Wipro Ltd (WIT) 0 Q0 法說會逐字稿

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

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

I would now like to hand the conference over to Mr. Sridhar Ramasubbu.

Thank you and over to you, sir.

Thanks, Marina.

Good day to all.

This is Sridhar and I'm joined by Manoj and Aravind from IR team in Bangalore and on behalf of the entire Wipro team, we extend a very warm welcome to all of you.

We are pleased to host Wipro's 4Q FY13 earnings call.

Hope you have received and seen the press release we issued yesterday late night EST and we'll have time for Q&A at the end.

On November 2, 2012, we announced our strategic intent regarding the Scheme of Arrangement for the demerger of the Diversified Business of Wipro.

We are happy to inform you that the necessary court and regulatory approvals have been obtained and the demerger process is now complete.

The financials from April 1, 2013 for fiscal FY14 for the listed company will be a pure play IT business organization.

The format for today's earnings call is as follows.

We have Suresh Senapaty, Corporate CFO, and T. K. Kurien, CEO of Wipro IT Business with us.

They are joined by bureaucrats and other senior members of the Wipro management team who will be happy to answer your questions.

As always, elements of this call and the management's view may be characterized as forward-looking under the Private Securities Litigation Reform Act 1995 and are based on management's current expectations and are associated with uncertainty and risk, which could cause the actual results to differ materially from those expected.

These uncertainties and risk factors have been explained in detail in our filings with Securities Exchange Commission in the US.

We do not undertake any obligations to update forward-looking statements to reflect events or circumstances after the date of filing thereof.

The call is scheduled for an hour.

The presentation of the 4Q FY13 results will be followed by Q&A.

The operator will walk you through the Q&A process.

The entire earnings call proceedings are being archived and transcripts will be made available after the call at our Company's website.

Replay of today's earnings call proceedings will also be available via telephone post the call.

During this call, I'm also available on email and through mobile as well to take any questions and table it to the Wipro team in case you are unable to ask questions for any technical reasons.

Ladies and gentlemen, over to Bangalore for management commentary.

A very good day to ladies and gentlemen in the United States and Europe and good evening to those of you in Asia.

Before I delve into our financials, please note that for the convenience of readers, our IFRS financial statements have been translated into dollars at the noon buying rate in New York City on 31 March 2013 for cable transfers in Indian rupee as certified by the Federal Reserve Board of New York, which was $1 equal to INR54.52.

Accordingly, revenue of our IT Services segment that was $1,585 million or in rupee terms INR86 billion appears in our earnings release as $1,569 million based on the convenience translation.

The Scheme of Arrangement for the demerger of Diversified Business is effective from 31 March 2013 with appointed date of 1 April 2012.

Therefore under IFRS, the Diversified Business would be shown as discontinued operation till 31 March 2013 while it is not considered under the Indian GAAP.

Total revenues for the quarter were INR110 billion, an increase of 12% year-on-year.

Total revenues for the year were INR434 billion, an increase of 16% year-on-year.

Total net income for the quarter was INR17.3 billion, an increase of 17% year-on-year.

Total net income for the year was INR66.4 billion, an increase of 19% year-on-year.

In IT Services, our revenue for the quarter ending 31 March 2013 was $1,599 million on constant currency at sequential growth of 1.4% within our guidance range of $1,585 million to $1,625 million.

For the full year, we delivered year-on-year growth at constant currency of 7.4%.

From a vertical perspective, we had strong performance sequentially on constant currency terms in energy, natural resources and utility, manufacturing and hi-tech, healthcare and life sciences.

From a service line perspective, infrastructure services continued to perform well growing 4% on a sequential basis.

Volume growth in the quarter was 2.5% on the back of ramp-ups from new deal wins.

Our realization declined impacted by cross currency, lower working days, and change in business mix.

The disconnect between the traditional way of looking at revenue growth in terms of percent, month, and rates is increasingly becoming obsolete in the current environment and going forward from next quarter, we would discontinue providing rate and volume growth data.

Margin declined by 60 basis points primarily on account of ForEx, which had a negative impact of 70 basis points.

Our realized rate for the quarter was INR53.96 versus a rate of INR54.54 realized for the last quarter.

As of period end, we had about $2.1 billion of ForEx contract.

Our IT Products business grew by 15% on a year-on-year basis.

Consumer Care and Lighting business, as part of our discontinued operation, continues to see good momentum with revenue growth of 15% year-on-year and operating profit growth of 18% for the quarter.

The effective tax rate for the quarter is 20.2% and 21.5% for the year.

For the quarter, we generated operating cash flow of INR18 billion, which was 105% of the net income and for the year, we generated INR70 billion of operating cash flow, which is 106% of the net income for the year.

