One year is a long time.

I don't want to guess that.

But basically if you look at utilization itself, we think we have headspace around utilization.

Thank you.

Edward Caso, Wells Fargo.

Hi.

Good evening.

It's actually Rick on for Ed.

The first question is just around discretionary spending.

Can you tell us sort of what you are looking at and what you have seen so far on discretionary spending, how has the year gotten off to a start relative to your expectations?

So on discretionary spending here is what we're seeing.

We're seeing -- there isn't a secular trend in terms of discretionary spending but what we're seeing is that in the US clearly people are kind of opening up their [purchasings] much more than what they were at last year.

If you look at areas like retail banking, we see the discretionary spending coming back.

If you look at utilities we see the same thing happening, we see it in process manufacturing, we see it in auto, we see it in pharma and we also see it overall in healthcare, both the payer side as well as the provider side.

But we're not seeing the same level of discretionary spending in other industries.

So from that perspective it's a industry issue that we face which is more or less global, yet we are seeing certain geographic differences too.

So for example, if you look at pharma we are not seeing discretionary spending starting off now in Europe.

We're seeing that clearly happening in the US.

We're hoping that Europe will follow because it is, in many ways, a global business but we are not seeing it.

And so would you say that this difference is by industry and geography?

I mean, broadly speaking is discretionary sort of on track with where you had expected it to be?

Pretty much.

I think retail was a surprise for us last quarter in a negative way and it has continued to be a surprise for us in quarter one, again in a negative way.

Okay.

Then just to clarify on the 30% to 40% reduction that you talked about in terms of pricing when they go through a competitive process, is that impacted by deal sizes getting shorter or TCVs contracting as you have fewer years on a deal?

Not necessarily.

It is absolute value of the deal coming down for the same TCV, same period.

Okay.

So it's an apples to apples type comparison?

Absolutely.

Then just the last one -- sorry, go ahead.

I think what's happened is that as customers have gone through one cycle of outsourcing and as they get more comfortable with the whole model, I think they are willing to try a lot more for cost because at the end of the day run budgets are under huge cost pressure.

The last one for me.

I saw you had a strong quarter in your media and telecom business.

Some of your peers have talked about telecom remaining relatively weak and I know it's a bigger vertical for Wipro.

So maybe if you could just talk about what you're seeing there.

Thank you.

So I have Ayan Mukerji with me, Rick, who runs our global media and telecom business and he can talk through it.

Ayan?

Thanks, T.K. So, Rick, we really haven't continued to do anything different than what we've been doing for the last three quarters.

Our hunting and mining continues or farming continues to be extremely focused.

We had very good year for hunting, adding some marque accounts which have led to some of the upside that you can see.

From a deal perspective, our win rates and deal flow has continued to be strong.

However, you see some of the seasonality and the fluctuation of quarterly revenues reflected in the current quarter performance.

Moving ahead, I do not see us being behind the rest of the corporation and the market in terms of both sequential and annual growth.

Thank you.

Thank you very much.

Sandeep Muthangi, IIFL.

Hi.

Thanks for taking my question.

T.K., could you give us some color on the order book that you have just mentioned in terms of what industry services that they are happening and what would you attribute the sharp jump in the win rates to?

I think the last part of the question is easily answered.

I think it's just better execution.

But if you look at our pipeline overall and the conversions, I think there are two standout areas where we have done very well.

One is around the healthcare space and I've got Sangita with me who can kind of talk a little bit about that.

The second big area where we have done very well is manufacturing.

I also have Bala on the line.

He can talk through both these areas and what they see in terms of demand and what they see in terms of opportunities going forward.

Sangita?

Hello.

Good morning, good evening, good afternoon.

So, yes, it's been a good quarter for healthcare and life sciences, and what we've seen happen is our focus on enabling our customers to drive a more leaner, more productive IT work place has really helped us win some of the deals in the infrastructure BPO and our bread and butter businesses.

