Wipro Limited

Ladies and gentlemen, good day and welcome to the WIPRO Limited Q3-FI23 earnings conference call. As a reminder, all participant lines will be in the listen-only mode. 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 Mr. Deepak Kumardora, Senior Vice President, Corporate Treasurer and Investor Relations. Thank you and over to you, sir.

Thank you, Inba.

Warm welcome to our Q3 FY23 earnings call and wish you all a happy new year. We will begin the call with our business highlights and overview by Thierry Delpotte, our Chief Executive Officer and Managing Director, followed by a financial overview by our CFO, Afterwards, the operator will open the bridge for question and answers with our management team. Before TIRI 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 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 filing with the SEC.

WIC Pro does not undertake any obligation to update the forward-looking statements to reflect events and circumstances after the data filing.

The conference call will be archived and a transcript will be available on our website. Inba, you can open the call now. Over to you, Terry. Thank you, Deepak, and thank you, everyone. Hello. Good morning. Good evening to you all. Thank you for joining our third quarter results. From our entire leadership team, I'd like to wish you first a fantastic year ahead. We are optimistic about 2023 to deliver groundbreaking work for our clients and continue on a growth trajectory. We'll talk about some of the opportunities that are ahead of us. Joining me today is our CFO, Jatin, you know him well, our Chief Growth Officer, Stephanie, our Chief HRO, Saurabh, and I'm pleased to introduce you to our new Chief Operating Officer, Amit Chaudhry. Earlier today, we reported our third quarter results, as you know. I'm pleased to share that we have delivered one Another quarter of WG-12 grows. Second, record order bookings of over $4.3 billion, led by large deals signing of over $1 billion. A margin expansion of 120 basis points, a huge surge in cash conversion, and a fourth straight quarter of lower attrition. Looking at the macroeconomic environment, Macroeconomic uncertainty we had discussed last quarter continues, there's no doubt. However, tech spending remains robust. It's a reality. Our clients are looking for value-driven transformation, tighter governance, and improved return on investments. Cloud transformation continues to be a priority, even as we see a higher focus on returns. It's against this backdrop that we have delivered our highest ever bookings in total contract value terms. Clearly, the investments we've been making in our clients, our efforts to bring about a shift in our portfolio and productivity shaping are all paying off now. On a year-on-year basis, our bookings in total contract value terms grew 26% in Q3. We signed Eleven large deals with a total contract value of over a billion dollars. This strong booking trajectory translates into a 50%, 50-50% year-on-year growth in our large deep bookings on a year-to-date basis. And by the way, our pipeline of large deals is both strong and diversified. Looking at the markets, three of our four markets grew more than 20% year-on-year in total contract value terms as well. Some interesting insights worth mentioning here. One, our strong bookings were driven by UPRO's full-stride cloud services and engineering services. These grew at 25% and 45% year-on-year, respectively. Second, our large deals include new and existing clients seeking a transformation partner or going through vendor consolidation. Renewals with existing clients are often accompanied by services expansion, taking market share for Moses and frankly expanding into new areas of our clients' businesses. The deepening of our relationships with our clients It's driven by our innovative solutions, by improved delivery execution, by higher customer satisfaction scores, and finally, by strong ecosystem partnerships. In fact, our customer satisfaction score has improved, just as the previous slide showed it, by 10 percentage points. The strong data booking proves, frankly, that our business strategy is working. Third point, our expertise in business transformation, coupled with decades of experience in delivering cost-optimal solutions, is the combination our clients are seeking in this market. A good example of this is a recent deal we signed with a US-based financial information, analytics, and ratings agency. The project involves integration and management of their infrastructure and security estate. As their transformation partner, we will help them improve their future readiness at a lower cost. Now, let's turn to revenue growth. And first, I'd like to note that over the last 10 quarters, we have grown at a very rapid pace. Our revenues have grown 45% in headcount has grown by 40%. We are now much bigger in scale, in size, with the breadth of service offerings and deeper client relationships. In Q3, we recorded our seventh straight quarter of double-digit revenue growth. We grew 10.4% on the year-on-year basis and 0.6% sequentially in constant currency terms. Our sequential growth was impacted by furloughs, as expected, and lower discretionary spending by clients. We have continued to turn the tide on margins. The hard work we've put into improving our supply chain, into delivery excellence, operations automation, has actually resulted in greater efficiencies. All this has contributed to a margin expansion of 120 basis points quarter on quarter. Our operating margin, therefore, is now at 16.3%, versus 15.1% last quarter. A little later, I'll ask Jatin to talk to you in more details about margin. But I do want to mention that this margin expansion is after absorbing the impact of three full months of salary increases that we've offered to our colleagues. It also factors quarterly promotions as well as the restricted stock units we've granted to our senior employees. Another good news has been on the cash conversion side. We saw robust cash conversion for the third quarter at 143% of net income. I will now share some details on our service offerings and sectors and how we are continuing to increase market share. market by market. One, our market, America's one business grew 11% year-on-year in Q3. And inside, the fastest growing sector in that market was communication, media, and information services, which grew at 14% year-on-year. Looking now at America's two business, grew 9% year-on-year in Q3. Their manufacturing led the pack with more than 18% year-on-year growth. Besides, energy and