WIPRO LIMITED
ANNUAL REPORT 2010-2011
DIRECTOR'S REPORT
Dear Shareholders,
On behalf of the Board of Directors, I am happy to present the 65th
Directors' Report of your Company along with the Balance Sheet and Profit
and Loss Account for the year ended March 31, 2011.
Financial Performance
Key aspects of consolidated financial performance for Wipro and its group
companies and standalone financial results for Wipro Limited for the
financial year 2010-11 are tabulated below:
(Rs. in Mn)
Consolidated Standalone
2010-11 2009-10 2010-11 2009-10
Sales & Other income 316,938 276,505 269,038 237,887
Profit before Tax 62,348 55,095 57,055 56,888
Provision for Tax 9,695 9,163 8,618 7,908
Minority interest & equity in
earnings/(losses) in affiliates 271 378 - -
Profit for the year* 52,924 46,310 48,437 48,980
Appropriations:
Interim Dividend 4,908 - 4,908 -
Proposed Dividend
on equity shares 9,818 8,809 9,818 8,809
Corporate tax
on distributed dividend 2,204 1,283 2,204 1,283
Transfer to General Reserve 4,844 36,218 4,844 38,888
Balance retained
in Profit & Loss account 31,150 - 26,663 -
* profit for the year in standalone result is after Rs. 326 million (March
2010: Rs. 4,534 million of gains/(losses) relating to changes Directors'
report in fair value of forward contracts designated as hedges of net
investment in non-integral foreign operations, translation of foreign
currency borrowings and changes in fair value of related cross currency
swaps together designated as hedges of net investment in non-integral
foreign operations. In the consolidated Accounts, these are considered as
hedges of net investment in non-integral foreign operations and are
recognized directly in shareholders' funds. (Refer note 6 on page 112)
Global and Industry outlook
According to NASSCOM Strategic Review 2011, IT spend in 2011 is expected to
grow about 4%. It is expected that in 2011, there will be increased use of
Cloud and Mobile Computing. IT Services is expected to grow by about 3.5%
in 2011 and 4.5% in 2012. Organisations will look for alternative IT models
like Cloud, On-demand Services, SaaS, etc., - in order to reduce hardware
infrastructure costs and achieve scalability on demand.
The Forrester US and Global IT market Outlook Q3, 2010- 11 predicts that
U.S. IT market will grow by 6.6% in 2011. Companies are increasingly
turning to Offshore Technology Service providers in order to meet their
needs for high quality, cost competitive technology solutions. As a result,
spending in several IT categories is expected to expand.
Subsidiary Companies
The Ministry of Corporate Affairs, Government of India, has granted a
general exemption under section 212(8) of the Companies Act, 1956 from the
requirement to attach detailed financial statements of each subsidiary. In
compliance with the exemption granted, we have presented in page 163 & 164
summary financial information for each subsidiary.
The detailed financial statements and audit reports of each of the
subsidiaries are available for inspection at the registered office of the
company during office hours between 11 am to 1 pm and upon written request
from a shareholder, your company will arrange to send the financial
statements of subsidiary companies to the said shareholder.
Consolidated Results
Our Sales for the current year grew by 15% to Rs.. 316,938 million and our
Profit for the year was Rs. 52,924 million, recording an increase of 14%
over the previous year. Over the last 10 years, our Sales and Profit after
Tax have grown at a CAGR (compounded annual growth rate) of 26% and 23%
respectively.
Dividend
Your Directors recommend a final Dividend of 200% (Rs. 4/- per equity share
of Rs. 2/- each) to be appropriated from the profits of the year 2010-11,
subject to the approval of the shareholders at the ensuing Annual General
Meeting. The Dividend will be paid in compliance with applicable
regulations.
During the year 2010-11, unclaimed dividend of Rs. 1,37,605/- was
transferred to the Investor Education and Protection Fund, as required
under the Investor Education and Protection Fund (Awareness and Protection
of Investor) Rules, 2001.
Interim Dividend
Pursuant to the approval of Board of Directors on January 21, 2011, your
company had distributed an interim dividend of Rs. 2/- per share, of face
value of Rs. 2/- each, to shareholders, who were on the Register of Members
of the company as at closing hours of January 28, 2011, being the record
date fixed by the Board of Directors for this purpose.
Issue of Bonus equity shares/American Depository Shares
In terms of approval of the shareholders of the company through Postal
Ballot pursuant to Section 192 A(2) of the Companies Act, 1956 read with
the companies (Passing of the Resolutions by Postal Ballot) on June 4,
2010, the Company had allotted Bonus equity shares of Rs. 2/- each in the
ratio of 2:3 (two bonus shares for every three shares held) to the
shareholders of the Company who were on the Register of Members of the
Company as on June 16, 2010, being the Record Date fixed by the Board of
the Directors of the Company for this purpose.
Mergers and Acquisitions
During the year, the Company re-structured a few of its subsidiaries
including overseas subsidiaries through merger/ other legal process.
Wipro Yardley consumer care Private Limited, a subsidiary company got
merged with Wipro Limited w.e.f. April 1, 2010, being the appointed date.
Investments in direct subsidiaries
During the year under review, your Company had invested an aggregate of USD
34 Mn as equity in its direct subsidiaries i.e. Wipro Cyprus Private
Limited, Wipro Inc, Wipro Holdings Mauritius Limited and Wipro
Infrastructure Engineering Machinery (Changzhou) Co., Ltd. Apart from this,
your Company had funded its subsidiaries, from time to time, as per the
fund requirements, through loans, guarantees and other means.
Corporate Governance & Corporate Social Responsibility
Your company believes that Corporate Governance is the basis of stakeholder
satisfaction. Your company's governance practices are described separately
in page 63 of this annual report. Your company has obtained a certification
from V. Sreedharan & Associates, Company Secretaries on compliance with
clause 49 of the listing agreement with Indian Stock Exchanges. This
certificate is given in page 92.
With a view to strengthen the Corporate Governance framework, the Ministry
of Corporate Affairs has incorporated certain provisions in the Companies
Bill 2009. The Ministry of Corporate Affairs has also issued a set of
Voluntary Guidelines on Corporate Governance and Corporate Social
Responsibility in December 2009 for adoption by companies. The Guidelines
broadly outline conditions for appointment of directors, guiding principles
to remunerate directors, responsibilities of the Board, Risk Management,
rotation of audit partners, audit firms and conduct of secretarial audit
and other Corporate Governance and Corporate Social Responsibility related
disclosures. Your Company has by and large complied with various
requirements and is in the process of initiating appropriate action for
other applicable requirements.
Corporate Governance is also related to Innovation and strategy as the
organization's ideas of Innovation and strategies are driven to enhance
stakeholder satisfaction.
Personnel
The particulars of employees as required by Section 217 (2A) of the
Companies Act, 1956, read with the Companies (Particulars of Employee)
Rules, 1975 as amended have been provided as annexure C' to this report.
Wipro Employee Stock Option Plans (WESOP) / Restricted Stock Unit Plans
Information relating to stock options program of the Company is provided as
Annexure B of this report. The information is being provided in compliance
with Clause 12 of the Securities and Exchange Board of India (Employee
Stock Option Scheme) and (Employee Stock Purchase Scheme) Guidelines, 1999,
as amended. No employee was issued Stock Option, during the year equal to
or exceeding 1% of the issued capital of the Company at the time of grant.
Foreign Exchange Earnings and Outgoings
During the year, your company has earned foreign exchange of Rs. 183,771
million and the outgoings in foreign exchange were Rs. 85,642 million,
including outgoings on materials imported and dividend.
Research and Development
Requirement under Rule 2 of Companies (Disclosure of particulars in the
report of Board of Directors) Rules, 1988 regarding Technical Absorption
and Research and Development in Form B is given in Page 54 of the Annual
Report, to the extent applicable.
Conservation of Energy
The Company has taken several steps to conserve energy through its 'Eco Eye
and Sustainability' initiatives disclosed separately as part of this Annual
Report. The information on Conservation of Energy required under Section
217(1)(e) of the Companies Act, 1956 read with Rule 2 of the Companies
(Disclosure of Particulars in the Report of Board of Directors) Rules, 1988
is provided in Annexure A in page 53 of this annual report.
Directors:
(A) Appointment
1. Mr. T. K. Kurien was appointed as an Additional Director of the Company
with effect from February 1, 2011 in accordance with Section 260 of the
Companies Act, 1956, by the Board of Directors at its meeting held on
January 21, 2011. Mr. T. K. Kurien will hold office till the date of the
Annual General Meeting of the Company scheduled to be held on July 19,
2011. The requisite notices together with necessary deposits have been
received from a member pursuant to Section 257 of the Companies Act, 1956
proposing the election of Mr. T.K. Kurien as a Director of the Company.
Accordingly, necessary resolution has been included in the notice for
calling Annual General Meeting, for his appointment as a Director
(designated as CEO (IT Business) and Executive Director).
2. Mr. M.K. Sharma was appointed as an Additional Director of the Company
in accordance with Section 260 of the Companies Act, 1956, by the Board of
Directors with effect from July 1, 2011. The additional Director would hold
office till the date of Annual General Meeting of the Company scheduled to
be held on July 19, 2011. The requisite notices together with necessary
deposits have been received from a member pursuant to section 257 of the
Companies Act, 1956 proposing the election of Mr. M. K. Sharma, as a
Director.
