Wipro Limited has informed the Exchange about Transcript of Analysts/Institutional Investor Meet/Con. Call
October 15, 2022
The Manager- Listing BSE Limited (BSE: 507685)
The Manager- Listing National Stock Exchange of India Limited (NSE: WIPRO)
Dear Sir/Madam,
Sub: Transcript of the Analyst / Institutional Investor Meeting
Please find attached herewith copy of the transcript of the Analyst / Institutional Investor Meeting held on October 12, 2022. The audio recording of the same is available at https://www.wipro.com/investors/quarterly-results/.
Thanking you,
For Wipro Limited
G Kothandaraman General Manager- Finance
Wipro Limited Q2 FY 2023 Earnings Conference Call October 12, 2022
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Management
Thierry Delaporte
Chief Executive Officer & Managing Director
Jatin Dalal
Chief Financial Officer
Saurabh Govil
President & CHRO (Human Resources)
Stephanie Trautman
Chief growth officer
Aparna Iyer
Vice President & Corporate Treasurer
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Moderator:
Ladies and gentlemen, good day and welcome to the Q2FY23 Earnings Call of Wipro Limited.
I hand the conference over to Ms. Aparna Iyer – Vice President and Corporate Treasurer. Thank
you and over to you.
Aparna Iyer:
A very warm welcome to our Q2 FY'23 Earnings Call. We will begin this call with business
highlights and overview by Thierry Delaporte - Chief Executive Officer and Managing Director,
followed by financial overview by our CFO - Jatin Dalal. Afterwards the Operator will open the
bridge for Q&A with our Management team.
Before Thierry starts, let me draw your attention to the fact that during this call we may make
certain forward-looking statements within the meaning of the Private Securities Litigation Reform
Act of 1995. These statements are based on management's current expectations and are
associated with uncertainties and risks, which may cause the actual results to defer materially from
those expected. The uncertainties and risk factors are explained in our detailed filings with SEC.
Wipro does not undertake any obligation to update the forward-looking statements to reflect events
and circumstances after the date of filing. The conference call will be archived and a transcript will
be made available on our website. Over to you, Thierry.
Thierry Delaporte:
Hello, everyone. Good evening. Thank you for joining our Q2 Earnings Call. And for those of you
joining us from the U.S., good afternoon, I guess maybe good morning for some.
Since the last time we spoke in July, we have seen the macroeconomic conditions across almost
all markets and sectors have changed. In speaking to our clients every day, we are seeing a
change in the level of optimism. As businesses around the world are dealing with inflation pressure,
with geopolitical turmoil, with energy crisis, also the rising interest rates. Almost every major
economy is experiencing economic deceleration.
And it's against this backdrop that we delivered a strong quarter. Our business strategy is sound
and our value proposition continues to resonate with clients across markets. This is reflected in
robust bookings, healthy deal signings, growth in revenues, as well as operating margins.
Let's start, our bookings. Our bookings in total contract value terms grew 24% year-on-year in Q2.
Two of the four markets, Americas 1 and Europe grew more than 30% year-on-year. We said in
the past that large transformative deals are a key pillar of our growth strategy. Indeed, they will
allow us to demonstrate the true power and scale of our services, talent and operations. Large
deals are where we deliver maximum value for our clients. So, I am pleased to share that large
deal wins have continued to be really strong.
In Q2, we signed 11 deals with a total contract value of USD 725 million. This actually follows an
exceptional quarter in Q1 when we clocked over a billion dollar in deal signing. And this strong
booking trajectory translates into a 42% year-on-year growth in our large deal bookings, in the first
half of this fiscal year. Over the last few years, we have steadily increased our win rate, improved
the quality of our pipeline. As of today, our pipeline has, a well-balanced, mix of transformation
growth and cost take-outs engagements.
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Now, this mix may change in the coming quarters based on external conditions that I talked about
earlier. But we expect continued strong demand for our comprehensive portfolio of services. We
know that technology in good times like and bad has become the underlying success factor for any
business. Regardless of what the problem is, increasingly technology is the solution. And I believe
we are better positioned than ever before to help our clients tap into the true power of technology,
whether that's to drive growth and transformation, or manage cost or build a sustainable future.
