Wipro Limited (WIT) Q2 2008 Earnings Report, Transcript and Summary

Good morning. My name is Neeva and I’ll be your conference operator today. At this time, I would like to welcome everyone to the Wipro second quarter earnings call. All lines have been placed on mute to prevent any background noise. After the speaker’s remarks, there will be a question-and-answer session. (Operator instructions) Mr. Ramasubbu, you may begin.

Thanks Neeva. Good morning, ladies and gentlemen and good evening to the participants across the globe. Rajendra, Lalit, Aravind join me from Bangalore in extending a warm welcome to all the participants to Wipro’s second quarter results and earnings call for the period ended September 30, 2008. We have with us today Mr. Azim Premji, Chairman; Mr. Suresh Senapaty, CFO, who will comment on the U.S. GAAP results for the period ended September 30, 2008. We are join by our joined CEO Suresh Vaswani and Girish and other senior members of the Wipro management team, who will be happy to answer question. During the call, we might make certain forward-looking statements within the meaning of the Private Securities Litigation Reforms Act 1995. These statements are based on management’s current expectations and are associated with uncertainty and risk, 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 Exchange Commission in the U.S.A. Wipro does not undertake any obligations to update forward-looking statements to reflect events or circumstances after the date of filing thereof. This call is scheduled for one hour. The presentation of first quarter results will be followed by a question-and-answer session. The operator will walk you through the procedure for asking questions. The entire earnings call proceedings are being archived and transcripts will be made available after the call at wipro.com. I’m available on e-mail and through mobile as well to take any questions and table 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.

Good evening and good morning to all of you depending on where you are located. Thank you joining our call; I’m sure you would have seen our results for the quarter ended September 30, 2008. I would like to spend some time reflecting on our performance for the quarter and our strategy going forward. Following that, Suresh Senapaty, our CFO will share financial highlights and the management team will be happy to take questions. Wipro Limited recorded revenue growth of 7.5% sequentially. In our IT services business we achieved revenue of $1.11 billion with year-on-year growth of 29% significantly outperforming our guidance of $1089 million. In rupee terms our revenue growth in IT services rose 36% year-on-year. What makes the result satisfying is that it has been achieved in the context of a deteriorating global economic environment. Several large financial organizations have either gone under or have been sold. There is significant credit squeeze and central banks are taking unprecedented steps to infuse liquidity into the system. Credit is the lifeline of any economy and that lifeline seems to have been impaired. The overall sentiment is cautious; the economic crisis has spread globally. With all of this means to our IT business is that we need to move from a business as usual approach to a more transformational approach that will help our customers realize better cost and service optimization in their times of need. I would like to focus on our initiatives which we believe will be the game changes in the current environment. First, our Global Programs Team has been instituted with the specific purpose of capitalizing on the rising number of transformational opportunity. The discretionary spending being cut, we believe that our growth will be fueled by transformational deals. Our global programs team has been able to create a decent pipeline of transformational opportunity. Second; in difficult time’s customers look for partners with strong consultancy and capabilities to realize cost or service transformation. Our consulting team of 1000 plus is focused on enhancing the quality of dialogue, the quality of relationships and the quality of work which we do for our top customers. Currently about two thirds of our consulting revenue comes from Mega and Gama accounts, these are accounts of revenue more than 50 million and accounts of revenue more than 100 million per year. Our consulting capabilities are also enabling downstream revenue from our large customers. Our domain capabilities are among the best as they have invested in the vertical structure 10 years back. Thirdly, we are increasingly moving towards our non-linear model and significant investments are directed towards this initiative. Our investments in this platform based BPO meant but we have grown revenues at 40% year-on-year in ’07, ’08 with a 16% increase in headcount. It also meant that we could maintain margins in the BPO business last year in spite of significant rupee appreciation. In IT services our non-linear initiatives are centered around three themes; intellectual property creation, efficiency enhancement and delivery organization. These are expected to generate returns going forward. Finally, our global integrated delivery model instituted at the beginning of this financial year is starting to delivery productivity gains. We have been able to make significant headway of utilization without compromising on our ability to fulfill demand requirements. We are also expanding our global presence with strong presence in near shore centers. This will enable us to provide near shore capability with specialized skills aligned with customers business need from regional centers. Overall, I’m confident that we have made the right investments for the future and we will be able to whether the near-term challenges posed by the slowing global economies. I will now request Suresh Senapaty, our CFO to comment on financial results before we take questions.

