Wipro hosted a conference call on April 19,2024. In the conference call , the company was represented by Mr Srini Pallia- CEO and Managing Director, Ms Aparna Iyer-CFO and Mr Saurabh Govil-CHRO.

Key takeaways of the call

5 focus areas for the company to revitalize include 1) accelerate large deal momentum by working closely with clients and partners;2)strengthen relationship with large clients and partners and further invest in accounts which have potential to grow to larger accounts; 3) focus on industry specific offerings and business solutions led by consulting and infused by AI; 4) continue to build talent at scale who are AI ready and able to deliver industry specific business solution and 5) continue to simplify the company’s operating model and focus on execution rigor with scale. These 5 factors will be adopted to accommodate technology shifts and market conditions.

Performance

Q4, IT services segment revenue was at $2,657.4 million, an increase of 0.1% QoQ and decrease of 6.4% YoY in reported currency terms.

The company had talked about green shoots in consulting business in Q3FY2024 and the traction has continued in Q4FY2024 reflected in CAPCO’s sequential revenue growing by 6.6% and order booking growing by 43.6%.

Six out of top 10 clients grew both on sequential and on a YoY basis in Q4FY2024.

Margins: In Q4 EBIT margins grew by 40 bps QoQ to 16.4%.  This improvement is after impact of 2 additional month of salary increase in Q4.

For FY2024 revenue stood at US$ 10.8 billion in reported currency a decrease of 3.8% YoY. However, the company continued to increase the % of revenues from top 5 and top 10 clients.

EBIT margins grew by 50 bps YoY in FY2024 to 16.1% when compared to FY2023.

Order bookings:

Total order bookings stood at US $ 3.6 billion in Q4FY2024 and for the full year stood at US$ 14.9 billion.

The company won 18 large deals in Q4FY2024 as against 14 in Q3FY2024. In TCV terms, the company’s large deal TCV stood at US $ 1.2 billion.

For FY2024, the large deal TCV stood at US $ 4.6 billion a growth of 17.4% when compared to previous year.

The company added 3 more clients in the US$ 100 million + category in FY2024.

Acquisition:

The company will continue to make investments in building capabilities and strategic acquisitions.

During the three months and year ended March 31, 2024, the company has completed a business combination by acquiring 60% equity interest in Aggne Global Incand Aggne Global IT Services Private Limited, a leading consulting and managed services company serving the insurance and Insurtech industries. Aggne is a leading alliance partner of Duck Creek, which is a market-leading platform for property and casualty insurance.

People:

Attrition:Voluntary attrition was at 14.2% on a trailing 12-month basis.

Utilization for the company remained healthy at 86.9% excluding trainees in Q4.

The company depending on the supply and demand and the demand environment will ramp up the head count. The company does not see a challenge in adding head count.

Americas 1 continued the strong momentum in bookings. The company booked 8 large deals adding to a total TCV of US $ 587 million. For the full year order bookings in TCV terms grew by 24.9%.

Q4 revenues for Americas 1 declined by 1.8% in cc terms QoQ and full year revenues grew 0.2% YoY.

Health care vertical grew by 18% YoY in FY2024.

America 2 market grew 1.9 % QoQ on back of strong quarter performance by CAPCO, BFSI, Hi-tech. On a full year basis revenue in Americas 2 declined by 6.1% YoY in FY2024. Almost 60% of the revenue in this market comes from BFSI sector and the company is witnessing return to stability in the sector led by Capco.

In Europe, revenue decreased 0.1% QoQ and 0.7% on a full year basis. While Germany and UK continue to be impacted due to slowdown in demand environment, markets such as Switzerland and south Europe are witnessing some recovery which grew 1.7% and 1.6% in Q4FY2024 respectively. Southern Europe as a sector grew 14.6% YoY in FY2024. The company also witnessed strong traction in order bookings in Europe. The company won 5 large deals in Europe adding to a TCV of US$ 300 million.

In the APMEA market, revenue declined by 2.2% in Q4 QoQ and 4.5% YoY in FY2024.The company’s strategy in APMEA market is to move towards high value transformation projects and move away from low margin accounts. The success of the strategy has resulted in margin improvement of 235 bps for the full year.

Effective tax rate stood at 24.5% in FY2024 as against 23% in FY2023.

Guidance:  The company expects revenue from its  IT Services business segment to be in the range of US $ 2,617 million to US $2,670 million which translates to a sequential guidance of -1.5% to 0.5% in constant currency terms in Q1FY2025.

The company expects margins to remain range bound like in the last few quarters.

Outlook: Overall demand environment and macro- economic condition there is no material change when compared to beginning of the calendar year. Challenges for discretionary spending remains.

The company is witnessing green shoots in CAPCO clients and experiencing stability after few rough quarters. The company is also witnessing green shoots in health care vertical.

The company will try and focus to create proactive pipeline and focus on these proactive deals.

One of the reasons for slower growth in the company is on account of higher exposure to discretionary spending.

Large deal pipeline continue to remain strong and will sustain large deals and mega deals.

Last year macro-economic challenges were posed to the whole of the industry and Wipro was also impacted. Economic environment is still uncertain and there may be more challenges in the short term. However, opportunities for the company are limitless. The industry is in the middle of a major technology shift. Every client is eager to leverage AI to shape the future of the business and the company is gearing up for this moment.

The company has made substantial investment to strengthen its capabilities across the organization. The company has acquired companies like CAPCO to add capabilities and boosted the companies consulting capabilities.

The company remains optimistic about the long term. However, the company’s immediate priority is to accelerate growth.

Management Commentary:

SriniPallia, CEO and Managing Director, said “FY24 proved to be a challenging year for our industry, and the macroeconomic environment remains uncertain. However, I am optimistic about the opportunities that lie ahead. We are on the brink of a major technological shift. Artificial intelligence is transforming our clients’ needs as they seek to harness its power for competitive advantage and enhanced business value. At Wipro, we have been gearing up for this moment. We have the capabilities, leadership, and the strength of over 230,000 Wiproites around the world to help us realize our goals. Although there’s a considerable amount of work ahead of us, I am confident that together, with our collective effort, we can pave the way for the next chapter of growth.”

AparnaIyer, Chief Financial Officer, said “We expanded our margins by 40 basis points during the quarter resulting in EPS growth of 5.2% QoQ in Q4. Despite a challenging macro-environment our IT services margin expanded by 50 basis points for the full year FY24. We generated highest operating cash flow in recent years which is at 183% of our net- income in Q4 and 159% on a full year basis.”