Wipro Limited

Good evening, ladies and gentlemen. We thank you for participating in today's conference. I request everyone to be on mute until the question and answer session. If you want to ask any questions, please choose the raise hand option in the toolbar. We also request you not to turn on your camera until we open up for the Q&A session. I will hand over the floor to Mr. Vipin Nair and ask him to take further.

Thank you, Neha. Good evening, everybody. We'll now begin the press conference with opening remarks by our CEO, Thiru.

Good evening, ladies and gentlemen. Really wishing you all a very Happy New Year. It's an absolute pleasure to speak with you today. Last year, we witnessed some very unprecedented times and now with improved vaccine prospects, we are filled with optimism for 2021. And we are very hopeful that It will be a better year for the society, for the businesses, our clients, and for us. I'm also quite happy to share with you that effective January 1st of the new year, we have gone live with our new organization structure. Let me now give you an update on our Q3 performance. I must say I'm pleased to share with you that We have had a second consecutive quarter of strong performance with healthy growth in revenue, acceleration in order booking, expansion of margins, a sustained lower employee turnover, and solid operating cash flow. The revenue growth of 3.9% in reported terms and 3.4% on constant currency terms is at the upper end of our guidance. Our growth was the highest in 36 quarters. The growth in revenues was broad-based across sectors and markets and led by a surge in volumes. We expanded our operating margins during the quarter by 240 basis points to 21.7%. this again is the highest we have achieved in the last 22 quarters the expansion was led by driving excellence in operations and focusing on improving the quality of revenues several operating metrics are at our all-time best including offshore mix utilization attrition and optimized subcontracting Our overall order booking for the quarter grew also double digit on a year on year basis. The order book was strong across sectors and service offerings and had a good mix of both large and small deals. We closed 12 deals with over $30 million TCV and the TCV booked of these deals was over $1.2 billion. We also closed our largest deal ever in continental Europe with Metronome. All of this was achieved while implementing the biggest transformation that the organization has seen in recent years. To me, it's a testimony to the steadfast execution capabilities and a committed one Wipro team that we have in place whose relentless efforts are paying off. Now, let me provide some color on the underlying business performance. There is significant traction in markets across all our key geographies. We saw good order booking across major geographies in US. The gross funnel ad was very healthy and the order booking grew double digit year on year. We have consistently converted some of the large deals in Europe. which has resulted in Europe growing faster on a year-on-year basis at 1.4% in constant currency terms. We see demand in Europe being particularly strong, driven by acceleration in adoption of cloud, digital transformation, and driving efficiencies in the core, leading to optimized costs. Now, From a sector view, I'm pleased to report that we had all cylinders firing. Five out of seven sectors grew over 4% sequentially. Consumer sector continues to trailblaze on the back of solid deal wins. Growth in financial services is driven by demand across all sub-verticals led by demand in digital operations, in cloud infrastructure services and digital transformation. The momentum in energy and utilities was led by utilities. However, we are beginning to see a ramp up in demand in oil and gas customers and encouraged by the deal wins we had. Technology bounced back this quarter with a Healthy growth despite the furloughs, communications and manufacturing continued to build on the momentum. Healthcare and life sciences performance was aided by a seasonal uptick in our health plan services business. Now, let me share, give you some example of some of our wins in digital operations and cloud infrastructure services space. Wipro has won a multi-year, multi-million dollar engagement from a US-based mortgage lender to provide customer service to the lender's rapidly growing retail mortgage client base. Wipro will leverage its best-in-class mortgage centers in the US and in India business operations services and application development to power the customer's aggressive growth strategy. Another example, a US-based multinational food manufacturing company has awarded Wipro a strategic multi-year global managed services contract for cloud and infrastructure, service desk and IT service management, As part of this engagement, Wipro will also provide end-to-end infrastructure services, including multilingual service, site support, workplace optimization, cloud on AWS, cross-functional coordination and tools, ServiceNow ScienceLogic in particular. In addition, Wipro will consolidate all infrastructure projects globally. The clients are definitely embracing the transformation of their IT estate and are moving away from traditional IT models and adopting business technology operations model and shifting the discussion to overall TCO. Second, our clients are investing significantly on digital business solutions. Customer experience transformation programs are becoming front to back initiatives, including core transformation, and not just on an omni-channel experience. Third, clients are moving beyond the lift and shift of the workloads to the cloud to exploit the automation and native capabilities, and we are helping them link this directly to business goals. partnership with our strategic alliances to create joint solutions are leading to wins where we are helping clients transform their IT and create business solutions. Let me give you a few examples. With Metro AG, the leading global wholesale food company, we have signed a five year and 700 million with the intention to extend up to four additional years for potential spend of one billion dollar strategic digital and i.t partnership with metro wipro will deliver a complete technology engineering and solutions transformation program for metro as it positions itself as a wholesale 360 degree provider in the trading cash and carry hotel restaurant and catering food industry Wipro's transformation program will encompass cloud, data center services, workplace, and network services, along with application development and operations to provide an integrated, flexible, and robust digital infrastructure. Partnering with Wipro allows Metro AG to simplify and streamline the IT landscape. and critically gives them access to innovation and the best digital practices. Another example, we have been chosen as the transformation partner for a bank in the UK to reimagine their customer journey and transform to be more a digital relationship bank delivered with cloud-first architecture. Our cloud studio continues to build and leverage industry and horizontal patterns, enabling us to deliver business outcomes rapidly. Another example for a leading healthcare provider, we have leveraged AWS containerized solution to deliver complex data application in four months to meet their year end regulatory requirement. Now, On our outlook for Q4 21, we have guided for a revenue growth 1.5 to 3.5%, which reflects the current demand environment and considers that we will deliver this in our new and improved operating model. The last 90 days have been very busy for us as an organization, but The good news is that we are moving in the right direction. The team is in place and our focus now is only on growth and on accelerating the momentum. In our Analyst Day commentary, we had said that we see margins sustainable in medium term. As you have observed, we have delivered significant margin expansion in Q3. Growth remains our top priority. We have begun to make investments in our frontline sales and domain specialists. For 80% of our employees, we completed the promotion cycle, effective December 1st, and we will also be rolling out salary increases for them, effective January 1st. We have also announced 100% viable payout for Q3 and Q4, which will make it three consecutive three consecutive quarters of full payouts. Our margin for Q4 will have headwinds of these investments, but will still remain elevated. To summarize, I'm very excited by the acceleration in business momentum we have seen this quarter and optimistic about the year ahead of us. With that, I hand it over to Jatin. for his comments on the financial performance for Q3 21. Jatin, over to you.

