Wipro Limited (WIT) Q1 2015 Earnings Report, Transcript and Summary

Ladies and gentlemen, good day, and welcome to the Wipro Limited Earnings Conference Call. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Mr. Aravind Viswanathan. Thank you, and over to you, sir.

Thank you, Sharma. Good evening, and good morning to all of you. A warm welcome to our quarterly earnings call. We will begin the call with business highlights and overview by T. K. Kurien, Executive Director and CEO; followed by the financial overview by our Executive Director and CFO, Suresh Senapaty. Post that, the operator will open the bridge for question and answers with all the management team. We have the senior management team of Wipro present here to answer your questions. Before Mr. Kurien starts, let me draw your attention to the fact that during this call, we may make certain forward-looking statements within the meaning of Private Securities Litigation Reform Act 1995. These statements are based on management's current expectations and are associated with uncertainties and risks, which may cause the actual results to differ materially from those expected. The uncertainties and risk factors are being explained in the detailed filings with the 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. The conference call will be archived, and transcript will be available on our website, wipro.com. Ladies and gentlemen, let me now hand it over to Mr. Kurien.

Good evening, and good morning to everyone. It's a pleasure to be here. I'm happy to announce the results for the first quarter of fiscal 2015. We had sequential revenue growth of 1.2%, which is in line with our guidance. Our quarterly IT Services EBIT grew 35% year-on-year. We continue to make investments to enable our customers to compete better in the marketplace and for improving our execution capability. But let me first give you a sense of the demand environment. The demand environment continues to hold steady. In North America, we see a return of discretionary spending. Continental Europe, continues to have significant potential for outsourcing IT Services. During the quarter, we saw major deal wins. We also announced our largest ever outsourcing contract last week. The deal pipeline is healthy, and we remain focused on converting these opportunities. Within our SBUs, we see strong demand in Healthcare & Life Sciences, which grew 20% year-on-year in revenue this quarter. Business momentum is improving in Manufacturing and Hi-Tech, while we continue to see challenges in retail for at least another quarter. Among the service lines, Global Infrastructure Services continues to score good wins with a sequential growth of 5%. From a geo perspective, we saw good growth coming in from India and the Middle East business. From an execution standpoint, we improved on our utilization by 103 basis points, and we believe we still have further headroom for growth. The share of fixed-price projects have steadily increased over the last 4 quarters from 47.4% in quarter 1 of 2014 to 52.1% in quarter 1 of 2015. Our customers, stakeholders remain engaged significantly with project level satisfaction scores increasing by 210 basis points quarter-on-quarter. Two themes have been -- becoming increasingly significant with the potential to transform the business landscape. Open source technologies have moved mainstream, especially in infrastructure and the applications layer, with traditional enterprises adopting models from web companies. Our open source practice is engaged with leading customers to rearchitect the technology landscape to achieve significant cost savings, innovation and agility. We have also secured mandates from 6 customers over the last quarter in this particular area. Additional transformation is driving our customers to rethink on how they protect themselves from disruption, by improving customer elements and cost efficiencies, by digitizing their legacy processes and infrastructure. Wipro Digital, a new business, brings capability, scale and acceleration to this vision. We have recorded 3 wins in this quarter and see positive business momentum. We have also launched a major organization-wide training initiative to enable proactive response to shape future demand. Our investment in employees are bearing fruit, and we're gratified to be recognized as the "Best Company to Work For," among the Super Sized Organizations, by the Great Places to Work Institute. We have implemented both our restricted stock units and our merit salary increases, one effective 1st of April and the other one effective June 1. I'll request Senapaty to talk about financials in a little more detail. Thank you.

Good day, ladies and gentlemen. Before I get started on the financial results, please note that the -- for the conversion of readers -- convenience of readers, our IFRS financial statements have been translated into dollars at the noon-buying rates in New York City on June 30, 2014 for cable transfers in Indian rupee as certified by the Federal Reserve Board of New York, which was $1 equal to INR 60.06. Accordingly, the revenue of our IT Services segment that was $1,740 million, or in rupee terms, INR 105 billion, appears in our earnings release as $1,750 million, based on the convenience translation. Total revenues for the quarter was INR 111.4 billion, an increase of 14% year-on-year. Total net income for the quarter was INR 21 billion, an increase of 30% year-on-year. In IT Services, our revenue for the quarter was $1,740 million, sequential growth of 1.2% on a reported basis. Operating margins of the IT Services segment declined from 69 basis points on a quarter-on-quarter basis, largely, due to an increase in compensation cost. Let me remind you that we gave our merit salary increases effective 1st of June to our employees, both on-site and offshore. On the ForEx front, our realized rate for quarter 1 was INR 60.39 versus a rate of INR 61.73 realized for the quarter 4 of last year. As of period end, we had about $2 billion of ForEx derivative contracts and hedges outstanding. Our IT Products business decreased by 6.2% on a year-on-year basis. Our revenues from IT Products segment declined in line with our strategy to stay focused on IT Services, with participation in selected deals, where products form a critical part of the solution. This strategy has helped to expand the margins, and grow profits by 26% year-on-year. Note that IT Products revenue for the year ended March 31, 2014, included sales of Wipro branded desktops, laptops and servers. The manufacturing of which sealed in the quarter ended 31st December 2013. The effective tax rate for the quarter is 21.9% as against 22.6% in the previous quarter. For the quarter, we generated operating cash flow of INR 21.7 billion, which was 103% of the net income. We generated free cash flow of INR 18.4 billion, which was 88% of net income. We'd be glad to take questions from here.

