Wipro Limited (WIT) Q1 2023 Earnings Report, Transcript and Summary

Ladies and gentlemen, good day and welcome to the Q1 FY2023 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. [Operator Instructions] 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 FY2023 earnings call. We will begin the call with business highlights and overview by Thierry 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 Thierry starts, let me draw your attention to the fact that during this call we may make certain forward-looking statements within the meaning of 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.

Aparna, 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 our financial performance, I'm both humbled and excited, humbled to have had the owner 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 quarters 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 expense 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 cyber security are seeing definitely strong interest from our clients. Led by our FullStride Cloud Services, more than half of our bookings today are attributable to these strategic focused 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, TCV 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 TCV 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 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 talents 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 Rizing last quarter. Rizing is a global SAP consulting firm, one of the leading strategic partners in the world for SAP. Rizing will become a critical extension of Wipro's SAP cloud practice, but also Wipro FullStride Cloud Services. Our Q1 operating margins as anticipated were lower at 15%. This is because we are 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 fresher’s 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 digit 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 details. In Americas 1, 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 2. We grew 17% year-on-year in Q1. Financial services and manufacturing, those two sector 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 all 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 APMEA 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 as part of our strategy continuing to strengthen client relationships remains the top priority. We have created 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. And 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 offerings 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 cybersecurity services led growth with 34% year-on-year in Q1. Improved customer and employee experience are definitely fueling these growth 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 differentiator. Our role, as a cloud ecosystem orchestras 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 strategize 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 has grown at the compound 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 probably say that we are a true leader in engineering services. And this week we have launched Wipro 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 edge by combining capabilities such as cloud 5G, AI, Industry 4.0, IoT and silicon design. Engineering AG 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 won a multiyear engagement with a leading U.S.-based semiconductor operation 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, AI. I will share a couple of examples before I move on. Wipro as one aim, a very strategy engagement to assist in the digital transformation journey of a leading U.S.-based Fund Administrator, who will provide a range of services, including digital contract management, cloud migration, with Wipro Full Stride 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 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 onboarded more than 10,000 freshers in Q1. Now, where we are on the subject of talent? I want to share that our attrition has continued to moderate, right. That's three consecutive quarters of improvement in employment retention in reality. In Q1, it was down to 23% on the trailing 12 months 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 11.6% to 13.8% on year-on-year in constant currency terms. 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 strategic 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 Jatin 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. Our ETR for the quarter was 23.7%. As you know, that's industry leading ETR. We had hedges of $3.9 billion. The exchange rate realization for quarter one was 77.81. On a trailing 12 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 3% to 5%, for quarter two at the exchange rates, which are mentioned in our press release. And we'll be very happy to take your question from here on.

Thank you very much. Ladies and gentlemen, we will now begin the question-and-answer session. [Operator Instructions] Our first question is from the line of Moshe Katri from Wedbush Securities. Please go ahead.

Hey, thanks and congrats on doing a great job on attrition here. Thierry, just a big picture question for you now that Capco's anniversary as we speak. So at this point you are 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 are 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 in a little muscle. So I hope I got that. But I certainly understood you were asking about Capco. So actually Capco acquisition was final, it was about a year ago, right. We celebrated one year of Capco in the Wipro family a few weeks ago. I can tell you one thing it’s been an absolute success obvious, 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 slow down 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, we know that 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 these clients, one. Second the fact that it’s truly connected to their digital transformation. And so, I think they are on the right topic. And third, 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 improvements and Capco is very much geared to address these challenges as well. So at the end of the day Moshe, Capco is going well and is a very solid contributor to our performance.

So again, just as a follow up, not that you’re anniversary that acquisition, are you comfortable that you’re going 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, Thierry.

You’re welcome.

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

Yes. Hi, good evening. Thierry, I would kind of add onto probably a broader consulting piece. If you, you lost two years, you have added up quite a chunky bit of consulting revenue to Wipro, even the recent macro environment, what are the risks you are preparing for in this business? Because, the past experience suggest 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, which generally gets highlighted during weaker times. So, if you can just, highlight both from a cost aspect, as well as, how you are managing or looking forward to the growth in the consulting business over next one year, it would be great? I also had a question for Jatin. Jatin, how should we see the weight cycle play out after the shift to the quarterly promotion cycle? I think you just, Thierry just mentioned that the wage hikes have been post out to Q3, is that the right assumption? And besides utilization, what other limited, what other immediate levers do you have, which can help you take up the margins over next two quarters?

