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Wipro Limited (NYSE:WIT)

F3Q 2012 Earnings Conference Call

January 20, 2012 8:15 AM ET

Executives

Sridhar Ramasubbu – IR

Azim Premji – Chairman

TK Kurien – CEO, IT Business and Executive Director

Suresh Senapaty – CFO

Manish Dugar – SVP and Global Head, Wipro BPO

Jatin Dalal – CFO, IT Business

Bhanumurthy BM – SVP and Chief Business Operations Officer

Analysts

Joseph Foresi – Janney Montgomery Scott

Cliff Chaudhry – Global Equities Research

Rick Eskildsen – Wells Fargo

Nabil Elsheshai – Crest Securities

Swami Sunmugasundaram – Morningstar

Keith Bachman – Bank of Montreal

Avishai Kantor – Cowen & Company

Operator

Ladies and gentlemen, good day, and welcome to the Wipro Limited Earnings Conference Call for the quarter ended December 31, 2011. As a reminder, for the duration of this conference, all participant lines will be in the listen-only mode, and this conference is being recorded. After the presentation, there will be an opportunity for participants to ask questions. (Operator Instructions)

At this time, I would like to turn the conference over to Mr. Sridhar Ramasubbu. Thank you, and over to you, sir.

Sridhar Ramasubbu

Thanks Melissa. Good day, and wishing you all the very best in 2012. This is Sridhar, and I’m joined by Rajendra, Manoj who is taking over from Raj, and Aravind from IR team in Bangalore, and on behalf of the entire Wipro team, a very warm welcome to all. We are pleased to host Wipro’s 3Q FY’12 earnings call. Regarding the materials for this call, we issued the press release yesterday late night EST, and we’ll have time for the Q&A at the end.

The format for today’s earnings call is as follows. Azim Premji, Chairman will give us a overview of Wipro business, TK Kurien, CEO of Wipro IT Business and T.K. will share his perspectives on the IT Business side. Suresh Senapaty, CFO, will comment on the IFRS financial results for the quarter ended December 31, 2011. They have joined by BU heads and other senior members of the Wipro management team who will be happy to answer your questions.

As always, elements of this call and the management’s view may be characterized by forward looking statements under the Private Securities Litigation Reform Act of 1995 and are based on management’s current expectations and are associated with uncertainty and risks, which could cause the actual results to differ materially from those expected. These uncertainties and risk factors have been explained in detail in our filings with Securities and Exchange Commission in the U.S. We do not undertake any obligations to update forward-looking statements to reflect events or circumstances after the date of filing thereof.

The call is scheduled for an hour. The presentation of the 3Q FY ‘12 results will be followed by Q&A. The operator will walk you through the Q&A process. The entire earnings call proceedings are being archived and transcripts will be made available after the call at our company’s website. Replay of today’s earnings call proceedings will also be available via telephone post the call.

During this call, I’m also available on email and through mobile as well to take any questions and turn it to the Wipro team in case you are unable to ask questions for any technical reasons.

Ladies and gentlemen, over to Mr. Azim Premji, Chairman of Wipro.

Azim Premji

Good morning and good evening to you all. Let me talk a little bit about Wipro Limited and Wipro Corporation. We recorded revenues at Wipro Corporation that is for Q3 of INR100 billion, a year-on-year growth of 28%. Net income for the quarter at INR14.6 billion for the year-on-year growth of 10%. IT services business delivered a robust constant currency sequential growth and we continue to build on the momentum by incremental investment in delivery as well as the sales engine. We have seen positive movement both in employee satisfaction as well as customer satisfaction.

A little bit about the macro environment, there is a lot of uncertainty in the overall macroeconomic environment, particularly in Europe with signs of growth returning in U.S. with unemployment levels getting solved. In our view customers are prepared for slow growth in the Western world and IT strategies are designed keeping this variable at very much in mind. There is an increase focus on emerging markets, which is leading to superior growth for us. We’ve continue to see a lot more stability and clarity in customer organizations compared to dual rate. Organizations are focused on adopting the business module to meet the changing growth outlook in the business both on the revenue side as well as on the cost side.

A little bit about Wipro Consumer Care and Lighting, in Consumer Care and Lighting business, we have seen very strong growth of 26% year-on-year for quarter 3. Business has shown consistent growth upwards of 20% year-on-year throughout the year. Santoor continues to grow well through a healthy mix of both volumes and value led growths. We continue to see all around growth across product segments.

Unza business, which represents our Middle East and represents our Fareast business, continues to do well and growth was driven by China, by Indonesia, Vietnam and Malaysia. Wipro infrastructure engineering, despite market softness, we continue to see growth in India. We’re beginning to see Europe customer’s sentiment reflects in boards order intake in some segments.

