We'll acquire new biz for skills we can't build internally, says Wipro CFO

Jatin Dalal, Wipro CFO
Wipro Chief Financial Officer JATIN DALAL tells Bibhu Ranjan Mishra and Samreen Ahmad in an interview that even though a couple of past buyouts have not done well, it will not turn away from inorganic opportunities. The focus, however, would be to grow capabilities organically. Excerpts:

Your growth in FY18 slid to 4.6 per cent from 4.9 per cent in the previous year, and based on the outlook you have given for Q1, will that growth decelerate?

Our digital growth has been building well at 27 per cent, farming (growing client accounts) has been good; growth in Europe has been robust, and application services, which always had lower growth, have been ahead of company growth this year. Overall, we feel quite good about what we are able to build as ‘growth factors’. We are constantly hit by external factors such as bankruptcy and others. We are trying to delicately balance both — not letting go of our growth building blocks and at the same time resiliently facing what is coming on the external side. From hereon, the external impact should moderate and growth factors start contributing bigger numbers.

You also faced external factors in the past also. What’s your view?

Yes, external impacts do come. But we never had these kind of challenges of an external environment earlier. If such things do not recur with similar frequency, I am positive some of the growth factors we have put in place will start picking up. You can never predict what will go wrong externally, but one hopes that some of these will not continue for a long time.

So will growth pick up from Q2?

We believe it will pick up. But we don’t formally guide for the full year.

The telecom business surely is an external factor. Even part of health care is not doing well. India and West Asia business continue to be under pressure. Any sign of improvement on those fronts?

We should improve and only place where we need to work are India and West Asia, which are volatile and the business rhythm is still not shockproof. Global businesses can take ups and downs. India business is reasonably volatile, given factors like demonetisation, sectoral views such as retail, banking. The external environment has remained volatile in India. Saudi Arabia has gone through its own challenges in the past few months. Now it’s coming back to normalcy. We do hope some of the positivity flowing into our business.

At least two of your past buyouts — Infocrossing and HealthPlan Services — failed to achieve stated objectives. How do you balance inorganic and organic growth?

If you look at our M&A history, only one or two have not done well for every six or seven deals. There’s a 40-60 ratio. Deals that have done well have more than delivered for the cost that we incurred for the entire 100. I am very balanced about certain skill set that you will have and some that you will have to buy. Growing internally is significantly less expensive. But certain things you can’t build internally. We will always acquire for skill set.

That means you will be selective in M&A?

We will be open to looking at things that we can’t do internally.

Communications (business) continue to drag your growth?

We have been in a traditional communication service providing business. We have had a couple of large projects that went down ahead of time and one of the bankruptcy clients was in the communications space.

When the data centre service business (sold to Ensono) goes away, how much of revenue impact it will have?

The current revenue of the business is $50-55 million per quarter.

But its divestment is benefiting the profit margins? 

Yes, but more critically it will monetise an asset, which was no longer core for us, so that much capital is available to invest in areas where growth could come.

 
What is the visibility on margin then?

Yes, we will increase margins through the year, but first quarter will have headwinds of lower revenue because of the bankruptcy businesses and salary hikes that we will give that is coming from June 1.