Wipro Limited (WIT) Q4 2013 Earnings Report, Transcript and Summary

Manoj Jaiswal Suresh C. Senapaty - Chief Financial Officer, Executive Director and Member of Administrative/Shareholders & Investors Grievance Committee T. K. Kurien - Chief Executive Officer of Information Technology Business, Executive Director and Member of Administrative/Shareholders & Investors Grievance Committee Anand Sankaran - Senior Vice President of Wipro Infotech & Global Infrastructure Services Anand Padmanabhan - Senior Vice President of Energy, Natural Resources & Utilities N. S. Bala - Senior Vice President of Manufacturing & Hi-Tech Rishad Hasham Premji - Chief Strategy Officer and Head of Strategy and Mergers & Acquisitions

Ravi Menon - Equirus Securities Private Limited, Research Division Manish Hemrajani - Oppenheimer & Co. Inc., Research Division Mitali Ghosh - BofA Merrill Lynch, Research Division Nitin Padmanabhan - Espirito Santo Investment Bank, Research Division Diviya Nagarajan - UBS Investment Bank, Research Division Pinku Pappan - Nomura Securities Co. Ltd., Research Division Pankaj Kapoor - Standard Chartered PLC, Research Division Rishi Jhunjhunwala - Goldman Sachs Group Inc., Research Division Sandip Agarwal - Edelweiss Securities Ltd., Research Division Viju K. George - JP Morgan Chase & Co, Research Division

Ladies and gentlemen, good day, and welcome to the Wipro Limited Earnings Conference Call. [Operator Instructions] Please note that this conference is being recorded. At this time, I'd like to hand the conference over to Mr. Manoj Jaiswal. Thank you, and over to you, sir.

Thank you, Ilba. Good afternoon, everyone. A very warm welcome to the first (sic) fourth quarter earnings call. My name is Manoj Jaiswal, and I manage Investor Relations along with Aravind and Sridhar. We will begin with an overview of the group, particularly [ph] financial performance, by our CFO, Mr. Suresh Senapaty; followed by IT business highlights and overview by Mr. T.K. Kurien, CEO, IT business. Post this, the operator will open the bridge for question and answers with the management team. We have the senior management of Wipro here to answer your questions. Before Mr. Senapaty starts his address, let me draw your attention to the fact that during this call, we might make certain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These statements are based on management's current expectations and are associated with uncertainties and risks which may cause actual results to differ materially from those expected. These uncertainties and risk factors have been explained in a detailed filing with SEC of U.S.A. Wipro does not undertake any obligations to update forward-looking statements to reflect events and circumstances after the date of filing thereof. This conference call will be archived, and the transcript will be available on our website, www.wipro.com. Ladies and gentlemen, let me now hand over the call to Mr. Suresh Senapaty.

A good day, ladies and gentlemen. Before I delve into the financials, please also 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 31st March 2013, for cable transfers in Indian rupee, as certified by the Federal Reserve Board of New York, which was USD 1 equal to INR 54.52. Accordingly, revenue of our IT Services segment that was $1,585 million or in rupee terms, INR 86 billion, appears in our earnings release as $1,569 million based on the convenience translation. The scheme of arrangement of the demerger of diversified business is effective from March 31, 2013, with appointed date of April 1, 2012. Therefore, under IFRS, the diversified business would be shown as discontinued operation in March 31, 2013, while it is not considered under Indian GAAP. Total revenues for the quarter were INR 110.26 billion, an increase of 12% year-on-year. Total revenue for the year was INR 433.6 billion, an increase of 16% year-on-year. Total net income for the quarter was INR 17.3 billion, an increase of 17% year-on-year. Total net income for the year was INR 66.4 billion, an increase of 19% year-on-year. In IT Services, our revenue for the quarter in March 31, 2013, was $1,599 million on constant currency, a sequential growth of 1.4% within our guidance range of $1,585 million to $1,625 [ph] million. For the full year, we delivered year-on-year growth on constant currency of 7.4%. From a vertical perspective, we had strong performance sequentially on constant currency terms in energy, natural resources and utility, Manufacturing and Hi-Tech, and Healthcare and Life Sciences. From a service line perspective, infrastructure services continued to perform well, growing 4% on a sequential basis. Volume growth in the quarter was 2.5% on the back of ramp-up from new deal wins. However, utilization declined, impacted by cost currency, lower working days and change in business mix. The disconnect between the traditional way of looking at revenue growth in terms of percent months and rate is increasingly becoming obsolete in the current environment. Hence, going forward, from the next quarter, we will discontinue providing rates and volume growth data. Margin declined by 60 basis points, primarily on account of currency, which had a negative impact of 70 basis points. Our realized rate for the quarter was INR 53.96 versus a rate of INR 54.54 realized for the last quarter. As of period end, we had about $2.1 billion of ForEx contract. Our IT Products business grew by 15% on a year-on-year basis. Consumer Care and Lighting business, as part of our discontinued operation, continues to see good momentum with revenue growth of 15% year-on-year and EBIT growth of 18% for the quarter. The effective tax rate for the quarter is 20.2% and 21.5% for the year. For the quarter, we generated operating cash flow of INR 18 billion, which was 105% of net income. For the year, we generated INR 70 billion of operating cash flow, which is 106% of net income. Now I request T.K. Kurien to give an overview on the IT business.