Thanks a lot, Thierry. And ladies and gentlemen, thank you very much for joining us. Very good quarter, excellent quarter in terms of execution on all parameters. Let me talk some of them. Revenue, as you know, we have come very close to our upper end of the guidance at 3.4% in constant currency. We expanded operating margin to 21.7. And as a result, our operating profit grew 24% year on year. Our ETR was slightly higher this year compared to last year. Last year, it was around 20%. This year, it's about 22.1%. So therefore, net profit growth was 20.8%. And EPS growth was 20.7%. Overall, we are quite pleased with the way from revenue to profit, the whole execution translated into performance in terms of financial parameters. Let me talk about cash. An excellent quarter on cash also. We improved our DSO by six days. Our operating cash flow was 106% of EBITDA. Our free cash flow was 133% of net income. At the end of quarter three, we had $6.2 billion of gross cash, and we had net of debt cash of $5.2 billion. Our Forex realization was at 74.04. We had $2.7 billion of hedges at the end of quarter three. Overall, Forex gave us an upward movement in margin by 0.3% in quarter three. Working on completing our buyback program, as all of you know, it will get most likely completed by January end. And the board of directors have recommended an interim dividend on one rupee per share. With that, we'll be very happy to take your questions. Thank you.

Thank you. I request Mukta to unmute yourself and proceed.

Mukta, you are on mute.

Hi, sorry. Can you hear me now?

Yes, we can hear you.

