While the country’s third largest software exporter Wipro posted in-line growth numbers for the second quarter, it issued a guidance for the next quarter, which was seen by analysts as very conservative, especially on the back of commentary from the management in the past. CFO Jatin Dalal spoke to BusinessLine on the outlook, margins and ways in which the company is looking at upping its digital play.
Last quarter the management said that second half of the fiscal would be better than the first. But your next quarter guidance is very muted (0.5-2 per cent in constant currency). Are you seeing concerns in outsourcing demand?
The demand is stable. We do not guide beyond a quarter but we maintain that our aspiration would be to do better in terms of the sequential growth that we have achieved. As mentioned some sectors like financial services and manufacturing are expected to have furloughs. Also, we have one consolidation deal which is taking time. We do expect that some of that consolidation gain will reflect in the last quarter.
No. Margins were impacted by salary hikes offered in June but it will be stable going forward. We are operating in a band, which we said is in the range of 21-22 per cent. Last full financial year, our profit margin was 22.2 per cent and a year before that it was 22.6 per cent. We see this as our comfort zone. However, we are focussed on driving our growth and to drive that, we need to make investments. For example, teams may want to build something in digital or create an IP in a new area, all of which requires a budget. We believe that once we get growth, margins will follow. It is not only us, even competition is doing that. Therefore, our priority is to get growth back and for that we will make the necessary investments in areas where we need to make them.
How soon will the 10,000 people who will be trained in digital technologies impact utilisation?
I would look at it differently. We have put a lot of efforts on productivity drive in terms of next gen delivery model. Newton's Cradle is an example of that. Basically, it gives opportunity to our experienced staff to engage in larger projects and when that happens there is a natural suction for newer employees to work towards those kinds of projects. It also creates fluidity in the system and that gives me additional comfort on utilisation. I do not see it adversely. If we had not done things, the situation would have been adverse.
In digital, a lot of companies tell us that the talent has to be based overseas and also they are on a higher pay bracket. As this grows, how will you manage this?
There are two components to digital. One is the design side and then there is the execution and analytics side. The architecture and design talent generally tends to be more client facing whereas from the architecture execution standpoint, it can be done offshore. However, we create a unique set of people to create an experience centre for a client requires understanding of various technologies. Even if the person is not aware of a particular technology, we look at the ability to learn it quickly and get into the digital project.
Energy and utilities seem to be signs of bottoming out as mentioned by CEO TK Kurien? By when do you think it will bounce back for Wipro?
We are seeing signs of bottoming out and it is reflected in some growth. There is a lot of consolidation of vendors happening there and we have won every engagement in this phase.