Also what's happened is our focus on moving to more domain-centric solutions for our customers, particularly in the life sciences space to move into patient centricity arena which is help our clients move beyond the pill has helped us drive some of the wins.

In the healthcare space, really leveraging what we are seeing in the client organizations to move towards more implementation of ObamaCare that drives more accountable care has helped us drive some of these large wins in healthcare and life sciences.

We are confident to see this momentum continue.

Bala?

Thank you, Sangita.

Yes, T.K. So, Sandeep, just to give you a color of what's been happening on the manufacturing side, we've had a good order book in quarter four.

What's worked for us is the fact that we've been successful in engaging with customers on large scale transmission programs, particularly in terms of streamlining the cost and more importantly helping them work as one global organization.

There have been large transformation programs.

We've had some good order wins in quarter four.

The pipeline continues to be strong and particularly in the hunting side we've [opened] some good logos, particularly in quarter four.

And as we look at where we stand going forward, we're reasonably confident that we will continue to have a good win ratio in the pipeline.

The other color to it is the fact that these deals are annuity deals which is also helping us from a overall portfolio perspective and making the business portfolio much more robust.

Thanks for that.

I have just one more question.

Now I understand that 1Q will not be reflective of the kind of traction that the Company has been seeing.

So is it safe to expect that by 2Q the evidence of the traction everything should be completely in the revenue growth in terms of saying that 2Q revenue growth should not be lagging some of your peers?

I wish I could answer that because I don't know -- I have no clue how my peers will do, but broadly the ambition would be to do -- certainly do better than what we have done -- what we have planned for in quarter one.

Okay, thank you.

Manish Hemrajani, Oppenheimer.

Yes, thanks for taking my call.

Good quarter, guys.

One question on the India business, given your higher revenue contribution from there any impact from the elections, either positive or negative on that business?

So I'll pass it on to Mr. Soumitro Ghosh who runs that business and he can give you some color on what's happening in that particular area.

So quarter four has been a good quarter for us and principally if I look at it from a industry segment perspective, in India we saw some good traction in two areas.

One is the financial services space and the second one being telecom.

In the Middle East, which is also a part of the remit of Wipro Infotech, we saw good traction happening in the oil and gas segment and energy and -- oil and gas segment and engineering and construction.

From a service line perspective, we saw some very good growth from our application services which clocked more than 5% to 6% in terms of sequential growth.

And we won two or three fairly market deals on the apps side, both in financial services as well as telecom.

In terms of the go-forward piece, of course, especially in government and over the last six months there had been a considerable slowdown and a lot of projects have been really stalled.

So hopefully, depending on of course how strong the government which comes in, hopefully things should look much better and one should see project clearances happening and traction picking up.

Got it.

Thanks.

T.K. you talked about highest margin in the last 15 quarters, large order book, win rates significantly improving all those things.

How much of these attribute to the disruption at one of your peers and how much do a shift -- how much of that do you attribute to a shift to offshore on deal renewals?

And also if you can talk about why your win rates have risen significantly?

Thank you.

So I think, Manish, it's very simple, our execution has improved clearly.

And from our perspective, the way we see it is, there is clearly more movement offshore primarily driven by smaller ticket sizes that are coming through the pike.

And I think from our perspective, one of the things that we have done well last year is that we're really focused around customer quality and our repeat business from existing customers also has kind of gone up.

That's been a big positive for us.

So if you look at our NPS which came out just about a couple of weeks ago, we have almost doubled from where we were in last year.

That's been a significant increase.

So in net net, I think it's just better execution.

NPS is Net Promoter Score.

Got it.

Thanks.

That's all I have.

Sandeep Shah, CIMB Securities.

Yes, solid quarter in terms of the margin again.

Just a question on the margin outlook going forward like, the exit rate is closer to around [34 points].

So, let me do one thing, let me hand this over to Jatin Dalal, our CFO, to talk through this.

Yes, hi Sandeep.

