WIPRO LTD(WIT)Q4 2024 法說會逐字稿

Ladies and gentlemen, good day and welcome to Wipro Limited Q4 FY '24 Earnings Conference 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. Please note that this conference is being recorded. I now hand the conference over to Mr. Dipak Bohra, Senior Vice President, Corporate Treasurer and Investor Relations. Thank you and over to you, sir.

Thank you, Yashashri. Warm welcome to our quarter four FY'24 earnings call. We will begin the call with the business highlights and overview by Mr. Srinivas Pallia, our Chief Executive Officer and Managing Director; followed by updates on financial overview by our CFO, Aparna Iyer. Afterwards, the operator will open the bridge for Q&A with our management team. In this call, we also have our CHRO, Mr. Saurabh Govil on the call. Before Srini starts, let me draw your attention to the fact that during this call we may make certain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 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 filing 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. With that, I would like to hand over the call to Srini. Thank you.

Thank you, Dipak. Good evening and good morning, everyone. Thank you for being here today. I'm honored to be here as CEO of this remarkable organization. My memories of joining Wipro in February 1992 directly from the Indian Stock Science Campus are still fresh in my mind. I have been with Wipro for over 30 years. I'm proud to say that it’s such a unique company, the way it has combined profits and purpose, a very strong global brand present in over 60 countries, leading in technology and committed to sustainability, diversity, and inclusivity. As you know, I’ve been in the CEO role for about two weeks now. Through internal and external conversations and the press reports I've read, I'm aware of the high expectations for my role. Despite my extensive experience as a business leader, stepping into the CEO role for the first time feels profound, especially when it comes to leading this iconic institution.

As I go through the many emotions of this transition, one thing stays strong, my unwavering belief in Wipro, our values, our people, our clients, and our resilience. Last year posed big challenges for the entire industry. It has affected Wipro's performance too. The economic environment is still uncertain and there might be more challenges in the short term. However, the opportunity before us is limitless. We are on the brink of a major technological shift; every client I talk to across all industries is eager to leverage AI to shape the future of their business. At Wipro, we have been gearing up for this moment; we have made substantial investments to strengthen our capabilities across the organization. We have a global and diverse team. We have made bold moves in M&A, acquiring companies like Capco and Rizing, which have boosted our consulting capabilities, and we have simplified our operating model.

The building blocks are firmly in place, and I'm committed to expanding on this even more. While I remain optimistic about the long term, it’s important to be transparent; there's still a considerable amount of work ahead of us. Our immediate priority is to accelerate growth. Before diving into the financial performance for Q4 and the full year, I want to discuss the five focus areas we will concentrate on to revitalize the company. One, accelerate large deal momentum by working closely with clients and partners. Two, strengthen relationships with large clients and partners and further invest in accounts that have the potential to grow into large accounts. Three, focus on industry-specific offerings and business solutions led by consulting and infused with AI. Four, we'll continue to build a talented scale, which is now AI-ready and able to deliver industry-specific business solutions. Finally, continue to simplify our operating model and focus on execution rigor with speed.

As you see, the core tenets of our strategy remain unchanged. What's important is how we build on these five priorities and adapt as necessary to accommodate technological shifts and market conditions. My years of experience in the markets have taught me that integrating strategy with rigorous execution yields tangible results, and that's where our focus will remain this year. Now, let me turn to our financial performance for quarter four and the financial year ending March 2024. In Q4, our IT services revenue grew sequentially by 0.1% in reported currency. If you recall last quarter, we talked about seeing green shoots in our consulting business. That traction continued in quarter four, reflected in Capco's sequential revenue growing by 6.6%, and order bookings growing by 43.6%. Now talking about order bookings in quarter four, total order bookings stood at $3.6 billion, and for the full year, it was $14.9 billion.

Coming to large deals, in Q4, we won 18 large deals against 14 large deals in the previous quarter. In TCV terms, our large deal bookings for quarter four was $1.2 billion. For financial year 2024, we recorded large deal bookings, TCV of $4.6 billion. This was a growth of 17.4% compared to the previous year. For FY’24, our revenue was $10.8 billion in reported currency. We continued to increase the percentage of revenue from our top five and top ten clients. Also, we added three more clients in the $100 million plus bracket in FY‘24. Six out of our top ten accounts grew on a sequential and year-on-year basis in quarter four. Moving on to margins, in quarter four, we saw further expansion to 16.4%. This is a 40 basis point improvement over last quarter. We closed FY‘24 with a margin of 16.1% and an expansion of 50 basis points from FY‘23. Like I said earlier, we will continue to make investments in building capabilities and strategic acquisitions.

