Wipro Ltd (WIT) 2023 Q1 法說會逐字稿

Ladies and gentlemen, good day, and welcome to the Q1 FY '23 Earnings Call of Wipro Limited. (Operator Instructions) Please note that this conference is being recorded.

I now hand the conference over to Ms. Aparna Iyer, Vice President and Corporate Treasurer. Thank you, and over to you, ma'am.

Thank you, Inba. A very warm welcome to our Q1 FY '23 earnings call. We will begin the call with business highlights and overview by Thierry Delaporte, our Chief Executive Officer and Managing 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 Thierry starts, let me draw your attention to the fact that during this call, we may make certain forward-looking statements within the meaning of Private Securities Litigation Reform Act 1995. These statements are based on management's current expectations and are associated with uncertainties and risks, which may cause the actual results to differ materially from those expected. The uncertainties and risk factors are explained in our detailed filings with SEC. Wipro does not undertake any obligation to update forward-looking statements to reflect the events and circumstances after the date of filing.

The conference call will be archived and a transcript will be made available on our website. Over to you, Thierry.

Aparna, thank you. Hello, everyone, and absolutely good evening. Thank you for joining our Q1 earnings call.

Let me first tell you that as I speak to you today to show our financial performance, I'm both humbled and excited. Humbled to have had the honor of leading this incredible company for exactly 2 years now and excited for what lies ahead of us.

As always, I'll share with you a view on the demand environment and also offer some details on sectors, markets, service offerings as well as business outlook for the quarter ahead.

Despite the uncertainties of the macroeconomic environment, if I look at the pipeline, our order bookings and the discussions we are having with our customers, there has been no slowdown or pullback of spend for us. The demand for our IT services is robust, and I must say I'm thankful for that.

Our overall pipeline is actually, in fact, at an all-time high, and it continues to be renewed as we are winning deals at a pretty good pace. High-growth services like cloud, like digital, like engineering services or cybersecurity are seeing definitely strong interest from our clients.

Led by our FullStride Cloud Services, more than half of our bookings today are attributable to these strategic focus areas. And we believe this rotation to high-growth areas is going to accelerate. Our bookings in cloud are up 35% year-on-year and engineering services bookings literally doubled.

Overall now, bookings for the quarter were very solid. Our bookings in total contract value, TCV terms, grew at 30% plus year-on-year. And in annual contract value term, ACV, it grew 18% year-on-year. Three of the 4 markets grew upwards of 25% year-on-year in TCV terms.

I've shared this with you in the past. The large transformative deals are a key pillar of our growth while they provide -- we know that, excellent opportunities to showcase our capabilities and scale. But I tell you, I'm pleased to share that our large deals bookings were nearly $1.5 billion this quarter, which is almost 3x of what we did, for example, last quarter, and the majority of these are new.

Our revenue growth during the quarter was at 2.1% in constant currency terms and 17.2% year-on-year. We grew 15% and plus year-on-year across all markets. We are investing heavily in talent to support our ambition growth plans for the year. We added such 15,000 net new talent during the quarter.

In line with our strategy to reinforce our cloud and consulting capabilities, you probably remember, we acquired and we completed the acquisition of Rizing last quarter. Rizing is a global SAP consulting firm, one of the leading strategic partners in the world for SAP. Rizing will become a critical extension of Wipro's SAP cloud practice, but also Wipro FullStride Cloud Services.

Our Q1 operating margins, as anticipated, were lower at 15%. This is because we're investing in solutions and capabilities for us to further strengthen our position as a strategic partner for our clients. But we've also accelerated structural transformation by investing in freshers in particular and in our own IT that will help drive operational efficiency and agility.

The inorganic bets we made to accelerate our growth are presently diluting our margin by 2.3% as a reference. And at 15%, we believe we have bottomed out, right?

I will now provide some finer details on markets, on service offerings and on sectors. All markets grew double digits, with the Americas and Europe, our top 2 markets, growing at 18% and 16% for the quarter in year-on-year constant currency terms.

Let's go through each of these regions in details. In Americas 1, we grew 20% year-on-year in the quarter, with all sectors showing strong growth. During the quarter, technology products and platforms grew 37% year-on-year; and communications, media and information services grew 26%.

