Wipro Ltd (WIT) 2015 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 participant 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, Shyma.

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, Member of the Board and CEO, followed by the financial overview by our CFO, Jatin Dalal.

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

The senior management team of Wipro is 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 Reform Act 1995.

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

The uncertainties and risk factors have been explained in our detailed filings with the SEC.

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.

Good morning and good evening to everyone on this call.

Let me give you some perspective on our all-round performance during the year, demand environment and the areas of investment.

On a full year basis, our IT services revenue grew 8.7% in constant currency.

The healthcare and life sciences and services business unit delivered 19.6% growth for the year in constant currency.

Manufacturing and high-tech grew 10.1% on constant currency.

We've also seen a tremendous pick-up in India and Middle East with a 21% year-on-year growth in constant currency.

We continued to see robust momentum in infrastructure services with a growth of 19% during the year.

More importantly, customer satisfaction scores have improved by [680 basis points] over the last year.

On overall basis, the demand environment remains stable.

However, we see uncertainty in two industry sectors.

From a portfolio mix perspective, we have led the energy sector and a short-term cutback in CapEx in that particular sector has impacted us this year close to about $100 million in revenue compared to fiscal year 2014.

But despite the structural impact, we've scored significant wins at large oil majors.

Our utility business would be the bright spot that's grown rapidly to narrow the gap with the overall energy and utility business unit.

On BFSI, we saw some slowness in spending as we exited the previous calendar year.

We've not seen that pick up yet.

We see strong growth in three of our six business vertical units; healthcare, manufacturing and RCTG.

And we expect to see our global media and telecom business largely stable.

Among service lines, we see momentum pick up in infrastructure services and product engineering.

During the year, we've added one customer to the $100 million category.

Going back to investments, we viewed these through the [lens of run a change].

We've invested in the 350-member team ought to serve up two years hyper automation and AI engine.

We've deployed the automation platforms across 45 accounts, leading to significant improvements in productivity.

We've also been able to drive non-linear growth in some areas of delivery.

And we intend to drive further productivity increases across the business.

On the chain side, we planned to make significant investments in Wipro Digital that pull together mobility, analytics, UEX and cloud technologies with an ambition to be ranked among the top three service providers in the next three years.

We have delivered six engagements over the last year in customer journey engineering, we've radically transformed customer philosophies and delivered unique end-user experience.

However, in the world of the future, building intellectual property is critical to remain relevant.

We are very focused on driving innovation and aim to double our rate of patent filing to over 500 in the current year.

We also continued to make investments in the talent that's required for the changing business landscape.

We're working internally on process simplification and enhancing employee engagement across all levels.

Last quarter, our annualized attrition dropped from 16.4% to 15.6%.

Let me now request Jatin to walk through the revenue numbers in far more detail.

Thank you.

Thank you, T K. Good day, ladies and gentlemen.

It is a pleasure to speak to you.

Before I speak on the financial performance for the quarter and the year, kindly note that for the convenience of our readers, our IFRS financial statements released today have been translated into dollars at noon buying rate in New York City on March 31, 2015 for cable transfer in Indian rupee as certified by Federal Reserve Board of New York.

This was $1 equal to INR62.31.

Accordingly, our Q4 revenues of our IT Services segment that was $1,774.5 million or in rupee terms INR112.4 billion appears in our earnings release at $1,804 million based on this convenience translation.

Now, let me talk about the performance.

For Wipro Limited, our total revenues for the year were INR469.5 billion, an increase of 8% year-on-year.

Total net income for the year was INR86.5 billion, an increase of 11% year-on-year.

Revenues for the quarter were INR121.4 billion, an increase of 4% year-on-year and net income for the quarter was INR22.7 billion, an increase of 2% year-on-year.

In IT Services segment, our revenue in US dollar terms for the year was $7,081.6 million, a year-on-year growth of 7% on a reported basis and 8.7% in a constant currency terms.

IT Services revenue for the quarter was $1,774.5 million, a sequential decline of 1.2% on a reported basis.

The dollar revenue was impacted by depreciation of major global currencies against the dollar and therefore in constant currency, the IT Services revenue for the quarter grew 1.2%.

For the quarter, IT Services margin was 22%, an expansion of 23 basis points on a sequential basis.

The impact of negative cross currency on margins was offset by operational improvements.

Let me talk about IT Products segment now.

Our IT Product segment delivered a revenue of INR9.5 billion or $152 million for the quarter ended March 31, 2015.