Good afternoon, everyone. It's a pleasure to talk to you. Our results for the fourth quarter and for the full year have been with you for some time now. We've delivered a dollar revenue sequential growth of 1.4% in constant currency for the quarter, which is in line with our guidance. Let me start by talking about the demand environment the way I see it. On one hand, we continue to see opportunities in the market and there is more positive customer commentary on IT spend, especially in the U.S. On the other hand, we have seen certain areas of the portfolio which have been impacted by delays and discretionary spending. Those factors, coupled with seasonal weakness in quarter 1 of our India and Middle East business, have resulted in the current outlook for quarter 1. However, we see demand environments picking up from the quarters ago. On the backdrop of the demand environment, we continue to build on association and value-creation at the customer end and driving operational efficiency before delivery function. All our current initiatives and customer growth and execution are driven by this long-term approach. On the customer front, we have done well, driving customer value and revenue growth of the technical account management. Our 100 billion [ph] customer accounts is increasing 7 to 10 over the year. Our top 10 accounts have grown 17% over the year, much higher than the company average. Our focus and the next step is to drive similar results in our large-based, strategic [indiscernible] key growth accounts. As mentioned earlier, while we see delays in discretionary spending in BFSI, we have seen good momentum in Energy & Utilities, HLS and manufacturing. From a service line perspective, we saw growth in infrastructure service and consulting. Infrastructure services continues to be the biggest driver of growth in the marketplace. And we focus on increasing our footprint and ensuring availability of these deals. On customers, we're seeing an increased value with the delivery. We've seen a significant improvement in our Net Promoter Score, up 13.6%. And overall customer satisfaction score is up 7% during the year. We have added 192 customers in fiscal year '13 as against 117 in fiscal year '12. On the execution front, the focus is with dealing in revenue growth from headcount while non-linear initiative and leveraging processes and tools in order to raise productivity, quality and flexibility. Our initiative in automation and [indiscernible], allowing us to deliver greater customer value through faster execution cycles, increased productivity and [indiscernible] cost data. Revenue productivity for the year increased by 4.2%, purely by pricing, and 2.7% offshore. We are focused on emerging areas and new technologies to address customer needs to optimize the technology spend and for driving better business outcome. A couple of examples, in the on-cloud space, Wipro has won multiple deals, including a multicurrency and multi-country cloud-based CRM, covering 15,000 users in 50 countries, and a cloud-based human capital management solution, touching close to 10,000 customers. We have secured an end-to-end cloud operations management team from energy majors we delivered out of our Cloud Command Center. In the big data space, key engagement include building up with a machine learning-based recommendation engine to drive personalized recommendation and an architectural group blueprint to drive realtime analytics proven strong. We continue to score wins with significant working student customer analytics and asset pricing validation. Finally, we recognized we are the people's business, and our strategies will work as well as the quality of the people that we have, the training and the level of engagement. Volunteer attrition stood at 13.7% for the year, a 3.7% drop from the last year at an annual attrition of 12.5% for quarter 4. This is the lowest rate in the last 2 years. On wage hikes, our annual compensation review is conducted every June and we will stick to it. The quantum of increase is determined closer to the date of the announcement. On sales confirmation, we have followed up on the structured assessment process that I've mentioned last quarter with creation of individual development plan and focused training and coaching. I want to conclude by saying that we continue to focus on execution. And that's primarily what Wipro is known for. Thank you. Open the questions.

[Operator Instructions] The first question is from Ravi Menon of Equirus Securities.

I would just like to get some bit of color on what you're seeing in the ADM side. Is there any sort of softness? And what product engineering and R&D -- do you think that's bottomed out?

Ravi, very quickly, the ADM business that we have, the way we classify it, is primarily driven by the maintenance work that we do in the telecom space and the work that we do in mainframe. So telecom, as you can see over the past year, had a secular decline, especially on the equipment vendor side. And that's primarily what is driving the softness. On the product engineering side, have we hit the bottom? Have we sifted already? The answer is, yes. And we think that growth will come back in that segment.

That's helpful. And you said the technology infrastructure space, you'd be -- you're actually -- you have a leadership position in terms of revenue and you aspire to keep that position. And you had also talked about some investments in BPO. Any specific areas in both of these and sort of deals that you're chasing? That will be helpful.

So let me hand it over to Anand Sankaran, who runs our global infrastructure business, and he can give you a sense of what we are doing in that particular space to maintain market leadership to grow the -- and to grow our share there.

So, Ravi, on the technology infrastructure services, based as you rightly said, we continue to maintain our leadership position. And we're working on 2 broad areas over there. One is in the area of managed services, where we are really looking at -- trying to see how we can improve productivity significantly by using some of the autonomics tools we've been developing over the last few quarters. So we've experimented with these tools in a few client locations so far. And the results are quite encouraging in terms of us being able to drive productivity towards a completely different level. So what we'll do is really to look at broad-basing this across a lot of other customers of ours. The second is in the area of transformation. So while customers are fast to work with us on managed services, they also expect us to deliver a whole lot of transformation in the areas which we are involved in. So we would be focusing on really driving transformation in the area of data centers so -- and also cloud-based solutions for our customers. So it's a combination of really looking at driving productivity on the managed services side and being able to up our capabilities while driving transformation for our customers on data centers, network, end users and also looking at how we can move some of the applications that the customer has into a cloud environment from an infrastructure standpoint. So, no, but does -- we believe that we would be able to continuously deliver value to our customers. The good news is that we have a fairly strong funnel in place. And we hope that we would be able to maintain our leadership position in the interest of the services space. And we've had a fairly good last year in terms of our growth. And we hope to sustain it both in the developed markets, as well as emerging markets.

