Wipro Ltd

NSE:WIPRO

Earnings Call Transcript 2023-Q4

[Operator]

Ladies and gentlemen, good day and welcome to the Wipro Limited Q4 FY 2023 Earnings Call. As a reminder, all participants 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 Kumar Bohra, Senior Vice President, Corporate Treasurer and Investor Relations. Thank you, and over to you, sir.

[Deepak Kumar Bohra]

Thank you, Yashashri. Warm welcome to our quarter four FY 2023 earnings call. We will begin the call with the business highlights and overview by Thierry Delaporte, our Chief Executive Officer and Managing Director; followed by a financial overview by our CFO, Jatin Dalal. Afterwards, the operator will open the bridge for Q&A with our management team.

Before Thierry starts, let me draw your attention with 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.

Thank you. Over to you, Thierry.

[Thierry Delaporte, Managing Director & Chief Executive Officer]

Deepak, thank you. Hello, everyone. Thank you for joining our quarterly earnings call. Joining me from Bangalore today is our CFO, Jatin; our Chief Growth Officer, Stephanie; our Chief Human Resource Officer, Saurabh; and our Chief Operating Officer, Amit.

So, on this call, I want to share with you the details of our annual results as well as our fourth quarter performance. We share highlights of our sectors, markets, service offerings, and an overview of the demand environment. And finally, our business outlook for the quarters ahead. Of course, happy to also take on any questions you have for us.

Starting on FY 2023. We closed with the strongest ever bookings recorded in a year. Our bookings in total contract value terms, grew over 28% year-on-year. We finished the year with two consecutive quarter of total bookings of over $4.1 billion each. Our revenues, they grew 11.5% year-on-year in constant currency terms, putting our full year revenue at $11.2 billion.

Our operating margin for the year was 15.7%. The cash conversion was at 115% of net income versus 91% in the previous year. Our transformation journey continued in FY 2023. We made several strategic investments and acquisitions, and we've added new capabilities.

Whether it is our account strategy, the large deal approach or our sector and market mix, there's a clear and obvious difference between the Wipro pre-2020 and the Wipro of today. Our top accounts are bigger in size. We have a more diversified pipeline and we continue to make bold investments in talent to support our future growth.

Now coming to Wipro's performance in the fourth quarter. Total bookings for the quarter were US$4.1 billion. In total contract value terms, quarterly bookings grew by 47% year-on-year in the Americas on strategic market unit, and by up 33% year-on-year in Europe. The revenue for the fourth quarter was up by 6.5% year-on-year in constant currency terms. Sequentially, revenue declined by 0.6%. This is mainly due to the uncertainty in the market and the resulting slowdown in discretionary spending.

Our operating margin for the quarter was 16.3%. That is 60 basis points higher than the full year margin of 15.7%. Our IT services profit was highest ever in absolute terms. Our CEO team under Amit's leadership has brought in new rigor to the way we approach operations, where we enhance delivery, drive client experience and efficiencies. And we are already seeing the impact of utilization rates improved to 81.7% in Q4 from 79.7% in the previous quarter.

Looking at earnings per share. EPS is expanded for the third consecutive quarter. We reported EPS of INR 5.61 for the quarter.

Now turning to our sectorial performance. All four of our strategic market units recorded over 10% revenue growth for the full year in FY 2023. In Americas one, revenue grew 6% in Q4 and 13% for the full year in FY 2023. There growth was led by health care and medical devices at 10%, followed by Consumer Goods and Life Sciences at 8%. Americas two market grew 4% year-on-year in Q4 and 10% for the full year as well.

Energy & Utility revenues grew 8% during the quarter; securities, capital markets and insurance grew 7% during the quarter. But we are seeing some softness in the banking and financial services space, no doubt, and in consulting due to the current macro environment. The bookings in terms of our total contract value grew 27% in Q4. These are all year-on-year comparison figures, of course.

Third market, our Europe market, delivered a year-on-year revenue growth of 9% in Q4, 12% for the full year. Growth in Europe was led by Southern Europe and Germany, which grew over 30% and 20% in Q4, respectively.

Finally, revenues for the APMEA market unit grew at 8% year-on-year in Q4 and 10% for the full year. There, Southeast Asia grew about 25% year-on-year and Middle East is growing in double digits as well. For the full year, bookings in TCV terms are looking healthy with 20% year-on-year growth.