On ForEx front, our realized rate for quarter 4 was INR63.35 versus a rate of INR63.19 realized for quarter 3, fiscal 2015.

As of the period end, we had about $2.7 billion of ForEx derivative contracts as the hedges.

The effective tax rate for Q4 was 21.5% and effective tax rate for fiscal 2014/2015 was 22%.

For the quarter, we generated operating cash flow of INR25.5 billion, which was 112% of net income and a free cash flow of INR21 billion, which was 92% of our net income.

For the full year, we generated an operating cash flow of INR78.6 billion, which was 90% of our net income and free cash flow of INR67 billion, which was 77% of our net income.

The Board has recommended a final dividend of INR7 per share.

The final dividend along with the interim dividend of INR5 will take the total dividend for the year to INR12, an increase of INR4 over fiscal 2013/2014.

This translates into a dividend payout ratio of 41% including the dividend distribution tax.

We will be happy to take questions from here.

Operator, you may open the line now.

Thank you very much, sir.

Participants, we will now begin with the question-and-answer session.

(Operator Instructions) Moshe Katri, Cowen and Company.

T K, in your presentation to the media, you indicated that the oil and gas vertical impacted revenues by about $100 million, I think you said last year.

How much will that in your view impact fiscal year 2016?

I am very sorry.

There was an interruption in between.

I don't know who it was.

But can you repeat the question, Moshe?

Sure.

In your presentation to the media, you indicated that the oil and gas vertical I think impacted revenues last year by about $100 million.

Can you tell us how much in your view would that impact growth for fiscal year 2016?

Very difficult to say that because, it's a pretty dynamic market right now, in the sense that what is happing is that at least our experience with the last quarter has been that, whenever you think you hit the bottom, you've suddenly discovered a new bottom, but here (inaudible).

So it's very, very difficult for me to make a judgment as to where it could finally end up.

But here is a positive.

I think the positive is there are some consolidation fees out there in the market and we have won two of them.

So -- which is positive, especially with oil majors and that there are many more of them out there, and we just think that given our strength in that particular verticals, we are logically kind of positioned to kind of win more than our proportionate share.

Okay, that's fair.

And then just one last question.

Guidance for the next quarter seems somewhat muted, is that a function of the continued weakness in oil and gas that you mentioned, and some of the weakness that you've seen in insurance or there is something else that's kind of impacting guidance?

The biggest thing that's impacting guidance today is oil and gas and the reason behind that is pretty simple.

Last quarter, after we kind of gave guidance, we were a little surprised by what we saw specific to oil and gas.

And we want to make sure that we don't have those kind of surprises coming in this quarter.

Similarly, what we also found was then one of our banking customers we have seen some softness, which we think we would recover, but that is going to play (technical difficulty).

Hopefully, it's a quarter phenomenon and it's kind of (inaudible) as we go into the following quarters.

Edward Caso, Wells Fargo.

I just wonder if you could differentiate between the pace of work and the type of work you're seeing in the United States versus what you're seeing in Continental Europe, just sort of new technology versus old technology spend.

So let me do one thing, just to give you a specific example of what happens by industry and I'm going to ask Sangita Singh to kind of give a quick -- a little bit of color between old technology spend and new technology spend and I think that broadly here is what we're seeing.

On the infrastructure side, we are seeing clearly significant level of transformation happening.

And in many cases, what we saw in the past was, there was set of large players out there who had -- who are really competing to keep their real estate.

Now what we are finding is the same set of existing, and these are the global writers, they're coming back pretty aggressively with a new set of services, with a -- primarily, they are variabilizing cost of infrastructure.

The good news is that we've been kind of winning in that segment too.

So, that's a positive, but we have seen a resurgence from some of the existing players in terms of making sure they keep share in their infrastructure business.

And broadly across industries what we're finding is that the kind of work that we are getting in from the US, the Run business is clearly under pressure, because of consolidation, pricing is under pressure.

But on the chain side of the business, we are finding significant opportunities coming up in terms of especially around Digital where we've been and newer technologies like open source where we've been really winning the share compared to some of our other peers out of India.

But I'll hand it over to Sangita to kind of give you a little more color from an industry perspective.

Thank you, T K and good afternoon, good morning wherever you are.

Really from a healthcare and life sciences perspective, one I would concur with what you heard from T K, there is one big mega trend around digital adoption and that cuts across the payer, provider, life sciences and medical devices.