So, Mukul, so let me take the first question and then, I’ll pass the mic to Jatin. So, I suspect your question was specific to consulting, but broadly looking at the different consulting component of the business. At Wipro, we really have a consulting business that is really very much connected with our technology business, right? So, 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 different type of clients. And I think it changed a lot the landscape, because the reality is that as you said, companies, I mean, like you, one, let’s start with what we are hearing. I mean, like you, we are listening to what the analyst, what the market, what journalists have to say about macro environment. And when we hear that, we obviously get, we pay attention to potential implications for our business. But then, important is the connection with our clients, right? 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 the war on the side, 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, this, they have reinforced a conviction during the last two years, that technology is not a call center. It is a driver of transformation. Now, what might have happened or might happen now, Mukul is that in some cases where company were driving program to drive to develop new business models or improve experience, I think they are possibly more – going to more focus on drive productivity gains and reduce the cost of running the business. But that’s completely fitting with our capabilities and solutions that we have. We are indeed helping them leveraging technology to drive 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’re winning deals together. If you look at the rising business, we already have several leads where the rising team and the SAP team of Wipro 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 the one end, I don’t want to be arrogant. I want to 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, booking performance solid for Q1, I should say, even extremely solid by applying all time high and extremely good engagement with our clients. So level of confidence and our growth going forward is solid. Jatin on question two?

Yes. Thanks, Thierry. So Mukul, I will, let me let me articulate the levers that can help us improve margin from here on, I see six levers. The first is, is clearly utilization, as you know, and it is visible in data sheet before, including freshers. So excluding freshers, you will see around 5% away from, what are the peak utilization. So, that’s first. Second, subcontractors as borders and travels for difficult, all of us and particularly us have accumulated 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, than your more – than your own employees. So that is second. Third, and most important lever is, the pyramid and fresher improvement. As you know, we have hired in FY 2022 double, more than double of fresher’s that we are hired in FY 2021, and FY 2023, 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 cyber security, and the rates there reflect very differently than what you would see in a traditional managed services business of Wipro. So pricing for right services, cloud is another area where we are invested heavily, and our ability to come on price, there is definitely much better than the traditional areas that we work in. So that’s the fourth. So the fifth is attrition itself, because one of the biggest impact on our cost structure is when you are simply replacing a similar scale 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 that attrition is moderating and that should certainly give us liver. 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 guide back to a structurer superior position from the margin standpoint.

Thank you. Just if you can 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 first September, and we have given the promotions from first 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, team, and thank you for taking my question. My first question was on your earlier commentary on margin in previous quarters where you have talked about a margin guidance 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 as well?

So Rakesh thanks for your question. You are absolutely right. We – in the beginning of last quarter, we say that we will be away from the range of 17% and then 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 roughly of the two percentage point, one and half percentage point comprises of 20 basis point for the Rizing 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 where we made in IT to make ourselves far more efficient, agile, and productive over a period of time, and 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 when – 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’ll 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, Jatin for that. My second question was around the Capco acquisition. So one of the rationale we had at the time of Capco acquisition was that it will give us a scale 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 all the 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 approve from that acquisition in the BFSI space, or is it something which we are happy with what we have achieved so far?

Rakesh, we always are expecting always more in term of growth, but the reality is that our BFSI business today is growing 24% year-on-year. And I think what is very visible and converting for us is that not only we’ve driven growth in term of volume, if you like, but also in term of positioning in those accounts. We have increased the number of larger 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 initiative 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, I think we can say after a year that it’s really a success, 24% year-on-year is not a – is a decent growth, I would say.

Thank you Thierry for that. I have more questions, but I’ll follow back and get you. Thank you.

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

Yes, thanks for the opportunity. If I just look at one metrics of revenue per employee on a YoY [ph] basis, it is gone down by 8% in the IT services. And this is despite of high revenue yielding companies acquired like Capco, Rizing and the Agile as a role. 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, I mean, realization is one third in India. So that has definitely played out in terms of IT services for employee realization coming down. I am not seeing from a pricing power standpoint any concern where we are giving our 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 are added Agile, we are added Rizing, which are significantly higher realization generative business by design.

Okay. Okay. And just in terms of the consulting companies, which we are acquiring like Rizing as well as the Capco and Thierry comment about – can you hear me?

We lost you for a few seconds Sandeep. We may, you – we heard Capco and then you…

Yes. Just a follow-up question. Yes, yes. Just a follow-up question in terms of the consulting company like Capco and Rizing, and Thierry is your comment regarding sensitivity to macro issue slightly higher for these consulting businesses. So how flexible we have in terms of a cost management within this company as a whole, both in Capco and Rizing if slow down 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 tell you one thing. We have in the obvious levers to pull to improve the margin of our consulting business in particular Capco, but also Rizing, which is to continue to develop the offshore component of this business. And we have a lot more to do in that area. So 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 Rizing it’s obviously very, very new, so nothing for now. But I think, we will continue to work on those aspects as well. Jatin, you want to add something?

Thanks, Thierry. Only additional point I want to make is these are not small businesses. These are large businesses with 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’re able to carry themselves through one phase to the other. So I’m – we remain quite optimistic that right now we don’t see anything, but even if two years down the line, there is a downturn, we would be able to manage the cost structures quite well.

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

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

Nitin honestly speaking for 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 this quarter we see a little less than 2% to 4%. It doesn't necessarily reflect a slowdown is just sometimes because you have a deal that is 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 deliver – 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 the performance in bookings in Q1 is just confirming this. We've done really well in the business, in our bookings in Q1 across the 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 3X in term of performance of what we had done a quarter ago. And I think it's also, I would say it's all the efforts an investment made over the last quarter that are paying off. And so when you combine 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%.

