Wipro Limited

Ladies and gentlemen, good day and welcome to the Q1 FY23 earnings call of Wipro Limited. As a reminder, all participant lines will be in the listen-only mode, and there will be an opportunity for you to ask questions after the presentation concludes. Should you need assistance during the conference call, please signal an operator by pressing star and then zero on your touch-tone telephone. Please note that this conference is being recorded. I now hand the conference over to Ms. Aparna Iyer, Vice President and Corporate Treasurer. Thank you and over to you, ma'am.

Thank you, Inba. A very warm welcome to our Q1 FI23 earnings call. We will begin the call with business highlights and overview by Siri Delaporte, our 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 theory starts, let me draw your attention to the fact that during this call, we may make certain forward-looking statements within the meaning of Private Securities Litigation Reform Act 1995. These statements are based on management's current expectations and are associated with uncertainties and risks, which may cause the actual results to differ 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 forward-looking statements to reflect the events and circumstances after the date of filing. The conference call will be archived and the transcript will be made available on our website. Over to you, Thierry.

Thank you. Hello, everyone, and absolutely good evening. Thank you for joining our Q1 earnings call. Let me first tell you that as I speak to you today to show financial performance, I'm both humbled and excited. Humbled to have had the honor of leading this incredible company for exactly two years now and excited for what lies ahead of us. As always, I'll share with you a view on the demand environment and also offer some details on sectors, markets, service offerings, as well as business outlook for the quarter ahead. Despite the uncertainties of the macroeconomic environment, if I look at the pipeline, our order bookings, and the discussions we are having with our customers, there has been no slowdown or pullback of spends for us. The demand for our IT services is robust, and I must say I'm thankful for that. Our overall pipeline is actually, in fact, at an all-time high. And it continues to be renewed as we are winning deals at a pretty good pace. High-growth services like cloud, like digital, like engineering services or cybersecurity are seeing definitely strong interest from our clients. Led by our full-strike cloud services, more than half of our bookings today are attributable to these strategic focus areas. And we believe this rotation to high-growth areas is going to accelerate. Our bookings in cloud are up 35% year-on-year, and engineering services booking literally doubled. Overall, now bookings for the quarter were very solid. Our bookings in total contract value, DCB terms, grew at 30% plus year-on-year, And in annual contract value term, ACV, it grew 18% year-on-year. Three of the four markets grew upwards of 25% year-on-year in DCV terms. I've shared this with you in the past. The large transformative deals are a key pillar of our growth. Well, they provide, we know that, excellent opportunities to showcase our capabilities and scale. But I tell you, I'm pleased to share that our large deals bookings were nearly $1.5 billion this quarter, which is almost 3x of what we did, for example, last quarter. And the majority of these are new. Our revenue growth during the quarter was at 2.1% in constant currency terms and 17.2% year-on-year. We grew rapidly. 15% and plus year on year across all markets. We are investing heavily in talent to support our ambition growth plans for the year. We added such 15,000 net new talent during the quarter. In line with our strategy to reinforce our cloud and consulting capabilities, you probably remember we acquired and we completed the acquisition of Rising last quarter. Rising is a global SAP consulting firm, one of the leading strategic partners in the world for SAP. Rising will become a critical extension of Wipro's SAP cloud practice, but also Wipro full-stripe cloud services. Our Q1 operating margins, as anticipated, were lower at 15%. This is because We're investing in solutions and capabilities for us to further strengthen our position as a strategic partner for our clients. But we've also accelerated structural transformation by investing in freshers in particular and in our own IT that will help drive operational efficiency and agility. The inorganic bets we made to accelerate our growth are presently diluting our margin by 2.3% as a reference. And at 15%, we believe we have bottomed out, right? I will now provide some finer details on markets, on service offerings, and on sectors. All markets grew double digits. With the Americas and Europe, our top two markets, growing at 18% and 16% for the quarter, in year-on-year constant currency terms. Let's go through each of these regions in detail. In America's one, we grew 20% year-on-year in the quarter, with all sectors showing strong growth. During the quarter, technology products and platforms grew 37% year-on-year, and communications, media, and information services grew 26%. Now let's look at Americas too. We grew 17% year-on-year in Q1. Financial services and manufacturing, those two sectors, led the performance, recording a growth of nearly 30% each year-on-year. This order book in total contract value terms grew nearly 30% year-on-year in Q1. Now let's look at Europe. Our European business, delivered a year-on-year growth of 16% in the quarter gone by. UK and Ireland, Southern Europe, and Benelux grew at or over 20% year-on-year. Our pipeline here is robust, and we have won many large deals in the market. Our order booking total contract value terms grew at 40% year-on-year. Finally, our