Good morning to all of you in the United States and good evening to those of you in Asia. Let me comment my highlights by highlighting the fact that for the convenience of the readers of the U.S. GAAP financial statements have been translated into dollars at the noon buying rate in New York City on 30 of June 2008. For cable transfers Indian rupee well certified by the Federal Reserve Bank of New York, which was $1 is equal Rs.46.45. Accordingly, revenues of our global IT Services segment that was $1110 million or in rupee terms Rs.47.3 billion, appeared in our earnings release at $1019 million USD based on the convenience translation. With the limited revenue grew 36% year-over-year and our net profit grew 1% year-over-year. Our IT Services revenue for the quarter was $1110 million against the guidance of $1089 million, a sequential growth of 4%. In cost and currency terms of sequential growth was about 5.6%. We continue to publish our adjusted non-GAAP net income in addition to publishing results for GAAP and also provide a detailed reconciliation between GAAP net income and adjusted non-GAAP net income to help our third quarter see our results together. Our adjusted non-GAAP net incomes for the quarter excluding the translation loss of ECB, excellent commercial borrowings of Rs.1156 million and fringe benefit tax of ESOPs of Rs.86 million was Rs. 9.47 billion, this translates to an EPS of Rs. 6.51, which is $0.14 representing a y-o-y increase of 16%. We had a tax write back in quarter two of 2007-08 excluding which our year-on-year growth would be 18%. We have had well rounded group for the current quarter. Our Retail & Transportation vertical recorded strong sequential growth of 9.2% whereas Financial Services and Manufacturing and Healthcare recorded a growth of 7.8% and 6.7% sequentially, respectively. Our differentiated services lines of Infrastructure Services recorded a sequential growth of 9%, whereas Testing Services and Package Implementation grew 7.1% and 6.2% sequentially respectively. Our Infocrossing acquisition exhibited good traction and sequentially grew higher than the company average. Our Americas business grew 3.3% and Europe grew 4% sequentially. Constant currency growth sequentially is 7.6% for Europe. We won six multimillion dollar deals during the quarter. Our strong focus on liability and global program is reflected in our deal wins and the healthy deal pipelines. Overall India in Middle-East business continues to have tremendous traction with 48% year-on-year growth and 14% sequential growth, 19% the constant currencies. Our strong presence in products in addition to services in these geographies continued to gives us leadership on end-to-end system integration and total outsourcing deals. During the quarter we added 28 new customers. Our investments in account mining is with reaching the dividend with our number of clients more than $50 million on a trailing program basis increasing from 14 in quarter one to 16 in the current quarter. The margin for the combined IT Services was 23.3% in quarter two, against 20.1% in quarter one. We gained salary increases to offshore employees effective August. We were able to offset the impact of salary increase through the improvement in realization and utilization. In the current quarter, our realization improved by 1.9% of onsite and 1.8% of offshore sequentially. On a year-on-year basis, rates for onsite and offshore improved by 5% and 4.3% respectively. Our improvement in rate in spite of adverse currency movement vis-a-vis the U.S. dollar was through a mix of changes in customers, non-linearity initiatives and increased realization in fixed price project. Our proportion of fixed price projects increased 500 basis point year-on-year and 100 basis points sequentially to 31.6%. Our continuous focus on utilization has seen us move deliver from 67.9% in quarter one to 70.3% in quarter two on gross basis. The utilization excluding support function was 77% an improvement from 74.4%. We believe that our utilization will remain in the narrow range from here on. We added 2,241 employees from campus during the quarter. Out IT product business had a spectacular quarter with sequential growth of 31% and year-on-year growth of 44%. Wipro Consumer Care and Lighting business continues to see good momentum with industry leading growth rates of 36% year-on-year. Our domestic business continued its robust revenue growth achieving our 14 consecutive quarters of 20% flat growth. Unza continues to grow well in all the countries we operate in. On the foreign exchange front our realized rate for quarter was 42.65 versus a rate of 41.16 realized for the quarter ended 30 June, 2008. On a quarter-on-quarter basis FOREX give us a positive impact of margins by about 38 basis points. As the period ends end after our timing to the assets on the balance sheet we have about $2.17 billion for contract at rates between 39.50 and 47. For the quarter ended December 2008 we expect volume led growth will have the impact of salary increases of our BPO employees as well as full quarter impact of offshore employees in the current quarter. We will be glad to take question from here.

