Wipro Ltd (WIT) 2019 Q4 法說會逐字稿

Ladies and gentlemen, good day, and welcome to the Wipro Limited Q4 FY '19 Results Conference Call.

(Operator Instructions) Please note that this conference is being recorded.

I now hand the conference over to Aparna Iyer, Vice President and Corporate Treasurer, Wipro Limited.

Thank you, and over to you, ma'am.

Thank you, Zaid.

A very warm welcome to our Q4 earnings call.

We will begin this call with the business highlights and overview by Abid, our Chief Executive Officer and Executive Director; followed by financial overview by our CFO, Jatin Dalal.

Afterwards, the operator will open the bridge for Q&A with our management team.

Before Abid 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 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 made available on the website.

Over to you, Abid

Thank you, Aparna.

Good evening, and good morning, ladies and gentlemen.

I'm joined here by my leadership team, and it's a pleasure to speak with you all and share the results of the fourth quarter and the full year performance of FY 2019.

Let me first quickly provide you an update on Q4.

Our revenues grew by 1.4% in reported terms and 1% in constant currency terms, which is the midpoint of our guidance range.

On a full year basis, we grew 5.4% in constant currency terms.

Through the year, we have built on the momentum with the year-on-year growth improving consistently each quarter.

We are also pleased with the rigor in execution and focus of -- on improved quality of revenues, which I have talked about earlier, which has resulted in operating margin expansion of 1.8% for the full year.

Our operating metrics have shown consistent improvement across the board, including the utilization, a higher offshoring, higher percentage of work done by bots and moderation in our attrition rates.

On our outlook, Q1 is a seasonally weak quarter for us, which is reflected in the guidance.

The outlook also factors completion of certain large programs and in some spaces that we've seen some delayed start of fresh projects in spite of having a very strong order book coming out of Q4.

That said, we are confident that our growth trajectory will improve from Q2 on the back of the strong order book as well as the healthy pipeline that we have.

We see continued momentum in Banking and Financial Services and insurance, in the consumer business unit, in the energy and utilities unit on a year-on-year basis in FY '20.

We will see an uptick in growth rates in communications and tech BU this year, while health and manufacturing are likely to remain a bit choppy, especially in the first half of the year.

The demand environment in the global markets is stable, and we see abundant opportunities in newer areas of digital and cloud and all the big-bet areas that we've talked about, and we are winning our fair share of the business.

Now let me quickly update you on the strategic themes that I do on a quarterly basis.

Our digital revenue growth continues to be strong.

It grew 6.4% sequentially and now, about 35% of our overall revenue.

During the year, digital grew by 32.2% year-on-year.

Wipro Digital has helped clients redesign their business to be future-ready and move beyond implementing agile into a truly achieving enterprise agility.

We are helping our clients fundamentally transform their IT operating model across the different dimensions of digital, which is team, talent, method engineering and architecture.

As an example, a large global oil and gas company has chosen Wipro as a partner in an engagement that will be executed in a no-shore delivery model.

Wipro Digital will help set up a high-performance software engineering center that will transform the client's applications design, build and delivery, which will bring about greater agility, reduced cost of ownership and enhance quality for the oil and gas major.

On mining, in Q4, our top 10 customers continued to post a strong performance, and we added 3 new customers in the $75 million bucket in Q4.

On a full year basis, our top 10 clients grew by 9.6% in reported terms on a year-on-year.

Our NPS continues to improve, and this year, our NPS was 510 basis points higher compared to last year.

And we continue to win both business and renewals from our customers as well as participate in their digital transformation and enterprise modernization.

We continue to focus on automation, and Wipro HOLMES is now deployed in over 350 clients.

The work done by bots, which was 6.7% last quarter of our fixed-priced projects is now 11.3% in Q4.

And our fixed-price mix has improved to 60%.

In a multi-year contract from a consumer goods company to automate and manage their cloud and data center landscape, we've been able to win the engagement on back of Wipro HOLMES to be able to enable faster turnaround times and lower operating costs for the client.

On localization, we continue to significantly invest in localization across all our major markets.

In U.S., we reached 64% localization, and we have now a very well-established campus hiring program from universities across U.S. and some of the key markets in which we have taken our talent development program that we perfected in India.

We continue to do well in innovation ecosystem.

In Q4, we completed a new investment in B Capital, an enterprise-focused VC fund based out of Los Angeles, taking the total number of our investments to 18.