Continuing our vision to expand the hydraulic portfolio, we formerly signed a JV agreement with Kawasaki Precision Machines Limited in December. The JV will focus on manufacturing of hydraulic pumps, which is considered the heart of the cylinder. Kawasaki brings in technology and Wipro brings in the local relationship with OEMs, and extremely strong market presence.

Wipro Eco Energy, we’ve continue to see demand for intelligence, sustainable, alternative for energy generation. We want the mandate to implement and manage at energy management system for 1,100 store locations of a large retailer in U.S.

We have successfully delivered a cumulative capacity of about 400 megawatts of utility scale solar premium plants which has been connected to the national grid. Overall we continue to be very positive about this business. I’m confident that we are on the right path.

I will now request TK Kurien to give a brief overview about the IT business followed by Suresh Senapaty to give you financial highlights.

TK Kurien

Thank you, Premji. Good morning ladies and gentlemen and thank you for taking the time to join us today. Over the past couple of quarters, we talked about change and we always believe that change is terrific, but not has been impacted by the execution, it’s a pretty hollow statement. Having said that, in our business, there are only two constituents that we need to match; one is our customers and the other is our employees.

And in the past quarter, we have done some work which tends making believe that we’re in the right direction. First, our customer satisfaction for schedule accounts continues to improves; year-to-date our improvement in customer satisfaction is running at around 9%. Customers appreciate the solutions that we provide, more importantly they also appreciate responsibility and accountability at the account level, which really has been a big driver for our growth over the past couple of quarters.

On the employees front, we have reduced our quarterly efficient by over 9% in the last two quarters. In fact, if you look at our attrition numbers, we’re probably one of the lowest in the industry, which is based out of India has at its peak. This is the reflection of the fact that employs them bid new direction and our engagement measures are making a difference. The result of all this is that we grew 4.5% sequentially in constant currency and exceeded the top end of our guidance in the last quarter.

At the end of the day, our goal is to be a business value player, especially in a market which like ours primarily driven by disruption. We truly believe that the next technology disruption will be at the intersection of cloud analytics and mobility and that’s where we’d like to pay for the intellectual assets and platforms that can really provide differentiation for us to make an impact in front of the customer.

Now, let me talk about three themes that we have and let me give you a sense of what happened in the past quarter. In the cloud business, we had 20 new wins across various industry segments. We see strong growth in our cloud-based IT confirmation and our process confirmation using public fast SI services, which makes it a legitimate option for enterprise clients. We have build key IT assets in areas of public cloud management, ERT as a utility and offering cloud along with mobility, big data and analytics.

For example, for our telecom maker , we are enabling process confirmation and CRM at four enterprises processes, which will bring true variability in operational costs. Along with this, we’re also driving consolidation of display systems and driving standardization across the organization. Overall, the cost of operations for this particular customer would reduce by over 40%.

The other big area that we’ve invested in is analytics, where we continue to show good traction with focus and differentiation, and more importantly linking that back into performance insights which helps to serve customers better. We have launched two cloud offerings on two analytical solution, market mix modeling and customer attrition and we have clients in both these solutions.

We’ve also set up a high performance computing lab for developing in memory analytic solution and we are among the first of the leading global service providers to have this facility. On mobility, it’s been an action packed quarter for us. We saw the head account and attractive increased to 1,700. We have done plenty of work in this area for many customers, including multimillion dollar turnkey deals to design tablet computer based applications, but lots of work being done behind that in terms of Process Reengineering.

More importantly, we have launched another initiative internally which we call Wipro Add Life. This initiative is helping our employees to collaborate, to build solution ideas for our clients as well as improving our internal operations. It provides employees an opportunity to utilize the creative energies outside unheard normal day of work. We have already qualified 1,000 employees who signed up to create applications for Wipro from 3,000 who applied for this.

The App store apps we’re improving efficient elaboration including family management, sales CRM feed engineering confirmation, diamond assets. Some applications develop include a mobile solution JINI, which is transforming fee revenue support to customers. We believe that this is the way forward and we are making investments and enabling internal measures to drive in this direction. Bottom line, we’re executing to a well laid out plan to build a company that will lead the next wave of business opportunities. Thank you. Over to Senapaty.

Suresh Senapaty

Good evening and good day in India and good day to all of those who are in the U.S. Ladies and gentlemen, wish you a very, very happy and prosperous new year. Before I delve into our financials, please also note that for the convenience of leaders, our IFRS financial statements have been translated into dollars, with the main language in New York city on 31st December 2011 as tables afterwards Indian rupee. As certified by the Credit Reserve Board of New York, which was $1 equal to INR53.01 rupee. Accordingly revenues for our IT Services segment that was $1,505 million or in rupee terms INR76 billion appears in our earnings release as $1,435 million based on the fundamental operations.