So what I am saying is the exit rate is 24.5% and the full year has been at 22.6% and when we enter the FY15, I think, yes, there are headwinds through the wage at the same time we have tailwinds in terms of utilization and also T.K. in his opening remarks had said that most of the reorganization has been done.

So perhaps scenario the investment in terms of sales and marketing may not be that big going forward.

So is it fair to say that we have quite a good visibility to carry forward the exit rate with a plus or minus or a narrow band going forward?

So, Sandeep, if you see we have made substantial improvement over last four quarters.

Compared to Q4 of last year to current Q4, we have 430 basis point improved.

We also always maintain that our priority has been growth, and to that extent if we need to invest we'll continue to invest.

For Q1 specifically we will have the investment in form of the salary increase that we will give to our employees.

And to that extent that will be an headwind.

Also as we have spoken about, we have had some deal wins and typically in such deal wins you have investment in terms of hiring of key employees et cetera which happens before the revenue comes in.

So to that extent, you would have a little bit of volatility in margin also on account of that.

So this quarterly volatility or fluctuation will play through in quarter one.

But we feel that we have improved our execution in form of a higher automation, productivity et cetera and some of those gains are definitely we are hopeful and confident of continuing as we get into fiscal 2014, 2015.

Okay.

Perfect.

And just in terms of the solid order book which we had in the fourth quarter, is it fair to say that we are now the selected vendors in most of those deals or still there is some contracting stage that has been pending in many of those deals?

Yes.

So Sandeep, it is both.

The deals have come in the latter half of quarter four.

Some of them are contracted and concluded as on 31 of March and some of them are in progress of completion.

But they have been clearly been -- we have been clearly selected as a vendor who would provide the services and therefore we have articulated those as wins and that's the statistics around.

Okay.

And just T.K. if hypothetically if you assume that retail would not have been a problem area for the first quarter, do you believe that the guidance for the first quarter could have been better than what it is currently?

I wish I could [share Sandeep].

Sandeep, I don't want to start getting into details.

I think we have given a guidance.

I don't want to say anything more than that.

Okay.

But why I am asking --

Let me put it this way, guidance of -- this retail has hurt us.

Okay.

Because why I am asking is maybe the India business decline may not have a significant impact in terms of the growth rates where the growth in the other verticals can't able to compensate that.

Anyway, I can't say anything more than that.

Okay.

Thanks.

Keith Bachman, Bank of Montreal.

Hi.

You talked about a couple of practice areas.

One that was good was BPO in terms of sequential growth.

The other was consulting which was fairly weak.

What were the reasons behind that and does that trend continue?

So, Keith, on consulting, I guess there is some level of lumpiness in terms of revenue, the rate comes and goes.

As far as India is concerned, typically what happens is our quarter one has always been weak.

And quarter two, quarter three, quarter four, if you look at last year, we have grown sequentially at a 5% clip quarter on quarter on the India business.

So to that extent I think what happens is that this has been a traditionally weak quarter for us and we see that weakness continuing this year too.

Okay.

In terms of the attrition picked up a little bit, [if it would] stay at these levels, do you see it going higher, do you see it going lower particularly given that your wage rates that you talked about versus at least one of your peers is a little bit higher.

Where do you think your wage rate -- I mean, excuse me your attrition will move to?

So let me hand that over to [Saurabh Goel] who is the Head of HR and he can talk through that.

So if you look at our attrition numbers for the quarter, I think it's actually quarter annualized numbers have come down.

So it's a drop there and we have been operating in this band.

And as we look forward, I don't think so we'd see anything different.

We will continue to operate in the similar bands.

The last two, three quarters we were in this narrow band of 1% to 1.5%.

And on wage pressures.

(inaudible) T.K. mentioned that it will be effective June.

We are looking at offshore increases to 6% to 8% and 2% to 3% on onsite population of the covered population.

So the way we see this, Keith, I don't think we are in a market where talent is short across all levels.