Speaking of sustainability, we continue to build sustainability into everything we do, including
across our tech stack. You will see us leveraging our sector domain expertise and a strong
partnership to develop new, low carbon impact solutions for our clients. Our enterprise scaling and
sustainability process experience is helping us standout in the market and leading to strong client
demand. Overall, with our deep engineering expertise and comprehensive set of offerings, we are
well positioned, to be the partner of choice for our client as they face a growing set of headwinds.
Now, turning to our revenue growth, we recorded 4.1% growth in constant currency terms
sequentially, and 13% on a year-on-year basis, that translates into double digit growth across all
markets.
Business growth translate into growth for our colleagues, and I am happy to share that we rolled
out quarterly promotions to our employees in July. And salary increases effective September. And
yet, we have achieved operating margins of 15.1%.
As we continue to enhance our portfolio with the newer and more strategic service offerings, our
clients are recognizing the value we deliver. This is increasingly reflected in our improved price
realizations. This combined with operational excellence, automation, higher productivity are the
key levers for margin improvement.
As every quarter I will now have share some finer details on markets, service offerings and sectors.
Let's start with our markets.
In Americas 1, we grew 15% year-on-year in the 2nd Quarter with all sectors showing strong growth.
During the quarter, the fastest growing sector in the market was Technology Products and
Platforms which grew 26% year-on-year. Order bookings in total contract value terms grew nearly
34% year-on-year in Q2.
Now moving to Americas II, we grew 12% year-on-year in Q2. Manufacturing and Energy and
Utilities led the performance, recording a growth of more than 20% each year-on-year. Financial
Services grew 17% year-on-year.
Moving on to Europe, our European business delivered a year-on-year growth of 12% in Q2. Most
of the markets recorded strong double-digit year-on-year growth with Benelux, UK, and Ireland
and Southern Europe leading the pack.
Our order book in total contract value terms grew at 36% year-on-year, which is quite massive.
Our APMEA business grew at 11% year-on-year in Q2. Regions that did particularly well during
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the quarter where Southeast Asia, Australia and New Zealand and Middle East so you can see
across all markets, double digit growth.
Strengthening client relationships remain a top priority for us. As a result, we are gaining share in
our metal accounts. Our Top five clients grew 19% year-on-year. Our Top 10 clients grew 17%
year-on-year in constant currency terms.
Now moving to service offerings, we have two Global Business Line iDEAS and iCORE. Let me
go through each of these two business lines. Our iDEAS Global Business Line grew 15% year-on-
year in Q2. This growth was led by Cloud Transformation first, which grew 26% year-on-year, by
Applications and Data which grew 21% year-on-year, and finally by Engineering Services which
grew 18% year-on-year.
Now looking at iCORE, the other Global Business Line grew 9% year-on-year in Q2. But here led
by Cyber Security Services which grew 23% year-on-year in Q2. And as the speed of
transformation accelerates, we are experiencing increased demand for our full suite of cyber
offerings. We are leveraging internal methodologies, framework and intellectual property in
collaboration with our technology partners to help clients manage a dynamic and complex risk
environment.
In one recent example, we helped a global communications organization improve and automate
their compliance processes, leading to an enhanced risk posture. We now operate and execute
this program globally and have driven significant cost reductions in their security and compliance
program.
Then talking about Wipro FullStride Cloud Services, which is more than 1/3rd of our business today,
continues to be a driver of our success, and partnerships are at the center of this growth. In fact,
in the 2nd Quarter, bookings with Hyper Growth Partners grew 24% year-on-year.
Working alongside our partners, we know we are creating industry solutions and leading major
transformation efforts designed to help clients unlock the value of Cloud, but also realize new
efficiencies.
In addition to modernizing applications, we see a great amount of interest in modernizing data
operations. Organization realized the power of data in gaining new insights into their business. For
example, for a U.S. based Diversified Financial Services Group, we are working on a digital
transformation and data modernization effort which actually involves building a Next Generation
Cloud Analytics platform. The goal here is to deliver omni-channel experiences that help our clients
get better, real-time insights into their business. Ultimately, the transformation is helping our clients
reduce time to market for new capabilities and deliver enhanced experiences.