utilities, securities, capital markets, and insurance also recorded good growth of more than 12% each. Order bookings grew 40% year-on-year. Our business in Europe also has continued to be a strong growth spider. Double-digit growth for seven quarters in a row. Europe delivered a year-on-year growth of 12% in this quarter. Almost all the markets in Europe grew double-digits, led by the Nordics, by the UK and Ireland, by Germany, and Southern Europe. The order book in total contract value terms grew also at 25% on a year-on-year basis. Finally, our APMEA, which stands for our Asia-Pac, Middle East, and Africa region, grew at 7% year-on-year in the third quarter. Regions that did particularly well during the quarter were Southeast Asia, but also the Middle East. Our transformation efforts in this region have started yielding results. It's very visible. This quarter, we closed one of our largest deals in this market. The other bookings, they grew 22%, and looking forward, the pipeline is strong. Overall, I would say we've continued to strengthen existing client relationships, and I'm pleased to share that our top 10 clients grew 15% year-on-year, which also here confirms our strategy around growing large accounts. Now, let's look at the service offerings. Ideas, my call. First, our ideas global business line grew 12% year-on-year in Q3. This growth was led by one, cloud, the cloud transformation part, which grew 27% year-on-year. Absent data, which grew 18% year-on-year. Digital experience, which grew 16% year-on-year. And finally, engineering services, which grew 12% year-on-year. Now, looking at the ICO part of the house, the global business line grew 8% year-on-year in Q3. Cybersecurity led to growth at 16% year-on-year, followed by digital operations and platform growing at 9% year-on-year for Q3. From a total contract value standpoint, cloud infrastructure, our CIS business line, grew over 50% year-on-year. CIS revenues now are lower as we continue to rotate our existing portfolio and move towards the cloud, which is very in line with our strategy, as you know. At the same time, we are signing long-term deals with clients in this business. We are continuing to evolve our full-strike cloud services business, creating new industry offerings, working together with partners, which is, in fact, helping expand our market coverage. Cloud services continue to be a high growth area for us, contributing over one-third of our total revenues today. Our cloud expertise spans the entire spectrum of cloud services, from cloud strategy, migration, modernization, to full-stack industry solutions and running and optimizing cloud. Partnerships continue to be a source of growth as well. Bookings with hyper-growth partners industry continued to be strong, nearly $2 billion. That's a 35% year-on-year growth. Bookings through hyperscalers today stand at 44% of Wipro's overall booking in terms of total contract value. Besides cloud, are expanding capabilities in artificial intelligence in data and engineering increasingly going to market as one repo and these investments are getting noticed a us-based energy company has selected us to build an end-to-end greenfield fully automated warehouse in europe the project will allow the client to manage large sums of chemical storage while maintaining strict health and security requirements. This room, if we look at it, brings together our domain, our engineering, digital, cybersecurity, and health and safety capabilities. And it also underscores how our advisory capabilities, technical and engineering expertise are differentiators for us in the market. Let me now turn to our most important asset, our people. I am pleased to share that attrition continues to drop for the fourth straight quarter. In Q3, attrition dropped to 21% on the trading 12-month basis. Our quarterly annualized number, which dropped 360 basis points quarter on quarter, are now at 17.5%. We are confident that our focused talent strategy will result in continued moderation of attrition in the coming quarters as well, frankly. Second, we are recognizing and rewarding our talent, promoting a record number of colleagues in FY23, the highest ever, in fact, with numerically 30% more promotions than in FY23. Our leadership teams, breadth of expense, high performance standards, and strong collaboration continues to fuel our growth and our transformation. And finally, I'm encouraged to see more diversity in our leadership ranks, which has been a focus for the past several years. And definitely, we have more work to do here, we know that, but one promising change worth sharing with you is that we have more than doubled the number of women in senior leadership roles at Wipro. As these visible, impactful leaders progress their career, they demonstrate the impact diversity has on our clients, on our business, and on our people. We've been strict about maintaining that focus on talent quality, high performance orientation, and inclusion in our graduate hiring as well. Year to date, we have hired and onboarded more recent graduates than the whole of previous years and actually ever before. Now, otherwise, I'll close with an outlook for the full year. Full year revenue growth to be at 11.5% to 12% in constant currency terms. On margins, our Q3 number is now the new base, and we will look to improve it further. In summary, I'll say that we had an excellent quarter with record bookings, sustained growth, and delivery excellence. Our strategy continues to pay off, and we will remain on course. With that, I will hand it over to Jetty now for his comments. Thank you very much, Thierry. I will quickly summarize the financial highlights for the quarter. We grew 10.4% year-on-year on constant currency terms. Our margins expanded 120 basis points to 16.3 percentage points. If you see our ETR, it was 22.9 compared to 21.5 last year, so that impacted a little bit net income conversion. But despite that, sequentially we delivered 14.8% growth in net income and 2.8% on year-on-year basis. Cash flow remains strong at 143.5% of operating cash flow as percentage of our net income. Our cash At the end of the quarter was 4.6 billion gross and 2.7 billion net. This is a volatile year and quarter on Forex. We had about $4 billion of Forex hedges and our realized rate for quarter three was 82.24%. As Thierry mentioned, we are guided for 11.5 to 12% growth in constant currency terms for the full year 2022-23 at the exchange rates which are mentioned in our PR. Thank you very much for joining and we'll be very happy to take your questions from here.

