While India's third-largest IT company Wipro 's revenues met analysts' expectations, brows have been raised over its Q1FY15 guidance . The company has guided for a muted Q1FY15, but still is a growth from earlier guidances, says Suresh C Senapaty, executive director and chief financial officer.
While Q1 and Q4 are traditionally weaker quarters, the company gave a guidance of less than 5 percent growth in Q1FY14 and that has risen significantly to 8 percent in Q1FY15.
"Theoretically, quarter-on-quarter (QoQ) looks weaker but on year-on-year (YoY) basis it is looking strong," explains Senapaty.
While the current quarter is likely to be plagued by the major headwinds of contraction in retail and India business, the net quarter (Q2) is looking to be positive, adds chief executive officer TK Kurien
Below is the edited transcript of the boardroom.
Reema: The first question I have is on guidance. While Q4 was a good quarter we will talk a bit about the Q1 guidance. For growth to come down from 2.5 percent in Q4 FY14 to possibly no growth in Q1 FY15 , what are you factoring in terms of India business as well as retail because you have highlighted both of them as the pressure points for a weak guidance in Q1? Are you factoring in a possible contraction in India as well as in retail into this guidance?
Kurien: If you look at our business and I want to just give you a sense to what Q1 guidance is all about in the backdrop of what we have achieved in Q4. If you look at Q4, Q4 was very good quarter for us in terms of order book. We see the same momentum continue in terms of order book in Q1 and Q2.
However, there have been two headwinds that we have had. One is the retail business where we have seen a secular decline and we see that decline continuing in Q1 also. Similarly, in the India business, traditionally we have had a lumpy India business. Q4 thanks to budgets, have always been very good and in Q1 it takes time for us to renew budgets, which happens through the quarter.
However, when we give guidance we don't anticipate stuff that is going to happen. We basically take all the orders that have been closed, look at execution and then give our guidance. To that extent India has been muted in terms of guidance. It is actually a decline and we expect that as we go through the quarter we would be in a position to kind of catch up. So, that broadly would be factored in into the negative side of the guidance.
On the upside what we have factored in is a fact that we will be able to execute all the orders that we have won. I think that is the range we have given. Fundamentally, what has happened is that we try to stay within the range as in the past and that will be exactly what we are going to try this quarter too.
Q: I get qualitatively that you are saying it is going to be a muted performance but quantitatively is it going to be a contraction in Q1 in these two? I still do not get that?
Kurien: I think in retail there is a going to be a contraction. In India business too there is going to be a contraction. The answer is yes, but we expect that as we go through the quarter the contraction that we are going to be seeing in retail in Q1 would be made up in Q2 and to that extent we clearly see the quarter two looking better than Q1.
Senapaty: One will see that Wipro generally is much stronger in Q2 than Q3 traditionally and Q4 and Q1 tend to be weaker with Q1 being the weakest.
The first quarter, while in some form on its QoQ basis looks little weaker, if you look at last year Q1, we gave a growth of less than 5 percent and this year based on the guidance of this Q1 that we are talking about, it is at 8 percent plus. Therefore, as one can see, on a quarter-on-quarter basis we are increasing the guidance on year on year basis and as we move forward, our India business would be taking this 8 percent up as we go forward.
We talked about good order wins, we talked about good pipeline. We did some closures towards the end of Q4 and the benefit into Q1 will be lower but as we get into Q2, it will be far better and therefore some of will be reflected in Q2. Therefore, theoretically QoQ looks weaker but on year on year basis it is looking strong.
More to come.
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