Wipro Ltd (WIT) 2021 Q2 法說會逐字稿

Ladies and gentlemen, good day, and welcome to Wipro Limited Q2 FY '21 Quarterly Investor Conference Call. (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.

Thank you, Aman. A very warm welcome to our quarter 2 earnings call. We will begin the call with 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 question and answers 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 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 our website. Over to you, Thierry.

Thierry, please unmute.

Yes. Thank you, Aparna. Can you hear me now?

Yes, you're audible, sir. Please go ahead.

Okay. Wonderful. Okay. So good morning, good afternoon, good evening, ladies and gentlemen. It's a true pleasure to really speak with all of you today. Since our last interaction we had in July, it was few days after I joined Wipro, there hasn't been a single day without meeting a customer. Over the last 3 months, I have met over 100 customers and more than 20 partners. Our customers are very clear. They appreciate our passion for innovation. They like and respect our values, our work ethic, our culture. They really perceive us as a partner who brings deep technology expertise, but also industry focus and collaborate with them to build business solutions.

When I was reflecting on all these meetings that I've had with them, I felt quite good about the quality really of the relationship built with our clients over the years, strong, based on solid common values, on trust in our ability to deliver on the conviction that we know them well, that they see us as a true partner working with them, helping them transforming their organizations. So the context is good.

Now let's reflect on what has happened over the last months. There's no doubt that the context for our customers has changed enormously through the pandemic. What we are observing is that while the traditional IT services will continue to be important, the next big wave of opportunity will clearly be driven by next-generation services of cloud, digital transformation, IoT, 5G. Enterprises in the post-crisis world are transforming their technology stack so that it really enables them to operate with flexibility, with agility.

A large portion of our customers feel the need to accelerate digital transformation to stay relevant. In fact, I haven't had one single meeting with a CXO where we did not discuss about the need to accelerate this transformation. Digital transformation of both the front-end to gain better access to markets, to add an additional sales channel and on the back-end also to improve efficiency and drive cost optimization. Modernization, including cloud, automation, AI is really top tech priority.

There is also, I feel, a clear flight to safety and trust has become more critical than ever in cybersecurity, in data but also in partnerships. Fewer, stronger partnership is what everyone is looking for.

A few examples of how we helped a customer accelerate digital transformation. So we have a business personal online banking customer in UAE, intending to transform not only its existing products and services but also disrupt and lead the market with new disruptive possibilities. Wipro helped the bank to transform into digital experience by deploying Digital 2.0 mobile app for retail customers.

Another example, a leading multinational oil and gas company in the U.K. who partnered with Wipro on operating model transformation for cloud migration journey. The exit of America data centers helped the customer in cloud-first strategy and is the foundational core in modernization journey of going digital.

So when it comes to engagement, our customers are clear about how they want to work. They want us to be global but they also need us to be local. While they're becoming increasingly comfortable with the virtual, the remote and distributed work model versus physical, they also want proximity with their client partners, who can then provide them the business solutions with local context and an industry expertise.

We want and we're proud to be a trusted partner to our clients in their transformation journey. And we want to enable them in achieving leadership position in their respective industries, which brings us to the charter or a set of priorities that I have drawn and we have drawn for ourselves, and I will focus on 5.

First, absolute growth focus. We will continue to invest in our existing accounts, shape large transformation deals, with best-in-class sales excellence and leverage our partnerships with large technologies.

Second is about focus on sales. We will prioritize the markets and sectors that are relevant for us and ensure we are in leadership position in our chosen markets.

Third, in terms of offerings, we will continue to expand our presence beyond IT office, structure vertical solutions, leveraging our ecosystem of partners, both the large technology players and the start-ups.

Fourth point is about talent. We will invest in specific capabilities, such as domain expertise, digital transformation architects, large program managers, technology experts; invest in talent to reinforce innovation, business understanding technology skills. We will reinforce a high-performance culture to build the champions league of talent.

And finally, fifth point is about simplification of our operating model. We need to be agile and empowered at the age which means a leaner organization completely centered around our clients.

I know you will have plenty of questions. We plan to do an Analyst and Investor Day sometime next month, and I will share more details then, right?

Now let me now give you all a quick update on Q2 '21 performance. We had an excellent quarter with growth on revenue, expansion on margin, lower employee turnover and solid growth of operating cash flow. Looking at the revenue, the revenue growth of 3.7% in reported terms and 2% on constant currency terms was broad based. It was led by a robust pickup in volumes. The fresh volume we added has been highest over the last many quarters. We also hired over 13,000 people during the quarter.