[Operator Instructions] We have the first question from the line of Joseph Foresi from Janney Scott.

My first question is, you announced a large deal one, which I think is the largest one you've ever had. Maybe you could just talk about any of the changing dynamics in the marketplace, and if you feel like you're taking market share? And if so, why?

So, Joe, if you look at it, there are 2 components of our business that, today, exist in our portfolio. One is the regular run business that we address. The value proposition there is primarily around cost reduction. And I think the deal that you alluded to with ATCO, clearly, falls within that particular category. Fundamentally, the objective of the ATCO deal would be to make sure that the client gets a superior cost position after they outsource with us, and along with that, they get flexibility, and to some extent, they get variability in terms of the way they manage their cost structures on a going forward basis. So I think that's one play that continues to remains strong. And we see opportunities in that particular area, both in the North America, as well as in Europe. The second segment is what customers, typically, define as changing their business, which means the move into the cloud analytics, digital, all that falls within that particular category. In that segment, we are seeing discretionary demand in some industries picking up in the U.S., and in yet others, we see some headwinds, especially, and there may be headwinds, which are primarily for us, which could be things like retail where in client-specific issues, we may have headwinds for -- we clearly had headwinds for the last quarter, which may continue for this quarter too. So on the change of business site, we see more smart technology is coming into that particular space. And cloud is a fairly big element of that, cloud and analytics. So that's, broadly, what we see in the demand environment. As far as Europe is concerned, smart technologies are picking up, but not at the rate at which you've seen in the U.S. Asia Pacific, again, continues to be a cost play.

Got it, okay. But have your win rates changed at all? And the deals that you're seeing? Are these renewals or they new business?

This is a new business that we talk about, frankly, what we do is that, if you looked at our business portfolio, there are 2 kinds of businesses that we are going after. If you look at our client base, one is basically taking share, where we are a dominant player, or if you're a marginal player making an aggressive play at the incumbent share. That's one type of business that we're seeing. The second type of business that we're seeing is completely green field, like the one that we've announced. That is, again, traditional business, green field, absolutely new business, net new revenue for us. In terms of win rates, our win rates haven't really changed in quarter 1, and we think that we probably have a few percentage points that we can do to kind of improve it. But as of now, between quarter 4 and quarter 1, it's been pretty much flat.

Okay. And last question for me, on the pricing front, what -- have you seen any changes there? I mean, how much of that is a factor in either your incumbent or green field deals compared to, let's say, 2 or 3 years ago?

I think on the newer deals, we're seeing, especially on the cost side, we are seeing commoditization happening. There's no question about that. But will that reflect itself in pricing? I don't know. I can't really comment on that, because until now, we've been able to kind of hold that off to productivity. We don't see anything right now that makes us believe that it'll change, but in our industry, you can never say never.

Our next question is from the line of Pankaj Kapoor from Standard Chartered.

A few questions first. If you could just clarify, if the second quarter guidance is building in the ATCO deal? And if so, if you could quantify the contribution?

Is there any other question, Pankaj, or just one?

No. I have a couple of others, should I go ahead, or...

Just repeat all the questions, then we can decide who to pass it on.

And the second one is, I mean, it appears that the organic guidance is broadly in line with the 2% to 4% that we have been seeing in the last year as well. So I'm just wondering, that given that we had a good deal with momentum in the quarter, how should I look at the trajectory going on from the second quarter onwards? Do you expect the impact of these deals wins to show up more in the second half? Or is it that there is some business accretion that is happening, which is taking the growth away, despite the momentum in their deal win? My third question relates to the margin profile of these deals, especially, the ATCO deal, if you could give some color, in terms of how the margins profile of these deals is?

Let me pass that question on to Jatin Dalal. He can answer all those questions.