I now hand over to Kurien for the highlights on the IT business.

Good morning, everyone.

It's a pleasure to meet all of you on the phone.

Our results for the fourth quarter and for the full year have been with you for some time.

We have delivered a revenue guidance -- a dollar revenue sequential growth of 1.4% in constant currency for the quarter, which is in line with our guidance.

Let me give you a sense of the demand environment as we see it.

On one hand, we continue to see opportunity in the market and there is more positive commentary on IT spend, particularly in the US.

On the other hand, we have seen certain areas in our portfolio that have been impacted by delays in discretionary spend.

This factor coupled with seasonal weakness in our quarter one for India and Middle East business has resulted in our current outlook for quarter one.

However, we see the demand environment picking up from the next quarter.

On the backdrop of this demand environment, we continue to focus on building association and value creation at the customer end and driving operational efficiency before delivery function.

All our current initiatives in customer growth and execution are driven by this long-term approach.

On the customer front, we have done well in driving customer value and revenue growth and effective account management.

Our $100 million customer accounts have increased [7 to 10].

Our Top 10 accounts have grown at 17% for the year, much higher than the Company average.

As mentioned earlier, while we see delays in discretionary spends in banking and financial verticals, we have seen good momentum in energy and utilities, healthcare and manufacturing.

From a service line perspective, we saw growth in infrastructure services and consulting.

Infrastructure services continues to be the biggest driver of growth in the marketplace and we are focused on increasing our footprint and ensuring availability of these deals.

We have added 192 new customers in fiscal '13 as against 173 in fiscal '12.

We have added 52 new customers in the last quarter, a reflection of our increased investment in hunting.

Our customers are also seeing increased value that we are delivering.

We have seen significant improvement in Net Promoter Scores, up 13.6% and overall customer satisfaction score was up 7% over the year.

On the execution front, the focus has been dealing in revenue growth from headcount via non-linear initiatives and leveraging processes and tools in order to raise productivity, quality, and flexibility.

Our initiatives in automation and standardization are allowing us to deliver greater customer value through faster execution cycles, increased productivity, and more (inaudible) cost income . Revenue productivity for the year increased by 4.2% onshore and 2.7% offshore, driven primarily by productivity.

We focus in emerging areas and new technology paradigms to address the customer needs, to optimize new technology spend, and to drive better business outcomes.

In the on-cloud space, Wipro has won multiple deals, including a multi-country cloud-based CRM rollout covering 15,000 users in 50 countries and a cloud-based human capital management solution touching close to about 10,000 employees.

We have also won an end-to-end cloud operations management deal from an energy major to be delivered from our Cloud Command Center.

In the big data space, key engagements include build-up of a machine learning-based recommendation engine to drive personalized recommendations and an architectural blueprint to drive real-time analytics improvement product.

We continue to score wins with significant working student customer analytics and asset pricing validation.

Finally, we recognize that we are in a people's business and our strategies will work only as well as the quality of the people, the training that we give them, and the level of engagement.

Voluntary attrition stood at 13.7% for the year, a 3.7% drop from the last year and the annualized attrition of 12.5% for quarter four, which is the lowest rate in the last two years.

Our wage hikes are based upon our annual compensation review that's conducted every June and we will stick to it, the quantum of the increase is determined closer to the date.

We have shifted our hiring focus to meet skills both in domain and technology areas.

On sales transformation, we have followed up on the structured assessment process that I had mentioned last quarter with the creation of individual development plans and focused training.

I want to conclude by saying that we continue to focus on our execution and we are confident that we are on the right track.

Thank you.

Over to questions.

Thank you very much, sir.

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

[Operator Instructions] Joseph Foresi, Janney Montgomery Scott.

Please go ahead.

Hi.

I wonder if you could talk a little bit about the June guidance or outlook, what are the puts and takes?

I know you discussed discretionary spending and some of the other areas that are positive or negative, but it seems like we haven't hit an inflection point yet from an acceleration standpoint so I'm just trying to understand what's causing that guidance from a macro perspective and a Company specific perspective?

So here's what we see in the market to give what's driving the quarter guidance.

Typically what happens is that in quarter four of our fiscal year, which is quarter one in the calendar year, we clearly see our India business kind of peak and India is a fairly substantial part of the overall Wipro services revenue and then there is a very sharp drop off in quarter one.

If you look at last year, last year our quarter one, we had a negative 1.4% in terms of our reported numbers.

This year, we expect that the fall off in the numbers that we get from India would be compensated to some extent by our traditional outsourcing revenue that we get.