(B) Re-appointment
Articles of Association of the Company provide that at least twothird of
our Directors shall be subject to retirement by rotation. One third of
these retiring Directors must retire from office at each Annual General
Meeting of the shareholders. A retiring Director is eligible for
reelection. Mr. Suresh C Senapaty, Mr William Arthur Owens and Mr. B C
Prabhakar retire by rotation and being eligible offer themselves for
reappointment at the ensuing Annual General Meeting. The Board Governance
and Nomination Committee have recommended their re-appointment for
consideration of the Shareholders.
Board of Directors vide circular resolution of June 15, 2011, re-appointed
Mr. Azim H Premji as Chairman and Managing Director of the Company
(designated as 'Chairman') for a further period of two years with effect
from July 31, 2011. This re-appointment is subject to the approval of the
shareholders of the Company at the ensuing Annual General Meeting.
(C) Cessation
During the year 2010-11 Mr. Girish S Paranjpe and Mr. Suresh Vaswani
resigned as Board members of the company with effect from closure of
business hours on January 31, 2011.
The Board places on record the valuable contributions of Mr. Girish S
Paranjpe and Mr. Suresh Vaswani during their tenure as Directors of the
Company.
Group
The names of the Promoters and entities comprising 'group' (and their
shareholding) as defined under the Monopolies and Restrictive Trade
Practices ('MRTP') Act, 1969 for the purposes of Section 3(1)(e)(i) of SEBI
(Substantial Acquisition of Shares and Takeover) Regulations, 1997 include
the following:
Sl. Name of the shareholder No. of
No. shares
1 Azim H Premji 93,405,100
2 Yasmeen A Premji 10,62,666
3 Rishad Azim Premji 9,46,666
4 Tariq Azim Premji 2,65,000
5 Mr. Azim Hasham Premji Partner
Representing Hasham Traders 543,765,000
6 Mr Azim Hasham Premji Partner
Representing Prazim Traders 541,695,000
7 Mr. Azim Hasham Premji Partner
Representing Zash Traders 540,408,000
8 Regal Investments & Trading Company Pvt Ltd 1,87,666
9 Vidya Investment & Trading Company Pvt Ltd 1,87,666
10 Napean Trading & Investment Company Pvt Ltd 1,87,666
11 Azim Premji Foundation (I) Pvt. Ltd 10,843,333
12 Azim Premji Trust 2,13,000,000
13 Azim Premji Trustee Company Private Limited NIL
14 Azim Premji Foundation for Development NIL
15 Azim Premji Foundation NIL
16 Azim Premji Trust Services Private Limited Nil
17 Azim Premji Safe Deposits Private Limited Nil
18 Azim Premji Custodial Services Private Limited Nil
Management's Discussion and Analysis Report:
The Management's Discussion and Analysis on Company's performance -
industry trends and other material changes with respect to the Company and
its subsidiaries, wherever applicable, are presented on pages 32 through 48
of this annual report.
Re-appointment of Statutory Auditor
The auditors, M/s. BSR & Co., Chartered Accountants, retire at the ensuing
Annual General Meeting and have confirmed their eligibility and willingness
to accept office, if re-appointed. The proposal for their re-appointment is
included in the notice for Annual General Meeting sent herewith.
Re-appointment of Cost Auditor
Pursuant to the direction from the Ministry of Corporate Affairs for
appointment of Cost Auditors, your Board of Directors has re-appointed M/s.
P.D. Dani & Co., Cost Accountants, as the Cost Auditor for the year ended
March 31, 2012.
The Cost Audit report for the year ended March 31, 2010 was due on
September 30, 2010 and was filed by the cost Auditor on August 25, 2010.
Fixed Deposits
Your company has not accepted any fixed deposits. Hence, there is no
outstanding amount as on the Balance Sheet date.
Green Initiatives in Corporate Governance
Ministry of Corporate affairs has recently permitted companies to send
electronic copies of Annual Report, notices etc., to the e-mail IDs of
shareholders. We have accordingly arranged to send the soft copies of these
documents to the e-mail IDs of shareholders wherever applicable. In case
any of the shareholder would like to receive physical copies of these
documents, the same shall be forwarded on written request to the Registrars
M/s. Karvy Computer Share Private Limited.
Directors' Responsibility Statement
On behalf of the Directors I confirm that as required under Section 217
(2AA) of the Companies Act, 1956.
a) In the preparation of the annual accounts, the applicable accounting
standards have been followed and that no material departures are made from
the same;
b) We have selected such accounting policies and applied them consistently
and made judgements and estimates that are reasonable and prudent so as to
give true and fair view of the state of affairs of the Company at the end
of the financial year and of the profits of the Company for the period;
c) We have taken proper and sufficient care for the maintenance of adequate
accounting records in accordance with the provisions of the Companies Act,
1956 for safeguarding the assets of the Company and for preventing and
detecting fraud and other irregularities; and
d) We have prepared the annual accounts on a going concern basis.
Acknowledgements and Appreciation
Your Directors take this opportunity to thank the customers, shareholders,
suppliers, bankers, business partners/associates, financial institutions
and Central and State Governments for their consistent support and
encouragement to the Company. I am sure you will join our Directors in
conveying our sincere appreciation to all employees of the Company for
their hard work and commitment. Their dedication and competence has ensured
that the Company continues be a significant and leading player in the IT
services industry.
For and on behalf of the Board of Directors
Azim H. Premji,
Chairman
Bangalore, June 17, 2011
Annexure - A forming part of the Directors' Report
A. DISCLOSURE OF PARTICULARS WITH RESPECT TO CONSERVATION OF ENERGY
(Wipro Infrastructure Engineering Division)
ELECTRICITY 2010-11 2009-10
a. Purchased
Unit KWH 8,528,328 5,683,709
Total Amount Rs. 46,194,564 30,024,982
Rate/Unit Rs. 5.42 5.28
b. Own Generation through DG:
unit KWH 1,080,430 824,978
Unit/Ltr. Of
Diesel Units 2.91 2.53
Cost per unit Rs. 13.28 13.87
B. CONSUMPTION PER UNIT PRODUCTION
(Wipro Infrastructure Engineering Division)
Hydraulic cylinder Electricity Diesel
(kwh/cyl.) (Lts/Cyl.)
2010-11 20.11 0.77
2009-10 20.40 1.02
C. DISCLOSUREOF PARTICULARS WITH RESPECT TO CONVERSATION OF ENERGY
(Wipro Consumer Care Division)
Electricity 2010-11 2009-2010
a. Purchased
Unit KWH 19,857,756 18,104,719
Total Amount Rs. 98,858,732 81,983,935
Rate/unit Rs. 4.98 4.53
b. Own generation
Through Diesel Generator
Unit KWH 1,961,637 1,047,006
Unit/litre of diesel Units 3.14 3.15
Cost per unit Rs. 12.25 10.90
Coal:
Quantity Tones 1,843 2,594
Total Cost Rs. 10,184,851 12,115,327
Av. Rate Rs. 5,528 4,671
Furnace Oil 2010-11 2009-10
Quantity FO Ltrs. 3,149,110 4,546,900
Total Cost Rs. 102,419,666 120,679,932
Av. Rate Rs. 32.52 26.54
LPG & Propane:
Quantity Kgs. 741,751 697,410
Total Cost Rs. 30,954,644 24,944,813
Av. Rate Rs. 41.73 35.77
H2 Gas
Quantity CMT 108,642 107,623
Total Cost Rs. 3,547,283 3,670,983
Av. Rate Rs. 32.65 34.11
D. CONSUMPTION PER UNIT PRODUCTION
(Wipro Consumer Care Division)
Vanaspati Electricity Liquid Diesel Oi
(KWH/ Tonne) (Litres / Tonne)
ACT STD
2010/11 132.38 109 NA
2009/10 130.53 109 NA
General Lighting System Electricity Liquid Diesel Oil
(KWH/ 000 nos.) (Litres / 000 nos.)
ACT STD ACT STD
2010/11 14.04 16.00 0.36 -
2009/10 14.72 16.00 0.37 -
Flourescent Tube Light Electricity Liquid Diesel Oil
(KWH/ 000 nos.) (Litres / 000 nos.)
ACT STD ACT STD
2010/11 107.55 129.00 5.19 -
2009/10 135.20 136.00 3.79 -
FORM - B
Wipro's R&D Activities: 2010-11:
Wipro's R&D focus is to strengthen the portfolio of Applied Research,
Centers of Excellence (CoE), Solution Accelerators and Software Engineering
Tools & Methodologies.
Applied Research
Your Company's activities in Applied Research are focused around Content
Analytics and E-discovery. Investment in Applied Research has helped in
collaboration with academic institutes like Georgia Tech for Enterprise
Software Infrastructure performance in the cloud and IIIT-B in the space of
social analytics. Your Company has filed invention disclosures in the area
of query processing incubated solutions of E-discover and made publications
in ACM.
Your Company's researchers were actively involved in Government committees
to integrate Rupee sign into ICT environments. Rupee symbol is incorporated
into personal computers and first keyboard was created with the Indian
Rupee symbol.
Your Company has entered into a joint collaboration agreement with Imec, a
leading research institution from Belgium, world leader in Applied Research
in Semiconductor and Nano technology in March 2011. The joint team being
set up at Wipro's campus in Bangalore will develop IPs targeted for
products and solutions based on MEMS based smart sensors for emerging
market need.