We're seeing that as a significant big mega trend in terms of adoption of digital to drive through the whole journey of the life cycle.

We supported a top-tier pharma company to enhance drug adherence during clinical trials and we continue to see significant momentum in the space and this trend, I would say, is the same in the US as well as in Europe and as well as in the rest of the world.

The second big trend that we are seeing is really speak to value and customers are looking to transform while they transition and we see that in the form of integrated infrastructure and application deals, while clients are looking to drive efficiency while at the same time improve their customer or end-user experience.

The other two trends with respect to healthcare and life sciences is really the hold shift towards patient and patient empowerment.

Payers in the US are seeing a rapid growth, largely led by enrollments in the Medicaid, Medicare as well as duals.

We're supporting this through our SaaS-based Medicare, Medicaid platforms and we're continuing to win reasonably significant deals that are outcome based.

And the second big trend with respect to healthcare and life sciences is really the pay-for-performance revolution that we are seeing and that's because the reimbursement contracts for a lot of the providers are coming down to the tune of about 20% to 40%, all of that largely leading to building capabilities in our core EHR space and we've recently won an engagement to support a core EPIC-based application for a top US provider.

So, I would say those would be the notable trends that we're seeing with the healthcare and life sciences lens.

T K, can you speak to sort of the re-skilling needs of your workforce?

Can you find them in the market or is it upon Wipro to retrain the workforce in the new areas and at what pace is that happening and is it having implications for employee attrition?

So actually, we have a couple of things that we're doing.

First is that just from a workflow perspective, if you've looked at the past, typically what we used to do was we used to typically train people on uni-lines, which meant that if there was a technology, we went into depth as far as that is concerned.

For example, if you take Java, we used to train people on Java and all its variations.

Now what we're finding is more and more, we meet people who can work in one particular technology area in depth, but also have the ability to integrate across different technology components.

So in many ways what you typically see as digital unicorns, we need to see a smaller version of that coming into the workforce, and that's a huge re-training exercise that we have to do just to make sure that we are digital ready.

On the other hand, our existing Run business continues to kind of give us opportunities.

To that extent, I think the challenge that we have is how do we manage the old with the new.

So what we're really doing is that we've created a growth path for people who are really good at cross technology integration to move out of their current responsibility and move into the newer areas like digital for them to kind of gain experience and also train for that particular job.

So that's really what we are doing.

Sandeep Shah, CIMB India.

Just the first question is the management in the last analyst meet, which has happened in the March, we have said that traction in the banking and financial services has been improving with some client-specific issues are now getting behind.

So what has changed in the last one month for us expectation has been changing now?

So Sandeep, it's pretty simple.

If you look at last quarter, last quarter on a constant currency basis, our growth has been 3.7% in banking -- in BFSI.

So it's not something that has affected us.

But this quarter, we've seen one particular client specification taking a toll, but it's not something that's going to be there forever.

We expect to see that is coming back.

So that's going to affect quarter 1 for us.

But again, by a way of commentary, I just wanted to give you guys a quick sense of what is happening in the market for quarter 1 guidance, but the reality is the biggest impact for us in quarter 1 has been our oil and gas portfolio.

Like I mentioned earlier, the positive is the fact that we think that given the fact that we have the largest stake, as we consolidate oil and gas out, we'd be in a fabulous position to kind of gain (technical difficulty).

In fact, Anand is on the call; AP, if you could kind of give us a little bit of color on what's happening in the oil and gas segment, that would be useful.

So Sandeep, you heard our commentary on quarter 1, if -- you have any follow through questions?

Secondly, in terms of the TCV signings, like we also made a comment that the TCV signs or hunting clients in FY15 is almost like 10X or 12X of what we have signed in FY12 and there were many deal announcement, which we have made in the span of last three to five quarters.

But at the same time if you look at, again, we are starting next year on a slow pitch which is -- may result into again tepid low-single digit or a mid single-digit kind of a growth.

So why this TCV signs are not getting reflected in terms of the growth rates?

What is being wrong, is it like the mining is still an issue or is it more in terms of the leakage of the existing revenues where we are not able to retain those revenues?

Sandeep, fundamentally, both -- in the world that we are in, I think both are co-existing, some of the hunting wins that we have had have been extremely good revenue generative for -- they have been revenue generative for us and extremely good market reference for us.