That's very helpful. And on BPO, what sort of investments are you planning? Any specific areas that you plan to focus on?

Ravi, we need more time for the specific areas. But yes, the way we see the BPO business coming in. Ultimately, in the BPO business, it's too big for us to say, "Let's take a broad-based approach to everything in BPO." You can't be everything to everyone. But we clearly are going to use BPO as a tool. Thereby, we don't have market leadership in a particular industry. BPO could be the way by which you can go in and have the application space that lies beneath. So that's the whole approach. So I don't want to specifically call out the areas. But we are -- that's, again, an area where we have very clearly decided that we want to make significant investments to kind of make sure that we get a little more growth in that segment than what we've been used to in the past.

All right. And you spoke about the cloud-based HCM engagement. So in that, are you thinking about bundling in BPO, something of that type?

Absolutely. Every cloud-based service today goes with some form of BPO as an option.

All right. That's very helpful. And one last question, if I may. On Europe, last quarter, we saw a big jump in revenues over there. It was just fairly broad-based across geographies, if I remember it correctly. And then this quarter, we saw a slight decline there. Anything that we should read into that?

Europe -- in Europe, the reason why you're seeing that it's primarily the currency impact that you're -- that has been present in the last quarter, there's a fine line 8% impact because of that.

And that's likely for the next year?

Yes.

Our next question is from Manish Hemrajani of Oppenheimer. Manish Hemrajani - Oppenheimer & Co. Inc., Research Division: Can you throw further light on your guidance for the first quarter? Do you expect to reverse this pure lag in the second quarter given your overall guidance for the year?

Yes. Just one correction to the last statement Kurien had made, that the Europe growth on constant currency basis was 0.9%.

Yes, it is 0.9%, negative 0.9%.

Negative 0.9%.

Not negative 3.2%. The currency impact really was 2.5%, not 0.9%. So I made a mistake on the 0.9% now. I want to correct it. So Manish, very quickly, on the quarter 1 guidance -- so typically, what we have see in quarter 1 in Wipro is that quarter 1 has been a soft quarter for us, primarily because what happens is that quarter 4 -- because of the India business and our full weight on the India business, typically, what happens is that as business goes up in quarter 1 and typically -- in quarter 4 and typically comes down in quarter 1. Part of the drag has been according to the estimate that we have given for the year. Now clearly, from our perspective, the way we see growth, we see growth coming back after quarter 1 is over. And fundamentally, from our perspective, we think that the lag you see in quarter 1 would get reduced from quarter 2 onwards. Manish Hemrajani - Oppenheimer & Co. Inc., Research Division: So in terms of growth, how do you see seasonality playing out in fiscal '14?

So the way we see growth coming, we see growth in quarter 2 which probably -- if you look at the Wipro traditional quarters, and I cannot talk about anything else. I can't -- we don't give full year guidance. So I can't talk about seasonality with numbers. But let me give you a sense of what happens in a typical Wipro, in the past what's happened. Quarter 2, quarter 3 are normally the better quarters. Quarter 4 is when, again, we have a slight lag in terms of the global business, but the India business actually picks up during that time. That's how it kind of plays out typically year after year. Manish Hemrajani - Oppenheimer & Co. Inc., Research Division: And that's how you'd expect fiscal '14 to play out as well?

Absolutely. Manish Hemrajani - Oppenheimer & Co. Inc., Research Division: Okay. Then can you talk about the current discretionary spend environment? Also, where are you seeing pricing pressures reasonably, as well as by verticals?

So if you look at the -- I'll ask the -- we have the SBU heads with us. So I'll ask the SBU heads to kind of step in and give their comment on what they have seen there in their businesses. But fundamentally, if you look at the Wipro overall revenue mix, typically, the application management and infrastructure management business of ours, it remains at around 50% of our total revenue and -- approximately. The balance is primarily based upon discretionary spend. So that's how it kind of typically plays out. So roughly about 42% of our total portfolio exists with discretionary spending, to be precise. But in the discretionary spend, if you look across verticals -- and I can talk a little bit about the banking and financial services. In banking and financial services, we find discretionary spend continuing in retail banking. We find it very difficult to come by in investment banking. And we find insurance -- in the insurance business, given the portfolio that we have of -- our mix is primarily discretionary and not annually in any form of share. But -- so that's where we are seeing our mix as far as banking -- BFSI is concerned. As far as Energy & Utilities is concerned, I'll give it to Anand Padmanabhan to give a comment and then pass on to N.S. Bala, who heads up our manufacturing, to talk to his portfolio.

This is Anand here. I manage E&U for Wipro. So, no, we are not really seeing a significant price pressures in the Indian market in the sense -- I think there's a lot of transformation taking place in the market globally. And people are getting into new production methodology, getting into shale gas, getting into new geography and so on, so forth. So it's been driven primarily by demand of capability in the market rather than by price pressure. So I think E&U segment, we are not really seeing a price point. We are seeing demand for capability in difficult geographies. And sort of -- and it's common across all the 3 verticals that are managed, which is oil and gas, utility, as well as natural resources. Bala?

