Wipro Limited (NYSE:WIT) Q2 2024 Earnings Call Transcript

Wipro Limited (NYSE:WIT) Q2 2024 Earnings Call Transcript October 18, 2023

Wipro Limited misses on earnings expectations. Reported EPS is $0.06 EPS, expectations were $0.07.

Operator: Ladies and gentlemen, good day, and welcome to Wipro Limited Q2 FY24 Earnings Call. 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 Mr. Deepak Bohra, Senior Vice President, Corporate Treasurer and Investor Relations. Thank you, and over to you, sir.

Deepak Bohra: Thank you, Yashashri. A warm welcome to our Q2 FY24 earnings call. We'll begin the call with the business highlights and overview by Thierry Delaporte, our Chief Executive Officer and Managing Director and a financial overview by our CFO, Aparna Iyer, followed by Amit Choudhary, Chief Operating Officer. 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 the SEC. Wipro does not undertake any obligation to update the forward-looking statements to reflect events and circumstances after the date of filing. The conference call will be archived and a transcript will be available on our website. Over to you, Thierry.

Thierry Delaporte: Thank you, Deepak. And good -- actually good morning or good afternoon. Good evening, everyone. Thank you for joining our second quarter earnings call. I'll begin with an overview of this quarter's results and detail of our sector performance, talk about the demand environment and some direction for the coming quarter. Our CFO, Aparna and our COO, Amit, will join in with their comments as well. So Q2 was yet another quarter of strong deal bookings for us. Total contract value terms, we closed large deals to the tune of $1.3 billion. This is the highest in the last nine quarters and this represents a 79% year-on-year growth and a 6% growth on a quarter-on-quarter basis. During the quarter, we booked 14 deals in the greater than $30 million TCB range versus 10 in the previous quarter.

Total bookings from a TCB standpoint stand at $3.8 billion, which is also a growth of 6% year-on-year. We have added this quarter, again, one new account in the greater than $100 million client category in Q2. We now have 22 accounts in that bucket. If you remember, back in FY21, we had 11 $100 million accounts. So we've doubled the number of accounts in the $100 million categories. We've won also two close to $0.5 billion deals, in two of our large accounts as has been the case for several quarters now. Cash flow has remained strong at 145% of net income in Q2. EBIT or earnings before tax and interest of our IT services segment has increased 6% year-on-year. All of that gives us confidence that we're winning in the market against a backdrop of economic weakness.

The business environment, as you all know, has been uncertain. Inflation has stayed high as have interest rates. Clients are continuing to take a much more rigorous look at their investments. They are hyper-focused on efficiency on optimization of existing investments and faster return on new ones. Lower discretionary spending is a reality today. Conversion of order book has become slower. Transformation programs that are nearing their project term are being replaced by new ones, but at a slower pace. All of this has impacted our top line growth as well. In Q2, revenues declined 2% quarter-on-quarter in constant currency terms. But even though there's some softness in top line growth, we are continuing to hold margin steady. Operating margin for the first half of FY24 was 16.1%.

This is 110% basis points higher than our operating margin in the first half of FY23. Now let's look at the performance of our four strategic market units. One, in our Americas 1 market unit, revenue grew 1% quarter-on-quarter in constant currency terms in Q2. This revenue growth was led by a strong performance in our healthcare business as well as in the technology products and platform business. Order bookings in terms of TCV grew 36% year-on-year. Our Americas 2 market units which has higher exposure to consulting clients and to the BFSI sector, so a higher than usual impact of the macroeconomic slowdown. Revenues in Americas 2 declined 2.3% quarter-on-quarter in Q3. Europe which has been our growth engine for the last two quarters -- for our last two years, growing by 39% in FY22 and 12% in FY23 has also seen slowing demand and reprioritization of client spend, waiting on the overall business, revenues in this market declined 5% quarter-on-quarter.

Having said that, we are seeing strong traction on the other bookings side, which in total contract value terms increased 10% in Q2 year-on-year. Given our strong bookings in this market, we are confident of a swift rebound. Finally, in our APMEA business, revenues for the quarter declined 0.5% quarter-over-quarter. Our goal in this region is absolutely to capture the rapidly digitizing market. For that, we are leveraging our global scale and domain expertise to actually continue to move our portfolio towards higher value transformation projects. This focus on improving the quality of revenue is now reflecting in our margin performance, which has improved 330 basis points over the last five quarters. Being able to sustain margin despite softer revenue is largely due to our ongoing transformation efforts.