One of our portfolio companies, Demisto, was acquired at 5.5x the investment value, making it the first exit for Wipro Ventures.

The reason I mentioned this is that this is a testament to our selection process and investment framework, which has been working out well for us.

And we have now over 90 production deployments of the startup technologies in the companies that we've invested through Wipro Ventures in our customer engagements.

Through the Horizon program, we've invested in 16 themes through FY '19 in areas such as software-defined infrastructure, analytics, cloud security, integrated threat management, open banking, additive manufacturing, autonomous vehicle, et cetera.

Topcoder continues to see strong traction, which we believe is the way of working of the future.

A global medical devices company has chosen Topcoder to develop real-time analytics capabilities and sentiment analysis, which will enhance its customer service experience.

Our internal crowdsourcing platform, Top Gear, has on-boarded 7,600 employees this quarter, taking the total number of Wiproites being prepared for the ways of working of the future to 98,000.

This quarter, 3,053 project challenges were executed successfully, taking the total amount of -- total number of projects to 7,800 in this financial year that were delivered on the Topcoder platform.

In conclusion, I would say that we've built a strong foundation for growth and believe that the growth in revenues this year will be better than the last year.

I will now request Jatin to give highlights on the financials.

Thank you, Abid.

I think one of the most fundamental things about this year was the margin expansion of 1.8%, that almost entirely converted itself in the EPS growth, which was 18.6% for this fiscal.

Finally, that also converted completely in cash because our net income to free cash flow was 100%.

We have given that back or we are going to give that back in form of the share buyback of INR 10,500 crores at the share price of INR 325.

These are the key highlights.

We have had a very stable ETR.

Our hedge has remained almost at the same level, $2.65 billion as in Q4 and as in Q3 and our exchange rate has slightly come down from INR 71.66 to INR 70.28 in quarter 4, and that has given us minus 0.4% in operating margin.

I also want to bring to your notice that there is a line called other operating income, which is the gain on sale of our Workday business, which is sitting in the P&L.

And then there is another hit that we have taken on amortization acceleration of our platform in HPS business, which is of INR 148 crores, which is sitting in cost of goods sold.

These were my opening remarks, and we will be very happy to take questions from here.

(Operator Instructions) The first question is from the line of Sandip Agarwal from Edelweiss.

Yes.

A couple of questions from me, Abid.

One, you have been mentioning that we have been gaining lot of momentum in last 3 quarters in terms of deal signing and our pipeline and all.

And I understand the fact that we have a little weak first quarter seasonally.

But even keeping that in mind, doesn't the guidance look very weak and it kinds of reflect more pessimism than seasonality alone would have?

Point one.

Point two, on the digital front, what is your sense, I mean are we seeing the same phenomenal growth, which our competition is seeing?

Or are we doing something differently there?

Or our client sets are different, means, because we are not able to get that sense that digital is able to compensate our losses from other piece of business?

So I'll let Rajan answer the second part of your question, but let me address the first one.

So we do see a strong momentum.

As you know that we've been restructuring and transforming our business, and there is the part of the business that we are divesting out of and that has had a slightly larger impact on the legacy deterioration for us.

And so if you look at it on a net basis, the guidance does look slower.

But if you look at the digital and the cloud and our big-bet areas, we are seeing quite good growth.

We are winning our fair share of deals in this area, and we do think that we have a superior offering in that space.

I'll let Rajan elaborate on your question on digital.

Thanks, Abid.

Sandip, thanks for your question.

If you see this financial year, we've had a very strong growth in our digital business.

We've grown 32.8% year-on-year.

Of course, we cannot guide for future growth, but I can tell you that we will continue to have strong momentum.

We are seeing 2 types of deals.

We are seeing a lot of what we call outside-in innovation deals, which are largely design-led with rapid prototyping and we make those programs successful and then we scale those.

We've also seen over the last 18 months a lot of inside-out renovation deals.

These include modernization, cloud, agile, and when we put both the inside-out and the outside-in together, we are able to take our enterprises and clients to what we call enterprise agility, which is beyond agile.

So I continue to see momentum, and we feel that with Wipro we have a very strong digital capability.

So I don't see a reason for us to be weary of digital growth.

Thanks, Sandip.

Next question is from the line of Sandeep Shah from CGS-CIMB.