This is Bala. I head the Manufacturing and the Hi-Tech business. From my industry standpoint, fundamentally, the recovery in the discretionary spend is happening in a few areas. One has to do with the transformation that they are going through from being B2B manufacturing companies to more looking like B2B2C companies. So there's a little bit of investment which is happening, driven by CMOs around digital. And there is a lot of fraction [ph] around that front. The second side where we see investments increasingly happening is also on the service side on analytics to drive warranty cost-reduction and more integrated service life cycle management. So those are some of the areas that we are seeing. The third area which we are also seeing of interest now is in terms of the [indiscernible] innovation, which they are driving for product launches in the emerging markets. So the significant part which we are really seeing a lot of momentum is in the digital transformation space. As companies spend more and more in terms of reengineering their channels, both online and physical, we find that they are -- there's a lot of budget, like I said earlier, driven by the CMOs as well as with IT companies. And that's, in turn, driving a lot of discretionary spend in those areas. So [indiscernible] of the broad areas that I would call out as action. Manish Hemrajani - Oppenheimer & Co. Inc., Research Division: That's helpful. One last one for me. It's early days yet, but could you comment on the Immigration Reform Bill? And how do you see that impacting Wipro, especially from a margin perspective?

So I'll give you some high-level numbers and then what I'll do is I'll pass on to Suresh Senapaty. So very quickly, the way we see this panning out for us is like this: today, if you look at the locals that we have in the U.S., that is American national, will be employed. That number would prop up -- would be the reason for about 36% of our total employee base in the U.S. To that extent, there is no short-term impact on us. But having said that, that's just a high-level view of what we see. That will have [indiscernible]. There are plenty of details that we are not yet aware of. And I think it's going to take us the next couple of weeks to kind of really understand that and then kind of comment on what it means from a P&L perspective.

Yes. So I think it's an important legislation from a U.S. perspective and will -- but majorly supportive from an overall impasse of what this bill is intended to. And Wipro, as you know, in these last 5 years, have always been increasing its local companies in the overall deployment of resources in each of the geography. If you look at the -- or we saw positive sources that we have outside of India, we have 40% as the local across all the geographies; U.S., we didn't talk about the number. So at this point in time, it is -- we're just starting. I think there a lot of good research in terms of increasing the number of caps, our flexibility to deal with respect to the H-1B, how it is working, et cetera. And there are many areas which are not so good as perhaps economic implications, as perhaps some procedural implications which continue to process. So at this point in time, we are just starting the details. The process has just begun so far as the U.S. legislation is concerned. And I'm sure our lawyers and their associations will work in detail to be able to take up this issue on an ongoing basis to look at a solution so that there is less disruption, both from an economic point of view, as well as a procedural point of view, whereby it will be difficult for any of the IT service providers to be able to service U.S. clients, which has currently enjoyed a lot of competitive advantage because of this service that IT companies do.

Our next question is from Mitali Ghosh of Merrill Lynch.

As, Kurien, you mentioned in the beginning that there has generally been -- as we enter the year, there was optimism, that pent-up demand and some improvement in the economy in the U.S. should see discretionary spend pick up. And yet you did also mention that you have seen delays in the last quarter in terms of discretionary spend. So would you say that the environment has changed then the -- in some way? And what is really leading to that?

Mitali, let me kind of explain that. See, fundamentally, if you look at it, to a large extent, growth in our business is dictated by 2 factors. The level of stability you have in your existing base is driven by the annual discipline [ph] that you bring in and also by how discretionary spending happens in our customer base. I think those were the 2 things that affect growth for us. If you look at last quarter, what's happened in some businesses, we have had a pullback. I don't say a pullback, a delay in discretionary budget. And to that extent, we see some of that coming back. And in certain other verticals, we see discretionary budget being managed even now on a quarter-to-quarter basis. For example, in some of the large independent banks, we still see discretionary budgets being given out on a quarter-to-quarter basis. If you look at our base of customers and if you look at where we play, in many cases, what happens is we play on the development side and on the integration side of the business rather than on the application management side of the business. And that is, I think, the -- what was reflected ultimately in our revenue.

Sure. So would you say that there -- is the pickup, therefore, perhaps in discretionary spend a little bit slower than what you anticipated going into the quarter?

So the answer is, yes, clearly. I think what we expected was that we expected that some of the large projects that were coming, we would be able to execute. And that did not happen. I think that's fundamentally what affected last quarter, especially contracts that BU [ph] had been closed.

Okay. And do you sort of expect that to be closed in the next few weeks?

Yes, of course. Going into quarter 1, we expect that we would have certainly more closures than we had in quarter 4 of this year, there's no doubt about it.

Sure. And in fact, on that, could you perhaps help us understand how the pipeline looks today versus a year ago overall? And, yes, if you could maybe just share some numbers on that.

We don't share pipeline numbers. But let me give you a sense of various data. Pipeline is kind of flat to up year-on-year as far as we are concerned. But I think what we have focused on is increasing the conversion rate that we've seen then. And I think that's where the value comes in. So if you look at where we are today, in terms of -- I think if you look at the farming versus hunting pipeline, today is roughly about -- 25% of our pipeline sits in hunting, and the balance is in farming. We expect to see that the hunting pipeline would be transitionary in nature and the farming pipeline would continue to kind of grow, if not sequentially but at least in a kind of -- in terms of wins. That's really the focus.