All right. Congratulations on a very strong quarter. Priya, I want to start with you first. You did mention that the new organizational structure came into effect starting this month, starting Jan 1st of 2021. How has the transition been so far in the last 13 days? You also talked about lowering dependence on the U.S. market and increasing focus on other markets like Europe and Asia. If you can highlight over the last couple of weeks what that how that has played out and you know when uh when will vipro get back to industry level growth will this organizational change really accelerate uh you know uh that for vipro uh i wanted to ask you uh you know about of course the margins uh definitely a big jump in margins uh 230 bps uh what is the impact on margins that you see from this uh you know structural reorganization Have you accounted for what it will be in this, you know, in this quarter now that it's come to effect in January? And also I wanted to ask you about what the digital revenue growth has been, you know, because theory had in the analyst call pointed out that digital technologies will grow at 15 to 20% in the next five years. What is the digital revenue growth been in Q3? And, Saurabh, coming to you, you know, in this whole organizational rehaul, you know, Geeri had talked about how there will be a new CTO, a new chief growth officer, a new chief revenue officer. What is the status on those? Have they been appointed yet? Attrition is at 11% on par with Q3, but given the organizational shift, do you expect this to impact attrition? Do you think attrition could go up because of the structural changes?

Okay, so thanks a lot for all these questions. I will try to take the first three and make sure that I don't forget any and then I think we'll pass it to Jatin and then Saurabh will end. But I will possibly respond to a fourth one as well. So the first question is clearly on the transition itself. You know, we have engaged the leadership in the work, in the thinking, in the design of the operating model early enough that when we decided to start the transition basically mid of October, the teams were already quite clear about how to progress, what to do, while keeping an absolute focus on the market. And I must say that, you know, by the time we are actually officially shifting organization to the new model on January 1st, most of our teams are already in place and organized to really drive their business in the new model because the transition had started before. So at this point in time, I would say like in every organizational evolutions, you have certain time you need a certain time to adjust and that's what we call transition but from my standpoint the transition that we are driving is very smooth and the feedback we've got from our employees you know looking at the surveys we've run has been extremely encouraging as well so you know i don't expect much disruption uh from that standpoint the focus on the market remains the same if not more intensive than ever. On your point on the geographical focus, we've never said that we would focus less on the U.S. market. U.S. is the number one market of our business and will continue to be. And in fact, two of our strategic market units or two of our four P&Ls are focusing on this market. absolute focus on the U.S. market and on the whole America's market. But besides these markets that are so important, we are also re-energizing the focus, if you like, and increasing the focus on our European and Asia Pacific and Middle East markets. And here I would say we have new teams in place. very excited, very mobilized, obviously leveraging the strong relationship we have in these markets, but also investing, investing in market expertise, investing in capabilities, investing in talent in each of these zero geographies. So this is also looking good and will produce results rapidly. Your third question was on when will we be catching up with the competition in terms of growth? So let me start with one thing. The roadmap we've designed for ourselves is focusing on our own priorities. We are driving the trajectory for Wipro for the next years. And this is what's driving us. We do not want to be constantly comparing with competitors. Having said that, we are very aware of the fact that, you know, for years we have grown less than most uh and as you know i have had the opportunity to say several times one is we are restoring growth which was in q2 then we are accelerating that's the work for the next quarters and then there will be a point in time we will reach the point of growth of our competitors and we will go over and beat the competition in growth. That's the trajectory. Bear with us. We do not want to over promise, but we will certainly keep you updated on the perspective on growth quarter over quarters. With that, Jatin, over to you.

Sure. You know, We have said, we said at the time of Endless Meet that we do see a benefit of moving two things. One is moving from three axis to two axis and that frees up resources, that frees up duplication and that we should be able to reinvest back. Second thing we say that we will remain very focused in our investment and we will not spread um and and hope for success but we will really remain very strategic very determined where we are investing the dollars uh and as you know we have moved to the new model uh from first january so it is too early to say that we have fully realized the benefit of these two strategies and they will uh play out over next few quarters and we just, I mean, theory mentioned that investment will remain focus, will remain our focus for growth. So one is definitely not expecting a cost saving out of that, but really far more effective investment that we can, we can deploy to, to grow, grow faster. And that's, that's the, that's the real, you know, point of view that we, that we have moved on, on digital. As you know, we have taken a view that we will reassess because the context has changed. What we used to publish as digital before last year and what were the client priorities has certainly changed between last year and now. We will come back to you with a measurement of new from quarter four standpoint, quarter one standpoint. But let me give you some indication of success that we have seen, and it's very heartening. The first is cloud, which has grown 23% for the company. Second is cybersecurity, which has grown on quarter three, 30% YOY for the company. There are specific... specific services within Embiid of larger digital, such as data practice, and we classify all those services separately within our digital services, that has grown 4% plus sequentially quarter two to quarter three, which is ahead of company growth rate. So there are many strong individual performances, and we expect that we should be able to carve out a number that is representative of strength of each of these service lines' performance and share with you from quarter four to end one. Saurabh.