Now let's look at Americas 2. We grew 17% year-on-year in Q1. Financial services and manufacturing, those 2 sectors led the performance, recording a growth of nearly 30% each year-on-year. This order book in total contract value terms grew nearly 30% year-on-year in Q1.

Now let's look at Europe. Our European business delivered a year-on-year growth of 16% in the quarter gone by. U.K. and Ireland, Southern Europe and Benelux grew at or over 20% year-on-year. Our pipeline here is robust and we have won many large deals in the market. Our order book in total contract value terms grew at 40% year-on-year.

Finally, our APMEA business grew at 15% year-on-year in Q1. The regions that did particularly well during the quarter were Australia and Southeast Asia. But here also, overall, the order bookings in total contract value terms were very robust, growing at 60% year-on-year.

We said, as part of our strategy, continuing to strengthen client relationships remains a top priority. We have created a segmentation strategy to grow in key markets by not only deepening our relationships with our existing clients, but also bringing on new clients who are looking for a strong business and technology transformation partner to help them digitize their business. And as I mentioned earlier, we are pivoting our go-to-market investments to allow us to do this.

As a result, our top 5 clients grew 26% year-on-year. And our top 10 clients grew 22% year-on-year, both in constant currency terms. If we look now in the last 24 months, we have doubled our clients in more than $100 million segment to 20, so from 10 to 20. We also added 8 clients in the more than $50 million segment just in the last 12 months.

Now from a service offering standpoint, our iDEAS global business line grew 21% year-on-year in Q1. This growth was led by, one, digital experience, 25% year-on-year; two, domain and consulting, which grew over 45% year-on-year; and three, engineering services, which grew 18% year-on-year.

And then our second global business line, our iCORE GBL grew 11% in Q1. You will certainly appreciate that this performance comes against a backdrop of accelerated rotation of portfolios to the new -- to the high-growth areas I talked about earlier. And cybersecurity services led growth with 34% year-on-year in Q1. Improved customer and employee experience are definitely fueling this growth in iCORE. Our customers want us to reimagine what I would call traditional services such as end-user computing services to -- or in human resource outsourcing.

Leading with business solutions has been one of our key differentiator. Our role as a cloud ecosystem orchestrators with Wipro FullStride allows us to increase opportunities to grow our business. Last month, we hosted our first ever FullStride Sales and Partner Summit, featuring 23 of our cloud partners. Together, during several days, we strategized around new opportunities and committed to working together to help our clients transform in the cloud. There was tremendous energy across our teams.

And in the market, we are partnering closely with Microsoft, for example, to help one of our large health care clients transform their legacy infrastructure to Microsoft's cloud.

Now our engineering services have grown at a compounded growth rate of 4% over the past 4 quarters, which is showing the consistency in growth. In the depth of our services and capabilities here, I can proudly say that we are a true leader in engineering services. And this week, we have launched Wipro Engineering Edge, our full-stack portfolio of engineering services. We know this will enable our clients to innovate at scale. This also extends our engineering heritage by combining capabilities such as cloud, 5G, AI, Industry 4.0, IoT and silicon design.

Engineering Edge is already having an impact in the market. For example, a leading mobility technology company has chosen Wipro as an extension of their global engineering team to support them on the development of software-defined vehicle applications, high demand around SDV these days.

We also won a multiyear engagement with a leading U.S.-based semiconductor corporation to provide VLSI and system design services across a variety of products globally. We will help meet the quality standards required of semiconductor chips used in applications such as high-performance computing, self-driving cars, design and visualization, deep learning, AI.

I will share a couple of examples before I move on. Wipro has won a very strategic engagement to assist in the digital transformation journey of a leading U.S.-based fund administrator. We will provide a range of services, including digital contract management, cloud migration with Wipro FullStride Cloud Services, quality and process engineering, as well as create a talent transformation road map for the client's workforce.

Wipro has also entered a multiyear strategic agreement with one of the world's leading energy technology companies. Here, we will reimagine the employee experience for the firm's 70,000-plus employees across 75 countries.

I'll now share a view of our talent landscape. You may remember, I had shared earlier about a shift in our talent strategy towards fresher intake. In line with that, we have onboarded more than 10,000 freshers in Q1.