But when we do a guidance, fundamentally what we do is we take all the risks that we see, all the upside that we see, and we come to a considerate judgment in what we should be guiding.

The downside fundamentally reflects number one, the downturn that we see in the India business, to some extent uncertainty around discretionary spend that may kick in, and third and most important would be our ability based upon both these risks to assume where we've finally come up, what number we finally come up with.

So that's the basis of the whole guidance.

Okay.

On the discretionary spending side of things, it seems like as we go further through the quarter that there seems to be different views and different performances within particularly banking and financial services.

Do you feel like maybe you could just talk a little bit about what's going on from a discretionary spending side in that vertical?

And is this customer-specific issues or do you think it's still broad-based and it remains muted?

I think what we are seeing is that on the retail banking side, we don't see too much of a -- we see discretionary spending happening, but unfortunately for us from our portfolio, we don't have very many large retail banks.

Our portfolio is overweighted towards investment banking and investment banking, we still see and continue to see cuts in terms of discretionary spending, which happen sporadically.

And I think that's been the -- that being one of the biggest reasons why we cannot really estimate as to how much discretionary would come in.

On insurance, if you look at our business, our Britain business is heavily over-weighted towards discretionary spend and there are large programs which run on a longer period of time, typically don't get cut, but smaller projects, especially on the digital side tend to come on and off, depending upon quarters.

That's really what we're seeing.

So, from our perspective, if you just look at banking and financial services, net-net, investment banking REIT, retail banking, discretionary spending is strong, but our client base [is weak].

Investment on insurance, we see discretion spend happening, but fundamentally in our customer base it tends to be spotty.

I think that's the real reason.

Okay, it's very helpful.

And then my last question here, and I think as I understand it, the pricing declined for a variety of reasons, but it doesn't sound like it's related to the demand environment.

Maybe you could walk us through the decision to stop giving volume and pricing numbers going forward and talk about what the pricing environment is like out there and how we should think about that in relation to what happened this quarter?

Yeah, hi, this is Jatin.

Let me talk to the current year numbers on pricing.

While there is also the quarterly volatility, but if you take out the lower number of billing days and the impact of euro and pound depreciation, then the pricing volatility from Q3 to Q4 is approximately 1%, both on-site and off-shore, and effectively that is the maker of the business, 1% plus or minus every quarter we would get depending upon the project.

So this quarter, while the headline number looks large, it is largely driven by the cross-currency movement and number of days they were available to bill on all of this.

Now coming to the second point on discontinuing to show volumes and pricing going forward, really this is driven by the fact that earlier our model was really about adding more and more and more volumes and at a stable pricing that would be a great indicator of what the revenue is likely to be.

But we are now in the stage of industry where we are deploying a lot more automation tools and driving productivity in existing businesses, as well as pricing the new businesses which are not linked with the number of people that we deploy, but really linked with the outcomes that a customer want us to drive.

Now, in that environment volume and pricing are very tightly integrated and in a quarterly basis you will say volume up and pricing down, or vice versa, doesn't really tell the momentum or the quality of the revenue.

And, therefore, going forward, we would give you our overall revenue number, which would be a good reflection of what we are working and how we look at it internally, as against it breaking in volumes and realizations.

And, Joe, very quickly what happened was, in the last quarter in the fall, we got a lot of requests from analysts saying that we're confusing them with these two numbers.

And really it was in response to that that we decided that we would go ahead and stop this.

But we didn't want to stop it at the end of the year.

We wanted to make sure that we give everyone enough notice before we did it.

Okay.

Thank you for the explanation.

Thank you.

Moshe Katri, Cowen & Co.

In terms of the assumptions of volume growth and pricing in your June quarterly guidance --

Moshi, your voice is not very clear.

Can you talk on the phone or adjust your volume, please?

Sure.

What is embedded in your June quarter assumptions, or June quarter guidance in terms of the assumptions for volume growth and pricing?

So, Moshi, as we just spoke and as we have disclosed, we won't be sharing volume and pricing going forward, but from an assumption standpoint it is reflection of typically a volume with a narrow range movement in pricing.

Okay.

And then can you comment on the disparity in terms of the sequential growth rates that you have between your top -- one client, I think, was about 13% and I believe your Top 10 clients and Top 5 clients declined sequentially.

Is there anything that we can -- give us some more details on that?

Thanks.

Yeah.

So, Moshi, if you see our top client, as you mentioned has grown handsomely between quarter three and quarter four.

However, there are number of customers in Top 10, which have been impacted by the cross-currency movements, which happened in pound and euro.

And, to that extent, our overall Top 10 customer growth is muted, compared to what we have seen over previous quarters.