Centers of Excellence (CoE)
The goal of a CoE is to create competencies in emerging areas of
technologies and industry domain and incubate new practices for business
growth. In order to enhance focus, few technologies are driven centrally as
Theme initiatives. For FY 2010-11, thetechnology themes identified were
Cloud Computing, Green IT, Social Computing, Information Management,
Mobility, Collaboration and Open Source. Investments in Technology Themes
have resulted in creation of several new services like Cloud SI Services,
Cloud Originator Services in areas of Mortgage Processing and Green
Consulting. We have established partnerships with leading technology
platform providers like Microsoft, Cisco, EMC, HP, Oracle, Amazon,
Salesforce, etc.
Solution Accelerators
Your Company continued to invest in Reusable IP's/Solution Accelerators
(components, tools, frameworks) which help in accelerating the
implementation of Solutions in customer engagements. Your Company has
integrated various accelerator assets to create integrated stacks and
solution.
Sample examples of integrated stack and solutions and business platforms
are the Wipro Cloud Stack, Digital Marketing Platform and Enterprise Grade
Smart Meters, Telco in a Box, Oracle based Clinical Trials solutions.
Software Engineering Tools & Methodologies
Your Company continued to invest in in-house development of Software
Engineering tools to improve productivity and Quality; Examples include
Wipro Style, Wipro Accelerator , Wipro Unit Test and Wipro Code Checker and
Deepcheck. These tools have been widely deployed across projects in your
Company.
Your Company continued investment in developing an approach for Flex Shared
Delivery with innovative solution for effective queue and capacity
management for reduced cost.
Your Company has developed an in-house KEDB (Known Error Data Base) Tool
that will help in faster ticket resolution in Managed Services projects.
Patents
In FY 2010-11, your Company had filed for 7 new patents and from the
previous filings, 6 patents have been granted.
Expenditure on R&D
During the year under review, your company incurred an expenditure of Rs.
1,656 million including capital expenditure in continued development of R&
D activities.
Annexure - B
DISCLOSURE IN COMPLIANCE WITH THE CLAUSE 12 OF THE SEBI (EMPLOYEE STOCK
OPTION SCHEME) AND (EMPLOYEE STOCK PURCHASE SCHEME) GUIDELINES 1999, AS
AMENDED
Description WESOP1999 WESOP 2000 ADS 2000
Stock Option
Plan
1. Total Number of 50,000,000 250,000,000 15,000,000
options under the plan (Adjusted for (Adjusted for the ADS
the issue of issue of bonus representing
bonus shares in shares in the 15,000,000
the years 2004, years 2004,2005 underlying
2005 and 2010) and 2010) equity shares
(Adjusted for
the issue for
bonus shares
of the years
2004, 2005 and
2010)
2. Options/RSUs - - -
grants approved
during the year
3. Pricing formula Fair market Fair market value Exercise price
value i.e. the i.e. the market being not less
market price price as defined than 90% of
as defined by by the Securities the market
the Securities and Exchange price on the
and Exchange Board of India date of grant
Board of India
4. Options Vested
during the year - - -
5. Options exercised - 80,000 -
during the year
6. Total number of - 80,000 -
shares arising as a
result of exercise
of option (as of
March 31, 2011)
7. Options lapsed/ - 121,606 -
forfeited during the
year *
8. Variation of - - -
terms of options
upto March
31, 2011
9. Money realised - 23,472,000 -
by exercise of
options during the
year (Rs.)
10. Total number of - - -
options in options
in force at the end
of the year
(granted, vested
and unexercised/
unvested and
unexercised
11. Employee wise
details of options
granted to:
i. Senior Management
during the year
a. Suresh Vaswani Nil Nil Nil
b. Girish Paranjpe Nil Nil Nil
c. TKKurien Nil Nil Nil
d. SDeb Nil Nil Nil
e. Pratik Kumar Nil Nil Nil
f. Vineet Agrawal Nil Nil Nil
g. Martha Bejar Nil Nil Nil
ii. Employees Nil Nil Nil
holding 5% or more
of the total number
of options granted
during the year
iii. Identified Nil Nil Nil
employees who were
granted option,
during any one year,
equal to or exceeding
1 % of the issued
capital (excluding
outstanding warrants
and conversions) of
the Company at the
time of grant
12. Diluted Earning 19.78 19.78 19.78
per Share pursuant
to issue of shares
on exercise of
option calculated
in accordance with
Accounting Standard
(AS) 20
13. Where the Not Not Not
Company has applicable applicable applicable as
calculated as there as there were there were no
the employees were no no g grants during
compensation cost grants rants during the year
using the during the year under this
instrinsic value the year under this Plan
of the stock under Plan
opitons, the this Plan
difference between
the employee
compensation cost
so computed and
the employee
compensation cost
that shall have
been recognised
if it had used
the fair vaule
of the options.
The impact of this
difference on
profits and on EPS
of the Company
14. Weighted average Not applicable Not applicable Not
exercise prices as there were as there were no applicable as
and weighted average no grants grants during there were no
fair values of during the year the year under grants during
options separately under this Plan this Plan the year
for options whose under this
exercise price Plan
either equals or
exceeds or is less
than the market
prices of the
stock
15.A description of - - -
method & significant
assumptions used
durng the year to
estimate the fiar
values of options,
including the
following weighted
average information:
(a) risk free Not applicable Not applicable Not
interest rate as there were as there were no applicable as
no grants grants during there were no
(b) expected life during the year the year under grants during
under this Plan this Plan the year
(c) expected under this
volatility Plan
(d) expected
dividends and
(e) the price for
the underlying
share in market
at the time of
option grant
Description Wipro Wipro ADS
Restricted Restricted Restricted
Stock Unit Stock Unit Stock Unit
Plan 2004 Plan 2005 Plan 2004
1. Total Number of 20,000,000 20,000,000 20,000,000
options under the (Adjusted for (Adjusted for ADS
Plan the issue of the issue of representing
bonus shares bonus shares 20,000,000
of the years of the year underlying
2004, 2005 2005 and equity shares
and 2010) 2010) (Adjusted for
the issue of
bonus shares
of the years
2004. 2005
and 2010)
2. Options/RSUs 1,352,480 3,390,840 84,580
grants approved
during the year
3. Pricing formula Face value of Face value of Face value of
the share the share the share
4. Options Vested 921,477 5,519,756 1,073,312
during the year
5. Options exercised 1,618,092 3,864,118 870,622
during the year
6. Total number of 1,618,092 3,864,118 870,622
shares arising as a
result of exercise
of option (as of
March 31, 2011)
7. Options lapsed/ 111,960 646,488 233,715
forfeited during the
year *
8. Variation of - - -
terms of options
upto March 31, 2011
9. Money realised 3,236,185 7,728,235 1,741,244
by exercise of
options during
the year (Rs.)
10. Total number of 3,231,032 10,361,519 3,223,892
options in options in
force at the end of
the year (granted,
vested and
unexercised/unvested
and unexercised
11. Employee wise - - -
details of options
granted to:
i. Senior Management
during the year:
a. Suresh Vaswani Nil Nil Nil
b. Girish Paranjpe Nil Nil Nil
c. TK Kurien Nil Nil Nil
d. SDeb Nil Nil Nil
e. Pratik Kumar Nil Nil Nil
f. Vineet Agrawal Nil Nil Nil
g. Martha Bejar Nil Nil 16,600
ii. Employees Nil Nil Nil
holding 5% or more
of the total number
of options granted
during the year
iii. Identified Nil Nil Nil
employees who were
granted option,
during any one
year, equal to
or exceeding 1%
of the issued
capital (excluding
outstanding
warrants and
conversions) of
the Company at
the time of
grant
12. Diluted 19.78 19.78 19.78
Earning per Share
pursuant to issue
of shares on
exercise of option
calculated in
accordance with
Accounting Standard
(AS) 20
13. Where the Since these Since these Since these
Company has options were options were options were
calculated the granted at granted at granted at
employees a nominal a nominal a nominal
compensation cost exercise exercise exercise
using the price, intrinsic price, price,
instrinsic value value on the intrinsic intrinsic
of the stock date of grant value on the value on the
opitons, the approximates date of grant date of grant
difference between the fair value approximates approximates
the employee of options the fair value the fair value
compensation of options of options
cost so computed
and the employee
compensation cost
that shall have
been recognised
if it had used
the fair vaule
of the options.
The impact of
this difference
on profits and
on EPS of the
Company
14. Weighted average Exercise price Exercise price Exercise
exercise prices and Rs. 2/- per Rs. 2/- per price Rs. 2/-
weighted average option. Fair option. Fair per option.
fair values of value Rs. value Rs. Fair value $
options separately 480.20/- as 480.20/- as 14.65/- as on
for options whose on March 31, on March 31, March 31,
exercise price 2011 2011 2011
either equals or
exceeds or is
less than the
market prices of
the stock
15.A description - - -
of method and
significant
assumptions used
during the year
to estimate the
fiar values of
options,
including the
following
weighted average
information:
15.A description - - -
(a) risk free Since these Since these Since these
interest rate options were options were options were
granted at granted at granted at
(b) expected life a nominal a nominal a nominal
exercise exercise exercise
(c) expected price, price, price,
volatility intrinsic intrinsic intrinsic
value on the value on the value on the
(d) expected date of grant date of grant date of grant
dividends and approximatels approximatels approximatels
the fair value the fair value the fair value
(e) the price for of options of options of options
the underlying
share in market
at the time of
option grant
Description Wipro
Restricted
Stock Unit
Plan 2007
1. Total Number of options under the Plan 16,666,667
(Adjusted for
the issue of bonus
shares of the year
2010
2. Options/RSUs grants approved during 1,837,030
the year
3. Pricing formula Face value of
the share
4. Options Vested during the year -
5. Options exercised during the year -
6. Total number of shares arising as a result of -
exercise of option (as of March 31, 2011)
7. Options lapsed/forfeited during the 73,950
year *
8. Variation of terms of options upto March 31, 2011 -
9. Money realised by exercise of options during -
the year (Rs.)