In Q4, we took a majority share in Aggne, a leading consulting and managed services company serving the insurance and insuretech industry. This allows us to strengthen our value proposition in a fast-growing part of the insurance vertical. Expanding on our substantial investments in AI, in quarter four, we launched the Wipro Enterprise Artificial Intelligence Ready Platform with IBM. It's a new service that will allow clients to create an enterprise-level, fully integrated and customized AI environment. Let me share one example of a win in quarter four that came from an AI-powered solution tailored to our consumer business. A leading global apparel brand chose Wipro as its strategic partner to implement GenAI solutions for driving their digital transformation. This involves implementing large language models to improve search, recommendation engines, and enable hyper-personalization at scale, all done responsibly.

Before I hand it over to Aparna, let me share our guidance for Q1. We are guiding for a sequential growth of minus 1.5% to plus 0.5% in constant currency for Q1 ‘25. We expect margins to remain range bound like in the last few quarters. Here, the next few months will be crucial as we steer the company towards growth. As a passionate hiker, I deeply connect with these words from Junko Tabei, the first woman to climb Mount Everest. She said, even if it is hard, you can reach the peak if you climb step by step. Of course, I seek the trust and continued support of all of you, our clients, our associates, partners, and media as we move forward. Thank you. Let me now hand it over to Aparna to share more details on our financial performance.

Thank you, Srini. Good evening and good morning, everyone. Let me highlight our financial performance for Q4 and the full year ending March 31, 2024. On IT Services revenue for Q4, we delivered a reported currency growth of 0.1% sequentially and minus 0.3% in constant-currency terms. For the full financial year ‘24, IT Services revenue declined 3.8% year-on-year in reported currency terms and 4.4% year-on-year in constant-currency terms. Let me also provide some insights on our market unit performance. Please note that all revenue growth numbers are in constant-currency terms. In Americas 1, we continued our momentum of strong bookings in Q4. We booked eight large deals in Q4 amounting to a total contract value of $587 million. For the full year, order bookings in TCV terms in Americas 1 grew by 24.9%. Quarter four revenue for this market declined 1.8% on a sequential basis, while the full year revenues grew 0.2% year-on-year.

Our healthcare sector grew by 18% in FY’24 year-on-year. Americas 2 market unit grew 1.9% quarter-on-quarter, aided by robust performance in Capco, BFSI, high-tech, and Canada sectors. On a full-year basis, the revenue in this market declined by 6.1% year-on-year. Almost 60% of our revenues in this market come from the BFSI sector. As Srini mentioned, we are starting to see a return to stability in this sector led by Capco. In Europe, revenue decreased 0.1% sequentially in Q4 and decreased by 7% for the full year. While Germany and the UK continue to remain impacted due to the slowdown in the demand environment, we are seeing a recovery in sectors like Switzerland and Southern Europe that grew 1.7% and 1.6% in Q4. Southern Europe, as a sector, grew 14.6% year-on-year in FY ‘24. We also continue to see strong traction on the order booking side in Europe. In Q4, we won five large deals with a TCV of more than $300 million.

APMEA revenues declined 2.2% quarter-on-quarter and 4.5% for the full year. Our strategy in APMEA has been to shift towards high-value transformation projects and reduce low-margin accounts. The success of our strategy is reflected in our margin improvement of 235 basis points for the full year. In terms of IT Services operating margins, our continued focus on improving operational excellence has helped us to expand our operating margins by 40 basis points in Q4. This is after absorbing the impact of two additional months of salary increases in Q4. On a full-year basis, our margins are at 16.1%. They've improved by 50 basis points year-on-year. Our net income and EPS for the quarter increased by 5.2%. Despite being impacted by a challenging macroeconomic environment, it is encouraging to note that our EPS for the full year grew by 0.8%. The increase in EPS was after absorbing the one-time restructuring charges of INR6.8 billion during the year.

