Capco’s acquisition will be completed in Q1FY22: Jatin Dalal, Wipro
Jatin Dalal, President and Chief Financial Officer (CFO), Wipro Limited, talks about Q4FY21 results, margin outlook, Q1FY21 guidance and acquisition of Capco and Ampion among others during a candid chat with Swati Khandelwal, Zee Business.
Jatin Dalal, President and Chief Financial Officer (CFO), Wipro Limited, talks about Q4FY21 results, margin outlook, Q1FY21 guidance and acquisition of Capco and Ampion among others during a candid chat with Swati Khandelwal, Zee Business. Edited Excerpts:
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Q: Wipro has posted the best fourth quarter in a decade. What were the reasons for this revenue performance and what is your revenue outlook for FY22?
A: Our performance for the fourth quarter has been broad-based. Our performance in the Americas and Europe has been very good, close to 3.5-3.7% and 3.7%, respectively. Even in APMEA (Asia Pacific Middle East and Africa) has also been good, except the Middle East where many low quality and low margin contracts were available and we have not yet participated in it, so the situation was a bit negative there. But otherwise, we have seen a broad-based secular growth in the fourth quarter. If you will have a look at the service line then the performance of our iCORE (Cloud Infrastructure, Digital Operations, Risk & Enterprise Cyber Security Services) service has been 4.3% sequential and the IDEAS (Integrated Digital, Engineering & Application Services) service line has been 2.1% sequential. So, overall, our performance has been very good at all the places.
Q: Margins got hit due to a wage hike coming in at 20.5%. Do you expect to get it hit further in FY22?
A: The scenarios are quite different between FY21, the year that ended and FY22, the year that has started. If you will have a look at the same time, last year then we were in a dilemma as to what would happen with demand and how would we manage the cost if there was no demand. So, the priorities and questions that we had last year and if compared from this year then the questions are completely different, I would say that the questions are 180 degrees opposite. Currently, demand is quite good in the market, opportunities are very high and we have to see that how we can maximize this year from the perspective of demand capture and revenue growth. So this year, we have to invest. In the first quarter- as we have told in the press conference – we will give salary increments to our senior colleagues. We are giving across the board promotions as well as skill-based bonuses. Our front-line investment will be for our global account executive cadre and it will continue to happen and very senior people hiring will happen. By all means, we will try to manage our investment in a way that we can capture maximum demand this year and accordingly it will reflect in our operating margin. But, I feel, it will have more impact in the initial quarter and as we will continue to grow during the year, we will be able to recapture the margins.
Q: Wipro has provided guidance of 2-4% revenue growth in dollar terms for Q1FY21, excluding the benefit of the recently announced acquisitions of Capco and Ampion. By when they will be incorporated in your results and how much would be the impact?
A: The growth of Capco and Ampion has been factored in our growth numbers for second, third and fourth quarters and it will be present in those. And, Capco and Ampion are not included in the guidance that has been provided for the first quarter. And, I would like to say that right now, it is difficult to estimate the revenue that we will get from Capco and Ampion this year because it will be decided from the day when these acquisitions are integrated, from that day we will have to see its revenue. We believe that these acquisitions will be completed in the first quarter, by end of June. So, whenever it is completed, we will inform you about the way you should count it FY2021-22.
Q: You have announced your largest-ever acquisition of Capco in the global financial services sector and the total contract value for Q4FY21 stands at $1.4 billion, which includes 12 large deals. Can you give us an idea of any other large acquisition coming up for FY22?
A: We continuously evaluate acquisitions and move forward in those which tick the three, our financials, cultural and strategic fits. We will continue to evaluate the acquisitions. Now, I would like to say that Capco is a big acquisition and you need more time, more effort and strategic thinking to integrate every big acquisition. Therefore, I would say, we will make every big acquisition very thoughtfully so that we can integrate it well and it fits into our overall strategy. So, we will look forward to acquisition in FY22 as well but big acquisitions will be made after giving a thought to it.
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