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Wipro, India's third largest software services firm, reported muted growth in the June quarter. Net profit rose 6.6 per cent sequentially to Rs 1,580 crore against Rs 1,481 crore in the March quarter, lower than estimates of Rs 1,641 crore. Suresh C. Senapaty, executive director and chief financial officer, and T.K. Kurien, CEO, IT business and executive director, discuss the result on NDTV Profit.

 

Below is the interview transcript. Watch the accompanying video here.

 

Q: Your outlook on the Q2 revenue guidance...
Senapaty: Last quarter we had guided minus 1 to plus 1, which is $15-20 million and against that, on a constant currency basis, we delivered $1540 million, which is a 0.3 per cent growth. In the current quarter, we reported $1,550 million, against that we are guiding a number of $1520-1550 million, which means 0.3 per cent to 2.3 per cent (growth), a positive unlike the last quarter. Hence, the guidance is far superior to the guidance given in the first quarter, in line with what we spoke about last time. We had said that we expect the second quarter to be better than the first quarter. Hope that clarifies…
 
Q: It does..but Mr. Kurein, I want to ask you what sort of business environment does it build in because if I go back and look at the reported IT service revenues in the last four quarters, numbers seem to be stalling?
Kurein: In the last quarter, we have taken a $25 million hit in terms of cross-currency. So, we have ended up with $1540 million, which means that last quarter when we guided negative (minus 1 to plus 1), we ended at 0.3 sequential. So, we have shown sequential growth in terms of the constant currency. Now none of us can control the currency because as you know the euro has already dropped to 1.20 per dollar. There are issues there from the currency perspective. 

Now what you should look at is the rupee revenue and there we have shown significant increase year-on-year. Our rupee revenue has gone up to 30 per cent. But the bigger thing is that it is not the environment that keeps us awake at the night. If you look at different customers, depending upon where you are present, different customers react differently to the market. As long as you are sitting with customers who react to growth, and use growth as a level, then you are good. If you have customers who get defensive, then you play on the cost-side. So, fundamentally, it is your portfolio to the large extent that determines the way you are growing.
 
Q: Mr. Senapaty just talked about the expansion you have reported on the margin front. But looking at how the currency moved, expectations for that number were larger. What happened?
Senapaty:Yes, we gained as far as the currency is concerned. But we had talked about the compensation increase effective from June 1, 2012. We had some extra manpower cost-related expenditure in the fourth quarter, which was about 1.6 per cent. It has allowed us to be able to spend much more in the sales and market, like we said we want to stay tracked in terms on investing, in terms of the transformation that we are seeking. So, we had almost 6 per cent. There was a marginal decline on the price realisations. We have also got price expansion on on-side of about 20 basis points; on the off-side, on the constant currency basis, we lost about 100 basis points. So, net net if you look at the currency, it has got offset with most of its investment-related expenditure or sales and marketing related expenditure. And net net, we expanded margins for about 35 basis points. If we did not do any of those, we could have expanded more. But like you aid, we are not playing quarter to quarter, we are playing this transformation, which is going to give us results going forward, in the medium to longer term rather than trying to expand margins, which would not sustain for a longer period.

Kurein: If you look at our investments in sales and marketing and in terms of giving compensation increases, we believe these are long-term decisions and not decisions that play out on a quarter to quarter basis. And if you at the results of that??, if you look at our top 5 accounts have grown approximately 5 per cent in the last quarter, which means that the investment we have put in last year, has paid off. 

If you look at $ billion accounts, they have gone up to 8, which it is a significant change from where it was last year. So, fundamentally, our point of view is that we will not ever compromise on stuff that impacts the customer. On the other hand, we will like crazy productivity. We want to make sure that we are competitive, that's the strategy. 

Senapaty: Also, if you look at the overall numbers, we held flat 60 per cent (outstanding sales) despite the fact that many in the industry have increased the same. Our quality of revenue is intact. If you look at our operating cash flows, they are 74 per cent of the net income, free cash flow, 75 per cent of the net income. So overall, if you look at the financial numbers, they have panned out well as far as the first quarter is concerned.
 
Q: Mr. Senapathy you spoke about pricing, which has come off, how is it looking?
Senapaty: I think the pricing is pretty stable, except a few pockets, where there is a little bit of pressure. But they are primarily in the run the business model…

Story first published on: July 24, 2012 14:31 (IST)

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