Wipro Limited analyst Q&A

Thank you and congrats on a strong result. Happy New Year. Thierry, 2 questions for you. There's clearly a lot of excitement and bullishness in the market about the prospects for the industry for the next 6 to 12 months. From your perspective, looking at visibility in the pipeline, do you feel that we're headed towards that inflection point? Maybe you can talk about that. And then the second question is on Capco. Clearly, you have a very unique asset there. Maybe you can remind us, maybe talk about the met rics. The headcount at Capco, you said that the bookings were pretty strong. Talk a bit about the nature of the work and what sort of client conversations you're having when you're kind of pitching Capco. Thanks a lot.

Moshe, thank you for your question. Let me try to address them. The first one is the outlook. Let me rephrase a little bit your comment on the outlook for the service industry. Let me tell you what we see. What we've seen is that, first of all, over the last few quarters, it has been a market unusually, I would say, slow and exposed to uncertainty. I mean, it was visible in some industries, in particular financial services. We've seen it with banks reducing their spend, discretionary spend, with technologies who typically we re significant technology spenders before, and other industries as well. Let's be clear, Moshe. The market has not fundamentally changed in the last weeks. What we are seeing is, I would say, we are seeing green shoots. We are seeing a certain form of stabilization and, in some ways, some pickup in discretionary spend. That's what we are seeing. And I think we are trying to be cautious in our optimism because we want to continue to see more about it, right? And you know that typically in January, February, beginning of calendar year, are the times where, through our interactions with our clients, we get a better feel for what will be their budget and what will be their priorities. So what I would say is, a little early to tell for the next year or the year soon to start for us, but I would say a little bit of green shoots. We've seen, hence, the ability to hit the top of the guidance. One element of -- major of this improvement is coming from the performance of our consulting business, and in particular of our Capco business. Precisely in this industry, financial services, that has seen one of the most steep reductions in discretionary spend in the previous quarters, the performance of the team has been really solid in bookings during the quarter. That's why we report and share it with you openly. I was the first one to recognize that the choice of our strategic decision to invest in consulting was absolutely critical to our strategy, essential, key. But we also knew that those are the businesses that typicall y are the first ones to slow down when there is a slowdown in the market. They are also usually among the first ones to bounce back. Let's just say, it's been a strong performance this quarter and it gives us good optimism for the quarters to come. You asked about the type of business. Capco is more on the business side and it is on the IT side, but it's also on the IT side. That's the strength of Capco. And it's also because Capco have been working together with Wipro – with our clients. And therefore, it really goes from all advisory discussions, compliance, all the way to driving transformation, large -scale transformation to technology implementation, including AI, Gen AI programs.

So, I hope I answered your question, Moshe.

Yes, thank you very much.

Thank you. We have our next question from the line of Girish Pai from Nirmal Bang Equities. Please go ahead.

Thanks for the opportunity. I want to go back to the Capco situation. You said that there was double-digit growth in order bookings in Capco. Can you tell us how material the order bookings are? Because for the quarter, you talked about $3.8 billion as order inflow. How much of that would have come from Capco? And if you were to compare the order inf low for Capco in the December quarter, how does this compare with the all-time high order inflow number that Capco had post acquisition? That's my first question.

So, Girish, a couple of comments. One, we are not necessarily commenting on specifics of every brick of our organization. Okay? So, I'll keep that in mind. Second, I would say the performance of Capco is material for the organization, right? So, in good and bad times, Capco is a key strategic part of our organization. It's the reality. Third, difficult to compare or have a meaningful comparison with when we acquired them because between the day we acquired them and now, Capco has grown tremendously. So, it's a different business and certainly business has changed. So, not necessa rily able to relate to that. I think, let's put it that way. There has been a period where Capco has grown very rapidly and was driving growth for the entire organization. I mean, leading growth, I would say, because everybody was growing. Then, in the ti me of slowdown, Capco has been a little more exposed. And today, we are seeing Capco showing signs of bounce back.

Couple of follow-up questions on Capco. Was the growth in order book broad-based across your various BFSI clients or was it very specific to pockets within BFSI? That's question number one. Second question is, for $1 of consulting, what is a typical downstream dollars that you kind of get from Capco?

