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Updated: October 24, 2013 00:18 IST

There are opportunities to expand margins: Suresh Senapaty

V. Sridhar
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Suresh Senapaty.
The Hindu
Suresh Senapaty.

A day after Wipro announced its results for the second quarter, posting its best revenue growth in seven quarters, its Chief Financial Officer Suresh Senapaty spoke to this correspondent. Excerpts:

Wipro’s margins, like most of its competitors, have been under pressure. Your performance in the last quarter, however, was the best in the last several quarters. Does this mark a turnaround? How much of it is to do with the rupee’s decline?

Of course, the rupee’s decline has quite a lot to do with the improved performance, but the investments we had made in sales and marketing, process automation and back-end standardisation … we have recovered some of the investments we had made through the decline in the value of the rupee. In short, we have gained because of rupee’s decline, but we have also gained because of our improved operational efficiency.

We think the margins we posted in the last quarter (22.5 per cent) are sustainable in the medium- to long-term.

There are opportunities to expand margins further with our existing business model, unless our peers also bring down their margins. The other option is to make inorganic investments. Our focus is on keeping margins where they are while ensuring that there is (revenue) growth.

How much are you worried about the possibility of undercutting by your rivals?

I would not be truthful if I said we are not worried. But there is enough work for everybody. I believe there is no insanity.

But the rupee’s decline lays the ground for such a possibility…

Yes, it does, but the good thing today, compared to five years ago, is that most of the service providers are now competing in terms of offering outcomes to clients, which offer them greater leeway to retain margins.

But there are worries that the proposed immigration bills in the U.S. may add costs for Indian service providers…

The immigration bills will add costs to our operations. Our sense is that some cost increase will occur. But as long as there are no discriminatory provisions, the cost increase will be similar for all our peers.

How big is the legislation a worry?

In their current forms, the House Bill is more acceptable than the Senate Bill. The latter is certainly very retrograde. Our customer base has generally been supporting the House Bill. Also, some of our global competitors, who were earlier supporting the Senate Bill, have switched. Even at the political level, there is greater acceptance for the House Bill. But the political process will mean compromises and renegotiation. We have to be watchful, and spend time and energy with every possible person who has a decision-making ability or the ability to influence the outcome.

RELATED NEWS

Wipro net rises 17 % in Q4April 19, 2013

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