Neeva we can start with the Q&A

Thank you. (Operator instructions) Our first question comes from Moshe Khatri from Cowen & Company.

Hey thanks. You spoke a lot about the transformational deals that you are focusing on. You’re saying that the pipeline looks pretty decent. I would appreciate some more commentary maybe some more details about that specific pipeline. How would you be able to compete on those deals with some of the more – the stronger players on the transformational side like Accenture, and then obviously you did provide cautionary guidance for the December quarter? Are you just being cautious here, are you actually saying delays or cancellation in your pipeline of deals? Thanks

Hi, Moshe, Girish here. Two separate questions, so let me take them one at a time. So you said you asked about how we are hoping to win deals on the transformation side against our some of our global EPS. So, the short answer to that is that we see that happening more and more where we have a combination of outsourcing and transformation, because client see the value of outsourcing work to us and then expecting us to transform that as a part of an overall contract. So it is a cycle that we go through. We will start with some work that will get outsourced which will transform and then further outsource again once the transmission is complete and I think in this way the get the benefit of some of the transformational gains that they get, we get ploughed back into the transformation investment and further get maintained towards the subsequent outsourcing contract, so the whole cycle of outsourcing and transformation is what we are seeing traction in, so we have seen that in multiple cases which is why it gives us confidence that we will be able to do more and more of that going forward. On the second question on guidance, I think the current environment is such that we have to be cautious because lot of our clients have going through some amount of uncertainty and lot of the teams are on hold and we can only give guidance based on what visibility we have now. In addition to that where we have billing on a time and materials basis that is certain amount of risk inherent in this quarter because of a number of days of vacation which happened in the end of this quarter.

Okay and last question. This is for Mr. Premji, obviously you’ve been with the company for a long-time, can you kind of compare and contrast this period of uncertainty to what we have gone through from ’01 to ’03? Thanks.

I think ’01 to ’03 was a reaction to a balloon, whereas this one is not the reaction to a balloon. I think that’s one fundamental difference; two, in terms of certainly the IT services industry from India, this is significantly more mature today than it was ’01, ’02 and is doing work which is significantly more embedded into customer requirements and customer strategy than what it was doing in ’01 and ’02, so I will see that also as a significant strength so far as the industry is concerned. Would you like to supplement a little about that

No, I think the difference this time Moshe is that in 2001, 2003 the slowdown was really led by an excess on the expense side and restricted to the tech sector, whereas this time we are far more subversive because it is probably going to affect all features of the economy.

Your next question comes from Trip Chowdhry of Global Equities Research.

Thank you. Premji I was just wondering like incomes of downturn which could be quite long probably two years and so; a product company normally spends a lot in innovation, R&D and other stuff. What is the services company do in a downturn, and what do they do to make sure that once the up-tick occurs, they are much better positioned that anybody else, and then I have a follow-up question also.