But I must point out that for the full year, the Top 10 customers in fiscal 2012-2013 has grown at 17%, which is roughly 4x the overall Company growth rate.

So, we don't see a -- I mean, we see it as a very positive indication of what we have been able to do with our account management structure, especially in the mega and gamma accounts.

Okay.

Now, since your June quarter guidance seems a bit conservative; typically just June quarter is strong for the industry, what is your -- and I know you don't provide guidance for the year -- are you showing better for the rest of the year?

Do you feel -- what are your thoughts about your Company growth rate vis-a-vis NASSCOM's expectation in terms of the industry?

And then, do you think that fiscal year 2013 will be a stronger year for you guys versus -- sorry, fiscal year 2014 will be stronger in terms of growth rates versus the year that you just closed?

Thanks.

So, Moshi, this is T.K. Very quickly, you know, where we are sitting this year, I think we think we are sitting in a better position than the same time last year.

I think that's the positive.

We don't guide on a full-year basis.

I'm sure you know about it.

So, any comment about the NASSCOM guidance wouldn't be an appropriate comment given the circumstances.

But all I can tell you is that from a sentiment perspective, we are certainly feeling better right now than we were the same period last year.

Alright.

Thanks.

Trip Chowdhry, Global Equities Research.

Thank you.

A couple of questions here.

First, in terms of new capabilities, of course, the market is changing, the new technologies are getting deployed.

What is your sense, like what new capabilities does Wipro need to have in place and what capabilities they need to de-emphasize?

So, broadly if you look at our strategy, our strategy calls for differentiation in the front and significant level of standardization and automation at the back.

So, the person who is guiding our differentiation in the front from a technology perspective is Shaji who is sitting right next to me, and he can kind of give you a quick view what's happening out there.

On the standardization side, in terms of making sure that what we are doing in autonomics and everything else, Bhanu, who is at Head of Delivery can talk to that.

And if you want a vertical color on what's happening in the industries, we can have N. S. Bala, who runs our manufacturing business to talk through it.

Yeah, hi.

This is Shaji Farooq.

Just to comment on the work we are doing in terms of differentiation, the role of Advanced Technologies, and this is cloud, mobile, analytics and social, actually there are the real couple of plays.

One is around technology transformation, which is optimizing clients' IT investments.

And then there is the second set of opportunities, which is really around disrupting and changing the way they do business.

Combined, these technologies can create significant disruption, which is a positive for our clients, and we'll continue to focus on these areas and we will continue to focus in driving deals that would leverage, not just each of these areas as silos, but bring them all together.

Hi, Trip, this is Bhanu here.

I can talk to you through about what we are doing in terms of standardizing the core of our operations.

Two big elements; one is, as much as these technologies are revolutionizing the businesses of our customers, we are also using the same technologies to ensure that our [deliberate] operations become standardized.

So, for example, in very matured services, such as both application management and infrastructure, we are adding significant amount of technology in eliminating the work for manual intervention there.

We are also adding lot of analytics, so that you can gain significant insights about customers' application and infrastructure environment and hence build up on those insights to ensure a standardization of service.

So that's the one big element that we are doing.

The second area is in terms of building additional competencies required for the organization.

Again, we are using technology to ensure that we impart the right level of training and the right amount of exposure to our teams, especially in the emerging technologies that Shaji talked about.

So one is putting technology to use in the way we deliver service.

Two, putting technology to use in the way we get our people trained for getting ready for the marketplace.

So both of the activities we are doing.

Hi, Trip.

This is Bala, I head the manufacturing and the Hi-tech business unit.

Good talking to you again.

Just to give an example of the differentiation to your question on how we are driving the change in the front, I'll take one example of after-market services.

We see a fair amount of interest in customers to drive a different level of engagement in the after-market, post-sale, warranty support, as well as connecting with customers.

So, for example, we have launched a platform, wherein we are collecting data from products in the field and machines on the shop floor and combining that with transactional data to provide very different analytics to the enterprise.

So there is a lot of interest in customers, therefore, to use the platform for improved plant efficiency, as well as an improved connect with customers, post sale.

So that's an example of what we are trying to do.

Beautiful.

Something that we have observed in our research, and this is more of a comment, but I would like to see how you as a Company would like to react to it.

Like the new generation companies coming up, like VoltDB, which is providing in-memory database and the business model is all about pretty much giving the database free, but making money on the applications that can be created on top of it, which they themselves are creating, whereas their partners are also creating.

The value migration is literally moving up to the application layer, more as self-contained applications.

So what I was thinking is -- and this is not just VoltDB, it's across the industry, where the lower level of stacks, even like OpenStack is going to be given free, whereas the value is going to be created at the application level.

