Wipro Limited (WIT) Q2 2012 Earnings Report, Transcript and Summary

Sridhar Ramasubbu – Chief Financial Officer, International Operations T. K. Kurien – Chief Executive Officer, IT Business & Executive Director Suresh C Senapaty – Chief Financial Officer and Executive Director Manish Dugar – Senior Vice President & Global Head, Wipro BPO Saurabh Govil – Senior Vice President – Human Resources, IT Business Srinivas Pallia – Senior Vice President & Global Head, Business Application Services Jatin Dalal – Chief Financial Officer, IT Business Soumitro Ghosh – Senior Vice President, Finance Solutions Anand Sankaran – Senior Vice President & Business Head, India, Middle East & Africa Jatin Dalal – Chief Financial Officer, IT Business Rishad Premji – Chief Strategy Officer, IT Business

Joseph Foresi – Janney Montgomery Scott Edward Caso – Wells Fargo Securities Trip Chowdhry – Global Equities Research Nabil Elsheshai – Pacific Crest Securities Swami Shanmugasundaram – MorningStar Keith Bachman – Bank of Montreal Anthony Miller – Tech Market View Avishai Kantor – Cowen & Company

Ladies and gentlemen, good day, this is Melissa, and I will be the moderator for your conference call. Welcome to the Wipro Limited Earnings Conference Call for the second Quarter Ended September 30, 2011. As a reminder, for the duration of this conference, all participant lines will be in the listen-only mode, and this conference is being recorded. After the presentation, there will be an opportunity for participants to ask questions. (Operator Instructions) At this time, I would like to turn the conference over to Mr. Sridhar Ramasubbu. Thank you, and over to you, sir.

Thanks, Melissa. Good day, and on behalf of Wipro team, a very warm welcome to all of you. This is Sridhar, and I’m joined by Rajendra and Aravind from IR team in Bangalore. We are pleased to host Wipro’s 2Q FY ‘12 earnings call. Regarding the materials for this call, we issued the press release package yesterday late night EST, and we will have time for Q&A at the end. The format for today’s earnings call is as follows; T. K., CEO of Wipro IT business will share his perspective on IT business; Suresh Senapaty, CFO; will give an overview on Wipro’s businesses and also comment on the IFRS financial results for the quarter ended September 30, 2011. They are joined by business heads and other senior members of the Wipro management team will be happy to answer your questions. As always, elements of this call and the management’s view may be characterized as forward-looking under the Private Securities Litigation Reform Act 1995, and are based on management’s current expectations and are associated with uncertainty and risks, 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 and Exchange Commission in the USA. We do not undertake any obligations to update forward-looking statements to reflect events or circumstances after the date of filing thereof. The call is scheduled for an hour. The presentation of the 2Q ‘12 results will be followed by Q&A. The operator will walk you through the Q&A process. The entire earnings call proceedings are being archived and transcripts will be made available after the call at our company’s website. Replay of today’s earnings call proceedings will also be available via telephone post the call. During this call, I am also 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 T. K., Wipro, Bangalore.

Good morning ladies and gentlemen. This is T. K. Kurien, I run the IT business of Wipro. In the last few quarters, we have put together in place Wipro’s foundation for change. Although we continue to fine-tune our approach, I’m convinced that we’re moving in the right direction. As an example, we fed the top end of our guidance and also had good volume growth of 6% and about 4.6% organic volume growth. This is the best that we’ve had in the last four quarters. In constant currency, we grew about 5.5% sequential. We added over 5,200 med people and we reduced quarter-annualized attrition by 4.7% to 18.5%, again the lowest in the last six quarters. Fundamentally, we are making progress every quarter. The realignment of structure, focus on account mining and alignment of accountability at the account level is beginning to show results. Our top 10 accounts contributed immensely to our revenue growth. We now have five new relationships dropping $100 million in revenue compared to one customer a year ago. Also for the first time, our relationship with our largest customer is greater than $200 million in annualized revenue. The result of my conviction on our strategy is based up on the leading indicators that we track. In our business, feedback is a leading indicator of future business.

Excuse me, this is the operator. This is the operator, the Bangalore line connection is lost.

Yes, yes, now we are connected.

Sure. Please go ahead.

