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| The flagship software services exports arm, Wipro Technologies which contributes nearly 3/4ths to revenues of Wipro, has reported a topline growth of 39 per cent in YoY terms to Rs 4,405 crore, backed by better utilisation, better pricing realisation both for onsite and offshore, good return from fixed priced projects and outcome based prices. |
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| However on a sequential quarter basis, the topline of the software business has moved up by 3.5 per cent and has cautiouslly guided the street that it will grow by a mere 2 per cent for the second quarter on a sequential basis. |
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| As of June 30, 2008 the Company has recognised mark-to-market losses of Rs. 9,34 crore relating to derivative financial instruments that are designated as effective cash flow hedges in the shareholders' funds, which will be spread over three years. |
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| Even though the company reported a forex loss of Rs 67 crore, it combated the impact of depreciating rupee by enjoying a 0.1 per cent favaourable impact on its operating margin. Senapaty said that this positive impact was due to the booking of income at different times when the rupee value went up from Rs 40 in April to Rs 43 during June. |
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| Wipro chairman Azim Premji said under the changed economic environment, the focus of the company would be to maintain close proximity with the customers and partner with them in their business priorities. "In the backdrop of significant economic uncertainty, our Financial Services and Retail businesses demonstrated their resilience. We improved on several of operational parameters during the quarter, " he said. |
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| Given the environment where large global financial institutions are tightening their belts, Wipro remains cautious in the near-term. "Looking ahead, for the quarter ending September 2008, we expect our Revenue from our IT Services business to be approximately $1089 million," he added. |
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| Suresh Senapaty, Chief Financial Officer of Wipro, said: "During the quarter ended June 2008, we were able to sustain margins in spite of Restricted Stock Units grants. Rate Realization and Utilization improved sequentially by 300 basis points and 50 basis points respectively. We have won 7 multi-year multi-million dollar deals and added 31 new customers during the quarter. We added another customer to our $100 million customer list." |
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Wipro has about $2.6 billion of forex exposure (hedging) as of June 30, 2008 which were made at the rate between Rs 39.50 to Rs 45 a dollar. The company intends to keep up that level for over a period of next 2-3 years "since we have a lot of long-term contract", said Senapaty.
The company was also noticing a few cases of clients in the BFSI sector coming in and asking for re-negotiation of pricing. The company says that this is basically from those clients who were badly hit due to the US subprime crisis and slowdown. |
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Said Senapaty, "Even though there are a very sporadic and few cases, the company is seeing business as usual. We are not seeing a trend when everybody is coming in and asking for re-negotiation. There are some clients who have been affected much more harder than the others. There have been cases when we have gone for price increases and there had been cases where price reduction has happened. But whatever reduction has happened has been usual."
In terms of revenue share from the top clients, there is a marginal decline from the top-5 and the top 10 customers on year on year basis. While the contribution of the top 10 customers were 22.6 per cent in the same quarter in the fiscal 2007-08, this has come down to 20.9 per cent in the first quarter of current fiscal. However the company says that this is nothing unusual.
In the next two quarters, Wipro is expecting a much better growth said Senapaty. "The uncertainties has still not disappeared, but based on some of the wins we had in the current quarter, that we will start billing in the subsequent quarters. Besides, the size of the funnel we are contesting and we hope to get is quite encouraging. Based on that the second half of the fiscal will be better than what we did in the first half," he added.
The company's employee strength as of June 30,2008 stands at 95,675 which includes 20,837 for the BPO business. The company has given a guidance to hire 14,000 new people in the current fiscal of which most of them will be campus hires. The uncertainties in the IT environment has brought down the attrition rate by 1 per cent to about 16 per cent in the current quarter from about 17 per cent in the previous quarter.
Given the environment, the company was expecting a moderation in the compensation hike to the employees, which used to be in the range of 10-12 per cent earlier. "We have not decided on this as of now. We will review this in the current quarter. We gave the compensation increase in 1st of August last year, for offshore employees. This year, we will review it. But we are of the belief that there will a significant moderation than what it was last year," said Senapaty. |
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