We also have ambitious growth plan for India. In fact, you should know that we have significantly improved our quality of revenue in our step enterprise segment over the last couple of years. With that, we have decided to merge that segment with our IT Services segment starting Q1 2024.

Now let's look at the performance from the service offering standpoint. Our ideas, global business line grew 7% year-on-year in Q4 and 14% for the full year. Most of the service lines showed a healthy year-on-year revenue growth led by cloud transformation, which grew 22% year-on-year and Applications and Data grew 18% year-on-year.

Our iCORE global business line grew by 6% year-on-year in Q4 and 8% in the year of 2023 -- fiscal year 2023 Digital operations and platform led but the growth was 7% year-on-year for the quarter. Against a weakening macro environment, our results underscore the efficiency and the effectiveness of our transformation and growth strategy and how far we've come in just under three years.

We are not only winning at a higher rate in the market, but the nature of the deals we are winning is changing. Today, we have 19 $100 million accounts compared to 11 in fiscal year 2021. We are winning large transformation deals benefiting from the consolidation in the marketplace and expanding our relationships with existing clients.

As an example, we expanded our long-term relationship with a multinational insurance company through a strategic transformation initiative, the growth-oriented initiative will enhance customer experience, simplify and digitize operations and lower the cost to serve as part of a 10-year partnership.

In another example, Wipro was selected by a leading global professional staffing services provider to help them transform into a shared services product platform operating model. The new operating model will help accelerate the simplification of technology, applications, infrastructure and risk management. Here, again, leveraging cloud as a key enabler for business scalability and agility.

In many of these deals, we are bringing one Wipro capabilities together in brand new and innovative ways, including introducing a product platform mindset and combining experience platforms and operations to drive business outcomes. Further, as market conditions soften, we are deploying advanced technologies to help clients better manage cost and anticipated risks.

We are building resiliency here and efficiency for our clients' businesses. For example, we've been selected by a leading North American financial institutions, as a strategic partner for their Data as a Service platform to accelerate their cloud migration, we will leverage our data analytics and artificial intelligence accelerators to expedite this journey and bring cost benefits.

Our partnership strategy is yielding good results. As we continue to build capabilities jointly with our strategic partners and drive large complex deals. The share of partner bookings as a percentage of our total bookings rose from 25% in FY 2020 to 44% in FY 2023. We believe our new organizational model of Four strategic market units and four global business lines will further improve our market position.

Organizing around our strategy, priority areas, cloud, enterprise technology, engineering, consulting will give us the agility to adapt to changing market conditions, but also innovate even faster. One, Wipros FullStride Cloud is a significant growth driver for us, no doubt. Now, as a dedicated global business, it will accelerate growth, innovate with partners and clients and deliver on the promise of cloud via differentiated futuristic capabilities.

Our new enterprise suturing global business line will combine our enterprise technology platforms and enable digital operations and security. By leveraging data and artificial intelligence, as well as immersive technologies, this GBL will build a distinctly forward-looking view into our clients' operational and technology needs.

Let me now turn to our most important asset, our people. In a highly dynamic business and technology environment, building the right skills across our organization is more important than ever. Over the past year, we've trained over 50,000 employees in demand-driven skills. Next-Gen Associates, formerly call Freshers, continue to be a critical part of our talent strategy. The remaining of this group of colleagues is actually a reflection of their value to our business and of our commitment to their success.

We hired over 22,000 next-gen associates in FY '23. Here again the highest ever in our history. Our talent transformation efforts are yielding results. In Q4, we were recognized by top employers Institute as 2023 top employer in 11 countries, actually even securing a top three ranking in five of those countries. Finally, our attrition rates have been steadily declining throughout FY '23. We ended the quarter with 14.1% attrition.

Now looking ahead, the macro environment continues to be challenging. Our clients, our industry and many sectors are impacted by the prolonged uncertainty in this economic environment. These headwinds are impacting our business and projections as well. For the next quarter, we are giving a sequential guidance of minus 3% to minus 1% in constant currency. On margins, we expect to be in the similar range that we delivered in recent quarters.

So to summarize FY '23, we closed the year with the strongest ever bookings recorded in the year. Our revenues grew 11.5% year-on-year in constant currency terms, taking our full year revenue to $11.2 billion. Finally, our IT services operating profit is the highest ever at US$ 1.7 billion for the year. By most accounts, we've closed our fiscal year at a significantly improved place than where we began. We're getting stronger operationally, taking a more futuristic approach to our solutions. We have the growth mindset and the right organizational structure and talent, giving us the resiliency for long-term success.

