Cautiously optimistic about future growth: Wipro

In an interview to CNBC-TV18, Wipro's management, executive director and chief financial officer Suresh Senapaty, chief executive officer-IT biz  and executive director TK Kurien, executive VP-HD Pratik Kumar, speak about the results and give their outlook going forward.

Below is the edited transcript of the interview with CNBC-TV18's Udayan Mukherjee.

Q: The big number is that the volume growth for your company still continues to be fairly tepid, 0.2 percent. When do you see meaningful improvement in that number?

Kurien: Our strategy, which we laid out in the beginning, a couple of quarter ago, was pretty much clear. It was to drive value on one end and make sure that we get efficient execution engine sitting in our core. So, over the past couple of quarters, we have been investing significantly in intellectual property. That is really reflected, to some extent, in our volume growth. Lower volume growth is reflected in higher pricing. If you look at our pricing, our pricing onsite has gone up by 1.9 percent and offshore by 1.5 percent.

Also, if look at cloud, mobility and analytics, they have done extremely well. Overall, if you ask me, I am not that worried about the volume growth portion because I think at certain point of time, after you get the efficiency, that will start kicking in. If you look at our net additions, they have actually gone up to over 2,000 people. We have not cut back on our hiring. So, we are, I would say, cautiously optimistic, as far as the future is concerned.

Q: At a time when your peers are generating 4-5 percent volume growth you are reporting pretty much flat QoQ. When do you see deals picking up, because the street will not like to see this kind of anaemic volume growth even if you can eke out small gains in pricing?

Kurien: The demand estimate has not really changed too much over the past quarters for us, but in the end of Q2 we saw an uptick coming in, in terms of just deal closures, so in that extent again cautiously optimistic. I would not say that I see a blowout future ahead of us, but I clearly see more optimism than I saw a quarter again.

Senapaty: If one looks at the Q2 numbers, we have done basically well in terms of the guidance that we had given. We have said that part of it was muted because the India piece of the business, which used to have a higher growth, did not and was not even forecasted to have. Therefore, there was a little bit of mutedness. Even in Q2, if one looks at the actual numbers that we have delivered and look at it on YoY basis, it comes to 7.5 percent based on what we have delivered.

If one does a factoring of the India IT piece of the business, which tends to be growing at about 25-30 percent, we could have been much higher, but it was not the case. In the India market, the interest rates are higher, currency is an issue, telecom is not spending money, no capital investments are taking place. But recent past developments that have happened with the new Finance Minister and a cabinet reshuffle, definitely, there is much more hope than before. We are also banking on it to be able to get back some of those growth rates as we go forward.

Other than that, the YoY is about 7.5 percent on a constant currency basis. Having said that, while Q2 guidance was about 0.3-2.3 percent, in the Q3 guidance we have improved, which is about 1.2-3.2 percent. We think we are in the right trajectory.

Our top 10 accounts have grown 8 plus percentage sequentially in Q2. We have added one more customer to our USD 100 million basket. We have added two more customers to our USD 75 million basket. We have added 50 plus customers in the last quarter. We have in some form improved the tail customer by about 30 of them. We are focusing on the right thing in terms of mining. We are focusing on the right thing in terms of hunting. It has been reflected in terms of pipeline.

We have grown well on the energy, natural resource and utilities. The growth which was muted so far as our BPO and IT infrastructure services were concerned two quarters back has come back to their growth trajectory. Healthcare services which had muted growth rate in Q1 and Q2, as we go forward based on the deals that we have won and the trajectory that you are seeing, that will start kicking in.

We are expecting financial services, retail and RCTG to be kicking in. From that point of view, some of the areas which had been muting growth whether from a practice or a vertical standpoint, we are getting over that. Continued slackness would be there in terms of investment banking and capital markets and sort of the telecom OEMPs and the semiconductor area. Otherwise we are seeing pretty decent movements. The Q3 approach that we have taken vis-à-vis Q2 is good. Hopefully, we will come out better as we go forward because the investments are in that direction.

We have increased the sales and marketing by 1 percent at this point YoY. We have increased the sales and marketing 20 bps QoQ. There is this particular investment that is happening, focused attention being done on the back end from a standardization point of view. It takes some quarters, but we are in the right direction.

Q: The pricing improvements that you spoke about is it one off or do you see that as a rising trend over the next few quarters?

Kurien: It is reflecting the strategy that we laid out for ourselves. We don’t think we are going to drop pricing.