10. Total number of options in options in 1,790,210
force at the end of the year (granted,
vested and unexercised/unvested and unexercised
11. Employee wise details of options granted to:
i. Senior Management during the year:
a. Suresh Vaswani 50,000
b. Girish Paranjpe 50,000
c. TKKurien 30,000
d. SDeb 18,000
e. Pratik Kumar 30,000
f. Vineet Agrawal 40,000
g. Martha Bejar Nil
ii. Employees holding 5% or more of the total Nil
number of options granted during the year
iii. Identified employees who were granted option, Nil
during any one year, equal to or exceeding 1% of
the issued capital (excluding outstanding warrants
and conversions) of the Company at the time of grant.
12. Diluted Earning per Share pursuant to issue of 19.78
shares on exercise of option calculated in
accordance with Accounting Standard (AS) 20
13. Where the Company has calculated Since these
the employees compensation cost options were
using the instrinsic value of the stock granted at
opitons, the difference between a nominal
the employee compensation cost exercise
so computed and the employee price, intrinsic
compensation cost that shall have value on the
been recognised if it had used the fair date of grant
vaule of the options. The impact of this approximates
difference on profits and on EPS of the the fair value
Company of options
14. Weighted average exercise prices Exercise price
and weighted average fair values of Rs. 2/- per
options separately for options whose option. Fair
exercise price either equals or exceeds value Rs.
or is less than the market prices of the 480.20/- as
stock on March 31, 2011
15.A description of method and significant -
assumptions used during the year to estimate
the fiar values of options, including the
following weighted average information:
(a) risk free interest rate Since these
(b) expected life options were
(c) expected volatility granted at
(d) expected dividends and a nominal
(e) the price of the underlying share exercise
in market at the time of option price, intrinsic
grant value on the
date of grant
approximatels
the fair value
of options
MANAGEMENT DISCUSSION AND ANALYSIS
A. Economic Overview:
The global economy, post the unprecedented economic downturn in 2008-09,
has seen signs of steady recovery. While the world output had decline by
0.6% in 2009, it grew by 5% in 2010 and is estimated to expand by 4.4% in
2011. While the economy is not completely out of woods, there is a lot more
reason for optimism. We are increasingly seeing a bi-polar world with
subdued growth in the developed markets and developing markets growing at a
healthy pace. Coupled with this change, we are also seeing ecological
sustainability gaining more prominence.
Wipro is well positioned to profitably grow in this evolving landscape. Our
IT business addresses the needs of both the developed and developing
markets, as the customers look to transform their cost and revenue in
addressing their client needs. Our Consumer Care and Infrastructure
Engineering businesses seek to benefit from the economic boom of the
emerging markets. Our new business initiative 'EcoEnergy' will help
businesses become eco-friendly in the way they operate.
B. Business Segment Overview
IT Services
Industry Overview
NASSCOM Strategic Review Report 2011 refers to IDC forecast of 5.7% CAGR in
worldwide IT spending for the period 2010-2014. IDC forecasts worldwide IT
services spending of approximately $684 billion by 2014, reflecting a CAGR
of 4.5% from 2010-2014. However, Forrester US and Global IT Market Outlook
Q1 2011 predicts that US IT market will grow by 8% in 2011 following a
growth of 8.9% in 2010.
However, offshore IT spending is expected to grow faster. Key factors
supporting this projection are the growing impact of technology-led
innovation and the increasing demand for global sourcing. India is a major
component of the offshore IT outsourcing.
Companies are increasingly turning to offshore technology service providers
in order to meet their need for high-quality cost-competitive technology
solutions. Technology companies have been outsourcing software research and
development and related support functions to offshore technology service
providers to reduce cycle time for introducing new products and services.
India is also a leading destination for IT enabled services. The proven
track record and client relationships of established Indian IT services
companies; availability of a large, high quality, English speaking talent
pool; industry moving up the value chain to provide business and technology
solutions; and a regulatory environment more friendly to investment are
facilitating India's emergence as a global outsourcing hub. According to
NASSCOM Strategic Review Report 2011, the worldwide BPO market is expected
to touch $201 billion by 2014, representing a compounded annual growth rate
of 6.2% in the period 2010-2014.
Global IT & ITeS Market ($ Billion)
IT Spends by category 2010 2011 2012 2013 2014 CAGR
IT Services 574 594 621 652 684 4.5%
BPO 158 167 177 189 201 6.2%
IT Services + BPO 732 761 798 841 885 4.9%
Software 282 297 316 337 362 6.4%
Hardware 599 643 686 727 767 6.4%
Total Spend 1,614 1,702 1,800 1,904 2,014 5.7%
Engineering Spend* 1,125 1,150 NA NA 1,200- 1.6-2.7%
1,250
Source: Nasscom Strategic Review 2011 IDC, *Booz & Company
Our IT Services business addresses the market of IT Services and BPO spends
globally which is estimated to be $885 billion in 2014. We also address the
Engineering spend which is estimated to be between $ 1.20 trillion to $
1.25 trillion in 2014.
Wipro Credentials and Prospects
At Wipro, we are focused on creating the right kind of growth frame work in
order to leapfrog into the next level and be:
* atrusted partner of choice to clients
* employer of choice in the sphere of our operations
* preferred partner of choice to our alliances
* recognized as an organization that delivers sustainable and profitable
growth to our investors
In line with achieving this goal, we are driving strategies and initiatives
aimed at profitable growth. We have 6 key elements to enable this:
1. Differentiated approach to growth & investments: The differentiated
approach is focused on taking advantage of growth hot spots across industry
segments and geographies. We have renewed our focus on Emerging (momentum)
markets by creating dedicated teams covering France and Germany in Europe,
ASEAN, Australia and New Zealand in Asia Pacific, India and other
geogrphies of Canada, LATAM, Middle-East and Africa. On the industry front,
our endeavor is to invest disproportionately in growth leading segments
such as Banking, Financial Services, Insurance, Energy & Utilities,
Healthcare and Retail & CPG. Acquisitions will continue to play a key part
in strengthening our domain and technology capabilities, driving increased
market penetration and broadening the depth and breadth of our service
portfolio.
2. Client-centricity: With the client being our central focus, we have re-
designed our proposition and capabilities to address the needs of Global
2000 enterprises. Our endeavor is to deepen penetration of these accounts
through a consulting-led domain approach to business. Further, we are
pursuing the Client Engagement Manager model, which enables swift and
impeccable execution with single point accountability with support from
rest of the organization. The number of customers from whom we derived
revenues in excess of $50 million is 22 in fiscal year 2010-11.
3. People - The Central Nervous System: We believe that people are the
backbone of our organization; hence a large part of the management focus is
towards building and developing employees. Our aim is to build the best in
class global leadership and provide employees unlimited opportunities for
career enhancement and growth. It is our aim to be a truly global company
that not only services customers globally but also employs people
worldwide. We are focused on diversity with 28% of our employees being
women and 38% of our onsite employees being local. We have a young employee
base with 66% of our employees aged less than 30 years and an average age
of the employee base at 29. We have employees of 74 nationalities on our
rolls.
4. Co-creating our value proposition along with clients:
We believe that the fundamental business practice in this new millennium
will be multiple entities working together as one value chain in order to
create superior flexibility, productivity and financial performance.
Keeping in line with macro and micro changes taking place, we have
developed a research-backed consulting-led approach involving all
stakeholders - employees, clients and partners - to arrive at our 21st
century Inc model to meet the needs of the increasingly global enterprise.
The model comprises of core/non-core client business analysis and
rationalization, lean optimization and technology innovation and co-
creation of solutions with our strategic alliance partners.
5. Comprehensive and integrated capability across the services value chain,
backed by IP assets: Our ability to provide a comprehensive 'process' to
'service' suite uniquely positions us to be a master system integrator and
transformation partner to clients. The focus is to develop IP assets that
solve clients' business problems efficiently. In addition, 'enablers' or
processes and programs designed to aid people development, leadership
development and skill enhancements are ongoing efforts.
6. Innovation: For us, innovation is not just a term. It is at the core of
what we do, part of a business driven culture imbibed in the organization.
We innovate to meet changing client needs and technology advancements
besides generating newer streams of revenue for the organization. The
innovation are in it in segments like Cloud, Mobility, Analytics and Big
Data, and Green IT or Non-linear delivery models. Our innovation not only
has the ability to drive significantly higher productivity and efficiency
in client enterprises but also possesses the potential to fundamentally
alter underlying business models of clients.
