This summary is based on the third quarter fiscal year 2007 earnings call conducted by Wipro Ltd. (WIT) on January 18, 2008.
Management:
-
Chairman: Azim H. Premji
-
EVP of Finance and CFO: Suresh C. Senapaty
-
President, Finance Solutions: Girish S. Paranjpe
-
EVP of Human Resources: Pratik Kumar
-
President of Enterprise Solutions: Sudip Banerjee
-
COO: Dr. A. L. Rao
-
President of IT Practices: Suresh Vaswani
–
CEO of Infocrossing: Zach Lonstein
-
Investor Relations: Sridhar Ramasubbu
Key Investor Issues:
- Revenue increased 32% from a year ago to $1.33 billion.
- The company reported an increase of 11% in net income to $210 million or 14 cents a share.
- Global IT Services and Products Revenue increased 26% to $917 million.
Third Quarter Highlights:
Revenues were $1.33 billion, representing an increase of 32% over the same period last year due to strong performance from Global IT Services.
- Revenues from the Global IT Services at $910 million were ahead of the guidance of $905 million.
- Net income was $210 million or 14 cents a share, up 11% from the prior year.
- The margins remained flat despite an appreciating rupee and increased costs on account of wages'' hikes effected.
The firm continues to win large deals and have a healthy pipeline of these deals as it moves into the new calendar year.
- Financial Services business grew nearly double digit sequentially during the quarter, despite the challenging times for the sector.
- The company’s Retail and Healthcare Verticals were reported to be growing ahead of their profit growth rate and sales growth rate.
- The firm’s service lines had strong growth in their BPO and Testing Services and the company’s top 10 customers grew at a healthy rate during the quarter resulting in winning a good set of new clients with some mission-critical and transformational projects being awarded to it.
On the operational front, the firm drove for higher productivity and realized a 200 basis point increase in mix of revenues from fixed price projects this quarter.
- The company drove for higher pricing for its services and saw price increases from its customers in the range of 3% to 6% as new customers were coming in at around 5% higher than the average.
- This has helped in improving the firm’s realization by about 50 basis points sequentially.
- The firm started investing early in the Indian market in solutions and new service lines like Total Outsourcing that has reflected in its growth rates and deal wins.
- Over the last 24 months, the company reported an increasing size of deals in the market and of its abilities to offer transformational solutions to customers.
Wipro Consumer Care and Lighting also grew well with both revenue and PBIT growing by 25% each on an organic basis.
- This business reached a quarterly revenue run rate in excess of $100 million and the firm continues to see strong demand for its products in India and Asia.
- Two large strategic acquisitions were made during the year, namely Unza in the Consumer Care and Lighting business and Infocrossing in the Global IT business.
- The company reported that it will be focusing on a set of strategies that will help it maximize growth and enhance value creation as well as increase investments.
The reported Global IT Services revenue of $910.1 million included $772.2 million for IT Services, $76.5 million from BPO Services and $61.4 million from two acquisitions.
- The organic revenue growth was 7.4% in Global IT Services with revenues of IT Services growing 7.2% sequentially while revenues of BPO Services grew 9.3% sequentially.
- Revenue growth of 7.2% in IT Services was driven by volume growth of 6.4%, while blended pricing increased by 50 basis points quarter-on-quarter.
The firm added 39 new customers, 10 of which were Fortune 1000 Global 500 customers.
- The company also had its first $100 million client and the number of clients of more than $50 million increased from 9 to 12.
- The price realization in the IT Services business went up by 5% for onsite work and 2.2% for offshore on a YoY basis.
- The company had an adverse impact of 50 basis points on margin due to exchange rates, which was offset by pricing and other operational improvements.
- The operating margin dropped by 150 basis points versus previous quarter, primarily on account of acquisitions.
Fiscal 2008 Outlook
- The company expects volume led growth with stable price realization and impact on margins due to the wage hikes given for its onsite workforce effective for January 2008.
- Margins of Global IT business are expected to be in a narrow range excluding impact on foreign exchange fluctuations.