This includes several programs around delivery excellence and operational efficiencies. Across the board, we are pivoting our business towards high-quality, high-potential businesses and reducing our loss-making accounts. We're also working on faster bench deployment. In the last quarter, talent utilization increased to 84.5%, an improvement of 80 basis points quarter-over-quarter. Third, our segmentation strategy, together with the One Wipro approach is helping us sell bigger deals with existing clients and win in a consolidating market. And I'm proud that we are seeing these benefits within three months of moving to the new four global business line operating model. Amit will share more details shortly. Both on the delivery assurance and efficiency side, these actions are having an immediate positive impact while also setting us up for long-term margin resilience, because profitable and sustainable growth is our top priority.

In Europe, we closed three large consolidation deal in Q2 at a 100% bid-to-win rate. For example, the global bank has selected Wipro as its partner to deliver multiyear digital transformation initiatives across business units. We probably work with the bank to build solutions to enhance its global products and services through responsible use of AI and also hyperautomation. This will deliver better customer experience, analytics and drive significant operational efficiency. Another important point to drive your attention on. Our partnership strategy continues to stay strong. Looking through our partners as a percentage of total bookings have continued to increase quarter-after-quarter from 25% in FY22, 44% in FY23, and it was at 53% in Q2. [Increasingly], clients are not just looking to migrate to the cloud but also run and grow their businesses more efficiently on the cloud.

Our FullStride cloud services, which with its full stack cloud offering is setting us apart from competition and letting us tap into opportunities across the cloud journey. For example, multinational healthcare and insurance firms want us to co-create a consumer digital experience. As a strategic technology partner who will build AI and automation solutions to drive speed to market, better client experience and reduce their costs. Our high-performance software engineering program will bring them at least 20% more efficiency. Now, if you look at the bigger picture in this, you will see that our ongoing transformation is driving a substantial improvement in our market position. And that's, in turn, reflected in the types of deals we are winning.

Clients now look to us to help them solution and orchestrate their transformation. They trust us with their complex challenges. That's reflecting in the latest customer satisfaction survey as well with our NPS expanding by 840 basis points, which is quite substantial. I'll take a few minutes now to share an update on Wipro's AI 360 strategy. Since our announcement last quarter, we have trained as many as 180,000 employees in basic Gen AI principles. We have rolled out personal-based learning pathways to create a pool of specialized talent with deeper technical expertise. We are working with our alliance partners to further enhance AI learning pathways through our AIM Cloud Academies. Recently also, we launched a new Gen AI Center of Excellence with IIT Delhi.

A student in a classroom with a computer, reflecting the technology degree programs offered. Editorial photo for a financial news article. 8k. --ar 16:9

We're rapidly integrating Gen AI into our processes, our solutions and our offerings, thousands of our employees have or are starting to use Gen AI. Let me give you examples. In the HR functions, our teams are seeing significant productivity gains by using Gen AI for candidate background verification. And in marketing, we are using Gen AI for content generation and translation, tasks that used to take hours earlier now takes a minutes. In sales, we're deploying Gen AI for research to improve sales collaboration and to generate RFI responses. Now Engineering business. Gen AI is helping with software development and lifecycle automation. One of the areas with the biggest productivity gain is in quality engineering and quality assurance testing.

Gen AI is helping with scenario creation, cogeneration, synthetic data creation as well as execution at scale. Initial pilots of these Gen AI apps have been so successful that we are now rolling them out to all our employees. On the client front, Gen AI is now a part of every client conversation, there is tremendous interest in exploring new use cases as well as understanding the benefits and implications of this technology. Today, we are seeing a doubling of Gen AI active projects than we did just one quarter ago. For now, we're seeing rapid adoption in healthcare, consumer and financial services, but also in high tech and utilities. One example I can share with you here is the following. We are working with a US based health insurer to deploy a Gen AI-based chatbot for their agents.