Our strategy for growth is backed by strong investments in delivery
capabilities like:
1. Global Delivery Model
a. As the industry is moving rapidly into a commoditized market for pure
play IT services at one end and specialized transformational capabilities
at the other end, the delivery models are morphing to align to these
changes. As pioneers of the Global Delivery Model or GDM, we have always
looked at innovative ways of servicing customers more effectively by
leveraging on the depth of experience in the Wipro ecosystem. Several of
these differentiated services are now scaling up and demonstrating a strong
value proposition to customers besides enabling us to open marquee accounts
as well as delivering business benefits to customers.
b. To enable the alignment of the delivery competencies to the changing
customer needs, a tiered competency development framework with associated
training and assessment centers have been set up. A fast-track program to
create Project Management talent has been created with talent from premier
engineering colleges being exclusively selected and groomed for this cadre.
c. We have invested in training capabilities with capacity to train 10,000
employees every day across IT Services. We have 500 plus trainers across
our business. We are the only company in the world to win the American
Society of Training & Development award for 6 successive years.
d. In line with the goal of providing world class delivery experience to
customers, we have set up competency-led centers at strategic locations
including Atlanta in the US, Chengdu in China, Romania and Philippines. The
team of over 3,000 professionals working from these centers has the motto
of 'Global Reach with a local touch'. Overall, we have more than 20,000
employees onsite.
e. Our delivery excellence was reinforced when we were awarded the '2010
Outstanding Corporate Award' for contribution to the Embedded Systems and
Very-Large-Scale Integration (VLSI) industry segment by Mentor Graphics and
Silicon India. Equaterra, an independent sourcing advisory in more than 60
countries, ranked Wipro #1 in Client Satisfaction, Applications Management,
Infrastructure Management, Price and Governance; underlining Wipro as a
leader for client satisfaction in its detailed UK IT service provider
performance study.
2. Non Linearity-the game changer
a. Non linearity is a concept that we have started to focus on in the last
couple of years - be it new engagement models, way of delivery or building
platforms and automation. The company has developed non linearity in two
areas - Revenue initiatives and Delivery initiatives. We have made strong
progress with Non-Linearity constituting 12% of our Revenues in FY11 as
against 7% in FY10
b. The focus that we have put in to build Non Linear capability is yielding
results and the benefits are being seen both by our customer and employees.
Non linearity brings in efficiencies of deployment, tools and accelerators
and productized solutions.
c. A key investment of Wipro towards seamless global delivery is the Flex
Delivery model - an industrialized, multi-tenanted service delivery model
providing fast startup, predictable time of delivery and reduced total cost
of operation through well defined processes, tools, interfaces and a de-
centralized scalable team. The model comprises of pre-defined, standardized
and scalable set of services that can be delivered on demand by the
customers.
d. Flex centers have been established in most of the service lines based on
platform/technology competencies and in multiple locations. Several of the
industry verticals have also adopted this model over the past one year. The
maturity of the centers has been assessed and improved using proprietary
frameworks and workflow tools.
e. Solution accelerators teams within Wipro have generated hundreds of
accelerators for use in projects. The company has run contests successfully
to generate ideas from employees to develop future accelerators as part of
this initiative.
Performance Highlights:
(Figures in Rs. Million except otherwise stated)
Year on
Year ended March 31, Year change
Particulars 2011 2010 2010-11
Revenue 234,850 202,490 16.0%
Gross profit 81,404 70,346 15.7%
Selling and marketing expenses (12,642) (10,213) 23.8%
General and administrative
expenses (15,355) (12,446) 23.4%
Operating income 53,407 47,687 12.0%
As a Percentage of Revenue:
Selling and marketing expenses 5.4% 5.0% (34)bps
General and administrative
expenses 6.5% 6.2% (39)bps
Gross margin 34.7% 34.7% (8)bps
Operating margin 22.7% 23.6% (81)bps
Our revenue from IT Services business increased by 16% in Indian Rupee
terms. In USD terms our revenue increased by 18.9% from $4,390 million to
$5,221 million. This increase is primarily on account of increase in volume
by 16.8%.
During the current year, we realised 51.7% of revenue from work done in
locations outside India ('Onsite') and remaining 48.3% of revenue was
realised from the work performed from our development centers in India
('Offshore').
As part of our non-linearity drive and focus on improving revenue
productivity, we have increased our percentage of revenue contribution from
Fixed Price Projects to 45.7% as against 41.5% in the previous year. In
FPP, we undertake to complete project within agreed timeline for a given
scope of work. The economic gains or losses realised from completing the
project earlier or later than initially projected timelines accrues to us.
Revenue Mix Vertical Distribution
The overall revenues were driven primarily due to a 24% increase in revenue
from Energy & Utilities Services, a 23% increase in revenue from Financial
Services, a 22% increase in revenue from Retail & Transportation Services
and a 21% increase in revenue from Telecom Services.
Revenue Mix Service Line wise Distribution
We continued to expand and grow our Services portfolio. Growth in the
current year was driven by 22% increase in revenues from Package
Implementation, 20% increase in revenues from Technology Infrastructure
Services, 19% increase in revenues from Application Development and
Maintenance and 40% increase in revenues from Product Engineering.
Growth in the current year was driven by a 23% increase in revenues from
Europe, 26% increase in revenues from India & Middle East business and 45%
increase in revenues from
APAC and Other Emerging Markets. Increase in Revenues from US in
the current year was 13%.
We added 155 new customers in the current year, as against 121 in the
previous year.
Our top customer contributed 3% of revenue, top 5 customers 11% of revenue
and the top 10 customers accounted for 19.5% of the revenue. We have 3
customers contributing more than $100 million revenues in the current year,
up from 1 customer in the previous year
Revenue contributed by the customers added during the year was at 2%, at
the same level as in the previous year.
In our IT Services Business, manpower cost accounts for approximately 50%
of the Revenues. Other major costs included Sub-contracted manpower cost,
depreciation and employee-travel cost.
The operational drivers for manpower costs are Utilisation of employees,
Onsite: Offshore composition and the composition of experience profile of
employees called 'Bulge-mix'.
During the current year gross Utilisation was 70% compared to 72% an year
ago. As of March 31, 2011 approximately 40% of our employees had less than
3 years of work-experience, as compared to 43% as of March 31, 2010.
Risk Factors
Our revenues from this business are derived in major currencies of the
world while a significant portion of its costs are in Indian Rupees. The
exchange rate between the Rupee and major currencies of the world has
fluctuated significantly in recent years and may continue to fluctuate in
the future. Currency fluctuations can adversely affect our revenues and
gross margins.
The market for IT services is highly competitive. Our competitors include
software companies, IT companies, systems consulting and integration firms,
other technology companies and client in-house information services
departments. We may also face competition from IT and ITES companies
operating from emerging low cost destination like China, Philippines,
Brazil, Romania, Poland etc.
We derive approximately 55% of our IT Services revenues from United States
and 27% of our IT Services revenues from Europe. In an economic slowdown,
our clients located in these geographies may reduce or postpone their
technology spending significantly. Reduction in spending on IT services may
lower the demand for our services and negatively affect our revenues and
profitability.
Some countries and organizations have expressed concerns about a perceived
association between offshore outsourcing and the loss of jobs domestically.
With the growth of offshore outsourcing receiving increasing political and
media attention, there have been concerted efforts to enact new legislation
to restrict offshore outsourcing or impose disincentives on companies which
have been outsourcing jobs. This may adversely impact our ability to do
business in these jurisdictions and could adversely affect our revenues and
operating profitability.
Our employees who work onsite at client facilities or at our facilities in
the United States on temporary or extended assignments typically must
obtain visas. If U.S. immigration laws change and make it more difficult
for us to obtain H-1B and L-1 visas for our employees, our ability to
compete for and provide services to our clients in the United States could
be impaired.
These risks are broadly country risks. At an organizational level, we have
a well-defined business contingency plan and disaster recovery plan to
address these unforeseen events and minimize the impact on services
delivered from our development centers based in India or abroad.
IT Products
Industry Overview
According to NASSCOM Strategic Review Report 2011, IDC forecasts that
worldwide hardware spending will increase from $599 billion in 2010 to $767
billion in 2014, representing a compounded annual growth rate, or CAGR, of
6.4%.
According to IDC, the hardware market account for 40% of the Indian IT-BPO
industry. The key components of the hardware industry are servers, clients
(desktops and laptops), storage devices, peripherals and networking
equipments. The overall hardware growth is projected at 15.8% for the India
market with storage and networking products leading growth within this
segment in 2011. Spending in Government, BFSI and Telecom sectors will be
the key drivers for networking equipment segment.
Wipro Credentials
Our IT Products business provides a range of IT products encompassing
computing, storage, networking, security, and software products. Under this
segment, we sell IT products manufactured by us and third-party IT
products.
We plan to grow in the IT Products market by focusing on:
- Positioning
- Build enhanced solution capabilities to position ourselves as a Value
Added System Integrator
- To offer innovative and best in class IT Products and Solutions catering
to client needs
* Product Differentiation
- Product Engineering to deliver value differentiation on Wipro products
- Focus on building brand 'Ego' and evolve as lifestyle brands within our
manufactured products business
- Strengthen server portfolio through a combination of in-house and traded
products
* Geo expansion - enhanced focus for addressing new markets-Middle-East and
Africa
* Customer Engagement
- Vertical Focus - Strengthen presence in key verticals such as
Government, Telecom and Banking
- Mid-Market Drive - Tier 2/3 city penetration. Establish leadership
position in 10 cities through increased coverage and marketing activities
- Deliver customized solutions
* Alliances - realign existing and form new alliances, leverage alliance
partnerships for joint Go-To-Market with Wipro. Partner with emerging
technology providers to improve market address and develop new streams of
revenue
* Operational Excellence- Sustain Green Leadership in Wipro manufactured
products. Continue to drive delivery and operational excellence through
industry standard processes and global best practices for better customer
satisfaction (CSAT) and cost optimization.