But at the same time, we have another variable, which we did not have before, which is the challenge that we have on that energy sector -- oil and gas sector and therefore the number that you are seeing is the number that we have for quarter 1, but I do want to point out that even with the challenge that we have on energy sector, our quarter 1 guidance translates into a y-o-y growth on currency adjusted basis between 7.8% to 9.4%.

And if you compare that with the growth that we had last year, that despite the headwinds of energy sector, you are not seeing any deceleration and if we see some of the momentum back in energy sector thereby the customer, after the initial uncertainty related with the change in oil price, do come back and give us more work to do which is the natural follow through behavior we have seen every time an industry has gone into crisis, that's the nature of follow through behavior that we have seen from customer.

It could potentially be a good outcome in a three months to six-months time.

Jatin, because it looks like the upstream revenue contribution for us is not that big.

So, is it -- let me ask you in a different fashion, is it -- any color in terms of how the guidance will look like if you exclude energy for the first quarter?

Sandeep, you know the answer to that.

If we exclude something, the other thing will look better.

But reality is that you judges on the whole number and the whole number is what we've shared with you.

But I do want to point out that the acquisition that we did in 2011, which was of the oil and gas business, SAIC, in fact, our positioning and presence on upstream would be among the top, if not the top most, IT services provider in that space and therefore our consequent exposure also as we enter this onto certain figures it is relatively higher and that has sort of played out.

Okay.

Just last bookkeeping question is, the realized cross currency rates like the versus the euro and the GBP, it's like 1.07 and 1.49, which I'm reading from the constant currency growth guidance for the first quarter, seems much lower than the peers.

So is it -- just wanted to ask whether the guidance is still based on a constant currency or we have changed the method?

There is no change in the methodology, Sandeep.

Guidance is based on the constant currency.

Okay.

The rates look really lower versus the other peers who have actually reported the numbers, yes?

They are the rates that we realized in quarter 4 and they are the rates, I mean, you can -- they are very close to the current rate I mean in some form.

So it's not -- I don't know how others take it, but this is the rate that we have realized in quarter 4.

Sandeep Muthangi, IIFL.

I have a quick question on the ADM business.

So we've seen a pretty sharp decline in the ADM business and this has been a trend that's been going on.

I understand there's been some issue with the backfill revenues in the past.

I just wanted to get some more insights and a quick update on what's happening with the ADM business and how do you see this panning out in the future?

I have two points to make on that.

Number one is, if you see our ADM, it is split between two service lines.

One is business application services and the classic application development and maintenance.

So if you see business application services, this year has grown 9.7%.

So you are seeing a traction on a much larger base, which is business application services.

ADM has seen for the full year a 13% reduction and there is a sharper reduction in sequential basis.

And so the point -- two points.

Number one, if you combine with that the impact would be different and numbers will be different.

But even on stand-alone this is nothing, but the reflection of the challenges on the energy and oil and gas sector which has flown through ADM lastly.

And just one quick question on the top 10 clients and their contribution.

I've been asking this question for some time now.

For nearly three years we've seen this top 10 bracket flat lining either because of client-specific issues or some issues with the mining.

What are your thoughts on that and what are your key initiatives to accelerate growth in this very important segment?

So Sandeep, if I could just kind of add to that, this is T K, there are two things.

If you take out the oil and gas impact that we had last year, you'll see that that top 10 accounts segment will grow very, very differently.

That's number one.

Number two is, which I think is very important, is that admittedly in some of our accounts we've not -- our mining engine hasn't really performed the way it should.

And the reason primarily is one of the cross-sell of servicing.

So one of the big things that we have done this year is if you look at the automation change we have created, we've got all the service clients now working under [Amit].

And to that extent what happens is we believe that that itself with a new service integration led (inaudible) we think that's going to clearly help us cross-sell far better than what we have done in the past.

So I think if you ask me mining is a very important part of our entire equation, while we've done a fabulous job on hunting, I think mining is where we have got work to do and we are kind of aware of the fact that we have to fix that upfront.

I am pretty confident that, over the next -- this year that issue will get sorted out.

Srivathsan Ramachandran, Spark Capital.

Just wanted to get your comments on the 1Q guidance, you did mention that there are some specific weakness in oil and gas specifically, but outside that, how do you see, India has been good.

So previous year's 1Q is to be weak, thanks to India, but we've seen India shape up.

So just wanted to understand how do you see maybe post 1Q, do you see things shaping up back to good demand maybe from 2Q, what -- it's been the practice and just wanted your thoughts on broader FY16?