With that, let me turn it over to Jatin for his comments. Thank you.

[Jatin Dalal, Chief Financial Officer]

Thank you, Thierry. Good evening, good morning. Thank you all for joining this call. Let me start with the revenue growth for 2023, we grew 11.5% in constant currency terms. Our operating profit, as Thierry mentioned, was highest at $1.7 billion, and that was a growth of 1.2% year-on-year.

In quarter four, our net profit was INR30.7 billion, which was 0.7% sequentially. We continue to have a very strong cash conversion. For FY 2023, we converted operating cash flows were at 115% of our net income.

We exited the year with $4.9 billion of cash gross of debt and $3.1 billion net of debt. As we exited the year, we had $3.8 billion of ForEx hedges, and in quarter four, the realization rate was $81.63.

I'll quickly talk about buyback details. As we have shared in our press release, the buyback quantum is INR12,000 crores, including taxes, approximately INR14,800 million, which translates to US$1.8 billion. Buyback price has been set at $4.45, and this is subject to the shareholder approval that we will duly undertake.

As Thierry mentioned, we have also brought IS segment as part of the IT Services segment. And our guidance for quarter one includes ISRE, both in the base for quarter four and the growth that, which we are projecting. The performance of quarter four was excluding ISRE, the guidance was given as such, and we have delivered within the guidance range, excluding ISRE in quarter four.

With that, we are happy to take your questions.

[Operator]

Thank you very much. We will now begin the question-and-answer session. [Operator Instructions] We have a first question from the line of Sudheer Guntupalli from Kotak Mahindra Asset Management. Please go ahead.

[Sudheer Guntupalli, Kotak Mahindra Asset Management]

Yeah. Good evening, everyone. Jatin, firstly, on the guidance of minus 3% to minus 1% in constant currency. So what are the underlying assumptions here between the growth rates of our consulting book of business and the services to business. I know maybe a little difficult to apportion it very precisely. But broadly, if you can give some indication as to what is the decline you are expecting in consulting and except that, let's say, what is the rate you are expecting in services?

[Jatin Dalal, Chief Financial Officer]

Yeah. So Sudheer, as you know, we don't – we will not be able to break this down between consulting and risk of the business. But I would request Thierry to give us color on overall business.

[Thierry Delaporte, Managing Director & Chief Executive Officer]

Absolutely. So Sudheer, so let's look at different elements. First is -- one is the performance in bookings. What do we learn when we look at what we've done in Q4 or Q3, two very strong quarter of bookings, among the highest one, actually highest on large deals, very strong performance, significant growth, 27% growth year-on-year. So this is clearly showing that we continue to see opportunity in the business that we win and that we are growing our backlog for the quarters to come.

Second is -- no doubt that there is -- if we look at some sector trends, there are sectors that have seen a little bit more of headwinds are seeing some more macro uncertainties. Banking and insurance, technology are sectors where we have seen slow down or cut in discretionary spend over the last weeks. But fundamentally, we remain positive, given the volume of business that we are delivering.

We are possibly waiting for the uncertainty to clear. But the current guidance we are showing for the quarter reflects really the view. On one side, other sectors where there's growth, those sectors where discretionary spend is being cut and the performance on bookings.

From -- you asked questions about consulting. So I will say the following: Yes, we have increased the percentage of our revenue coming from the consulting business over the last years. We've done it for strategic reasons. The strategic reasoning behind these decisions hasn't changed. And indeed, the acquisitions we have made have absolutely allowed us to have -- to transform to change the game in our interaction with clients in those fields, whether it is in the security space, the SAP space or in financial services.

And by the way, all these acquisitions in the consulting space have delivered performance that we're ahead of the plan, built at the time of the acquisition. Having said that, and I think it's in line with what we said a quarter ago. We know that those business are early cycle. And typically, feeling first, a reduction in discretionary spend, but also the ones bouncing back the fastest. And that's in line with this prediction last -- if we are looking at the performance of this business as compared to the market, the consulting market, I think those businesses are holding pretty well as well. So that's -- that's what -- that's the color I would give you on our guidance for Q1.