Thank you very much, sir. 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 touchstone telephone. If you wish to remove yourself from the question queue, you may press star and two. Participants, you are requested to switch to handset mode while asking a question. Ladies and gentlemen, we will wait for a moment while the question queue assembles. We take the first question from the line of Mukul Garg from Motila Loswal Financial Services. Please go ahead.

I'm sorry, Mr. Garg.

Could you switch to our handset mode? We can't hear you that well, sir.

Yeah, is this better?

Yes, sir. Thank you.

Yeah, sorry. I have two questions. The first one falls for and Stephanie if she's there. I just wanted to better understand how should we look at the TCV number, the total number, not just the last day. Because if you look at the Q3 print, your TCV of 4.3 billion implies a book to bill of almost one and a half times. You have been growing the TCV number quite handsomely over the last few quarters as well. How should we think about the duration of the deal wins? you know, which obviously will convert into revenues and, you know, when should that impact start going through? And B, you know, the revenue in last four quarters, you know, has, the incremental revenue has been barely about 18 million, whereas your D-win continues to grow in 25 to 30% range. So is there, you know, something which is kind of Impeding the conversion of these bookings into revenues over the last four quarters?

So, Mukul, Thierry, I will take your question. And, Stephanie, if you want to add, of course, feel free. But, you know, Mukul, you're right. I think, you know, the performance in bookings has been good for several quarters. This quarter has been outstanding. I think we've really done a great job of not only developing our pipeline of deals, but also converting them into deals, contracts for us. We've shown two things during this quarter, or two confirmations, if you like. One is that we continue to see a lot of opportunities for us in the market, which confirms that this is still a robust market for us. And second, that we continue to win well over competition. We continue to show healthy levels of win rate, if you like. From a type of deals standpoint, I would say, yes, the investment made on large deals Now, when was that? 18 months ago, he's paying off a little more every quarter. It's the reality. It started with, you know, one big deal and then, you know, a few quarters later, another one. And then, you know, we are gaining in volume but also in consistency. And we hear from Stephanie that it's across the organization now. So this is really reassuring because, you know, that we get a lot of comfort from that. And I would add that there's also a promising volume of large deals in our portfolio, in our pipeline. The conversion question, so the conversion of the revenue to, of bookings to revenue that you are asking, I think this is, A reflection of a couple of points. One is there is no doubt that while the market continues to be good and the investment in tech continues to be good, there is a change that I called last quarter. A macroeconomic environment drives a certain volume of uncertainty, and that exists. There are sectors... Everybody will not be surprised to hear that the tech sector is a sector that has certainly felt quite, you know, really felt the impact of this change in microeconomic environment. Second is probably the fact that there is a potential slowdown of more, I would say, volatility of the discretionary spend from clients. Third, what we are seeing is that there's not necessarily a slowdown of the decision process. If that were the case, maybe we wouldn't have had such a good quarter in terms of bookings, but I think the time it takes to ramp up, to launch and ramp up those programs behind may take a little bit of time and we have to go with the pace of our clients in this context of uncertainty. An example of that is typically deals where there has been a consolidation of vendors that we have won and then there's a period of transition for the business to go from one partner to another. And I think it is a fact of life that we have reflected in our projection. But certainly, the performance in bookings, the volume of these, but also the quality of our pipeline give us quite a nice level of confidence for the next year as well. Stephanie?