Do you think FY16 directionally can be better than FY15?

Srivathsan, if I'm going to just look at the overall numbers that we have, I think we have sorted out three business units, which I think are going to do well this year.

When I say well, I mean, it's going to be -- there is going to be significant growth from those three.

Healthcare and life sciences is going to kind of lead it, it's going to be followed by -- we are going to have manufacturing and retail and consumer goods also kicking in.

So these three verticals are going to do -- in fact, I mean, they are going to do well.

If you go back and look at our other businesses, telecom we think will pretty much perform at the same level at which they have performed this year.

Our telecom business is going to get hit pretty much by cross currency because most of their revenue comes out of Europe.

We are pretty underway when it comes to US.

To that extent, there is going to be a level of currency playing out in that particular segment, but otherwise from a volume perspective, we believe it's going to be as good as this year.

If you go back and look at the last two segments that we have, banking and financial services, I think on the insurance area, we have to find a solution for it.

Last quarter growth has been good, in constant currency we've grown about 3.7% and that's positive.

But I think going forward in this quarter, we see one client specific issue in banking, but otherwise structurally for us to get growth in that particular segment, we have to [pick] our insurance trouble.

Insurance is the largest vendor and today we almost do not participate in that segment and that's really what we have to think.

Oil and gas frankly is the joker in the pack because what happens there are huge consolidation opportunities in oil and gas.

We are a leader in that space.

We've been winning in the last two quarters.

The issue that we have is that our revenue that's coming in is not enough to offset the revenue that is going out and that's what is being -- really affecting us badly this quarter.

When I say this quarter, I mean quarter 1. I personally believe that you may see an effective tax -- a little bit of tax kind of carrying onto quarter 2, but at the end of the day, it is the bottom that it can hit, it can't go on like this forever.

But by quarter 2, quarter 3, we should see some of the consolidation opportunities kind of coming in and to that extent, after that we hopefully will see the oil and gas business kind of improving.

I hope that's enough color.

Sure.

Just one more question on the oil and gas piece.

It's slightly more counterintuitive you see, India and Middle East doing very well.

At some level, the entire Middle East market is dependent on oil and oil rate.

So, just wanted to understand what's driving the demand in Middle East specifically and in India, if you can just give some more color with that?

It's very simple.

In the India and Middle East geography, we have closed two deals where we have kind of one -- two deals from oil companies and in those two deals, we have consolidated out our local competition.

When I say local competition, I mean -- consolidated our competition and that provide the flip, if you may, to our revenue and it's a pretty significant flip.

So, while we are kind of -- while there is a decline globally, we are seeing signs of consolidation coming out of this particular area, we expect to see that kind of spreading to the existing players.

Mitali Ghosh, Bank of America.

I wanted to understand the situation in Europe, because I think it's really been very weak for Wipro both this quarter as well as for the full year, which is otherwise I think a geography that see increased outsourcing.

So, if you could discuss what steps you're taking to remedy the situation and maybe what we should expect going ahead?

So, Mitali, if you really look at our segment revenue for Europe, that's been affected very badly by oil and gas.

Some of the largest customers that we have are sitting in oil and gas and especially in that particular -- and that's what is really affected us.

So pretty much all the revenue that we have lost in oil and gas has come from Europe.

So that is one.

Second is that, we have been winning deals, especially in Europe.

In fact some of the deals that we have won in Europe especially in quarter 4, that has still not produced revenue.

We don't expect it to produce revenue in quarter 1, but we expect revenue to pick up in quarter 2 onwards.

Secondly on the pipeline, if you could perhaps discuss what it's looking like versus similar time last year, excluding perhaps the energy vertical and what you feel about the coming year in terms of the demand outlook?

So, here is what we see in terms of pipeline.

It's a good question, except that keep your oil and gas sector out of it.

I think the demand pipeline is fairly steady.

What we have found is we have found plenty of opportunities in healthcare in terms of consolidation on the Run side of the business.

Again the same goes to manufacturing and also in retail.

In retail, surprisingly, we saw weakness in the beginning of the quarter (technical difficulty) which is quarter 4 and now we're seeing that kind of dime down a little bit.

We clearly see demand coming back in retail.

So overall in these three verticals I see clearly opportunities.

If I look at telecom, I think telecom would show the same level of growth last year.