Let me try and take a shot at that. So in some ways if you look at the growth especially for global providers out of India is the we’ve had almost an uninterrupted period of growth from 2002 middle onwards till 2007 and it has been a fairly high rate of growth somewhere between 40%, 35% to 45% depending on which year you look at. So, in some ways the slowdown actually helps us to kind of re-look at what we have been able to do and takes stock of what further competency we need to build maybe do some amount of spring cleaning of somehow things that get accumulated when you have five, four to five years of uninterrupted growth. So, it is the great opportunity, if you look at it positively to take a breather and to get ready for the next session.

The other question I had was, once your customer goes under, do they inform you like we have got under or all of a sudden, they just stop paying you? What is the dynamics, like how do they wind it down?

We’ve have gone through that experience twice in the last four weeks. I can only say that they know of it when we see it on the CNBC ourselves. So, I don’t know whether we will get any advance, more of a advance notice them back, but I think one good part of what we currently do and this maybe of interest to you that in both those cases we have managed two kind of continued relationship with the successor organization and our hope is that, our business will not get significantly impacted and this maybe an opportunity to hire lenders.

And pre-pay you, like suppose I’m a company which has gone under and I have say 100 employees and I’m using them and I owe you $100, are they prepaid? Or do they like repay after the work is done and in a situation where the customer goes under, what happens to the money which has not been paid yet? You put into collection agency or how does it work?

So first of all, our endeavor is not to work for companies which have100 people.

I’m just giving an example.

Then we are talking about big banks, which have been affected in the current slowdown, right, so which is a very formal process of how they handle critical services which are provided to them and what part of our receivables are secure and how they will get paid for by the successor organizations. So again, touch wood and I don’t want to express satisfaction too early, but I would say the impact on us has been minimal of both of those situations.

The next question is from Joseph Foresi of Janney Montgomery and Scott.

I wonder if you could talk a little bit about some other pieces that were in the model this quarter. It looks like other revenue dropped off sequentially. I wonder if you maybe you could talk a little bit about what cause that drop-off and also there appear to be a loss in other income, maybe you could talk a little bit about that.

Yes, I think, so far the other two concerns between the small Wipro engineering business that we have, which primarily addresses the domestic market, but also there is a piece in Europe and in both those segments, that has been particulate from an infrastructure in the spending point of view, that has been a complete slowdown and as a result there is a normal headwind and there has been decline in the growth from June ’08 to September ’08 by a formal to about 30%. Part of it is the currency and part of it is U.S decline in terms of the outlook, but that will be able to pull kind of our revenue and that has impacted the overall other income. So, other income has two components that is the stream work of our Rs116 million and one is with respective to a $40 million incremental of Fringe benefit tax on ESOP’s, which under the U.S. GAAP has to be taken to the P&L, while the money that the Fringe benefit tax that we collect goes into these results, so it is one at $40 million and the balance amount is primarily because of the reduction in the profit other thing out of the dip in the of what Azim explained. So these are the two big factors for the other income declines that we won’t see that went up about from June ’08 to September ’08.

And what particularly, I mean I know you said it was an Infrastructure business. What specifically are you doing with that business?

That business deals with the Hydraulic Cylinders, which is a component which goes into manufacturer of construction equipment such as dumpers, excavators and stuff like that which is in a traditional business which Wipro has started.

I mean do you expect to out grow that loss? What you expect from other income in that particular business or other revenues next quarter?

Well typically that business, thanks to the (inaudible) anyway, so we have been having very good growth on that part of the business over the last three years, so we expect particularly from Indian economy perspective lot of step the government is taking and we expect that in the next few months we will see much more infusion of investment much more lowering of the interest rates in terms of what actions initial step that we had seen from the Bank of India as well as government of India. So we would expect the domestic market to pick up in the next two quarters and so it will be concerned I think it is anybody’s guess as much as yours and mine, because we have gotten back to quarter two is concerned and I think it will take a wide the before that stars picking up.

So, the business is expected to be flat to slightly up it sounds like?

Yes, I think the objective, in the next one or two quarters we will be more or less similar to what we are in quarter two.

And one last question. Just on the margin trajectory obviously that came which put us in some wage increases. What do you expect from margins in the back half of the year, and what you are expecting for the full year? Thank you.