Apnea business grew at 15% year-on-year in Q1. The regions that did particularly well during the quarter were Australia and Southeast Asia. But here also, overall, the order bookings in total contract value terms were very robust, growing at 60% year-on-year. We said it, you know, as part of our strategy, continuing to strengthen client relationships remains a top priority. We have created a segmentation strategy to grow in key markets by not only deepening our relationships with our existing clients, but also bringing on new clients who are looking for a strong business and technology transformation partner to help them digitize their business. As I mentioned earlier, we are pivoting our go-to-market investments to allow us to do this. As a result... our top five clients grew 26% year-on-year, and our top 10 clients grew 22% year-on-year, both in constant currency terms. If we look now in the last 24 months, we have doubled our clients in more than $100 million segment to 20, so from 10 to 20. We also added eight clients in the more than 50 million segment just in the last 12 months. Now, From a service offering standpoint, our ideas, global business line grew 21% year-on-year in Q1. This growth was led by one, digital experience, 25% year-on-year, two, domain and consulting, which grew over 45% year-on-year, and three, engineering services, which grew 18% year-on-year. And then our second global business line, our ICO, GBL, grew 11% in Q1. You will certainly appreciate that this performance comes against a backdrop of accelerated rotation of portfolios to the new, to the high-growth areas I talked about earlier. And, you know, cybersecurity services led growth with 34% year-on-year in Q1. Improved customer and employee experience are definitely fueling these goals in ICO. Our customers want us to reimagine what I would call traditional services, such as end-user computing services and human resource outsourcing. Leading with business solutions has been one of our key differentiators. Our role as a cloud ecosystem orchestrators with Wipro Full Stride allows us to increase opportunities to grow our business. Last month, we hosted our first ever Full Stride Sales and Partners Summit, featuring 23 of our cloud partners. Together, during several days, we strategized around new opportunities and committed to working together to help our clients transform in the cloud. There was tremendous energy across our teams. And in the market, We are partnering closely with Microsoft, for example, to help one of our large healthcare clients transform their legacy infrastructure to Microsoft's cloud. Now, our engineering services have grown at a compounded growth rate of 4% over the past four quarters, which is showing the consistency in growth. In the depths of our services and capabilities here, I can proudly say that we are a true leader in engineering services. And this week, we have launched WePro Engineering Edge, our full-stack portfolio of engineering services. We know this will enable our clients to innovate at scale. This also extends our engineering heritage by combining capabilities such as cloud, 5G, AI, Industry 4.0, IoT, and silicone design. Engineering age is already having an impact in the market. For example, leading mobility technology company has chosen Wipro as an extension of their global engineering team to support them on the development of software defined vehicle applications. High demand around SDV these days. We also want a multi-year engagement with a leading U.S.-based semiconductor corporation to provide VLSI and system design services across a variety of products globally. We will help meet the quality standards required of semiconductor chips used in applications such as high-performance computing, self-driving cars, design and visualization, deep learning, AIs. I will share a couple of examples before I move on. Wipro has won a very strategic engagement to assist in the digital transformation journey of a leading U.S.-based fund administrator. We will provide a range of services, including digital contract management, cloud migration, with Wipro full-stripe cloud services. quality and process engineering, as well as create a talent transformation roadmap for the client's workforce. Wipro has also entered a multi-year strategic agreement with one of the world's leading energy technology companies. Here, we will reimagine the employee experience for the firm's 70,000-plus employees across 75 countries. I'll now share a view of our talent landscape. You may remember I had shared earlier about a shift in our talent strategy towards fresher intake. In line with that, we have embodied more than 10,000 freshers in Q1. Now, while we are on the subject of talent, I want to share that our attrition has continued to moderate, right? That's three consecutive quarter of improvement in employment retention in reality. In Q1, It was down to 23% on the training 12-month basis. And we expect further moderation ahead. Our talent investments, I believe, are paying off. That's what it says. If you recall, we announced moving to a quarterly promotion cycle, which will be effective actually July 2022, and salary increases for all those eligible in September of this year. Before I close, I will share an outlook for the next quarter. We have guided for a revenue growth of 3% to 5% in Q2, which will translate to growth of, to be precise, 11.62%, 13.8% on year-on-year in constant currency turns. With this guidance for Q2, let's be clear, we will very comfortably grow in double digits for fiscal year 2023. In summary, all our markets are growing. We have doubled our 100 million strategy clients. Our order bookings are strong. Our pipeline is at an all-time high. I must say I'm very optimistic about the rest of the year. With that, I'll hand it over to Jetty now for his comments. Thank you.