Now while we are on the subject of talent, I want to share that our attrition has continued to moderate, right? That's 3 consecutive quarter of improvement in employment retention in reality. In Q1, it was down to 23% on the trailing 12-month basis. And we expect further moderation ahead. Our talent investments, I believe, are paying off, that's what it says. If you recall, we announced moving to a quarterly promotion cycle, which will be effective actually July 2022 and salary increases for all those eligible in September of this year.

Before I close, I will share an outlook for the next quarter. We have guided for a revenue growth of 3% to 5% in Q2, which will translate to growth of, to be precise, 11.6% to 13.8% on year-on-year in constant currency terms. With this guidance for Q2, let's be clear, we will very comfortably grow in double digits for fiscal year 2023.

In summary, all our markets are growing. We have doubled our $100 million strategic clients. Our order bookings are strong. Our pipeline is at an all-time high. I must say I'm very optimistic about the rest of the year. With that, I'll hand it over to Jatin now for his comments. Thank you.

Thank you, Thierry. I'll share some data points.

As you know, we grew 17.2% year-on-year in constant currency terms. We delivered a net profit of INR 25.6 billion. Our ETR for the quarter was 23.7%. As you know, that's an industry-leading ETR. We had hedges of $3.9 billion. The exchange rate realization for quarter 1 was INR 77.81.

On a trailing 12-month basis, we have converted 68% of our net income into operating cash flow. And as at the end of the quarter, we had $3.9 billion of gross cash on the balance sheet and $1.7 billion of net cash on the balance sheet.

As Thierry mentioned, we have given a robust revenue guidance of 3% to 5% for quarter 2 at the exchange rates which are mentioned in our press release.

And we'll be very happy to take your questions from here.

(Operator Instructions) Our first question is from the line of Moshe Katri from Wedbush Securities.

Congrats on doing a great job on attrition here. Thierry, just a big-picture question for you. Now that Capco's anniversary-ing as we speak, so at this point, you're not going to get the contributions from Capco that you've had. How do we try to fill in that gap down the road? And obviously, you spoke about some of the different areas that you're focusing on in terms of high-growth initiatives. Maybe we can get some color on that and some detail on strategy.

Moshe, I hope I will answer your question. Your voice came a little muffled, so I hope I got that. But I certainly understood you were asking about Capco. So actually, Capco acquisition was finalized about a year ago, right? We celebrated 1 year of Capco in the Wipro family a few weeks ago.

I can tell you one thing. It's been an absolute success. Obviously, always early to say after 1 year. But frankly, the way the team has integrated and maintained the focus on the market, the way this team has continued to play this role and started to connect with the Wipro BFSI business to develop common go-to-market strategy with our key clients has been really remarkable.

Capco has performed quarter after quarter. The growth has been extremely strong. Capco has not seen any acceleration increase or anything of attrition after the acquisition. Capco is very much involved into our deals. And frankly, we are not seeing a slowdown in the growth of Capco. The performance in bookings in the last 2 quarters of Capco has been solid. This quarter, again, the pipeline is strong. So we know that typically, sometimes consulting business are more exposed when there is a slowdown. But this is not what we are seeing.

And I think it comes from one aspect. One, it's the quality of the relationship built by Capco with its clients, one. Second, the fact that it's truly connected to their digital transformation. And so I think they are on the right topic. And third, we are seeing a certain shift sometime of not of the volume of opportunity, but the type of opportunities of clients who are still looking to transform but with the objective to drive more productivity improvements. And Capco is very much geared to address these challenges as well.

So at the end of the day, Moshe, Capco is growing well and is a very solid contributor to our performance.

So again, just as a follow-up. Now that you're anniversary-ing that acquisition, are you comfortable that you're going to be able to sustain the growth that you've seen? And I'm talking more about the year-over-year growth comps that seem to be, I guess, moderating in Q2 versus Q1.

The answer is yes.

We'll take our next question from the line of Mukul Garg from Motilal Oswal Financial Services.

Thierry, I would kind of add on to probably a broader consulting piece. If you -- your last 2 years, you've added quite a chunky bit of consulting revenue to Wipro. Given the recent macro environment, what are the risks you are preparing for in this business? Because the past experience suggests to all of us that advisory work generally slows down at a faster pace compared to the demand which is out there for the cost optimization piece that generally gets highlighted during weaker times. So if you can just highlight both from a cost aspect as well as how you are managing or looking forward to the growth in the consulting business over next 1 year, it would be great.