Our stated guidance for Q3 '21, despite the seasonability of silos, reflects this business momentum. From a sector view, consumer sector will grow faster on the back of solid deal wins. We remain also optimistic on financial services, though it will be impacted by furloughs. Energy and utilities and technology sectors will return to growth in Q3. And finally, communications, manufacturing, health care and life science will continue to grow moderately.

If we look at the demand environment, it has improved from Q1, no doubt. The intensity of sales activity continue to rise, and the pipeline is robust. The overall pace of decision-making has improved, though I find it still a bit slower on the larger ticket hunting deals.

Now looking at the margin. We expanded our operating margins during the quarter by about 20 basis points to 19.2%. This was definitely led by operational improvement of about 80 basis points, offset by 60 basis point of impact of appreciation -- of appreciating rupee, a higher offshore mix, improved utilization, lower employee attrition and the benefits of lower subcontracting headed the operational improvements.

Besides, we continue to emphasize on employee safety as most of our employees continue to work from home globally. I want to, by the way, thank them all for the incredible hard work and tenacity which has helped us deliver these results. I'm quite excited, frankly, about the opportunities that lay ahead of us and very encouraged by the acceleration in business momentum we have seen this quarter.

With that, I hand it over to Jatin for his comments on the financial performance for Q2 '21. Jatin, over to you.

Thank you very much, Thierry. So good evening, good morning to all the participants who are joining us on the call. It has been a very good quarter of execution. If I can take you back to the beginning of the quarter, we had mentioned that we are looking at a stable quarter in quarter 2, and we have delivered a 2% sequential growth in constant currency. As we look at quarter 3, we have guided for 1.5% to 3.5% in constant currency. That is reflective of some of the momentum in volume adds that Thierry spoke about.

From a margin standpoint, we had mentioned that we will keep our margins in a narrow band excluding the impact of currency, but we have been able to offset the adverse 60 basis point on account of appreciating rupee and still delivered 20 basis point expansion of margin at 19.2%.

If you see our cash flows, the cash flows have been quite robust. We delivered 127% of operating cash flow as percentage of EBITDA, and our free cash flow was 164% of net income. As a result, at the end of quarter 2, we had a net cash of $4.6 billion. If I talk about ForEx performance, the rupee appreciation did impact our realizations. We delivered INR 75.12 for every dollar in quarter 2.

Overall, I want to also talk about 2 more things. First is about the buyback. We have delivered -- we have announced that the Board has approved, subject to the shareholder approval as well as the regulatory approvals that may be appropriate, a buyback of INR 9,500 crores, excluding the tax impact. If you add back the tax impact, that number is around INR 11,600 crores, which is higher than the number that we had considered for buyback in our last round. Overall, we feel that this is a great return of the cash to our shareholders. $1.3 billion of buyback to the shareholders and another roughly $300 million of tax costs if I include, then $4.6 billion would be roughly $3 billion, and I think that is something that we should keep as part of our strategic flexibility.

I also want to talk about an exciting acquisition that we have announced today. Eximius Design is one of the leading players in VLSI and system design space, and we would be very happy to welcome them as part of overall Wipro Engineering Group during the course of quarter 3.

Overall, we had good quarter, and we are looking forward to continuing to execute in quarter 3 as well.

We will be happy to take your questions from hereon. Thank you.

(Operator Instructions) The first question is from the line of Ankur Rudra from JPMorgan.

Congratulations on solid execution, and great to see a strong guidance to the December quarter. Thierry, thank you for your brief comments on the change -- or the strategic direction you highlighted. Could you perhaps elaborate on what your early thoughts are on which sectors or market where you see potential to take leadership? And any thoughts on the period over which you can see this happen? Also, incrementally, on your fifth point, where do you see scope for simplification of the operating model to drive external focus and perhaps the related increase in large deal participation?

Yes, absolutely. Thank you for the question, Ankur. So if I look at the first one, which is really around the -- your point was on the simplification of the model and then on the market of focus -- area of focus. So if I look at the market, yes, the point here is clearly to say we are a global player, but we cannot equally focus on all markets and all sectors with, I would say, the same level of intensity. Because then what happens is that you are spreading the investment across a huge market, and you're having a smaller impact than if you are really focusing on the ones where because of their size or because of your relative strength, you can really have an impact. And so let me give you a few examples. So for example, model is Wipro has a strong position in the banking and insurance sector. We are a strong player. We will continue to increase focus in this sector.