Yes, Terry, I would just reinforce your comment in terms of the health of our pipeline, the types of deals that we're winning. It is a mix of new clients. It's a renewal of existing clients who are expanding our scope. We're taking market share and vendor consolidation. And it's also a pivot of our portfolio to the new. And you heard us talk about the growth in full-size cloud services. So very, very happy with our pipeline, the health of our pipeline for Q4 and even going into next year. So I think our growth will continue and we'll start to see, you know, the revenue convert in future quarters.

Understood. Thanks. And I had one quick one for Jatin. Jatin, I was a little bit confused with the employee cost number which you printed this quarter. If you look at the cost per employee, excluding the subcontracting expenses, this was a quarter where two months of wage hike was flowing through. We also had promotions which kind of took place. But the employee cost per employee in IANA terms has been flagged and actually declined almost 2% versus last quarter in ULC terms. So what really is leading to this flattish kind of a cost which I think has been managed quite well. What are the drivers which are helping you kind of keeping this under check given that I think last few quarters have been exceptionally in terms of overall expenditure of all employees?

Yeah, so I think the most foundational reason, Mukul, and there are three reasons I will go through each of the three. One is the most foundational reason is that we have improved the way we manage our supply chain. We have far more freshers who are part of our pyramid. So pyramid has continued to improve quarter on quarter. Second is the attrition is lower which helps us manage the cost better because to that extent there is impact of premium which reduces of lateral hires. So overall the most foundational reason is that we have managed our cost structure much better. The third and of course the other third component is that we have released a lot of efficiency gains from our fixed price projects and those get redeployed for our TNM and other work and therefore you don't need, your employee cost remains the constant whether you are able to add revenue. So these are the most foundational, as I said, the cost structure improvements that we have made. The second is also that if you look at it from a consolidated repro-limited standpoint, there was a restructuring cost which was sitting in the employee cost line which was not counted towards the segment margins of 15.1% in quarter two, but it was sitting in concerted line, which is not present now, so that shows a downward path on the employee cost, so that is the second. And third is quarter three, typically the employee cost also has certain amount of accruals related with leave and other provisions, which takes it up or down, but If you want to model it, you model it based on the first reason that I've shared, which is the more foundational improvement in the cost structure of our employees, and we'll continue to work on that. The second and third factor, the second factor was one quarter impact, which will not recur, and the third impact is seasonal, which will come back in next December but won't recur in the future quarter.

That's quite helpful. Thanks for taking my question. I'll get back to you.

Thank you. Our next question is from the line of Abhishek Bhandari from Nomura. Please go ahead.

Thank you. Happy to hear Keri and the entire management team. Keri, I just had one question.

Abhishek Bhandari, I'm sorry to interrupt. Your audio is a bit muffled, sir. If you're in a speakerphone, switch to handset, please.

I hope this is clear now.

Yes, thank you.

Yes, it's good, Abhishek.

Well, it looks like Mr. Bandari's line has just got disconnected. If he joins the queue, we will take his turn. In the meanwhile, we move to our next question. That's from the line of Sandeep Shah from Equidress Securities. Please go ahead. Your line has been unmuted. Please go ahead with your question, sir. There seems to be no response from this line. We will take our next question. That's from the line of Gaurav Rutteria from Morgan Stanley. Please go ahead.