We are developing a solution that is fine-tuned to be more contextual so that agents can provide more personalized assistance to every member. This solution is driving 30% to 40% reduction in operation costs, significant improvements in agent productivity and improving Net Promoter Scores. Another example, we're working with a European multinational telecom company to unlock value from data. Working with different vendor tools and software kits, we are generating high-quality synthetic data, which allows the client to not only increase cross border collaboration but also mitigate buyers and eliminate distribution limitations that exist in real data. As the technology evolve and Gen AI output becomes more accurate, we expect demand for our Gen AI services and expertise to increase greatly over the next six to 12 months.

Frankly, we're very excited by the opportunity Gen AI presents. And we are investing in new use cases, solutioning for clients as well as upskilling our employees because we really want to take a leadership position in this space. A word on our guidance now. For the next quarter, we are guiding for a sequential growth of minus 3.5% to minus 1.5% in constant currency terms. We expect margins to stay range bound as we've seen over the last few quarters. As the market starts to turn around on the back of our transformation and efficiency plays, we expect to start seeing improvements in the coming quarters. Despite the global slowdown across businesses, Wipro will continue to invest in its people through training opportunities, leadership development, global exposure to new clients and technologies and by obviously also rewarding them with merit based salary increases, because intellectual capital, our people are our biggest strengths.

We're continuing to strengthen our foundation, streamline our operations and moving towards a more modern dynamic culture, we have the right strategy and vision to keep us competitive and resilient. With that, I'll turn it over to Aparna for her comments. Thank you.

Aparna Iyer: Thank you, Thierry. Good evening to everyone who is joining us on the call today. In my update, I will quickly cover some key financial highlights for the quarter. To start with on the revenues, our IT Services revenue for Q2 declined 2% quarter-on-quarter in constant currency terms, which is at the lower end of the guided range for the quarter. We reported yet another quarter of healthy deal bookings. In total contract value terms, we closed large deals to the tune of $1.3 billion, which is a 79% year-on-year growth. We also booked 14 deals, which are greater than $30 million in TCV. Total bookings from a TCV standpoint stands at $3.8 billion, which grew 6% year-on-year. Turning to margins. Our ongoing focus on operational improvement has ensured that the margin remains steady even in a softening revenue environment.

Our operating margin for the second quarter was 16.1%, an expansion of 100 basis points year-on-year. Shifting to our cash flow performance. Our operating cash flow for Q2 is at INR38.6 billion, which was 145% of our net income. Our free cash flow as a percentage of net income was at 149%. Cash flow has been strong for the first half at 137% of net income. At the end of Q2, we had $4.1 billion of gross cash and $2.2 billion of net cash on the balance sheet. Our net income attributable to the shareholders for the quarter was at INR26.5 billion. Our EPS grew 4.1% year-on-year. Our effective tax rate remained flat for Q2 at 24%. On the ForEx front, our realized rate for IT Services in Q2 was 82.5%. Our DSO for the quarter is at 79 days, which is an improvement of 3 days year-on-year.

To conclude, our guidance for the next quarter from IT services business segment is expected to be in the range of $2.617 billion to $2.672 billion. This translates to a sequential guidance of negative 3.5% to negative 1.5% in constant currency terms. Thank you, and over to you, Amit.

Amit Choudhary: Thank you, Aparna. Hello, everyone. I will share some updates on our business transformation and how that's reflecting in our steady margin performance. Our new four global business line model has allowed us to deliver a One Wipro service excellence approach to our clients. It is reflected in our latest customer satisfaction survey with our NPS expanding by 840 basis points. This directly reflects our performance with clients, delivery, program governance and our capabilities, and this is further strengthening our delivery-led sales. On the delivery excellence side, we have been very focused on consistency, efficiency and productivity for our clients. Automation and Gen AI is a cornerstone here with the corresponding productivity kicking in, both on the delivery and functional sites.

Over the last quarter, on the operational efficiency front, utilization is now up to 84.5%. In fact, utilization has increased by almost 470 basis points in the last four quarters, including utilization of next-gen associates. We have taken several actions here from sustained bench reduction efforts, pyramid optimization to onshore offshore rationalization and rigor around subcontracting costs. Alongside, we are keeping a very close eye on discretionary spends with increased rigor on cost and efficiency management. Thierry has talked about skill being our biggest currency. On the talent reskilling side, we continue to scale Gen AI talent. Over 180,000 of our employees have taken the first Gen AI course, focused upskilling initiatives across skill families are in place now, including several account academies.