I also had a question for Jatin. Jatin, how should we see the wage cycle play out after the shift to the quarterly promotion cycle? I think you just -- Thierry just mentioned that the wage hikes have been pushed out to Q3. Is that the right assumption? And besides utilization, what other limited -- what other immediate levers do you have which can help you take up the margins over the next 2 quarters?

So Mukul, so let me take the first question, and then I'll pass the mic to Jatin. I suspect your question was specific to consulting but broadly looking at the different consulting component of the business.

At Wipro, we really have a consulting business that is really very much connected with our technology business, right? So it's not uncommon. The proportion of our business that actually combine consulting and technology capabilities is important, okay, is significant. So those are not stand-alone consulting business just selling to different type of clients.

And I think it changed a lot the landscape because the reality is that, as you said, companies, I mean -- like you, one, let's start with what we're hearing. I mean, like you, we are listening to what the analysts, what the market, what journalists have to say about macro environment. And when we hear that, we obviously get -- we pay attention to the potential implications for our business.

But then, important is the connection with our clients, right? I'm speaking to clients every single day, every single day. And discussions about macro environment, again, they are like us, seeing those same signs between war on one side of the world, inflation, interest rates, potential clouds on the economy in a given country or another. But they also have learned over the last 2 years that technology -- and when I say they have learned, either they knew it or they have reinforced their conviction during the last 2 years that technology is not a cost center, it is a driver of transformation.

Now what might have happened or might happen now, Mukul, is that in some cases, where companies who are driving program to drive to develop new business models or improve experience, I think they are possibly going to more focus on drive productivity gains and reduce the cost of running the business. But that's completely fitting with our capabilities and solutions that we have. We are indeed helping them leveraging technology to drive their transformation and improve their productivity.

So at the end of the day, consulting is an integral part of our go-to-market strategy. They are working with our technology teams. They are developing opportunities in the pipeline. They're winning deals together.

If you look at the Rizing business, we already have several leads where the Rizing team and the SAP team of Wipro are working together. If we talk about Capco, the first question was on capital. We have had more than 60 joint wins in the last 12 months.

And so this is really what's driving the growth. So at the end of the day, I confirm today, we are -- on one hand, I don't want to be arrogant. I want us to continue to stay vigilant and observe the market and see and be ready to react when there are different signs, okay? That we cannot predict always.

But what I'm telling you is that as we speak right now, booking performance, solid for Q1. I should say, even extremely solid. Pipeline, all-time high. And extremely good engagement with our clients. So the level of confidence on our growth going forward is solid.

Jatin, on question 2?

Yes. Thanks, Thierry. So Mukul, I will -- let me articulate the levers that can help us improve margin from here on. I see 6 levers. The first is clearly utilization. As you know and it is visible in data sheet before, including freshers -- so excluding freshers, you will see around 5% away from what was our peak utilization. So that's first.

Second, subcontractors. As borders and travels were difficult, all of us, and particularly us, have accumulated certain amount of subcontractors which we will be able to moderate every quarter going forward. And that should provide additional lever because the cost of subcontractor is typically about 30% higher than your own employees. So that is second.

Third and most important lever is the pyramid and fresher improvements. As you know, we have hired in FY '22 double -- more than double of freshers that we have hired in FY '21. In FY '23, we will hire another more than double, which means that our ability to correct the pyramid through consistent improvement of the base and moving people up through the pyramid would be a big structural lever. In fact, that is the only lever which can reduce the cost pressure that we have seen in last 18 months.

The fourth lever is pricing power. The attrition on one hand and our ability to position ourselves very differently. For example, the Agile acquisition puts us in a very different space of consulting in cybersecurity and the rates there reflect very differently than what you would see in a traditional managed services business of Wipro. So pricing for right services.

Cloud is another area where we have invested heavily and our ability to command price there is definitely much better than the traditional areas that we work in. So that's the fourth.

The fifth is attrition itself because one of the biggest impact on our cost structure is when you are simply replacing a similar scale and similar capability and similar experience, but you are paying premium to a lateral of 25%, 30%. As we spoke about and as you are aware, the attrition is moderating and that should certainly give us lever.