Abid, just wanted to understand the 1Q seasonality for us, because every year, we say that there are some productivity gains which we need to pass on in the 1Q, which also impacts the seasonality versus the earlier weightage being higher in terms of the R&D or OEM-related work, which has gone down.

On the productivity side, just want to understand that by what time you believe that the impact of the same will reduce in terms of the 1Q growth?

Because we could be in third or fourth year where there is a possibility that most of the productivity gains might have been transferred to the client and the seasonality may come down going forward?

Yes, I think we're continuously working on it, but a lot of the deals that get renewed there -- because primarily these deals are in the infrastructure and the Run space.

They get renewed and the year-on-year productivity aspect continues.

Having said that, we are consciously making sure that we kind of make ourselves immune to this seasonality so that we can have a more robust growth in Q1.

Okay.

But in terms of renewal, do you believe that these deals may be in the fourth year or fifth year of renewal starting from FY '21, maybe the seasonality impact may be lower because you might have transferred almost 90% to 100% of your portfolio in terms of the productivity gains on renewal?

Yes, but we renew a lot of those deals and as we renew the deals, it's an ongoing cycle.

We're just trying to stagger it across the year.

And also, as we mine our accounts more, some of these accounts have been a single service line account on the infrastructure.

As we mine our accounts more, we are able to cross sell into these accounts.

Just as an example, we did a renewal for an auto company this year, and we have been providing infrastructure services to the auto company.

And now when we did the renewal, we've been able to do another deal with them, which is around developing a solution platform for their autonomous vehicles and an advanced driver-assistance system.

This kind of project involves platform design and development, automation, artificial intelligence and those kind of things.

With that, even at an account level, we are able to avoid the seasonality because we are cross-selling and up-selling better through a higher farming mindset.

So we're doing both, staggering those renewals and deals as well as reducing our dependence on single service line in that account so that when the annual productivity comes in, we see a dip in revenues from the account.

Okay.

Okay.

Just in terms of order book, you mentioned that there is a strong order book in fourth quarter.

Can you give some color in terms of any Y-o-Y growth number or a Q-on-Q growth number?

And you also alluded that there would be some delay in the projects in the 1Q.

So what is causing these delay and is it in 1 or 2 segments or 1 or 2 clients or it is more widespread?

Yes.

So Sandip, overall deal momentum has remained -- order booking momentum has remained robust, and we have had closer to double-digit growth.

But at the same time, we have seen couple of instances -- a few instances where a deal that would have got signed in quarter 4 has now got pushed to quarter 1. So it's a little mixed environment, but we remain largely -- on large component of our business, the order booking does give comfort, and that's what we have highlighted in Abid's opening remarks.

Okay.

Okay.

What is causing these delay in start of projects?

Is it more macro related or is it maybe an aberration which may...

Yes, it's a mix.

It's a mix.

There are a couple of deals in the banking space where given some of the volatility that happened towards the end of the year and early -- beginning of this calendar year, the customer wanted to take a little more time.

Some of this is just a timing issue because a lot of our digital work comes as projects and sometimes while the first phase of the project gets over, the customer doesn't immediately sign the next phase, which in a very stable macro environment could happened immediately.

Sometimes system is delayed a little more.

In one of the cases, where we were supposed to start a deal after winning it, the CIO changed over there and there is little time till the new executive gets comfortable, and we can start the deal.

So there's no pattern, but there is just a few such areas in different parts of the business, which have had a little impact to keep the Q1 guidance softer as we see it right now.

Okay.

Just last question, Jatin, just wanted to understand, if I look at the recurring margin or the -- excluding some of the one-offs, the margin looks close to around 19.2% for the IT services.

So how are we looking in terms of the margin band going forward because you might have juiced out many of the levers on the margin?

Or you believe still there is an upside potential entering FY '20?

Yes.

So Sandeep, as always, our endeavor is to get revenue momentum.

Revenue in our business drives the impact on the margin as a very good byproduct as all of us are aware.

So we will remain focused on getting revenue momentum.

Having said that, there are 2 prospects, specifically on margins that I would like to talk about.

One is that, in Q1, we do have the salary increase for the whole company and that will be a headwind as we enter into Q1.

And at the same time, what I would like to say that we have shown the execution in form of superior operating levers management over the course of last 4 quarters.

And our endeavor is to clearly remain very focused on automation, on superior bulge management, superior fixed-price project management, and hence, pricing in line with our digital growth.

