Wipro revenues have grown slightly despite Q3 being a seasonally weak quarter. What drove this growth and what is the Q4 outlook?
Aparna Iyer: Revenue for the quarter was 0.1% up in constant currency terms. This was slightly above the guidance range that we had given out for Q3. Our outlook for Q4 is minus 1% to plus 1% growth. The strong in-quarter execution is what led to the outperformance. And for Q4, the outlook that we have given is based on the current visibility that we have. We are seeing momentum in America’s market. Capco is showing a strong bounce back in terms of its growth. Even in Q3, they grew 11% year on year. In Europe and APMEA, we are seeing some softness. Our guidance bakes in some of these puts and takes.
What is your expectation on the wage hike impact on margins because that is one commentary that we are getting to hear from all the IT majors. What is Wipro’s planning on the same in terms of the wage hike and what is the expected quantum?
Aparna Iyer: The wage hike that we had rolled out was effective from September 24 and we have completed it. We took two incremental months of wage impact in our Q3 earnings. We have delivered 17.5% operating margins after absorbing that incremental wage hike. There will be nothing more in terms of that to absorb in Q4, so that will not be a factor as we enter Q4.
Large deal TCV fell about 30% on a sequential basis. What caused this decline and what is the outlook now for large deals going forward?
Aparna Iyer: I will perhaps go and then maybe Srini you can add. Large deals typically seem to have a volatility. They do lump up and are not entirely in control because the client decision cycles could stretch longer. The pipeline for large deals continues to be robust. We had a very strong first half in terms of the large deal bookings. At a billion dollars, it is still very strong. As we look into the pipeline for Q4, it is fairly robust. So, we feel optimistic about it.
I would like to have your comments on the client budget and what kind of an environment that we are into. Can you comment on the client budget and where we expect the spends to flow?
Srini Pallia: There will be significant investment in AI which actually will help the overall transformation programmes that our clients are driving, which is a combination of AI, data, and cloud. Two, we are also seeing the discretionary spend coming back and it is again in pockets, in certain industries. Aparna talked about Capco, that is a very good example and that discretionary spend is happening in sectors like banking and financial services and that is another opportunity area that we do.
But overall, if you look at our current pipeline, a significant piece of the pipeline still continues to be on cost optimisation, which could be building efficiencies for the clients, which could be vendor consolidation and it could also be trying to reduce the cost to actually invest in transformation and change aspects of the business.The other thing I wanted to understand was the attrition levels and they continue to stand at about 15.3% versus 14.5% earlier. What levels are you now targeting for FY25?
Saurabh Govil: The attrition number for trailing 12 months has gone up marginally. However, the good news is that we are seeing a reduction in net new resignations, which basically means quarterly attrition is coming down, and we would see that very much in the coming quarters. We are fairly comfortable at this level. We have done our wage hikes ahead of time. We have done our promotion cycle. We are making sure that variable payouts are 90% plus for our employees for the last three quarters. On that basis, we feel this will be stable for us as we move forward.The other talking point with respect to the whole IT space is definitely the H-1B visa issue. Could you tell us the likely impact that you are expecting and the likely impact on the onsite and offshore mix that could be there because definitely all eyes are on the Trump inauguration and the policies thereof.
Saurabh Govil: A fairly large number of our employees in the US are locals. Around 80% of our employees would be locals there. So, we do not see this as a challenge. Also, we have enough inventory of H-1B visas and as the demand picks up, we will have enough from a supply side, so supply side will not be constrained as we are looking at demand. So, we do not see us getting impacted by the new changes on the H-1B.
Are you expecting a recovery in demand once Trump comes into power for the second term?
Srini Pallia: If you look at the commentary in the industry, the US as an economy is going to be very resilient into 2025. Two, we all have to wait and understand the new policies, if any, with the new administration coming in. Having said that, if you look at sectors that we operate in, banking and financial services, they will continue to invest in technology and Gen AI and core modernisation will accelerate that aspect.
Healthcare will continue to be on the journey of transformation, both because of the digital transformation aspect of it and also the technology advancement leveraging AI, whether to do with process improvement or in terms of efficiency. So, industry by industry, we see positivity coming in terms of the spend, but we have to wait and watch if there are significant policy changes that could impact the broader economy. But the US will continue to be resilient in our perspective.
And also, what opportunities do you see in generative AI and how is the demand shaping up for the cloud services?
Srini Pallia: So, the demand for cloud services continues. If you look at any enterprises, for them to get the best out of the AI implementation, they have to get their AI, data, and cloud end-to-end in place. So, there are a lot of conversations that we are having with the client, because if data is not right, it is very difficult for the Gen AI to actually impact a business or a process or their entire operations.
Going back to your point on the cloud, I think that continues as there are certain enterprises, certain clients of ours who have not fully moved into cloud and that aspect we continue to see that. Second, the AI and the data aspect of it continues to be an opportunity area for us and this is also driving modernisation of their core which is also another opportunity that we see.
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