Wipro says Q4 growth likely to be volume driven

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Wipro says Q4 growth likely to be volume driven

Wipro said it expects USD 1.52 billion to USD 1.55 billion revenue from its IT services unit, which contributes three-quarters of its total sales, in the March quarter, a sequential rise of nearly 1% to 3%.

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Wipro , India's third largest software services exporter, cited the uncertain global economic setting as a concern after roughly meeting expectations with a 10% rise in quarterly profit, mainly helped by a weaker rupee.

Speaking to exclusively CNBC-TV18, the Wipro management said, efficiencies were driven out of fixed price contracts. It said that the utilisation dropped to capture short-term opportunities. "We are reasonably comfortable with the current utilisation levels," Wipro team said.

Wipro said it expects USD 1.52 billion to USD 1.55 billion revenue from its IT services unit, which contributes three-quarters of its total sales, in the March quarter, a sequential rise of nearly 1% to 3%.

Wipro and larger rivals Tata Consultancy Services and Infosys are part of India's USD 76 billion software services industry that gets more than 90% of its revenue from the United States and Europe.

Most client budgets have been finalized and spend is unlikely to contract, the management told the channel adding, "The growth is likely to be volume driven in the fourth quarter."

The management said the company has shown significant improvement in attrition levels. It saw net additions of 5,000 employees in the quarter in focus. "We have seen positive feedback from customers and employees on our restructuring approach."

Wipro has given a dollar revenue guidance of USD 1.52-1.55 billion. It said the fourth quarter guidance is based the dollar-rupee at Rs 51.75 and euro-dollar at 1.33.

"The investment in sales is partly offsetting currency pricing benefits," Wipro team said, "The pricing is up 3-4% in constant currency terms."

Below is the edited transcript of the interview with CNBC-TV18's Udayan Mukherjee and Mitali Mukherjee. Also watch the accompanying videos.

Q: Your volume growth for the quarter is 1.8%, lower than all of your frontline peers. Why are you still lagging on volume growth?

TK Kurien, ED and CEO-IT Biz: There are a couple of reasons behind that. There are three levers that we typically use within the shop to manage our business. One is the pricing piece of it. The second is our utilisation. The third is volume growth.

Last quarter, if you look at our uptick that we have had in terms of just our pricing, our pricing, both onsite and offshore, on a constant currency basis, has gone up by between 3-4%, 4.2% is the onsite increase. Fundamentally, last quarter, the projects that we have run, especially fixed price projects, we have really driven efficiency out of them.

If you look at our net addition of headcounts, we have added more than 5,000 people last quarter. This is the second quarter in a row when we have done that.

Now, the utilisation itself has dropped. It has dropped because we believe that there are going to be short-term opportunities coming up. If we tighten down on utilisation, our view is that we may just miss opportunities that may come down the pipe and we don't want to do that.

Q: That still doesn't answer my question on the low volume growth. Unless you are saying that you have actually made a sacrifice in volumes to inch prices higher, have you done that?

Kurien: Absolutely, because we have driven efficiency on fixed price projects.