So Pankaj, your first question, yes, the revenues from ATCO has been factored in our guidance, to the extent that we think it is reasonable, given the date of consummation that we expected to flow there. So it has been factored in our guidance. We are not sharing that number separately, Pankaj, but as I said, it is part of our guidance, overall guidance that we do. And the philosophy, I'll share, so that you can understand, this is part of -- like, it is like any other deal. It is a large total outsourcing contract, which does have an element of acquisition, which is embedded into it. But for all practical purposes, we win large deals and we have ramp downs, and we similarly have a start date here too, which we've factored in our guidance. So I think it is, therefore -- we are not breaking it out, specifically for this deal, because we don't see it very differently, in this case as against the other cases where we were in large cases. So that's to your first question. In terms of your third question, which is the profitability of the deal, it's a large contract, as you can -- as you are aware. And the way we have done the deal is that over the life of the contract, it certainly won't be dilutive to the deal, dilutive to the overall company margin. The impact on margin would be -- would not be material. And even in early years, we don't see a significant data which versus the average of 10 years. So obviously, there will be some changes year-on-year, but it's not a large number for us to talk to you about. Lastly, your second question vis-à-vis guidance. So Pankaj, I will say that we -- the guidance is a reflection of where we see our current quarter performance. Do we see traction in the marketplace? Certainly, we are seeing the traction in the marketplace, as we'll just signed one of the -- not one, the largest deal that we have done in terms of absolute revenues. And therefore, our expectation is that as we go through the year, the performance continues to improve from here on, and thus the overall expectation.

Jatin, my question was more in terms of the deal ramp up and these newer deals that we have won in the quarter. My presumption is that the deal wins in the current quarter was better than what we have been doing in the last few quarters. So do these -- the profile of the deals is that, they will have a normal ramp up, so that it is factored to that extent in the guidance or it'll -- in the subsequent quarter? Or you see the profile is such that the ramp up could be slightly more staggered? So we will see the full revenue impact more in the second half.

So it is difficult to comment, because the ramp up is really a factor of which service line it is. And to that extent, I don't see a difference in mix materially to talk about here, Pankaj.

Our next question is from the line of Keith Bachman from Bank of Montréal.

I had 2 questions, also. If you could talk about some of the practice areas that had much, substantially weaker growths sequentially, how you would anticipate those areas ramping as we look at the back half of the year, so for instance, product engineering, ADM, and consulting is fairly small for you. But if you could just talk about your expectations for some of those practice areas. And if you want, I can ask all my questions now, but I was going to leave it, one at a time.

If you could just finish off, Keith, all the questions at a time, I think that will be much better.

Okay. And then the second one would be, specifically, addressing BPO. How you're seeing the pipeline in BPO and any pricing pressures. And then the third is, you talked about utilization rate -- excuse me, realization rate, I was hoping you could just repeat what you just said, what the realization was, but more importantly, talk about how you see realization unfolding through the year.

So Keith, maybe what I'll do is that, given 3 sets of question, I have to kind of break them up separately. So what I'll do is that -- I and Mukerji who runs our product engineering business, and he can give you a sense for the outlook for product engineering -- on a going forward. And then I'll come back for the next 2 questions that you have, to give you some color on that.

Thanks, T.K. So Keith, as you know, I have recently taken over this role as the Head of Product Engineering Services. My sense is that some of the weakness that you see, in the Product Engineering Service revenues, is primarily stemming from our silicon services. Hardware and systems as a line of service business, is changing dramatically, in the way Product Engineering Services is taking a look at the market. However, on the brighter side, our automotive business and our consumer electronics business is doing exceedingly well. But to keep the answer short, my sense is that quarter 3 to quarter 4, our product engineering business should be in line with the rest of our company growth. One of the things that we're doing separately -- sorry, just one last point, is our company strategy which is being led by -- from a company strategy standpoint, which is being led by PES, is the whole initiative of Internet of things, and as of, say, the way PES is looking at the market is changing. And hopefully, that should help us get in line with company growth rates.

Okay, let me update the question on BPO. As far as BPO is concerned, we've seen the deal flow improving. It's too early to call victory on that one, but clearly, we see the flow improving, especially, over the past 2 quarters. The second component of pricing pressure on BPO. I think what we see is most of the BPO work that we're getting is transformation-led, it's not just pure BPO. If you're doing commoditized BPO work, it's pretty clear that there'll be huge pricing pressure and making money in the business is tough. But whenever, it's reengineering-led, we're able to kind of hold on to our prices, our ticket prices, and that's where, I think, the value of technology and BPO both come together. On the third question in terms of realization, I think the point really was around -- on the comment that I've made earlier was all around, the fact that, if you look at pure cost-based play, which are primarily around run-the-business, while we see increasing commoditization happening on standard services, we've been able to make that up to productivity. So overall, we don't see a great productivity, a great realization up or a great realization down. We see it kind of operating in a narrow path.

Okay, so you think, it will remain steady through the year?