And finally, the operating leverage, as we work through, as the growth comes back, not all cost structure should go up in line with the growth of the revenue.

So there are levers. I do not want to, for a second, believe that they are not sufficient levers in our business to get back to a structural superior position from the margin standpoint.

Just if you can clarify on the wage hike part of the shift into the quarterly promotion cycle. That's all from my side.

We are not making any shift. We have said we will give wage increases on 1st September. And we have given the promotions from 1st July. And these are the areas of investment for quarter 2.

Our next question is from the line of Kumar Rakesh from BNP Paribas.

My first question was on your earlier commentary on margin in previous quarters where you had talked about a margin guidance of 17% to 17.5% for the foreseeable future and below that for the next couple of quarters. So where do we stand on those commentary and specifically about the band of 17% to 17.5%? By when do we expect our business to get back in the context of potential macro headwind in the second half as well?

So Rakesh, thanks for your question. You are absolutely right. We -- in the beginning of last quarter, we said that we will be away from the range of 17% and then 17.5% for a few quarters. That was also purposeful because we were planning to invest in the business, apart from the fact that some of the operating expenses were coming back, like travel and facilities. And those investments have been made. Roughly of the 2 percentage points, 1.5 percentage points comprises of 20 basis points for the Rizing acquisition dilution for a month or so. But more importantly, nearly 1.3% is on 3 areas: utilization, which I spoke about before; our subcontractor; and some of the internal investments where we have made in IT to make ourselves far more efficient, agile and productive over a period of time. And those investments have been made.

We said this is the bottom. And from here on, our endeavor would be to come back to the guided range that we spoke about before. However, we will calibrate it every quarter. We are not giving a time window or by when we'll come back. For quarter 2, specifically, I spoke before that we will have to invest in talent. So whatever efficiency gains we are making, it will get invested back into the business in quarter 2. And beyond that, we will talk at the end of quarter 2 rather than making a comment beyond that today.

My second question was around the Capco acquisition. So one of the rationale we had at the time of Capco acquisition was that it will give us a scale in BFSI. Also, the consulting capability which comes with Capco should help us and start delivering strong growth in the BFSI vertical. Over the last 2 quarters, we have seen that the BFSI vertical has been doing reasonable growth, but it hasn't been outperforming the industry per se. So are we still seeing the benefit yet to accrue from that acquisition in the BFSI space? Or is it something which we are happy with what we have achieved so far?

Rakesh, we are always expecting always more in terms of growth. But the reality is that our BFSI business today is growing 24% year-on-year. And I think what is very visible and comforting for us is that not only we've driven growth in terms of volume, if you like, but also in terms of positioning in those accounts. We have increased the number of large accounts. We have increased the nature -- or we have changed the nature of our relationship with our clients. And we are a lot more able to work with them on more strategic initiative than we were in the past.

So I think it's absolutely -- certainly, we can do more and we will continue to do more. We have continued to reinforce our setup, if you like, to trigger even more impact on the larger accounts. But frankly, I think we can say after a year that it's really a success. 24% year-on-year is not -- is a decent growth, I would say.

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

If I just look at one metric of revenue per employee, on a Y-o-Y basis, it has gone down by 8% in the IT Services. And this is despite a high revenue, leading companies acquired like Capco, Rizing and the Agile as a whole. So what are the reasons for the same? I do agree utilization has gone down, but that explains partly, not fully as a whole. So what are your views? Is it some traditional business has a higher pricing pressure?

No. So Sandeep, let me answer that question. If you see the overall offshoring trend, offshoring trend continues to be very favorable to Wipro. And when the offshoring trend is favorable to Wipro, you would realize -- I mean, realization is 1/3 in India. So that has definitely played out in terms of IT Services per employee realization coming down.

I am not seeing, from a pricing power standpoint, any concern where we are giving away price discounts. In fact, I would think it could be a little bit of a portfolio play. In fact, I would believe that if you adjust for offshore, you will see a strength there because we have added Capco, we added Agile, we added Rizing, which are significantly higher realization generative business by design.

Okay. Okay. And just in terms of the consulting companies which we are acquiring like Rizing as well as the Capco, and Thierry's comment about -- can you hear me?