Sure. You had mentioned a number of the pipeline being higher, 70% year-on-year of last quarter. I was just looking for any update on that.

So the 70% exists today. The way we see this is that our pipeline is kind of -- remains more or less flat with a slightly upward line. There hasn't been a significant increase of that sort in terms of the pipeline as we exit the quarter.

Sure. And just lastly, in terms of client mining, you've done a great job in mining the top 10 clients, but the product line base has been somewhat sluggish. So could you perhaps discuss the initiatives that you have taken, where you are in that journey and when one should expect to see results?

Mitali, what I'd do is I'll pass it on to N.S. Bala and -- since he runs manufacturing. And he can talk about what he's doing in his client base. It's -- I didn't give you a general answer. It's always nice to get specifics around the specific SBU.

Yes, Mitali, particularly what you have seen in the last few quarters, not just specifically in quarter 4, but in the last several quarters, we had a focus of going back into the Mega/Gamma accounts and the key growth accounts and investing significantly in areas that could have significant impact on the business. Now that's been paying, I would say, good results. And what we've been doing in these accounts is going back beyond the CIO and focusing on 3 other particular groups, particular to manufacturing. Obviously, one continues to be the VP Engineering/CTO, which has to do with product design, product development. But of late, in last few quarters, we've also gone back to the CMO, particularly where there is a lot of digital transformation happening. And we've also been focusing on the VP manufacturing stroke [ph] VP operations and impacting things on plant harmonization, shop floor harmonization and things like that. So in doing so, what's really been happening is that we've been able to tap increasingly the budgets, not just from the standard, the IT budgets, which we will go after, but also from the budgets that reside within the non-CIO functions, and that's been resulting in terms of results. The second aspect of what we've been doing is also increasing the CXO connects, which is also seeing an impact in terms of increased NPS from the farming accounts. So the NPS has also shown a significant uptick in terms of where the CXO's rate us and where our normal buyers also rate us. So on both these fronts, I think we have had reasonable degree of success, which is really what is helping in terms of cementing our presence in the growth accounts.

The next question is from Nitin Padmanabhan of Espirito Santo.

Actually, I had 2 questions, and the first one in 2 parts. One is if you look at when we go out into the fourth quarter, we basically had a guidance range that was broader. And our understanding was that there were a few deal closures that needed to happen. And if that would happen on time, the quarter would be better. Otherwise, it would move to the next quarter. So I just wanted to understand, one, the weakness in this quarter and the guidance for Q1. Is it because of these disclosures not happening on time, or is it to do anything with the business with existing clients? That's question number 1. Question number 2 is from -- you seem to be pretty bullish in terms of growth from Q2. I just wanted to understand if you could at all any qualitative color in terms of what gives you confidence that it can actually be better and no delays in decision making or any such thing shouldn't really push it away.

So here's what -- so let me answer the second question first and then get on with the first question. So fundamentally, our belief is that towards the end -- comes second quarter onwards, the guidance range that we have given of negative to where we are today, that band, we think it will -- I mean as we sit today, we think it will go positive. It won't be negative, okay? That is what we -- that is the reason why we're giving the best as we sit today. Having said that, having said that, if you look at the deals that are sitting out there in terms of pipeline, do we have more closures coming up? Clearly, we have seen some closures coming up towards the end of the quarter. If we stop all the closures that we had at the beginning of the quarter that we estimated in January, some of them have not happened, some of them have been pushed out and pushed out towards the second quarter and the third quarter. So that has been 1 big problem that we have had, and that's the reason why the guidance ranges we give, the upper end of the guidance range, we could not hit.

Sure. And the first question?

Could you repeat that question again, sorry?

All right, I think you broadly covered both. I just want to understand in terms of from the weakness that we have seen some, with the IMS, and even specifically, if I just look at the ADM business, you did suggest that there's a lot of mainframes and maintenance on the telco side. I just wanted to understand, structurally, is that business a declining business in terms of -- because 22% of the revenues. And from an IMS perspective, how would you see that? Do you see attraction already improving from here on?

Okay, here's what I said [indiscernible]. So if you look at the numbers that we have there, let me just clarify, it's not with regard to the service provider business. It is specific to the equipment vendors. If you look at our telecom business, roughly about 1/4 of our business, 25% of our business, comes from the telecom equipment vendor segment. If you look back 10 years earlier, 100% of our telecom business almost is to come from that particular area. What we've seen that business do is reduce down to 25% of our total portfolio, and that business has been having secular declines quarter-on-quarter, year-on-year. And that's really led to the drag that we've gotten overall business that we have had in our global media and telecom business. If you go back and look at the ADM component that relates specifically to the software that we are using and the mix of software that we kind of maintain and manage on the switches, and that's the real part -- that's the majority of what sits out there. And that is the reason why you're seeing a large part of the drop.

And what's your question with sort of ADM or was it...

It was on the ADM.

Yes. So, ADM has the component of R&D, so this is -- and therefore, you saw that, yes.

Technical [indiscernible]

[indiscernible]

Right. And broadly, just one last question, if I may. How would you look at margins overall going into next year? Anything qualitative in terms of both from post-wage increases perspective, and broadly, how do you see the margin trajectory as a whole?