Some of these levers we'll continue to remain very focused on as we get into the year.

The next question is from the line of Vimal Gohil from Union Mutual Fund.

I'm sorry to interrupt Mr. Gohil, but may we please request you to speak a bit loud because your voice is very feeble.

Is this better?

Yes, much better.

My question is on the P&L have been answered.

I just wanted -- I just had a question on the balance sheet.

We are seeing some sort of an improvement in your unbilled receivables and your payables have gone up quite sharply.

So this improvement in working capital, is it sustainable?

Is it something which is onetime in nature?

Or can we see this sustained improvement in working capital going forward?

Yes.

So Vimal, thanks for your question.

I think it's a -- it reflects the quality of revenue that, I would say, business has been very focused on over last 8 quarters and in some form finally starts reflecting in the percentage unbilled.

And as you know, our percentage unbilled was much higher earlier.

Now we are at 11.6%, which I would think is very, very competitive, very, very good, vis-à-vis the best.

Our endeavor would be to build on this, but there would always be 1 or 2 large projects and fixed-price engagement where milestones may not be exactly reflective of the cost that we are incurring.

And therefore, I think we will remain in 12% to 15% range, and that would be our endeavor as we go forward.

And how much of this improvement has come from the divesture of your -- some of the businesses that you divested during the year?

So both businesses that we divested were capital-intensive, but -- and certainly, DCS was a capital-intensive business, high capital employed, but its working capital cycles were quite regular.

So I don't think either of them contributed in any meaningful way for improvement of unbilled.

This was really the core of our business, which has shown the improvement.

The next question is from the line of Sudheer Guntupalli from AMBIT Capital.

Firstly, can you please help us understand the thought process behind the sale of Workday and Cornerstone OnDemand practices?

Both seem to be in the new age and high-growth areas and both of these practices were acquired fairly recently.

And at the time of acquisition, these areas were expected to augment capability significantly.

So what has changed in our thought process in terms of how we look at these businesses and their strategic fit with our portfolio?

Yes.

So as we did the Appirio acquisition, both our Workday and Salesforce practices have done very well.

As you rightly said, they are new-age practices.

And we had the opportunity to create a strategic partnership with Alight, which got reflected in the $1.5 billion deal that we signed with them.

And as part of that, there is a larger opportunity in the market that we could go together with them in an enterprise HR transformation kind of situation.

And in the interest of that partnership, we decided to divest our Workday business, which catered to small enterprises inherently to Appirio and then to Alight, and then that gives us the opportunity to partner with them more holistically in the overall HR area.

Sure, sir.

Fair enough.

And secondly, certain media reports actually indicate that security of some IT systems of the company were compromised and used to launch cyber attacks against more than a dozen clients and the company and Wipro is actually investigating the matter.

Any further context setting here will be helpful because we are seeing varied reports in media.

And what are the risks we are forcing at this point in time because of this incident, be it in the form of financial, regulatory or even reputational risk, especially because it appears to be a matter involving clients?

This is Bhanu here, I take that -- this question.

We came to know about a potentially abnormal activity within our network and that involved a few of our employee accounts and these people were subjected to an advanced phishing campaign and a persistent phishing campaign.

And as you know, like any large enterprise, we investigate a large number of alerts every year.

We investigate about over 4.8 million alerts every year.

And on knowing about this alert, we promptly kicked off our standard processes that we had -- that we use to address such incidents, and we investigated -- we have began investigating the incident.

They have identified and isolated the employee accounts, which were impacted as part of this incident.

We've taken remedial steps to contend the incident and mitigate any potential effects of this incident.

We have used our own industry-leading cyber security practices and our partner ecosystem for these steps.

This being a zero-day malware attack.

We've shared this intelligence to our partners to develop and upgrade the antivirus signatures and the same we have applied to our enterprise systems as well.

We have informed the handful of customers where our employees are engaged with -- these affected employees are engaged with.

This is our standard protocol, and we have done that right now.

And we continue to collaborate with our partner ecosystem both to collect and monitor advanced threat intelligence and this will help us to further enhance our security posture.

And as you know, we continue to monitor our enterprise infrastructure at very heightened levels of alertness right now.

Yes, sir, anything on the potential reputational risk here?

So when you look at everything that Bhanu said, we were able to detect this and respond to this quite reasonably fast, and we've had some customers appreciate it.

I can understand a lot of customers are anxious about it because what came in the blog is as you would expect, not entirely accurate.