That's -- So, the first question. So the first question I would say is, the growth is broad -based. It's not like there's been a one account bump or anything. It's broad-based. So, your first question is, here is my answer. The second one is, what we call the pull-through, right? Consulting should lead to -- It's not always easy to track, but you can expect easily 5x to 6x the consulting business. That's what we are seeing with a lot of the projects we sign. And then, the reason why it's difficult to answer, Girish, is because there's an evolution of an account development strategy over time. And so, when you look at the cycle, a life cycle of an account development, there will be a time where there will be a larger component of consulting. In some moment, there's going to be a smaller versus the different type of services. And that’s - - we are observing this. But the pull-through is significant, that's for sure.

Okay, thank you.

Thank you. We have our next question from the line of Sudheer Guntupalli from Kotak Mahindra Asset Management. Please go ahead.

Yes, thanks. Hi, Thierry. Just one question. So, growth in Q3 ended up towards the higher end of our guidance band, and you're calling out green shoots of recovery in consulting segment. Historically, March quarter has not been so bad for us in terms of seasonality. And after multiple quarters of revenue weakness, our base looks mathematically favourable. So, in that backdrop, I'm a little perplexed on how to reconcile the lower end of our guidance band at around 1.5% decline. So, are we being a little conservative here to keep buffer for any potential shocks? Or is there any revenue impact due to the restructuring of the low margin business that we spoke about?

Sudheer, this is the nature of our guidance, to give a bracket so that they are -- You know, because the reality is that we are still in a market where there's things are happening and up and down. And there's -- We need to see how this quarter turns. But I think this guidance is sharing a, I would say, cautious level of optimism.

Got it, Thierry. No, I was just surprised as to the lower end here implies the same kind of number that we did in December quarter, which is typically very weak seasonally. And this time around, almost everybody is seeing higher than expected furloughs. So, I was just trying to understand how you arrived at that base case scenario. Is there anything specific that you're looking at or just the wide band that you wanted to keep?

Well, if I'm not wrong, Sudheer, actually the lower end of our guidance equals the top end of the guidance of the previous quarter. So, it shows a trend.

Got it. Thank you so much. All the best.

Thank you.

Thank you. We have a next question from the line of Abhishek Kumar from JM Financial. Please go ahead.

Hi, thanks for taking my question. Thierry last few quarters, our growth has been challenged by some of the project cancellations , leakages, etcetera. Now, as you say, there are signs of stabilization. Is the leakage reduced to a level where the incoming revenue from all the deals we have won has started to exceed what is leaking out and therefore, incrementally, there should be growth? Is that kind of the right understanding?

You know, if we look at our performance on bookings, therefore our ability to close deals in the market, it continues to be rather good. So, the sales performance has never stopped to be pret ty good. I mean, the performance for the last three quarters, and we know that through those performance in sales, in particular with significant volume of large yields, this will definitely increase our backlog for the quarters to come. What was hurting our growth was the discretionary spend. So, typically the smaller type of projects, but which in large volume was contributing to revenue growth. In this context, that's why you've seen that indeed we've not been able to show growth over the last quarters. We are seeing a little bit of a -- probably a significant, I would say, and I don't know how to say it, either an end of the discretionary spend or actually a slight pick-up of the discretionary spend. But that's where we are seeing a little bit of inversion of the trend for sure.

Yes, that's helpful. And maybe the next question is on margin, maybe on the medium term. We have done a tremendous job in protecting our margin despite revenue erosion. So, as growth comes back, how are we lookin g at or how should we look at margins over the medium term? Should we go back to maybe pre-Capco kind of margin levels? Any colour on margin trajectory over the medium term? Thank you.

So, I'll reflect a little bit on your question and then I'll ask Aparna to build on or to take this point more specifically. What I would say is that for sure, it was important to us to show that through our actions around efficiency, productivity, automation, process improvements, all of that deep, deep activity inside the organization, the objective was to build a certain level of resilience of our margin profile. And indeed we have launched these actions a few years ago at a time where we didn't know the market would slow down. Actually, this market slowd own has been a proof point that our resiliency has improved tremendously over the last quarters. Indeed, you say it, despite the slowdowns, despite, the lack of growth, despite, salary increase, MSI to our employees, we've been able to hold our margin. So, it gives us certainly a certain level of confidence that with the growth, we'll be able to imagine expansion. Aparna?

