The Hindu Business Line : NewLogic will help us expand in Europe: Senapaty

WIPRO CFO, Mr Suresh Senapaty believes that the acquisition of NewLogic in Austria will double its strength in Germany and France. It will also have delivery centres in these countries. He estimates the revenues to be five million Euros for the quarter ending December

What is this NewLogic all about and how will it augment your presence in the product engineering space?

I think if one looks at the product engineering and embedded space, we have a strong presence in United States and also in Japan, and apart from that other two big markets are in France and Germany. Our business has been very insignificant there; so with this acquisition, we are more than doubling our presence in France and Germany apart from making an entry into that particular space, plus we are getting a delivery centre in both these countries. Second, they are very strong in their IPs, they have 25 patents and are very strong in the wireless LAN as well as in the Bluetooth. Wipro is very strong in the wireland LAN, so they complement fairly; while we can pick and choose the best of the breed in the wireland LAN on other LAN areas. I think this is a big leverage, where the billing rates starts from 90 Euros to about 190. It is a great leverage and we are excited about it.

Is this a profitable company?

It is about 14 million Euros for the calendar year ending December, for the December quarter it will be about 5 million Euros and because of the intangibles that we are going to get factored into for the first one -two quarters, there will be a loss which will reflect, although it is marginal at the technology level.

But thereafter we expect the profit margins to go up and over a period of time we think this particular entity would help deliver average EBITDA levels that technologies would have.

Why for the first time you shifted to a royalty-based model and the point you made about the company being at a ramp-up stage — what sort of growth do you expect to see at EBITDA levels for '06 and then in '07?

We have not specifically articulated a range but all we can say is that five million Euros is what the estimated revenue would be and would expect a sequential growth for the next quarter.

As you know a significant part of the consideration is linked to a three-year projection that we have and this particular linkage is with respect to the EBITDA delivered, it is to the revenue delivered over a 3-year period and will be spread over a three-year period.

Consequently we would expect a growth rate in EBITDA and revenues, which will be far superior to our product engineering solutions group.