Let me start by explaining that the Board of Directors have declared an interim dividend of IRN2 per share in the current quarter. Moving into the quarter performance, our IT services revenue for the quarter earnings 31st December was $1505 million on a reported basis, a sequential growth of 2.2% and year-on-year growth of 12%. On the constant currency basis, we delivered a sequential growth of 4.5%, which was ahead of the upper end of the guidance. We’ve seen all around the globe in the current quarter. Health care lead growth with 6.9% sequentially on a constant currency basis, followed by Retail 5.4%, Global Media and Telecom 4.8%, BFSI 4.6% and Manufacturing 4.2%. We continue to be positive on our momentum verticals, BAS analytics and ADM lead the great form service line perspective. We saw a pickup in growth in U.S. on amount of reemergence of growth in Japan and continued growth momentum in India and Middle East in the past.

To move the middle cluster on our focus area of finding business, the current quarter on a trailing 12 months, there was six accounts which are more than $100 million in revenue, up 21 from last year.

We are happy with our progress and we continue to make investments in this area. We saw improvement in revenue productivity in the quarter with a drawback of productivity from fixed-price project. Offshore realization improved 3.6% and onsite realizations improved 4.3% sequentially on a constant currency basis. We continue to correct drive the pricing environment at stable. Sequential volume growth in the current quarter was 1.8% impacted by additional lead taken by employees during the quarter and effort optimization in fixed-price project.

Operating margin improved by 80 basis points, largely driven by currency and pricing, we’ve also funded additional investment in SG&A and strategy plans.

As of 21st December 2011, our DSL showed marked improvement and was at 21 days, down from 76 in the previous quarter. Our return on capital employed for the IT business improved by 4% sequentially to 38%, while return on capital employed for the overall company improved by 2% with 21%.

Our IT products business showed a bit growth of 16% year-on-year in the current quarter. Consumer care and Lighting business continue to see good momentum with revenue growth of 26% year-on-year and EBIT growth of 22%. On the foreign exchange front our realized rate for the quarter was INR50.53 versus a rate of INR46.38 realized at the last quarter. On a quarter-on-quarter basis Forex gave us a positive impact of 70 basis points to operating margins. Our OCI was as of period and stood at INR5.5 billion and we had about $1.7 billion of Forex contracts outstanding. The effective tax rate for the quarter was 20.7%. Our net cash balance on the balance sheet was INR53 billion.

We would be glad to take questions from now.

Azim Premji

We’re ready for Q&A.

Question-and-Answer Session

Operator

Thank you. Ladies and gentlemen, we will now begin with a question-and-answer session. (Operator Instructions) We have the first question from the line of Joseph Foresi from Janney Montgomery Scott. Please go ahead.

Joseph Foresi – Janney Montgomery Scott

Hello. My first question here is just I was wondering can you give a little bit detail on the overall demand environment? You told some of your competitors talked about how the discretionary spending is not coming as quickly as you had expected for 2012. Could you just talk about what you see in discretionary spending side, maybe side of the business relating what seems consistent with some of your competitors?

TK Kurien

So, Joe, this is TK Kurien and I will answer that question, so strengths what we have seen, it’s difficult to meet the kind of give you a broad brush answer to that because I think it’s very related to the industry segments that we gain. So, for example, what we’ve seen is that, if you look at investment banking clearly we have found that they are under stress as far as the fiduciary values are concerned. As far as business is – the lights on business is concerned, in DIB segment we clearly see pressure coming in from that particular segment in terms of cost and we see – if we have a particular run business, we see run business under competitive pressure, there is no doubt about it.

If you look at retail banks what we see there is that inclined projects which are already started, which are critical for the company or for the banks, continues. There may be cases where in certain geographies of the bank may not decide to kind of go ahead, but overall it continues.

There is also in retail banking within another picture which is around process reengineering. We are seeing a big change in terms of the way people are dressing the product by starting a whole bunch of processes during project. So to that extent while the business budget may not be allocated to application development, but that money being spent somewhere else in terms of process reengineering.

If I look at retail there has been a slowdown at the end of last quarter. We believe that the budgets have already been allocated, but the way that budgets have found its way into the organization is kind of a little spotty right now. We expect to see some discretionary projects starting end of January or being in February.

If you look at energy itself, long-term projects in energy have not gone on hold. They have continued especially on the upstream side where the typical cycles are slightly longer than you would find for typical application management in our life – kind of business that you may have.

The same thing is true for natural resources. If you look at healthcare, I think pharma presents a big opportunity. There again budgets are almost flat. I don’t see any big change in budgets and there too critical projects continue to kind of be executed. But overall it’s too early to call at least from our perspective this is what we’re thinking. We would probably see a opening up of the budget at the end of January or beginning of February, March more than what we see today, but long-term, if I would give you some kind of – it would be that long-term projects that have got long-term impact, we haven’t seen calculation, a lot of short-term projects clearly we see are impacted.