There are certain skills where clearly we see shortages and yet others where we see plenty.

So from our perspective while we run a band, I think where we have to pay more to get talent we will -- get and keep talent we will absolutely do that but we don't see too much of pressure on absolute wages.

Okay.

Well the last one I have then is going back to the pricing issue.

There has always been -- look over the last couple of years there is always renewals that have come up, there has always been a number of competitors typically competing for those renewals.

Why do you think there is more aggressive pricing at this juncture?

What's driving that?

Is the behavior of the vendors being more aggressive, is this the companies looking for more price concessions, what's really driving the increased pricing pressure that a number of different service providers have talked about in the last two weeks?

I think there are a couple of reasons why that's happening.

Number one is that if you look at the run business, that's the business that typically goes out for competitive bidding.

In case of the run business, I think there is huge pressure in most CIO organizations to cut their budgets.

That's one trend that we are clearly seeing.

So some part -- I think most organizations, especially CIOs, have realized that if they take a large contract that's typically sitting with a multinational vendor, if they go out, they can get substantial reductions in prices and absolute costs.

So some of that is driven by a behavior which is let me go and get better cost.

The second big driver for that is better quality.

So I think from our perspective, the way we see it is that typically a large part of the world that's migrating to vendors who are were coming out of this particular geography is primarily driven by better quality, so it's quality and price.

And number three within the vendor base I think clearly people have decided that if you [try to] do forward pricing based upon automation and based upon some level of productivity then ability to get price -- going with lower price is significantly higher than you wish you went in with today's prices -- today's costs.

So to that extent some people are taking a view of forward pricing too and I think it's a combination of all this that's kind of playing itself out.

So is it your opinion that this pricing pressure is here to stay then?

Absolutely.

On the run side of the business, I would say it's here to stay.

I don't think it's going to go away in a hurry.

And do you see it spreading to other areas, you see a risk that that spreads to other areas (multiple speakers) run business?

Not really.

What I am seeing in other parts of the business is that if you look at some of our other businesses we are seeing ticket sizes actually going up.

If you look at our analytics business, if you look at our business that we have called advanced technologies, we actually see ticket prices moving up, we don't see it coming down.

So to that extent it's a mix bag.

Skills that are -- skills and technologies where you're able to integrate solutions of folks, especially on the digital side, clearly even today command a premium.

Okay.

Fair enough.

All right.

Thanks guys.

Ravi Menon, Centrum Broking.

Thank you for the opportunity.

I just want a little more color on the order book that you won and I wasn't sure whether you meant that you won this in Q4 or Q3.

I wanted to know if this has more run the business or [changed] the business and are these like really large deals or is this the kind of penetrate and radiate kind of model that you opened at some accounts and started smaller projects.

So that's one.

Ravi, it's pretty simple.

I think to a large extent the business that we have won and -- we have won and it's all been won in quarter four.

Typically has been -- most of the deals that we've won has been on the run side of the business.

And these have been -- it's a combination of small deals and also a significant portion are actually large deals with a mix bag.

But when we book order book, just to give you a sense, what we recognize is order book within is really the orders that we receive, the TCV of the orders that we receive.

So if it's a tiny order, then the impact on order book is not very substantial.

All right.

So you are not just looking at the potential.

Got it.

Okay.

And second question is, the go-to-market strategy for Digital.

Are you looking at using the same sales force and what about the internal organization for deliveries, is this going to be completely separate?

No, no.

The way we look at our -- the way we actually sell is kind of a little different.

So the delivery heads who are expected to deliver their services to the customers that they're already delivering and expand their services within the customer for the same range of services.

If it's a new service line, we expect that it's done by the account head in conjunction with the delivery guy, but the primary responsibility that would be account head.

If it's going to be a completely new account and a completely new service there is a dedicated team under the vertical head and the service line head then transit and goes and gets that business.

That's the way we've kind of broken up in terms of responsibilities.

All right.

Great.

Thank you.