The reason of my conviction on our strategy is based up on leading indicators that we track. In our business, CPAP is a leading indicator of future business. I’m very encouraged by the 8% improvement in feedback in new account, another lead indicator that we track pipeline, the quality of pipeline. Our pipeline is showing a positive trend and we are currently focusing some large deals including 25 deals of $50 million or more. : From our perspective, there are three broad trends that are driving this differentiation out there in the marketplace. The first one is what we call consumerization of technology. The second is what we call variabilization of technology. And the third is what we call performance management driven by analytics. So maybe I should just give you a sense of the kind of work that we are doing in all three of them. For example, around mobility, today we have 1,500 consultants engaged in 75 plus projects that are enabling new channels, increasing customer thickness and improving productivity for our customers. An example of the work that we’ve done is, we’ve developed an iPhone based e-commerce solution for a leading U.S. retailer, application is the number one retail app in the Apple app store. This solution enables consumer to search in by product anytime, anywhere. The other area that we talked about was performance analytics. We’ve grown our analytics business by 7.3% quarter-on-quarter, in the second quarter of 7% flat sequential growth. In this business, we have worked with two specific customers; we’ve discussed some path breaking works. One is the Fortune 100 retailer for home business was in top 50 product category to improve pricing and to improve product differentiation. This particular action has result in a 3% increase in sales across the product categories. The growth is something that we look at everyday, which is cloud. The key driver for cloud is simplification. And if you look at our reengineering and simplification business, we’ve doubled our business in terms of number of engagements between the same quarter last year to this quarter. We have created integrated cloud services organization, only to better the product engineering group, the application and the BPO to scale our business in the cloud. For example, we are working with a leading bank in the U.S. there we are doing a private cloud implementation that will reduce the total cost of ownership by 25%, and improve their provisioning cycle from 52 days to a few minutes. All this is going to be possible with highly committed and motivated employees. Wiproites are now highly energized and fully behind the strategy and the direction. Employees like the culture of winning; the openness and engagement and the simplicity in the process that we are striving for. This really reflects itself in the improved attrition numbers that we can see over the past quarter. I would like to conclude by saying that Wipro had laid the foundation to be a new generation IT services company. We hope to say that we want just continuous demand from business led technology, coming in from the world and really at the end of the day, help our customers leverage technology to do business better. That in essence of the theme that all of us are driving towards. Thank you, ladies and gentlemen for your time. And apologize once again, what happened was, we got cut off for a couple of seconds. I hope you haven’t missed any part of my speech.

Good day, ladies and gentlemen. Before I cover the financials, let me cover the other parts of the business, the other businesses of Wipro Corporation. In Consumer Care and Lighting business, we had all round growth across lot of segments, India business growth driven by Santoor, Yardley, CFL Lamps, commercial lighting and office furniture. Our international Unza business growth was driven by Malaysia, Middle East and China. Santoor, our flagship brand ran top two spots amongst India’s top 100 most trusted brand in 2011, significantly moved up from the ranking of 90 in 2010. Our major acquisitions, Yardley and Unza continue to perform well in line with our expectation and planned target. Before I turn back to engineering, we are seeing a strong growth trajectory in India and larger recovery in Europe in half year one of the current fiscal. We are focused on creating strong presence in emerging markets Asia and Latin America are expected to yield growth due to significant infrastructure spending. We entered the Brazilian market through the acquisition of R.K.M. As customers look to Global low cost sourcing, we have expanded our manufacturing base and setup new capacity in China. We are excited by the growth potential in this business particularly in the developing markets. Overall, we see an exciting future and we are confident that we are on the right path. As far as the financials are concerned, before I dwell in that, please note that for the convenience of readers, our IFRS financial statements have been translated into dollars at the noon buying rate in New York City on 30 September 2011 for cable transfers in Indian rupee, as certified by Federal Reserve Board of New York, which was $1 equal to INR 49.05. Accordingly, revenues of our IT Services segment that was $1472 million, or in rupee terms INR 68.29 billion, appears in our earnings release as $1392 million based on the convenient translation. Our IT Services, the revenue for the quarter ending 30 September ’11 was $1472.5 million on a reported basis, a sequential growth of 4.6% and year-on-year growth of 15.7%. We’ve delivered $21 million more than the upper end of the guidance in constant currency. On an organic basis, revenue growth in IT Services was 2.9% sequentially as against the guidance of 0% to 2%. We continue to be positive on our momentum, we saw BFSI showed strong growth of 6.3%, analytics had another strong quarter with 7.3% sequential growth, while APAC and other emerging markets showed double-digit sequential growth. Client engagement continues to be our top priority. In the current quarter, on a trailing 12 months, we have five accounts, which has more than $100 million in revenue, up from one last year. Our largest account has crossed a revenue run rate of more than $200 million. We are happy that, with our progress and we continue to make investments in this area. Sequential volume growth in the current quarter was strong at 6%, on an organic basis it was 4.6%. We saw an unfortunate happen, a decline and this impact the strong base for the future quarters. We saw a drop in revenue productivity in the current quarter driven by close and fixed priced projects. We have not seen pressures in coupon rate pricing and we’ll characterize the pricing environments in Q2. Operating margins for IT Services was 20%, down 200 basis points due to impact of salary increase for two months. At quarter end 30, ’11, our DSO was at 76 days, down from 77 in the previous quarter. We hope to bring this down to our historical levels over the next few quarters. Our IT products business showed a good growth of 6% sequentially in the current quarter. Consumer Care and Lighting business continue to see good momentum with revenue growth of 20% year-on-year. On the ForEx front, our realized rate for the quarter was INR 46.38 versus a rate of INR 45.5 realized for the last quarter. And on quarter-on-quarter basis, ForEx gave us a neutral impact to margins. As at period end, we had about $1.7 billion of ForEx contracts. The effective tax rate for the quarter was 18.1%. Our net cash balance on the balance sheet was $43.5 billion. The net cash balance dropped due to payment of dividend in the quarter two. We will be glad to take questions from here.

