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

Key takeaways of the call

Performance

Q1, IT services segment revenue was at $2,625.9 million, a decrease of 1.2% QoQ and decrease of 5.5% YoY in reported currency. In cc terms revenue decreased 1.0% QoQ, and 4.9% YoY .Revenues were within the company’s guided range.

Margins: EBIT margin stood at 16.5% an increase of 0.1% QoQ.

Americas 1 delivered a sequential growth of 0.4% in Q1. Americas 1 had a good financial year in FY2024 with health and technology sector leading the race. The company is now witnessing momentum in consumer and communication sector as well.

America 2 had a sequential decline of 0.7%. However, BFSI performed well achieving a sequential growth of 1.4% in Q1 and 12.1% YoY. With bookings in Americas 2 being strong , the company is optimistic of returning to growth in the market in medium term.

In Q1, the company also continued positive momentum in Capco business achieving a sequential growth of 3.4%.

Europe and APMEA markets remained soft for the company with sequential decline of 1.4% and 4.2% respectively. Pipeline in Europe is healthy and the company’s primary focus is on conversion. The company is reviewing its strategy in APMEA market.

BFSI segment retained its positive momentum from last quarter and the company has witnessed growth in this sector for 2 consecutive quarters. BFSI grew 0.5% sequentially in Q1.

Driven by deal flow consumer business grew by 1.6% in Q1. However manufacturing and energy and utilities continued to show weakness for the company experiencing sequential decline of 0.3% and 6.3% respectively.

Effective tax rate stood at 24.5% in Q1FY2025.

Update on progress of 5 strategic priorities: 1) accelerate large deal momentum by working closely with clients and partners- The company is driving large deals creation systematically across its client base, The company is shaping these opportunities with proactively engaging with clients and partners resulting in large deal pipe line being robust. The company has won 10 large wins in Q1;2)strengthen relationship with large clients and partners and further invest in accounts which have potential to grow to larger accounts-this has resulted in top 10 clients growing by 1.3% QoQ and 3.8% YoY; 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- trained 225000 employees in foundational AI skills and additionally trained 30000 employees in advanced AI skills and 5) continue to simplify the company’s operating model and focus on execution rigour with scale.

Wage Hike: the company has not decided on the timing of increase in wages. The wage hike will be in line with markets.

Order bookings:

Total order bookings stood at US $ 3.3 billion in Q1FY2025 with large deal TCV at US $ 1.2 billion.

Large deal wins announced are net new. Deal tenure is mostly of 3-5 years.

Guidance:  The expect revenue from our IT Services business segment to be in the range of $2,600 million to $2,652 million. This translates to sequential guidance of (-)1.0% to +1.0% in constant currency terms.

The company expects margins to remain range bound with a upward bias. Levers for margin expansion include improvement in pyramid, on boarding of freshers’ will lead to reduction in deliver cost going forward and optimization of overheads.

Outlook:

In Q1, the company did not witness a significant shift in the demand environment. Clients have continued to remain cautious and discretionary spending continues to be muted.

Profitable growth is the company’s focus. Margins will continue to expand due to operational excellence.  The company will not hold investment for growth.

Management Commentary:

Srini Pallia, CEO and Managing Director,  “We recorded another quarter of total large deal bookings over $1 bn, with our largest win in the recent years. Our top accounts continued to grow, accompanied by a growth in Americas1 SMU, BFSI and Consumer sectors. We are pleased with the momentum we have built in Q1 across industries and sectors and confident in our ability to execute better on bookings and profitable growth as we transition to Q2. While we continue to build on our ai360 strategy and preparing our workforce for an AI-first future.”

Aparna Iyer, Chief Financial Officer, said “We continued to expand our margins to 16.5% in Q1’25, this is a 42-bps improvement YoY. Our margin performance is also reflected in our EPS increase of 10% YoY. Our operating cash flows continue to be strong at 131.6% of our net income which takes our current investment and cash balance to $5.4 billion.”