Thank you, Thierry. I'll share some data points. As you know, we grew 17.2% year-on-year in constant currency terms. We delivered a net profit of 25.6 billion Indian rupees. Our ETR for the quarter was 23.7%. As you know, that's an industry-leading ETR. We had hedges of $3.9 billion. The exchange rate realizations for quarter one was 77.81. On a trailing 12-month basis, we have converted 68% of our net income into operating cash flow. And as at the end of the quarter, we had $3.9 billion of gross cash on the balance sheet and $1.7 billion of net cash on the balance sheet. As Thierry mentioned, we have given a robust revenue guidance of three to five percent for quarter two at the exchange rates which are mentioned in our press release. And we'll be very happy to take your questions from here.

Thank you very much. Ladies and gentlemen, we will now begin the question and answer session. Anyone who wishes to ask a question may press star and one on their touch-tone telephone. If you wish to remove yourself from the question queue, you may press star and two. Participants are requested to use handsets while asking a question. Anyone who has a question may press star and one. Ladies and gentlemen, we will wait for a moment while the question queue assembles. Our first question is from the line of Moshe Katri from Wetbush Securities. Please go ahead.

Hey, thanks, and congrats on doing a great job on attrition here. Terry, just a big-picture question for you. Now that Capco's anniversary as we speak, so at this point you're not going to get the contributions from Capco that you've had. How do we try to fill in that gap down the road? And obviously you spoke about some of the different areas that you're focusing on in terms of high-growth initiatives. Maybe you can get some color on that and some detail on strategy. Thanks a lot.

Moshe, hi, and I hope I will answer your question. Your voice came with a little muscle, so I hope I got that. But I certainly understood you were asking about Capco. So actually, Capco acquisition was finalized about a year ago. We celebrated one year of Capco in the WePro family a few weeks ago. I can tell you one thing. It has been an absolute success. Obviously, always early to say after one year, but frankly, the way the team has integrated and maintained the focus on the market, the way this team has continued to play this role and started to connect with the Wipro BFSI business to develop common go-to-market strategy with our key clients has been really remarkable. Capco has performed quarter after quarter. The growth has been extremely strong. Capco has not seen any acceleration, increase, or anything of attrition after the acquisition. Capco is very much involved into our deals. And frankly, we are not seeing slowdown in the growth of Capco. The performance in bookings in the last two quarters of Capco has been solid. This quarter, again, the pipeline is strong. So, you know, we know that, you know, typically sometimes consulting business are more exposed when there is a slowdown, but this is not what we are seeing. And I think it comes from one aspect. One, it's the quality of the relationship built by Capco with its clients. One. Second, the fact that it's truly connected to their digital transformation. And so, you know, I think they are on the right topic. And so, you know, we are seeing a certain shift sometime of not of the volume of opportunity, but the type of opportunities of clients who are still looking to transform, but with the objective to drive more productivity and coherence. And Capco is very much geared to address these challenges as well. So at the end of the day, Moshe, you know, Capco is going well and is a very solid contributor to our performance.

So again, just as a follow-up, now that your anniversary of that acquisition is Are you comfortable that you're going to be able to sustain the growth that you've seen? And I'm talking more about the year-over-year growth comps that seem to be, I guess, moderating in Q2 versus Q1. Thanks a lot.

The answer is yes. All right. Thanks, sir. You're welcome.

Thank you. We'll take our next question from the line of Mukul Garg from Motilal Oswal Financial Services. Please go ahead.

Hi, good evening. Harry, I would kind of add on to probably a broader consulting piece. If you last two years, you've added quite a chunky bit of consulting revenue to Wipro. Given the recent macro environment, what are the risks you are preparing for in this business? Because the past experience suggests to all of us that advisory work generally slows down at a faster pace compared to the demand which is out there for the cost optimization piece, you know, which generally gets highlighted during weaker times. So if you can just, you know, highlight both from a cost aspect as well as, you know, how you are managing or looking forward to the growth in the consulting business over the next one year, it could be great. I also had a question for Jatin. Jatin, you know, how should we see the wage cycle play out, you know, After the shift to the quarterly promotion cycle, I think you just mentioned that the wage hikes have been pushed out to Q3. Is that the right assumption? And besides utilization, what other immediate levers do you have which can help you pick up the margins over the next two quarters?