Thank you. Ladies and gentlemen, we will now begin with the question-and-answer session. (Operator Instructions) We have the first question is from the line of Joseph Foresi from Janney Montgomery Scott. Please go ahead. Joseph Foresi – Janney Montgomery Scott: Hi, gentlemen. I think my first question is, maybe you could just walk us through with your current positives and negatives on the demand environment area, and then any color you could provide on what you’re hearing about 2012 and 2012 IT budgets?

Joseph, it’s T. K. Kurien, and maybe I’ll take the question. So here is what we are seeing across the environment, and what we have done is to arrive at this tentative conclusion, because you’d appreciate that budget as they confirm, as they’re getting firmed up closer to the year, we get a sense of what’s going on, but we don’t have, definitely we can’t say this is the way it’s going to go. So broadly, this is what is happening. If I break up the segments, let’s take banking and financial services, we see banking, retail banking continuing to kind of depend, we see investment banking being a little weak. The European investment bankers are a little weaker than the U.S. investment bankers. We are seeing insurance continuing to do work as they kind of discover outsourcing more and more, and we see our pipeline in that business growing, but it’s a very different kind of a pipeline, it’s not a typical IT pipeline, its more an intergraded IT and BPO pipeline. So overall across banking, as BFSI is trying to kind of summarize the demand environment, I would say right now, we don’t see any cost of concern as far as the segments are concerned, how that investment banking. But as we get to the end of the quarter, that situation might change; right now we’re not seeing any noise. If I look at retail, slightly different picture. Our retail decision making especially on decisions where they have to move out an existing vendor and move to a new vendor. Those decisions are not closing as fast as they could. So, there is a little bit of delay there that could be because of the Christmas season coming up. Folks maybe busy with what they are doing, but we have seen a little bit of delay in that segment. CPC continues to be strong and we don’t see any issue there. If you look at healthcare on the pharma side, we see demand continues to be strong as companies look for cost benefit. And most of the pipeline there comes from traditional pharma company. There is a significant amount on integration that’s happening between IP and BPO there due especially around back offices. But overall, demand doesn’t seem like it is coming down. On the Life Sciences fees, we see a lot of interest especially around data analytics, especially when it comes to the lead management that is one area of opportunity that we see. Broadly across the board, we see fairly decent demand coming in from the healthcare segment. If I breakup energy and utilities, the energy segment continues to be strong. There is a significant amount of spend, which is going to come up over the next years in this particular segment. And to that extent, we just believe that the acquisition of SAIC and our accesses to the upstream business is really going to hold us in good stead as we go forward. This is basically the story of our momentum vertical. If you look at manufacturing, we see strong demand coming up from process manufacturing and [decreased] manufacturing. Hitech is a little weak, but besides that, again we don’t see too much kind of an impact as far as overall numbers from demand is concerned from that segment. If you look at Telecom, it’s a little different picture. Equipment vendors are under pressure and as equipment vendors are under pressure, especially the established ones; we are finding demands slowing down from there. We see a clear change in demand as far as equipment vendors are concerned. Service providers, we still see demand remaining robust, and as far as media is concerned, we are small to make an impact. So, to that extent we continue to see growth, but again, I would just like to kind of caution all of you about the fact that we are small. So, we are not sure about the exact demand picture in that particular segment. So overall, this is what we see in the market. If we have a look at the geographical spread; if you read the headline news, all of us would have probably shutdown our businesses and gone home. The realty is that business continues both into the U.S. as well as in Europe. Our exposure to Southern Europe is minimal, to that extent we have not seen the impact of the so-called recession, but as far as the rest of Continental Europe is concerned and the UK is concerned, given the portfolio that we are in, we don’t see any secular decline or any cause for concern. Asia-Pac and Latin America for us continue to remain a growth market, because they still seem to be going through the investment cycle, so a lot of opportunity out there, but in a different kind of business. We’re seeing more SI opportunity, more BPO opportunity, more opportunity coming up from natural resources, more opportunity coming up from oil and gas. That in the sense is what we are seeing across the demand segment. Joseph Foresi – Janney Montgomery Scott: Okay, that’s very helpful. And then, if could you just switch gears here and you could talk a little bit about the pricing. At least looking at sort of what we have put in, it looks like pricing was down offshore, what caused the decrease on the offshore side and then, of course anything you can provide on the demand environment?