Thanks, Jatin. So Mokhtar, you had asked two questions. A theory had called out and the analysts meet the number of senior hires, which we will be doing. One of the few of them in as theory direct reports and a number of them in second line. I can only tell you that there have been intense activity over the last few months to hire these people and you would hear and see them as we move in this quarter and going ahead. all these senior leadership would be getting inducted so as part of the reorg where it has not only we have some of our leaders have moved on there's a lot of new talent getting inducted into the organization and you'll hear about them as they as they come on board the second question which was asked about was on attrition you know so as you know we have been on a flat attrition quarter and quarter but but as the The market is buoyant, the industry is buoyant. We have seen hiring activity across the industry, even for us and for others. We have seen a gross hiring of 14,000 for us, which is a record. Very clearly, I see that we will be under pressure on attrition in the coming quarters. We have taken action, as Thierry called out. either by giving salary increases or 100% variable pay or promotions to our people. But there is a war for talent, and we will be working very actively to ensure that this does not impact us in a growth trajectory. There will be no supply-side constraints, and we will continue to make sure that we have enough people required to manage the growth momentum. Thank you, Mamda.

Sajeev, would you like to go with your question? Please unmute your line and proceed.

Good evening, gentlemen. My first question is really with respect to IT spend. You've been speaking to lots of clients over the last couple of quarters. What is the kind of, you know, IT spend that you're looking at for 2021 and maybe the year forward? And what kind of market that you can capture going ahead? The second one is on the margins forefront. It's a surprise, Jatin. Can you give us some more color to the margin in respect to where did you get that expansion happening? And for the next quarter, are we going to see margins in a similar line? Or is there a band which you're looking at going forward, given the fact that we just spoke about some pressure coming in from VHI and attrition that may come in in the next quarter there? And I need one more, you know, color on the BFSI space, how is it looking for you, especially in the North American and the European market? And now that we have seen COVID coming back in some of the European countries, is it impacting you in some way or your performance? Thank you very much.

thank you for your question i hope you know i i have well understood the line was not uh perfect um so your question i believe was on the perspective of growth we see in the market in in 2021 and you know i'm observing the market every day and the way for me to get a feel for the evolution of the market is to connect with the clients right talk to our clients and i've done that every single day um since i joined wipro and it's obviously to look at the evolution of our pipeline based on this i can tell you that you know the demand is here that there is a very positive market a market where the demand for you know transformation skills is high the demand where you know come reflecting the fact that the companies across all industries uh have as a priority to drive their transformation, their digital transformation on all the different fronts, whether it's in the way they connect with their clients, with their employees, or the way they are driving their business from an efficiency standpoint. And so the demand is good. And I would say looking across industries, frankly, as well as across markets, We really see in each of our markets a pickup in demand for those, what I would call those new areas, digital around cybersecurity, around cloud transformation. The speed of cloud adoption in Europe in particular has accelerated. And we see that very clearly in most of the markets in Europe. The need on the engineering side is promising as well. So as we look at FY21, we certainly feel that the IT span will continue to go well. And not only coming from IT department, I insist, you know, we see that also in our interaction with our clients. More and more of the IT spend is being spent outside or not fully inside the IT department on the business side as well.

Thierry, his third question was on BFSI demand outlook. If you can cover that also, then I'll come back on that.

Of course. uh bfsi outlook you know we what we've observed is clearly that across all the different departments of banking there is a we observe several things one a continued expectation from the client to from the client to reduce the number of partners they're working with So vendor consolidation is a reality. You know, the BFSI sector is, you know, highly dependent on technology, continue to invest in technology, spend more in technology than ever. There's a lot of, you know, programs to drive simplification and efficiency, obviously reducing the cost of running the operations and investing in their digital transformation as well. Your clue for the banking sector for us is good.