Sure. 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, by what we've – I was trying to sort of understand was, it is 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. I'm not – I don't think there is necessarily a seasonality or fatality to Q1. I don't see it, especially the Q1 is actually all Q1 is Q2 for some of the companies. So I don't really understand the rationale behind that. No, no, I think don't, don't assume that, and don't assume that there is any season game between a Q1 and a Q2. I think it's, 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, okay. I think the volume of larges and we all know that the volume of larges is driving 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 were shifted to September – starts September. So it's exactly the same as what it would've been if it was – if this 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 what I want to remind all of us is that it is I think the wording shifting is little misplaced because we had our last salary increase in September of last year, which is 12 months from there, and we are giving our increases on after 12 months. So it is not a – 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 by now moving from a yearly cycle of promotion to a quarterly cycle of promotion, it has also some real implication from a compensation standpoint.

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

Thank you.

Thank you. Our next question is from the line of Gaurav Rateria from Morgan Stanley. Please go ahead.

Hi, thanks for taking 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 Wipro? How much is because of overall market being pretty strong for our giving in the last quarter? And the related question is that; how should we think about the contractual profitability in these large deals has anything changed compared to the past in terms of gross margin coming down because of macro or things are pretty much cable?

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

Thank you, Thierry. And thank you, Gaurav for your questions. We've seen tremendous momentum and large deals both in the quarter and in 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 deal team is paying off, and we're seeing a lot of momentum in the market. In terms of margins 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 we can value price our opportunity. So it's a bit of a mix right now, but as our – as we continue to pivot our portfolio and position ourselves better as an orchestrator for our clients in delivering those outcomes we anticipate seeing margin improvement as well in our deal.

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 16%. So there were a couple of regions that clearly tagged down the overall growth there. So what were the factors that drove back is something again related to the external involvement or is it the more a Wipro specific phenomenon?

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

Yes. Couple of regions...

Gaurav, let me just chime in here. From a clarification standpoint theory mentioned in place meeting as well as its 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 – which was from the first April onwards. So Europe – I mean, Europe was at a extraordinary base to climb on. And that's the reason you are seeing little muted, but we remain very confident including the deal wins that we have seen in quarter one as how the Europe will pan out for quarter two.

Hey Gaurav, Thierry now I understood the point. So when you look at a gross 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, and 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 term of sequential growth is solid as well. So, no we had our board over the last two days our peer, our Head of Europe was here, and we 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 slow down 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.

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

Welcome.

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

Yeah. Thanks for the opportunity and congrats for decent growth acceleration outlook. Couple of questions starting with first clarification. I think Jatin earlier we indicated by Q4, we should be achieving our medium term margin expression. So, I was not sure what you in earlier, one of the question 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 cash generation. If I look this quarter, cash generation even fairly weak, if you can provide some sense about what played out there. And last question is about iCORE revenue. This quarter it is pretty quarter-on-quarter, despite cloud cybersecurity is part of the 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 that we are bottomed out in quarter two, particularly we will have whatever operational efficiency gains we’ll get. We’ll 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 press 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’ll catch it up in quarter two. And on your question on iCORE growth, there were a part of iCORE is also our digital operations business, which has a reasonably large presence in, through our HPS business, which sees a great momentum of open enrollments in quarter four, which it did not have in quarter one and therefore, while cybersecurity and infrastructure business continued to do well. We had a little bit of moderation through our DOP business purely on the seasonality of our open enrollment business. And that’s the reason, that there is a slight moderation there.

Understand. 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, the – you have reiterate that, we are probably seeing worst times behind, but if we do the adjustments for the acquisitions, still our outlook doesn’t look very exciting. So is there some conservatism, which you are building in, or you think that, it is best to wait and watch and see how things pan out because of the tremendous amount of fear, 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 they – do they believe that, despite challenges in the macro it’ll be very important for them from a long-term perspective to invest in technology. So as to, maintain their market share of 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 expense. So what is your assessment?

Okay, so Sandeep, so let me start with the clarification. So, you are saying, our guidance 3% to 5% grows for this coming quarter is conservative and not exciting is what you’re saying?

I’m saying it looks little conservative, when we adjust for the equation.

Sorry for that. But, 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 Sandeep, we didn’t say that the worst was behind, actually, we’ve never said that there was any worse. I think we are, connected with the market every day. And we are seeing that – we are saying that there demand that we have seen in the last quarter’s continue to be good. So that’s what we have said. This is, in term of market outlook frankly, there is demand for technology, expertise, capabilities, talent, and in the areas that we are talking about, cloud, engineering services, cybersecurity data, digital transformation. We have plenty of opportunities. Okay. So that is, 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, not being overly optimistic. Okay. So it’s definitely not a way of guiding. Okay. Is that okay?

Yes. That’s okay. I just wanted to understand a little bit more that how your clients are thinking now given the current macro [Technical Difficulty]

So it’s always difficult to respond in few minutes to equation 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 company, 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. They, what they’re 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.