We generated cash flow of $626 million in Q4 and $2.1 billion for the full year, which is at 182.6% of our net income in Q4 and 159% of our net income on a full-year basis. This is our highest cash flow in recent years. Our gross cash as a result is at $4.9 billion and net cash was at $3.2 billion. Both have increased year-on-year, despite completing our largest buyback in July of 2023. In terms of some other important metrics, our ETR is at 24.5% for FY‘24 versus 23% in FY’23. Our hedges continue to be in line with our policy. We had about $3.1 billion of Forex derivative contracts as hedges at the end of Q4. Finally, I would like to reiterate the guidance for Q1 2025 stated by Srini: we expect our revenues from the IT Services business segment to be in the range of $2.617 billion to $2.670 billion. This translates to a sequential guidance of minus 1.5% to plus 0.5% in constant currency terms. With that, I now hand over to the operator for questions.

We'll take a first question from Moshe Katri from Wedbush Securities.

Srini, congratulations on your role.

I'm sorry, we're not able to hear you clearly.

Can you hear me now? Is that better?

Yes, please go ahead.

Perfect. Srini, congrats on your new role here. Looking at the five focus areas that you mentioned, I'm going to look maybe at three of them: large deal momentum. What needs to get done to get there? Are you talking about restructuring sales, sector-specific offerings led by consulting and AI? Are we talking about strategically using Capco given their expertise? And then, you talk about simplifying the operating model; are we planning a restructuring in terms of the various segments of the business?

Let me answer in terms of the structure and operating model. I said that we'll continue to simplify our operating model, but the focus will actually be more on execution rigor and speed. That was the key message, Moshe. Now, coming to the large deals, we want to create this large deal momentum, and one of the things that we want to do is be more proactive with our clients and our partners. The second part of your question is that we want to be very specific with the industry-focused business solutions on the cost transformation as well as the business transformation side, which is a lot more industry-focused with consulting-led and AI-infused solutions. I think that's how we want to differentiate our large deals going forward.

And then final question here, can you talk a bit about how you're planning to use Capco? I think you have a very unique asset that Wipro has not leveraged efficiently enough in the past since the transaction. So what's going to be different here under your leadership at Wipro with Capco down the road?

Consulting for us is going to be a strategic advantage, and Capco plays a significant role here, as you said, Moshe. Now, there are a couple of things we want to do with Capco. Capco for us in the context of BFSI is going to be the tip of the spear for us. We want to look at it from an end-to-end process, from consulting-led to execution. This is the entire story we want to take to our clients, and we're getting a lot of good traction as we speak. There are places where clients find it very interesting that a consulting company can execute and manage the end-to-end process for them. So we'll continue to collaborate much stronger in front of the clients, both leveraging Capco's capabilities; this is going to be a significant strategic advantage for us.

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

Srini, congratulations on your elevation. My first question is on Capco growth. You mentioned you saw both potential growth and strong bookings. I'm just trying to reconcile this with the comments that we hear about discretionary spend, especially in BFSI remains sluggish. So what explains the strength in Capco? Maybe if we can highlight certain areas where Capco is winning deals? That's my first question.

Your observation is right, Abhishek. In the last two consecutive quarters, we have had sequential growth in both order bookings and revenues. I think what we are seeing is in the BFSI sector, these are green shoots. We have seen some of the discretionary spending coming to us in the context of consulting. The second part is, wherever we are leading with Capco as a tip of the spear, we're gaining traction around the deals we're working on. There are a lot of synergy deals that we are working on together going forward. So that's an advantage we want to leverage, and that's our differentiation moving forward.

Maybe a quick follow-up on this. Given the strength here and BFSI stabilizing, I'm just wondering why this is not translating into slightly better guidance for next year. At the midpoint, we still see a decline sequentially. So what explains a slightly weaker guidance for Q1?