But we are responding to customers, the ones where we felt there was a reason we proactively had contacted.

Now since it is out in the media, we are talking to all the customers to avoid the anxiety on that.

Most customers who understand the whole process that Bhanu explained, do see it as a industry standard processes that one would undergo whenever there is an alert and they appreciate what we've done.

Sure, sir.

One last question, if I may.

In health BU, we have a new leadership in place, and we seem to have relooked at our value proposition in the segment.

Even excluding the weakness in HPS part, still there seems to be no respite in this vertical.

And we are saying next year also, we don't expect this vertical to do very well.

So any qualitative color on the developments here will be helpful.

Sure, I will let the new leader, Bill Stith himself give you an update on that.

So we're seeing sharp uptake in our pipeline with increased demand.

We continue to see ability to leverage our assets, both the HPS asset as well as what we have in our Medicare and government group plans to renew offerings to our clients.

That's being received well.

So we're -- we have a positive outlook that especially coming into the second half, we'll continue to see growth.

And just to add to that, as I have said, the core of our health care business has been doing relatively well.

When you add it up along with the decline in HPS, that has kind of given a relatively slow and bumpy ride to our health view.

As we bottom out on the HPS and as we do things that Bill just mentioned in terms of re-platforming and providing new services on that platform, I feel quite good about our health business in the later half of this year.

Next question is from the line of Dipesh Mehta from SBICAP Securities.

I have a couple of questions.

First is about, if you look FY '19, revenue growth is largely driven by BFSI and consumer vertical, rest of the verticals are still not firing.

So if you can provide some color when you expect broad-basedness would be quite evident considering the pipeline and robustness which we are referring to?

Second question was about geography also.

I think Europe and rest of world is still seems to be relatively softer.

So if you can provide some colors about how you expect those geography to play out over a next year or so?

And what led to this kind of weakness?

If you can provide some more color.

And the third question is about, if I look 1 million plus, 3 million plus, we are seeing some kind of lower number in terms of number of clients.

So it is by design kind of thing or how one should read that number?

Well, thank you.

As you rightly said, we've had a great run in BFSI and I also want to take this opportunity to recognize Shaji Farooq, who's led this growth and introduced Anggun as Shaji, because of health problems is going to take some time off and take care of his health and Anggun will be leading our Banking and Financial Services and insurance SBU.

But as you see, consumer has been doing very well.

Bala, who has taken responsibility for Energy and Utilities, we've had almost a double-digit growth in ENU, while BFSI and consumer have been having double-digit growth north of 13%, 14% and Banking and Financial Services 15%.

So 3 of the units, I feel quite good about.

We talked about health care already.

Communications has started doing well.

This quarter was a little choppy primarily because of India, but I do see -- I have great confidence that communication, especially with our investments in 5G and new leadership, which as you know, Milan has taken over, we've seen some great traction over there and we'll see growth.

So in -- as part of our transformation by vertical, I think each one of these verticals has been gradually improving in performance, but more importantly, has been executing on the strategy that we've outlined.

Sometimes it takes a quarter or 2 more or less, but I feel quite good on that.

North America, especially U.S., we've had near double-digit growth, which is our largest market.

In Europe, AP, Anand Padmanabhan, is now leading that market with Chris, and we are making investments in that market, especially on the intersection of manufacturing and Europe is where we have some work to do and I would give it a couple quarters.

We have historically had a relatively lower penetration in Europe.

We have invested in a team there, we had restructured it a few quarters back, that restructuring has now stabilized.

Historically, we had been present only in the capital markets in Banking and Financial Services.

Now with the new leadership in BFSI, in Europe, we are seeing a very good pipeline in the BFSI market, especially both Banking and Financial Services and manufacturing, which would be the 2 largest verticals in Europe with our new teams over there.

I feel good about the pipeline and it will take some time to translate into revenue growth.

So that's kind of in summary overall -- our Asia Pacific has been doing very well.

We've grown very well over there.

I've talked about our India markets restructuring, where we have new leadership for both the state-run enterprises, which Sanjeev Singh now runs and the private enterprises, which Anand Padmanabhan runs, which both we have seen the right traction in what I call as the services of the future, which is the digital transformation and consulting-led business compared to the historic infrastructure kind of business that we were doing primarily on feet on street.

So overall, I wanted to give color across markets and across BUs.