Yes, we don't see I mean, put it this way, if I'm losing sleep over 3 things, this wouldn't be right on top of my agenda.

Okay, maybe you want to address what the 3 things are that you're losing sleep over, but I will see the floor.

Given the fact that you had 2 questions that you've asked them, Keith. I'm waiting for one of the other folks from the line to ask that question.

Our next question is from the line of Viju George from JP Morgan. Viju K. George - JP Morgan Chase & Co, Research Division: I have 2 questions. In the previous quarter, when giving guidance for this quarter, you had mentioned that India is one big reason, because of seasonal weakness you see in the June quarter, is one big reason where the guidance is so muted. Now given that you've come in between below the median of the guidance you've indicated for this quarter, and the fact that India hasn't done too badly, I'm just curious where the miss occurred? It seems to me that it's occurred more on the developed market side. My second question relates to the declining trends that we're seeing happen in the ADM side of the business. It's been continuing declining as a percentage of revenues, maybe just comment on what's happening there.

So on the India business, Viju, there were 2 things that happened, At least, as far as, we were concerned. one was that we expected to see significant headwinds coming out of India, given the fact that elections were there, and we expected that it would get a -- quarter 1 guidance would get affected to that extent by poor results out of India. Fortunately, for us, that did not happen. Our Middle East business, also kind of kicked in. I think, if you look at that particular segment, it's not just pure India. It's India and Middle East. So our Middle East business performed better than what we expected it to, and that was primarily the reason for that bump-up that you saw there during the quarter. Having said that, I think, we've got new leadership there. Our teams in the ground are executing, so that's a positive, I don't want to take it away from them, and I don't think it's going to be an incidental kind of a bump-up. Just for last quarter, we expect to see that momentum continuing into this quarter too. #2, on your question in terms of the -- sorry, just repeat your second question? ADM, sorry, on the ADM piece, I think, that's a question that somehow we get asked in every call, and we tend to kind of explain it in the same way, which is, if you look at the way we classify ADM, ADM, in many ways for us, is all the legacy business which does not fall part of application services or which is our old OCI [ph] business, or anything else that falls within our advanced technology services business. So that, in a way, is what we have. And if you look at that segment, that segment consists of couple of components. That segment consists of our legacy Telecom business, and to some extent, whatever are the legacy business we may have in the other verticals. And that's why you see a decline. Long-term, you'll have maybe 1 or 2 quarters where you'll have a bump up as we do transition. But long term, that particular segment would be down. So it's not generic ADM that we're talking about -- in that particular segment, it's the way we reflected, it's really legacy ADM.

And, Viju, if you see all our classification, where we have business application services, which is a unique way of looking at from industry standpoint, that continues to grow ahead of company growth rate, including this quarter, and then there is an advance technology solutions, which is another high growth segment. So for us, applications is really 3 separate pieces, and given -- and in some form they reflect the growth momentum in the marketplace.

Our next question is from the line of Trip Chowdhry from Global Equities Research.

2 quick questions. First, you did mention about, there are more work or more implementations using open source technologies. 2 sub-questions in this category is, what kind of technologies are we seeing in open source, which customer or which enterprises are really adopting other than Linux? Secondly, in terms of pricing and duration of the deal, how different are those? What you say, a package application installation? And then, the second set of question I had was more on the lines of -- we are talking about cloud implementations, mobile implementations. Is it a global phenomenon? Or is it more like more in USA and Western Europe versus Middle East? And that's all for me.

Trip, I'll just kind of give you a quick sense of what's going on, as far as open source is concerned. More and more, what we're seeing is folks trying to run specific workloads using an entire open source stack, and it's not just Linux. It's Hadoop, it's Spark, everything on top in terms of analytics, and down below in the infrastructure, fundamentally what people are doing is disintermediating a lot of the hardware layers and putting in OpenStack components on top, which can actually kind of cut the hardware costs significantly. We've just won a fairly large deal in Europe, where we are providing an entire open source stack with guaranteed workloads back into large customer, large enterprise customer, right now. So in the past, open source used to be a little bit of an experiment, a little bit of a leap of faith. It's early days yet to -- declare victory in that particular area, but we're clearly seeing that, that's an opportunity that's kind of opening up. As far as pricing is concerned, in terms of skills, the skills, given the fact that the fundamental skill shortage in that particular area, we don't necessarily have any pricing pressure for that segment. Does that answer your question, Trip?

Yes, it does. My second question was regarding the deal flow on cloud and mobile in different geographies. Are they same across all the geographies? Or more deals, say, in Western Europe, Europe versus, say, Middle East?

I think on the infrastructure layer, it's pretty much kind of common, given the fact, that hybrid is everywhere. If you look at applications, fundamentally, what's happening is, on standard applications that are used across like sales force, it is kind of common across, sales force and HR. Besides that, we're seeing more and more adoption happening in the U.S., not necessarily that much happening in Europe.