So, Mukul, so let me take the first question, and then, you know, I'll pass the mic to Jatin. So, you know, I suspect your question was specific to consulting, but broadly looking at the different consulting components of the business. At Wepro, we really have a consulting business that is really very much connected with our technology business, right? So... You know, it's not uncommon. The proportion of our business that actually combine consulting and technology capabilities is important, okay, is significant. So those are not standalone consulting business just selling to, you know, different type of clients. And I think it changed a lot the landscape because the reality is that, as you said, you know, Companies, I mean, like you, let's start with, you know, what we're hearing. I mean, like you, we are listening to, you know, what the analysts, what the market, what, you know, journalists have to say about macro environment. And, you know, when we hear that, we obviously get, we pay attention to the potential implications for our businesses. But then important is the connection with our clients. I'm speaking to clients every single day, every single day. And discussions about macro environment, again, they are like us, seeing those same signs between a war on one side of the world, inflation, interest rate, potential clouds on the economy in a given country or another. But they also have learned over the last two years that technology, when I say they have learned, either they knew it or they have reinforced a conviction during the last two years that technology is not a cost center. It is a driver of transformation. Now, what might have happened or might happen now, Mukul, is that in some cases – where companies were driving programs to drive, you know, to develop new business models or improve experience, I think they are possibly going to more focus on drive productivity gains and reduce the cost of running the business. But that's completely fitting with our, you know, capabilities and solutions that we have. We are indeed helping them, leveraging technology to drive productivity. you know, the transformation and improve their productivity. So at the end of the day, consulting is an integral part of our go-to-market strategy. They are working with our technology teams. They are developing opportunities in the pipeline. They are winning deals together. If you look at the rising business, we already have several leads where the rising team and the SAP team of people are working together. If we talk about Capco, the first question was on Capco, we have had more than 60 joint wins in the last 12 months. And so this is really what's driving the growth. So at the end of the day, I confirm today we are on one hand, I don't want to be arrogant. I want us to continue to stay vigilant and observe the market and see and be ready to react when there are different sides. Okay, that we cannot predict always. But what I'm telling you is that as we speak right now, you know, booking performance solid for Q1, I should say even extremely solid. pipeline all-time high, and extremely good engagement with our clients. So the level of confidence on our growth going forward is solid. Chateen, on question two.

Yeah, thanks, Siri. So Mukul, let me articulate the levers that can help us improve margin from here on. I see six levers. The first is clearly utilization. As you know, and it is visible in the data sheet before, including freshers or excluding freshers, you will see around 5% away from what was our peak utilization. So that's first. Second, subcontractors, as borders and travels were difficult, all of us, and particularly us, have accumulated a certain amount of subcontractors, which we will be able to moderate every quarter going forward. And that should provide additional lever because the cost of subcontractor is typically about 30% higher than your own employee. So that is second. Third and most important lever is the pyramid and fresher improvement. As you know, we have hired in FY22 more than double of freshers that we have hired in FY21. And FY23, we will hire another more than double, which means that our ability to correct the pyramid through consistent improvement of the base and moving people up through the pyramid would be a big structural lever. In fact, that is the only lever which can reduce the cost pressure that we have seen in last 18 months. The fourth lever is pricing power. The attrition on one hand and our ability to position ourselves very differently. For example, the Agile acquisition puts us in a very different space of consulting in cybersecurity, and the rates there reflect very differently than what you would see in a traditional managed services business of Vipro. So pricing for right services. Cloud is another area where we have invested heavily. and our ability to command price there is definitely much better than the traditional areas that we work in. So that's the fourth. The fifth is attrition itself, because one of the biggest impact on our cost structure is when you are simply replacing a similar skill and similar capability and similar experience, but you are paying premium to a lateral of 25, 30%. As we spoke about and as you are aware, the attrition is moderating and that should certainly give us leverage. And finally, the operating leverage, as we work through, as the growth comes back, not all cost structure should go up in line with the growth of the revenue. So there are levers. I do not want to, for a second, believe that there are not sufficient levers in our business to get back to a structure superior position from the margin state.