This is Suresh Vaswani here. Our margin outlook going forward is a stable margin environment with a positive device. So, if you look at our margin performance last quarter, if we have improved our margin and we have improved our margin on the back of some rate increases that we have got, but more than that it’s been driven by productivity, its been driven by utilization, its been driven biggest either trust or fixed price projects and its been driven on operation excellence, so going forward we still think we have adequate levers in terms of driving operating efficiencies. We have adequate levers in terms of driving non-linearity in our delivery model and with that we believe we can sustain a stable to a positive operating margin wise going forward.

Okay, thank you.

Your next question comes from Arvind Ramnani from Bank of America Securities.

What kind of work are doing in financial services? What customer or segments are feeling 41% growth in financial services?

So, I think we impact of good traction with plants in Europe and a lot of work that we do even in U.S. has been fairly critical for clients and some of continuity perspective. So, we have not seen significant reduction in the work that we do even in challenging situation in the U.S. and in Europe we actually, we have seen good growth, which is on the back of new orders that we won and that given that happens with big plant.

Also what is Wipro doing to have going to reinsulated overall growth as you mean that this economy continues to weaken. I mean most specifically, can you comment of the specific solutions that you are developing to address current client needs?

Let me give you two perspectives. Number one, from a customer perspective and some of market perspective we are focusing our energies in terms of growing our existing accounts through stronger client engagement structure and through much more alignment to the various practices and various services that we had behind the client engagement manager in the specific account. So, clearly, grow the existing account is one expect of some of mitigating the challenges that we face. The second thing is, we are looking for opportunities or we are hunting opportunities in accounts with instead of stop of meditation type of complex, we get more services type of complex and where we believe we’ve an opportunity to scale our services in the account. So, that is some of our client market addresses perspective. In terms of specific practices, in addition to what we’ve been doing in contexts of the vertical practices, the service lines and the domains over the last couple of years, we’ve invested in a strong global programs team, which has the ability to code further our transformational opportunities with customers or to create transformational opportunities with customers, that is one initiative. The second initiative is, building up strong consulting base within Wipro, so that we are able to bring the value of all that we represent in terms of IT and BPO from a consulted of sample to our customers and then lead it into system integration and transformation type of projects. The third initiative that we’ve taken and this we may have spoken about in the past. The strong alliances with technology partners, so we have five major strategic alliances; Cisco, Microsoft, EMC, SAP, and Oracle and we are coordinating with them. We are doing clients listing with them, so that we are able to bring that value of a technology provider and a service provider to some of our customers. So, these are some of the broad initiatives that we are taking to sort of risk mitigate us in this economic environment.

Also are you all developing anything that kind of addresses, kind of immediate client needs, where there is a lot of merger activity they can placed and that kind of in many ways the world has really changed in the last couple of months. So, are you all developing any solutions that address this immediate needs of clients?

Absolutely, so we know that in many cases clients will have to address the issues of integration especially with mergers taking place between big banks, also there is an increased focus on trying to bring process and technology together. So, we have got out on the frame work for application of integration and application of externalization which will really help clients integrate that kind of differing application and architecture and get benefits of synergy when they merge to organizations and we have got real life practical experience working with banks on how to bring process and technology together and then to move it on a global deliver model, so that they get the benefit of both the synergy as well as the arbiter that comes out of relocation.

Sure, now what is plant in into your third quarter guidance other than your macro headwinds, I mean known most specially do you have project delays, slower client decision making cancellation, how pessimist is the view of basically our third quarter results?

So guidance is a point of time estimate of where what think this quarter is going to look like and it takes into account all the things that you mentioned, there will be some project delays, there will be some cases like it seems on hold. There are some cases so they’d be expect clients to declare two weeks off at the end of December which will effect billing, it take into account some cyclical downturns in some of the industries like semiconductor, so all of that is kind of baked into our forecast and it is all the realistic is it tend be at this point of time.