Second, if I look at markets, there's no question that the U.S. market is the #1 market, and we'll continue to invest in this market. If I look at the European market, there is a market, German market, where we have a reasonably strong position, but where we can really go stronger if we really focus our efforts. So this is really more looking at the places where we feel we can have a true leadership position.

I will give more details when we meet, I think, at the Analyst Market Day. But frankly, you should consider that typically, sectors like banking and insurance, consumer and retail, energy, utilities, health care are sectors incredibly important for us. And then we will define for these sectors, the markets that matter the most, where we feel we can build a leadership position. So that is for the first question.

For the model itself, for the evolution of the model. One, I would tell you that there is no organization in our industry who is not exposed to the level of complexity that is driven by the size of our teams. Thousands and -- dozens of thousands of employees is driving complexity. I usually find beauty in simplicity. And so to give you a feel for the direction we are taking, it's better to be simpler than being perfect, okay?

In terms of model, what is critical is that you have a model that is centered around the clients. That radius internal barriers reduce the number of P&Ls because P&Ls are driving individual focus. And what you need as an organization is to be able to mobilize all forces of an organization for the benefit of one client. So fewer P&Ls, fewer teams, fewer metrics. We don't need hundreds of KPIs to follow our operations, right? So that is for the organization.

Then we need to work on the processes, simplify the processes, simplify the different steps of controls. How can we have less controls, how can we have less people focusing internally and free up time for the market. And finally, obviously, it's about systems. So how can we have a program launched a few years ago, called Quantum, who is really aiming at driving efficiency in our systems? And that is also going to drive a lot of simplification of the model itself. When you combine, refine model, simplified processes, set of processes and more efficient system, it's inevitably driving simplified -- simplification across the organization, a greater sense of accountability and more time for the market, less time for the internal.

That makes a lot of sense. If I could just get in one more question. Just on thoughts on the quarter itself. It appears that a lot of growth was there in the operations part of the business. So I just wanted to get a sense how much of this was supply resumption versus truly demand improvement?

Jatin, you want to take this one?

Yes. Ankur, I would say this is a real growth. This is driven by the ramp-up in some of our new and existing customers. So it is not just resumption of supply. In fact, I would say that a very small component of this 8% odd growth that you are seeing is resumption of supply. It is market-led healthy growth that we will -- we are confident of sustaining and growing further.

Yes.

The next question is from the line of Sandip Agarwal from Edelweiss.

Congratulation on a very good execution and also guidance. Okay, I have only 2 small questions. One is that if we, say, see our business mix, we are almost having more than 50% business, which is in the high-growth space, and it has been further probably triggered by the pandemic, like digital operations, cloud, infra, and data and analytics. Now if I see this with the number of clients we are adding, and this has been a very aggressive number in the last reported quarter which you have reported today, my sense is that is the business somehow moving towards more democratization or disintermediation of the intermediaries?

What I'm trying to ask here is that I understand that we are in B2B business. But if the number of client additions increased so significantly because of the nature of the business or because of the nature of deals becoming smaller, will it mean that going forward in the long term our volatility in the business or lumpiness in the business will start going down because we are basically directly enabling our customers which are businesses to service their customers, so in a way, there is more democratization of the decision-making process? So that is number one. And number two, I just...

Sorry, Sandip, your audio is breaking, sir. We have lost.

Yes, sorry. Am I audible now?

Yes.

Yes. And the second question is that on the application services, what is your strength? How will it pan out over the next 2 years? Because although we have very good exposure with (technical difficulty)

I'm sorry, sir. Your audio is still breaking, sir. I would request you to come in [later], please.

I am actually not using any speaker phone or something. I'm on hand. But yes, so to complete the question, just that the application services, if you can give some outlook for the next 2 years, what would be the sense on that? I'm not asking for numbers. I'm just asking for qualitative input.

Okay. So the first question I will try to respond. The second one, if moderator, you can -- because I'm not sure to have fully understood. There was a lot of breakup. So if you can clarify that would help me. I will respond to the first one, to start with. So there is no question that there is an evolution of the business mix, and it will continue to occur over the next quarters because, as I said, the pandemic is -- if anything, is increasing. The speed -- the need for speed in driving transformation from our customers -- for our customers. I have spoken to all these clients and all of them -- I haven't had one single client meeting without having a discussion on the need to transform the business and really accelerate the plans they had built in the previous months or quarters to transform their business, front-end and back-end.

