No pricing pressure, attrition to decline in Q3: Wipro

A jubilant Wipro is gaining fast on the bourses today after it posted a better-than-expected second quarter earnings. The software service provider company has managed to improve its volume growth at a time when the world economy is grappling with various crisis and downgrades.

The management of Wipro is positive in its outlook and sees no pricing pressure at the moment. In an interview to CNBC-TV18, the management of Wipro including Suresh Senapaty (ED and CFO), TK Kurien (ED and CEO-IT Business) and Pratik Kumar (EVP- Human Resource) gave guidance for the third quarter. Noting that top customers have continued to drive analytics business, Wipro said that their client mining efforts is beginning to pay off. The company added 44 new customers in the second quarter. BFSI, healthcare, retail and energy still remain the focus areas, the management said. Its second quarter net profit rose a better than expected 1.2% at Rs 1300.9 crore,, helped by increased spending by clients and a depreciation in rupee. Net income from sales for the quarter was up 18% at Rs 9094.5 crore. Meanwhile, a confident Wipro management said that attrition has been down 4% sequentially and it is likely to see further dip in the third quarter. Average wage hike is at over 12%, it said.  It added 5,240 people in July-September to take its employee strength in IT services segment to 1,31,730 employees. The only concern, the management pointed out, is the third quarter volume growth is likely to be moderate due to fewer working days. Vineet Agrawal, president of Wipro Consumer Care and Lighting also indicated that the company has had a good quarter this year. "The three segments (household, institution business and acquisition of Unza) have grown 20%," he added. Moreover, Agarwal feels Wipro Consumer Care and Lighting would maintain the operating margin around 11.5-12% going forward. Below is the edited transcript of the interview. Also watch the accompanying video. Q: You are seeing nearly 6% volume growth after quite a while. Would you classify this as a bit of or first sign of a turnaround from the lackluster performances that you have had in the last two or three quarters as you went through the transition? Kurien: At the beginning of the year we messaged that our strategy was around two components - customers and employees. Fundamentally execution has backed strategy. The good news is volume growth is up as far as our top 10 accounts are concerned; our average revenue has gone up from USD 108 million to USD 118 million which is positive. The service that we are selling them has also changed. Almost 60% of the topline of our analytic business comes from our top customers. For our mobility business, we have got 75 active projects. We have deployed 1,500 employees in that segment. Overall, our portfolio is in the right direction. We have plenty of work to do going forward. My own sense is that what you see in phase one of the whole effort that we started off some time ago, we have got phase two and phase three to follow. So there are plenty of opportunities and we have to execute them. Q: Your margins have expectedly dipped in the current quarter can you just take us through how much of it was because of wage hikes, how much of it because of SAIC? Senapaty: If one looks at the way we guided last time, there have been two big investments that we have made. On June1, we did compensation increase across board including promotions. And that has led to moderation in attrition rates or employee satisfaction has been much higher in addition to quality dip parameters. We also did the SAIC acquisition in the oil and gas space. Both these combinations were far in excess of 2%. But because of some operating leverages, we were able to keep the damage to just about 200 basis points. As far as foreign exchange is concerned, we had a pretty decent hedging policy vis-