Our next question is from the line of Sandeep Shah from CIMB, India.

The first question is just, in terms of what Viju has asked...

I'm sorry, I can't, we can't hear you, very well. Can you just repeat that?

Yes, yes. The first question is, in terms of what Viju has asked. Just the guidance, what you have given for the first quarter was assuming a muted growth from India. However, if you look at the growth from India as per what you said, the headwinds were lower than anticipated. But does that mean, that there has been a negative surprise in the U.S. and the Europe, because the positive surprise in India has not given you a positive surprise to your midpoint of the guidance?

So here's what happened. In one particular segment, if you look at retail and transportation, we had expected a downside. I think we were a little surprised by the downside that we got. The other area, primarily, was in our -- a couple of customers in Europe and U.S., which sets in within our top 10 customers. Some of the projects that we had, kind of we had project shutdowns. And that's why, if you look at our top 10 customer growth rate, that's been affected there , and that's happened primarily, some of the large projects that were finished. The new projects were not initiated. We expect to see that situation continuing for at least one more quarter, and then we expect to see this coming back.

Okay, okay. And additional, T. K., just in terms of the deal win momentum in this quarter, outside the deal win from the Canada, can you throw a color? Because last quarter, you said that, we expect the record TCV wins of fourth quarter to continue in the first quarter. I'm just asking outside the Canada, Has it been, as good as, what we have seen in the fourth quarter?

So not, as good as, we've seen in the fourth quarter, but been good enough for both in quarter 1, it's been decent. So from that perspective, and between -- spread between Europe -- between U.S. and Europe or North America and Europe, I must be a little careful about U.S. itself.

Okay, okay. And just the last question, with the good order books for the last couple of quarters, one can assume that the group momentum should be better in Q3 versus Q2. I'm not asking guidance, but qualitatively, is it a fair assumption?

I think, Jatin answered that question, pretty clearly. Really, as far as we're concerned, if you look at our quarter 1 and quarter 2, our endeavor would be to make sure that we perform better in quarter 3 and quarter 4.

Our next question is from the line of Manish Hemrajani from Oppenheimer. Manish Hemrajani - Oppenheimer & Co. Inc., Research Division: Good growth in the India business. Can you talk about the India business on a longer-term basis, how you see it playing out given the new regional center?

So, Manish, typically what happens is, if you look at our India business, there are a couple of things that we must really see. One is that after the new government, there has been a renewed sense of kind of positivity, if you may, that has come up. And that's opening up opportunities for us, cleverly around a couple of specific industry segments. One is banking, other one is government, and the third is in areas which are traditional like manufacturing. These are the 3 areas. But overall, if you look at the trend this year, we don't see it being worse than what it was last year. We actually see it -- we actually hope to see it better. But if you want to get more color on it, Soumitro Ghosh, who runs our India and the Middle East businesses on the call, and he can kind of give you more specific color, if you may. Soumitro?

T.K., thanks. So we had a pretty strong quarter, and fundamentally, if I look at it from different lenses, from a geography perspective, I think, we since represent the title of -- so up to 3 regions India, KSA and Gulf. We did very well in KSA, which is Kingdom of Saudi Arabia, and we had a good growth even in India. From a vertical specific, we had pretty strong traction in Financial Services. We had strong traction in the Telecom segment, and we had strong traction in the Energy & Utilities segment. Going forward, my vision is that, as T. K. said, that -- with the new government and the new budget, there is a lot of optimism, which is there in the market, right? And one sees good opportunities coming up in the government, as you, yourself have seen, the type of investments with the country, the government is willing to make in, say the, railways or the mission mode projects or the -- in financial inclusion fees or the smart cities fees et cetera, et cetera, there is a lot of opportunity, okay. But many of these will take time, for example, the smart cities, is a long haul opportunity, okay? So a lot of the initiatives, one will have to break into here-and-now opportunities, and opportunities which are going to take time. But there will be a lot of opportunities from government. We'll be selective, but we'll be focused on the ones that would give high returns. Financial Services, we see a lot of traction in the market, especially, around the new business license, which has been issued. Some of the core banking replacements, some of the risk management initiatives, et cetera. In the Energy & Utilities segment, a lot of this one in the Middle East, which is in the engineering construction fees, and the oil and gas fees. Overall, there's a fair bit of deal traction, and we hope to continue the momentum which we had in quarter 1. Manish Hemrajani - Oppenheimer & Co. Inc., Research Division: And the margins in the India business, are they similar to corporate average?