Thanks, Siri. I will cover your question on margins. A little more color on quarter three. Here are the details. We had about 0.3% uptick because of Forex. So if you see overall 240 basis points on a round-figure basis, then about 0.3 or 30 basis points came from Forex. Remaining 2.1% or 210 basis points was really three things. Number one was that we have got the revenue momentum translating into operating leverage. So a lot of our expenses have remained at a lower level given pandemic, and the revenue growth has happened of 3.4%, which does give us a sound operating leverage. The second thing, which has worked quite well for us, is offshoring. We have seen improvement in offshore mix by about six percentage points from last quarter, Q3 last year, to Q3 this year. So there is a 6% improvement in that offshoring and that has certainly helped the profitability. And the third is utilization. You know, if you see our utilization year on year, significant improvement, and even quarter two to quarter three, we have been able to retain utilization in a narrow band. If you adjust for the seasonal leave, which is typically higher in quarter three, you see a strong performance on utilization. It's really operating leverage. offshoring and utilization, which has played through the operating or operations of quarter three in terms of margin. For quarter four, as Thierry indicated in his opening remarks, we definitely see headwinds in terms of all the investments we are doing in terms of front end sales, as well as all the actions we have initiated on talent. So we will see margins lower than quarter three for sure. But we mentioned that we will still remain elevated and we don't expect to go back to, let's say, where we were earlier. So overall, our commentary remains that we have headwinds that we'll try and work through. And we have benefits of certain lower expenses related to the pandemic. Those benefits will continue. So therefore, margin should remain slightly elevated.

Ayyan Pramanik, do you want to go with your question, please?

Yes, yes. Hi, Thierry. Congratulations on a good set of numbers. I just want to understand one particular thing. So since you're, you know, Wipro forces faster growth in the European region, how will Brexit play out going forward? Because the UK is a significant market for you, right?

You know, frankly, first of all, you know, I think what the client hate the most is uncertainties. And we've been in the uncertainty of the Brexit for many years already. I think now we are in a cleaner situation where we can go and look forward. You know, I've discussed with some of our UK clients and that's exactly what they've told me. They've told me, you know, now we know how to deal. Now we know, you know, the terms of the agreement. And we have a clean table to start and really build and structure our strategy for the years to come. So actually, I do not see a difficulty from a business, from a demand standpoint. From an operational standpoint, we have a very high localization, over 70% in the UK as well. So we have our teams over there, absolutely. And we continue to grow significantly in this market. So frankly, I don't see a real concern at this point, at this moment in time due to Brexit.

One just additional question to that is what's the kind of growth that you have seen from India, that IRSE segment, right? I mean, if you, the diversity right segment business.

Do you want to take this one?

Yes, absolutely. You know, we, We have articulated that the focus of the ISRE segment remains very very sharp and that focus is that we complete some of the long pending system integration projects. As you can see, we have steadily improved the execution rhythm in that segment. We have improved profitability. We had earlier losses in this segment. We have, in fact, this quarter, we have a very strong profitability. I cannot commit that and I would not like to set an expectation that that would be going forward trend too. But we have our ambition that is really not not a revenue growth, but really to do high quality work, which is well contained in terms of risk. And we have a reasonable return on capital employed. And that's that's the that's the focus. Thank you. Thanks.

So I think you can go ahead with your question.

I hope I'm audible.

Yes, you are.

Thank you. Yeah, just a couple of questions. I saw that your active clientele has increased to 1136, much higher than both sequential and your on your basis. If you can share some color on, is it a result of your new transition which has happened? It would be great. And second thing is to about the KPI. I mean, the last on this call has spoken about a performance driven culture, high performance driven culture, and how the KPIs would be changed. So if we can throw a little more color on your KPIs as well, and also the growth out at the hiring outlook for FY20. These are my two questions.

Okay. So to be sure I understood the first question was on the revenue growth.

No, the clients, the active clients.

Jatin, would you like to take that?