I think the issue for telecom is going to be that telecom is going to get hit pretty badly by cross currency movements at least for us, but I don't see a demand issue there.

I see clearly that in terms of volume growth, we'll have the same volume as last year.

In banking and financial services, banking continues to grow pretty well.

I think the weak point for us to mention that incremental growth we are not getting at the same level as we should compared to competition.

Our capital markets continues to be strong.

Utility business for us, we have come off the back of a fairly strong year.

In fact, if you look at constant currency, our growth in the utility business has been [in excess of 70%].

So that's pretty substantial.

This year what we see is we see growth moderating a little bit in that segment, primarily because we are coming off a huge growth category.

But, yes, whatever we have in our case, utility in terms of incremental revenue, we're going to find it very difficult to make it up in terms of losses that they're going to have in oil and gas.

So basically it looks weak.

But what I can do is I can pass it onto Anand for a little more color.

Anand?

I'm sorry.

I think I have lost him.

Excuse me, sir.

We have the line for Mr. Anand.

Mr. Anand, your line is talk mode.

You may go ahead.

Sir, it seems it's muted from his end.

There is no response.

No problem.

It's okay.

Thanks.

Robert Simmons, Janney Capital Markets.

Calling in for Joe Foresi.

So, can you talk a little about where you see your margins going both in the near-term and long-term and what drivers you think you still have to drive your margins higher?

Joe, can you repeat your question?

We missed it.

So, can you talk about where you see your margins going in the near-term and in the longer term and what drivers you think you still have to drive margins higher?

So, Robert, as you can see in Q4, we have expanded margin by 23 basis points vis-a-vis Q3, despite the headwinds on the cross currency and related impact on the margin.

For full year fiscal 2014/2015, we have remained in a very narrow range of that of fiscal 2013/2014.

So we have had stability on margins.

Now, I'll talk about what we do going forward or what is our sort of priority going forward.

Our priority as we always said is growth and that is the single thing that we sort of focus on as we think about the future and therefore we are not chasing growth -- we are not chasing margin at the expense of growth.

From that standpoint, we will continue to remain invested, make investments when and where it is necessary, but of course manage margin in a reasonable band.

Particularly for quarter 1, we will have headwinds in form of the investment that we'll make for the salary increases of our employees starting June 1 and the rest, I mean this would be the normal quarterly volatility that you'll see.

Nitin Padmanabhan, Investec.

Just wanted to check, if you look at the pipeline, say, what it is same time last year, how does it look today and second, is this pipeline more likely to fructify towards the second half of the calendar, because that's what the comment that we got from a peer?

So Nitin, Jatin here, so we don't specifically talk about the quantum of the pipeline, but directionally, we see it improving.

Certainly, our [win ratios] are much better than what they were a year back.

And overall, we see that as oil and gas sector stabilizes and some of the demand starts coming back in form of consolidation of the spend for customers, we should certainly see better momentum as we progress through the year.

And Jatin, just the other question on wage increase, what is the quantum of wage increases that you are giving this time now?

I request Saurabh to take that question.

So, Nitin, wage increases planned in effective June 1 along with our promotion cycle.

It will be in-line with what is happening in the industry.

We haven't set on an exact number.

So, closer the date, we'll let you know.

Sure.

And just one last thing from an ATCO perspective.

Post the acquisition of ATCO, the idea was that there will be more access to Canada and Australia as market both on the utility space.

How has that sort of progressed and what kind of opportunities do you see there in terms of cross selling apart from ATCO?

So, I just give you a two minute perspective on what's happening.

So we have -- in that particular segment in which ATCO is and the segment that the ATCO group was playing in, I think we have made significant progress in terms of hunting deals across Australia and Canada.

Canada has been a little slower, because one of the big segments that we want to go after was government and we haven't yet done that.

But that's the segment for which we will be creating a separate organization to kind of address that particular market.

But as far as Australia is concerned, I think there is opportunity there.

We are right now chasing a couple of large deals and we think that's really something which in the near term should give us some level of comfort in terms of making sure that the acquisition is working for us.

Sure.

And the two oil and gas consolidation deals that you were talking about was the [India made] deal?

Absolutely.

(technical difficulty).

Mukul Garg, Societe Generale.

First question is for T K. Have you seen any impact coming from hyper automation?

Your margins are stable in spite of a big impact from FX.

So is there any impact because of hyper automation on revenue growth also, for example, are you seeing any lower revenues, but better profitability in business because of successful implementation of hyper automation?