These are collaborative initiatives with our clients, providing a skilling road map for our teams to serve them better. I am pleased with the progress we have made so far and a lot more lies ahead. Now I'll turn it back over to Deepak.

Deepak Bohra: Yashasvi, now we can open up the question-and-answer session.

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Q&A Session

Operator: [Operator Instructions] We have a first question from the line of Kumar Rakesh from BNP Paribas.

Kumar Rakesh: My first question was around the large deals and TCV. So over the last four quarters, you have been consistently reporting $1 billion or more of large TCV. Over the last two quarters, your revenue from existing customers have reached almost close to 100%, about 99.6-ish or so number, which was about 95%, 96%, sort of last year. Does that imply that large part of these deals which we are seeing are renewable, I understand that you don't disclose those data, but -- and this challenge of high yield when not translating into revenue, it's not just unique to you, we have seen with other companies as well. But at least their guidance or the commentary do suggest that in the coming quarters, they are going to see a much better growth outlook.

Whereas in contrast, your outlook suggests that the growth is going to further de-accelerate from here on? And it's absolutely in contrast to the deals and TCV, which you are reporting. So is that a reflection that almost the entire part of the large TCV which we are seeing here is actually a renewal and not meaningfully new TCV?

Thierry Delaporte: This is Thierry. This is not the case. I think you're certainly reflecting on the fact that indeed, bookings in TCV have been very solid over the last quarters. That is true. What we are seeing is we are winning more large deals. There is a good balance between new and renewals. Renewals can include increased scope in the case of consolidation. So we have different types of those large deals. What's clear is that while we -- and I think you will recognize also what we've said because the market has not dramatically changed versus the previous -- last quarter is that while we win large deals, that may take a little bit more time to convert into revenue there's a lower volume of discretionary spend being clocked, if you like, with our clients.

That is the kind of now type of revenue that we are missing. So that -- it is -- the revenue trend you're seeing is a reflection of those two different realities. On the one side, there's a very decent volume of business in the market. We have a strong pipeline and we are winning a nice share of those deals. We are winning more large even before. Every quarter we improve I mean, it's quite interesting. We've moved from never going into largely to -- going occasionally a big one to now system -- more systematically, I would say, win large deals this time to close to $1 billion deal for the same quarter is a sign of that. And yet at the same time, discretionary spend is lower. You know that like everybody in our industry, we have certain volume of our business that is for discretionary.

We might be a little more exposed than some of this because of our significant presence in consulting business, in particular. And even if we know that it will be the first one to bounce back when the demand is there. But so that's what we are seeing. And now the last thing is, except the fact we are guiding for the quarter to come and not beyond that and that’s probably why that’s how we are guiding to you. But we also believe that should the market remain as it is we will slowly bounce back.

Kumar Rakesh: My second question was around your strategy of exiting from the smaller accounts. And we started seeing the effect of that from last year's fourth quarter. And since then, the revenue for the IT services has come down by about $90 million. Does it appears to be that proactively pruning small accounts at a time when the demand environment could be counterproductive and actually could be one of the reason why our growth could be getting impacted?

Thierry Delaporte: Well, so first of all, Kumar Rakesh, our strategy that we elaborated back in 2020 was to clearly develop large accounts. We had, at that time, 11 accounts over $100 million, which was clearly lower than most in the industries, companies of similar size. And so we felt that -- you cannot invest unilaterally across the board. You have to make choices. And that makes a lot more sense to invest into partnership, relationship with clients, that will allow you to drive significant growth, there's a potential of significant growth. And that's what we've done. It means that instead of -- the cost of sale for very small account is higher. It is proven. We know that until a certain point in time, you are spending an abnormal amount of time to close very small deals, and not so much more time to close bigger deals.

So that's a conscious decision to focus on less number of talent but be meaningful as a partner in these accounts, be their partner in the transformation. And that's what we've done. So I give you two data points, Kumar Rakesh. One, if you look at the top -- the accounts of over $100 million, we've doubled the number of these accounts in two years, right, from 11 to 22, as simple as that. Second thing, if you look at what we call our metal account, which are our top 80 accounts, they've actually resisted a lot better than the smaller ones. So I think it's just a confirmation that this is the right strategy. We need to continue to focus our attention on those accounts where there will be growth over the next quarters. But also accounts that are shaping our industry and reduce the wasted investments in accounts where we will never go beyond the certain point in terms of size.