So there is no doubt that they will continue to accelerate. Cloud agenda will become even more strategic. I was not having a cloud discussion with a lot of CEOs of large companies some years ago because it was more infrastructure-led discussion with the CIO. Today, every CXO understands the impact of and the need to accelerate the cloud journey. And we are responding to that. We are shifting. We are rotating our portfolio in every of our service line.

If we look at our offerings, we have an acceleration, and we are really focusing the rotation to what I would call the new space to really match the expectation of the client. You were then making a link with the increase of number of clients. And here, I'd like to tell you that, that includes now the acquisition of 2 companies, 4C (sic) [Weare4C] and IVIA, who are dealing with smaller clients in size, and so that has brought some new clients as well. I don't think you should read anything from that in terms of the more clients and smaller in volume. That's not the reality, I don't see. We continue to have the right volume of deals with our top clients, and the pipeline is actually very healthy there. So I think -- I don't see a shift here. Moderator, can you help me with the second question?

Yes. Sir, my second question was, what is your view on the application services? How will it pan out? I'm not asking for any quantitative guidance, but I'm just asking your view how the application services will pan out over the next 2 years? Do you see growth? Or do you think that it will stabilize here? What is your sense on that?

No, no, no. This is going to be growth application world. It's going to be growth. There's so much to do around data. There's so much to do to shift. A lot of the applications, migrate them into the cloud to really develop cloud-native applications. If you look at typical S/4HANA projects, they are -- we are not even touching yet the acceleration that will happen over the next few years. So I am really bullish on the fact that the applications world is going to grow well over the next years as well.

The next question is from the line of Kawaljeet Saluja from Kotak.

Congratulations on a reasonably good quarter and a pretty good guidance as well. My first question is for Thierry. Actually, the first couple of questions are for Thierry. The first question, Thierry, is that the set of priorities that you have announced requires changes on multiple dimensions, whether on all structure, people, possibly even go-to-market approach. Now can you please share your high-level thoughts on the potential changes that one can look at?

And the second question is that you mentioned that lesser number of P&Ls is one of the goals to bring in our simplification, which actually runs contrary to the conventional wisdom in which as you gain size you break the organization down into smaller units to create or to retain agility, of course, with clearly defined KRAs. So I couldn't completely get the perspective -- your perspective on when you say that you have lesser number of P&Ls, I mean how does that bring in agility. So just your thoughts on these.

Okay. Okay. Perfect, perfect. Okay. 2 good point. Thanks, Kawaljeet. So looking at the first one, which is about the priorities. Your point is those priorities require change. And yes, they do. Yes. And I think it's the reality in our industry we must be in the state of constant change. We are constantly challenging the way we are addressing the market, the way we are working and the way we can be more agile. There is -- I always take the example of the number of layers and the span of control is in an organization like ours, and I'm not speaking for Wipro. Whatever the organization I'm in, this is something if you're not keeping an eye on it, it will constantly drive -- it will increase.

You will have more layers of leadership with people controlling -- controllers, and you will have a lower span of control of people managing very small teams and so on. And so you need to constantly challenge your engine. Me joining the organization, I think it's very healthy to, obviously, look at the organization and the way we are working with a fresh pair of eyes. And I find the organization extremely receptive and really, really positive about keeping what makes us so strong and so -- having strong relationship with our clients but also having an incredible strong identity internally, which makes the people of we call loving the organization but also identifying what can be refined, where we can drive improvement.

The -- if you look at the 6 priority -- or the 5 priorities -- sorry, there's only 5 priorities. They do drive some change, but I don't think it's breaking any of the way we are working today. It's actually going to improve, redefine free up time from internal for more time for the clients and keeping the focus for the clients. If you look at the 5 points, it's all about the client. The way we are leveraging and investing into our existing accounts, the way we are developing a strategy and a team that can go after large deals, bringing expertise in commercials, in negotiation, in managing complex programs in following different cycles because this is a very long process usually to drive large use.

All of that will come to an addition to what we have and clearly will certainly allow us to have better results. Same thing for the partners. It's about connecting with the partners, but connecting in an aligned fashion with a strategy road map, if you like, in terms of directions but also in terms of ambition. And I think it's all about connecting day-to-day and working with partners on real opportunities. It's not at the corporate, at the design level.