Just wanted to share that the overall demand environment hasn’t seen a material change. I think it’s very similar to how we saw it at the beginning of this calendar year. So the macroeconomic environment and the challenges around slower discretionary spending remain. What we've shared is that we are seeing green shoots in Capco within the set of the portfolio of clients Capco works with. We are beginning to see some stabilization. The growth that Capco has shown in quarter four is very encouraging. As for Q1, they are continuing to have stability, but this comes after a few tough quarters for Capco. So you should read it in that context, Abhishek, okay? Overall guidance visibility, of course, the green shoots in healthcare and Capco are part of it, but also the overall macroeconomic environment and the softness there are very much a part of it. So this is what we have guided based on what is visible to us now.

So maybe one quick last question. I just noticed a sharp uptick in the top client revenue this quarter. Anything to read into this? Is it one-off? What explains such a sharp increase in top line revenue?

Abhishek, you would recall sometime in Q2 that we shared in a couple of our large accounts, we had order bookings that aggregated to about $0.5 billion each, right? Now one of those clients has actually gone ahead and become our top client. So we're very pleased to share that our top client is now different from what we've had for several years. And we're very happy with the progress we've made. So that's why you're seeing the movement.

Abhishek, just to add a bit more color to that. Our large deal pipeline continues to be strong and it consists of mega deals as well. We are also well positioned to sustain and further improve our large deal and mega deal wins going forward.

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

Congratulations on your new role, Srini. Wishing you the best. My first question is about the top 10. You've observed growth not just in the top line but also in the top two to five. Your BFSI sector has demonstrated strong growth as well. When I look at healthcare, I see all the positive developments. However, it seems the segments that are underperforming are relatively smaller, such as communications and high-tech. Can you provide some insight into whether the challenges in these segments contribute to your cautious growth outlook for the next quarter? Should we anticipate growth in your largest verticals?

Maybe I will ask Aparna to give some color to that.

So, Ravi, yes, this quarter for us in terms of BFSI saw quarter-on-quarter sequential growth after at least four quarters of being very soft. Healthcare has continued to do well, and we will continue to see momentum build there. We are very happy with both our positioning, offerings, and the growth we are seeing in that sector. On manufacturing, we believe that has been soft for Wipro and there is some effort to be built. We have a good pipeline, with interesting deals in play, and we'll see how they convert. We're more hopeful about getting back to growth in these sectors in the second half. Consumer and life sciences continue to be impacted by overall spending owing to higher inflation. Therefore, it's a bit of a mixed bag. So, yes, we are seeing green shoots, and we will see early signs of stability since we’ve had two quarters where we've consistently seen not only consulting but other parts of BFSI coming around. However, it’s still early to determine if this is a definitive shift, right? So we continue to remain cautious in that space. We've shared with you an outlook that includes components of everything I've just covered.

And the utilization number at 84.8% excludes all the acquisitions, right? So how should we think about where, say, for example, Capco’s utilization might be? Should that be a margin lever if the BFSI demand comes back?

Certainly, we don't share our utilization including some of the acquired entities, that is correct. Overall utilization, even outside of the acquired entities, has shown remarkable progress over the last four to five quarters. We are very happy with our current position and hope to sustain it even as the demand picks up. At some point, we may have to invest for growth; but for now, we will try to maintain this utilization. In Capco, certainly, that is a lever. We've got an incredible asset like Srini said. We have to drive more synergy wins and enhance revenue acceleration in Capco, which should positively impact margins as well.

We have the next question from the line of Kawaljeet Saluja from Kotak.

Srini, many congratulations on your elevation to CEO role. I have three questions for you, Srini. The first one is the fact that you have been with the organization for more than three decades and have been quite a remarkable performer. You cannot say the same thing for the Wipro organization as a whole. So what is, in your view or your assessment, the reasons for Wipro's challenges and aspects of Wipro's business that require fixing?

Having been here for three decades, all I can say is that if we continue to focus on those five key priority areas that I called out just now and execute them with the speed and rigor that we need, I think we can make a difference. So to me, strategy combined with execution is what can yield the outcomes we are looking for. The second part, Kawaljeet, in the recent past as an organization, we have had high exposure to discretionary spending. Hence, we have sometimes faced softness in BFSI during those periods, which explains why you would have seen us grow a little slower.

So you basically think that there’s nothing fundamentally wrong; just those portfolio challenges are tactical, and a simple focus on execution would remedy that?