In another example, for a leading provider of industrial automation solutions, we are working on a
transformation program that will help them become more client and relationship centric. We are
building a multi-Cloud solution that will transform the firm's marketing sales and services around a
single client definition, creating opportunities for more meaningful engagement with customers.
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And we continue to double down on strategic investments in areas that we know will drive long-
term competitive edge, for us and for our clients. For example, recently, we launched Lab45, a
new brand for our CTO organization. Lab45 is a new direction for Technology Research and
Development Unit.
The objective of Lab45 is to develop new assets, intellectual property, and products through client
collaborations and partnerships. Lab45 will help our clients build new business models, enhance
user experiences and drive growth through enterprise technologies. In fact, the opportunity to tap
into our expertise and world-class talent through Lab45 is already factoring into client decisions
and making an impact on how we win in the market.
We are continuing to also expand our capabilities in strategic areas, such as Artificial Intelligence
and Data, but also 5G, Metaverse, IoT and Industry 4.0 to help clients gain new competitive edge.
I will now share a view of the talent landscape. I am first happy to share that our attrition has
continued to moderate for the third quarter in a row. In Q2, attrition was down to 23% if you are
looking at it on a trailing 12-month basis. And our quarter annualized numbers are trending even
lower than that. We expect a further moderation in Q3.
And like I had shared last quarter; we are now offering promotions to our employees every quarter
and in Q2, we promoted about 10,000 colleagues. I am also pleased to share that the annual
salary increases were given to our colleagues across bands in Q2 where it is our philosophy a
steep differentiation in a reward for our top talent.
We have also on-boarded over 14,000 freshers in H1, which is I would imagine 75% of what we
added in the whole of last year. And finally, I will share an outlook for the next quarter. We have
guided for revenue growth of 0.5% to 2.0% which will translate to growth of 10% to 12% year-on-
year in constant currency terms. This guidance reflects the current environment and the quarter
seasonality. For the full year, we also think that we will report double digit growth. Our margin in
Q3 will have some headwinds, there’s the impact of two incremental months of salary increase
and yet we expect to hold a margin in a narrow band.
In a summary, we have delivered a strong performance against the backdrop of a mixed
macroeconomics environment in Q2. Our order bookings and large deals reflect an improved
market competitiveness. And prove that our strategy is working. We are experiencing a real shift
in the market as clients increasingly turn to us to realize their boldest ambitions. And based on all
these factors, we remain confident of gaining market share in the coming quarters. With that I will
hand it over to Jatin now for his comments.
Jatin Dalal:
Good evening, good morning, good afternoon everyone. We had a solid quarter we delivered
slightly above the mid-point of our guidance at 4.1% sequentially which was 12.9% YoY growth.
We delivered operating margin which was slightly higher than Quarter 1 at 15.1%. We had an ETR
of 22.5% which was again 1% better, than what we had for Quarter 1. And as a result, our net
income grew 3.7% sequentially for Quarter 2.
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We had robust performance in cash collection and overall improvement in working capital cycle
management. We therefore have posted a very robust 180% ratio of operating cash flow to net
income.
At the end of Quarter 2, we had $4.3 billion of gross cash and $2.2 billion of net cash on our
balance sheet. We had a good performance in forex, our realization rate was 79.93. And we had
$3.8 billion of forex hedges at the end of the quarter.
Our guidance as Thierry remarked for Quarter 3, is 0.5% to 2% in the constant currency terms.
We will be very happy to take your questions from here.
Moderator:
Thank you very much. Ladies and gentlemen, we will now begin the question-and-answer session.
We will take the first question from the line of Sandeep Agarwal from Edelweiss please go ahead.
Sandeep Agarwal:
So, I have a small question from Thierry. Thierry in all your discussions with the client right now,
are you hearing any kind of cautiousness from the any of the clients in any of the vertical or
geography regarding this macro, or it is more a preventive step that they don't want to go
aggressive right now? Or they want to also be careful and watch the environment how it plays out.
So, what kind of restrains you are seeing whether it is a realistic pressure, which is leading to some
kind of cautiousness and it is more likely to get cut, or you think that it is just a preventive step from
them right now, where they want to wait and watch the macros, #1.