And then I have a bookkeeping question.

The funny thing about hyper automation is that number one is, we have done [four to five] projects right now on which we are specifically kind of applying the hyper automation principle to make sure that we take cost out.

Now, ultimately what's happening is that will affect the way we price these out into future.

I think those are the two things that we're going to see.

So clearly what we are going to see is that the pricing that we give on fixed-price projects clearly across the board we see, if not we don't give them that, competition will, we clearly see that commodity kind of services are under pressure.

But the good news is that we've been able to kind of get some of that back primarily by reducing efforts.

So in effect what has happened is that realization by itself hasn't changed substantially and that's the positive.

Okay, thanks.

And the second question, I just wanted to understand how did we arrive at the realized quarterly exchange rate of INR63.35?

If you can help me understand.

And similarly, let me understand clearly that euro-USD average for the quarter was 1.07?

I'll request Aravind, who is our Treasurer to take this question.

Our realized rate includes the gains on exchange rate on our hedges because we do designated cash flow hedges and that's why you get a realized rate, which is a little higher than the spot rate that you saw during the quarter.

Okay.

And the same cases therefore euro-USD also?

So the process is more a function of when you book your revenue.

So you saw a lot of volatility in the process and this is really the realized rate that we got for our process for computing our dollar revenues.

Okay.

So we should expect this to continue in the next quarter also?

I just wanted to get an understanding of whether the cash flow hedges will flow through to the next quarter also, given that you are giving constant currency guidance.

So, our hedges are the -- the designated hedges are for using USD-rupee leg and that has been factored in for our internal estimate what we give you guidance for is the dollar revenue for quarter 1, which is impacted, if at all, by GBP, euro, AUD and other currencies, which is stated on an average realization that we had in quarter 4 and not what we expected to be in quarter 1.

Ravi Menon, Elara Securities.

Gentlemen, do you expect to make significant investments in Europe through an accelerated growth there, I mean, you said that energy has been a drag there.

But outside of that, do you think you've got sufficient investments in place to kind of bring that up to achieve the same growth that you would see in the US or faster or do you expect to step that up?

I think clearly from our perspective, Europe is in tyranny and we started with decent Europe and these are significantly large deals that extend.

I don't see an issue in terms of either investment or growth.

The concern as far as Europe is concerned [because there is debt].

At the end of day when you talk about US dollars, what would you finally realize and I think that's the question, but that's something that we can't control, so what we have -- what we live with.

But overall, we're not cutting back investments in Europe just because the euro is kind of [soft].

Yogesh Aggarwal, HSBC.

Just a couple of questions on BFSI business.

So see -- like we got impacted by the fall in crude prices in the energy business, you guys have very high exposure to the capital markets and there the business environment has been pretty good, if you look at the recent results as well.

So in your conversation with your capital market trends, is there a possibility for a positive surprise of spending from some capital market clients?

So let me do one thing.

I have Shaji Farooq on the line.

Shaji, can you kind of answer that, Shaji?

Seeing certain trends in the capital markets industry, specifically related to increased trading volumes, also connected with the volatility that the market has seen, the translation of that directly into increased spend on IT is, I mean, I would be a little dubious about that, right?

We don't see a clear linkage between those two things.

Having said that however, if I look at the overall capital markets area, the mood is a lot more bullish and more focused on driving revenue which generally bodes well.

The second area that has continued to remain strong is the area of regulatory compliance and risk, which has again been very sharply focused for obvious reasons.

And we expect to continue to see strength in that area as well.

The flip side is, as you see increased spending in the regulatory compliance side, that has to get financed through some of the new.

And so there is a lot of focus on driving efficiencies particularly in areas such as infrastructure, more of the spend that is not directly related to business outcome.

So that's really the trend that we are seeing.

Overall, I would remain positive on that sector.

I think things have really gone through -- bottomed out in many ways and barring some unusual, very unusual events which are really hard to predict in any case, I expect the sector to continue to show improvement.

Okay.

Thanks for that, Shaji.

Just a clarification on compliance.

You said the spending is increasing year-on-year or it just been very high over the past few years?

Actually, it has been so high, but it's also increasing, right?

Because there are always additional demands from the regulatory side.

So, overall, I mean, it's hard to say that that trend will continue again this year, but last year we thought it was already at a very high level, but we actually saw a pick-up even improve through last year.

And generally, finance through efficiency is in other area.