[indiscernible] See, as we look at medium to long term, we certainly see significant opportunities to sustain an increased margins from where we are. But specifically for Q1, we will give salary increase, and that will have an adverse impact on margins for Q1. And we will value our operations and try and mitigate as much as we can of the network impact for Q1. And beyond Q1, it's difficult to say right now.

Our next question is from Diviya Nagarajan of UBS.

You've spoken about daily closures this quarter. Could you kindly give us some color on the kind of vertical segments and service quality of the deals that you are -- that you've signed in the last quarter?

So we do expect -- Anand runs our energy and utility business. And what I'll do is I'll pass it on to him, so that he can answer the question on what happened the utilities business. And then pass it on to N.S. Bala, who runs our manufacturing business, can also talk to what he's done.

Yes. This is Anand here. So basically, specifically, to the E&U segment, we had a consistent year last year in terms of deal closures. So we had consistent disclosures [ph] across all the 4 quarters, which were running. And I think we've broken to a couple of more all measures, which was one of our focus areas last year as we enter into the year. And we have also expanded into new geographies, so there will be focus areas that we got into Latin America, we got into Northern African belt, and we got into the Southern Russian belt, right? So we got 2 deals from those geographies, which will help us expand further into those geographies, as well the new deals will help us grow this year. So all the 4 quarters had a similar type of deal closures, and it was more uniformly spread across a year.

Yes. I run manufacturing high-tech. In our industry segment, the closures have largely -- both, like I said earlier, are on original transformation and cloud transformation, and that's been happening across. We've had some deal closures around companies wanting to transform both the infrastructure, as well as applications to the cloud. And from a geography perspective, we've had an increased number of closures also from the shippers' rig [ph] region for this year, which has also been shipped from the way we have seen business in the past. So we've been more successful now in the Asia Pacific region, apart from Europe where we have seen their sort of deal closures. So by and large, from my industry's portfolio, I would say, Europe and Asia Pacific have been drivers, particularly in the last -- and around up to the last quarter.

Fair enough. And T.K., just some color on the deal win rates. I know a couple of quarters back, we had said that we -- in a lot of the deals we were definitely now participating increasingly in the top 3. Just trying to see if you had any improvement on those rates in terms of the win rates, say 3, 4 quarters ago, and what it is in terms of win rates in the deals that we participate now.

So basically, what we have seen is that in terms of win rates, we have not seen any significant change over the past 2 quarters. I think there are 2 parts of it. Let me kind of answer that in all of that -- the commentaries. If I break up into 2 parts, if I could break up into existing accounts of win ratios that is significantly higher, in hunting account, which is really where we haven't made a significant change in terms of the way we've been able to kind of grab share, I think that's the one area of concern as we -- as far as we go. So existing base, we're able to preserve and hunt, and our win rates are significantly high. I would say excess of -- in excess of 50%. When it comes to hunting for new geographies, new territories, new accounts, that's where our win ratios significantly lag.

Okay, then just one last question. I know in the past, you have not discussed a margin guidance because we had multiple businesses. Now that we have kind of demerged on IT businesses and had a very straightforward IT-only model, is there any thought of kind of getting us at least some indications of how margins can proceed for the rest of the year?

Diviya [ph], right now, that is not a part of any active consideration of giving any additional guidance. We are, consistently -- all aspects have given guidance, quarterly guidance on revenue. And we see that continuing.

Our next question is from Pinku Pappan of Nomura.

T.K., I'm just trying to understand your comments about the pipeline, because last quarter you were saying that it was a 70% increase year-on-year in the pipeline that you saw. And today, you're saying it's just flat to marginally higher. I'm trying to understand is there a shrink in the pipeline? Or what's happening the caused such a big decline in terms of your year-over-year pipeline increase?

So here's the way I would explain it. Exit December to December, right, our pipeline was up. Exit 31st March and 31st March of this year, that is -- it's flat.

And so, it's not really a decline in the current quarter. It was bad in Q4 of last year. We have seen a significant increase in the pipeline, and that's sitting in the base. And therefore, we are saying there is no significant difference between last March to this March.

Okay. But sequentially how would you classify the pipeline momentum? I mean, sequentially, has it increased? I'm not talking year-over-year, just sequentially from..

Yes, from a December quarter to March quarter, it has been...

[Indiscernible].

Yes, has -- but it is not a 70% kind of increase. It is -- it has remained stable with a positive balance and the values [ph] and that happens because of win and loss.

Okay, got that. And my next question is on your expectations for the next year, FY '14. Which verticals and which service segments do you think would be the -- would drive growth?

Well, here's the way I would describe it. If you look at each of our businesses and that performance last year, if you look at businesses that drag beneath the company average, it will be BFSI, it would be retail, it would be manufacturing. Now this year, we've seen in quarter 4 of this year that manufacturing has picked up, and I leave it to Bala to give some color on how he sees manufacturing performing over the next year.

From a manufacturing perspective, we expect to see increased activity around discretionary spending in a few areas. Also -- and plus there's a lot of activity around infrastructure. So I would say from a pipeline perspective, you look at what's coming ahead, we see a lot of deal renewal activity in these 2 spaces. So we see a healthy pipeline. It's hard to say whether the year will be terrific, but we are much more confident than we were last year in terms of where we see the year heading.