If you look at the focus and scale which is looking at the sectors in the market where we want to have an impact, it's the same thing. It's about saying which one matters to us today and where we feel we can really, really increase our chances of winning and find more growth and put more stake into it, more -- align our efforts as opposed to spread them around. I think it's the same focus for the market. I can go through the last 3. I mentioned the simplifying the operating model, which is about spending less time internally. I'll come back to your second question. But if you look at talent, it's also important, and I think when you have a talent agenda, it's about constantly thinking about, okay, do we have the best team? How can I improve the quality of my team? How can I unleash the potential of our teams? How can we give them more power, more responsibility, more accountability so they can have a bigger impact, but also how do we invest into them? How do we grow them? But also how do we bring talent from the outside? All of that is obviously driving change. There's no question on that.

On your second point, on the less P&Ls and your point around smaller volumes. Agility comes -- the necessity in our industry is to get the people who is the closest to the client having the power or having the power to make decisions, whether it's about adjusting the offering or the solution to be -- to meet the expectation of the client or whether it is to deliver quality for the customer. And the rest of the organization, you need to align and support this client team to make sure that we are not only able to produce good offerings or good solutions, good proposals, but obviously win them and deliver with great quality.

P&Ls do not matter to our clients. P&Ls are operational needs to control the operations and drive processes and alignment from an internal standpoint, okay? So that's where I see the difference to me. P&Ls are obviously needed to really manage our operating models, to manage the performance, to control the cost. But the client doesn't need it to see that. He does not rely on P&Ls.

And then my second point on P&Ls, 25 years in this industry, I have been wrestling with this question multiple times, as you can imagine. Every time you have one P&L more, you create one wall more in the organization, okay? So if you want to have a small unit and with a P&L for each unit, you're going to have many, many walls, and everyone will have his own agenda and go after his own client with his own offering, and that's not Wipro. We want to have One Wipro in front of our client selling everything we have and giving access to the client to every assets we have, leveraging all the best talents we have. And that is the philosophy we are going after and that is absolutely in line with the objective of agility.

That makes a lot of sense. Appreciate your insights. But I mean, I'll just squeeze in one more question. This for Jatin. Jatin, given that buyback is nothing but -- the tender buyback is nothing but an alternative form of dividend distribution in which the price really does not matter that much. I was just curious why you're so stingy with the premium to the current market price on the buyback as such?

I thought, Kawaljeet, you would say that we have been very spontaneous about it, but you are not mentioning that. But I will respond to that in a way -- we looked at both 60 days weighted average movement -- volume weighted average stock price movement. And since the share price has done well, that has been one consideration. And the second one is compared to the previous calls, which was yesterday, what should be the price and that's how we determined. The third factor which also plays is the accretion at EPS level, and which is quite a moderate, a small number, even at this price and that we wanted to keep it. So these are the 3 factors which have played out, Kawaljeet, in our decision of the share price determination.

Okay. My objective was not to be critical. I was just curious more than anything else. Yes. Nonetheless, great job.

(Operator Instructions) The next question is from the line of Pankaj Kapoor from CLSA.

Congratulations on a good quarter. Thierry, of course, we will look forward to a more detailed overview on your business plan next month. But just a couple of points before that. First, I mean the changes that you're planning to initiate, if these are just incremental in nature, then you think just tinkering may not really help Wipro bridge the kind of a differentiating growth that it has versus companies with -- versus the peer groups. And conversely, if you are indeed planning more structural sweeping kind of changes, then shifting the focus to internal issues in the current environment may again not be the most sensible thing to do. So I'm just curious how you are planning to balance these -- balance the approach between these 2 extremes? That's the first question.

Yes. Pankaj, thanks for the question. I mean that's what I've tried to articulate in couple of questions. There is no doubt that -- a couple of things, one is change is okay, and we are going to make some changes, and I've never hide it. And I've said after a few days, we're going to make some changes and that's okay. Changes are fine. In our industry, we must be able to constantly challenge ourselves and make changes and adapt to the evolution of the market, to the evolution of the industry. And we are in an industry that is changing rapidly.

But you're absolutely right. We don't want to have people spending their time internally. It is definitely not the right thing to do. That's why, for me, when I look at actions, it's all about the market. It's all about clients. You do not see the 5 points me telling you we are going to cut costs here and there. I'm not saying we are going to spend hours and weeks and months in mobilizing the teams to reflect on who we are and where we are going and so on. This is not at all. It's all about the execution. It's all about the execution in the field. It's all about connecting with the client, okay?