Nithin Padmanabhan, Espirito Santo.

Yes, hi.

Thanks for taking my question.

T.K. just two questions actually.

One is, if we just look at the last two years, we went through the phase of cutting those tail accounts and that in some form sort of tempered our revenue growth.

And we have always had this telecom equipment vendors which sort of popped up at some point or the other with sort of hampered revenue growth.

Do you think portfolio issues have largely been sorted out looking at the next year versus what we have seen in the past?

So Nithin, it's like this.

On the portfolio side, I don't think anything substantial out there that can impact us in terms of growth.

There will always be bits and pieces but I don't think that should affect our push towards growth.

Right.

And the second one was, T.K. you had always -- I think this was the last quarter the quarter before, you spoke about how hunting -- the proportion of hunting led deals for us versus the industry was quite lower.

How do you see that having improved recently?

It's kind of interesting that you asked that question.

If you look at our entire hunting approach, it has taken us about two years, but we are very satisfied with what we've got there.

Of course there is lots of work to be done.

But basically what has happened is that we have substantially improved our win rates in the hunting side.

Nithin, Jatin here.

This is -- even the deal wins that we are talking about, a quantum of that has come through hunting as much as it is from the core business through pharma.

All right.

And just one last one if I may.

On the retail vertical, your comments on the discretionary side, is that more backward looking in terms of what's already happened because I think there have been talk about incremental retail sales that are being pretty good, the best since 2012 and things like that.

So I was just wondering looking forward do you sort of have a feeling that things could improve or it's similar to what you saw in the last two quarters?

I'll put it this way.

I am not betting on any improvement in the future as far as guidance is concerned on retail.

Right.

Would that be specific to our client portfolio or do you think it's an industry-wide phenomenon?

I think it's a bit of both because in some -- if you are sitting in weaker retailers, you would have that problem primarily because people cut budgets and I also think from an industry perspective we have a problem, assets kind of played itself hard, but some of our other peers.

Sure, T.K. Thank you so much and best of luck.

Thank you.

Viju George, JPMorgan.

Hi.

Congratulations on a good margin performance.

I was just trying to get a sense of whether you have a target margin band in mind because your margins are certainly improving with productivity.

Would you say that I'd like to manage the business for a certain target margin band and maybe reinvest the excess back into the business?

Here's what we'll do.

Our investment cycle, I can't specifically talk about a margin band.

We have a margin band internally.

But here are two areas where we will never cut back in terms of investments.

Our sales and marketing and our domain consulting is an area that we're never going to cut back on.

We'll try as hard as we can to kind of spend what we need to make sure that we penetrate the customers.

The second area that we will not cut back on is developing intellectual property, especially around process automation.

That's the other big area that we are going to keep investing in.

So that's broadly where our investments are going to go.

Besides that everything else is a fair game.

Sure.

The other question I had was looking at your head count addition over the year, clearly there is a disconnect between, thanks to productivity, there's a disconnect between your revenue growth and headcount addition.

Do you think that this disconnect can continue going forward and therefore we should not look at any signals of headcount addition as an indicator of growth potential?

Yes, Viju this is Jatin.

So if you see our full-year utilization on a gross basis, it is flat, vis-a-vis fiscal 2014 and in fiscal 2013.

So we have as much space to support growth as we had last year and that is despite the growth that we had through the year.

So in some form at no point we are constraining ourselves vis-a-vis the growth that we can generate by deployment of resources.

Having said that, we are constantly focused on driving productivity and doing the same amount of work with much lower labor content than what we used to do years back or what we have been doing traditionally.

And that itself creates the additional headspace for us to invest our efforts in.

So fundamentally, we don't see any reason for us to worry about whether we have right capacity on that is reflected in the utilization number that is here.

Sure.

Thank you.

All the best for FY15.

Mukul Garg, Societe Generale.

Thanks.

T.K. I have, again, a question on the guidance for the next quarter.

You mentioned that you are seeing weakness in India business.