And you mentioned that you expect telecom to grow. Could you just give us some more color on that?

The telecom last year had a terrible year. In fact, if you look at their overall top line, their growth has been negative. [indiscernible] growth negative [indiscernible]. This year, we think this kind of bottomed out as far as the equipment vendor participant's concerned. And if the equipment vendor just bottoms out just by -- it remains flat, would naturally be good.

Okay. And what sort of tax rate should we be factoring now that it's just the IT business for the next year?

Well, you would expect it to be between 100 to 200 basis points around the normalized tax rate for quarter 4.

I'm sorry, what was it, 100 to 200?

Yes.

Our next question is from Pankaj Kapoor of Standard Chartered Securities.

So first, I understand that the growing relevance of this whole volume realization metrics. I was wondering if you will be sharing some additional metrics that can give a more clearer picture of the business.

Any addition of what we share?

I don't know, I mean it could be in terms of PC-driven or the order pipeline, order booking.

We haven't yet thought about that.

Pankaj, our overall endeavor would be that we provide you with data points which help you see the business very healthy, so we will come back to you on that point. But we do feel that the incentive volume and price is becoming very invigorated in some form, and therefore, it's better to give [indiscernible] number out. And therefore, we will -- it's going to be volume and I think that call [ph] for next quarter. And we will include and come back on if there's any additional thing that we can provide.

[Indiscernible] the point is it is no more a signal of any nature because olden days, it used to be completely linear. Every revenue growth and the headcount growth is to be linear. That isn't the case anymore because a lot of driving -- that drives that is happening in terms on our linearity. And of course, the nonlinearity is much more at the maintenance kind of business, IT and such [indiscernible] services that [indiscernible] and much more value added, high end continue to invest more and more. So depending on which particular quarter or which part of the business is going up or down, you get into a volume or a price. And why? There's no more than signal to the market as there is a collapse of the pricing or a significant lag in the volume. That is [indiscernible] certainly greater happening now last year or 2. And more and more consensus is going towards why do you have to give that difference? Because it is no more supply-constrained environment, but it is more demand-constrained environment. So here we develop -- we will continue to be giving you a guidance with a 2 percentage range on a quarter-on-quarter basis on a constant currency. And that, itself, would be a good indicator of how this quarter is looking. And the outlook, as we see it today for the next 3 to 4 quarters, is always we share. We thought that will good enough for you to be able to get a sense of how do we see the market.

Yes, sir. I, actually, 100% agree with this view. The only thing is that since we only give a quarterly view on the top line just to create a slightly longer term view in terms of the growth outlook, it becomes important to look at some of the numbers given the B2B nature of our business. And my fear is that we should not get increasingly opaque about the business. So hence, the -- if you can...

We will continue with that, and therefore, you will have seen there are not too many people who have given you quarter-to-quarter guidance, but here we are giving. And so I am not yet concerned in some form, you get some kind of a status [ph] from NASSCOM. So that is some kind of indication you already have. So there is no point in trying to get into a second guess as to what the industry numbers would be. That is why we thought of giving you a quarterly guidance will give you a good ability [ph] and understanding.

Fair enough, sir. And T.K., I was wondering if you can share some numbers that I'll give -- basically, giving you the confidence that things will basically start improving from the second quarter. Again, I don't know, I mean it could be terms of TCV or of the deals that you've already won, maybe which will start transitioning in next quarter onwards or any of the number that can give some quantification of this confidence. I mean we have seen a slippage in terms of their decision making from 1 quarter to another, so that is the reason why there's this persistence.

Pankaj, the one data is the quarter 1, historically, which is weak for us, particularly in the India business which does well in quarter 4 and quarter 1, we can speak of. It is -- that is not continuous as far as quarter 2 is concerned. And similarly, we expect some of those holdbacks that we have we have experienced in last quarter is likely to be closed in the current quarter, which will help us to be able to tell you we have much better numbers for quarter 2.

Our next question is from Sandip Agarwal of Edelweiss Securities.

I just have one question, and the question is for T.K. If you see...

Sandip, we can't hear you very well. Can you come closer to the telephone?

Can you hear me now?

Can you repeat your question?

So my one question is that if you see that we have a very strong high impact as well for quite a long period, and we are one of the leaders in the country and we have been seeing softness in rest of the business for competition also. But the difference between us and the competition has been for last say, 6 quarters, if you see that competition has, in spite of posting lower growth in 70% of the business, has been able to manage the overall company growth by very high growth in -- from management business. But what is so different in our business? We've been market leaders, and we've been pioneers probably in that business, have not been able to bring overall companies growth by driving that particular vertical when that vertical is doing so well currently. So my only question remains, are we lacking somewhere because of some strategy issues or some pricing issues or some positioning issue, what it is?

So let me pass the question on to Anand Sankaran, who runs our Global Infrastructure business. He'll give you a little bit of color on that. And if there are any supplemental questions, I'll take it.