#2 The guidance while I understand that the environment is very volatile and because of that,
probably you have kept in some bit of conservatism while guiding, but it still looks a little slower
given the kind of demand environment what we are hearing from the industry, what we are hearing
from the competitor. So, what is hurting us more than the others can you elaborate a little bit on
that?
Thierry Delaporte:
Let me take the questions, one-by-one, one is talking about the market environment. I think the
answer was almost embedded into your question. So, here it is that I think we all are connected
with the market news. And it's quite interesting to see every single day what's happening in the
whole world, macro environment weather, what's happening in Ukraine, what's happening with the
energy, what's happening in market conditions in America or in most of the countries. There is a
certain evolution of the climate that is certainly the confirmation that we have, the market has
changed market and conditions has changed. We are no longer in the same market and condition
that we were nine months ago or 12 months ago. That's a reality.
But the big question is, is this context going to impact our industry. And frankly speaking, I am not
sure. That's why I see a certain level of uncertainty today. There's a bit of uncertainty, because, in
talking to clients, they all are assuming that at some point in time, this will have some implications
for them. And I think that would be naive on our side to not hear what they are saying.
So, that's probably what it is and I am moving to the question #2, it's probably what's leading to
our guidance. The business is good. I mean, we have been growing well over the last quarters, we
have been performing well on bookings. So, there is no sign on our side of any particular slowdown,
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except that the market has changed, except that they are a certain environment of uncertainty that
is impacting our clients.
And then obviously, Q3 is also a quarter where there is furloughs. Do we have more furloughs than
the previous years? I don't know. But we know that they will be furloughs and so I realized that you
might see a point of caution, and it's maybe the case, but I think we have tried to be cautiously
optimistic.
I want to also give a perspective in terms of the growth trajectory. If you look at Q2, we do 4.1% of
gross, which is a sign of very strong performance. All our markets have grown double digit year-
on-year, not one grew less than 10%. So, we see this trend. Now, if you take even more, step back
and look at you know, Wipro’s trend, last year we were industry leading grows, right, this year,
double digit growth, and we are only halfway through the year, we know, that will be double digit
growth. This company will have grown to 40% in two years. That's the rarity. And then again, the
performance in bookings, the impact we have in the market gives us great confidence that we will
continue to grow well and certainly gain market share in the next quarters. That's the mindset that
we have right now.
Moderator:
Thank you. Our next question from the line of Abhishek Bhandari from Nomura. Please go ahead.
Abhishek Bhandari:
Thierry, I have two questions. One is more from a near term and one is more medium term. The
first one is, in the backdrop of volatile macro, which you have been alluding to multiple times in
your press conference, and even in the recent last 20 minutes. How are you some of your recent
consulting acquisitions playing out, especially Capco and Rizing, if you could share some trends
over there? And also, from a pipeline perspective do you see any kind of change coming through
these two particular subsidiaries?
Thierry Delaporte:
So, the first one about consulting. Consulting business has been a massive driver of growth for us
over the last two years. I was talking about Capco, we have grown more than what we had in the
plan every single quarter. Now, there is no doubt that there is a slowdown, and we see it. It was
actually forecasted for us, and we see a slowdown for this consulting business. We also know
because it's a reality now in the industry, that consulting tends to be early cycle. So, the first one
to slow down, first one to accelerate, and extremely agile to adjust to market evolution, so that's
for your first question.
In terms of as you said, looking at the pipeline, a pipeline is stronger than ever. We have a very
solid pipeline; I think supporting our growth. If we look at the nature of the pipeline, they might be
a certain evolution of the type of deals won, they are definitive, significant driver of growth, we see
it. Cloud will continue to grow massively for us, and it's the third of our business. Security will
continue to grow also large double digit. Engineering is growing very well, as well.
In terms of type of offerings, those are here, but I think even if we look at the Cloud, I think it is the
type of deals will possibly and I am being cautious in my assessment, because the trend is to be
observed over a longer period of time, but I think, we should certainly expect that a lot of the
investments that our clients need to do in technology will require a business case, and therefore
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will have a stronger focus on cost optimization, on productivity gains, and so on. That's possibly
where I see an evolution of the of the pipeline.