Yes, you know, to just add to what you said, Thierry, that when the growth returns, obviously you will see an uptick in the margins. But we also need to remind ourselves that, we need to also invest for growth. And that will also remain a key agenda for us. There are areas of AI we need to continue to invest in our people, in processes. And therefore, yes, there is an expansion possible with returning growth, but with investments for growth.

Sure. Thank you and good luck.

Thank you.

Thank you.

Yes, thanks for the opportunity. Two questions. First, about in your prepared remark, you indicated E&U, where demand remains healthy. But if I look at our performance for the last couple of quarters, E&U remains weak, at least from a sequential growth perspective. And E&U, where we used to have significant capabil ity compared to some of our peers. So if you can provide some sense about, and most of your peers so far indicated E&U is one of the resilient verticals from a demand perspective. If you can provide some sense, how one should look at the demand trajectory for E&U verticals. And second is on manufacturing. Now, manufacturing remains weak for some time. And otherwise, manufacturing is showing a strong demand direction. So if you help us understand steps you're taking to expand our capability, landscaping, man ufacturing, and how one should look at it from a medium-term perspective? Thank you.

Okay, understood. Thank you, Dipesh. So, first of all, I always caution a little bit any conclusion, too rapidly drawn by, looking at a Q-on-Q performance in a sector. Because sometimes, it just, happens that in an account or in a geography, one event is slightly impacting the picture. What I would say is looking at E&U and manufacturing. So E&U is actually a reasonably good market. It's a place where, there's significant investment, whether it's on the engineering side, on the IT side. Significant investment made on the AI, Gen AI as well. So, that's a market where, we are expecting to see growth for us. Manufacturing, you said it, it's been mixed over th e last few quarters. But there's particularly, for example, if I look at automotive, it is an area where there's significant investments. We are really making significant inroads in this industry in particular through our investments, whether it's on -- around the car cloud business or whether it's on, autonomous, you know, automation and so on. There's a lot that we've been doing and we will see growth over the next quarters for sure.

Okay, I'm looking. Yes, sorry. I'm looking from slightly medium-term perspective. Let's say manufacturing, if you look at from size perspective, for us it is 6% -7% adjusted revenue. Now, 6%-7%, whether you believe it is reflective of the market opportunity or you think it will change over the next three, five years? And if it is likely to change, which area we are investing to drive that change?

You know, you ask me now to look at the crystal ball, right, and tell you what's going to be the growth in the next four years in this industry. It's hard to tell. I can tell you that I certainly want us to invest in the Energy and Utilities as well as in the manufacturing sectors. Those are two key sectors for Wipro. And we have, big ambitions. We are working with large clients and will continue to do so.

Thanks.

Hi, thanks for the opportunity. So I have a couple of questions. Firstly, just wanted to understand, that when can we sta rt to expect the next headcount addition? So now that we're expecting growth to come back, maybe in the medium term, can we expect that we add supply from the next quarter?

So, Tob, you want to take that one?

Yes. So, look at the entire supply chain. Today, a low attrition, a headspace for higher utilization. We have enough talent pool available. And for certain specific skills which we require, we'll continue to hire. So the current environment, we feel that it's from supply will not be a constraint. As demand picks up for the quarters, we'll definitely look at hiring in more bigger numbers.

Sure. And secondly, if you can indicate how has been the trends and deal wins in terms of the net new versus renewals?

Net new versus renewals. So we are not communicating this information. But what I can say is that if we look at the large deals, actually, the majority is net new.

Sure. Thanks. That's it from my end.

Thank you. Ladies and gentlemen, that was the last question for today. I would now like to hand the conference back to Mr. Dipak Bohra for closing comments. Over to you, sir.

Thank you all for joining the call. If you have any further questions, please feel free to reach out to the investor relations team. Have a nice day.

Thank you. On behalf of Wipro Limited, that concludes this conference. Thank you for joining us. And you may now disconnect your lines.