Have enough cash reserve, will look at potential M&A deals: Wipro CFO

In a Q&A, Jatin Dalal says his company is looking at investments that are good but impacted by the market downturn

At a time when the IT industry is fighting the Covid-19 crisis, Wipro is confident of sailing through on the back of its strong balance sheet and service offerings. In an interaction, The firm's CFO Jatin Dalal tells Debasis Mohapatra and Sai Ishwarbharath B that the company has enough cash reserve to tide over any rise in working capital requirements and will also look at potential M&A opportunities going ahead. Edited excerpts:

Wipro has said its working capital need is likely to increase in coming days owing to Covid-19 crisis. What is the kind of increase of working capital, you project and how is it placed against the free cash flow generated by the firm?

In our balance sheet, our current assets are around $6.9 billion and current liabilities around $2.9 billion. So, our net assets are around $4 billion at any point of time. However, our current assets include $3.2 billion of cash and cash equivalents. We also don't have very large working capital requirement. While our working capital requirement will be somewhere around $600 million, we generate around Rs 10,000 crore of net income. So, I will not be worried about our ability to generate sufficient cash from our operation to fund our working capital. Also, we have $3.4 billion of cash on balance sheet on net basis and $4.4 billion of gross basis. So, this could be the time to see possible M&A opportunity.

So what kind of opportunities, Wipro will explore in the current situation? Is there any enterprise value in mind?

Our choice has not changed in the kind of companies we are looking at. But we have always been competing, apart from the strategic players, with the private equity firms as well. We are looking at investments which are good but impacted by the market downturn. M&A is also a good opportunity in the current time but this doesn't mean that we go out and take a large acquisition for the sake of it. It will be a balanced approach and will be the right call for the organisation. What we intend to convey was the things we wanted to do are more affordable now than six months back.

But given the environment, will there be cost optimisation moves?

Absolutely. We are looking at costs as if our lives depend on it. If one is witnessing a revenue reduction which will happen, the only way to respond is to reduce the costs. We have three priorities- revenue maximisation and market share gain, second is cost optimisation and third is retaining talent.

So, you see revenue contraction as a possibility in FY21?

It is something we cannot rule out at present.

Are you factoring in that second half of FY21 may be better than the first half of this fiscal?

We really don't know when the situation will stabilise. We are not sure whether the peak-level of Covid-19 cases have already been reached or will it be touched in the future. Similarly, in developed countries like the U.S. and Europe, they have reached peak levels. We should have a clear sense of how things will pan out by the end of the April-June period end. It's too early right now.

What is your take on leadership transition? Will it be deferred given the current environment?

Some of the situations can't be controlled. CEO departure is an independent decision of (Abidali Neemuchwala)based on personal circumstances and subsequently, Covid-19 is also something which is out of our control. But Abid is in absolute control of the day-to-day operations and will be till his last day whenever that happens. We see ourselves working as a team and we are on every minute basis led by Abid.