Thank you. Just if you could clarify on the wage hike part after shifting to the quarterly promotion cycle. That's all from my side. Thank you.

We are not making any shift. We have said we will give wage increases on 1st September, and we have given the promotions from 1st July, and these are the areas of investment for quarter two.

Thank you.

Thank you. Our next question is from the line of Kumar Rakesh from BNP Paribas. Please go ahead.

Hi, good evening and thank you for taking my question. My first question was on your earlier commentary on margin in previous quarters where you had talked about a margin variance of 17 to 17.5% for foreseeable future and below that for the next couple of quarters. So where do we stand on those commentary and specifically about the band of 17 to 17.5% by when do we expect our business to get back in the context of potential macro headwind in the second half?

So Rakesh, thanks for your question. You are absolutely right. In the beginning of last quarter, we said that we will be away from the range of 17 and 17.5 for a few quarters. That was also purposeful because we were planning to invest in the business, apart from the fact that some of the operating expenses were coming back, like travel and facilities. And those investments have been made, you know, roughly off the 2% point, 1.5% point comprises of 20 basis points for the rising acquisition dilution for a month or so, but more importantly, Nearly 1.3% is on three areas, utilization, which I spoke about before, subcontractor, and some of the internal investments that we have made in IT to make ourselves far more efficient, agile, and productive over a period of time. Those investments have been made. We say this is the bottom. And from here on, our endeavor would be to come back to the guided range that we spoke about before. However, we will calibrate it every quarter. We are not giving a time window or by when we'll come back. For quarter two specifically, I spoke before that we will have to invest in talent. So whatever efficiency gains we are making, it will get invested back into the business in quarter two. And beyond that, we will talk at the end of quarter two rather than making a comment beyond that today.

Thanks, Jeff, for that. My second question was around the Capco acquisitions. One of the rationale we had at the time of Capco acquisition was that it will give us a skill in BFSI and also the consulting capability which comes with Capco should help us and start delivering strong growth in the BFSI vertical. Over the last few quarters, we have seen although BFSI vertical has been doing reasonable growth, but it hasn't been outperforming the industry per se. So are we still seeing the benefit yet to accrue from that acquisition in the BFSI space, or is it something that we are happy with what we have achieved so far?

Rakesh, you know, we are always expecting always more in terms of growth, but the reality is that our BFSI business today is growing 24% year-on-year. And I think what is very promising visible and comforting for us is that not only we've driven growth in terms of volume, if you like, but also in terms of positioning in those accounts. We have increased the number of large accounts. We have increased the nature or we have changed the nature of our relationship with our clients. And we are a lot more able to work with them on more strategic initiatives than we were in the past. So I think it's absolutely – certainly we can do more, and we will continue to do more. We have continued to reinforce our setup, if you like, to trigger even more impact on the larger accounts. But frankly, you know, I think we can say after a year that it's really a success. 24% year-on-year is a decent growth, I would say.

Thank you, Fahey, for that. I have more questions, but I'll call back and get you. Thank you.

Thank you. Our next question is from the line of Sandeep Shah from Acura Securities. Please go ahead.

Yeah, thanks for the opportunity. If I just look at one matrix of revenue per employee, on a worldwide basis, it has gone down by 8%. in the IT services and this is despite high revenue leading companies acquired like Capco, Rising and the Agile as a whole. So what are the reasons for the same? I do agree utilization has gone down but that explains partly not fully as a whole. So what are your views? Is it some traditional business has a higher pricing pressure?

No. So, hi, Sandeep. Let me answer that question. If you see the overall offshoring trend, offshoring trend continues to be very favorable to Wipro. And when the offshoring trend is favorable to Wipro, you would realize that realization is one-third in India. So that has definitely played out in terms of IT services per employee realization coming down. I am not seeing from a pricing power standpoint any concern where we are giving away price discounts. In fact, I would think it could be a little bit of portfolio play. In fact, I would believe that if you adjust for offshore, you will see a strength there because we have added Capco, we have added Agile, we have added Rising, which are significantly higher realization, generative business by design.

Okay, okay. And just in terms of the consulting companies which we are acquiring, like Rising as well as Capco, and theories coming about... Can you hear me?

We lost you for a few seconds, Sandeep. We heard Capco and then you... Let's now follow up question...