Hi, thank you for taking my question. Happy New Year, Terry. First question, any... Thank you.

First question, any color on the percentage of renewals in TCV? Is it consistent with the historical last few quarters or anything has changed?

uh and how should one think about uh timing of uh ramp up of the deals that you have signed in the current quarter uh would would it be like a 1q phenomena would it be more like a 2q phenomena how should one think about the timing you know this is uh this is uh so god so first of all at the new year and uh you know i i you know to your questions i would say first of all uh the um um Yeah, regarding the balance, I was trying to remember. The balance between, you know, the new and renew, I would say this is a, you know, as expected. You know, there's a healthy balance, I would say. From one standpoint, you know, the deals that, you know, we managed to extend them to, you know, to sometimes, you know, widen the scope, increase our presence, that's also, you know, in particular when we've been able to consolidate some positions. But we've also had a good volume of new deals, which is quite comforting because we know that we will be able to continue to expand and grow in those new accounts as well. So this is a good balance, I would say, a good balance between the two. The second question that is about the time things will take to ramp up, it's a difficult question if we are sticking to the rule that we're only guiding for the next quarter. But what I would say is that for sure we are seeing growth ahead of first quarter. So this projection for Q4 certainly reflects for the reasons that I mentioned before. The way we are seeing ramp ups happening, but it can only go up.

Got it. Thank you. Secondly, you made a very interesting point on percentage of the order book coming through hyperscalers. How should one think about the nature of these deals? Is the contract profitability similar to regular deals or there are different kind of nuances one has to keep in mind?

Well, so the first point, Gaurav, you know, remember back, you know, mid-2020 when we started to lay out our strategy, you know, Partners was at the center of it. And the way we grow was, you know, connecting and engaging at the strategic level with Partners wasn't sufficient. And so we've clearly, you know, we organized ourselves to be able to be a lot more relevant with them. And so we have built these teams globally with local connections under the leadership of our CGO function. And this is paying off every single quarter ever since. At that time, I remember that the revenue we were getting from our top five or six partners was not exceeding a quarter of our bookings. And today, as you heard, we are not that far from half of the bookings coming from our hyperscalers only. So it gives you a feel for the volume of growth that we've been driving with them. But in a very strategic way, so going to clients together, developing solutions together, you know, literally developing strategy and, you know, going after the markets as real close partners. And that is, you know, that is, you know, now you can ask what type of deal. Typically, you know, obviously, ITOS skills are, you know, involved in most of our cloud transformation deals. So the whole strategy that we've developed around full stride has been paying off as well. And so, you know, how you should see it as a relation that is accelerating, that is gaining muscle every day, and will continue to drive growth. The margin profile actually is rather good. As you can imagine, if we are improving our operating margin so significantly, it's because, you know, the margin we are getting from our deals is going in the right direction. I think it's also, we all know that, and it's actually visible in our books that, you know, every time we are taking a deal that is more, you know, where it's more value-based, if you like, you know, we are going to deliver better margins as well.

Great. Thanks for a great explanation. Lastly, if I can squeeze one full strike, TCV grew 25%. This is in context of what we are kind of hearing in the market that cloud spend is likely to moderate because of the macroeconomic involvement.

So would it be more of an amount of market share gain for you or you fundamentally believe that, you know, that slowdown in cloud spend may not necessarily have happened as it was feared?

Thank you. You know, it's interesting. Your question is a good one, Gaurav. I have a view on that, and let me tell you what I've observed, and I spend a lot of time with the hyperscalers personally, is that there was a gap. You know, there was a shortage in our ability to deliver there on their demand just because of the magnitude of the size of this market. And so the fact that they are slowing down doesn't necessarily mean much in terms of impact for us. I believe that, you know, with the size of these hyperscalers, even when they are growing a few percentage less, you know, we can still grow, you know, more or less at the same speed. I remain very bullish that, you know, what, you know, talking about cloud and what is representing today north of a third of our business, will continue to gain, you know, grow in terms of, you know, proportion of our revenue mix, if you like, going forward. So, you know, market may slow down. We may not slow down around cloud. All right. Very clear. Thanks a lot and all the best. Thank you. You too.