[Sudheer Guntupalli, Kotak Mahindra Asset Management]

Yes. Thanks. Thanks very, sorry for that. And just one follow-up, if I may. So there is this question in the last quarter also as to why the strength in deal bookings is not necessarily converting into revenue and forward-looking outlook. So does that also have to do with the fact that, let's say, some of this consulting book of business is where -- which is more discretionary in nature, it's where we are seeing a bigger pain, especially in the current macro backdrop? And then given the geographies that some of these entities are operating in?

[Thierry Delaporte, Managing Director & Chief Executive Officer]

What is clear, Sudheer, is that we are – I don't -- we don't have any client situation, any one event, any cancellation, any loss of client, delivery issue or anything that would have played in this projection. So this is not that. It's really that on one side, you have the intense activity of the sales team, driving wins and allowing us to obviously expand our position in those accounts. And on the other side, you have decisions a very short term of the time from clients to cut discretionary spend, because we know that this is what they're doing in time of uncertainty. And so that's what we're observing. But -- so on the one hand, we see the consequence of that indeed leading to the guidance we show for Q1, but also gives us quite good confidence in our ability to rapidly bounce back in the following months.

[Sudheer Guntupalli, Kotak Mahindra Asset Management]

Thank you very much for the very impactful comments and all the best.

[Thierry Delaporte, Managing Director & Chief Executive Officer]

Thank you.

[Operator]

Thank you. We have a next question from the line of Sandeep Shah from Equirus Securities. Please go ahead.

[Sandeep Shah, Equirus Securities]

Yeah. Thanks for the opportunity. The question is a follow-up to what Sudhir. I fair to understand why such a low correlation of a high book-to-bill ratio, which we have in December 2022 at 1.5x March 22 at 1.5x. So is it fair to say that the discretionary portfolio or project-based portfolio in the book has increased so materially that it is not helping us to convert the on delineate growth as of this because Q3 was disappointing. Q4 was disappointing Q1 guidance is disappointing. While the order book in all these three areas have been really fast

[Thierry Delaporte, Managing Director & Chief Executive Officer]

Yes. So Sandeep, thanks for your question. I will try and articulate this. There are clearly two engines or two legs to our revenue performance. The first is the new deals and the large deals that we sign every quarter. And as we have shared, that growth has been very robust. That growth has been for FY 2023 across geographies. The largest was upwards of 30%, but even the smaller of the three was 27%. So across geographies, the growth has been very robust. And -- the deals that we have won is converted into converting into revenues. But the second end of our growth is also a lot of discretionary work, which continues to happen in project extension mode from our customers in an ongoing manner.

And as we articulated, there is a pause in some of the discretionary work. This discretionary pause is around reprioritization of where the customers want to spend their money in a changing macroeconomic backdrop, which is quite I would say, which is quite common in our industry, and that is having an impact for us in quarter one, and that's sort of a quarter of adjustment that we see. And that's what it is. I would argue that, in fact, the deal wins that we have had in the last two quarters, in fact, increases our ability to withstand some of these volatilities, which has been coming through the discretionary side. And our focus will remain to continue to push whatever we can do to improve our deal win trajectory. Lastly, if I see the backlog that we are carrying, is definitely reflective of the success in the deal wins that we have had in the last few quarters.

[Sandeep Shah, Equirus Securities]

So Jatin, is it fair to say, 1Q would be the last quarter, or you believe it all depends about how macro shapes up. And if macro concerns continues to remain muted post 1Q. This phenomenon may continue where pause on discretionary will keep impacting us despite we are firing on the LDC numbers.

[Jatin Dalal, Chief Financial Officer]

Yeah. So, Sandeep, the fact remains that the macro remains reasonable. As all of us know, it is not in a very adverse scenario. Especially in U.S., you see that the employment rate continues to be good. Inflation continues to come down. There is a reasonable growth assumption for 2023 and 2024.

The interest rates have potentially picked. It may go a little more up, but there's certainly not another three percentage point increase that we are seeing on the horizon. So macro environment remains reasonable.

Now what has happened in previous quarter is that there have been certain events, which has led to a greater cautiousness in client spending than what it was existing before beginning of quarter four and we have to see, how does this situation pan out for next couple of quarters?

If there is no more situation of an adverse nature, I think the growth could come back. If there is something else, it could get cost. So right now, I would say it would be too early to call that Q1 would be the last quarter. Like you, we will also watch what happens very close.

[Sandeep Shah, Equirus Securities]

And just the last question, in the opening remarks, Delaporte has said that we would like to continue current margins in a range going forward. So is it the commentary for 1Q or for the whole of FY 2024?