We lost you for a few seconds, Sandeep. We heard Capco and then you...

Just a follow-up question. Yes, yes. So just a follow-up question in terms of the consulting company like Capco and Rizing. And Thierry, your comment regarding sensitivity to macro issues are slightly higher for these consulting businesses. So how flexible we have in terms of cost management within this company as a whole, both in Capco and Rizing? If slowdown happens, you believe the margin of these companies can slide? And if we try to manage the margin, do you believe we are running a risk of a high attrition as well in this company?

I tell you one thing. We have obvious levers to pull to improve the margin of our consulting business, in particular Capco but also Rizing, which is to continue to develop the offshore component of this business. And we have a lot more to do in that area. So certainly, we will do it.

And for the rest, I think we've also triggered a certain volume of cost synergies between these business. For Capco -- for Rizing, it's obviously very, very new, so nothing for now. But I think we will continue to work on those aspects as well. Jatin, do you want to add something?

Thanks, Thierry. Only additional point I want to make is these are not small businesses, these are large businesses with the right amount of governance of the profitability management where they have been in existence for a long period of time. They have seen ups and downs. They are able to carry themselves through one phase to the other. So we remain quite optimistic that right now, we don't see anything. But even if 2 years down the line, there is a downturn, we would be able to manage the cost structure quite well.

Our next question is from the line of Nitin Padmanabhan from Investec.

So Jatin, you're pretty bullish on growth itself based on the pipeline and the kind of deal wins that you've had. I just wanted some color on what you saw this specific quarter, considering that the organic growth was just around 1%. Is it the annual productivity benefit cycle that's sort of driven the weakness? Or is this something that you anticipated earlier? Or was it a surprise? Just broad thoughts and anything from a vertical standpoint would help.

Nitin, honestly speaking, for -- if I'm not from -- for 6 quarters, we have guided every quarter between 2% and 4% of growth. And for 6 quarters, we have guided -- we have delivered north of the middle of the guidance and sometimes above the guidance itself.

In early Q1, we said, this quarter, we see a little less than 2% to 4%. It doesn't necessarily reflect a slowdown. It's just sometimes because you have a deal that is starting here or the previous quarter, you had a bigger deal, or just the nature of the type of deals, you see a little less. And so we guided 1% to 3%. And we are delivering right in the middle of the guidance.

When we deliver -- when we guided on 1% to 3% for Q1, what we said, we said 2 things. We said, one, I mean, frankly, we've been delivering north of 3% for 6 quarters in a row. And you could expect that one quarter, you have a little less, and then another one, you have a little more. And second, that it was not reflecting any more profound, more deep trend of our business.

And the performance in bookings in Q1 is just confirming this. We've done really well in the business in our bookings in Q1 across all markets and across sectors. And we have a good mix of small deals, medium deals and large deals. We've closed 18 large deals. We've had 3x in terms of performance of what we had done a quarter ago. And I think it's also, I would say, it's all the efforts and investment made over the last quarter that are paying off.

And so when you combine the visibility we have on our backlog, if you like, account by account, that you add the booking performance of the quarter, I think that's how we are coming with a guidance that indeed is rather strong for Q2 of 3% to 5%.

Sure. Actually, the context of the question was that, historically, we have always seen a weak Q1 for Wipro. And the thought process was that this should sort of come down with the acquisitions in terms of that seasonality, although it has come down a bit. The only -- what I was trying to sort of understand was, is this here to stay in terms of seasonality and then should sort of slowly sort of reduce on a going-forward basis for Q1? I was thinking more from that aspect than trying to nitpick Q1.

Nitin, I'm challenging the seasonality aspect of the growth. I'm not -- I don't think there is necessarily a seasonality fatality to Q1. I don't see it, especially that Q1 is -- actually, our Q1 is Q2 for some other companies. So I don't really understand the rationale behind that.

No, no, I think don't assume that and don't assume that there is any season gain between Q1 and Q2. I think it's the flow of business that are delivered every quarter. We have done very well in bookings in Q4, but we had said at that time that it was mostly driven by smaller and medium deals. We had less large deals, okay? I think the volume of large deals -- and we all know that, the volume of large deals is driving a little more growth and that's what we are seeing for Q2.