If you look at technology platforms, if you look at analytics; analytics project continue because the payback is much, much shorter. Similarly, mobility programs continue and on the infrastructure side movement towards the cloud continues to happen. But again these are typically within the enterprise, private cloud. So on those areas, it will continue to spend money and that (inaudible) by payback disease justify that. And we have got a very long payback. I think it’s really being questioned.

Joseph Foresi – Janney Montgomery Scott

Okay. And just second question. Just relook at maybe some key areas – focus on this year and letters mobile and cloud. Can you give us, maybe example of what we’re doing each particular offering. In other words how are you addressing the demand for quality because as they people work can you just give us specific examples of what we’ve been into adjustments?

TK Kurien

Joe your voice is kind of cutting in and out. The question is what are we doing in mobility I can answer that.

Joseph Foresi – Janney Montgomery Scott

Yeah. I’m just looking for an example of what you do in each particular practice that you talked about giving strength in analytics and mobile?

TK Kurien

Okay. That’s pretty in fact, Joe happy to share it with you. I read it as part of my opening remarks on what we are doing in each one of them. But if you don’t mind, I’d rather do it in the end if I can rather than holding the phone up because I have already gone through it once.

Joseph Foresi – Janney Montgomery Scott

Okay. All right. And then I guess my last question is maybe you could just give us an update on the products business and BPO?

Suresh Senapaty

(Inaudible) largely they’re in the nature of special integration and largely due for India. And so what I’ve India is concerned a lot of it being government business, we spend also corporate business it tends to be more quarter ending September and March centric. December is generally a weaker quarter and however it can be margins that have made in quarter two about 5.3% operating margin has been commendable. So we see quarter four, we expect quarter four to be better so we don’t give any specific guidance, but additionally quarter four has been better than quarter three.

TK Kurien

So Joe the bottom-line is that primarily India very big business for us and typically the two peaks September and March and December has been a weak quarter additionally been a weak quarter. On the BPO segment, we have our Head of our BPO business right here with us, Manish Dugar, and he can take us through it.

Manish Dugar

Hi Joe, this is Manish. From a BPO perspective, first of all, business has a relatively longer decision period in terms of the time we win the deal and the time the revenue starts flowing in. We are seeing at least in the last two quarters recent pipeline and deal flows and that gives us confidence that we should start seeing those translating into revenues.

One another thing I thought I must share with you is that is our focus on outcome-based productivity linked contracts and with focus on observation with an intend to reduce the cost to serve and knowing more and more what to state to processing and reduced operational costs, which is part of the integrated offering we are trying to look at a Wipro Limited level. What it does is, it translates into a continuous reduction in the operational costs which is what we typically report from the revenue in BPO perspective.

So it’s almost like running on a treadmill and hence the flattish shows slight drop in revenue that you see is primarily contributed by our commitment to clients to bring in more automation, self service – processing, and reduced operational costs. And as we start seeing the revenues kicking in from the new deals that we have been winning in the last couple of quarters, we should start seeing that not only negates the drops because of those commitments, but actually reflect in revenue growth as you growing up.

Joseph Foresi – Janney Montgomery Scott

Thank you.

Operator

Thank you. The next question is from the line of Cliff Chaudhry from Global Equities Research. Please go ahead.

Cliff Chaudhry – Global Equities Research

Thank you, I have a couple of questions and the first question I have is regarding the competitive environment and if we segment the players in the IT premises, we can probably segment them in three or four buckets number one is integrated IT services providers from the likes of IBM, HP and maybe Dell, the second segment could be companies who are totally IT focused companies like Infosys, Wipro, Cognizant and others and the third segment I would say is domestic outsourcing companies, who are based in U.S., but don’t have the global scale and the fourth company I would say is European Central Centric IT services companies.

So I was wondering that this the segment that states in these three four buckets and then we think in terms of customer, customer puts in an out of fee and let’s assume all the players from these different segments come and bid for the project. What kind of discussions or engagements or negotiations happened and under what situation would an integrated IT services play over in and under what situation say companies like Wipro will win and then I have a follow-up?

TK Kurien

Cliff can you also ask your follow-up then we can probably combine both and give you one answer.

Cliff Chaudhry – Global Equities Research

Yes the other question was the web speaker talk a lot about business analytics which definitely we do think it’s a very strong area to have services delivered in. Another question is that would it at least in some tendencies of market a new business analytics product or think in terms of services, open source projects which is getting traction call – from revolution analytics started by a professor at Stanford, but in Britain it is getting some traction. My question on that would be is, do you think it make sense to be a commercial entity for an open source project like, say, System R similar to what Red Hat is for Linux, maybe Wipro could be for this open source project?