Our Product range includes
1. Wipro Manufactured Products: Our manufactured range of products
comprises desktops, notebooks. Net Power servers and super computers.
Wipro's own brand of product competes successfully with all the global
brands in various market segments. We offer form factors and
functionalities that cater to the entire spectrum of users - from
individuals to high-end corporate entities.
2. Enterprise Platforms: Our offerings under this category comprise of
design and deployment services for enterprise class servers, databases and
Server computing resource management software.
3. Networking Solutions: Our offerings under this category comprise of
consulting, design, deployment and audit of enterprise Wide Area Network
(WAN), Wireless LAN and Unified Communication Systems.
4. Software Products: Our products under this category comprise enterprise
application, data warehousing and business intelligence software from
world's leading software product companies.
5. Data Storage: Our products under this category comprise network storage,
secondary and near line storage, backup and storage fabrics.
6. Contact Centre Infrastructure: Our offerings include Switch Integration,
Voice Response Solutions, Computer Telephony Interface (CTI), Customized
Agent Desktop Application, Predictive Dialer, Customer Relationship
Management, Multiple Host Integration, Voice Logger interface.
7. Enterprise Security: Security products include Intrusion detection
systems, firewalls and physical security infrastructure covering
surveillance and monitoring systems.
8. Emerging Technologies: We also cater to new technologies in the market
including virtualization, IP video solutions and private cloud
implementations.
Performance Highlights:
(Figures in Rs. Million except otherwise stated)
Year on
Year ended March 31, Year change
Particulars 2011 2010 2010-11
Revenue 36,910 38,205 (3.4)%
Gross profit 4,067 4,054 0.3%
Selling and marketing expenses (1,284) (1,275) 0.7%
General and administrative
expenses (1,174) (1,015) 15.7%
Operating income 1,609 1,764 (8.8)%
As a Percentage of Revenue
Selling and marketing expenses 3.5% 3.3% (14) bps
General and administrative
expenses 3.2% 2.7% (52) bps
Gross margin 11.0% 10.6% 41 bps
Operating margin 4.4% 4.6% (26) bps
Revenues from the IT Products business decreased by 3.4% primarily due to
initial hardware requirement in certain large transformational projects
during the year ended March 31, 2010, which were in sustenance phase during
the year ended March 31,2011. Our gross profit as a percentage of our
revenue of our IT Products business increased by 41 bps. This increase is
primarily due to an increase in the proportion of revenues from highyield
products.
Risks
IT Products revenues are impacted by seasonal changes that affect
purchasing patterns among our consumers of desktops, notebooks, servers,
communication devices and other products.
The IT products market is a dynamic and highly competitive market. In the
marketplace, we compete with both international and local providers. We are
witnessing higher pricing pressures due to commoditization of manufactured
products business and higher focus on Indian markets by all leading IT
companies.
Nonetheless, we are favourably positioned due to our quality leadership,
expertise in target markets and our ability to create client loyalty by
delivering value to the customer.
Consumer Care and Lighting
Industry Overview
AC Nielsen estimates that India is amongst the fastest growing geographies
for FMCG, with a 2010 growth rate of 15% for the non-food segment. This
market is estimated to grow at a CAGR of 12% - 15% for the period 2011-
2014. The household and personal care FMCG market in the other Asian
countries in which we operate including Malaysia, Vietnam and Indonesia,
are expected to grow at a CAGR of 8% for the period 2011 -2014.
The Indian domestic market for institutional lighting and office modular
furniture is estimated at U.S. $700 million and is expected to grow at the
rate of 10% to 15% for the period 2011 -2012. Key sectors contributing to
the growth are expected to be modern work spaces, IT-ITeS, Retail,
Healthcare and Government Infrastructure spending.
Wipro Credentials
Our Consumer Care and Lighting business focuses on niche profitable market
segments in personal care in specific geographies in Asia, Middle East and
Africa, as well as office solutions in India. We successfully leverage our
brands and distribution strengths to sustain a profitable presence in the
personal care sector, including personal wash, fragrances, hair and skin
care, male toiletries and household lighting products. Our office solutions
include lighting products, modular switches, modular furniture and security
solutions. Our Santoor brand is the third largest in India in the soap
category, and Safi brand is the largest Halal toiletries brand of Malaysia.
Our Yardley brand gives us a stronger presence in the Middle East, and into
the luxury segment of personal care. We are amongst the top 15 players in
personal care in India, and fourth largest player in personal care in both
Malaysia and Vietnam.
We sell and market our consumer care products primarily through our
distribution network in India, which has access to 5,121 distributors and
1.6 million retail outlets throughout the country. We sell significant
portion of our lighting products to major industrial and commercial
customers through our direct sales force, from 29 sales offices located
throughout India.
In our other geographies, led by Malaysia, Vietnam, Indonesia and Greater
China, we have direct access to over 200,000 retail outlets, with a
significant presence in the fast growing modern trade.
Performance Highlights:
(Figures in Rs. Million except otherwise stated)
Year on
Year ended March 31, Year change
Particulars 2011 2010 2010-11
Revenue 27,258 22,584 20.7%
Gross profit 12,116 10,779 12.4%
Selling and marketing expenses (7,514) (6,470) 16.1%
General and administrative expenses (1,152) (1,207) (4.6)%
Operating income 3,450 3,102 11.2%
As a Percentage of Revenue:
Selling and marketing expenses 27.6% 28.7% 108 bps
General and administrative expenses 4.2% 5.3% 111 bps
Gross margin 44.5% 47.7% (328) bps
Operating margin 12.7% 13.7% (108) bps
Consumer Care and Lighting revenue increased in the current year by 20.7%.
This increase is attributable to an increase of approximately 20.9% in
revenue from consumer products excluding Yardley sold in Indian markets and
an increase of approximately 9.6% in revenue from personal care products
sold in south-east Asian markets. Further, integration of our acquisition
of Yardley has contributed an additional 5% of our total revenue from the
Consumer Care and Lighting business.
Our gross profit as a percentage of our revenues from the Consumer Care and
Lighting business decreased by 328 bps. The reduction in gross margins is
primarily due to an increase in major input costs. This was partially
offset by increase in gross margin due to integration of our acquisition of
Yardley.
Risk Factors
Our competitors in the consumer care and lighting are located primarily in
India, and include multinational and Indian companies. Certain competitors
have recently focused on sales strategies designed to increase sales
volumes through lower prices. Sustained price pressures by competitors may
require us to respond with similar or different pricing strategies. This
may adversely affect our gross and operating profits in future periods.
A major share of revenue in Consumer Care and Lighting business comes from
top three brands in India and international business. Any dilution in
market share of such brand against competition may adversely impact our
revenue. Further, price volatility in major inputs for personal care
products, could have an adverse impact on our margin.
Others
Our Others business includes our Infrastructure Engineering business. We
are the world's largest third-party manufacturer of hydraulic cylinders. It
is centered on our mobile construction equipment business and our material
handling business. We manufacture and sell cylinders and truck hydraulics,
and we also distribute hydraulic steering equipment and pumps, motors and
valves for international companies. We have a global footprint in terms of
manufacturing facilities in Europe and India and sell to customers across
the globe.
In the current financial year, we are seeing resurgent growth specifically
in the Asia segment of our business. We believe that the fundamentals of
the infrastructure engineering business remain strong. Our strategy is to
increase our global market share through:
* strengthening relationship with global original equipment manufacturers
(OEMs) who are likely to seek stable suppliers like Wipro in the current
economic environment; and
* diversification into newer segments organically and/or inorganically.
We are also in the water solutions business, which addresses the entire
spectrum of treatment solutions, systems and plants for water and waste
water for industries.
We are also in cleantech business - Wipro EcoEnergy, which provides
intelligent, sustainable alternatives for energy generation, distribution
and consumption. We transform analytical insights obtained from energy data
into sustainable solutions. We help customers reduce their energy
footprint, recover higher energy efficiencies from energy deployment and
replace conventional with renewable energy sources.
Risk Factors
The Infrastructure Engineering business is linked to infrastructure
spending globally. If there is an economic slowdown, it would translate in
to lower growth for our customers and in turn reduce our growth prospects.
Performance Highlights
Revenue from our Others business, including reconciling items, increased by
44.3%, from Rs.8,295 million for the year ended March 31, 2010 to 1,969
million for the year ended March 31, 2011. The increase in revenue is
attributable to increased demand for infrastructure engineering products in
India and Europe.
C. Performance Review at Corporate Level:
Our revenue and profit for the years ended March 31, 2011 and 2010 are
provided below.
Wipro Limited and Subsidiaries
(Figures in Rs. Million except otherwise stated)
Year on
Year ended March 31, Year change
Particulars 2011 2010 2010-11
Revenue 310,987 271,574 14.5%
Cost of revenue (212,808) (186,299) 14.2%
Gross profit 98,179 85,275 15.1%
Selling & marketing expenses (22,172) (18,608) 19.2%
General and administrative
expenses (18,339) (14,823) 23.7%
Operating income 57,668 51,844 11.2%
Profit attributable
to equity holders 52,977 45,931 15.3%
As a Percentage of Revenue
Selling and marketing expenses 7.1% 6.9% (28) bps
General and administrative
expenses 5.9% 5.5% (44) bps
Gross margins 31.6% 31.4% 17 bps
Operating margin 18.5% 19.1% (55) bps
Earnings per share
Basic 21.74 18.91
Diluted 21.61 18.75
Results of operations for the years ended March 31, 2011 and 2010:
* Our total revenues increased by 14.5%. This was driven primarily by a
16%, 21% and 44% increase in revenue from our IT Services, Consumer Care
and Lighting and Other businesses, including reconciling items, business
segments respectively. This increased revenue was partially offset by a
decline in revenue from our IT Products business segment.