All of our services have done well, our digital operations and platform services, which enable automated operations have done well.

Our cloud infrastructure services transforming well from a historic data center on-prem business to cloud.

This year, cloud business would have grown about 25% to cross about $1.4 billion in revenue.

So I feel quite comfortable about that.

Analytics and artificial intelligence, the data analytics and artificial intelligence practice has done very well.

Our offering, both the platform offering that we have over there as well as the overall AI offering has been seen very well with the customers.

And the digital, of course, we've spoken about already.

Digital grew by about 32% year-on-year for us.

So I feel quite good about overall across services.

And of course, when some of these verticals and services and geographies intersect, we have some work to do in some of the areas, which we will continue to do.

Yes, sir.

Abid, one question was unanswered, it is about $1 million, $3 million bucket.

It is by design we are reducing some of the tail account and if you can provide some color there?

And the last one on manufacturing, what would be your outlook?

How you see that sector playing out for us?

Yes, so effectively, it is combination of 2 things.

We do have a minimum threshold for us to recognize a customer is active customer, and that plays out on the total number of active customers line that you see.

On $1 million to $3 million, the impact would be largely on account of the divestment that we have done, because those businesses would have small-sized customers, which would -- which have gone up (technical difficulty)

Sir, we are not able to hear you.

Sir, on manufacturing.

If you can provide some color.

Yes.

This is Milan here.

Yes, so the manufacturing business has been under some pressure because of closure of some programs.

And deemed renewals, particularly in some of the legacy areas where the renewals have been at lower rates.

But what we have tried -- trying to do now is a significant shift towards modern applications and towards engineering services portfolios, which we believe are the growth areas for the future.

Abid talked a little bit about the intersection of Europe and manufacturing.

We have undertaken restructuring there and -- as we mentioned, and we expect to see the results of that coming in a couple of quarters.

So we feel that the pipeline is going to get better, and we see recovery in manufacturing in the second half of the year.

(Operator Instructions) The next question is from the line of Viju George from JP Morgan.

Did you say, Abid, that you are confident of better growth in FY '20 versus FY '19 on the IT services side?

Yes, Viju, I think I see that given the momentum with which we are entering FY '20 both from a deal as well as the order booking that we've done in the last couple of quarters.

I believe we will be better in FY '20 compared to FY '19.

And is there anything to call out on arbitration, because Infosys' clearly seeing a lot more attrition.

So I want to try and understand if there anything in environment, is the environment hottening (sic) [heating] up, which makes it difficult for you to hold on to people?

Anything that is causing you worry on that front?

This is Saurabh here.

So first on attrition, per se, if you look at Q4 numbers, attrition has improved by a percentage from Q3.

And over the last 6 quarters, if you look at it, we have been in a narrow band of between 1%, 1.5%.

So it's a very -- from that perspective, it's stable.

While I say this for the people with 5 years in that experience, we see much more mobility and much more turnover for such people, and we are taking measures to make sure that we ring-fence the right people.

We have our merit salary increase coming up in June, and that's the time when you will differentiate and take care of these people.

But it's not something that's worrying you where you need to do out-of-turn promotion, hand out greater-than-expected either wage hikes or retention bonuses, nothing of that sort, is it?

So we had done something regarding this for people who were below 5 years' experience.

Effective 1st January, we had given them a ring fence critical people, especially people who had joined us from our campuses this year.

But that was more to make the -- sort of bridge the gap between from the market and where they were, and we continue to look at these people.

And I will rather never say that it's not a worry, it's always making sure that attrition will continue to be a worry for everybody and we make sure we retain our best people.

So that will always continue.

But from our numbers if you see, it's been very stable across for the last 6 quarters.

Sure.

And last question, when you look at the virtues of doing this buyback via tender versus open market, what made you go for a tender?

Is there any particular reason?

Is it just easier to do, very quicker to do versus an open market kind of mechanism?

So Viju, you know in our specific case that the promoter group holds a large -- a very large percentage of the stock.

And if we were to go through the market route, then our head space would be very less.

So for us to return large quantum of share -- capital back -- cash back to shareholders, it is imperative that we go to the tender route.

That's how we can build a size that we have built which is INR 10,500 crores.

The next question is from the line of Sumeet Jain from Goldman Sachs.

So firstly, congratulations on a good execution around the margin improvement for the entire year.