So Kawaljeet, if you look at it the way we are structured, we have the four markets, right? Each of the markets is different. They have varied responses to the macro environment we're looking at. That’s number one. Second, if we look at Wipro as a group, we have gone through significant transformation in the last few years. For a transformation of this scope, sometimes we have to make adjustments across the organization, which could lead to different perspectives. I believe my knowledge of our clients and our business—along with the connections I’ve built throughout my time here— will enable us to implement actions quickly.

The second question I have, Srini, is that your organization has witnessed a lot of churn among senior executives. What measures will you put in place to reduce the churn levels?

Kawal, I must tell you that over the last two weeks, since Srini has taken over, there's been notable enthusiasm among employees who see someone who started his career in the company reaching the top. So I believe if growth returns, opportunities for people to grow will follow. They are witnessing people rising through the ranks, and we have had examples like Aparna, who also began her career here. So that's the key aspect. Having said that, as Srini stated, our structures and strategy are not changing. Leadership will evolve, and there may be some movement, but there's no major disruption in our operations. So I don't foresee significant challenges moving forward.

We want to develop talent internally and maintain a strong pipeline of leaders for the future. That’s another focus area for us moving forward.

The final question I have for you, Srini, is that I remember some time in 2020 you had a magic wand; you struck very lucrative mega deals in the retail vertical. However, the organization has been silent on mega deals since. Has the muscle memory weakened on the mega deals, or is there good news around the corner?

I think the way we have structured ourselves in pursuing large deals and mega deals is not only in how you go after a deal, but how do you originate a deal, how do you shape the deal—an entire process around that. That becomes very critical for us. What I would like to do is have the sales team across the markets and industries create a proactive pipeline because that's crucial for us; working closely with the client and partner on deal pursuits significantly increases our winning probability. What we want to do is stay focused on those proactive deals as we move forward. Also, if you look at earlier, we mentioned in Q2 that we had won close to $0.5 billion deals in two of our large accounts. One of these accounts has now become one of the largest clients for Wipro. So we've seen that momentum occur as well.

Srini, can you elaborate further? Also, keeping the Capco brand as it is a strategic business. But what's more important is looking at Capco or any of our consulting business units as the tip of the iceberg for us. When approaching a client, we need to present ourselves as one Wipro in how we develop solutions. The relationships that Capco has with CXOs are crucial for the rest of Wipro to leverage. Therefore, we will concentrate on joint positioning and construct disciplined sales campaigns that can yield the best for Wipro within that segment.

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

Many congratulations, Srini, on your new role. My first question is again regarding your success in mega deals. When evaluating your overall internal mega deal participation, where do you think improvements are needed? Is it more about your participation, or is it more about your win rates? I’m trying to grasp what changes need to be made to consistently secure mega deals.

Gaurav, if you could just repeat the question—I lost you for a moment, sorry.

Yes. My question is regarding your mega deal success. I want to understand whether improving participation or win rates requires addressing your approach. What needs to be revised to deliver mega deals consistently?

I got your question. Absolutely, both areas need improvement. It’s essential for us to proactively engage with the market, both with our clients and partners as well as influencers, to source these deals and then shape them within specific industries. Finding a solution that meets the business objectives of clients is critical as well. It’s a combination of both that will enhance our win ratio moving forward. I’ve noticed that whenever we collaborate effectively with clients ahead of the curve, our probability of winning significantly improves. Our aim is to be more consistent and repetitive across all markets and industries.

My second question relates to Capco. Can you elaborate on what nature of deals are coming through? Is it broad-based across numerous clients, or is it concentrated among a few? Is it focused primarily on tip-of-the-spear engagements? Does it also involve some downstream work? This will help us gauge the sustainability of this trend?

Absolutely, Gaurav. We have two prospect sets with Capco. One is Capco executing its consulting work independently, which typically involves different buyers within the organization. The primary focus, however, is the synergy deals where Capco serves as the tip of the spear, enabling us to secure downstream business. This is where we can successfully win more large deals and mega deals. By leveraging Capco, we can shape the deal with a sharper focus on specific customer processes and business challenges, allowing us to achieve substantial downstream revenue, whether through cost transformation or business transformation.

Regarding the recent success you've seen over the last two quarters, is it driven more by synergy deals or by Capco's independent work?

