Deal pipeline looks steady with marginal progress: Wipro

Below is the verbatim transcript of TK Kurien, Suresh Senapaty and Saurabh Govil:

Q: There has been disappointment as far as the dollar revenue growth is concerned coming in at 1.8 percent and my question is very simple. It continues to be lower than it appears, when are you going to catch up with the industry average as far as dollar revenue growth is concerned?

Kurien: If you look at our guidance, the range that we had given was between 1.7 and 4.1 percent, we have ended up at 3 percent in constant currency terms. Where we have lost out really is in the crosses and we have lost 1.2 percent which is roughly about USD 20 billion on the crosses and to that extent our belief is that there is nothing much which we can do about currency movement. We have an inordinate exposure to currencies outside the US dollar and that is really what has contributed to this. It could very well swing in the other direction of the currency’s move in the other direction. To that extent onetime gains and onetime losses, I really don’t bother about it too much. Really, the growth number we are looking at is 3 percent.

As far as growth is concerned if you look at last year to this year overall our growth has been better. Right now if you look at it year-on-year (YoY) basis our growth is running at 8.6 percent in dollar terms in spite of taking this hit. So to that extent we remain pretty confident that we will improve as we go along especially the second half of the year.

Q: If you can give us some indication and colour on the kind of pressure that your top clients are facing and Mr Premji when he was speaking earlier said that he anticipates a pick up or a turnaround coming in as far as December is concerned. If you can give us some sense of the client mining that you are anticipate as well?

Kurien: If you look at our top 10 accounts we have been very clear about messaging in the large quarter that we would continue to have softness in our top 10 accounts, at least for two quarters. We expect that softness to go away in quarter four which is first quarter of the calendar year next year and more importantly it is very specific to some customers that we have who play in a particular part of the commodity cycle.

If you have seen commodity prices the way they gone especially oil prices and natural resources they have been on the downward trend and that has resulted in cut backs as far as capital expenditure is concerned, but that is temporary. When it will come back it will come back not necessarily as capital expenditure it will come back more in terms of maintenance revenue as we go along. So that is a short term phenomena which we see kind of coming back but overall we are pretty confident that as far as top 10 is concerned we will come back in quarter four.

More importantly one of the numbers that is not very clear out there is if you look at USD 100 million accounts now we have on a quarterly run rate basis we have 11 accounts which are at USD 100 million. If you look at our new account acquisition we have grown by 50, we have got 50 new accounts in this particular quarter, in quarter two and that is what gives us confidence as far as our guidance is concerned in quarter three.

Q: There has been disappointment as far as the margin picture is concerned. Can we expect Wipro to regain ground as far as margins are concerned?

Senapaty: I am sure you can expect but as we said always whenever you give a compensation increase it hits and then the recovery happens over a period of time. So, we have given a compensation increase effective June 1. So, Q1 had an impact of one month and there is an additional two months impact that we got so far as Q2 is concerned. Though the manpower related costs has been about 1.5 percent the margin decline is only 80 basis points. So, there has been productivity improvement whether it is utilisation, offshore and little bit with respect to certain income that we got out of sale of some strategic investments and so on. So, in a shorter term there will be some amount of volatility because the investments, acquisition of customers, little bit onsite, people additions that you do it doesn’t start billing immediately particularly when you do campus hiring and so on but in a medium to longer term will this kind of margin sustain and have a positive bias? Clearly yes.

Q: In the medium to short term you anticipate a further decline in margins or do you believe that margins will remain where they are at this 22 percent kind of level?

Senapaty: In medium to longer term margin can be as good with a positive bias.

Q: I understand that gross utilisation is perhaps the highest that you have seen in about 6 quarters coming in at 70 percent, is there room to squeeze out further?

Govil: Absolutely, we had a good story. Over the last 4 quarters if you see we have increased our utilisation by 400 basis points and given the hiring which we have done in this quarter in the net ads we clearly see a room for us to improve. There is headspace for us to improve utilisation as we move forward.

Q: What is the comfort level that you are looking at as far as utilisation is concerned, how much more can you increase this?

Govil: A number of guidance on utilisation very clearly we have seen a traction over last four quarters. We will keep working on it making it growing but you should look the overall supply chain both from utilisation point of view, attrition which has come down as well as the hiring which we have done, the net adds which we have done all three gives us headspace for us to improve and we will see improvement as we move forward.

Q: How long till we can see Wipro back to industry leading growth numbers, and you have been there for quite some time, I am asking by when would you be back there?

Govil: Sooner than later.