Yes, theory. Her question is on the 89 active clients that we have added. Yes, you are right, the trend is a little higher, but we have shared this before that whenever we complete an integration of an acquisition. Typically, we see a slight bump up in that quarter because we add all of those customers to our customer list in that quarter. As you know, we completed one acquisition during the course of this quarter. It was a smaller one, but it still adds a number of customers. Otherwise, we feel very comfortable with the new customers we are adding from a hunting standpoint in global markets and the spread of these customers between US, Europe and Asia-Pacific. So there is no real change in trend. But as we continue to integrate our acquisition in our financial reporting, you may see some of these bumps in quarterly reporting.

Thanks, Chetan. Shati, on the other question, you asked two questions. One is... I wrote theory spoke a lot during analyst meet about performance driven culture. And, uh, I can tell you that that's number one priority, uh, from a talent standpoint, the theory has to drive a performance based culture. And our first step towards that is as we are reorganized, our roles have become clearer. Accountability has become clearer and our focus. And I let me keep it at much more broad based of focus. And you look at KPIs going forward is individual and team-based. both looking at shared KPIs, which is a shared goal, as well as looking at how Wipro goes and the individual business unit goes. So it's all coming together. We can have a separate debate, but it's much more sharper. It's much more focused. It's much more team driven, which can drive one Wipro agenda for the larger growth of the organization. first discussion with our teams as we get into the new fiscal and and put these together is that they're very excited to see the clarity and the simplicity of the new organization and the roles that is coming through so i i leave it at there in terms of at a high level that yes this both these will continue to be a priority in the times to come we have time to take one last question

No, the question on the hiring outlook for FY22, the pressure for hiring.

Yeah, sorry. So hiring outlook looks very robust. You know, if you see this quarter itself, we have added more than 5,000 people net. We have gross hiring of 14,000 people. We are looking at, we have onboarded freshers from our colleges, engineering colleges in quarter three, in quarter two, and we'll continue to do it in quarter four. are hiring globally across we are making big investments in both in the europe and the us and in asia pacific so and on the new technology areas i can only assure that supply side constraints will not hold back the growth momentum which we are foreseeing we will ensure that supply side we have taken care of all actions that we have a seamless growth in the coming quarters But very, very robust hiring plan. We don't give exact number, but a very robust hiring plan across both freshers, laterals, India, global, everywhere.

Thank you, Swati. We have time for one last question.

Sure. Joshel, you want to go with your question, please? Yes.

Thank you for taking my question. Congratulations on the great results. Mr. Delaporte, my question is for you. In the strategy, you know, in the strategy call, you talked about increasing national diversity in client facing roles at Wipro. I was wondering if you could give us some color on this and, you know, where, how would you take, what steps would you take to improve national diversity? And would this happen mainly in Europe or would this happen, say, in markets such as the US as well?

You touch a very important point. We are a global company. Wipro is serving among the global firms across industries around the world. And we are working with, therefore, companies that have local presence in many different areas. And we want to constantly be more global. in our mindset and in our spirit. And diversity is absolutely critical and absolutely central in our strategy. So we have made a very clear commitment to really drive a, you know, ambitious program in terms of diversity, all sorts of diversity, diversity of background, of culture, of gender. You know, this is the really looking at diversity from a broad standpoint. It applies around the world and how we are driving it. We are driving it through, you know, obviously hiring, through acquisitions, but also in the way we are managing the organization every day. I think it is a mindset that we have know inside our team so that we pro looks like you know the societies where we live in uh wherever we are we must we want and we will uh uh show a global face a diverse face of we pro to our customers to the ecosystem where we are um in in the different markets of course they are you know it's it's obvious that if you take you know the um you know the take the example of the swedish market you know speaking swedish is important it doesn't mean that you cannot do well in this market if you don't but it means that you know it it must be a good balance and that's what we are focusing on every leader has a diversity priority, diversity agenda for 2022 and for the years to come. And this is a topic that we are discussing regularly. In fact, we discussed it at our board as well this morning.

May I ask, is there a metric you are tracking for this? You said they have an agenda. Is there a particular metric that you will track to see if you meet it?

we have different metrics of course that we are tracking to drive the diversity agenda i am i will not necessarily share each of them with here but you know yes we do have metrics because we we know that this is how we are progressing so thank you joshua we have completely run out of time thank you all for joining take care and be safe Thank you, everyone. Thank you.