So as far as the offshore pricing was concerned, last quarter in many ways with an aberration, because we had some effort going in far more than what we had anticipated to close projects out and to that extent, that has been reflected in pricing. In this particular quarter, given [just] that the offshore nature of holidays, we’ve got significantly more holidays this quarter. Pricing would be affected this quarter too on product for all our DNM engagements. So overall, this quarter too, we would see some issue not probably in the same kind of band that we have seen last quarter. But going forward, quarter four, based upon what we’re seeing today, we’d probably think that we would be able to recover whatever the loss in these two quarters? As far as the ticket price is concerned, we see low pricing pressure as far as our clients are concerned. We’ve had sporadic requests from some segments of the market for price reduction, but they are more sporadic and far in-between. And given the fact that nobody has really spread their costs too much, generally makes us believe that it’s probably a year-end event and not necessarily a serious situation to be worried about. Joseph Foresi – Janney Montgomery Scott: Okay. And then, my last question. You’ve talked about the turnaround, is that process complete, maybe you could put that in context, it seems like the number of net new customers decreased this quarter if there was some growth from the top client, maybe you could put that in context with where we stand from the full turnaround?

So, here is what it is. If you look at what we have done last quarter is that, we have really executed to a plan, because we believe that what we are trying to do and what the plans that we have in place. As a result of that, I’m going to be really [felt] in the medium to long-term. We are not short-term; these are not short decisions that are going to impact the short-term too much. If you go back into our mining, our mining has increased significantly in the accounts that we have as represented by our top 10 accounts. We have got five accounts that are more than $100 million run rate, up from only one account last year same time. : We’ve also kind of aligned our incentive prophecies to make sure that people get rewarded for customer satisfaction. People get rewarded for making sure they control employ admission and we will get rewarded for increasing top line and operating margin. And those are the early signs that goes inside of paying dividends, but next – here is what it is. I think what you’ve seen this quarter is just Phase I of our change. I think we have plenty of more work to do going forward and we are all kind of committed of getting there. ]: We’ve also kind of aligned our incentive prophecies to make sure that people get rewarded for customer satisfaction. People get rewarded for making sure they control employ admission and we will get rewarded for increasing top line and operating margin. And those are the early signs that goes inside of paying dividends, but next – here is what it is. I think what you’ve seen this quarter is just Phase I of our change. I think we have plenty of more work to do going forward and we are all kind of committed of getting there. Joseph Foresi – Janney Montgomery Scott: Okay. Thank you.

Thank you. The next question is from the line of Edward Caso from Wells Fargo Securities. Please go ahead. Edward Caso – Wells Fargo Securities: Hi, good evening. I was wondering if you could update us on your business process outsourcing or your BPO strategy. It seems to continue to kind of trend sideways. Could you update us there? Thank you.

So Ed, good morning, this is T.K. I’ll pass it on to Manish Dugar who is the head of our BPO business to give you a sense of what we are doing from a strategic perspective. But before he starts, I think one of the big things that we’ve been trying to do as far as the BPO business is concerned is being trying to integrate that with the four processes that we really like to be best in class. So today for example, if you look at the whole payment and settlement process, we’re probably the biggest in the world in the particular process. So we have picked up process areas that we want to specialize in, and that’s what we are going after. But Manish can give you a lot more color in terms of deal wins and everything else in that space, Manish?

Hi, Ed. Good morning, Manish here. Let me start by first responding to your point on BPO going sideways and in some ways that’s how people look at when they see the numbers. Just to give you a little bit of color on that, there are lot of projects, which has significant transition revenues, which come in lumps. And if you look at the quarter four of last year, you would have seen BPO growing at 14% sequentially, and that probably, the one-time revenue, which does not recur. And subsequently, lot of contracts that we have, there are commitments around auctioning, there are commitments around productivity gains, which continue to kind of reduce the run rate revenue. So unlike a business, which has steady growth or a steady revenue, these are lumpy revenues, which cause these quarter-on-quarter movements. Having said that, I think in the recent past, the pipelines have started looking much better. And from a strategy perspective, as T. K. mentioned, our focus has been to align with the larger Wipro story and we see significant benefit in going to the market along with the other service lines as an integrated organization rather than our earlier approach of more responding to RFE's. So we see significant benefit in aligning with analytics projects, with the application implementation projects, PeopleSoft project getting converted into an HRO, end-to-end deal, and SAP implementation getting converted into F&A and procurement deal, and a significant amount of interest in terms of clients wanting to do more and more starting with an opportunity assessment and eventually translating into a much larger outsourcing. So I guess, strategy of aligning with the larger Wipro world with making the initial investment of going into the client account and doing an opportunity assessment, which eventually open doors too much larger opportunities. It is what we are seeing leading to the large pipeline growth that we have had in the last three, four months. : : Edward Caso – Wells Fargo Securities: Great, thank you. And my other question revolves around employee attrition, you had a little bit better this quarter Q-on-Q, it seems high still relative to your peers, is there a sort of normalized level that you expect to get to at some point and maybe just a little bit on how you plan to get there?