And if I look at the margin improvement, a significant portion has come through your sales and marketing spending, where if I look at the 1Q FY '19, it was around 13.9% of your revenues and it stands at around 11.8% in 4Q.

So can you give some color as to what's happening around that front?

And even if I look at your sales and service support staff, that has come down over the year and it has been largely flattish over the last 3 years.

So can you comment as to how will we look our sales and marketing spend going forward?

So Sumeet, as you rightly identified, amongst the SG&A also we've done a lot of optimization of our G&A, while we continue to invest in sales, and we continue to invest in practices, which is also part of the SG&A, which are around both horizontal practices and industry practices.

So we do see headroom for improvement of margin, but we are very conscious that where we save and where we invest.

And I think that is what I feel quite pleased that the team has done very well in terms of taking cost out from the G&A areas and reinvesting a part of it in the sales and practices as well as passing a part of it into the margin.

So then in that case, shall we assume your 4Q run rate of G&A as a normalized run rate going forward?

So it's a fairly stable run rate.

There is always little bit of up and down in quarters because once we give salary increase, the G&A [start] that does push up the number in quarter 1, quarter 2. And it has also the PDD component, which is a little volatile, depending upon what has been the performance in that quarter.

So these are the 2 aspects.

The third aspect is that we do have an investment plan on our IT systems, which will lead to probably a larger depreciation line within G&A.

So these are the 3 variables that one needs to keep in mind as we enter the year.

Got it.

Jatin.

And just lastly, on your guidance, I mean, you said that minus 1% to 1% for 1Q is excluding the impact of divestment of Workday and Cornerstone business.

So is that divestment completely done or a portion of it is yet to happen?

So there is a small component, which is in Europe, which is moving through the process that we need to go through in Europe, which is little more long-tailed, which will complete in quarter 1. But our estimate is that it will get completed fairly soon.

So it should not have any material impact vis-à-vis what you're considering guidance with or without.

So there won't be a onetime guidance reset downward because of that divestment in a way.

No, we have an expected time lines and that has been factored in what we have guided.

The next question is from the line of Brian Krebs from Krebs Security.

This is Brian Krebs from Krebs on Security.

I'm the reporter who wrote the story yesterday about the security incident at Wipro that was discussed earlier.

One of the gentlemen speaking in response to a question earlier said the incident -- said the original report in the news media was incorrect on several points.

And I just curious if you could clarify what points in the story were an error given that you guys maybe wait 3 days for a statement which didn't address any of the points brought up by my sources.

Could you -- also could you just please clarify what points in particular were wrong about story?

And also how would you clarify the current situation, just what -- does Wipro believe that it has the situation under control?

Where would you characterize the company in terms of its processes going through and finding out the extent of this incident?

This is Bhanu here.

So we can -- I can definitely clarify to you what we observed and we can have a separate conversation, right, you and I, we can -- I'll set up the timing for you on that call.

At the same time, I do want to stick to the statement which I told in the beginning of this call that we have looked at the incident, and we have taken the steps that are required to be taken, right, and we have continued to investigate to understand the modus operandi of the attack and the motive.

The next question is from the line of Ankur Rudra from CLSA.

I've got a couple of questions on Financial Services.

You've had a very good year with strong growth in this vertical.

Any changes to the near to medium-term growth momentum, which has almost been at mid-teens consistently?

Maybe the changing on the macro and the capital markets part of your business.

And also maybe the [acture] of any large customer project completions?

That's the first part.

Second part is on the margin, the segment margin on Financial Services have also been very strong, indeed you seemed to have passed the trend of the rest of the business.

So what's working better there, and what can be replicated more broadly?

So Ankur, as I've always said, we've been undergoing a twofold transformation.

One is Wipro's internal transformation.

We feel quite good on the journey which we have embarked and how we are executing.

The second is as our customers transform, we help them transform and that is the new offerings that we take to them.

And again, there we are seeing very good traction with the customers.

So I do see, as I said, the growth momentum changing even in the last 4 quarters that you see the year-on-year growth of the 4 quarters has consistently improved.

And we do think that if the macro environment remains the same, we will continue to have that improvement.

There is a level of anxiety in the macro environment, as we mentioned towards the end of last year earlier this year.

In the capital markets domain, we saw some of that -- we saw some of that in European banking last year, and in U.S. banking, we saw in the early part of this year.

So we will continue to make sure that we remain cautious on that.

But as we see the environment, technology spends are not necessarily getting impacted as customers navigate that environment because they are transforming.