So on a margin piece, yes, the rate realizations in India are, obviously, very different from what it is globally. So the entire this one is in terms of how we can drive cost lower, and drive productivity to have margins which are in line with our expectations. But the entire game is all about driving efficiency. Manish Hemrajani - Oppenheimer & Co. Inc., Research Division: T. K., attrition seems to be picking up again. Is that a result of a better business environment? And what steps are you taking to curb attrition? And then, what impact do you expect higher attrition levels to have on wage inflation?

So I'll ask Saurabh Govil, who runs our HR function to talk through that.

So Manish, a couple of things here, attrition uptick has been seen across the industry, and that is a function of a better business environment. Very clearly, from our side, this quarter, as T.K. mentioned earlier, we've gone ahead with our salary increases and stocks to keep key people. And very clearly, we see that in the coming quarter, this would -- attrition would come down. Then the other critical piece, I want to highlight is that attrition for us is spiked only in the 2- to 5-year categories, that people have more experiences, it's a very flat. And then the third is, given that if you've differentiated our MSI, our merit increases, we're seeing that clearly, our attrition in the top performers coming down drastically, which is what we had wanted. So it's a combination, but as we move forward, we clearly see that this would come down. Manish Hemrajani - Oppenheimer & Co. Inc., Research Division: And then what impact -- expect to have on wage inflations from this higher attrition level?

Manish, as far as wage inflation is concerned, we've already given our salary increases. We don't expect to see any more increases happening in terms of wages still next year, June.

Our next question is from the line of Ankur Rudra from CLSA.

T. K., you've done really well in the large deal space in the last couple of years, but I'm just wondering, what's happening in the $20 million to $75 million band of accounts. This seems to be a bit of a struggle in terms of mining those. What are you doing there to, maybe, improve this going forward? That's question #1. And secondly, if you could just comment on, we've done very well in terms of increasing the utilizations in the last few quarters. Do we have further headroom for margin expansions from utilization, the rest of the year?

So Ankur, I'll ask Jatin to take the second question, and maybe even continue with the first, because he's completely read the first. So that I can jump in.

So, Ankur, the -- if I understood your question, second question was utilization improvement by 1%, and what is the headspace for us to do more.

That's right, yes.

So, Ankur, we have, historically, operated at a significantly higher utilization, and therefore, I don't see, at all, a constrain on growth because of utilization. We also continue to induct people through the year from campuses, as well as selective lateral hires that we do, and that adds to our flexibility of staffing the newer engagement. So I don't see that should be a cause of any concern vis-à-vis our ability to grow. It will -- as we grow, I think it will continue to flex that capacity that we have created. Now on your first question, you are right. In terms of from between $20 million to $75 million accounts have been a stable number for us and not a number that has increased materially. But we have -- as you're aware, last 2 years, we have done very well in our top accounts. most of the accounts we call Mega/Gama and that have been reflected in the growth that you've seen in the top 10 accounts in last 2 and 3 years. And this year, our focus is to really go after the smaller accounts, which could contribute meaningfully to the revenue growth. And therefore, we have effectively charged that unit with a structure, which enables the growth, a faster growth. And therefore, we believe that this year, you would see some incremental growth meaningfully coming out of the second layer of our tiered organizational account hierarchy.

If I could just get a clarification on the margin question, the utilization question. The question was, I'm not so worried about growth being a challenge. I was just questioning, whether you could use less in the margin levers for the rest of the year?

Yes, certainly, certainly. I mean if we grow and we use from our bench, certainly, that will help in terms of margins.

Our next question is from the line of Edward Caso from Wells Fargo.

With the attrition rising here year-over-year on the voluntary basis, is that a -- you did mention that the business is getting better, but is it a mixed scaling? Is some of the turnover reflecting the fact that the incremental business may be in areas where you have to develop new capabilities?

Well, absolutely, Ed. If you look at the way the business is kind of changing. In the past, if you dealt with 12 or 13 specific skill sets on the applications side, that number is now expanded multi-fold. And to that extent, what's happening is there is a certain level of attrition, which is caused by people trying to hire niche skills away from the organizations. And similarly, we do the same when it comes to making sure that we staff our power projects with people that meet these skills. So to that extent, I think that part of the market would continue to churn. But if you look at the secular number, the real issue that we have as far as Wipro is concerned, is the after 6 years category, 2 to 5 years category. And in that particular case, there are 2 reasons behind that. #1 is that these guys stayed in the company have acquired specific skill sets, and #2, what happens is, whenever remunerations that being at outside, sometimes, especially with [indiscernible] is significantly higher than what they get here. So for us, that's the band that we need to worry about. The critical band that kind of holds the customer together, our attrition rates have been significantly lower than that.

Okay. Could you talk a little bit about the India budget proposal and any implications that may have for the company around, say, transfer pricing, tax rates and so forth?

And, I'll hand that over to Senapaty.