So Ed, I will pass it on to Saurabh, who is the Head of HR of Wipro. But just to give a quick sense, our attrition in the last quarter, the voluntary attrition has come down by 4.7%. It is not – it’s probably the biggest reduction that we’ve ever had in Wipro. So it’s been a step change. And compared to peers, I’d like to get Saurabh to kind of comment on that on both the peer data, as well as the trend in quarter three. Saurabh?

Yeah. Thanks, T. K. Good morning, Ed. So as T. K. said, a sharp decline in our attrition numbers voluntary, in fact the best over the last six quarters what we have seen in attrition. The trend, which we’ve seen for Q3 continues to be on a declining, so we would further see a reduction as we move forward in Q3. So that’s a good story, significant across-the-board in different levels across the organization derivate. If you look at our peer group, we are in the same range; we were higher till that last quarter. We are in fact with some of our peer groups, we have actually come below them or run across compared to their attrition in Q2. So overall, it’s a – that have been very, very good story. And I would translate into four key reasons why voluntary attrition has come down. First of all, so in HR processes, we get our merit salary increases, and our promotion cycle happen in Q2. I think second is, as T. K. mentioned in the beginning of the call, our changes which we have put in place the structures and all that settled and people have brought into the new strategy. And I think the third key part is that, a lot of business engagement has happened with the employees at that cost levels and the business levels. And I think all three of them are showing us very clear dividends here. The response to that, the demand slow into the supply, hence is it coming down? I think we are not seeing that very clearly, our hiring continues to be robust, as well as, as T. K. said, the macro environment for us is very, very robust and hence it’s a clear internal action, which have driven this attrition down. Edward Caso – Wells Fargo Securities: Great. Thank you.

Thank you. The next question is from the line of Trip Chowdhry from Global Equities. Please go ahead. Trip Chowdhry – Global Equities Research: Thank you. A couple of questions here, first, regarding the private cloud that T. K. mentioned from implementations you guys are doing, wondering if you could tell us what kind of technology stacks has been used to do some of those implantations? And also if you can let us know your thoughts on your relationship on works and the opportunities and challenges you see in that relationship? And then I have a follow-up.

So just to kind of trip, so very quickly tell you about what’s happening on the cloud and the private cloud. Fundamentally, what were happened, if you look at our partnerships, we have partnerships with all the leading players in the industry. And fundamentally, what we have done is that we have pre packaged two solution set that cut across the technology players where our capability comes in, in terms of design and motivation. So fundamentally, what we do is sell re-produceable stack, we don’t sell stack, re-produceable stacks that are backed up by business processes in the back that make A, the implementation smoother, number two is value to our customer is covered much faster. So I don’t want to comment specifically on the technologies that we’ve used in this specific customer, but that’s broadly what we do in terms of process. If you look at Workday, I’d really like to kind of get Srini, who runs our Business Application Services, business to talk to a little bit about that. But nevertheless, we don’t have any challenges with Workday in any form or shape. We love Workday as a partner like we love all our partners, but Srini can talk a little bit. But I think the most important think that we have done till now is that as a structure, we have integrated our entire cloud structure under one leader. And to that extent, the re-produceable skill sets that we are able to create, the solutions which we are able to create, and the standard pre-package components that we are able to deliver to our customer, backed up business process is really when the tradition comes in. Just an example, in the past quarter, we have closed two deals with pre-package cloud solutions where you’ve gone after the medium size customer space to really sell a solution that’s end-to-end and that itself I think is probably one of the biggest wins that we’ve had this time. Srini, up to you.