It's both, Gaurav. Our growth is being driven by an upward trend across Capco's service offerings and geographies; it's quite broad-based. At the same time, we are winning significant synergy deals, and collaboration has improved over the past four quarters, given the current macroeconomic climate, making deals harder to secure. We've developed a much stronger muscle on synergy, and both strategies are currently in play.

Last question from me: Aparna, how do we view net income conversion into operating cash flow on a sustainable basis? While Wipro had an excellent year, what should be the right expectations moving forward?

Historically, we've consistently generated free cash flow as a percentage of net income of between 85% to 110%. That’s a solid number to target. FY’24 was indeed a fantastic year for us, and we will continue to work on all fronts.

We have the next question from the line of Kumar Rakesh from BNP Paribas.

My first question was about large deal acceleration. While I understand that mega deals haven't been around much, large deal performance has been quite consistent over the last two years. From a previous average of about $600 million, you're consistently achieving about $1.1 billion in quarterly large deals, yet this hasn’t translated into stronger growth. When discussing large deal acceleration, what does that mean to you? How should that translate into growth?

A couple of things. When I say large deal acceleration, it involves establishing a significantly more robust pipeline of deals. My goal is for us to proactively seek these large deal opportunities. This means shaping the deal before it’s publicly available, which is indeed possible with many of our large clients, thanks to our strong relationships. That's the first step. The second is increasing both the size and frequency of these deals could provide us with momentum going forward. To convert large deal bookings into revenue, maybe I'll ask Aparna to comment.

Rakesh, this is something we’re facing as well. While we continue securing these deals and replenishing the pipeline, a discretionary spend environment impacts our revenue performance. We are observing ramp downs in existing projects that aren't being replenished at the same pace. This negatively affects the conversion from bookings to revenue. Additionally, while momentum in larger deals remains strong, there has been a noticeable slowdown in the buoyancy of smaller deals, particularly in recent quarters.

My second question revolves around the number of clients with revenues less than $1 million. For the past few quarters, we have been pruning smaller accounts, yet the number has increased sequentially this quarter. Is this a one-off event, or has there been a strategic shift in how we approach smaller accounts?

There’s no change in strategy, Rakesh. We continue to focus on some niches while pivoting towards profitable growth. We will keep targeting regions where we can excel. As I mentioned, in APMEA, we executed this strategy effectively. What you see on a quarterly basis can vary, showcasing volatility. However, let me assure you, there has been no fundamental alteration in strategy. We remain committed to profitable growth.

Rakesh, I would like to emphasize that while it's not just about the number of accounts, the quality of accounts is critical going forward. Secondly, we continue to add accounts in the $100 million-plus segment. In fact, we added three clients to that particular category. That's a key metric we want to keep following.

We have the next question from the line of Yogesh Aggarwal from HSBC Securities and Capital Markets.

Srini, first of all, congratulations on your promotion. I have a couple of questions. Firstly, regarding the structure: a few years back under theory, Wipro moved to a geographic structure that was unique compared to other companies. Are you considering a return to a vertical structure? Please share your thoughts on this.

The four strategic market units and the four GBL structure we have will continue. I do not plan any changes, Yogesh.

The second question, Srini: your headcount continues to decline, down about 10%, alongside an 87% utilization rate. This makes me wonder whether you're anticipating an imminent pickup in growth, as this seems like considerable operational tightening.

Yogesh, Saurabh here. The reduction in headcount was driven by operational efficiency. As you can see, our utilization reached an all-time high in Q4. We are confident about our supply side; as demand improves, we can ramp up easily. So I don’t see that as a challenge. We’ve learned that we perhaps over-hired after COVID, and now we are being more cautious and judicious. When demand returns, we don’t foresee any issues.

The next question is from the line of Sudheer Guntupalli from Kotak Mahindra AMC.

Congratulations and best wishes on your new journey, Srini. Given that the organization underwent substantial changes over the last few years, there might be some change fatigue among employees. Do you view that change fatigue as a possible bottleneck for implementing incremental changes needed to turn around the growth path? Or might it delay that growth turnaround?

