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India Equity Research Reports, IPO and Stock News
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Mumbai Investor Meetings
CLSA organized investor meetings in Mumbai with Wipro CFO, Mr. Suresh
Senapathy. Interesting notes from management commentary include:
q Re-structuring: Wipro has completed its internal re-structuring in just two months
(usually takes around two quarters) and as of 31st March all middle and senior level
managers have been assigned responsibilities. There have been some employee
exits as a result of this but per Wipro, only 4-5% of the exits are regrettable. Wipro
believes re-structuring was essential as they were seeing customer satisfaction
scores go down over the last four quarters, which in turn impacted growth.
q Simplifying the organisation structure: Barring certain emerging geographies,
all P&L responsibilities have been kept at the industry vertical level. Wipro believes
this will prevent conflict of interest between vertical, service line and geography
which was hurting it under the previous structure. Employee incentives have been
aligned to account level customer satisfaction, revenue growth and EBIT growth
and Wipro believes this will help align employee and company interests.
q Growth trajectory in FY12: Distraction from the re-organisation implies 1HFY12
will remain soft on revenue growth. Wipro is aiming to be the industry growth
leader by Mar-12 (4Q12) quarter. Wipro’s current deal funnel is at 90-95% level c.f.
same time last year but Wipro believes that the new structure should help them
increase closure rate. Wipro’s 70 Mega/Gamma accounts contribute 70% of
revenues and Wipro is hoping to mine these better under the new structure.
q Margin performance in FY12: Lack of adequate revenue growth coupled with
wage hikes should keep margin performance muted through 1HFY12. Wipro’s
aspiration is to exit FY12 (Mar-12 quarter margins) at FY11 margin levels, i.e.
around the 22.5% mark. This would still mean a 100bpsYY decline in FY12. Unlike
peers like HCL, Wipro is not inclined to trade margins for growth.
q People metrics: Wipro expects attrition levels to come down by the end of this
year. 12-15% offshore wage hike (including promotions) and 2-4% onsite hike will
play a part in this. Besides, Wipro has now decided to effect all wage
hikes/promotions from 1st June and will continue to do so in future years as well.
Wipro believes this predictability will alleviate employee concerns on the previous
ad-hoc nature of Wipro’s salary cycles.
q Offshore wage cost management: 70% of Wipro’s gross hires will likely be fresh
engineers/graduates (~45-50% in FY11) in FY12. This will help Wipro manage its
per capita wage costs. Note that Wipro’s current offshore per capita wage cost is
~10% higher than peers. Offshore wage cost forms around 20% of revenues.
q Utilisation & Visas: Wipro is trying to ramp-up its local hiring to reduce visa
dependence. However, it remains confident of managing utilisation levels. Onsite
utilisation is currently at 89-90% and Wipro sees scope for taking those up.
q Acquisitions & Tie-ups: Wipro maintained that it will not acquire for the sake of
top-line growth. Acquisition of SAIC’s oil & gas practice strengthens its presence in
the upstream companies in the energy sector. A tie-up with Temenos on its T24
core banking product is aimed at making up for a lack of core banking offering and
addressing gaps in Wipro’s retail banking portfolio. Per Wipro, Infocrossing has
played a part in winning 60-70% of large deals in US since its acquisition in 2007.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Mumbai Investor Meetings
CLSA organized investor meetings in Mumbai with Wipro CFO, Mr. Suresh
Senapathy. Interesting notes from management commentary include:
q Re-structuring: Wipro has completed its internal re-structuring in just two months
(usually takes around two quarters) and as of 31st March all middle and senior level
managers have been assigned responsibilities. There have been some employee
exits as a result of this but per Wipro, only 4-5% of the exits are regrettable. Wipro
believes re-structuring was essential as they were seeing customer satisfaction
scores go down over the last four quarters, which in turn impacted growth.
q Simplifying the organisation structure: Barring certain emerging geographies,
all P&L responsibilities have been kept at the industry vertical level. Wipro believes
this will prevent conflict of interest between vertical, service line and geography
which was hurting it under the previous structure. Employee incentives have been
aligned to account level customer satisfaction, revenue growth and EBIT growth
and Wipro believes this will help align employee and company interests.
q Growth trajectory in FY12: Distraction from the re-organisation implies 1HFY12
will remain soft on revenue growth. Wipro is aiming to be the industry growth
leader by Mar-12 (4Q12) quarter. Wipro’s current deal funnel is at 90-95% level c.f.
same time last year but Wipro believes that the new structure should help them
increase closure rate. Wipro’s 70 Mega/Gamma accounts contribute 70% of
revenues and Wipro is hoping to mine these better under the new structure.
q Margin performance in FY12: Lack of adequate revenue growth coupled with
wage hikes should keep margin performance muted through 1HFY12. Wipro’s
aspiration is to exit FY12 (Mar-12 quarter margins) at FY11 margin levels, i.e.
around the 22.5% mark. This would still mean a 100bpsYY decline in FY12. Unlike
peers like HCL, Wipro is not inclined to trade margins for growth.
q People metrics: Wipro expects attrition levels to come down by the end of this
year. 12-15% offshore wage hike (including promotions) and 2-4% onsite hike will
play a part in this. Besides, Wipro has now decided to effect all wage
hikes/promotions from 1st June and will continue to do so in future years as well.
Wipro believes this predictability will alleviate employee concerns on the previous
ad-hoc nature of Wipro’s salary cycles.
q Offshore wage cost management: 70% of Wipro’s gross hires will likely be fresh
engineers/graduates (~45-50% in FY11) in FY12. This will help Wipro manage its
per capita wage costs. Note that Wipro’s current offshore per capita wage cost is
~10% higher than peers. Offshore wage cost forms around 20% of revenues.
q Utilisation & Visas: Wipro is trying to ramp-up its local hiring to reduce visa
dependence. However, it remains confident of managing utilisation levels. Onsite
utilisation is currently at 89-90% and Wipro sees scope for taking those up.
q Acquisitions & Tie-ups: Wipro maintained that it will not acquire for the sake of
top-line growth. Acquisition of SAIC’s oil & gas practice strengthens its presence in
the upstream companies in the energy sector. A tie-up with Temenos on its T24
core banking product is aimed at making up for a lack of core banking offering and
addressing gaps in Wipro’s retail banking portfolio. Per Wipro, Infocrossing has
played a part in winning 60-70% of large deals in US since its acquisition in 2007.
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