Thanks. This is Srini Pallia here. I head the Business Application Services. What I will do is I will try to hitchhike on to what T. K. talked about on the three broad themes. One is the variabilization, second one was consumerization and third one is the performance management. Having said that, if we were look at from a pure application footprint, what we have seen today customers are looking at a lot more of standardization and simplification in the context of various process areas. And predominantly three process areas is what we have seen, one is of course the HRM which is – HCM which is Human Capital Management, second one is the CRM and third one what I could call as the Supply Chain Management. Now in that context, what we’re seeing, there is a lot more – what the customers are looking at as the benefits and advantages of cloud in the context of not only variabilizing, but also quickly bringing up applications on the cloud and letting the business play around with that and then kind of roll it out across the organization. Two, we are also looking at international expansion where clearly products like Workday SMBC, play a critical role which actually hooks on to the legacy applications as well. Now, the second point was in terms of the private cloud, what I would say is that I think there is a lot more drive towards application re-factoring, either to a private cloud or to a public cloud. Now in the context of private cloud, what T.K. talked about specific to financial services where they want to leverage the cloud for variabilizing not only their hardware, but also simplifying their software and reducing the overall cost of maintenance. And that seems to be a big play and we are seeing a significant opportunities as we move forward. On the public cloud, we are also seeing customers looking at apps that can be taken to the cloud. For example, one of the retailers where we are kind of building application for their customer loyalty program and this is an application with that we’re trying to host on Amazon where the customer – for a customer in terms of leveraging the external hardware and external infrastructure and also variabilizing their costs. And finally coming back to the Workday, SMBC and NetSuite, these are the three product companies that we have very strategic partnership. We recently participated in all the three events that happened in the U.S. and I am not very specific around in terms of any issue with Workday, but I think that’s where we are ramping up, we are seeing significant opportunities and pipeline. Trip Chowdhry – Global Equities Research: Thank you.

Mr. Chaudhry, can you come back in the queue, we have several participants waiting. Trip Chowdhry – Global Equities Research: No problems.

Thank you. The next question is from the line of Nabil E from Pacific Crest Securities. Please go ahead. Nabil Elsheshai – Pacific Crest Securities: I like that, on dropping my last name. Thank you for taking my questions. A couple of quick ones. First, the percentage of revenue from onsite seems to be picking a little bit, could you talk about, is that a function of the investments into the new verticals or a sign of new project starts or how should we look at that?

So let me ask Jatin Dalal, CFO to kind of answer that question.

Hi, Nabil. I think, there is primarily two reasons, one is, we have this quarter consolidated the revenues from our acquisition of SAIC, which has a large component of onsite revenue. And the second is, we are seeing as the new wins comes through they are in the transition phase, which have higher onsite components compared to the steady state revenues meaning that this is (inaudible). So these are the two reasons why we are seeing revenue more onsite this quarter than the other quarter. Nabil Elsheshai – Pacific Crest Securities: Okay. And then, one of the follow-up on the growth in the U.S. that seem to lag a little bit in the quarter, but your comments earlier indicated that U.S. financial services being healthy. So maybe if you could drill down a little bit on why the U.S. service this quarter was lagging versus Europe?

Soumitro?

This is Soumitro, who heads up financial services business. So overall, financial services pace in terms of the trends, which T. K. had talked about earlier. So we are seeing insurance and retail banking not really being challenged in terms of budget cuts, it’s mainly the capital market space, which from a investment banking and especially in Europe to be challenged, but even in U.S., one or two of our customers, we are seeing the IT budget, which may get challenged. Now the new projects, which we are getting, initially, there will be work, which we do on the development side because of the discretionary spend where we are playing, and the initial pace of that will have a fair amount of onsite work due to the requirement capture and other stuff. And similarly on the cost reduction part wherever we are having knowledge transfer work, right, so there will be a initial component, which will be higher in terms of onsite. But once the AD works moves into the midstream where really we’re doing the cutwork or in maintenance, which is both knowledge transfer work right, that work will move from onsite to offshore. Nabil Elsheshai – Pacific Crest Securities: Okay, got it. And then, last question, you have seen a lot of growth from Asia-Pac and India, could you help me, if that continues to be the case, what is that due to margins, presumably you don’t have the same kind of wage advantage that you do from growth over there. So how does that impact your overall margin profile as that becomes a bigger percentage of the business?

As far as the India business is concerned, I will ask Anand Sankaran who runs our India business to kind of comment, talk a little bit about that. As far as the Asia-Pacific market is concerned, we don’t see a pricing differential or a profitability differential between our Asia-Pacific business and our global business. The India business comments can be given by Anand. Anand?

Yes. Nabil, the India business in terms of growth has been performing pretty well in the last couple of years. And the good news is that, the operating margin has also been improving quarter-on-quarter. So we do large integrated deals in India, we do large outsourcing transformational deals in India, and these are all long-term deals, so the flexibility that it gives us over a period of time is to optimize our delivery and cost structure, to be able to improve our margins. So all-in-all the India, Middle East business in terms of growth has been performing pretty well. And since we’ve been doing these large transformational deals, we’ve also been able to optimize our cost structure and improve our operating margins in the India, Middle East business over the last couple of years. So I would as a person running the business expect the India, Middle East margin to reach closer and closer to our global operating margins over a period of time. Nabil Elsheshai – Pacific Crest Securities: Okay, great. Thank you guys for taking my question.

Thank you. The next question is from the line of Swami Shanmugasundaram from MorningStar. Please go ahead. Swami Shanmugasundaram – MorningStar: Congrats on a good set of numbers, guys. I think my first question is related to cloud and mobility. And if I look at it over the last few quarters, I mean that has been getting good traction. But the overall spending is still small compared to the overall IT Services spending. So just wanted to get your thoughts as to how big the market would be, five years down the line and how are you guys preparing yourselves to play a leadership role over there?