TK Kurien

So, let me do one thing since there are two questions, and frankly for a retired accountant I don’t have knowledge of System R. K. R. Sanjiv who runs our analytics practice to come and talk about System R – information, I think it’s up and I should probably be going and looking at.

So let me answer the first question. So typically what happens is that in most of these cases, in this game ultimately the customer buys value. Value is demonstrated not necessarily by price, but by impact. So typically what happens is that impact again has its geographical connotation to it as well as the solution component to it. So at the end of the day it doesn’t matter where you’re from, but whether you’re a pure play U.S. player until and unless there are specific contracts were given governmental regulations you are not allowed into, otherwise pretty much if you look at it there is a level playing field out there, and ultimately I think the first two meetings determine whether you’re going to see it again or not as far as I’m concerned.

Suresh Senapaty

So Cliff, what we are doing at that is a two-fold. One is we are implementing a lot of advance analytics with our customers where they have direct growth customer. What we are also doing is we are trying to do some markets it’s obviously open to software to some of the solutions which we are internally building and taking for the client. What we are not doing as being suggested is to provide Red Hat kind of services around – because we used to think – we analyze that and we believe that should (inaudible) does not have the kind of revenue volume which we will expect from that service.

Cliff Chaudhry – Global Equities Research

A question, do you think system are recording some disruption in retail or some established company maybe feeling pressured because of this or it is to earning?

TK Kurien

I hate to kind of disable you, but can I do one thing Trip may what’s I’ll do in the – falls you with the – and we can also affect.

Cliff Chaudhry – Global Equities Research

Perfect. Thank you very much.

TK Kurien

I appreciate it.

Operator

Thank you. The next question is from the line of Edward Caso from Wells Fargo. Please go ahead.

Rick Eskildsen – Wells Fargo

Hi, thank you very much. This is actually Rick on for Ed.

TK Kurien

Edward can you be louder please, we can’t hear you?

Suresh Senapaty

And your voice is kind of very thin.

Rick Eskildsen – Wells Fargo

Hi, is this better?

TK Kurien

Yeah much better.

Rick Eskildsen – Wells Fargo

Sorry about that. This is actually Rick (inaudible) on for Ed. First question just you touched about a little bit earlier but I was wondering if you could talk about what you’re seeing from client IT budgets, what sort of looking at flat to hub or when you’re expect them to close?

TK Kurien

So I think most of the budgets that we see are flat to in some industry the negative side. Again in some specific industries for example, in natural resources and in upstream, we’ve seen an increase, but overall I’d say if I had to kind of generally side, I would say flat that’s what we’re seeing.

And our allocation like I said strategic projects allocations already finished. I think people are working on their budgets. They may not have released them out in terms of the book of work, but after they do that, whatever is left out would get allocated I guess to do in smaller components of projects that have not on the critical part. We haven’t seen that happening yet. We expect to have that happening sometime in early February or in January.

Rick Eskildsen – Wells Fargo

Thanks. And then just the next question is, referring to your comments on wage inflation expectations for the next year, some of your competitors have already come out, so?

TK Kurien

We haven’t yet kind of made up our mind, but you can see the market post-March. Our wage announcement is going to happen only in June. So we have a little bit of time before we kind of take any kind of action. Right now, if you look at the indication that seems like the wage inflation is going to in single-digits, but again, it will be going to be a constant demand, if we find that demand is finally going go to up in this quarter and towards next quarter, I’m sure there is pressure in all of us. Otherwise, right now it’s pretty muted.

Rick Eskildsen – Wells Fargo

Okay, great. And then just last question quickly on the pricing, what are you seeing in the pricing environment, what are your expectations going forward?

TK Kurien

Again, that is the industry slant to it. IT challenged, but option of different business model to recover whatever price you give away to optimization. On the others, no change in coupon price.

Rick Eskildsen – Wells Fargo

Okay. Thank you very much.

Operator

Thank you. The next question is from the line of Nabil Elsheshai from Crest Securities. Please go ahead.

Nabil Elsheshai – Crest Securities

Hi guys, thanks for taking my question. I guess I’m looking at start of the top, it does looks like some of the transformational stuff that you guys have been doing internal is making progress. But maybe if you could update us on what stage you’re in that process and what are the metrics, what we should look for or are you guys are looking for to judge such progress there?

TK Kurien

So Nabil, here’s what it is. When we started this whole process we basically said that we have three features of this. The first phase was really getting the organization alignment and making sure that across the organization all of us (inaudible) and all of us were kind of focused around one objective, which is the customer. I think we’ve kind of achieved that. today we have achieved that.