And don't you expect that current level of margin is still lower on a Y-o-Y basis. So there could be more upside potential on a Q-on-Q basis on margins, or that is too optimistic to assume looking at the soft growth year in FY 2024.

[Jatin Dalal, Chief Financial Officer]

So Sandeep, you are right, it is revenue volatility, which is also importance right now. And given the current revenue volatility, we have said we'll keep it around the ranges that we have seen in previous few quarters, and that would be our endeavor. But our focus would be to get back to a growth momentum as early as we can.

[Sandeep Shah, Equirus Securities]

Okay. Thanks and all the best.

[Operator]

Thank you. We have a next question from the line of Mukul Garg from Motilal Oswal Financial Services. Please go ahead.

[Mukul Garg, Motilal Oswal Financial Services]

Yeah. Hi. I hope I'm audible?

[Operator]

Yes, sir, please go ahead.

[Mukul Garg, Motilal Oswal Financial Services]

Thank you. Jatin, I just wanted to briefly understand, has there been any change in thought process in terms of how much cash on book U.S. will be holding. The buyback quantum has been quite substantial. And you guys, if I look at how much cash you will probably be left with, including incremental cash, which will be generated.

It will be a bit lower than the employee expenses you guys incur on a quarterly basis while this used to be one of the, defense maybe a few years ago and might not be really valid. But with this kind of the buyback how the overall thought process is over the next few years in terms of either business investments or inorganic acquisitions?

[Jatin Dalal, Chief Financial Officer]

Yes. So, Mukul, as you rightly called out, we will -- by the time we complete this buyback, we will still have $1.5 billion of cash net of debt on the balance sheet. Also, as you know, we continue to generate healthy cash flows every quarter, anywhere between $300 million to $350 million. So we will continue to generate cash even as we go.

The reason the buyback is at a particular size, is to make sure that we align with our payout strategy that we have articulated, which is 45% to 50%. We are broadly aligned with that number. Also the fact that, we are doing it at an interval of roughly two years and one quarter and that the fact that buyback is lumpy by design, and you can't have it at a frequent intervals, we felt this was the right size to go for.

[Mukul Garg, Motilal Oswal Financial Services]

Right. So then just to again clarify on this. Whether you don't think that the thought process about holding a certain amount of cash on books, to either take care of expenses or inorganic investments is something which is not valid in this environment.

And I'm just also trying to understand, given that the macro environment is relatively tougher, this also would imply that down the line you're immediately to kind of go with a similar sort of cash return to shareholders will also be impeded. So how should we think about this, the capital allocation from next year onwards?

[Jatin Dalal, Chief Financial Officer]

So our strategy for capital allocation remains what we have articulated, which is 45% to 50% of our net income over a block of three years, and we feel we will be comfortable with that. We, of course, have evaluated the cash position at the end of this buyback and the need for us, either for expenses or for inorganic opportunity, which could come in our way. I think we would be well covered with the capacity that we would have. And again, I would just reiterate saying, this is lumpy, and I can't have it at a frequent intervals. And hence, we have gone for the size that we have gone for.

[Mukul Garg, Motilal Oswal Financial Services]

Understood. One question for Thierry. And again, Thierry, on the consulting side. While the business obviously will rebound once the demand picks up. In the meanwhile, is there some portion of that business, which is relatively more resilient in nature, or do you think if demand environment remains weak, you can see continued moderation in the consulting revenues over the next maybe one or two quarters.

[Thierry Delaporte, Managing Director & Chief Executive Officer]

I think the -- we're observing the evolution of the consulting business. There's a lot of activity on the consulting side for deals around -- transformational deal, cost optimization deals where -- than where we are building business case and so on for clients. I think, there's quite a bit of activity.

We are seeing also a very significant demand in some area. I mentioned security in SAP, for example, where we've made an acquisition with Rizing few months ago. We have a very significant demand and the business continues to be good.

In some sectors, in particular, banking, financial services and technology, there's a more -- there's more slowdown coming from reduction of discretionary spend.

To your point, we consider that this is temporary and that will -- it will bounce back rapidly because in most of my interaction with our clients, it become more and more evident that they have a lot of programs that they still want to drive. They've been able to postpone or wait a little bit while to better understand the evolution of the macro environment, but there's also some pricing needs from the market -- and from the business, sorry. So I think it's -- we should see a rebound.