And we do feel that we have offerings that -- even from a margin perspective that you talked about, the newer offerings we are able to command premium pricing, which gives us a little uplift in margins.

At the same time, we're still in the investment phase in all of these offerings.

At an operating margin level, it may not come down.

While at gross margin levels, we do see differentiated margin in the offerings.

Just want to interject in and clarify the question with specific to Financial Services.

So Abid, you said in terms of improvement momentum and going into next stage.

Is that true for Financial Services separately also?

So Ankur, this is Jatin.

What we've maintained is that we see continued good demand in BFSI.

However, we do see moderations on the growth rate that we have seen in last year.

And we don't see any change in that position.

Okay.

And on the margin commentary, again, was just Financial Services would look like anything you said?

So Ankur, as I said before, our endeavor would be to make investment for growth.

Those will go in terms of the priority areas for us, which is clearly the big bet that we have articulated as well as making sure that we have right talent for the growth and that would be in terms of the salary increase for quarter 1. So for first quarter, certainly, I see that there will be some downward pressure on the operating margin, but I do want to recognize the work that the teams have done on automation, utilization, overall title acquisition of fixed-price projects and the operational improvement that we've been able to achieve over last few quarters and we will want to make sure that we don't let go of that operational rigor.

Next question is from the line of Ashish Chopra from Motilal Oswal Securities.

Abid, I just had a follow-up on the previous question, in particular, on the macro.

So when you had guided for the fourth quarter, you had said that the 0% to 2% is embedding some sort of a caution due to the uncertain macro.

And considering that you have actually ended up at the midpoint of that guidance, I'm guessing it would be fair to assume that some of that caution played out because you mentioned that BFSI had been slightly slower.

So just wanted to know as well you mentioned, again the gaps between digital projects commencing next quarter is attributed to macro.

So is it currently just being witnessed in Europe and U.S. BFSI?

Or are you also saying that maybe there are a few more verticals where some of it is visible?

No, we're not seeing in any other verticals, as Jatin expressed that we'll grow well in BFSI, but it will be a little moderated compared to last year.

Although some of the slowness that we saw in the beginning of the year as we were getting in, we feel that, as you progress through this quarter, some of -- digital projects are project based.

So a lot of SoWs get signed one after the other in a sequential basis and sometimes, some customers want to wait and watch and then sign this.

So we do believe that during this quarter, some of that work will get initiated and we'll start getting the momentum back.

So these were also the BFS that you would be referring to in terms of deferrals of commencement of some digital projects.

Yes, primarily, but there are some customers, some we saw in the technology vertical as well, some very similar effects.

(Operator Instructions) The next question is from the line of Ravi Menon from Elara Capital.

Among service lines, there's been good growth across all, except a minor decline in application services.

So considering this, can we say that your service portfolio is...

Sorry to interrupt, Mr. Menon, but we were not able to hear you.

Could you please repeat your question again?

Yes, sure.

So I was saying that among service lines, there has been good growth across all except for a minor decline in application services.

So considering this, can we say that your service portfolio is faring well, but the vertical specific declines seem to be client-specific issues.

If so, how transient are these or how structural are these do you think towards the declines that we've seen in the verticals?

Yes, so if you look at the core application services, right, if you look at the year-on-year, year-on-year it has shown a good growth and the areas where we are focused on in terms of our own data analytics as well as our digital operations and platform space, those have grown very well as well, right.

So if you look at across the service lines, you see good momentum on -- it's a secular growth that you see across the service lines for the full year.

And some of the quarterly variations are because of certain project movements and certain the application run activities that we have where there's this amount of seasonality for the same thing.

But otherwise, you would see that the momentum across the service capability is very high.

And as we previously explained to you, all the things that are modern, all the things that are important for the future of our customers, digital, cloud, engineering services and cyber security and our cloud infrastructure services, all are doing very well.

Thank you.

Ladies and gentlemen, we will take that as the last question.

I now hand the conference over to Aparna Iyer for closing remarks.

Over to you.

Thank you all for joining the call.

In case we could not take any questions due to time constraints, please feel reach -- please feel free to reach out to the Investor Relations team.

Have a nice day.

Thank you.

Good night.

Thank you very much, members of management.

Ladies and gentlemen, on behalf of Wipro Limited, that concludes today's conference call.

Thank you for joining us, and you may now disconnect your lines.