Yeah, yeah. Just a follow-up question in terms of the consulting company like Capco and Rising. And there is your comment regarding sensitivity to macro issue are slightly higher for these consulting businesses. So how flexible we have in terms of cost management within this company as a whole, both in Capco and Rising? If slowdown happens, you believe the margin of these companies can slide? And if we try to manage the margin, you believe we are running a risk of high attrition as well in this company?

I'll tell you one thing. We have an obvious levers to pull to improve the margin of our consulting business, in particular Capco, but also Rising, which is to continue to develop the offshore component of this business. And we have a lot more to do in that area. So, you know, certainly we will do it. And for the rest, I think we've also triggered a certain volume of cost synergies between this business for Capco, for Rising. It's obviously very, very new, so nothing for now. But I think, you know, we continue to work on those aspects as well. Chetin, you want to add something?

Thanks, Siri. Only additional point I want to make is these are not small businesses. These are large businesses with the right amount of governance of the profitability management where they have been in existence for a long period of time. They have seen ups and downs. They are able to carry themselves through one phase to the other. So we remain quite optimistic that – Right now we don't see anything, but even if two years down the line there is a downturn, you know, we would be able to manage the cost structures quite well.

Thank you. Our next question is from the line of Nitin Padmanabhan from Investec. Please go ahead.

Hi, good evening. Thanks for the opportunity. You are pretty bullish on growth itself. based on the pipeline and the kind of dealings that you've had. I just wanted some color on what you saw this specific quarter, consisting that the organic growth was just around a percent. Is it the annual productivity benefit cycle that's sort of driven the weakness? Or is this something that you had anticipated earlier? Or was it a surprise? Just broad thoughts and anything from a vertical standpoint would help.

Between, honestly speaking, four, if I'm not wrong, for six quarters, we have guided every quarter between 2% and 4% of growth. And for six quarters, we have guided, we have delivered north of the middle of the guidance and sometimes above the guidance itself. In early Q1, we said, ah, this quarter we see a little less than 2 to 4. It doesn't necessarily reflect a slowdown. It's just, you know, sometimes because you have a deal that is, you know, starting here or the previous quarter you had a bigger deal or just the nature of the type of deal, you see a little less. And so we guided 1 to 3. And we are delivering right in the middle of the guidance. When we guided on 1% to 3% for Q1, what we said, we said two things. We said, one, I mean, frankly, we've been delivering north of 3% for six quarters in a row, and you could expect that one quarter you have a little less, and then another one you have a little more. And second, that it was not reflecting in any more profound more deep trend of our business. And, you know, the performance in bookings in Q1 is just confirming this. We've done really well in the business, in our bookings in Q1, across all markets and across sectors. And we have a good mix of small deals, medium deals, and large deals. We've closed 18 large deals. We've had, you know, 3X in terms of performance of what we had done a quarter ago. And I think it's also, I would say, it's all the efforts, you know, and investments made over the last quarter that are paying off. And so when you combine, you know, the visibility we have on our backlog, if you like, account by account, that you add the booking performance of the quarter. I think that's how we are coming with a guidance that indeed is rather strong for Q2 of 3% to 5%.

I'm sorry. Actually, the context of the question was that historically we have always seen a weak Q1 for Wipro. And the thought process was that this should sort of come down with the acquisitions in terms of that seasonality. Although it has come down a bit. The only, what I was trying to sort of understand was, is this here to stay in terms of seasonality and then should sort of slowly sort of reduce on a going forward basis for Q1? I was thinking more from that aspect than trying to nitpick Q1.

Nitin, I'm challenging the seasonality aspect of the growth. You know, I'm not – I don't think there is necessarily a seasonality, a fatality to Q1. I don't see it, especially that Q1 is – actually, all Q1 is Q2 for some of the companies. I don't really understand the rationale behind that. You know, I think don't assume that and don't assume that there is any – season game between a Q1 and a Q2. I think it's the flow of business that are delivered every quarter. We had done very well in bookings in Q4, but we had said at that time that it was mostly driven by smaller and medium deals. We had less large deals. I think the volume of large deals, and we all know that, the volume of large deals is driving the a little more growth, and that's what we are seeing for Q2.

Sure, that's very helpful. Just one quick question for Jatin, if I may. Jatin, the wage increase cycle has shifted to September. It starts September. So it's exactly the same as what it would have been if it was shifted by a quarter. That's the way I should think it. So October, November, December will be a full quarter of impact for that. And the quantum of increase will broadly be the same.