And also Arvind, the cross currency that means the dollar appreciating significantly over Indian rupees as well as the other currency, compared to what we had as of adverse of the quarter was just all we ended the quarter two and how it is booked form September end to today there is fair amount of what we call in a dollar terms, there is contraction. So I think everything has been sort of taking into account from what we have forecasting yet, because we have so many moving lines there in the short-term that is happening.

Sure, and one final question, having it safe to assume we will have similar client prospects in ’09 as we had in ’08, so what is your report doing to kind of address that to make sure that when this projects, finance get delayed you all are actually kind of part of the process was that just being given a lower budget?

Again because we focus so heavily on account management and putting the senior team on the ground the ideas that we are working collaboratively with clients and not wating to be told.

Our next question comes from Ashish Thadani from Gilford Securities

Yes, good evening just wanted to go back to the operating margin discussion, specifically the IT services operating margin you mentioned was 20.3% this quarter and if I’m doing the math correctly, its down a 150 basis points year-on-year despite some very substantial currency tail wins. So, how do we reconcile this GAAP?

Yes Ashish, today’s we are having currency scale when its confirmed we haven’t benefited much out of fact, but the acquisition that we have done in (inaudible) than as we knew dilutive the margin diluted and for the for sometime. So that had an impact of about 1% plus, so net overall is to both adjust for that we have pretty much holding off.

Okay and there are two items, I just wanted to revisit a little, you know the Financial Services vertical the quarter-on-quarter growth was very strong as was pricing. Was there anything that was very unusual to this quarter? Or should we expect some kind of steep falloff in the coming quarters?

No, we were much more concerned when we started the quarter, because of the uncertainty that surrounded the industry and as thanks to our deep relationships with clients and also with the grace of god we’ve not been too badly affected. So we’ve had a decent quarter last quarter and other than what we’ve mentioned in oral guidance, I don’t think there are any unusual factors to look forward to in this quarter.

Our next question is from Kanchana Vydianathan from Pacific Crest.

Hi, thank you. I guess a couple of questions, let me start out with in your press release you highlighted a few of the key wins that you won during the quarter. I was wondering, if you could elaborate a little more, what would be the average annual contract value for these wins, I mean you mentioned that these are a multi-year multimillion dollar deals?

Typically we classified them only through there large sized not all of them that we get more than $25 million and this would range somewhere between 30 to 100

My second question is, in terms of looking at your utilization. Say utilization has been inching up quarter-on-quarter and your hiring still continues to be little muted, help us understand looking into Q3 and Q4 what should be our expectation, in terms of hiring and also in terms of utilization?

We sort of do not give specific guidance, vis-à-vis as we line items in terms of utilization and hiring, but all you can say is that quarter three and four as you look forward is the mostly like volume growth and giving that context we continued to work on various productivity improvement areas and some so forth and hence we would just in time kind of a concept will adopt to be able to add it on people.

With respect of pricing you have actually seen good pricing increases during the last quarter as well as during this quarter when compared to a year Q, can you elaborate a little more as to what is driving that revenue productivity improvement that you are seeing? Is it the new contract that you are signing that’s coming up and on higher pricing and that’s to driving the billing rate increases?

Just to clarify on the objective point then in fact of or besides of the deal that is basically when I said which is to $30 million to $100 million each and they are totaled contract of value, not annual third year kind of thing, $30 million to $200 million each of them over the period of time.

Got it

This is Suresh Vaswani answering your question on great utilization in pricing so it’s a combination of multiple factors. Yes the new contracts that we are signing or we had been signing have been at better rates progressively compared to some of our earlier contracts. We’ve also been able to renegotiate some of our contracts with some of our renewal, but you know the most important factors is the over drive on operation efficiency the over drive on productivity, which is manifested in substantially increased utilization that you see and also an increasing ratio of fixed price projects in the overall make up of our services which gives us the flexibility to drive productivity and therefore better rate realization.

So even in this environment, you are actually able to renegotiate contracts and get pricing increases, is that correct?

