Wipro guides up to 2% growth despite tough mkt situation

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Wipro guides up to 2% growth despite tough mkt situation

In an exclusive interview with CNBC-TV18, the Wipro management declared a guidance of 0-2% growth despite tough market situation. They said that it expected slow growth for the next two - three quarters, adding that growth was likely to pick up in 2010. They also said that the IT spend would be lessened in the next one – two quarters.

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Excerpts from Bazaar on CNBC-TV18 Watch the full show » ALSO READ See latest News about Wipro See previous management interviews See what other Experts & Brokerages are saying about Wipro Wipro BSE | NSE 31/05/12 Are Mutual Funds betting on Wipro?

Q: What remains the challenging quarters for you, I believe technology, media, telecom these remain some of the challenging verticals amongst the ones which are still not giving you good volume growth?

Paranjpe: You are right; technology remains a challenge because tech spend is not yet picked up and the companies there are consolidating maybe having fewer companies, fewer spends, so technology clearly is challenged both on the product spend that they are doing which is new product development spend as well as on the IT side.

In telecom the picture is little more nuanced; telecom equipment vendor is going through a secular consolidation phase, so there were ten equipment vendors five years ago, now we are down to five maybe it will shrink further so there is a kind of decline on the equipment vendor side.

On the other hand on the service provider and on media side we are very bullish; this quarter we have grown sequentially 6% and we see that as growth market for the future. Where telecom service provider will continue to spend as they push into emerging markets, as new technology comes in and how they are able to integrate media into their fold. So, I am pretty bullish on media and telecom service provider space. Where I am worried is on the equipment vendor side and on the technology side.    

Q: What's the outlook on pricing from here; do you expect such low and single digit declines even going forward for the next 2-3 quarters or pricing to be flat, what's a reasonable assumption to go by?

Vaswani: I would say these are tough times, clearly there are price and pricing challenges and customers are looking for aggressive pricing, from our perspective, what we really want to drive is deliver more value to customers without necessarily impacting our price realization too much, so I would say that the trend in terms of pricing would have a negative bias but not necessarily a very substantially negative one and typically one would say any where between a 0-3 or 0-4% sort of negative bias on pricing would be very real, but mind you as we keep driving our business towards a lot more fixed prices  as against TNM and this sort of leverage that we have, even at a lets say coupon pricing are adequate for us to drive price realizations up. We are driving, as you would be familiar a lot more of automated delivery and a lot more tools based delivery, a lot more non-linearity in our models and that also gives us adequate leverage for us to really keep what I would say price realizations in a narrow margin.

Q: When you say clients are looking for more aggressive pricing what is the water market that you have drawn by way of a pricing drop, the last time you talked about 2-5%, you think it could be that much or more or less?

Paranjpe: I think we will stay more or less in that range, what we are urging or clients is to look at outcome and not get too focused on price because beyond a point price doesn't deliver much to the clients and it definitely affects us. On the other hand if they look at net cost to them, then we can have a much more productive conversation about how we could lower costs for them without necessarily sacrificing margins on our side and the fact that we have organized from roughly a 20% fixed price to almost 38% of fixed price shows that we have made progress in that direction. That we have been able to tell clients that trust us, we will take a fixed price bid whether on development or on maintenance and you will get certain output which you should say for rather than worry too much about its price point or realization is and if you trust me to deliver that for you, then I can give you a much lower cost without necessarily sacrificing margins on my side and slowly it is beginning to risen and we have seen progress which is why you see that despite price drop of what we had this quarter and the margins have actually gone up.