The quantum of increase will be something that Saurabh will determine closer to the date as he gauges the environment. But, you know, what I want to remind all of us is that it is, I think the wording shifting is a little misplaced because, you know, we had our last salary increase in September of last year. It is 12 months from there, and we are giving our increases after 12 months. So it is not a shift for majority population, more than majority population of the company.

And, Nitin, if I can just build on what Jatin said, keep in mind the fact that, you know, by now moving from a yearly cycle of promotion to a quarterly cycle of promotion, it has also some real implication from, you know, a compensation standpoint.

Sure, that really helps. Thank you so much and all the best. Thank you.

Our next question is from the line of Gaurav Viteria from Morgan Stanley. Please go ahead.

Hi, thank you for asking my question. So I have a couple of questions, so I'll go one by one. The 18 large deals, very strong performance. How much of that was led by improved win ratio for the pro? How much is because of overall market being pretty strong for a large deal win in the last quarter? And the related question is that how should one think about the actual profitability in these large deals? Has anything changed compared to the past? in terms of gross market coming down because of macro. Things are pretty much stable.

Okay. So, Gaurav, here I'll hand it over to Stephanie, our Chief Growth Officer.

Thank you, Thierry, and thank you, Gaurav, for your questions. You know, we've seen tremendous momentum in large deals, both in the quarter and the deals that we closed, and also in our pipeline overall. The market is certainly creating these large opportunities, but we're also winning more. So our win rates are up. Our strategy to invest in the large field team is paying off. And we're seeing a lot of momentum in the market. In terms of margins, you know, we are seeing margin pressure on more commoditized type services as we compete for those. But a lot of our deals are actually more transformational in nature. where we're delivering on outcomes for clients, and therefore, you know, we can value price our opportunities. So it's a bit of a mix right now, but as we continue to pivot our portfolio and position ourselves better as an orchestrator for our clients in delivering those outcomes, we anticipate seeing, you know, margin improvement as well.

Thank you for that. The second question is on Europe. You talked about a couple of regions blocking more than 20% growth, but overall Europe was, I think, 60%. So there were a couple of regions that clearly tracked down the overall growth there. So what were the factors that drove that? Is it something, again, related to the external environment, or is it more of a specific phenomenon?

I'm not sure I understood. I know it was about Europe, but what was it?

Gaurav, let me just chime in here from a clarification standpoint. Theory mentioned in this meeting as well as in this opening commentary that Europe remains a very strong region for us. The only reason you are seeing a slightly muted growth is Europe had a fabulous growth in Q1 of last year. which was from the first April onwards. I mean, Europe had an extraordinary base to climb on, and that's the reason you are seeing little mutate, but we remain very confident, including the dealings that we have seen in quarter one, as how Europe will pan out for quarter two.

Gaurav, Thierry, now I understood the point. So when you look at a growth per quarter at the level of region, It's sometimes slightly misleading because of a deal like Metro kicking in one quarter or another, you have suddenly a step change, and therefore the next quarter is compared with a challenging baseline. But if you look at the performance of Europe, two data points, if you look at the performance of Europe year-on-year, it's 16% growth this quarter, so it's solid. And what we see from Europe for Q2 in terms of sequential growth is solid as well. So, you know, we had our board over the last two days. Our head of Europe was here. and we've had the opportunity to discuss with him also his perception on the market in Europe and so on, and he doesn't see signs of slowdown, frankly. And again, quite the opposite, given the volume of nice deals, new deals that he has won in Q1, the one he has in the pipe for Q2, I think there's a good level of optimism among his team at the moment for Q2 and beyond. Thank you.

Thank you. Those are all my questions. Thanks a lot.

Thank you. Our next question is from the line of Dipesh Mehta from MK Global. Please go ahead.

Thanks for the opportunity and congrats for this growth acceleration outlook. A couple of questions. Starting with first clarification, I think Jatin earlier we indicated by Q4 we should be achieving our medium-term margin aspiration. So I was not sure what you in earlier one of the questions you answered. Are we maintaining those kind of outlook when by Q4 we should have normalized margin trajectory? That is question one. Second question is about case generation. If I look this quarter, case generation went fairly weak. If you can provide some sense about what played out there. And last question is about I-Core revenue. This quarter it is pretty spot on quarter despite cloud cybersecurity is part of that service line. So if you can provide some sense what is playing out there. Thanks.