The second and the third phase I guess is the more difficult phase and that includes changing the – basically going back into our processes, looking at our processes carefully, figuring out what impacted customer, what doesn’t, looking and seeing what we can do in terms of technology to make sure that we’re able to deliver better, using more and more technology in delivery, and fundamentally kind of living up to what we had messaged sometime ago, which was high differentiation in the front end and a high degree standardization at the back. That’s the second phase.

In between we have a third phase which is kind of running parallel across the first, second and what I call the third phase which is really getting full aligned in terms of concept of common objective. And that’s a slightly longer-term thing. So those are the three phases that we are playing, this game is being played out on. Today, I guess we’ve kind of gone through the first phase, lots of work to do before we get to the second and the third.

Nabil Elsheshai – Crest Securities

Okay. And then switching gears a little bit, could you tell us, update us a little bit on the SAIC acquisition, has that generated new customers, new opportunities and do you see additional tuck in acquisitions, as we go forward as growth drivers?

Azim Premji

So, Anand, are you on the call? Okay. So let me, as Anand is not there on the call, maybe I will take it up and Jatin Dalal, our CFO can kind of add on. Do you think decent traction as far as the SAIC acquisition is concerned? If you go back to the rational of the SAIC acquisition, the idea really was that we had the software competency, but we didn’t have the upstream domain knowledge, putting these together we believe that we could really create a powerhouse in this space and that’s what we’ve been going after.

So first indications are extremely positive. We’ve gone out there and done joint calls with customers. We have won a couple of new customers at this stage, especially on the upstream side, and we expect to see more upstream work coming to us from our existing customer base. So overall if you ask me I would say, positive, given the fact that our business is a consulting business and last quarter and primarily DNM, last quarter because of the holidays, we did not have that kind of revenue that we would normally expect from our business. But we expect that in quarter, our quarter four which is quarter one, it would come back. So overall very positive.

Nabil Elsheshai – Crest Securities

Okay great. And then, I guess last question from me, when I listen to your commentary about budgets and macro, it seems okay, not great, not bad, last two quarters, you have had fairly healthy net add I think from 500 this quarter? Are you, did you like your taking share, given the fact that you are adding a little bit more with some of your competitors or what’s the reasoning behind that?

Jatin Dalal

So, here is what’s happening, couple of reasons. One is that, we are going after more and more integrated deals. We are probably going back to our customer base and mining a little better. We haven’t seen, I wouldn’t say to the secular trend of share (inaudible), we’d love to get there, but today I don’t think we are seeing that.

Nabil Elsheshai – Crest Securities

Okay. So primarily it’s just, you thinking you are taking – there’s of the installed base and has a potential of better volume growth, is that fair to..?

Jatin Dalal

That’s primarily what we are doing, even though I have often met that the new logo which that we have had have been, interesting over the past quarter, but again, that’s not reflecting in our top line. So, to that extent, while there is opportunity and while we’ve made some progress, I don’t think it’s making an impact, even though one number that I would like you to kind of watch is our – account to a 100 billion. Last year, same time, we had one account which is over 100 million. This quarter we have at 6, and that kind of reflects to some extension, the mining that we are doing.

Nabil Elsheshai – Crest Securities

Okay. Well thank you guys for taking my question.

Azim Premji

Thank you Nabil.

Operator

Thank you. The next question is from the line of Swami Sunmugasundaram from Morningstar. Please go ahead. Mr. Sunmugasundaram, your line has been (inaudible), please go ahead.

Swami Sunmugasundaram – Morningstar

Am I clear now?

Operator

Yes sir, please go ahead.

Azim Premji

Speak up a little bit more, Swami.

Swami Sunmugasundaram – Morningstar

Sure. Congrats on good numbers and thanks again for taking my questions. I think my first question is related to the budget and solid effects on it. I think you mentioned that budget of fine lines but not allocated. Come back to October and November, we continue to see signs of growth in the U.S. economy, so did that lead to any positive impact on these consumer budget activity? In other words, do you feel upside to budget on your customers’ spending intentions down the road?

Azim Premji

Thank you. Swami very good question. Let me answer this way. If you look at the economic indicators and if you relate that back into IT spending, frankly, I think that’s an indicator that’s got very little co-relation. My own sense is that customers today spend or decide to spend large – the discretionary component of their budget depending upon their quarter comparisons or more importantly what they feel in terms of long-term impact. I think that’s where the differentiation is coming. And I have not seen long-term projects, but I have seen a bunch of short-term projects actually go on to the backburner.

So again, it depends, it really means you have to go customer-by- customer, industry-by-industry and look at that. So as long as you’re aligned to projects that are long-term projects, that really are going to create impact for the customer that you are okay; if you don’t have that, you are in trouble.

