WIPRONSEQ2 FY 2023October 15, 2022

Wipro Limited

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Management on call

Aparna Iyer

Vice President and Corporate Treasurer. Thank

Key numbers — 39 extracted

24%

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-yea

30%

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

725 million

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

42%

ocked 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 l

rs,

ar 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 pi

4.1%

r 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

13%

rning 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

15.1%

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

15%

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 f

26%

uarter, 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.

34%

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

12%

tal 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 growt

Guidance — 20 items

Aparna Iyer

opening

“The conference call will be archived and a transcript will be made available on our website.”

Thierry Delaporte

opening

“But we expect continued strong demand for our comprehensive portfolio of services.”

Thierry Delaporte

opening

“And finally, I will share an outlook for the next quarter.”

Thierry Delaporte

opening

“This guidance reflects the current environment and the quarter seasonality.”

Thierry Delaporte

opening

“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.”

Jatin Dalal

opening

“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.”

Jatin Dalal

opening

“Our guidance as Thierry remarked for Quarter 3, is 0.5% to 2% in the constant currency terms.”

Jatin Dalal

opening

“We will be very happy to take your questions from here.”

Sandeep Agarwal

“#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.”

Thierry Delaporte

“So, that's probably what it is and I am moving to the question #2, it's probably what's leading to our guidance.”

Risks & concerns — 15 flagged

The uncertainties and risk factors are explained in our detailed filings with SEC.

— Aparna Iyer

As businesses around the world are dealing with inflation pressure, with geopolitical turmoil, with energy crisis, also the rising interest rates.

— Thierry Delaporte

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.

— Thierry Delaporte

In one recent example, we helped a global communications organization improve and automate their compliance processes, leading to an enhanced risk posture.

— Thierry Delaporte

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.

— Thierry Delaporte

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.

— Sandeep Agarwal

#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.

— Sandeep Agarwal

So, there is no sign on our side of any particular slowdown, wipro.com except that the market has changed, except that they are a certain environment of uncertainty that is impacting our clients.

— Thierry Delaporte

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.

— Abhishek Bhandari

Now, there is no doubt that there is a slowdown, and we see it.

— Thierry Delaporte

It was actually forecasted for us, and we see a slowdown for this consulting business.

— Thierry Delaporte

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 wipro.com will have a stronger focus on cost optimization, on productivity gains, and so on.

— Thierry Delaporte

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.

— Abhishek Bhandari

And there’s perceivably more slowdown to expect in this industry going forward.

— Thierry Delaporte

Another one where I could potentially see a potential slowdown if the economy worsen is a sector like retail.

— Thierry Delaporte

Q&A — 8 exchanges

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

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 con

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 fir

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 wipro.com 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. 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 qua

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 wipro.com 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 cou

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

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 marg

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. No, so I will just repeat my question, while all the players have seen. 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 expensiv

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 defin

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. wipro.com

Speaking time

Thierry Delaporte

Moderator

Jatin Dalal

Mukul Garg

Abhishek Bhandari

Manik Taneja

Aparna Iyer

Nitin Padmanabhan

Ravi Menon

Sudheer Guntupalli

Opening remarks

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

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 t

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. wipro.com 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 questi

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