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

Hello. Good evening and very happy to meet you.

Thank you. I had a couple of questions. First is on Europe. So I think it's been a little counterintuitive. Almost everyone has been showing very solid growth out of Europe. And the geographies which we thought were relatively stronger are actually much weaker. if you could give some color on what exactly are the dynamics at play here. That's the first question, and I had one more after this.

You know, Nitin, indeed, I am aware of, you know, and I should not necessarily comment on, you know, relative trends versus the competition. I think in the case of Wipro, what is clear is that, you know, over the last years, we have completely changed speed, focus, attention, and our impact in Europe is different, there's no doubt. I think the organization we've put in place with a focus on key strategic market, the leadership that we've either hired or promoted in these regions, the organization that we have reinforced, the connections that we have built with our clients, the intimacy, the ability to combine the power of our global network and very strong, impactful leaders in this market is making a difference. And yes, Wipro is a different competitor in Europe today than it was some years ago. Is it paying off? I'm assuming yes. It's clear that yes, we continue to grow. We continue to see nice deals. We have a nice portfolio of of clients in Europe and we will continue to gain market share in Europe. Sure. The second one was more of a clarification.

So I think the dealings have been sort of pretty – in the last three quarters have been pretty decent compared to the earlier quarter and as you mentioned that the conversion was low because of the environment.

And then if I just look at how we typically grow in a Q1, apart from one of the years where we had large deals and we grew pretty well, do you believe, is the understanding correct in terms of the commentary that you think the level of build in terms of the deals won

is sort of sufficient enough that despite those headings you'll actually see an improvement next year from a trajectory perspective on a sequential growth rate if you look at it that way. Or alternatively maybe the flip side of the question is do you think the cautiousness by clients and the view on discretionary expense and all of those

You think that consciousness should sort of dissipate nearly as we get into the new era, the next fiscal? Yeah, so Nitin, this is Jatin. I am smiling because this is one way to talk about Q1 numbers that we don't want to talk about. So we will give it a pass. We understand your question precisely. It's a great question, but we are not at a point in time we would answer that. But directionally, The fact that we are winning large bills, TCB, the revenue, the backlog is improving and it will convert into revenue. It's difficult to pinpoint a specific quarter that will get the boost out of it.

Sure, fair enough. Thank you so much.

Thank you. We'll take our next question from the line of Ravi Menon from Aquari. Please go ahead.

Hi, thanks for the opportunity. Firstly, on the overall deal, it looks like that's really strong.

So how do you think about the market demanding it, especially in, say, now for $50 million, such a disclosure sludge deal?

So would we continue to see that momentum even over the next quarter, or do you think that this sludge is going to be on hold? Ravi, your voice came a little muffled, so I hope I understood the question. But I believe you are asking some of yous on the market itself. Am I correct?

Yes, that's right. I was just asking about the deal pipeline. Do you think the position making could slow and therefore deal wins could get a little softer next quarter?

You know, when it comes to projecting bookings, you know, you can certainly base your level of confidence on the quality of the pipeline and on your trend offering rate over, you know, a certain period of time. If I base my judgment on that, I see that we have another third quarter of bookings coming ahead of us. Will it be as good as the one this quarter? That I don't know. I cannot tell. Sometimes it depends on the one deal and it makes a big difference. So I think very confident that it will be another solid quarter in terms of bookings. Let's see how it goes. But a little bit of reflection on the markets. Again, the softness of the economy The uncertainty of the macroeconomic environment is a reality. I said it in this room three months ago, Ravi, at a time where not necessarily others were saying it. But this hasn't changed. This hasn't changed. In this context, I can only recognize looking at the performance and the activity in the field from our sales teams that the tech spending remain robust. That's clear. I take obviously control from the fact that we are winning and that we are winning nice type of deals. If you look at being a little bit more looking at the type of deals, you probably have noticed that we are talking about total contract value. We also look at the annual contract value. What's interesting is that the total contract value has been our highest ever. The annual contract value performance has been also our highest ever. And what it says to me is that we have a good volume of large deal, good volume of medium deal, and good volume of smaller deal. I don't know if we call it taxonomy or this good pyramid of size of deals also reflect also the fact that our backlog for the quarters to come is reinforcing and is getting stronger. So, you know, reasons for us to be optimistic for next year. Thanks for the question. It's a bit of a revenue and positive question.