Abhishek Bhandari:
Thierry my second question which is more on the margin side; more for medium term perspective
while we understand in the current context, there is around 200 basis point impact of the
acquisition, which is continuing. But if I look at the gap between our margins and our peer set
margin, that gap has widened quite a bit. So, maybe if you could elaborate some of the medium-
term steps you think you could take to go back to your own older levels of margin of around 18%
to 19%. And you think the current softening of the supply side issues could help you achieve it
faster than what you would have thought maybe six months ago.
Thierry Delaporte:
One in terms of the margin, yeah, you said it certainly there was, it's a strategic choice that we
have made to make some significant investments in this business to make us stronger in the future.
And you are right to not only look at short term but also mid-term, where are these investments,
clearly strategic move with some of the acquisitions we have made, with all the acquisitions we
have made they have all been driven by a strategic objective and significant investment into talent,
significant investment into our operating model and into our operational excellence, significant
investment into our efficiency our market impact, significant investment as well in on freshers I
think we spend more time explaining this a quarter or two ago but we didn't have a fresher strategy
until a few quarters at Wipro that was at par with some of our colleagues in the market. And so,
we have decided to go ambitious and really build this freshers strategy and it requires investment.
Freshers are an investment that delivers over time. And so, we’ve made those conscious choices
knowing that that would knock down a little bit the margin, we also knew that in a market where
we are growing, as I said 40% of eight quarters in high demand environment with cost of people
being higher would have this impact, but that is also conscious now, what did we say. A quarter
ago, we said 15% is our floor, we are building from here, and we are going to progress. We will
not guide as you know beyond the current quarter, but it’s clear that we do not see the end of the
road where we are absolutely not. And so, what are the levers, continue to drive our fresher
strategy, continue to progress on the automation, where we’ve also made some significant
investment, continue to go for larger deals, continue to go for deals delivering more value, and not
only going after volume. And finally, I would say continue to work on our efficiency, we’ve made
some significant progress, there’s still more to do ahead of us. So, I’m not worried at all about our
ability to continue to improve margins and close the gap with some of our colleagues.
Abhishek Bhandari:
Thank you, Thierry and which you a great end to 2022 and talk to you soon. Thank you.
Thierry Delaporte:
Thank you Abhishek, talk to you soon.
Moderator:
Thank you. Our next question is from line of Nitin Padmanabhan from Investec. Please go ahead.
Nitin Padmanabhan:
I have two questions. The first is, if you could throw some light on the restructuring cost that has
impacted this quarter, it’s around 136 crores, what does that pertains to you if you could give some
color there. The second, just wanted your thoughts roughly from a vertical perspective in terms of
how you see demand on a going forward basis, for instance capital market, specifically maybe
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capital markets, retail and the high-tech side of things, and manufacturing so some color on those
as well.
Thierry Delaporte:
Yes, absolutely. So, I’ll take the first one, and I’ll ask Jatin to build on it. So, on restructuring, so
it’s a one off, so this is not something that is to be done repeatedly. It was needed, hadn’t been
done for a long time and it’s absolutely exclusively focused on Europe. And that was really to
address some, inefficiency that we were caring for a long time. Jatin, you want to say more.
Jatin Dalal:
No, it’s just sitting and reconciling item, because it’s a corporate action which we took at a company
level. And as Thierry mentioned it is a one off, there could be probably a small tail spent there in
quarter three, but nothing beyond that.
Thierry Delaporte:
Now, your second question, Nitin was about sectors, right industries and an outlook for the
industries. We are obviously observing the evolution of the market, industry by industry and
certainly everyone has different kinds of challenges. You could imagine, I believe actually the
banking sector should be holding pretty well and one it’s a sector that is used to adjust rapidly to
market changes, but also, it’s an industry where a lot of efforts will have to be done around driving’s,
simplification, alignment, streamlining, and compliance is also another important topics for banks
going forward. Now, a sector that has been growing tremendously over the last year and certainly
is slowing down is the set of technologies if you look at the large tech, look at what they’re doing
hiring has been slowing down and sometimes they are even reducing headcount. And there’s
perceivably more slowdown to expect in this industry going forward. Another one where I could
potentially see a potential slowdown if the economy worsen is a sector like retail. So, we’ll see,
Nitin.
Nitin Padmanabhan:
Just a follow up on the restructuring cost. Post the restructuring do you think that improves the
margin profile in Europe and should we anticipate that it should be a tailwind on margins, from a
European perspective after the restructuring?