[Mukul Garg, Motilal Oswal Financial Services]

Sure. Thanks all the clarification. Thank you.

[Thierry Delaporte, Managing Director & Chief Executive Officer]

You’re welcome.

[Operator]

Thank you. We have our next question from the line of Surendra Goyal from Citigroup. Please go ahead.

[Surendra Goyal, Citigroup]

Yes. Thanks. Good evening, everyone. So just wanted some insights on how the Jan, Feb, March quarter progressed? Did it get worse towards the end of the quarter, which prompted you to have unusually low first quarter guidance. And also, any vertical investments within the broad comment? Any insights would really be appreciated.

[Thierry Delaporte, Managing Director & Chief Executive Officer]

So on the first question, Surendra, the -- no. I don't think we can say that it's gotten any worse in the quarter. We believe that it's it’s the opposite. And so that's for the trend. Frankly, clear that it certainly did not get worse towards the end of the quarter. Sector-wise, I mentioned them, right? This is financial services market. This is technology market. Actually, two markets where technology is key, where investments are required, where there's always been demand and where, I would say, talent is always in need. So to balance with the temporary slowdown on discretionary spend again.

[Surendra Goyal, Citigroup]

These things were stable to getting better than how do we reconcile the unusually low first quarter guidance? Because again, just to kind of maybe put it in context, the two businesses, which you have added on the discretionary side, my sense is that there wouldn't be more than 10%, 12% of revenues. So are we saying that those businesses are all totally falling 15%, 20% sequentially. Is that what it is? And again, I know you can't share numbers, but any thoughts would be appreciated.

[Jatin Dalal, Chief Financial Officer]

So, Surendra the -- there is always the lag of intimation versus revenue reduction in our business. So while you continue to get integration through the quarter, but the impact really flows through as quarter comes to an end and you are seeing it now more profoundly, I would say, than what you saw in quarter four. Because it's not that overnight, you see a reduction in revenue. You get an intimation about 4 and after 15 or 21 days, two to three weeks is when you see the actual effect of the pools.

[Surendra Goyal, Citigroup]

And Jatin, since I have you, could you just share some color on what percentage of your portfolio in the fourth quarter would be consulting oriented that you would have added in the last couple of years? And the reason I ask that is that part of the portfolio would obviously have seen some pressure over the past few quarters. Again, broad thoughts, I know you won't share the number, but any broad thought.

[Thierry Delaporte, Managing Director & Chief Executive Officer]

Yes. Surendra, I don't think you should draw any conclusion that the discretionary spend are coming from consulting only. I don't think it's the case at all. Again, as I was saying, there are some areas of consulting where we are growing really well. There's demand in -- I can tell you there is a real nice growth in the security space, for example. So there's nice growth in consulting SAP business we acquired and so on. So this is not -- and even in financial services, we have areas where we are growing well. And so their discretionary spend also across the organization. It's the reality.

[Surendra Goyal, Citigroup]

Got it. Got it clearly. Thanks Thierry and Jatin, very helpful.

[Thierry Delaporte, Managing Director & Chief Executive Officer]

You're welcome.

[Operator]

Thank you. We have a next question from the line of Manik Taneja from Axis Capital. Please go ahead.

[Manik Taneja, Axis Capital]

Hi. Thank you for the opportunity. My question was an extension to what, Suren just asked. Unlike some other peers, we have seen some weakness in our revenue growth from Europe. So is that largely a function of the consulting piece, or is there something else or something else as well?

[Thierry Delaporte, Managing Director & Chief Executive Officer]

No. So Manik, the answer is no. In fact, our -- first, our Europe business is actually holding pretty well, okay? So we've done a solid quarter. There's good business going on. Again, I would be a little more cautious on the BFSI side, because most of the sectors are holding well. If we look at the deals we've closed in Q4, very solid performance from our European business as well. So no, don't draw any conclusion between consulting business and performance in growth.

[Manik Taneja, Axis Capital]

Sure. Thank you and all the best for future.

[Thierry Delaporte, Managing Director & Chief Executive Officer]

Thank you.

[Operator]

Thank you. We have a next question from the line of Girish Pai from Nirmal Bang Institutional Equities. Please go ahead.

[Girish Pai, Nirmal Bang Institutional Equities]

Yes. Thanks for the opportunity. Now, think today, if you look out into the rest of FY 2024, do you see growth picking up in the second half?