: Swami Shanmugasundaram – MorningStar: Sure. I think my first part was I mean, cloud and mobility has been getting good traction in the market over the last, I would say, few quarters or few years. But the overall spending by companies on cloud and mobility is still relatively small compared to the IT Services spending. So just wanted to understand your perspective on how big the market would be say, four years (inaudible) because all the companies have been making large scale investments on cloud and mobility?

So here is what our belief is as far as, and I’ll talk a little bit about mobility by sales and then we’ll get on to cloud. But if you look at standalone cloud revenue, or mobility revenue, that’s a wrong way of measuring what either cloud or mobility can do to your business. If you look at mobility, mobility gives you both context and location. With context and location, you have the ability to disintermediate your business dropsies significantly. And maybe disintermediate is too shallow a word. I would say disrupt is a better word, disrupt that doesn’t drop significantly, because of these two reasons. So what you can do with mobility really is to significantly improve the cycle time and if by capturing data closer to where the transactions originated, you’re also able to improve on what we call right first time. And if you improve right first time and you reduce cycle times, dropping efficiency is at a different level. So you really got to look at mobility as a tool to take you into something, which will fundamentally redefine the business drop itself. The buzzwords are great. At the end of the day, if it doesn’t impact the profit, it doesn’t really have value for business. If you look at us, that’s exactly the way we’re going. So we’re using both cloud and mobility as link to disintermediate the business profits on one end as far as mobility is concerned. As far as cloud is concerned, variabilize the business process. So some of the examples that Manish talked about into BPO case, what we are doing is putting together an offering, which is an application and a hardware offering on the could, backing it up with a BPO offering and offering a variablized price for products. That in essence is the way we are headed. We believe that there is going to be a segment of the market that’s going to clearly look at those kind of opportunities. That may not be your typical large customer, but that could be your medium-size customers. Swami Shanmugasundaram – MorningStar: Sure. I think my next question is with respect to Europe. Despite all the uncertainties, I mean you guys have been putting up decent numbers. So my question is, how much of that growth were due to say, higher penetration by offshore service providers in Europe and how of much of it was due do say, this shift that the company, I mean the regional players losing market to companies like Wipro and Infosys?

We really can’t get the number. But here is what we can say. Ultimately what happens is that the company with the value propositions that can really be in front of the customer on a regular basis will then. And that means more presence in the geographies that we are talking about on the ground, more solutioning and differentiation in the front-end and a high degree of standardization in the back that can help you scale your business. So ultimately, we believe that value is going to be created in the front and efficiency is to be delivered in the back. And that’s the way this model is going to evolve. And as the model evolves, we believe that we are going to be in the forefront of this model that held the evolution and more importantly being the front so that we can kind of garner market share as this change happen. Swami Shanmugasundaram – MorningStar: I think my last question is that related to visa, are you guys seeing any headwinds due to visa issues, I mean how has that been so far?

Jatin, why don’t you add?

Yeah. So on visa, we really don’t see at any point in time on our horizon visa becoming a constraining factor for our growth. We continue to apply for visa on operative basis as we see our demand unfolding in front of us. And we have sufficient visa inventory to be able to take care of our growth.

But keep just a take on from them. A very clear strategy has been driving to us, which is that – if you talk about differentiation in the front office, and standardization in the back, fundamentally what it means is that we’re going to create more jobs in the U.S. and in Europe. That’s clearly a way we’re going. Depending upon visa’s long-term to run a business, which is now a stable business, may not be the right thing to do over the long term. So more investment in the front, more development centers, more differentiation, more project management skills, more business active consulting skills, more technical architecture skills, more business architectural skills. So that’s the way we are kind of headed towards in terms of our onsite off shoring. And all this would be local hiring, because we believe that long-term you cannot be in a position where you take away jobs and not give anything back to the country from where you. That’s fundamentally essential to the way you do business. Swami Shanmugasundaram – MorningStar: And thanks T.K. and Jatin. Again congrats on a good quarter.

Thank you. (Operator Instructions) The next question is from the line of Keith Bachman from Bank of Montreal. Please go ahead. Keith Bachman – Bank of Montreal: Hi, I was hoping you could talk about your hiring trends, and specifically addressing how you’re thinking about lateral hires if you look between now and year-end. And the timing of either flexing up or down to respond to the economic backdrop particularly since you’ve mentioned there still a lot of uncertainty around areas, such as investment banking?