Jatin Dalal:
Yes, so Nitin it is right that we have done this to reflect what we need from technology standpoint
of future. But I don’t think it would be right to equate this number with the reduction in spend going
forward, because as you know in Europe as some of this restructuring cost you many years of pay.
So, I would request you not to equate this with the reduction in spent, but there would certainly be
a tailwind where we have reduced the employee spends.
Moderator:
Thank you, we’ll take our next question from the line of Ravi Menon from Macquarie. Please go
ahead.
Ravi Menon:
Thierry could you give us some color about how you’re thinking about the demand environment in
the US and Europe. So, when you called out macro uncertainty, does that apply equally in both
geographies?
Thierry Delaporte:
That’s an interesting question, Ravi. What we observed in the past is that, typically when there is
a slowdown or recession, it’s steeper in America but it’s quicker as well. In Europe it tends to be
coming a little later, but it takes more time to bounce back. So, we will see, today the performance
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what’s clear is if we look at our own business the growth we see in America and Europe are, I don’t
know if the comparison help, but I think they are, in the ballpark they are similar so there’s no
market that is growing faster than another. But if there is a slowdown, I’m guessing it could
potentially come from America now. There is something that is specific to Europe, which is more
this energy crisis. So, here also, there is a bit of uncertainty here. It doesn’t necessarily impact us
directly, but certainly impact some of our clients, I’m guessing, in industry like manufacturing for
example, it could have an impact on Europe, if not in Q3, in Q4 we will see.
Ravi Menon:
Thank you. And you spoke about how there is almost a sense of needing to accelerate the digital
transformations and continue on the journeys. So, do you think that that makes technology
spending a little bit more resilient in this downturn compared to what we’ve seen in the past like
either the GFC or in 2001?
Thierry Delaporte:
I am convinced that indeed you’re right. Technology services company are a lot more resilient than
they were, absolutely no doubt because technology is not a seen as a cost to reduce but seen as
a mean to transform organizations. And that is systematically what I’m hearing from clients,
systematically the fact that when you are connecting with the CEO is talking about technology. It’s
part of his priorities was not the case in the last economic cycles. So, it is definitely different and
there is no doubt that when you’re working on topics, like security, take the topic of security, I don’t
see this market slowing down. If you look at what we are doing in cloud, definitely not slowing down
now for sure, it will have to be at the back of business cases right, but clients are very mature and
they know what technology can bring to them and they know why they are investing in technology.
So, to your questions and absolute and frankly yes.
Moderator:
Thank you. Our next question is from the line of Mukul Garg from Motilal Oswal Financial Services.
Please go ahead.
Mukul Garg:
Thank you. Thierry I just wanted to follow up on the consulting business, it kind of sounded that
you expect consulting to be a bit slow in the near term, given the volatile demand environment,
how do you think about the profitability of the business in the near term, because this business
usually has very high operating leverage and slowdown kind of impacts the profitability
meaningfully. So, how should we think about the profitability aspect and consulting in general, I’ll
have a follow up question after this.
Thierry Delaporte:
Okay. So, first talking about the consulting business. One point interesting to note, consulting is
slowing down from where we were drawing some quarters ago it’s true, but what’s interesting is
that consulting continues to drive growth in our business. If you look at our banking sector for
example while Capco growth has been slowing down, the impact of Capco to us winning large
deals in the financial service sector is higher than it was, we win more synergy deal, we win more
deals that we wouldn’t have won and those deals drive, more value, they are more strategic and
so from that standpoint they continue to drive positive impact for us. From a profitability standpoint,
you’re making a good point, you’re absolutely right they are agile, it’s part of their DNA to react
and adjust to the demand rapidly. And that’s exactly what we are seeing actually as they are
slowing down margins are improving.
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Mukul Garg:
Okay. So, you expect consulting margins to improve as the growth moderates, not the other way
around?
Thierry Delaporte:
Yes, that’s what I’m seeing for Q3.
Mukul Garg:
Understood. The second question was also on the profitability side. If we look at the net adds
quarter, and the continuing decrease in utilization, can you just share some thoughts on how we
should look at growth versus profitability trade off over next few quarters, while I understand you
have scope and you will seek improvements in both of them, is there some point where you think
you need to prioritize one over other?