Swami Sunmugasundaram – Morningstar

Sure. I think my next one is about the customer satisfaction. I think in your opening comment you mentioned that there has been a 90% improvement. Do you mind going a little granular on this process behind us?

Azim Premji

So we do an independent customer survey across our customer base and we do it every month just to make sure that, I don’t know anybody know about this Swami. But what we have done is that we have linked the compensation of all our account managers and all the folks who work on the account to customer satisfaction, that’s the gate that they have to make before they qualify for their variable pay. And this was done across, I think 16 parameters, I’m not exactly sure of the number of parameters and it’s based upon that the customers rate the projects that they have done with Wipro and the experience that they’ve had and the value addition that we have finally given them.

Swami Sunmugasundaram – Morningstar

Sure. I think my last question is on the margin side. I mean you reported 80 basis points, I think sequentially, but it is still below your historical 22 plus range. So given the incremental investment that you guys are making, I want to get a little more clarity on the margin momentum down the road. I mean what are we looking at low order long-term looking going back to 22 players or is this kind of a new normal or?

Azim Premji

So, Swami guess what it is? There are a couple of things that we will do and there are couple of things we will not do. So let me tell you what we will not do. We will not cut back any investment that we have to make on our building capability to compete, which fundamentally need that we will not do anything to cut back sales and marketing. We will not do anything to cut back the domain expertise that we need to create in specific areas and certain key competencies that we believe are absolutely critical for us to kind of really have dominant market position, which is architecture and program management. These skill pools, we will not we will continue to invest in and probably growth.

So those we will not count, the other big areas that we believe that we will not contract any expenditure would be in intellectual property components and also platforms. So those are pretty much sacrosanct. What we will do though is and we will look into the way we operate because we believe that there is still enough head space in that particular area and that’s what we go after, because if you look at us as a company, our stated motive is that, we really have got a hand over the power and the strong for the client manager, worse than to face – of the customer.

And at the execution side, back to the Project Manager these are the only two places where decisions can be taken where impact can be had, everybody else in the middle is really just helping the process. So if we do have, so we believe there is enough opportunity for us to do work there to make our delivery model more effective. So net net at the end of it, long-term we expect that our margins will improve, short-term if it is to fall because we will not cut back on investment in areas where we believe that we should be invest in.

Swami Sunmugasundaram – Morningstar

Sure. Thanks again, guys. Thanks for taking my question.

Operator

Thank you. The next question is from the line of Keith Bachman from Bank of Montréal. Please go ahead.

Keith Bachman – Bank of Montreal

Hi, I have a couple please. I wasn’t sure on your previous answer, if look at your guidance for the upcoming quarter or comments on the upcoming quarter, could you talk about how do you see the difference between pricing and volumes?

Azim Premji

Sorry, Keith, I didn’t quite get the questions, what is the question specifically?

Keith Bachman – Bank of Montreal

If you could talk about how you see the difference between pricing and volumes playing-ff for the upcoming March quarter, please?

Azim Premji

We don’t give specific guidance with respect to split like that, but we’ll definitely report to you once the quarter is over and…

Keith Bachman – Bank of Montreal

I wasn’t just (inaudible) whether you think, can you suggest later, you get a benefit from pricing or can you give any at least directional columns?

Azim Premji

That’s something good, therefore we – while we do not give any specific guidance in terms of the split of the growth coming there, our expectation is largely the guidance that we have given for quarter four will be volume driven.

Keith Bachman – Bank of Montreal

Okay, thank you. Can you talk about what your counter (inaudible) if you look out over the next couple of quarters?

Azim Premji

I’m sorry, you talked about HR objective?

Keith Bachman – Bank of Montreal

(inaudible) HR additions.

Azim Premji

That is once again, we stopped guidance for the IT services revenue for the quarter with a currency stated and we do not anticipate to give any specific guidance with respect to headcount condition but as you’ve seen the track record of high, last quarter we added about 5,000 plus people on a net basis, even the last quarter before and we have guided and we are talking about this guidance more and more coming from a volume driven kind of a growth.

So we are quite sticking to a plan because we’ve had a significant compliment of our hiring coming from the campus which are almost on track. And so far as the lateral hiring is concerned, they are more sort of just in time picking up the requirement. But we do not give any specific guidance or what exactly the adds would be, but we do the (inaudible).

Keith Bachman – Bank of Montreal

Okay. Thank you. The last one from me then is the utilization rates were down from Q2 to Q3 and I want to try and get your sense not the absolute numbers, but directional numbers. How you see your basic rates unfolding in the next quarter or so, will that stay stable or improve or go down? If you could just talk a little bit directionally on where you think your utilization rates will be over the next couple of quarters? And that’s it from me. Thank you.