Kumar Rakesh: So the rationale behind the strategy is very well appreciated. My question was more around the timing of that strategy to bring into effect and full effect. Can that also be contributed by pulling down our revenue?

Thierry Delaporte: So let me address this point also. What have we done in terms of growth strategy over the last three years? The first two years has been a period of significant growth. There was significant growth in this market. We've grown all in, okay? And we have really got a good share of the growth. If you look at the growth during that time, company has changing scale, right, over 40% increase in size in 10 quarters. Market has changed, I think the cautiousness that we’re seeing. So this is not a growth market right now, let’s face it, right? And so I think we recognize that this is not necessarily a market where anybody will shine in terms of growth. For us, what it is to continue our focus on our transformation, continue to be more relevant, continue to drive our investment priorities around AI, around cloud, around security, continue to upgrade our talent, continue to be more nimble, more efficient, and that's how you will recognize that's how we continue to maintain and actually deliver the level of margins we are at in Q2.

And so that's -- we are ready for when the market will bounce back to go back into growth mode.

Operator: We have a next question from the line of Gaurav Rateria from Morgan Stanley.

Gaurav Rateria: So my first question is regarding initiatives taken by us to broaden our funnel to include mega deals which are like $500 million plus kind of a TCV in pipeline and pursue the same. And related question is also around nature of bookings that we have had. Are they more on the cost side or more on transformation side, have we made any tweaks in strategy to pivot to the changed market conditions when deals are coming more towards the cost optimization side?

Thierry Delaporte: Good question, Gaurav. So I'll take a shot at those two. Aparna, feel free to jump in or Amit, if you feel like it. So on the first point, which is the focus on the larger deals, I think it was clear that back a few years ago, we were not getting at Wipro our fair share of larger deals. And large deals are giving you a certain level of resilience and also a certain level of impact with the client. And that is completely in the center of our strategy to develop, as I said before to develop strategic relation and meaningful relation with our clients. So to do so, we've started to build with our CGO, Stephanie, we've started to build our larger deals, right? It started with bringing talent, people that have been -- that are big dealers that have been building larger deals in the past.

We've also obviously refocused our account executives and our leaders to be ready to go for larger deals. It has positioned us to engage at a different level with our clients. Let's pay more attention to their priorities and challenges and be proactive in bringing back to them solutions that would address the challenges. And we've started to win larger deals. It started with one big one and then another big one, but it was more erratic at the beginning, and then we started to win more of these large deals and larger ones in size. And I think it's becoming a machine now inside Wipro where as part of our deals, we have a significant volume of large deals every quarter. And I think we expect this to continue over the next quarters. So that's on the large deals.

On the cost actions you asked, Gaurav. If I understood well, your question was how did you balance focus on…

Aparna Iyer: To understand there is a pipeline, is that you're willing are…

Thierry Delaporte: So yes, that is -- I would say, Gaurav, on the pipeline, I would say there is certainly an evolution of the type of deals that we are seeing, and the attention to cost takeout, cost optimization, margin, productivity and so on has certainly a lot bigger than it was some quarters ago. There is no doubt.

Operator: We have a next question from the line of Dipesh Mehta from Emkay.

Dipesh Mehta: A couple of questions. First, about sales and marketing increase. This quarter, it is showing some percentage of revenue. There is a good uptick Q-o-Q, Y-o-Y. If you can help us understand, what drives the significant excess sales and marketing? Related question is if I look number of new clients which we add every quarter, it is showing moderate and for last few quarters. So these to numbers are not matching with the directionally, if you can provide some sense? Second question is about, if I look reconciliation item. Earlier, we indicated talent to correction is driving that item. Now this quarter, again, it has increased,so 2.2 billion loss in the key line item. How we should understand this line item and how would you expect it to trend in coming quarters?