Thierry Delaporte:
So, if I look at the situation from a client to another you may have different situation where
sometimes there’s a bit of a tradeoff to do between margin and volume, but as an organization
let’s be clear on the margin side, we will not go down from where we are. So, that is a clear position
on margins. Our objective is to continue to grow, certainly and drive profitable growth. So, that’s
continued, we are no doubt balancing growth and profitability. When you are referring to headcount
evolution and so on, what we had said in Q1 if you remember is, we had made the conscious
decision to make quite a material amount alright, significant amount of hiring knowing well that we
could end up the quarter with a little more headcount and a bigger bench than expected. And I’m
excluding freshers in my statement, because we needed to get ready for the demand that we were
seeing in our business. But we also made the conscious decision to invest in our fresher’s. And
so, we’ve just followed the strategy we haven’t changed. We have hired in H1 as many freshers
as 75% of the total number of fresher’s we hired last year, over 12 months. And those are
investments because we knew we needed it to continue to improve our operating model while
being able to deliver and respond to the demand. This quarter if you look at the utilization part of
the utilization is obviously impacted still by the volume of freshers, but we’ve continued to optimize,
our capacity and manage deliver a significant increase of the revenue without having any
significant increase of our headcount. It’s actually the meal of what we had said a quarter ago.
Jatin Dalal:
Mukul, I will just add to the point which Thierry made where he said we continue to utilize this talent
that we hired earlier, while it may not reflect in the numerical utilization number that you are seeing
in data sheet, because it has effectively the more experience or lateral bench has got utilized, it
has got replaced by a higher-pressure bench. So, economically, we have got an upside in quarter
two out of utilization, but it is not reflecting yet in the numerical number.
Mukul Garg:
Understood. Jatin if I may ask one question on capital allocation, you have in past mentioned about
focus kind of moving towards acquisitions. Given the environment in which we are, do you think
we need to take a step back from an acquisition point of view from inorganic growth point of view
and kind of move on to more cash return to shareholders, or is this the time to press accelerator
on the pedal?
Jatin Dalal:
So, Mukul we have always mentioned that acquisition remains the core part of our strategy, so
there is no change in that position. We also mentioned that 50% of the cash that we generate, net
income that we generate we will return back to shareholders and that also we will consistently
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maintain, we had one of our special dividends that we announced in Q4 FY22 as you’re very much
aware. Acquisition decisions are a factor of many things, especially apart from the attractiveness
of the asset it’s also a factor of willingness to sell price correction in the market, and so on and so
forth. But, overall, our position remains on the acquisition as well as on cash distribution back to
shareholders consistent with what we have said in the quarter. Thierry if you’d like to add.
Thierry Delaporte:
No, thank you, you said what I would remind Mukul is that what we’ve always said is that
acquisitions, we do them for strategic reasons. So, we do not have a number like we need to do x
number of acquisition in a given year. What is driving a decision is really, does it make sense, is it
a sound decision from a strategic standpoint. And so that approach doesn’t change for us. Now,
acquisition will never be used to offset organic focus, organic focus is what’s driving our day to day
the acquisition is really in order to get us to reinforce our opposition, in a place where we have
already a strong position or strengths but we believe we can accelerate and have a bigger impact
or actually acquire a new capability or a set of new technology or new relation with clients. So,
clearly strategic drive the decision. It’s never tactical and in second point, Mukul is we do not have
a number to fill so there’s no such thing as we have to do an acquisition. We do it when it means,
when it’s right for us.
Moderator:
Thank you. Our next question is from the line of Manik Taneja from JM Financial. Please go ahead.
Manik Taneja:
I wanted to pick your brains about the aspect that while you mentioned that you have been
investing in our talent supply chain. But generally, for the Indian origin or the Indian heritage IT
services players, we have seen margins now being at least if not on par but being lower than pre
COVID level. And that’s the case for us as well, while for some of our global competition, both from
the European heritage players as well as US, in their case we haven’t seen any margin
deterioration. So, if you could help us understand what do you think essentially explains the
disconnect in terms of the margin profile, or the impact on margins for Indian companies versus
the global peers?