Well, we’ve been able to renegotiate some specially place where we’ve done extremely strong job. Customers are fairly open to price increases.

Got it and one final question, I guess looking at your Infrastructure Management Services you’ve seen a very nice growth on – in this quarter. Can you help us understand was that driven by the Infocrossing? Was that driven just by Wipro and also what would be contribution if Wipro offering for causing in that revenue?

The Infrastructure Services business, now we reported as an Integrated Infrastructure Services business, which comprises our traditional technology Infrastructure Services business, comprises with Infocrossing and also comprises our Infrastructure Services business, in India and the Middle-East. So, what you’ve seen is an Integrated picture, because we have integrated, basically all the service lines into one consolidated Infrastructure Services line. So factor that are responsible for growth, one is of course in the India and Middle-East market we’ve done extremely well, particularly on the Infrastructure Services side, so that has given us a kicker and second is the combination of Info-crossing and the combination of Infrastructure Services and this is really from a future perspective I’m not necessary taking about on that current numbers outs us in front of some very large Integrated Infrastructure Services opportunity, which is that we would not have been able to quote in front of customers, but the combination of the onsite capability and the manage data centre services capability of Info-crossing with a strong remote Infrastructure Services Capability that we have is creating large opportunities for us and we’ll be responsible for the growth that we see in this sector.

Thank you. That’s very helpful.

Your next question comes from Mark Marostica from Piper Jaffrey.

I was just hopping if you could quantify how much of the improvements you saw in margins that related to utilization versus rate increases and then, if you could also quantify the correlation, if there is any between your increasing fixed price concentrations with margin improvement there we’re seeing, trying to get, roughly an idea of what levels of utilization we need to start to increase your net hires again?

Yes, there was a similar question, before and you said that is very difficult for us to project and give it to you. Always think that it is a constant process of trying to innovate trying to improve productivity and we have seen inside two expansion in the combination of multiple factors, A, we did some price increases, B, we got price realization improvement by virtue of driving high-level of productivity in the fixed price project and C, there is a change in the mixed in terms of customers and services. The combination of that we have been able to get the pricing of and going forward it will be continues gave up and almost the product utilization yes we have done good job and utilization so far and our key would be to sustain and improve going forward to.

Is there a level of fixed price concentration in your business that you can sort of maintain a higher level for run at utilizations at higher levels than historically for longer periods of time I mean can you address correlation there?

There is a fixed price projects in the percentage of total revenue is about 31% post as of September and we think we can go up further in that and particularly when we are looking at more and more non-linear kind of drive and whether we are in a outcome base kind of make further deal, some of that it is add on to that kind of stream of revenue that we have.

So, back to the question on utilization, does that enable you to run utilization rates or sustain them at higher rates than you have historically or will you need to if you get, above say the 80% level, will you need to continue ramp in that higher as that you have in the past?

So, we are in a little bit uncharted what was here because, I think our current utilization is fairly high and I don’t think too many people have gone way above that end of the utilization level, but what we have seen is that yes, as you said fixed price contract does give us fundability and ability to utilize resources much better. How much better it can be and what is exactly the correlation between utilization and fixed price project is hard to say and we are really to pushing on both kind of parameters not necessarily completely depending on each other.

We don’t seem to be having other questions, make one announcements for any follow-up calls. I don’t have any questions here pending on e-mail. Making an announcement for follow-up calls and then we can close the session.

Okay, thank you. We do have two question sort of just coming to the queue, would you like to take those?

Yes.

Okay. Ed Caso of Wachovia.

Could you comment on the number of campus offers made this year and next year?

We have made about 14,000…

For next year we made about 8000 campus offers.

Okay and the number for that starts this years is 14,000, is that correct?

That’s it.

Okay. Are you guys still are tracking to stick with that number as far as bringing them all on?

So we made 14,000 campus offices for this year. We intent to take most of that, but there could be a one or two quarter lag in terms of us taking on all the 14,000 time people on board. We’ve taken roughly 2500 peoples this quarter on board.