If the demand is strong, why are we looking at Middle East as a geography? We talked about investing. Historically, we used to think about the Middle East as a relatively low-billing rate and low-profitability geography.

So why not focus on the developed markets if supply is still tight there? You know, Middle East is a very important market for us. very important market. In fact, you know, by size, Wipro is one of the big players in the Middle East. So, you know, we are very proud of our business. We continue to invest in this business such that we've decided to establish the headquarter of the region in Dubai for, you know, for APNIA region in Dubai. And so, you know, we have invested, we have invested innovation lab in capabilities. We have just decided to launch our Capco business in the Middle East also a few weeks ago. And we are very bullish about, you know, our outlook of Wipro in the Middle East over the next quarters. It will continue to surprise. Thank you and best of luck.

Thank you. Our next question is from the line of Surendra Goyal from Citigroup. Please go ahead.

Yeah, hi, Kiri.

Just one question. How should we think about the correlation between TCE and growth? And the reason I ask that question is for the past six quarters, whatever metric you have disclosed, ACV or TCE, is up greater than 24% year-on-year, while growth in that period has gone from 25% plus YOY to a guidance of around 8% at the higher end in the coming quarter. So just wanted to understand how should we think about the correlation between TCV and group. Thanks. Surendra, since this is a little mathematical view, I will take it. I understand maths as well. Okay, Surendra. So I would, I mean, I meant it didn't have a demand color, but more conversion point, so I would take it. The key issue is that, I mean, we have mentioned in the last three quarters that in the first quarter we said our TCV growth is 32, then 28, and this quarter also has been very robust growth. The conversion has, two components, it has a future timing component, when does it convert, and a second is clearly the immediate component, which is it converts into next quarter or in a two-quarter phenomenon, et cetera. You have to appreciate the fact that we have won a very large component of TCV and something that we also covered in Thierry's speech, is that a large component of that is in cloud and infrastructure services, which are typically long-ended contracts over four to five years. So we can give you comfort that as we enter every quarter, we are entering with a superior backlog than what we are carrying in the previous quarter. And the uncertainty around discretionary spend or the conversion of large field continues to pay out in the immediate quarter. So you are not seeing this correlation in an immediate three quarter period of 22, 23 that you have seen the results of. But as we model it for future, we feel very comfortable that we are moving in right direction of securing a better book to carry as we enter 23, 24.

the acv that you were disclosing in q2 q3 and q4 of last year was all in excess of 24 percent also so this question was more around like i am sure deals which would have been one then should have converted by now so just wanted to understand it better if you want to kind of take it offline that's fine yeah and and we take your points surrender we can we can uh we can

even in next quarterly commentary we can cover this point specifically but we feel comfortable that the bookings in the current environment is the only way to continue to grow because uncertainty will always mean that in our business there is always there is certain amount of projects coming to an end and only way to continue to grow is to add more on the top so we feel comfortable but we can cover it as we go forward.

Just one clarification on your comments on the margin walk. You mentioned like something in the employee cost which kind of moved away from the cost of employee or employee cost for IT services. Could you just kind of elaborate on that and could you also quantify it for us?

Yeah, so so So it is quite straightforward. When you see our employee cost numbers, you see it on a consolidated basis for entire Wipro Limited. As you know that we had a restructuring cost which was sitting in the company books. So it was sitting in quarter to employee cost. But when we publish our segment results and IT services, it was sitting in not in IT services segment, it was sitting elsewhere. And clearly that restructuring cost has not recurred in quarter three and that has reduced from quarter two to quarter three that much cost in the employee cost line when you look at consolidated with the limited board.

Could you quantify that, Jatin, just for our convenience?

Yeah, I can quantify it, but you can also see it in last quarter's numbers or Aparna or Abhishek will give you the chart.

No, that's very helpful, Jatin.

Thank you so much. About 130 crores. Thank you, Jatin.

Thank you. Our next question is from the line of Manik Taneja from Access Capital. Please go ahead.

Thank you for the opportunity. I just wanted to get your sense around the margin improvement trajectory given the fact that over the course of last 18-24 months apart from acquisition in terms of engine especially when it came to pressures and now we are getting much more moderated.