Can you comment along the similar lines on what are the seasonal issues which will cause slower growth in other regions, specifically Americas?

So I think I've talked about that a little bit already.

I think on -- Mukul, just to kind of give you a sense, what we expect to see in India business, Soumitro and me both talked about it in terms of how typically in quarter one we see seasonal weakness in India.

Similarly, we have weakness in retail and the weakness in retail has been really felt by us both in quarter four and it continues into quarter one.

So those were the two that we clearly see.

Besides that we don't see anything else today.

There are some areas of strength which I again called out earlier.

And pretty much these are the two areas that we have to fix.

Okay.

And also you also commented that the quarter two will be better.

So should we take it as better than QoQ or better than the QoQ growth last year, any [thoughts process] on that?

I don't give guidance for quarter two.

So I am not giving guidance for quarter two right now.

All I can tell you is sitting where we are we see quarter two better than quarter one.

Okay.

Thanks.

That's all from my side.

Pinku Pappan, Nomura.

Hi.

T.K. you had three good quarters, nearly 3% growth from the US which was kind of a problem area for you in the past.

Will you say today that you've turned the corner here and can you help us -- how do you look at growth at 1Q and beyond say for in the full year?

Pinku, all I can tell you is that as far as US is concerned if you look at our absolute percentage of US business has actually gone up over the past couple of quarters.

So the US business for us has been doing well primarily based upon the recovery that we've seen there.

Overall, in terms of the demand environment, I see the demand environment as stable and for us I think what we are seeing is we are seeing improved win rates vis-a-vis the previous year.

Now you know that we don't guide full-year numbers.

But all I can tell you is that if you look at quarter one compared to quarter one last year, last year our quarter one year-on-year growth was 4.7%.

This year our quarter one growth at the lowest end of our guidance is close to 8% and that should give you an indication of what we are going to -- what it's going to look like next year.

Okay.

And you mentioned that you don't really look at cutting in cost -- cutting your sales and marketing expenditures.

But this quarter if you look at it, your absolute sales and marketing expenses came down sequentially.

Yes, that's an aberration.

So typically what happens is that towards the end of the quarter we start doing performance management of people who have not performed over the previous year.

Some of that will continue during this year too, the first quarter too, but pretty much otherwise we should really be spending more on sales and marketing.

And also there is a little bit of ForEx impact there because it's predominantly dollar-denominated cost and there is always a little bit of a delta between the realization of revenue and actual cost rate that -- at which the foreign currency cost gets booked.

So there is a little bit of play there too.

Okay.

And lastly, across your service lines, T.K. could you tell you kind of [given upgradation there] you've been able to achieve the maximum employee productivity and were you still facing challenges to improve the productivity?

I think from a productivity side, pretty much we have tried to push the lever right across.

In terms of sales, if I had to answer the question, I think our global infrastructure business is doing very well and we clearly see growth back in that segment.

We were lagging industry growth for a couple of years in that particular area.

We've come back in that particular area.

As far as our application business is concerned, we see points of hope in that particular area.

I have Bhanu here with me and he can talk through what we've done there.

And over to you Bhanu.

Hi.

Pinku this is Bhanu here.

I manage the application services business.

In the application services business, a couple of trends we watch very carefully right now.

One is, everything that is digital, right, even the digital transformation or the digital way of interacting with customers that's where we see the demand picking up from our customers and that segment is discretionary in nature but we do see investments coming up in those areas.

The second area that we see very strongly is in all things related to security.

We have seen a significant number of events.

You would have watched in terms of both the threats and the debt losses for some of the organizations.

Consequently, there is a lot more attention to that area of both infrastructure as well as the application security and the data security there.

So we see a significant amount of attraction coming in that business.

The third area which is the core of the application space which is both third-party product implementations and the testing services, they've been pretty traditional businesses.

Our approach to that business has been to get lot more productive, lot more effective in the way we manage those services.