Aparna Iyer: Dipesh, to your point on sales and marketing expenses being high, it's specifically in reference to one of the line items on depreciation and amortization, where we have taken an accelerated amortization pertaining to one of our customer intangibles. And that is why it's a one-off and it should normalize over a period of time. The second piece that you said on the number of accounts being moderated, Thierry just answered that it is a part of the strategy. We are focusing on increasing and expanding our top client relationships, and it is in line with what we are pursuing as a strategy overall. So your third question that you had asked on the reconciling items. Last quarter, that is in Q1 of this fiscal, we had announced that in owing to turn in the macroeconomic environment and for us in line with all the transformation that we are pursuing, we wanted to be more agile and we had announced a restructuring program under which we had taken in restructuring expenses, both in Q1 and we had indicated that there would be a spillover into Q2, which has been now booked in the reconciling items.

This is towards the employees severabce cost and is one-off in nature, and that is how you should model it.

Dipesh Mehta: So is it now over from Q3 onwards this line item will not be there or do you expect it to recur?

Aparna Iyer: So we're not calling out for any particular guidance on this. We have said that it was one-off in nature. We will need to take into account what is shifting and what's changing in our business. If there is more update, we will share it with you in the next quarter.

Operator: We have a next question from the line of Abhishek Kumar from JM Financial.

Abhishek Kumar: Thierry, you mentioned that you expect in the next couple of quarters, things to look up. I was just wondering what is driving your confidence? Are we seeing that the runoff of discretionary projects that we have witnessed over the last couple of quarters, is that coming to an end or you expect general demand to improve going forward?

Thierry Delaporte: I'll try to to address it, staying within our policy in terms of guidance. So one is, certainly, the guidance for Q3 includes a certain volume of follows, let’s be clear, bigger than it was the previous year, right? It's a fact, which we don't necessarily expect to repeat for sure. Second is the fact that quarter-after-quarter with our level of TCV, we continue to build the backlog of deals. So there's a bigger proportion of our revenue that gets covered by contract, if you like, for the quarters to come. So we are staying certainly cautious. And as you know, we are not guiding beyond this quarter, but it feels that we can reasonably expect a rebound to come after.

Abhishek Kumar: Just one follow-up, maybe. So on order backlog, you mentioned -- so while we are winning deals or inflow is good. At the same time, there is a depletion of current book of business. So I mean I know we don't give that number, but any color in terms of how the order backlog has improved over the past few quarters, given these two movement in the different direction?

Thierry Delaporte: Well, Abhishek, one, the type of deals includes a bigger proportion of larger dealers than before, okay, which will trigger a bigger stickiness in these accounts going forward, no doubt. Second, the varying nature of those larger deals tend to be more strategic. Third, the type of deals. Looking at our portfolio, we've done a lot of work over the last quarters to continue the rotation of our portfolio, more technology-based around data, around security, around cloud, and this is what's -- and engineering, and this is what's happening. So I would say the nature of these deals has certainly continued to evolve. There's a greater attention to cost rationalization, therefore, producing business case, delivering outcomes, those are typically what we are seeing in the deals that we are closing.

And I would say also we are seeing a good volume of deals of clients working on the consolidation of their providers where we are seeing opportunities to expand our position in these accounts.

Operator: Mr. Abhishek Kumar, does that answer your question?

Abhishek Kumar: Yes.

Operator: We have a next question from the line of Girish Pai from Nirmal Bang Equities.

Girish Pai: Thierry, how would you characterize the mood of clients, would you say they seem more optimistic or pessimistic compared to, say, when you tracked with them three months back or six months back. That's question number one.

Thierry Delaporte: If I understood well, Girish, you asked me to characterize the mood of the market of the clients?

Girish Pai: Mood of clients, right.

Thierry Delaporte: So it's an interesting question, Girish. I'm -- every day I speak to clients, right? So for sure, I try to gauge their mood and their priorities and so on. What do I see? There, first of all, technology is center to a lot of their priorities. They are very mature about technology. They have a lot of ambitions about how technology will transform their business. They are very curious about how AI and Gen AI is either impacting or transforming or helping them be more efficient in their industry. And a lot of those discussions are around that. There is a certain level of cautiousness to engage new program. There is a certain level of cautiousness to spend as much as what they used to spend in the previous quarter -- in the previous years.