Sure. That's very helpful. Just one quick question for Jatin, if I may. Jatin, the wage increase cycle were shifted to September. It starts September. So it's exactly the same as what it would have been if it was -- if this shifted by a quarter. That's the way I should think it? So October, November, December will be a full quarter of impact for that and the quantum of increase will broadly be the same.

The quantum of increase will be something that sort of we'll determine closer to the date as we gauge the environment. But what I want to remind all of us is that it is -- I think the wording, shifting is a little misplaced because we had our last salary increase in September of last year. It is 12 months from there. And we are giving our increases on after 12 months. So it is not a shift for majority population, more than majority population of the company.

And Nitin, if I can just build on what Jatin said. Keep in mind the fact that by now, moving from a yearly cycle of promotion to a quarterly cycle of promotion, it has also some real implication from a compensation standpoint.

Our next question is from the line of Gaurav Rateria from Morgan Stanley.

I have a couple of questions, so I'll go one by one. The 18 large deals, very strong performance. How much of that was led by improved win ratio for Wipro? Or how much is because of overall market being pretty strong for larger wins in the last quarter?

And the related question is that how should one think about the contractual profitability in these large deals? Has anything changed compared to the past in terms of gross margin coming down because of macro? Or things are pretty much stable?

Okay. So Gaurav, I'll hand it over to Stephanie, our Chief Growth Officer.

Thank you, Thierry. And thank you, Gaurav, for your questions. We've seen tremendous momentum in large deals, both in the quarter and the deals that we closed and also in our pipeline overall. The market is certainly creating these large opportunities, but we're also winning more. So our win rates are up. Our strategy to invest in the large deal team is paying off, and we're seeing a lot of momentum in the market.

In terms of margins, we are seeing margin pressure on more commoditized-type services as we compete for those. But a lot of our deals are actually more transformational in nature, where we're delivering on outcomes for clients and therefore, we can value price our opportunity.

So it's a bit of a mix right now. But as our -- as we continue to pivot our portfolio and position ourselves better as an orchestrator for our clients in delivering those outcomes, we anticipate seeing margin improvement as well.

The second question is on Europe. You talked about a couple of regions clocking more than 20% growth, but overall, Europe was, I think, 16%. So there were a couple of regions that clearly dragged down the overall growth there. So what were the factors that drove that? Is this something again related to the external environment? Or is it more a Wipro-specific phenomenon?

I'm not sure I understood. I know you -- it was about Europe, but what was the...

Gaurav, let me just chime in here from a clarification standpoint. Thierry mentioned in press meeting as well as his opening commentary that Europe remains a very strong region for us. The only reason you are seeing a slightly muted growth is Europe had a fabulous growth in Q1 of last year, which was from the 1st April onwards. So I mean, Europe was at an extraordinary base to climb on. And that's the reason you are seeing it little muted. But we remain very confident, including the deal wins that we have seen in quarter 1 as how the Europe will pan out for quarter 2.

Gaurav, Thierry, now I understood the point. So when you look at a growth per quarter at the level of region, sometimes slightly misleading because of a deal like METRO kicking in one quarter or another. You have suddenly a step change. And therefore, the next quarter is compared with a challenging baseline.

But if you look at the performance of Europe -- 2 data points. And if you look at the performance of Europe, year-on-year, it's 16% growth this quarter, so it's solid. And what we see from Europe for Q2 in terms of sequential growth is solid as well.

So we had our Board over the last 2 days. Pierre, our Head of Europe, was here. And we have had the opportunity to discuss with him also his perception on the market in Europe and so on, and he doesn't see signs of a slowdown frankly.

And again, quite the opposite. Given the volume of nice deals, new deals that he has won in Q1, the one he has in the pipe for Q2, I think there's a good level of optimism among his team at the moment for Q2 and beyond.

Our next question is from the line of Dipesh Mehta from Emkay Global.

Congrats for a decent growth acceleration outlook. A couple of questions, starting with, first, clarification. I think Jatin earlier indicated, by Q4, we should be achieving our medium-term margin aspiration. So I was not sure what your -- in earlier, one of the question you answered. Are we maintaining those kinds of outlook when by Q4, we should have normalized margin trajectory? That is question one.