Sure. So, Dipesh, let me clarify that I did not say that by quarter four it is going to be a particular range that we mentioned before. What I say is that we have bottomed out. In quarter two, particularly, we will have whatever operational efficiency gains we will get, we will invest back into the promotions and the salary increase. And from here on, we'll continue to calibrate upwards, but we'll guide you on that on a quarterly basis rather than telling you a particular quarter or timeframe around it. So that was the commentary that we have made since in-place conference as well as in the earlier part of earnings call. Your second question on cash, yes, it has been a slower quarter from cash standpoint, but we are very confident that we will catch it up in quarter two. And on your question on I-Corps growth, there were, you know, a part of I-Corps is also our digital operations business, which has a reasonably large presence through our HPS business, which sees a great momentum of open enrollment in quarter four, which it did not have in quarter three. And therefore, while cybersecurity and infrastructure business continue to do well, we had a little bit of moderation through our DOP business purely on the seasonality of our open enrollment business. And there's a reason that there is a slight moderation there.

Understood. Thank you.

Thank you. We'll take our next question from the line of Sandeep Agarwal from Edelweiss. Please go ahead. Mr. Sandeep Agarwal, could you please unmute your line and go ahead with your question?

Good evening and thanks for the opportunity. So I have one question on the demand side. While you have reiterated that we are probably seeing worse times behind, but if we do the adjustment for the equations, still our outlook doesn't look very exciting. So is there some conservatism which you are building in or... you think that, you know, it is best to wait and watch and see how things pan out because of the tremendous amount of care which is there for the macros. That is part one of my question. And part two, when you talk to your clients now versus earlier, that is two years back, is there a substantial change in their mindset regarding investing in technology in the sense that do they believe that, you know, despite challenges in the macros, IT WILL BE VERY IMPORTANT FOR THEM FROM A LONG-TERM PERSPECTIVE TO INVEST IN TECHNOLOGY SO AS TO, YOU KNOW, MAINTAIN THEIR MARKET SHARE OR GROW THEIR MARKET SHARE GOING FORWARD? OR YOU THINK THAT, AGAIN, THE DOMINANCE OF COSTS AND EFFICIENCY ARE ON THEIR MIND RATHER THAN GROWTH WHEN IT COMES TO TECH SPEND? SO WHAT IS YOUR ASSESSMENT?

OKAY. SO, SANDEEP, SO LET ME START WITH A CLARIFICATION. SO YOU'RE SAYING Our guidance, 3% to 5% growth for this coming quarter is conservative and not exciting, is what you're saying?

I'm saying it looks a little conservative when we adjust for the equation.

Sorry for that, but, you know, I think we'll go with this guidance. And for sure, trust we will do our best to surprise you, okay? We didn't say that the worst was behind. Actually, we never said that there was any worse. I think we are connected with the market every day. We are saying that the demand that we have seen in the last quarter does continue to be good. That's what we have said. In terms of market outlook, frankly, there is demand for technology, expertise, capabilities, talent. And, you know, in the areas that we are talking about, cloud, engineering services, cybersecurity, data, digital transformation, we have plenty of opportunities. Okay. So that is, you know, again, I don't think we are neither being – we are trying to be realistic in our guidance, okay? We're not trying to be conservative nor being overly optimistic, okay? This is definitely not a way of guiding, okay? Is that okay? Okay.

I just wanted to understand a little bit more how your clients are thinking now, given the current macro.

Our clients? So it's always difficult to respond in a few minutes to a question like this because clients have different industries, different reality, different markets. But I think what's visible, see, Sandeep, A week ago, I was in London visiting one of the largest insurance companies, speaking to the CEO. He has absolutely no intention to reduce the spend in technology. In fact, at no point in time in the discussion did we ever discuss the concern about the cost of technology. what they are looking for is really more the outcome, right? So what is it going to drive? So I think that's why I believe that in the way we are structuring our proposals to our clients, we are getting their attention when they can see immediate impact of the technology investment into productivity gains. It doesn't mean 100% of the programs are with that in mind, but I think there is a growing focus on this in the current macro environment.

Okay, thanks. That's very helpful. Thank you.

You're welcome.

Thank you. Ladies and gentlemen, we take that as a last question. I would now like to hand the conference over to Ms. Aparna Iyer for closing comments. Over to you, ma'am.

Thank you all for joining the call, as always. In case we could not take any questions due to time constraints, please feel free to reach out to the Investor Relations team. Have a nice day. Thank you.

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