Full Transcript of Wipro’s F2Q05 (Qtr Ending Sept 30, 2005) Conference Call — Prepared Remarks (WIT)

Here’s the entire text of the prepared remarks from Wipro’s (ticker: WIT) fiscal Q2 2005 conference call. The Q&A is here.

Moderator

Ladies and gentlemen, thank you so much for standing by, and welcome to the Wipro Technologies second quarter results earning call for the quarter ended September 2005. Now at this time, all phone lines are muted, are in a listen-only mode. Later there will be an opportunity for questions, instructions will be given at that time. If you should require assistance during the call, please press * then 0 and an AT&T operator will assist you off line. As a reminder, this conference call is being recorded. I now like to introduce Mr. Sridhar Ramasubbu, please go ahead Sir.

Sridhar Ramasubbu

Thanks Christina, thanks everyone for joining us for Wipro second quarter results and earnings call for the quarter ended September 2005. I have with me Jatin and Lan, who joined me in conveying a warm welcome greetings to all of you. With us today, we have Mr. Azim Premji, Chairman; Mr. Suresh Senapaty, CFO, and other members of the senior management team including the business unit heads under the new structure. I hope you have had an opportunity to review the press release we issued today morning under the US GAAP.

Let me give you quickly the agenda for today’s call. Azim Premji will share his perspective beginning with an overview of our results and Suresh will take you through our financials for Q2 in more detail. As a reminder, when we discuss our results in today’s call, some of the issues we discuss may be forward looking and I would like to advise you that these statements maybe subject to known and unknown risks and uncertainties that could cause actual results to vary materially. Such risks and uncertainties are discussed in detail in our filings with SEC. Wipro assumes no obligation to update the information presented during today’s call. For your information, the call is scheduled for an hour. The entire earnings call proceedings are being archived and transcripts will be made available after the call at www.wipro.com. I am online on e-mail and if you have any specific questions which you are unable to ask, please send me an e-mail or you can call my cell phone and we will address those questions as well as at the end of the Q&A.

So with that, let me turn over the call to Mr. Azim Premji, Chairman - Wipro.

Azim Premji

Good morning to all of you. By now you would have seen our results for the quarter ended September 30, 2005. While the management team would be happy to answer our queries, I would like to take sometime before that to share some thoughts on our performance and our prospects.

In terms of financial performance, all our major business segments recorded robust growth rates in revenues. Revenues in our global IT business at $430.7 million were ahead of our guidance of $422 million. The IT services business continued to witness board-based growth across verticals, across geographies, and across service lines. Our financial solutions business delivered its fourth consecutive quarter of double-digit sequential growth. Our differentiated services such as testing and technology infrastructure management continued to grow ahead of overall growth rate. Our investments in account management began to pay off as we saw the number of our million-dollar customers cross 200 for the first time. In line with our expectations, our business process outsourcing business witnessed flat revenues with significantly improved profitability. Even though revenue growth in this business will be muted in the near term, our wins in the transaction processing business during the quarter give us confidence that we are on the right track.

Our India, Middle East, and Asia Pacific IT business recorded revenue growth of 26% and profit before interest and tax growth of 43%. Our other businesses also turned in good performance.

The quarter was also unique for a few other distinctions. This was the first quarter when the quarterly operating income crossed the Rs. 5 billion mark. The quarter saw us crossing the landmark of over 200 customers with $1 million or more annualized revenue in our global IT business. In our IT services business, the quarter also witnessed the highest ever quarterly people addition of over 5600 people.

In what is probably a world record, Wipro and Wiproites through Wipro Cares initiative along with government and local authorities planted over 250,000 saplings in the tsunami hit area of Tamil Nadu state in 24 hours as a tribute to the people who perished and as a possible protection for the future.

Finally, this was also the first quarter with the new management structure. Our experiences and success so far have reinforced our confidence in our leadership team as well as in the current organizational structure.

Looking ahead, the prospects for growth look exciting. We exited the quarter ended September 2005 with a strong tailwind of business momentum. The challenge we have is to sustain this and build upon it. I am confident that our leadership team has the hunger and the passion to make this happen.

I will now request Suresh Senapaty, our CFO, to comment on financial results before we take questions.

Suresh Senapaty

A very good morning to all of you in the United States and a good evening to whoever is in Asia. I will touch upon areas in our performance and financial that will be of interest to you all. Let me start with giving the composition of our growth.

During the quarter ended September 30, 2005, we had a sequential dollar revenue growth of 8.1% in our global IT services business. This comprised of 9.3% revenue growth in the IT services partially offset by a 2.4% decline in the revenue from BPO services. The 9.3% growth in the services component was driven by an 11% growth in the volume of business offset by a 2.1% and 0.8% decline in the realization for work performed offshore and onsite projects respectively.

Price realization in IT services was impacted by the non-recurring project performance based incentives received in the quarter ending June 2005. Excluding this, the decline in price realization would be under 1%, which is a quarterly movement due to mix of customer and services. I would like to clarify that we have not seen any material change in the pricing environment. On forex front, our realized rate for the quarter was Rs. 43.93 a dollar versus the rate of Rs. 43.38 realized for the quarter ended June 2005 representing an increase of about 1% sequentially. This has a favorable impact of around 40 basis points on our margins.

With a view to provide increased information effective quarter ended September 2005, we have started providing segmental details on our BPO business. For the quarter ended December 2005, we expect volume-led growth with broadly stable price realization. Revenue growth would be impacted by the lesser number of working days and this has been factored into our guidance. Further we propose to stagger our compensation revision across Q3 and Q4 of the current fiscal year. Accordingly, operating margins for the next quarter would be impacted by the partial increase in compensation. We will endeavor to mitigate this through levers such as onsite-offshore mix and operational improvement and keep the operating margins within a narrow band.

We will now be glad to take questions.

Related:

• The Q&A from this call is here.
• Source: WIT web site.

• All India Stock Blog articles on WIT.
• A list of full conference call transcripts available on the Seeking Alpha Network.
• The complete list of India stocks (and links to articles about them) covered by The India Stock Blog.

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