So they are, like you and I,they are reading newspapers every day. They see the news on the American economy, European economy, the war here and there. And the fact that all of this is creating a certain level of instability and anxiety. A lot of people are starting to project themselves and say, okay, it's going to be time to resume some of those programs because the business will obviously suffer from less attention to technology. So that's -- the mood, I would say, is in a way, cautious and anxious, but at the same time, very aware of the fact that it's going to be time to resume those investments sooner than later. Over to you.

Girish Pai: Regarding your remarks on -- in your prepared remarks, you made a lot of comments on Generative AI. In your operations, to what extent are you using Generative AI today and where are you on that journey? And where you think like 12 months down the road and what is the kind of productivity gains you pick? And can I get you back, are the clients you mentioned that a lot of the presentations were on Generative AI, are they actually asking for…

Operator: Mr. Pai, I'm sorry, you're not audible.

Girish Pai: Yes. This is regarding Generative AI. Can you hear me now?

Operator: It is not very clear.

Girish Pai: Okay. Can you move to the next question.

Subha Tatavarti: Girish, I can -- this is Subha Tatavarti. I'm the CTO. We heard parts of your question, and I want to kind of address some parts of it. One was around what is our strategy? We believe that Gnerative AI will fundamentally change many businesses and also the way we live. So we have been very, very aggressive. And in the last six months, we have adopted Generative AI to streamline our technology business processes as well as people. The early signs, and this is very, very early, but early signs are indicative of productivity gains and in many areas, we talked a little bit about in the HR space, especially around background checks a lot of work we do is around employee hiring, retention, training and managing. So a lot of our work is now being streamlined, at least in early parts of our work with Generative AI in this space are very positive and encouraging in terms of productivity gains.

Similarly, on the quality assurance and testing practice, this has been quite interesting because in the last two to three months, the kind of pilots we've run are indicative that we can significantly reduce the amount of time or the number of hours it would take for us to be able to say perform functional testing or perform specifically around data generation and environment setup. So the early tests and early pilots are very encouraging, and we hope to continue to give you updates on this and the rollout as well as how we'll take our learnings from internal adoption to our customers shortly.

Operator: We have a next question from the line of Sandeep Shah from Equirus Securities.

Sandeep Shah: If I just look at the third quarter guidance and look at the first nine months of this financial year, it's likely to be a 4% decline on a Y-o-Y basis in a constant currency terms, which will be ine of the lowest in the industry, and this could be a second period in a row where our growth on an organic basis would be actually lower than the industry. So Thierry, my question is do we need to introspect our growth strategy, our offerings? Do you believe is there any gap in the offerings? Or is it to actually check and introspect our go-to-market model because deal wins are one indicator which everybody is winning, but our growth rates have been lagging quarter-after-quarter and period-after-period starting from FY '22 on an organic basis…

Thierry Delaporte: So Sandeep, we are very clear, in Wipro on the way we are -- we want to progress. We have our own journey, we are to define our own strategy and we have our own ambition and our own focus. Over the quarters, there have been quarters where we've grown a little more. Some of them we've grown less. And that's a reality. What matters is to look at the progression over the certain period of time and look at what we've done over the last years. And I think you'll have a response in terms of our growth strategy. The growth that this organization -- this leadership team has been able to drive over the last three years is actually a pretty decent level of growth. We always want more growth trust me, Sandeep. But at the same time, we are focusing on our transformation as much as we are focusing on the day-to-day performance.

And that's incredibly important. You need to reflect and understand that the way we have redefined our ambition, the way we have invested in our organization in talent, in capabilities, in solutions, the way we've invested in our systems, the way we have invested in consulting capabilities to reposition ourselves in our operating model, in our own efficiency, all of that is to be taken into account and you cannot take only one element of the performance in isolation of the rest. That's how we are looking at our progression. We are happy with where we are for sure. We're always trying to do more and we are always ambitious to do more, but we are looking ahead of us, quite confident at our opportunity to get back into growth as the market get a little better, frankly.

Sandeep Shah: And just a related question, when you expect a pickup in the growth and rebound in the growth. Is it fair to assume that fourth quarter onwards the guidance may not indicate any kind of a Q-on-Q dip, or are you indicating a rebound from 4Q or maybe 1Q of next financial year?

Thierry Delaporte: No, Sandeep, you will not get anything more from me. We are not guiding beyond the current quarter.