So it becomes somewhat of a double edged sword, because on one hand you have an opportunity, on other hand you have to find the means of saving your client's cost to essentially finance this increased level of activity.

But I expect that we'll stay at this level, if not -- maybe even I think a little further, but still it is already at a very high level in any case.

Omkar Hadkar, Edelweiss.

All my questions have been answered.

Thank you.

Manik Taneja, Emkay Global.

Thank you for breaking your commentary in terms of outlook of one business across verticals as well as Europe.

But if you could essentially give some sense in terms of how are you seeing your business in US across some of the segments, because we saw through the first half, the last year, we saw some pickup in North America and over the recent quarters, once again seen soft performance.

So, I think as far as US is concerned, secular demand continues to be strong.

So we really don't see an issue as far as demand is concerned out of US.

If you look at the recent ISG [card] we do, you would see that reflected in the US spending.

I think the overall deals that are coming out in the market from an ISG perspective, you saw a certain level of weakness coming out of Europe and more significant level of weakness coming out of Asia-Pac.

However, the last for us has been India.

So, I have Soumitro Ghosh who runs India, who can kind of give a little bit of color as to what's happening in India.

Thanks, T K. The last quarter has been extremely good for us and it is in line with actually the previous four quarters where every quarter we've actually posted in excess of 5% sequential growth.

If I look at the different segments, out of the seven business units which we run, four of them have been really strong.

So one is BFSI, second is telecom, third is energy and utilities and the fourth one is government.

And what we are seeing in each one of these is really new initiatives which are taking place.

For example, at BFSI we had two greenfield opportunities.

One, the new banking license, which got issued which was IDFC.

The other is very recently all the four public sector general insurance companies have created a new company called Hedge Funds, which is a shared services for the TPA business.

Similarly, most of the banks are taking a lead in terms of digitization of most of that offering.

And the third is in the banking world we have seen the last wave of core banking implementation.

There were couple of banks who had really not moved to a contemporary platform.

So now they are doing that.

Plus the refresh of the earlier deals are really coming soon.

So that's one.

In Telecom, we are seeing -- most of the big telecom players actually replacing their architecture.

Whether it is the OSS/BSS platform, whether it is the data warehousing architecture, whether it's the analytics piece, so that's one.

Second is the investment which all these guys are doing in the enterprise business.

So that is really driving growth.

The third is in terms of Energy & Utilities, T K talked about earlier that two of the customers, one in Middle East and one in India, proactively they have started looking at cost reduction.

And what they have done is two deals where they have really consolidated their vendors besides application rationalization, infrastructure rationalization et cetera.

And in the engineering construction side, we see a lot of activity in the Middle East where we are working with a whole lot of EPC companies.

Lot of money is being spent in modernization of the airports, in terms of the metros, roads etcetera, etcetera.

And the last of course is government where you're seeing a lot of action happening.

Currently, there is more -- the initial work which is happening in digital India, make in India or smart cities.

However, the previous government's lot of the programs, which were called MMP program, (inaudible) and really the growth is currently coming from that.

So, one is hopeful that from the new initiatives like Digital India and smart cities specifically there will be new business coming up.

One of the big initiatives as all of you must be aware is the GSTN initiative, which has to be implemented April 1 of next year.

So there is a lot of traction due to that, but government can be a really big opportunity in the next 12 to 24 months.

Overall from a geography perspective, we will have some very strong growth, both from India and Middle East, the heartening piece was India which almost posted this quarter double-digit sequential growth.

Sure.

Thank you for the detailed response, if I can [fraud you] further in terms of performance from Europe, while you did highlight that our client mix from Europe essentially is responsible for the tepid growth.

But if you could give us some sense in terms of how would be your vertical mix from Europe and how are you placed versus competition, especially in verticals like financial services and manufacturing, specific to Europe.

So, Manik, as you know, we don't break down these numbers, but qualitatively speaking, we have a large presence in three or four segments one is the banking and financial services, second obviously is energy, third is manufacturing and fourth is telecom and I think in all these sectors, we are as well placed as any local or international competition.

Thank you.

Participants, that was the last question.

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

Thank you and over to you, sir.

Thank you all for joining the call.

In case we could not take any questions due to time constraints, please feel free to reach out to us.

Thank you and have a good day.

Thank you, sir.

Ladies and gentlemen, on behalf of Wipro Limited, that conclude this conference call.

Thank you for joining us.

You may now disconnect your lines.

Thank you.