So broadly if I look at it all things that are related to customer facing applications we see a significant traction coming in, all things related to security and resilience, we see a significant traction coming in.

The core spaces we see significant effectiveness coming into the [area].

Diviya Nagarajan, UBS.

My questions have been answered.

Thank you.

Ankit Panchmatia, Dalal & Broacha.

Thanks for taking my question.

I just wanted to know the ideology of the management of forming this Wipro Digital SBU.

Actually I just wanted to know that what target the management has in (inaudible).

So what I will do is that I'll pass the question on to Bhanu and he can talk through specifically the goal of Wipro Digital and what we expect to achieve in that particular area.

Ankit, this is Bhanu here.

As you know we announced the Wipro Digital Solutions as a unit.

The focus of this unit is going to be to help customers on a couple of areas that I outlined in my previous answer.

One big area that we want to focus on is to help customers with their Chief Marketing Officers in interacting with the end consumers using omni-channel capabilities.

Today if you see majority of these organizations, those processes are pretty fragmented and those processes are -- there is a lot more opportunity for improving the effectiveness of those processes.

So the first focus of this division is going to be on the Chief Marketing Officers to ensure that the Chief Marketing Officers leverage the technologies that are available today, that implies that the marketing officers will have the capability to do online real time micro segmentation that is required for running their campaigns.

They have the capability to do live analysis of their effectiveness of their campaigns.

They have the capability to watch trends and adjust their campaigns based upon the trend that they see.

So the intention here is to make the Chief Marketing Officers' budgets much more effective, right.

That's the first step.

The second area that this division will focus on is in terms of helping organizations on their digital journeys, right.

So if you look at every business process, right, obviously, there is a element of digital in every business process.

However, the leverage of technology can be increased substantially.

And as you increase the leverage of technology, the processes can be redesigned substantially and hence the business itself can be redesigned.

So in two steps we are going to approach this area.

First one will focus on the Chief Marketing Officer and the second one will focus on the digital journeys of our customer organizations.

And to do this we will bring in the capabilities from -- our creative capabilities, we'll bring in capabilities on analytics, we will bring in the capabilities of front-end consumer experience design and the capabilities around core process changes that need to be done.

So the focus of this group will be to bring in all those areas together.

But what I see it into is I hope there would not be any cannibalization of the current revenue streams the Company have with this Wipro Digital.

Our view is that, we have not touched the Chief Marketing Officers that closely, right, that is going to be another way of entering into the customer organizations, right.

So, we have done bits and pieces of that already, right.

So you would have seen some of the work that we do along with Promax, along with the analytics team that we do already, right.

our intention is to keep these as a new way of entering into our customer segments.

Okay, thank you.

And plus the biggest thing really is, I think you have to redistribute revenue from one pocket to the other and yet spend money to do that frankly doesn't make business sense.

Thank you.

Participants that was the last question.

I now hand the conference over to Mr. Sridhar Ramasubbu for a short announcement.

Thank you and over to you, sir.

Hi.

This is Sridhar.

Thank you very much for your active participation in our Q4 earnings call.

After 25 years in Wipro, I am moving and taking up the role of CFO in Opera Solutions, a leading big data analytics company where Wipro has made a strategic minority investment.

I want to thank you all for the support you provided during my tenure as the investor interface in North America and I will stay connected.

I also want to take pleasure in introducing my colleague Vaibhav Saha, who will take over from me as the IR interface and request your support to him as well.

Vaibhav is a seasoned finance executive.

He operates out of -- he has been with -- in the industry for more than eight years and last role has been that of the finance leadership for Wipro Consulting business.

He will operate our New Jersey office and appreciate your support to him as well.

As always on this call, Wipro IR team, both in India and US are available for any additional clarifications you may need.

Thank you so much.

Thank you, sir.

Ladies and gentlemen, on behalf of Wipro Limited that concludes this conference Call.

Thank you for joining us.

You may now disconnect your lines.

Thank you.