So our strategy as far as hiring is concerned both, lateral hiring is actually very simple. So anything that requires us to build solutions, which are aimed at a particular segment or a particular market is, do by a global workforce. That workforce could sit in the U.S., it could sit in any part of the world where the confidence exists, and these guys work together in what you see to address company, that’s on the solutioning side. On the program management side similarly, we have an approach whereby we believe that program management should be geographically based, otherwise very difficult to manage and control projects. As far as delivery is concerned, that is where it becomes a little important for us, because as project ratchet up or ratchet down, the number of people that we would have the lateral hires that we need at the beginning of the project, maintain significantly as we go through the life cycle. And so that, while we have a minimal bench onsite to address those needs, we typically meet incremental demand through contractors and through third-party hires. We have a certain percentage if we keep with in as a number beyond, which we try to have a (inaudible) contractor hiring doesn’t go beyond that. But that’s what we used to make sure that we are able to manage or even go over uncertain demand environments. Anything you want to add, sir?

Just to something, you meant T.K., from hiring, we continue to be robust in the hiring requirements both off campus as well as lateral continuous plan. In India, especially the engineering schools are right now, the hiring season is going on, so we have gone to about more than 150 colleges, and we are doing the hiring there. So no change in the hiring plans as we had planned earlier, and move as we said visibility of demand is there and we continue to be on robust hiring. Keith Bachman – Bank of Montreal: Could you specifically address what your targets are for lateral hires in particular over the course of the December quarter?

We do not give numbers for hiring, hence we’re not able to comment on that? Keith Bachman – Bank of Montreal: Okay, thank you.

We don’t get numbers for the quarter in terms of hiring or even for the year. Keith Bachman – Bank of Montreal: Okay, thank you.

Thank you. The next question is from the line of Anthony Miller from Tech Market View. Please go ahead. Anthony Miller – Tech Market View: Yes, thank you. I’d like to get a little more color on movement on Europe if I may, in just a couple of areas. First, obviously Europe is growing at quite click here at the moment, which is your fastest growing market in Europe?

So, Jatin Dalal acting can answer that question. Jatin.

: Anthony Miller – Tech Market View: And in terms of the country markets though, which of the countries is growing fastest?

We are seeing good traction and this is more a reflection of the demand, the pipeline and order conversion as against specific revenue, if France and Germany are increasingly becoming more and more important for us sheerly based on the traction that we see on the number. Anthony Miller – Tech Market View: I see, because UK is obviously your largest country market in Europe. Can you just remind me roughly how much of your European revenues derive from the UK?

Yeah. So roughly anywhere between 55% and 60% of quarterly revenue of Europe is derived from UK. Anthony Miller – Tech Market View: Okay. And the second question around Europe is, you had 44 new logo wins in the quarter, how many of those would have come from Europe?

The number of the new customer from Europe this quarter was five. Anthony Miller – Tech Market View: And is that, how many of those would have been UK?

Well, actually, I wish we could both guide it. Anthony Miller – Tech Market View: Let me… (Multiple Speakers) How did you get? And just to finish off, of those five new logos, and how many of those would you have displaced an incumbent rather than supplementary one?

Well I think most of the cases, where we would have increased our market share and market share gain typically would be in the form of displacement of an incumbent, and not necessarily taking the in-house work. So I would think maybe at least three or four of the five you would see that little displacement of incumbent. Anthony Miller – Tech Market View: That’s great, thank you very much in deed.

Thank you. (Operator Instructions) The next question is from the line of Avishai Kantor from Cowen & Company. Please go ahead. Avishai Kantor – Cowen & Company: :

So as far as pricing has concerned we talked about that a little bit in the beginning, so don’t want to repeat it. As far as the M&A strategy is concerned I’ll ask Rishad, who is our Chief Strategy Officer to talk through on what we are doing on the acquisition front.

Hi, this is, Rishad. So we continue to remain active on the M&A front like we have for the last several quarters. We are focused primarily on three different areas. One is building domain competency in momentum verticals, which is BFSI, the oil and gas business, healthcare and retail and consumer products. The second area is focused around emerging technologies that we’re focused on, which is cloud, and particularly within cloud on the platform BPO side. On analytics as well as on mobility and then the third area we’re focused on is on geographic expansion with particular focus on growth market for us, markets like France, markets like Germany, et cetera. So that’s really our M&A strategy. Avishai Kantor – Cowen & Company: Thank you very much.

Thank you. As there are no further questions, I would like to hand the floor back to Mr. Sridhar Ramasubbu for closing comments. Please go ahead sir.

Thanks for joining the call. Again, apologies for the brief audio interruption during our CEO’s opening remarks. As mentioned during the early part of the call, we will make the call transcript available on our website. And audio replay will be made available post 2 p.m. EST today. IR team in India and in the US are available for off-line assistance. Thanks everyone once again.

Thank you very much members of the management team. Ladies and gentlemen, with that we conclude this conference call. Thank you for joining us on the Chorus Call conferencing facility and you may now disconnect your lines. Thank you.