I think the budget has primarily been the pretty status quo, so as far as we're concerned. But definitely, from an IT industry point of view, it gives us huge opportunity in terms of the kind of spending and the kind of programs that the government of India has talked about, whether it is private-public partnership models to be strengthened, the kind of investment they're looking at in railways, or the kind of e-commerce that they're talking about. E-governance project they're talking about, or reaching 4G into the hospitals and the schools of the various villages. So that clearly will give a lot of our business opportunities. Apart from the fact that there will be 2 legislations which will be contemplated with GST, General Sales Tax, and the second is the Direct Tax Code. I think we need to be cognizant of the fact that these are the 2 latest documents, which will perhaps be -- one of them will be coming this year, then the other one sort of this year, and next year, to be able to contribute into this process that it really supplements and encourages more trade and commerce, and business, as opposed to trying to have any kind of impediments more than what is currently in the law.

Last question. Any help here on the forward tax rate?

Ed, if you look at the tax rate, we had got some write-backs, so the normalized tax rate that we have, it'll be within 1 to 2 percentage range of the normalized tax rates.

Our next question is from the line of Srivathsan Ramachandran from Spark Capital. Srivathsan Ramachandran - Spark Capital Advisors (India) Private Limited, Research Division: I just wanted to get your commentary on the healthcare, because it's been doing pretty well for the last 4 quarters. So just wanted to get on a forward basis, how do we see this shaping up, and there are some broader headwinds and tailwinds, we just wanted to know in terms of both pipeline orders, how is it shaping up?

I think, if I look at the healthcare space, it's been doing very well over the past couple of quarters, and we have no reason to believe that among that would slowdown with that particular segment. If I look at our structure of the business that we operate in, there are nearly 3 large segments if you look at. One is, primarily around pharmaceutical companies, and that because of consolidation, we see a play, in terms of playing it better. Then the second big opportunity that we see is in the provider space and the peer -- peer to provider put together. We had a lead in terms of the provider segment, which we continued to kind of capitalize on. On the same care segment, given the legislation that's all in the U.S., again, we see enough opportunities for growth in that particular segment too. So overall, if you're asking, it's a secular demand that we see, and no particular reason to feel concerned about the fact that, something is going wrong, in fact, we see a lot of opportunities coming up as we go into the future. Srivathsan Ramachandran - Spark Capital Advisors (India) Private Limited, Research Division: Sure, just want to get your comments also on the margins. And assuming a constant currency, how would you see margin shaping up the remaining of the year?

So let me pass that the call to Jatin Dalal, and he can answer that question.

So as you are aware, we have 2 months impact of our salary in quarter 2. And we have also given restricted stock units to our employees, which has impact on -- in terms of -- the cost line. But more -- but one more factor will also play out that some of the deals that we continue to ramp in, we will hire ahead of the revenue that we generate from that. So that will be another factor that will play in near term. Having said that, we always maintain that there will be volatility in margins in a quarter-to-quarter basis, as some of these factors play out. What our outlook for medium term is positive from that standpoint.

Our next question is from the line of Mitali Ghosh from Bank of America.

On the deal wins, I think you mentioned, 6 large deal wins and 3 wins in digital. I was wondering, if you could share a similar deal win number, or perhaps a TCV number across the last couple of quarters, for us to be able to put it in context? And also, if you could provide some color on these deals, in terms of services, verticals and geographies? Second question was, again on, I think the question, it was asked during the call as well, is -- the initiatives and outlook in growing the existing clients, because if I really look at growth in the number of clients more than $50 million, that's been kind of stagnant over the last 1 year. So what really is the plan there? And the third one really is on the reasons for the weakness in the U.S. and what trends -- unlike your peers, who actually saw growth in that geography this quarter and what trends you're factoring in for the rest of the year?

Let me answer the last question first, and which is I think this quarter, what we've seen is -- we've seen our customers, the top 10 customers are based in the U.S., you've seen a decline in couple of them, and that's clearly contributed to the decline throughout the U.S. itself. It's not a secular trend. We expect to see the North American market coming back, especially in the next half of the year. We expect to see project ramp up starting again in quarter 3. So next quarter, you might probably have a little bit of headwind, but not too much and going to participate would probably be strong. So I don't think we should too much into that. On the category of account mining, I think, Jatin, alluded to that at the beginning. I think that's been an area of weakness. So that's one area that we're trying to change. And we see that growth in the next category of accounts will again start picking up during this year, that's category is also now confirmed. In terms of the breakup the deals, I'm sorry, I don't have the data with me right now, but we'll be happy to kind of, at some point of time, happy to kind of give it to the entire investment community.

Our next question is from the line of Ashwin Mehta from Nomura.