* Our gross profit as percentage of our total revenue increased marginally
by 17 basis points (bps). This was primarily on account of an increase in
gross profit as a percentage of revenue from our IT Products business by 41
bps, an increase in gross profit as a percentage of revenue from our Others
business, including reconciling items by 379 bps. This increase was
partially offset by a decline in gross profit as a percentage of revenue
from our IT Services and Consumer Care and Lighting business.
* Our selling and marketing expenses as a percentage of revenue increased
from 6.9% for the year ended March 31, 2010 to 7.1% for the year ended
March 31, 2011. In absolute terms selling and marketing expenses increased
by 19.2%, primarily due to an increase in the IT Services and Consumer Care
and Lighting business.
* Our general and administrative expenses as a percentage of revenue
increased from 5.5% for the year ended March 31, 2010 to 6% for the year
ended March 31, 2011. In absolute terms general and administrative expenses
increased by 23.7%, primarily due to increased expenses in the IT Services
business and IT Products business. This increase was partially offset by a
decline in the Consumer Care and Lighting business.
* As a result of the foregoing factors, our operating income increased by
11.2%, from Rs.51,844 million for the year ended March 31, 2010 to
Rs.57,668 million for the year ended March 31, 2011.
* Our finance expenses, increased from Rs.1,324 million for the year ended
March 31, 2010 to Rs.1,933 million for the year ended March 31, 2011. This
increase is primarily due to increase of Rs.1,065 million in exchange loss
on foreign currency borrowings and related derivative instrument. This is
partially offset by lower interest expense by Rs.456 million during the
year ended March 31, 2011, due to lower loans and borrowings.
* Our finance and other income, increased from Rs.4,360 million for the
year ended March 31, 2010 to Rs.6,652 million for the year ended March 31,
2011. Our interest and dividend income increased by Rs.2,408 million during
the year ended March 31, 2011 as compared to year ended March 31,2010.This
was partially offset by decrease of Rs.116 million in the gain from sale of
investments during the same period.
* Our income taxes increased by Rs.420 million, from Rs.9,294 million for
the year ended March 31, 2010 to Rs.9,714 million for the year ended March
31, 2011. Adjusted for tax write-backs our effective tax rate declined from
17.8% for the year ended March 31, 2010 to 16.5% for the year ended March
31, 2011. This decline is primarily due to higher profit based deductions
during the year ended March 31, 2011.
* Our equity in earnings of affiliates for the years ended March 31, 2010
and 2011 was Rs.530 million and Rs.648 million, respectively. Equity in
earnings of affiliates primarily relates to the equity in earnings of Wipro
GE.
* As a result of the foregoing factors, our profit attributable to equity
holders increased by Rs.7,046 million, or 15.3%, from Rs.45,931 million for
the year ended March 31, 2010 to X 52,977 million for the year ended March
31, 2011.
Foreign exchange gains / (losses), net:
Our foreign exchange gains / (losses), net for the years ended March 31,
2010 and 2011 were Rs.(383) million and Rs.445 million respectively.
Our foreign exchange gains/flosses), net, comprise:
* exchange differences arising from the translation or settlement of
transactions in foreign currency, except for exchange differences on debt
denominated in foreign currency (which are reported within finance expense,
net); and
* the changes in fair value for derivatives not designated as hedging
derivatives and ineffective portion of the hedging instruments. For forward
foreign exchange contracts which are designated and effective as cash flow
hedges, the marked to market gains and losses are deferred and reported as
a component of other comprehensive income in stockholder's equity and
subsequently recorded in the income statement when the hedged transactions
occur, along with the hedged items.
* Although our functional currency is the Indian rupee, we transact a
significant portion of our business in foreign currencies, in particularly
the U.S. dollar. The exchange rate between the Rupee and the dollar has
changed substantially in recent years and may fluctuate substantially in
the future. Consequently, the results of our operations are affected as the
rupee fluctuates against the U.S. dollar. Our exchange rate risk primarily
arises from our foreign currency revenues, cash balances, payables and
debt. We enter into derivative instruments to primarily hedge our
forecasted cash flows denominated in certain foreign currencies, foreign
currency debt and net investment in overseas operations. Please refer to
our Notes to the Consolidated Financial Statements under IFRS for
additional details on our foreign currency exposures.
Finance expense
* Our finance expense comprise interest expense on borrowings, impairment
losses recognized on financial assets, gains / losses on translation or
settlement of foreign currency borrowings and changes in fair value and
gains / losses on settlement of related derivative instruments except
foreign exchange gains/losses on short-term borrowings which are considered
as a natural economic hedge for the foreign currency monetary assets which
are classified as foreign exchange gains/losses, net within results from
operating activities. Borrowing costs are recognized in the statement of
income using the effective interest method.
Finance and other income
* Our finance and other income comprises interest income on deposits,
dividend income and gains on disposal of available-for-sale financial
assets. Interest income is recognized using the effective interest method.
Dividend income is recognized when the right to receive payment is
established.
Liquidity and Capital Resources
The Company's cash flow from its operating, investing and financing
activities, as reflected in the Consolidated Statement of Cash Flows under
IFRS, is summarized in the table below:
(Figures in Rs. Million except otherwise stated)
Year on
Year ended March 31, Year change
Particulars 2011 2010 2010-11
Net cash provided by/(used in)
continuing operations:
Operating activities 40,437 50,998 (10,561)
Investing activities (17,239) (33,815) 16,576
Financing activities (26,378) (601) (25,777)
Net change in cash and
cash equivalents (3,180) 16,582 (19,762)
Effect of exchange rate changes on cash
and cash equivalent 523 (1,258) 1,781
As of March 31, 2011, we had cash and cash equivalent and short-term
investments of Rs.110,423 million. Cash and cash equivalent and short-term
investments, net of debt was Rs. 57,621 million. In addition we have unused
credit lines of Rs. 37,525 million. To utilize these lines of credit we
require the consent of the lender and compliance with certain financial
covenants. We have historically financed our working capital and capital
expenditure through our operating cash flows and through bank debt, as
required.
Cash provided by operating activities decreased by Rs.10,561 million, while
profit for the year increased by Rs.7,205 million during the same period.
The decrease in cash provided by operating activities is primarily due to
an increase in current receivables including unbilled, attributable to an
increase in number of receivable days in the IT Services business from 61
days in March 2010 to 70 days in March 2011 and an increase in receivable
days in the IT Products business from 119 days in March 2010 to 131 days in
March 2011. Further, operating cash flow decreased due to increase in
inventory days for consumer care and lighting and infrastructure
engineering by 2 days and 4 days, respectively and also due to increase in
finance lease receivables by Rs.2,808 million primarily relating to large
projects. This is partially offset by the increase in trade payables and
accrued expenses on account of better management of payment terms.
Receivable days as of a particular reporting date is the proportion of
receivables, adjusted for unbilled and unearned revenue to the revenues for
the respective fiscal quarter multiplied by 90.
Cash used in investing activities for the year ended March 31, 2011 was
Rs.17,239 million. Cash provided by operating activities was utilized for
the net purchase of investments and inter-corporate deposits amounting to
Rs.11,772 million. We also purchased property, plant and equipment
amounting to Rs.12,211 million, which was primarily driven by the growth
strategy of the Company.
Cash used in financing activities for the year ended March 31, 2011 was
Rs.26,378 million as against Rs.601 million for the year ended March 31,
2010. This increase is primarily due to increase in net repayment of loans
and borrowings amounting to Rs.10,122 million and payment of dividend
amounting to Rs.15,585 million.
On April 27, 2011, our Board proposed a cash dividend of Rs.4 ($0.09) per
equity share and ADR. The proposal is subject to the approval of
shareholders at the Annual General Meeting to be held on July 19,2011, and
if approved, would result in a cash outflow of approximately Rs.11,410
million including corporate dividend tax thereon.
We maintain debt/borrowing level that we have established through
consideration of a number of factors including cash flow expectations, cash
required for operations and investment plans. We continually monitor our
funding requirement and strategies are executed to maintain sufficient
flexibility to access global funding sources, as needed. Please refer to
Note 12 of our Notes to the Consolidated Financial Statements under IFRS
for additional details on our borrowings.
As discussed above, cash generated from operations is our primary source of
liquidity. We believe that our cash and cash equivalent along with cash
generated from operations will be sufficient to meet our working capital
requirements as well as repayment obligations in respect of debt/
borrowings.
As of March 31, 2011, we had contractual commitments of Rs.2,071 ($47)
million related to capital expenditures on construction or expansion of
software development facilities, Rs.10,265 ($230) million related to non-
cancelable operating lease obligations and Rs.3,645 ($82) million related
to other purchase obligations. Plans to construct or expand our software
development facilitiesare dictated by business requirements.
In relation to our acquisitions, a portion of the purchase consideration is
payable upon achievement of specified earnings targets in future. We expect
that our cash and cash equivalents, investments in liquid and short-term
mutual funds and the cash flows expected to be generated from our
operations in future will generally be sufficient to fund the earn-out
payments and our expansion plans.
In the normal course of business, we transfer accounts receivables, net
investment in sale-type finance receivable and employee advances (financial
assets). Please refer Note 15 of our Notes to Consolidated Financial
Statements under IFRS.