For example, the companies like Pivotal, the business model -- which has just forked out or spun out from EMC and VMware, the business model is changing and I was thinking, like, from a Wipro perspective, do you think it makes sense for you to create your own app store on various platforms like OpenStack, VoltDB, Pivotal, and market it as a product versus as a service?

And, of course, when I say service here, the business model is more like an Amazon.com's model, where you are going to -- it's a machine or a technology service which is based on utility pricing, rather than human time spent.

Any thoughts on that?

Trip, today we have a very simple approach to this, especially around the whole VoltDB space, because our own sense is that what happens -- today, with the way technology is coming at us, we could have only limited levels of innovation, to the extent it relates specifically to our customers and our customers' issues.

Today, given the environment that we sit in, we've a hard time kind of running our own business and the minute you get into newer areas like this, it tends to kind of de-focus this.

So we haven't -- we have experimented that in the past in terms of creating an app store and all we've done is created an app store around the mobile applications.

That's all that we've done.

We have not taken it down one level below.

And, frankly, I think, for us it's going to be hard to do it.

Very good.

Last question on the strategic front, I was wondering like the traditional IT services model is going through major overhaul and I was thinking like many of the -- when industry goes through these shifts, many companies make a mistake and they think that the only way to grow is through acquisitions.

One thing you guys are doing good is you are doing some divestitures, which is good.

But I was also thinking in terms of your IT services business, if we have a mother ship, whichever name you can give, which is just going and capturing deals whether it makes economic sense or not, but go for market share and then spin off the companies whose interest could be just profitability and go for a segment of the deals that the mother ship gives you.

Have you thought more on those lines also?

No, we haven't and what we should probably do is that I'll have our Head of Business Strategy come and talk to you and it might be worthwhile exercise and we should take this offline.

Thank you.

Bye.

Thank you.

Jesse Hulsing, Pacific Crest.

Please go ahead.

Thanks for taking my question.

TK, when you came on board, one of your goals was to mine your top accounts and have more success mining your top accounts and this year you've done a pretty good job of that.

By my estimates, you're up in about mid-teens with the new Top 10 customers.

But given the growth and expansion that you've seen, which is unusual amongst your peers within the large customer base, what gives you confidence that that pace of expansion can continue in '14 and '15?

Jesse, very quickly, what we have seen is if you look at what we have done around our Mega/Gamma account, it is a pretty well thought out strategy except that it took a little more time than we expected for it to work.

So initially what we did was we took our Top 15 accounts and we said let's drive growth in those accounts and let's prove the model and that has paid off this year because if you look at our Top 10 accounts, the Top 10 accounts have actually grown 17%.

What we have done is that we have focused on the next set of 25 accounts, which we started focusing on that last year, and we expect to see some of that growth plateauing out on our top accounts and growth moving to the next set of accounts.

That's what we see.

And as we go through it, we have identified a total of 125 accounts where we are putting in structures in place whereby we expect to see growth happening across the next two years in various times whereby we can get the type of growth in those specific segments, segments that we have decided to kind of focus on.

The only problem that we've seen is that we originally estimated that it would take about six months to do this, now it seems like before the account actually starts producing results, it takes between 12 to 18 months.

Got you.

Thanks, that's perfect.

You're decoupling or you're, I guess, re-coupling pricing and volume and not going to disclose that and you mentioned partly because outcome-based pricing and fixed-based pricing kind of distort those numbers.

When you look at your portfolio, I know 48% is fixed price, what percent is the outcome-based within your portfolio right now?

We don't break out that number right now so I'm unable to share.

But I can share that within 48%, especially in the area of our technology infrastructure services and some of the applications, directionally we are moving towards more and more and more outcome-based results as well as the BPO.

So if you look at it, it's difficult to take a guess and we don't break that out separately in terms of what is outcome-based and what isn't.

But we do measure internally what's non-linear -- and what's a non-linear opportunity and what isn't, and that number we typically don't share.

Great, thanks.

And industry-wide looking at the deal flow that you saw, what was your sense on pace of activity in the quarter?

Did you feel like there's more or less activity that you saw both for wins and losses on the Wipro side?

And when you look forward, how does your pipeline look and what percent of those deals that are in your pipeline would you say are RFP-based type breakups and what percent would you say are sole sourced?

Thanks.

So again we don't breakup the sole sourced and the RFP-based separately, but just to give you a little bit of color; between 31st of March 2012 and 31st of March 2013, our pipeline has remained more or less stable.

Fundamentally what we are doing is the pipeline churn is pretty high, but what we've been trying to do is kind of make sure that our win rates improve significantly from where we are.