I had 3 questions. One, what was the margin impact due to wage hikes in this quarter? And what's the anticipated impact next quarter? Second question is in terms of ATCO, how will the USD 195 million cash consideration be accounted for? Would it be amortized? Or would it be considered as an acquisition consideration? And third, why have we stopped giving the cost of goods sold and SG&A breakup in IT Services and products, and also stopped our involuntary attrition disclosures.

I will hand the whole thing over to Jatin Dalal to answer.

Okay. So let me start with the last question first here. In some form we have gone through a segment reporting, which is the revised segments, but we're very happy to share the IT Services, gross margin, SG&A percentage. And if you can connect with Investor Relations team off-line, they will be able to share that at a later point. If you want, I can share those numbers right now, but and let me go ahead and do that for benefit of everyone. For IT Services segment, that -- the gross margin number is INR 38,626 million -- sorry, that is INR 36,941 million, S&M is INR 7,084 million and G&A is INR 5,856 million. So gross margin, INR 36,941 million; S&M, INR 7,084 million; and G&A INR 5,856 million for quarter 1. Now to your second question, which is related to the salary increase, we had 3 different impacts effectively in salary. One is the 1 month impact of the salary increase that we gave. The second is that we have given restricted stock units in quarter 1 to our top employees. And impact for that also flow through. And there is obviously, when you give salary increase, there is certain amount of actual provisioning related to long-term postretirement benefits, also goes up and that has also impacted. Collectively, I would say, a very large component of the margin difference that you're seeing is because of salary impact, all 3 put together. Now when we get into quarter 2, I would think that the RSU and postretirement benefit related impact will not come. But there will be 2 months impact of the salary increase that will flow through in quarter 2 .

Ashwin, If you can repeat your first question, we'll be happy to answer that.

Yes, in terms of ATCO, how would $195 million cash consideration be treated? Would it be amortized or would it be tested for impairment and treated as an acquisition consideration?

So we'll be happy to answer that question in next quarter, because we are concluding the deal as we speak, and accounting we will finalize during the course of the call.

And just one thing, in terms of involuntary attrition, if you can share that, that number, as well?

So Ashwin, the muscle of the organization is really the team which is performing. And to that extent, that is the impact, which is felt by the organization, in terms of the customer connect or internal performance and so on and so forth. So we felt that there was a greater importance of sharing voluntary information, and we should share that, and we had that thought for some time now, but we didn't want to make the change on the disclosure during the course of the year, but now, we've made a call to share voluntary information going forward, because that's what, really, impacts our ability to perform in front of our customers.

Our next question is from the line of Sandip Agarwal from Edelweiss.

I have just a question for Kurien. Can you please highlight a little bit more on the U.S. side? Already, you mentioned that this quarter has not turned out as expected. Because if you see, we were expecting that at least U.S. and Europe will do well in this quarter, and we were building in little bit of negativity from India, but it turned out that India was not that bad. It was actually better than expectation, but there was some disappointment coming in U.S. and Europe. So if you can highlight something related to the kind of one-off to look at, will it be right to see it as a one-off, or is it restrained or you're seeing that it not picking up the way we expected. What is the right way to look at it?

Yes. So this is Jatin. I will try and attempt that question, and if need, T.K. will then jump in. If you see our number for quarter 1, for U.S. and Europe both, they are respectively, Y-o-Y growth so 9.9% and 11.8% kind of numbers. And, Sandeep, that number is ahead of company growth rate. So effectively, for the last 4 quarters, we have been doing better in our largest market, which is U.S. and Europe. You are right, that when we started the quarter, we had an expectation that maybe those markets will continue to do well, and India will get impacted. But the reality of business is that there will always be certain moments during the quarter that you would not have visibility in the beginning of the quarter, and this turns out to be a similar, one such quarter. Having said that, we are not -- we remain confident of our performance in our largest markets. This is one quarter where it has played out like this, but over the course of last year, we have continued to do that.

And Sandeep, if I can just add on, I think what happened was 2 things affected us. One was the fact that our ramp ups for our deal wins did not happen the way we expected them to. That to some extent got -- hit our revenue. Second was in some of our larger accounts, we had a few ramp downs that happened. We expected projects to again restart, that's not happened. We expect that to continue for one more quarter, that piece of it. But overall, as far as we're concerned, in quarter 2 and in quarter 3 especially, we should see growth coming back quarter 2. It's a little early to judge right now and say what it going to look like, but my own sense, it'll probably -- we see some positive happening in quarter 2 also.

Participants, that was the last question. I now hand the floor back to Mr. Aravind Viswanathan for closing comments. Thank you, and over to you, sir.

Ladies and gentlemen, ending the call. If you have any questions that we could not take due to time constraints, please feel free to write to us, and we'll be happy to answer them. Thank you, and have a good day.

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