Apr 19, 2013, 01.09 PM IST
Given the fact that the first quarter of the financial year is traditionally a weak quarter for Wipro's Indian business, one should not read too much into the guidance, says chief executive officer TK Kurien.
“Last year, we ended up with negative 1.4 percent in Q1. Our Indian business traditionally has degrown in the Q1. Degrowth (in Q1) is not something unusual , we get it every year,” he said in an interview to CNBC-TV18.
The street is disappointed with Wipro’s guidance of USD 1,575-1,610 million from IT services in the first quarter, up just 1.6 percent at the higher end. (Read More) .
However, the management is optimistic that the quarter after that will be a much better one, compared to the same period last year.
Suresh Senapaty, ED & CFO highlighted that the company’s top ten clients have delivered well on an annual basis. “Our top ten customers in last one year grew by 17%. Our onsite pricing is up 4.2 percent, our offshore pricing is up 2.7 percent,” Kurien added.
India’s third largest software services exporter said that its deal pipeline continues to be stable and the company is likely to perform better in FY14 than FY13.
Though the company expects to see some volatility in margins in short-term, it expects margins to sustain with an upward bias in the medium-term.
Wipro’s Q4 employee attrition rate was the lowest in two years at 12.5% and the company will take a final call on wage hikes in June.
“June is our annual cycle of salary review. The increase in whichever form we end up giving would be in single digits, but we have yet not inked in terms of what that quantum is likely to be,” Executive VP HR, Wipro and President, Wipro Infra & Engineering Pratik Kumar added.
Below is the verbatim transcript of their interview to CNBC-TV18
Q: The Street is extremely disappointed with your Q1 guidance, minus 0.6-1.5 percent. What do you see which has led to this kind of a guidance for Q1?
Kurien: If one looks at our Q1, our Q1 has traditionally been weak. Last year we finally ended up with negative 1.4 percent. That was our final number, so to that extent I do not think one should read anything more than what is given in the guidance primarily.
Our Indian business traditionally has de-grown in the Q1 and de-growth is not something that is unusual. We get it every year. The bigger thing for us is when one looks at the quarters ahead what do the quarters look like? Sitting where we are we are far more bullish about Q2 than we were at the same point last year in the same quarter.
So, we still see hope in the quarters to come. However, besides that I would not read anything too much into it.
Q: The other issue that quite clearly stands out from these numbers is that while your top client has grown the rest of the top 10 clients have not grown. Is that a bit of a concern going forward because that is something that analysts have pointed out to and what has led to this bit of decline in top 10 clients?
Senapaty: So, far as these kinds of numbers are concerned to look at on a quarter-to-quarter it may not be very appropriate. There will be certain projects which we would be ramping down, but over a year if one looks at the top 10, they have delivered well and so is our top 50 accounts.
If one has seen the number of accounts that has gone up in terms of 100, 50, 75. It is already showing an improvement over the last two years. Going forward, we are strengthening and deepening our client engagement managements with dedicated people working on them.
Also with a support from delivery architecting and business development, one will see an support from all the practices in terms of advance technology areas. In infrastructure services space or Value Added Services (VAS) space one will find that the growth that you will be looking for from these 125 accounts on an overall basis will continue to be the growth drivers for us.
We have also invested a lot of in terms of our hunting engine. Today if one looks at the component of pipeline that we have from hunting, it has significantly improved.
So, we are looking at growth both from the top 125 accounts what you classify them as Mega, Gama, Nurture and Growth, apart from just trying to get more from the hunting engine. Overall we feel very comfortable in terms of what the strategy that we have and that it will start firing in the medium to longer term.
In shorter term it may not have shown as much as we would have wanted it to be. We are also looking at more and more tail account cleanups, but as one goes forward most of the confidence that TK talked about comes from the fact that we have got those accounts under control and the management of that is pretty deep.
Q: Coming back to that, you said that you are bullish about Q2. In general, will FY14 be better than FY13 and secondly, previously you have indicated to various analysts that the deal pipeline has improved, how has been the deal conversion have you seen an improvement in the win ratio?
Kurien: The top 10 customers in the last year has grown 17 percent. Our onsite pricing is up 4.2 percent and our offshore pricing is up 2.7 percent. So, in a way if one looks at the strategy that we have followed and the kind of approach that we have used in terms of service lines to push up pricing on one end and deepen up client relationship is paying off.
The second piece of it is sitting where we are, are we looking at a better 2013-2014? We do not give full year guidance. So, I cannot in all honesty, answer that question for the full year. However, I am more optimistic to where I am sitting this year compared to last year.
The bigger thing is that the fundamentals of our strategy were dictated based upon our customers and our employees. If one looks at our customer satisfaction in last quarter, our customer satisfaction as far as our annual National Pension Scheme (NPS) score has been up 13 basis points (bps). This puts us right amongst the top in terms of global peers. In terms of employee satisfaction, we have had the lowest attrition over the past two years. So, those are the positives.
I think what we want to do is in this quarter, we will announce our salary increase, which we will continue to remain and we will announce that on June 1. In spite of that we see operational levers from a profitability perspective to keep us broadly in the range in which we are.
So, to that extent, we remain committed to employees and customers and yet we think we have the operational play. That is required to keep our profits where it should be.
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