We have seen an interesting trend in that in existing accounts we have seen significant win rates in terms of percentages, but in our hunting account typically what we've seen is that we've seen fairly low win rates especially around commoditized services.

So wherever the customer is looking for value, there we seem to do better; where the customer is looking for a commoditized approach to a certain problem, that gets a little tougher for us to kind of go there and sell.

Great.

Thanks, guys.

Thank you.

Edward Caso, Wells Fargo.

Please go ahead.

Hi.

It's actually Rick Eskelsen on for Ed.

First question here is on Visas, curious to see what Wipro and the industry --

Ed, we can't hear you very well.

Sorry about that.

Is that better?

Yes, that's better.

It's Rick Eskelsen on for Ed.

The first question here is on Visas.

Just curious to see what Wipro and the industry are doing to respond to the proposed Visa legislation, both to change the law potentially and how to respond if it goes into effect?

As you know, the bill has presented only yesterday, which is of something like 800 pages.

So at this point in time although we are looking at this trying to analyze its understanding, so I think it will be too premature to be able to respond to this.

But at this point in time, looks like there are some good features and there are some features which perhaps are not so good from the point of view of some of the restrictions or some of the economic studies involved.

I'm sure the overall purpose this particular bill is expected to achieve is quite key so far as the US is concerned and if there are any issues, which have economic or restrictiveness in our ability to serve the US client, I'm sure bringing that to the notice of the legislators will help change -- bring out appropriate changes to be able to deal with it.

And we can only talk about so much because the analysis is incomplete and work in progress.

My next question is on the hiring, I wonder if you could give some hiring expectations for this year and also on potential wage increases, could you indicate or could you indicate the size of the wage increase that you're currently looking at?

Hi, Ed.

This is Saurabh here, Head of Human Resources.

As TK had mentioned, we are looking at our wage increase effective first of June.

We haven't decided on the exact quantum of the increase both onsite and offshore, but it will be in the single digits is what we expect in line with what is happening in the market.

From a hiring perspective, we don't give full-year guidance on our hiring, but we have absorbed all our freshers on campus for the last fiscal and we have gone on campus for this fiscal, that's on plan.

And we'll continue to hire people technical lateral hiring based on demand both onsite and offshore and build an inventory of high-end skilled people like consultants and business architects and solution architects.

I hope this answers your question.

Just to follow up on the hiring, is your hiring right now more skewed to the campus hiring or to laterals?

Any sense on that?

So I think the hiring is two-thirds on campus and one-third from laterals, that's the ratio we have.

Last question from me just a follow up on the earlier question on pricing, curious if you could give some comments on like-for-like pricing so not impacted by cross currency or any billing days, but what you're seeing on a like-for-like basis?

Thank you.

Third aspect is the business mix.

So these are the three impacts; number of days, cross currency, and business mix.

Other than these three, the impact is very marginal.

Thank you.

Swami Shanmugasundaram, Morning Star.

Hi, guys.

Thanks for taking my question.

I think my first question is, how much of a revenue visibility do you have when you get into the quarter and what determines swing between the lower and upper end of the guidance?

Yes, Swami, this is Jatin.

As we take a decision on our guidance, we look at all the risks that could potentially crop up and also look at all the opportunities that we would be able to convert during the quarter.

Then there are certain specific factors, such as the current quarter, which is Q1, seasonality of our India and Middle East business, where we know for sure that the revenues would be lower compared to Q4, which typically is a bumper quarter for that business.

And then we make a judgment on the lower end and the higher end of the guidance.

For the quarter, as we walk in, we have a fair visibility of the numbers that we go in, but, of course, there is that last mile of uncertainty on specific pieces of revenue that we work through as we progress the quarter.

Excellent.

And the reason for the question is, I mean, does deal closures, any way, play a part in determining whether it's going to be on the upper end or the lower end, because I think in the third -- when you entered the fourth quarter the guidance was between 0.5% and 3%, but I think you guys came in at the lower end.

And, Kurien, mentioned that there were some delays in the deal closures.

So did that have any impact, because if I look at the next quarter's guidance, is again flat.

Does that mean that those deals get pushed out again?

I mean that's the reason behind my first question.

Yes.

So, if you see our guidance for last quarter adjusted for currency was between $1,572 million and $1,612 million and we came at $1,585 million.

So we came between the two, sort of, markers and not -- I wouldn't say exactly at the lower end.

The next quarter guidance is what we see today as a fair band of expectations that we should have.

And, of course, there are deal wins during the quarter, which impacts the quarter revenues, because if you win a deal in the first month of the quarter, you do have an ability to start transitioning in second month and book a bit of revenue as you work through the quarter.