Our liquidity and capital requirements are affected by many factors, some
of which are based on the normal ongoing operations of our businesses and
some of which arise from uncertainties related to global economies and the
markets that we target for our services. We cannot be certain that
additional financing, if needed, will be available on favorable terms, if
at all.
As of March 31,2011 and 2010, our cash and cash equivalent were primarily
held in Indian Rupees, U.S. Dollars, Pound Sterling, Euro, Japanese Yen,
Singapore Dollars and Saudi Riyals.
Please refer to 'Financial risk management' under Note 15 of our Notes to
the Consolidated Financial Statements under IFRS for more details on
our treasury activities.
Contractual obligations
The table of future payments due under known contractual commitments as of
March 31, 2011, aggregated by type of contractual obligation, is given
below:
(Figures in Rs. Million except earnings per share data)
Total
contractual
Particulars payment Payments due in
2011-12 2012-14 2014-16 2016-17
onwards
Short-term
borrowings 31,694 31,694 - - -
Long-term debt 20,473 1,146 19,277 35 15
Obligations under
capital leases 635 203 292 80 60
Estimated interest
payment1(1) 804 379 416 6 3
Capital commitments 2,071 2,071 - - -
Non-cancelable operating lease
obligation 10,265 1,828 3,207 1,936 3,294
Purchase obligations 3,645 3,645 - - -
Other non-current
liabilities(2) 73 - 73 - -
Our purchase obligations include all commitments to purchase goods or
services of either a fixed or minimum quantity that meet any of the
following criteria: (1) they are non-cancelable, or (2) we would incur a
penalty if the agreement was terminated.
(1) Interest payments for long-term fixed rate debts have been calculated
based on applicable rates and payment dates. Interest payments on floating
rate debt have been calculated based on the payment dates and implied
forward interest rates as of March 31,2011 for each relevant debt
instrument.
(2) Other non-current liabilities and non-current tax liabilities in the
statement of financial position include 72,633 million in respect of
employee benefit obligation and 75,021 million towards uncertain tax
position, respectively. For these amounts the extent of the amount and
timing of repayment/settlement is not reliably estimatable or determinable
at present and accordingly have not been disclosed in the table above.
D. Risk Management at corporate level
Risk Management Initiatives
Risk Management at Wipro is an enterprise wide function. It is backed by a
competent and specialist team that develops frameworks and methodologies
for organization wide deployment.
Wipro ERM Framework
In continuation of our quest to be the 'Best in Breed', we have benchmarked
our practices with four globally recognized standards
(a) AS/NS 4360:2004 by AUS/NZ Standards board
(b) Orange Book by UK Government Treasury.
(c) COSO; Enterprise Risk Management - Integrated Framework by Treadway
Commission
(d) ISO/FDIS 31000:2009 by ISO
Our Risk Management approach is to carry out comprehensive vulnerability
analysis and extrapolate known failure modes as an early warning indicator.
The risks are then subjected to detailed review mechanisms which are tool
based and norm triggered.
Mitigation measures in the form of systemic fixes are deployed and are
subjected to a stress test to evaluate their robustness and effectiveness.
We made a conscious decision to move to a regimen of pro-active risk
management by responding to weak signals through program-managed mitigation
mechanism as compared to a reactive crisis management approach which is
event induced.
By acting early, we give ourselves a wider selection of options and
alternatives to respond effectively and decisively.
Key Risk Management areas that we focused on during the year:
(Listed alphabetically, not in order of Importance)
1. Alliance Risks
2. Business Continuity & Disaster Recovery
3. Climate Change& Sustainability
4. Country (Geo-Political) Risks
5. Employee Safety&Physical Security Risks
6. Emerging Technology Risks
7. Fraud Risks
8. Governances Policy Compliance
9. Infrastructures Operations Risks
10. Information Security&Compliance
11. Intellectual Property Risks
12. Large Programs-Order to Cash Risks
13. People Engagement& Supply Chain Risks
14. Regulatory Compliance including Employment, Immigration and Tax laws
15. Systemic Vulnerabilities Intellectual Property Protection
A master plan to assess & mitigate risks around Intellectual Property
rights was implemented. The Plan included a) Comprehensive reassessment of
all failure modes, b) Clear articulation of policy c) Continuous & targeted
evangelization, d) audit & assurance and e) systemic solutions to ensure
repeatability and reproducibility.
Business Specific Risk Management Models
Specific models to address risks in business segments/ processes were
rolled out such as country risk assessment, customer credit risk
assessment, deal risk assessment etc.
Employee Safety & Physical Security
Employee safety continued as a core focus with enhanced measures for
transportation process (24*7 operations). Security measures in offshore
locations enhanced with a tie up with Central Industrial Security force of
Indian government.
Proactive Anti-Fraud Initiatives
The control environment has been further strengthened during the year with
more automated controls. Failure modes were comprehensively re-assessed and
technology solutions were explored and implemented to automate controls.
Code of Ethics for Sales Force
In addition to the generic training & annual certification on code of
business conduct and ethics for all employees, a case study based
supplementary program on code of ethics for sales force was rolled out. 15
plus sessions were conducted globally to cover majority of our sales force
on topics including regulations such as FCPA law. Data privacy etc.
Info Security & Business Continuity
Information Security Program at Wipro covers core areas such as Physical
Security, Data protection, Business continuity planning. Intellectual
Property, access control, regulatory compliance and employee awareness.
Focus areas for the year included:
* Data protection reviews & compliance
* Electronic training module launched for all employees on information
security & compliance.
* Enhancing the Customer engagement - security compliance by federated
model of compliance
* The Business continuity process was successfully invoked in response to
the Japan nuclearcrisis
Oekom Research (Germany) ranked Wipro in the top most position for its
Information security compliance related to management of customer data as
part of its corporate responsibility review report 2011.
Alliance Risk Management
A Risk Management framework was deployed to assess the risks in engagement
with critical alliance partners. Key risk indicators such as availability
of alternates, financial stability, and delivery performance were assessed
and mitigated.
Awareness & Training
Role based training programs to enhance risk literacy covering Intellectual
property practices, information security compliance, bid risk management,
delivery risk management were deployed. The coverage included training more
than 90% of our Project and Technical Managers on risk management practices
and more than 50% of all employees on information security and compliance
practices.
E. Outlook
We have followed a practice of providing only revenue guidance for IT
Services, our largest business segment. The guidance is provided at the
release of every quarterly earnings when detailed Revenue outlook for the
succeeding quarter is shared. Over the years, the Company has performed in
line with quarterly Revenue guidance.
On April 27, 2011, along with our earnings release for quarter ended March
31, 2011, we provided our most recent quarterly guidance. Revenue from IT
Services business for the quarter ending June 30, 2011 is likely to be
ranged between USD 1,394-1,422 million*.
* Guidance is based on the following exchange rates: GBP/USD at 1.64,
Euro / USD at 1.46, AUD / USD at 1.07, USD/INR at 44.29.
F. Internal Control Systems
We have presence across multiple countries, and a large number of
employees, suppliers and other partners collaborate to provide solutions to
our customer needs. Robust internal controls and scalable processes are
imperative to manage this global scale of operations.
Our listing on the New York Stock Exchange (NYSE) provided us an
opportunity to get our independent auditors assess and certify our internal
controls primarily in the areas impacting financial reporting. For the
companies listed in the United States of America, the Public Company
Accounting Reform and Investor Protection Act of 2002, more popularly known
as the Sarbanes-Oxley Act requires:
1. Management to establish, maintain, assess and report on effectiveness of
internal controls over financial reporting and;
2. Independent auditors to opine on effectiveness of internal controls
over financial reporting.
We adopted the COSO framework (Framework suggested by Company of Sponsoring
Trade way Organisation) for evaluating internal controls. COSO identifies
five layers of internal controls, namely. Control Environment, Risk
Assessment, Control Activity, Information and Communication and Monitoring.
Information Technology controls were documented, assessed and tested under
the COBIT framework.
The entire evaluation of internal controls was carried out by a central
team reporting into the Chief Financial Officer.
We have obtained a clean and unqualified report from our independent
auditors on the effectiveness of our internal controls.
G. Human Resource
In our IT Services and Products business, we had 122,385 employees,
comprising 25,108 employees in BPO.
Attrition for the year in our IT Services business (excluding BPO
operations, Indian IT operations and other overseas subsidiaries) was 24.1%
compared with 18.3% last year. Voluntary attrition stood at 22.7% compared
with 12.1% last year.
Compensation/People practices
We have continued to develop innovative methods for accessing and
attracting skilled IT professionals. We partnered with a leading Indian
university to establish a program for on the job training and a Masters
degree in software engineering. We believe that our ability to retain
highly skilled personnel is enhanced by our leadership position,
opportunities to work with leading edge technologies and focus on training
and compensation. Our efforts resulted in us being ranked #9 in the Aon
Hewitt India's Best Employer Survey - the only IT company in the Top 10
list.
We have designed our compensation to attract and retain top quality talent
and motivate higher levels of performance. Our compensation packages
include a combination of salary, stock options, pension, and health and
disability insurance. We have devised both business segment performance and
individual performance linked incentive programs that we believe more
accurately link performance to compensation for each employee. We measure
our compensation packages against industry standards and seek to match or
exceed them. We periodically reward high performers with ong-term
incentives in the form of restricted stock units (RSU). RSU is a powerful
retention tool and aligns employees with the long-term goals of the
Company.
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