Suresh Senapaty

Yeah. So we have invested in capacity in last two quarters. We’ve hired close to 5,000 net hires. So to that extent it would help us deliver the guidance that we’ve given for Q4 and the growth after that. There is also a component of utilization dilution which has been invested in solutions, which will continue. So our expectation is that it would certainly improve, but not necessarily that we will go back to a number which was that in Q1.

Keith Bachman – Bank of Montreal

Okay. That concludes my questions. Thank you.

Operator

Thank you. The next question is from the line of Avishai Kantor from Cowen & Company. Please go ahead.

Avishai Kantor – Cowen & Company

Yes, hi. Thank you for taking my question. I am calling on behalf of (inaudible). Can you talk a little about to a supply chain initiative and how exactly you may have to grow top-line growth and improve margins?

Azim Premji

Sir, you can, can you repeat your question?

Avishai Kantor – Cowen & Company

Sure, if you can talk a little bit about your supply chain initiatives and how it’s going to help to grow business and improve margins?

Azim Premji

Yeah I would request Mr. Bhanumurthy, who is Chief Business Operations Head.

Bhanumurthy BM

Hi, this is Banu here. With respect to the people supply chain, I think that there are couple of initiatives that we are running after. Obviously Senapaty talked about our ability to go the campuses to increase the talent pool that we have. We are also looking at some of the lateral recruitment that is required to fulfill the skill gap that is required for the growth. And the people supply chain is also focused on building the domain competencies required for building the solutions required for our customers in the corresponding verticals. In addition we’re investing in building the teams required for the customer facing relation activities.

So, overall what they’re looking at is that the people supply chain is made up of both the special intake that we have, the internal talent that we are grooming, and the external talent that we are taking cost additional skill sets that are required, so that’s the focus that we are putting on the people supply chain right now.

Avishai Kantor – Cowen & Company

Can you expand a little bit about the impact of margins?

Bhanumurthy BM

Yeah, so what we talked about is that we will certainly get some upside on better people utilization, as well as smarter fast deployment of people, but we will also continue to invest a lot on the front end and to that extent, it’s difficult to say how this will flow through an operating margin line, especially in the context that we do not guide on margins for future.

Avishai Kantor – Cowen & Company

Thank you very much.

Bhanumurthy BM

So we have one follow-up question from Janney Montgomery, after that if there are no questions operator can ask for us more questions otherwise we will stop after that last question.

Operator

Thank you. The next question is from the line of Joseph Foresi from Janney Montgomery Scott. Please go ahead.

Joseph Foresi – Janney Montgomery Scott

Hi just wanted to follow-up to the end question. How would you I guess initial quarters the momentum has been I guess behind you, can you characterize for us do you feel like these kind of address some of the short-term changes in (inaudible). And then maybe you could just talk a just little bit about some of your long and current objectives and maybe the time (inaudible) would you expect it to return to I guess what it is considered industry growth rates?

Azim Premji

So I don’t can you repeat the question about the state that we are in an intensified journey because I just stopped the part earlier.

Joseph Foresi – Janney Montgomery Scott

Yeah I guess what I’m wondering is that whether it’s – through the short-term changes which I’m sure that you are going to say that you are and then of course what are your longer term objectives and when do you expect the business to return to industry growth rates?

Azim Premji

(inaudible) I explained this earlier and maybe I didn’t do it but here is what it is, the short-term changes of all time are I think we started this whole process we actually met this saying that we were really three phases that we were supposed to go through. We have just completed phase I. Phase I was making sure that we were all aligned and we were kind of being effective at the way we operated in front of the customer.

The second phase really for us is to make sure that – in the industry segments that we play in, number one, we build enough intellectual differentiation for us to really make an impact and that’s for second phase. And there are four components on these that I have to explain previously, but that’s really just what we’re doing.

The third across both these phases is a cultural change we’re going to try where fundamentally we need to have one culture when we want to go and impact customers. That’s likely longer term change.

When we’ll kind of go back to industry-leading growth phase, frankly, I don’t want to have it a guess, because industry leading means that I should really know what our competitors are and today I have no clue whatsoever . But from a market perspective, all I can tell you is that there is enough opportunity out there and frankly, what we’re doing is making sure the organization is getting cured with (inaudible).

Joseph Foresi – Janney Montgomery Scott

Okay, thank you.

Azim Premji

Yeah, at this time, there are no questions on the queue and there is one e-mail on some margin issues, which is from Bangalore and we’ll ask IR team from Bangalore to take it offline. So, we’ll close this Q&A session with this. Thank you very much for your participation. The audio recording of the earnings calls is available and the numbers are also circulated and the transcript will be posted on the website. The IR team is available both in India and U.S. for any offline questions. Thank you so much.

Operator

Thank you gentlemen of the management. Ladies and gentlemen, on behalf of Wipro that concludes this conference call. Thank you for joining.

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