So there are -- it's not a very large impact, but it does matter in the last month as we look at the large number.

Also, we're talking about the India business, which will be declining between quarter four and quarter one.

So that has been also factored into this [minus 0.6% to 1.7% plus].

Yeah, sure, thank you.

My next question is related to your ADM business.

My assumption is that that typically includes your bread and butter outsourcing, but if I look at the recent trend that hasn't been going well.

I mean, the revenue contribution from ADM has come down, as well as the growth.

So I just wanted to understand, I mean, could you throw some light on what's going on over there, whether there is any shift in the profile of the projects that you're looking at or--?

Yeah.

So, Swami, what is included in our ADM mix is also our classic R&D work that we do for telecom OEM customers and unfortunately that piece has seen industry challenges and that has been steadily declining and that has had impact on the ADM piece.

Also, ADM is a service line which we started entire outsourcing business with.

So that is to that extent one of the oldest service lines and the growth rates there are compared to the rest of the newer service lines are muted and to that extent it continues to lose its share among the overall bite.

So they are both factors which contribute for reduction in revenue contribution from ADM.

Sure.

My next question is on your client mining efforts.

I mean you guys have done a good job, but if I look at the recent trend, say, over the last three-four quarters, you kind of hit a plateau as such.

I mean, I don't see too much improvement, whether it's the number of $100 million accounts or the $75 million, I mean, all the way to $10 million.

So does that mean you need to change your strategy again or what exactly is --?

Yeah.

So, if you see, we have been steadily increasing our greater than $100 million customer.

In fact, between quarter one and quarter two we added one and quarter two and quarter three we added one.

This quarter, we have remained stable at ten, despite we lost close to 1% in terms of the revenue on account of cross-currency impact.

So I would say that we have made a substantial improvement in Top 10 customers, because that revenue YoY, full-year '12-'13 versus '11-'12 has grown at 18% in terms of total revenues.

We certainly need to make more improvement in the accounts which are between, let's say, $20 million to $50 million or $75 million and there is an ongoing focus of the organization as we start the new financial year to make meaningful difference in the growth momentum in those accounts too.

So very simply put, Swami, if you look at our numbers, you know, I've compared that to competition.

The biggest gap that we have is in the $50 million to $75 million range and that's what we need to fix, that's where the real focus would be.

How do you bring the guys who are at below $50 million to $50 million and above and how do you move the guys beneath that back into the higher category, that's the big question, because the pyramid is very important there too.

Yeah, sure.

Thanks, Kurien.

I think my last question is on the infrastructure outsourcing business.

Would you be able to give a split as to how much of it is the infrastructure as a service, as well as the legacy outsourcing and what's driving the growth there?

So, Anand Sankaran runs our Global Infrastructure Business and he can kind of talk to it.

Hi, Swami.

This is Anand here.

Over the last 18 months we have see an enhanced momentum towards customers looking at infrastructure as a service.

Nevertheless, it still constitutes to a small percentage of our overall business.

In infrastructure outsourcing, even today we have a large percentage of the business which is the traditional outsourcing model.

But as I looked ahead, I feel that the infrastructure as a service business, as a percentage of our overall business would keep going up in the next few years.

But as of now, it's still small, it's lower than 10% of our overall infrastructure management business.

Sure.

That's it from me, guys.

And good luck for the next quarter.

Keith Bachman, Bank of Montreal.

Hi, guys.

I was wondering if you could talk a little bit about your margin expectations over the next number of quarters, at least directionally, and delve into mix, pricing, utilization and any other factors that would be pros -- helps or hurts as it relates to the anticipated direction of margins?

That's my first question.

Thank you.

Yes.

This is Jatin Dalal here.

Our medium to long-term expectation on margin is definitely that of sustenance and improvement from where we are, because there are clearly other players in the industry with higher margins and therefore it offers us the headroom to move on.

However, in the short-term, there will be quarter-to-quarter variation that would flow in, especially in the next quarter there would be salary increase that we would give from first June and we will put our best foot forward with the operations improvement to mitigate as much as we can of the salary increase.

So that is on the short-term margin expectation that as it relates to Q1.

The key drivers for our margins are definitely, one is pricing, as to how much we are able to generate for every person month that we deploy to deliver to our customer.

Second is the onsite/offshore mix, which is again an indicator of the work that we're doing in a global delivery location, worth is from a client premises and arguably the work that we do from a global delivery location is more profitable.

The third, of course, is the cost of the people, which is reflected in the -- which is published in the financials and is also reflected in the metrics, such as utilization of the resource.