[Jatin Dalal, Chief Financial Officer]

Yes. So Girish thanks for the question. One would -- one certainly hopes that the growth picks up in the second half, but you know we don't guide for the full year and environment continues to remain uncertain. So we are not calling out that specifically, but I spoke about this with the macros are reasonable and current cautiousness are led by events and it all depends how the next few months go.

[Thierry Delaporte, Managing Director & Chief Executive Officer]

Yes. Girish, my view on that, in -- I mean my perspective on this are obviously in line with what Jatin says is, again, look at the performance in bookings. This is real stuff. This is real deals that we've won and it's several quarters where we are performing well. We have also a very good outlook in bookings for this quarter. So we are positive. Just assuming that the cut in discretionary spend will slow down, growth will be back.

[Jatin Dalal, Chief Financial Officer]

Stephanie -- hold on Girish, since we have also our Chief Growth Officer, Stephanie with us a few words on the -- on what you're seeing in the market.

[Stephanie Trautman, Chief Growth Officer]

I think there after two very strong quarters of bookings, as we look into this fiscal year, we continue to have a very robust pipeline. We still have a lot of very large deals in the pipeline. So I'm still very bullish that our growth strategy will continue to work. And once our clients start spending more in discretionary spend, we'll see that growth flow through.

[Thierry Delaporte, Managing Director & Chief Executive Officer]

Yeah. Thank you, Stephanie.

[Girish Pai, Nirmal Bang Institutional Equities]

Yeah. On the discrete -- you kept referring to discretionary spend being put off. And outside of consulting, what constitutes discretionary spend, if you can give some examples in BSSI or some of the sectors?

[Jatin Dalal, Chief Financial Officer]

So Girish, I would give some example. Certainly, on our application side, some of the feature development or extension of digital work that the customer has already carried out and would rather wait for the next steps to perform, then pursue it as if there was no change in environment. Those extension would have gone through. We are seeing a pause on that. It's not customer is not wanting to pursue it. It's just a pause before they decide where they want to spend their budget for 2023.

[Girish Pai, Nirmal Bang Institutional Equities]

Lastly, sudden increases, would the quantum be the same and the timing be the same as you did in FY 2020?

[Amit Choudhary, Chief Operating Officer]

So Girish, we gave our last salary increase in September of -- in Q2. So we'll be looking at the salary fees in Q2. And it's too early for us to comment on actual increase. We'll keep you posted

[Girish Pai, Nirmal Bang Institutional Equities]

Thank you.

[Operator]

Thank you. We have a next question from the line of Dipesh Mehta from Emkay Global. Please go ahead.

[Dipesh Mehta, Emkay Global]

A couple of questions. First, about the divergence between deal intake and revenue. I think earlier participant also trying to get spent, whether we are seeing any material delay in project start or subsequently restructuring in deal sizes. And whether we do, let's say, any restructuring or deal in place can happen when we report next quarter, deleted, whether we net it off or we don't let it off? Second question is about EBIT margin related outlook. Now if I look at utilization offshore mix, offshore mix has 10% is in last few quarters, utilization and also seeing improvement. So how one should look your EBIT margin outlook? And how one should be deal the optimal level of utilization in offshore mix? Thanks.

[Jatin Dalal, Chief Financial Officer]

Yeah. So I would respond to the first question, and I'll request Amit, our Chief Operating Officer, to speak on the utilization. We do have a process whereby we systematically look at when if a fixed price project has got restructured or has got extended early, that we reduced the booking which was earlier cover or shown as books before we booked a new bookings through that. So there is an adjustment that we make for our fixed price projects.

[Amit Choudhary, Chief Operating Officer]

On the utilization, what I would like to add is, as per our strategy, we want to continue to stress on internal build up talent as opposed to buy of talent. And as a result, we had higher talent, including the NextGen associates. And the focus in the current quarter and the future quarters will be to make sure that whenever the demand comes in, we first give priority to internal fulfillment and while we have already seen some improvement in utilization, we will keep pushing it more aggressively to get much more out of it and staff projects from inside.

[Dipesh Mehta, Emkay Global]

So broadly just wondered what would be the optimal target range, which, let's say, company trying to achieve from a utilization perspective and offshore mix, whether you still believe it is for the scope for expansion?

