Our MTM provision is not a loss`- interview with Wipro joint CEOs
| SOURCE: Business Standard DATE: JUly 19th, 2008 ARTICLE Mohit Soapbox: Like most of its peers in the industry, Wipro Technologies is passing through a tough phase. In spite of a global slowdown and an uncertain economic environment, the company is optimistic about maintaining its growth momentum. |
| Bibhu Ranjan Mishra spoke to the joint CEOs of Wipro Technologies, Suresh Vaswani and Girish Paranjape, about the company’s hedging strategy and future plans. Excerpts: |
| You have made a mark-to-market (MTM) provision of Rs 935 crore. What went wrong with your hedging strategy? |
 Paranjpe: We have taken some long-term hedges for multi-year contracts, which span over around five years and above, to make sure that we have certain amount of realisation.
Since some of those contracts were struck at around Rs 40, we have to carry out this MTM exercise as we didn’t want our profit to shrink based on the spot market rates. We don’t think we went wrong anywhere. |
| The MTM of Rs 935 crore in this quarter is not a loss, but money that is lying in the balance sheet and we will realise it as and when the rupee reaches the earlier level. The real impact of the forex loss was Rs 69 crore that we have reported in our profit and loss account. |
| How are you tackling the global slowdown? |
 Vaswani: We actually see an opportunity for us in that slowdown in the medium term. We clearly have a strong global delivery model that gives our customers a cost benefit across the globe.
We have taken our service delivery to the next level across all our service lines. Rather than bidding only for the request for proposals (RFPs), we are now going to customers and working closely with them. |
| BFSI and retail segments have been badly hit. |
| Paranjape: Many of the big players in the US have got badly affected by the sub-prime problem. So their business and usual plans have really changed to some extent. |
| They are looking at significant reduction in costs. Some of them have cut budgets. However despite this, the regular business has not changed very much. |
| Has there been a cut in IT budgets? |
| Paranjape: I have heard figures from 10-15 per cent, and in some cases, it is as high as 20 per cent. |
| But reduction in IT budget does not automatically mean that it will affect our business because the budget has multiple components like hardware, software licences and onsite contractors. We can work in an efficient manner, tightening our operations and pass on the costs saved to our clients to them. |
| There is a slowdown in revenue from your top-10 clients. |
| Paranjape: In every category, the number of clients has gone up. We are focusing mainly on accounts management and creating an incentive programme aimed at ensuring profitability. We added almost $500 million (around Rs 2,100 crore) worth of contracts, spanning over the next five years. |
| Going forward, what will be your acquisition strategy? |
| Vaswani: Infocrossing is a part of our long-term strategy since infrastructure is a big business for us. About 18 per cent of our business comes from infrastructure services. This is a critical part of offshoring for our US customers. We don’t have an acquisition plan just to meet the target. We look at long-term potential of the business. |
| Over the past few quarters, you are going more towards near-shore facilities and establishing delivery centres there. |
| Paranjape: In IT services, we have been focusing more on near-shoring or what we term as best-shoring. The traditional model is executing some works onsite and some at offshore locations like Bangalore. |
| Today, our customers are not bothered about the locations from where we deliver services, but about the kind of services. |
| Does it mean that you will hire more locals at your clients’ locations? |
| Vaswani: The drive is to establish a larger near-shore presence. We will consolidate our near-shore delivery model for our local customers. |
| Instead of sending people from India on H1-B visas, we will hire a lot more locally. We will house people at the near-shore centre more locally and create that as an integral part of our global delivery. |
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