How about in terms if the BPO continues to grow faster than some of the other parts of the business, I assume that would negatively impact margins?

Well, we don't break out the margins of individual business lines out of the mix.

It is a mix portfolio that we run.

We invest in a particular piece for higher growth and at the same time we have pieces of business we generate disproportionately higher profitability.

So far as BPO is concerned, definitely I can add color that it's definitely not a drag to the overall Company lines.

Okay.

The next question is do you think Europe growth was weaker than the Company average, would you anticipate -- on a sequential basis?

Would you anticipate that you'll get positive growth in Europe this year or to say it a different way, would you anticipate that Europe will grow at, above, or below whatever the year-over-year growth would be in say calendar year '13 or FY14?

Yes.

So if you see quarter four alone while you're seeing a negative 3.4% sequential growth in Europe, it's largely the currency and if I back out the currency, that number is up 1%, which is more of a reflection of some of the projects getting over there and not being replenished by new projects.

So I wouldn't read too much into the quarter four sequential number of Europe.

We see Europe as clearly a destination for IT services business.

We have invested in countries like Germany and France and we see that there is a vast amount of potential there for us to grow.

So certainly from medium to long term, we expect Europe to grow and lead the Company growth rate because here penetration is something that has enormous potential here.

Yes, fair enough.

Okay.

My last one is I want to go back to ADM, are you guys losing deals in ADM that are causing that business to grow materially slower than the Company average?

Really that is a reflection of two things as we spoke about.

One is our original R&D work that we use -- that we continue to do for a telecom equipment major, that business is under structural challenge and that business is coming down.

So I wouldn't -- I think there is a reduction in overall industry span, which is reflected into Wipro's revenue too.

And the second is that it's one of the oldest service lines of the industry and therefore the growth rate is certainly more muted than any other newer service line such as analytics or technology infrastructure services and therefore its share as part of the overall pie continues to reduce and I wouldn't see a wallet share or a market share gain there so much.

Okay.

That's it from me, guys.

Thank you.

Thank you.

Abhishek Kantor, Cowen and Company.

Please go ahead.

Hello?

Yes, please go ahead.

Yes, hi.

It's Abhishek Kantor behalf of Moshe Katri.

Can you talk a little bit about the pipeline and more of a long-term outlook on potential large contracts that could open up for recompetes?

So the biggest area of opportunity for us in terms of recompete is our Global Infrastructure Business and Anand Sankaran, who runs that business, can talk to it.

Yes, hi.

This is Anand here.

So we've been closely tracking all the opportunities that are coming up for renewal in the next 12 to 18 months and have been making proactive investments, both in terms of business development as well as having solution architects associated with the business development managers, to be able to architect a solution for those upcoming renewal deals.

So we are closely focusing on that.

We've identified the deals that are coming up in the next 12 to 18 months and have a team that's focused on guiding us through those opportunities.

So that's what it is, Abhishek.

Sure.

Thank you.

Thank you.

Marina, if there are no questions, we can close the call.

Are there any questions in the pipeline, in the queue?

We have one question, sir.

Okay, let them ask the question.

Shashi Bhushan, Prabhudas Lilladher.

Yeah, thanks for taking my question.

Sir, you talk about weaker win rate with our hunting compared to farming and we have made good investment in the hunting team.

How important is macro uncertainty a factor in weaker win rate for hunting and what are the steps we are taking to improve our win rate in hunting?

So, very quickly, I think by the very nature of hunting, you know, our win rates would be lower.

That's fundamentally the nature of these.

But what we are doing is we have clearly tightened up the qualification process on the deals that we chase.

But on hunting when you have strong account relationships it's much easier for you to [win a deal].

But fundamentally what we have noticed in the businesses that before you start hunting you really have to be in some way or the other, at least six months into the account for you to make impact.

And so, right now, before we start hunting, and Anand kind of alluded to it, our entire focus is making sure that we have -- we are there proactively with architects, with sales teams, building relationships and technical fusions, so that customers -- when the actual deal comes up, the customers are ready for it.

Sure.

Just thought I may squeeze in one.

You also talked about few larger deal decisions got pushed to Q1 and that we expect it to sign in Q4.

How critical these deals closure would be to return back to positive growth in Q2?

See, large deals give you nice bump-up effect quarter-to-quarter, so that's one.

While farming can give you a certain base rate, that's extremely critical for us to get high growth rates.

Thanks, that's all from me.

Okay.

Marina, we'll close the call.

I appreciate your interest in Wipro and for your active participation.

The IR team is available offline for any follow-up questions you may have.

Thanks, and have a good day.

Thank you very much, sir.

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

Thank you for joining us and you may now disconnect your lines.

Thank you.