[Amit Choudhary, Chief Operating Officer]

Yes, there is a further scope for improvement

[Thierry Delaporte, Managing Director & Chief Executive Officer]

Yes, it always dangerous to set a precise target for utilization because the pace, if you remember, for example, what we did about three, four quarters ago, if you remember, we had a quarter where we had a lower operating margin. And the reason we did that is it was a conscious choice because we knew it was an investment for the following quarters.

We wanted to develop capacity and then including a significant boost of our next generation associate program, which we've done. And so typically, when you do so, your utilization is going down on quarter one and then you are building back up.

As we stand right now, for sure, we are aware -- although we are improving utilization, as you can see versus previous quarter. There's still room for higher utilization and so we continue, but we are also making sure that it's not restraining our ability to grow when required.

[Dipesh Mehta, Emkay Global]

Thank you.

[Operator]

Thank you. We'll take the last question from the line of Gaurav Rateria from Morgan Stanley. Please go ahead.

[Gaurav Rateria, Morgan Stanley]

Hi, thank you for taking my questions. So, first question is for Thierry. On discretionary spend, the project start POS, what gives the confidence that it would not eventually translate into budget cuts, but it will eventually come back. So if you could highlight the nature of some of these projects, which gives you confidence that it will eventually come back?

[Thierry Delaporte, Managing Director & Chief Executive Officer]

Yes, that's a good point. That's a good point. So a couple of points. One is I think what I've always tried to do with Jatin, when we are looking at the projection is we really try to keep a very fair look at the macro environment. And if you remember back in October, we started to talk about a certain level of volatility that we could fill in the market.

And I think, let's be clear, Gaurav everyone -- not everyone in our industry has felt it, it's the reality, right? Look at every growth trajectory, there has been a change in the market environment that probably started somewhere in Q3 for us and then materialize in Q4. Second is, as always, what do we see in our pipeline and in our deals. One is the pipeline reducing yes on now?

Second, are we winning more or less? And what kind of deals -- and from that standpoint, we get a lot of comfort, right? We are feeling rather good because, frankly, -- we've won nice deals, large deals, and we feel that although until it's signed, it's not won, but we feel good about what we are seeing in our pipeline for Q1.

And finally is indeed the fact that sometimes discretionary spend may happen more or less unexpectedly, if you like, and because we have a very close connection with our client, we can completely understand the need they have to do that in some cases.

We feel that the level of uncertainty that we have felt is we don't see it as deteriorating any in any way ahead of us. And so the perspective is more into a resort of some of these programs, if you like, or a reacceleration. Again, we are in March -- in April, sorry, -- in speaking with our clients, they have priorities to deliver. They have targets to deliver. And they are very conscious of the fact that they need talent in order to drive those actions. And so that's how we are reading it grow.

[Gaurav Rateria, Morgan Stanley]

Thanks for the detail answer.

[Thierry Delaporte, Managing Director & Chief Executive Officer]

You’re welcome.

[Gaurav Rateria, Morgan Stanley]

Second question is for Jatin. So last year, our ability to get the margins back to 17% rate got impacted due to supply side challenges and our investments in building the pressure capacity. So with some of these things already behind us, had attrition issues coming down, we have kind of covered quite a bit of a journey in our fresher induction program. Do you think that margins going back to 17% is a reasonable target to assume? And will it be more like a fiscal 2024 phenomenon? Will it be more like a little bit more medium-term target? Thank you.

[Jatin Dalal, Chief Financial Officer]

So Gaurav, as you know, we don't guide on margins for the year or definitely in a range, but we give an indication. The current challenge we have is, you are right, it is not on the supply side. I think we have done very well in quarter four in terms of improving utilization, improving the way we induct our next-generation associates into our projects.

The challenge in quarter one is around the volatility in revenue that we'll have to mitigate as we work through the margin. And therefore, we are saying we'll -- around the range that we have delivered in previous quarters -- previous two quarters. But right now, our focus would be to get to revenue stability and hence -- and then we could work through the margin challenge.

[Gaurav Rateria, Morgan Stanley]

Thank you.

[Operator]

Thank you. As there are no further questions, I would now like to hand the conference back to Mr. Deepak Kumar Bohra for closing comments. Over to you, sir.

[Deepak Kumar Bohra]

Yes. Thanks. Thank you all for joining the call. If you need any further clarification information, please feel free to reach out to Investor Relations team. Have a nice day. Thank you.

[Thierry Delaporte, Managing Director & Chief Executive Officer]

Thank you. Bye

[Jatin Dalal, Chief Financial Officer]

Thank you.

[Operator]

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