The advantage I have is I've been through this transformational journey over the last four years. In my mind, we don’t need structural changes; the four SMUs and four GBLs are well-positioned. Instead, we must adjust our strategic priorities to meet market dynamics and the evolving technology landscape. What we need is greater execution rigor in the markets, sectors, and accounts we identify as both large and prospective large accounts. I believe if we execute well, using our best solutions in a consulting-led, AI-infused manner, we can distinguish ourselves and make a difference for our clients.

The second question is directed at Aparna regarding Capco. With such strong growth, one would have expected a slightly higher company-level margin expansion given that this is a heavy on-site, fixed-cost business. Should we assume that operating leverage will likely come with a lag?

Yes, Sudheer. Capco had the advantage of a seasonally favorable Q3. The bounce back in Q4 and the growth rates we’re discussing in that context were influenced by this base effect. Two, as stability returns, we’ll experience operating leverage, but for now, we’re just observing. We’ve been cautious in sharing Capco's performance metrics for the past two quarters, but we are encouraged and will continue monitoring—it's too soon to determine a definitive trend. Operating leverage should unfold with a lag.

The next question is from the line of Sandeep Shah from Equirus Securities.

Srini, congratulations and best wishes. My question is related to a point raised by a previous participant. Many of your earlier colleagues in our CEO role highlighted the focus on execution rigor, but it hasn’t consistently improved Wipro's organic growth rates. What, in your experience, do you believe is going wrong regarding execution rigour? Is it delivery, sales, client mining, or hunting, and where is the weakness pronounced? How do you plan to address this?

What I'm doing right now is based on my experiences over the years, assessing all the areas across markets: what's working, what's not—whether it’s large deals, account growth, or sector-specific solutions and approaches. While I have mentioned priorities, we need to translate them into execution rigor. Your observation is valid; with the right strategy, accounts, and target sectors, we need to endure over time because many of these won deals will take time to show results. Hence, we must maintain consistency and perseverance in pursuing deals and growing accounts.

To define a performance KPI associated with your targets and strategy execution, what might it be, and what's the timeline for that?

I don’t have a specific timeline as my new role is only two weeks old. Let me evaluate our current situation and what's needed; my focus will be on executing our priorities effectively.

Lastly, on capital allocation: Wipro has excelled at free cash flow generation. The outgoing CEO has emphasized pursuing bold M&A, where capital allocation contributed to sizable acquisitions. Do you agree with this approach? Your comments at the press conference regarding a commitment to M&A were noted. When you mention bold M&A, do you mean acquisitions for capabilities that aren’t necessarily big? Or do you believe there is still appetite to pursue M&As similar to Capco and Rizing?

From an M&A standpoint, I’ll begin and then turn over to Srini. We will continue to strategize on M&A and will be selective in our targets. We’ll invest in areas related to newer technologies and access to markets and clients. The focus and strategy for M&A, including our selection process, remains. In terms of M&A size, it’s hard to define. We tend to favor tuck-ins, as they help stabilize the business in difficult environments, but we’re flexible about what aligns best with our strategy. On capital allocation, our policy remains unchanged; we are committed to returning 45% to 55% of our net income over a cumulative three-year period.

I believe you captured it well.

Yes, go ahead, Sandeep.

Aparna, one final question regarding margins. We have performed well in this challenging environment; however, if I examine utilization, offshore revenue mix, and fixed-price contribution, most have peaked. Therefore, is it fair to assume that further considerable margin improvement is contingent upon growth? If growth doesn't pick up, should we expect to sustain around the 16% margin level?

As we've indicated, we are committed to maintaining a narrow margin corridor similar to what we delivered in the last few quarters. You're correct that utilization has improved significantly. Our margins have benefitted from that, and we are pleased with the results. Sustaining this will be key moving forward. We have various levers at our disposal, including offshoring, internal fulfillment, and optimizing G&A costs, especially through synergies we can generate from integrating acquired entities. Additionally, FPP productivity is a key lever. We are all focused on it, and AI presents potentially numerous opportunities for us. We will leverage as many avenues as possible.

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.

Thank you, Yashashri. 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 the Investor Relations team. Thank you so much again and have a nice evening.

Thank you, members of the management team. On behalf of Wipro Limited, that concludes this conference. Thank you for joining us, and you may now disconnect your lines.