Okay, so Sandip, on the infrastructure services business, if I were to just break up our business into emerging geographies and developed geographies, we've had a fairly robust growth in our developed geographies. But we have a fairly large percentage of our business coming in from India and the Middle East. Now in the last year, I would say that the India business, from an infrastructure services standpoint, has slowed down. So there was a lot of clamp-up on buying, and we all know this, right? So that's also reflected by infrastructure buying, as is products buying in the market. So there were segments of the market which did not buy as much as they had bought in the past. Telecom being one of them, government is the other. So the India business, from an infrastructure services standpoint, has slowed down last year, which had an impact on our overall business growth because India forms a fairly large percentage of our overall infrastructure services business. But as I look into next year, I think we are seeing a positive momentum in the market from -- in India. And I feel that the past buying -- the buying that happened in the past and the growth that happened in the past in the India business will probably come back in the coming years. So broadly, I think the reason why the growth has not been as sharp as some of our competitors is probably because of our slowdown in India business, which impacted us last year.

Again, a follow-up question from you, and then I have one more question for T.K. Just wanted to clarify, if -- can we say that the growth order have been in double digit sequentially for 5, 6 quarters if India would have helped out [indiscernible] assumption to assume?

Well, I hope India business had such a big impact on our global business. But unfortunately, it doesn't. So it wouldn't have gone to double digits, but it would have, obviously, had a positive impact had the India business been more positive than what it was.

No, I'm not talking about double digit for the company level. I'm just talking double digit on infrastructure service because...

I'm talking about the same, Sandip. I'm talking about the infrastructure services.

Okay. And one follow-up question for T.K. Can you -- although, I know Wipro doesn't give guidance, and we totally appreciate you not disclosing any numbers, but only 1 question with you I would like to ask is how do we -- from a view, how the next year will be because all the commentaries still now from everywhere has been very, very positive. Although, there is some [indiscernible] informal immigration and all. But until now, we are not seeing anything in numbers. So is it, or do you think is it a lag effect or we are still in the yes-no scenario where things can be good or may not be good in FY '14 versus FY '13? So how will you define the scenario today, whether it is really good versus FY '13, or we are not yet clear whether it will be good or bad, it can turn any way?

[indiscernible] I can't comment about the industry specifically. I can comment about Wipro. And let me give you a sense of what's happening. To a large extent, what happens is growth or slow growth or fast growth is dependent upon the base that you have in the customers that you set into a large extent and the industry that you see. So it's a combination of these 3 things. If you look at us, in our business, quarter 1 is traditionally weak; quarter 2 is better; quarter 3 is better; quarter 4, again, goes back to being a little weaker. That's traditionally how our business is being run over the past couple of years. Beyond that, I cannot give you any other indication of what the year will look like.

But would it be fair to assume that FY '14 will be better than FY '13?

No. It's a -- one thing I've stopped doing is even getting -- bottoming [ph] in any transitional [ph] way to a guidance discussion. So frankly, I'd rather not comment on that one.

Our next question is from Viju George of JPMorgan. Viju K. George - JP Morgan Chase & Co, Research Division: T.K., I had one question for you. You seem to think -- no, you have highlighted the secular issues in [indiscernible] and telecom vertical [indiscernible] go down. But if I look at your performance on a yearly basis, except for energy and resource and utilities, all of your other verticals have shown low- to mid-single digit growth. So it's not just a media and telecom. It's not a telecom issue alone. So it seems that you do have the task of bringing growth back to virtually all of your verticals except energy and utilities.

Viju, the numbers speak for themselves. There is no -- that's the reality. We have to get growth back in all our businesses. And as far as we are concerned, that's exactly what we are kind of focused around. And I can't say anything else except that's the reality of what we have, our performance of last year. Viju K. George - JP Morgan Chase & Co, Research Division: Sure. The other thing that strikes me also is that you have obviously achieved very good traction in the top 10 clients. And that is also evident in the increase in your $100 million headcount -- $100 million client count. But when I look at the 50, 60, 70, or each of the various bands about sales [indiscernible] million dollars, it seems that you haven't been able to transfer that progress down using the same techniques that you've used with your top 10 clients. So is that progress taking far too long? Or is the nature of the clientele different here? The progress doesn't seem to be -- will start filtering down to.

Viju, you're absolutely right, and you're spot on. Fundamentally, there's 2 ways, 2 reasons to handle the existing accounts. The level of investment, the timing of investments can differ. If you remember, as far as we are concerned, we've been talking about mega/gamma for a long time. And frankly, we never saw the large account growth happening in the mega/gamma. What we did was we took a base, a small base of accounts, invested into, tried growing that significantly. You should see this in the top 10 categories, primarily because the investments that we have made. And we picked up another 45 of them taking it up to 55 on total. In the 55, we expect to see not all 55 kind of growing significantly, but we expect to see a significant portion of that growing during the current year. As in the next year, we expect that we would have, out of the 70 of them that we have picked up now, on which we'll invest, and we see that in the next 18 months, we will start getting it up from there. But your point is absolutely right. If you look at the service [ph] in terms of growth, the service [ph] for Wipro is skewed in the 50 million to 75 million category. And that's where today we have 25 customers less in that competition in that particular segment. So that's the segment that we need to kind of grow.

Ladies and gentlemen, due to time constraints, that was the last question. I now hand the conference over to the management for closing comments.

Thank you, Ilba. With this, we come to the end of our conference call. In case there's any questions that we could not answer due to time constraint, please feel free to write to us, and we'll revert. Thank you, and have a good day.

Thank you very much. Ladies and gentlemen, on behalf of Wipro Limited, that concludes this conference call. Thank you for joining us, and you may now disconnect your lines.