Sandeep Shah: And a question to CFO, Aparna, just in terms of margins, in fact, wage hikes are effective from 1st of December and Q3 looks like from the guidance is likely to be a soft quarter. So in that scenario still flattish or a narrow band movement on the margin is still feasible, or there could be some seasonal impact on the margin because of the slower growth and the wage hike effective in December?

Aparna Iyer: Yes, you've already highlighted the headwinds that we are starting quarter three with, there will be pressure on margins. We've done very well on being -- remaining resilient in the first half. The efficiency measures have only intensified. It will be a challenging task. And that's why we have said that our endeavor will be to be range bound in terms of what we've delivered over the last few quarters. But I agree with you that there are more headwinds as we start the quarter.

Operator: We have our next question from the line of Ravi Menon from Macquarie.

Ravi Menon: Thierry, you mentioned about your win rates in the last years in Europe being 100%. Could you comment a bit on how that changed in the US over the last few years?

Thierry Delaporte: So specifically to Europe, Ravi, correct?

Ravi Menon: Specifically the US, Thierry…

Thierry Delaporte: So I would say, well, we do not have a 100% score in the US. It doesn't mean it's a bad score I think we've done very well in the US as well. We just highlighted the 100% score in Europe because it was quite -- we consider that this is quite a performance. But the performance, the win rate is actually improving and strong in the US like it is in Europe or actually in Asia Pac, Ravi.

Ravi Menon: So overall, you would say that you've seen win rates improve and your pipeline as well, and that's actually -- that's why we're seeing the deal TCV right overall step-up?

Thierry Delaporte: What we are seeing is that we are getting better at qualifying the deals that we see in the pipeline to reduce the lost investments, if you like. And so it is definitely delivering results. There's no doubt that when we come through the qualification process and feel that this is a deal that we can win, then the entire mobilization of the team is here to drive it until the finish line.

Ravi Menon: One last follow-up on Europe. We saw a surprising decline here, is there any specific industry or a country that was responsible for those?

Thierry Delaporte: Yes, you're right. It is a surprising decline for Europe, I can imagine for you, given the way we held pretty strongly the previous quarter. I think I'm looking at Aparna, but to me, this is primarily financial services -- financial services primarily, and manufacturing, correct -- and manufacturing,so two sectors. No, I mean we haven't lost any account or it's not like we've had a drama, but certainly, some significant slowdown, noticed in some of our large accounts in financial services and manufacturing in Europe. Having said that, that's what Ravi, if I can just add one element. Pipeline continues to be strong in Europe. The leadership team in Europe is pretty bullish. So it gives confidence that Europe will bounce back rapidly.

Operator: We have a next question from the line of Apurva Prasad from HDFC Securities.

Apurva Prasad: Thierry, would be interesting to know your thoughts on BFSI vertical in terms of how do you see the impact of potential Basel III, NDA and proposals on US banks and the resultant impact on tech spend? And the related piece could be on some large banking customers who are carrying out the org structure change in terms of delayering their personnel. So do you see this as an opportunity for incumbents such as Wipro or should that be more continued pressure?

Thierry Delaporte: Apurva, your questions are specific to the financial services sector. I think certainly, financial services sector has been slower -- significantly slower this year. I think we are seeing it across the board. It actually started in America then it moved to Europe. We are seeing places, in particular, type of Tier 2, maybe banks in America where the growth is coming back. So I would say these are definitely places in the banks where when I was referring earlier discussions I've had with clients telling me, we have a lot of programs that are in the waiting room ready to be launched and start. Certainly, in the banks, it's a reality. Banks are definitely focusing on cost takeout and productivity exercise. There's a lot of consolidation activities going on, which is -- we see it as an opportunity for us, no doubt, absolutely no doubt. So that's what we are doing.

Apurva Prasad: Thierry, just one more question on your…

Operator: Mr. Prasad, I request you to join back in the queue, please? Ladies and gentlemen, that was the last question for today. I would now like to hand the conference back to Mr. Dipak Bohra for closing comments. Over to you, sir.

Deepak Bohra: Thank you all for joining the call. In case we could not take any questions due to time constraints, please feel free to reach out to Investor Relations team. Have a nice evening. Thank you so much.

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