Second question is about cash generation. If I look at this quarter, cash generation went fairly weak. If you can provide some sense about what played out there.

And last question is about iCORE revenue. This quarter, it is flattish quarter-on-quarter despite cloud cybersecurity is part of the service line. So if you can provide some sense what is playing out there.

Sure. So Dipesh, let me clarify that I did not say that by quarter 4, it is going to be a particular range that we mentioned before. What I said that we have bottomed out in quarter 2. Particularly, we will have -- whatever operational efficiency gains we'll get, we'll invest back into the promotions and the salary increase. And from here on, we'll continue to calibrate upwards, but we'll guide you on that on a quarterly basis rather than telling you a particular quarter or time frame around it. So that was the commentary that we have made since -- in press conference as well as in the earlier part of earnings call.

Your second question on cash, yes, it has been a slower cash quarter from cash standpoint, but we are very confident that we will catch it up in quarter 2.

And on your question on iCORE growth, there were -- a part of iCORE is also our digital operations business, which has a reasonably large presence in our -- through our HPS business, which sees a great momentum of open enrollments in quarter 4 which it did not have in quarter 1. And therefore, while cybersecurity and infrastructure business continued to do well, we had a little bit of moderation through our DOP business, purely on the seasonality of our open enrollment business. And that is the reason that there is a slight moderation there.

We'll take our next question from the line of Sandip Agarwal from Edelweiss.

So I have one question on the demand side. While the -- you have reiterated that we are probably seeing worst times behind. But if we do the adjustment for the acquisitions, still, our outlook doesn't look very exciting. So is there some conservatism which you are building in? Or you think that it is best to wait and watch and see how things pan out because of the tremendous amount of fear, which is there for the macros? That is part 1 of my question.

And part 2, when you talk to your clients now versus earlier, that is 2 years back, is there a substantial change in their mindset regarding investing in technology in the sense that do they believe that despite challenges in the macro, it will be very important for them from a long-term perspective to invest in technology so as to maintain their market share or grow their market share going forward? Or you think that, again, the dominance of cost and efficiency are on their mind rather than growth when it comes to expense? So what is your assessment?

Okay. So Sandip, so let me start with the clarification. So you're saying our guidance, 3% to 5% growth for this coming quarter, is conservative and not exciting is what you're saying?

I'm saying it looks a little conservative when we adjust for the acquisition.

Sorry for that. But I think we'll go with this guidance. And for sure, trust we will do our best to surprise you, okay?

We didn't say, Sandip -- we didn't say that the worst was behind. Actually, we've never said that it was any worse. I think we are connected with the market every day. And we are saying that the demand that we have seen in the last quarters continue to be good. So that's what we have said. This is in terms of market outlook. Frankly, there is demand for technology, expertise, capabilities, talent. And the -- in the areas that we are talking about, cloud, engineering services, cybersecurity, data, digital transformation, we have plenty of opportunities, okay?

So that is -- again, I don't think we are neither being -- we are trying to be realistic in our guidance, okay? We're not trying to be conservative nor being overly optimistic, okay? So it's definitely not our way of guiding, okay? Is that okay?

Thierry, that's okay. I just wanted to understand a little bit more about how your clients are thinking now given the current macro, the current thinking of maybe just...

It's always difficult to respond in a few minutes to a question like this because clients have different industries, different reality, different markets. But I think what's visible -- see, Sandip, a week ago, I was in London visiting one of the largest insurance company, speaking to the CEO. He has absolutely no intention to reduce the spend in technology. In fact, at no point in time in the discussion did we ever discuss the concern about the cost of technology. What they are looking for is really more the outcome, right? So what is it going to drive? So I think that's why I believe that in the way we are structuring our proposals to our clients, we are getting their attention when they can see immediate impact of the technology investment into productivity gains. It doesn't mean 100% of the programs are with that in mind, but I think there is a growing focus on this in the current macro environment.

Thank you. Ladies and gentlemen, we take that as the last question. I would now like to hand the conference over to Ms. Aparna Iyer for closing comments. Over to you, ma'am.

Thank you all for joining the call as always. In case we could not take any questions due to time constraints, please feel free to reach out to the Investor Relations team. Have a nice day. Thank you.

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