Thierry Delaporte:
You asked me to comment the margin trends of my colleagues, is it what you’re asking me to do.
I have too much respect for them to do that.
Manik Taneja:
No, so I will just repeat my question, while all the players have seen.
Thierry Delaporte:
I get that Manik, I’ll try my best, okay. But don’t hold me against that, I’ll try. So, what happens is
that, why have the cost gone, why has the margin been impacted, because of the evolution of the
cost of employees, why the cost of the employees have gone up, because in a high demand market
attrition has gone up, attrition needed to be backfield, and backfield was with more expensive
resources. It’s what anybody in our industry has experienced, but also our clients have experienced
in the last 12 months. Now, it is a reality that is uneven from one market to another, one market
where it’s been extremely true is India and so the companies that have the biggest part of their
headcount in India have been most impacted. It’s a reality, that would be my explanation.
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Manik Taneja:
Sure. Thank you Thierry, but I also wanted to get a sense on how do we think about price increases
over the next six to nine months given the macro volatility do you think price increases still
continues to be a margin lever for the industry over the next six to nine months?
Thierry Delaporte:
Over the last quarters it has been the case, we’ve been able to raise prices with a lot of our clients,
and we’ve really driven conscious focus on that, just to make sure that obviously our client
understood that given the reality of the supply pressure if you like, it was the same way they see
inflation we also were exposed to the same situation and most of our clients want us, do not want
us to be no pressure from that standpoint. So, we’ve been able to work on it pretty well quarter
after quarter. Will it continue, that’s, we are assuming for the time being that yes, it should continue
but market can change at some point in time where it becomes more difficult. I don’t see it, for the
time being I believe that we should continue to expect price increase from our clients. Certainly,
our view.
Moderator:
Thank you. Our next question is from the line of Sudheer Guntupalli from Kotak Mahindra AMC.
Please go ahead.
Sudheer Guntupalli:
Jatin probably this question has already been asked but net utilization ex-trainees it has dropped
almost 400 basis points, any client drop off or any project drop off that is causing this reduction?
Jatin Dalal:
Sudheer thanks for asking that question. No, there is no such drop-off. I will just define it well, I
don’t think the net utilization excluding trainees, the trainees are the fresher’s who are getting
trained in the organization. So, that’s a very limited period for that, it is not a utilization excluding
fresher’s, who have come on board. So, it’s for a very limited period that they are, in training for a
couple of months where we exclude it. So, as they’ve completed the training, and they’ve gone on
projects and they are becoming productive during that period of time, they come in this definition
of overall bench and that’s why you’re seeing a reduction. However, as I mentioned before, the
economic utilization of quarter two has very clearly improved compared to quarter one and that
has given us benefit. So, I will request you for this quarter not worry about the numerical aspect of
utilization.
Sudheer Guntupalli:
Sure Jatin. Just a follow up so, as these resources start getting bill to the projects, you should see
a sharp increase in utilization in the coming quarters is that a correct understanding.
Jatin Dalal:
Yes, we will see an improvement in utilization as we move forward as they become more and more
revenue generated.
Moderator:
Thank you. As there are no further questions, I would now like to hand the conference back to Ms.
Aparna Iyer for closing comments.
Jatin Dalal:
Before Aparna goes on, behalf of Thierry, me, Saurabh, Stephanie and entire Wipro team we wish
you a Happy Diwali and brilliant New Year for those who take it as New Year and over to Aparna.
Aparna Iyer:
Thank you all for joining the call. In case we couldn’t take any of your questions. Please do feel
free to reach out to the investor relations team. Have a nice day and Happy Diwali again. Bye.
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Moderator:
Thank you. On behalf of Wipro Limited that concludes this conference. Thank you for joining us
and you may now disconnect your lines.
Wipro Limited (NYSE: WIT, BSE: 507685, NSE: WIPRO) is a leading technology services and consulting company focused on building innovative solutions that address clients’ most complex digital transformation needs. Leveraging our holistic portfolio of capabilities in consulting, design, engineering, and operations, we help clients realize their boldest ambitions and build future-ready, sustainable businesses. With over 250,000 employees and business partners across 66 countries, we deliver on the promise of helping our customers, colleagues, and communities thrive in an ever-changing world.
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