Okay, thank you and then also can you share, you are seeing in the global tech media in telecom, I guess the vertical; what you are seeing right now as far as the landscape?

Yes, it’s a fairly tough environment; one is, as you know the telecom equipment side. Already there has been significant consolidation and some of the big players are in a fairly challenging financial situation. Also on the semiconductor side that is some cyclical downturn that is in progress. So, those are the kind of two challenged verticals within TMT. We still have fairly optimistic on service providers area and on the media.

Great, thank you.

Our next question is from Kanchana Vydianathan of Pacific Crest.

I guess one thing, just looking at your industry verticals, the manufacturing and healthcare and retail again had a good quarter. Looking at your pipeline, at deal that you are working on, at the deal that you bidding for it; can you help us to understand what exactly you are seeing, the strength and weaknesses?

This is Suresh Vaswani here. Yes, you are right. We have to decide retail manufacturing have been driving growth for us so far and going forward in terms of the outlook of the deal pipeline. It is concentrated around these sectors and the telecom service provider sector. One more element in our overall get-up so to speak is also our thrust on the emerging markets; India and Middle East markets; where we are seeing significant interaction and that also forms a significant part of our opportunity base across all the sectors that I just mentioned.

Okay and one final question; looking at your ADM growth, so the ADM was near to growth this quarter; can you help us to understand what exactly is happening? Was there any specific industries where the ADM offering did not grow?

I think ADM is perhaps to most mature in terms of off shoring and outsourcing into India is concerned and the real growth drivers in so far is the new growth drivers are really the infrastructure services business. The package implementation business which has done significantly well this quarter in terms of a 6% or 7% sequential growth, so package and the testing services business, which again has shown a significant sequential and year-on-year growth. So really the answer is ADM is more mature and therefore growing from a market perspective at a lower hit compared to some of the more new generation services and these are the differentiated services for us and the other services that have been driving growth for us.

So, is it fair to assume that going forward we will still continue to see, if you look at the growth and then new offerings to exceed the growth in the ADM?

Yes definitely, you will see more growth happening across the newer growth, newer service lines, relatively speaking compared to ADM.

Okay, great. Thank you.

Your next question comes from Lydia Thomasfly [ph].

Yes hi, could you give us an update on the progress improving margins on the Infocrossing business and how much longer should we expect to see a dilution from that acquisition?

This is Suresh Vaswani here. The Infocrossing acquisition was really a strategic acquisition from the perspective of financing, our complete infrastructure services offering for the U.S. market. So, from that perspective going by the deal pipeline that we’ve created we do believe that we are in advanced stages of finalizing some of the contracts. We do believe that it is beginning to deliver on the strategic intent in terms of enhancing our infrastructure service and you’ve seen the sort of presence we have when infrastructure services. Yes Infocrossing has been dilutive from the margin perspective, but we are driving two things; we’re driving revenue synergies, which I just spoke about and we are driving cost synergies also because a lot of the work that Infocrossing does can also be delivered out of India. So, from a medium-term perspective, we do believe that the Infocrossing margin will be very similar to our infrastructure services margin, which is broadly inline with the overall margin that we enjoy as an organization as IT Service business.

Okay thank you and just on the utilization of the datacenters within that business, what progress has been made there in terms of bringing that up?

We don’t give out the exact numbers, but we do have adequate capacity to take care of the requirements at least in the short-term. So there’s adequate capacity for us to take on more customers and we don’t envisage any major CapEx expenditures at least for the next one to two years.

So, that the currency utilization has gone up, but we can do more.

Okay, thank you.

I think there are no other questions now. So we can just make one announcement and then we can close the session. Are there any other questions on the queue?

There are no other questions in queue, sir.

Okay. Thank you very much for all the participation. Rajendra and other people in the India team and myself are available for any offline discussions and there is a digitalized replay as well. Thank you very much.

Ladies and gentlemen, this concludes your conference call. You may now disconnect. Thank you.