Sorry to interrupt. Mr. Taneja, it looks like there's an audio break from your connection. If you're in a hands-free mode, please switch to handset and speak and you might have to repeat the question, sir.

Sure, thank you. I will answer to me and I will repeat that question. So the question was on margins. Over the course of last 18-24 months, we see transition in our margins because of the investment that we made around our delivery, especially in terms of pressures, as well as some of the acquisitions that we made. So now given the fact that growth is slowing down and hiring is coming off, Is there a timeline that you would want to essentially suggest as to us getting back to 18, 19 percentage margins?

Okay, so Manik, thanks for the question. And as you can see, we have made a substantive move on margin in quarter three. Certainly, we will protect this base and make an incremental effort for future, but right now, I don't think we should go ahead and quantify the quarter or year in which we will reach a particular threshold. Our effort clearly as we articulated in past also is that these are not the margins we are satisfied with from a medium term standpoint and our trajectory or our goal for medium term is higher and we will continue to make an effort. But please be mindful that in quarter three, we have made significant movement and we'll have to sustain that and on that, build it incrementally in next quarters.

Sure, thank you all the best for the future.

Thank you. Our next question is from the line of Abhishek Shandarkar from InterEd Capital. Please go ahead.

Hi, thanks for the opportunity and Happy New Year. uh theory in the preparatory remarks uh you mentioned about uh modest slowdown in the discretionary springs was this comment related to capco by any chance and given the fact that uh you know uh you have a solid uh uk european presence one of your competitors had highlighted uh that h1 could see some of the deals uh

converting the first half. Anything that you would like to comment on the same? Thank you for taking my question.

When I was referring about to discretionary extent, Abhishek, I wasn't referring to any unique specifically. It's a reality that applies to all kind of discretionary extent. As you mentioned, Capco, let me tell you one thing. The acquisition of Capco that we've done 18 months ago was an extremely strategic acquisition. The purpose of this acquisition was to change game changers for us in the BFSI market. Be able to suddenly completely transform the type of conversation that we are having with clients in order to be able to really engage with them at strategic level and drive larger program. This is exactly what has happened. The performance of Capco quarter after quarter over the last 18 months has been very good, actually higher than what we had anticipated or expected at the time of the acquisition, and that the nature of the strategic nature of the acquisition is a reality on the ground every day. So that's, I just wanted to be clear about this, the Capco since you mentioned it. As far as discretionary spend, I think it's the type of deals that the client feel they can stop at any moment in time. And this happened with every kind of clients

you know across sectors thank you we'll take our next question from the line of the page meta from mk global please go ahead thanks for the opportunity uh just on the deal

are related questions. If I look now, price relief contain not four, which include, we refer only gross dealing tech and any subsequent cancellation, termination and reduction is not the part of the number. So do we see any different trend, let's say our last few quarter, particularly on the termination reduction side, which could have implication about revenue growth trajectory compared to dealing tech trajectory. Second question is about the growth trend or demand trend.

If you can provide some sense about communication, BFSA, and consumer. Thank you.

Okay, Dipesh. Thanks for your question. So the first one, if I understand well, is about, you know, has there been more cancellation or termination? Is it what, that's what I understood, right? My answer is, we have not, you know, let's be very clear. We have not lost one single, you know, it's not like we, There was a question earlier in another forum about, you know, is it structural? It's not. We have not lost a client. We have not lost a, you know, there hasn't been, you know, a big termination or anything. So it's not like, you know, there's been a particular loss. That's the nature of the discretionary spend or the nature of, you know, a slightly slower ramp up that is more explaining the revenue profile. Jadim, you want to... No, you're good? Okay. You know, Dipesh, if you are okay, I wanted to also clarify the earlier question by Surendra so that we conclude this call answering every question. Surendra's question was for clarification. I will mention that Q2, Q3, Q4 withdraws ACV growth was quite high, and that was, I'm repeating, 31%, 22%, and 33%. And if I take the average of the three, it comes to around 28% growth in ACV, and that, if you see our 21-22 growth in revenues, was also 28% plus. So our ACV growth did reflect in our revenue growth. Both numbers include at Capco, so they're apple to apple. And therefore, we continue to see a strong correlation of our booking business with revenue. And if there are any other questions on this line, our IR team will be very happy to take it after the call.