What we are doing through these 5 actions is basically enablers. It's actually weapons. It's arming our teams, our client teams, whether they are sales or whether they're delivery with things that they did not necessarily have with the same level of efficiency in the past. And they will have it, and they will be stronger. And that's really how I see it. So at the end of the day, there is more intensity in the field it has ever been. And that's obviously not me saying that. This is my colleagues telling me that. This is the feedback I'm getting from speaking to the teams.

Over the last 3 months, I have connected internally with not only with clients, I have connected with a lot of our employees. I have had multiple, obviously, Town Halls -- I mean virtual Town Halls, as you can imagine, multiple calls with the vice presidents, the level below, the management teams, the different groups, senior and more junior, constantly connecting with people, including groups of very, very junior people that I'm speaking to every week for 1 hour and really getting their feedback.

The focus on the market is greater than ever. There is intensity. We measure that. We track that. We really expect from everyone to hit the market every day. I have a simple philosophy. I never do one day without a client, whatever it is, even a day like today, at least 1 client in the day. And I expect the same from my leaders. I expect the same from all the people that our markets facing, connecting with the client every day, listening to them, understanding from them what are the priorities and obviously, acting and be proactive.

If you look at the 5 points that I have elaborated, and I'll tell more obviously about them when we are together, but clearly, it's about equipping the greater sense of focus doesn't keep you away from the market, right? Having a big bill team doesn't keep you away from the market. Continue to invest in talent doesn't take you away from the market. So all of that is going to -- and actually simplifying the organization will certainly not make the people more internally focused. What makes them internally focused is having endless rounds of controls, of reviews, of internal meetings, of events. And the second thing is, if the model is leaner and simpler, you actually have a simpler accountability, you have more responsibility. You're not wondering always if you have the power to make a decision or not. You just go, you do it and you move forward. And I think it's driving agility. That is the objective.

Got it. So just for the second part, Thierry, does your changes -- are you also envisaging some investments to be made as part of this restructuring? And if so, any quantification of the investment that you would like to make?

Investments to be made in restructuring. I don't expect -- again, it's not a cost-cutting exercise. We are organizing, we are gearing up our growth engine. So this is clearly the focus. I'm more speaking about choosing the places where we want to invest and focus investment there as opposed to spreading the investment. That's more how I see the things. I'm not saying you should not expect a dip in the bottom line while we are working on that. That's not the point. The organization is more -- it's more about really choosing where to place your investments and place twice more where it matters rather than one a little bit everywhere.

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

Congratulations on good execution and the guidance as a whole. Thierry, just first question is in terms of the simplification of the process. Do you believe that process may require a higher lease time or it could be contrary where you can achieve a faster achievement of the goals, which you desire as a whole?

And second, in 5 of your priorities, there is, I think, no mention about the profitability focus. So will this -- assume that there could be -- simplification may lead to more flexibility on the commercial aspect of the growth and hence, in the near term to actually gain the lost wallet share we can compromise a bit of a margin just in the near term, while on the medium to longer term, we once win the lost wallet share, we can come back on the profitability?

No, no, no. So I'm not sure I fully understood because your tone was going a little bit down on the first part of your question. So if you can explain or remind me, but I will cover the second one. No, I'm not a believer of -- we focus on growth today and productivity -- or profitability will come tomorrow. I always communicate on profitable growth. I believe that this -- profitability is discipline. It's like cash management. And so you should never lose sight of your margins. Could it be that when you go and get a very large deal, you have a slightly lower profitability level? It's a possibility, but that's not at all as a strategy. It's not at all we are saying, okay, we are going to focus on growth now and profitability later. No, no. We do focus on both, and we are -- we've said it, Jatin has said it, we are going to -- we are communicating on the growth 1.5% to 3.5% for Q3. But we also don't expect the margin to drop from where we are.

Can you remind me your question number one?

Yes. Just in terms of implementation of your strategy, which is more on simplification, do you believe you require a lead time? Or you believe simplification actually can be implemented fast and there will be a faster achievement on the results?

It depends. We have different streams, and we have some fix that can be done rapidly, some takes a little more time. Usually, my philosophy is processes can be fixed rather rapidly. System takes a little more time. People take a little more time again, even more time because -- so it's more attention to change management. It is obviously working in-depth on systems, and it's identifying the processes where we can simplify sometimes leverage technology, of course, but also review the different steps and see how we can make it more agile and more efficient for everyone.

So at the end of the day, some can be fixed rapidly, some will take a little more time. This is the road map we're going to work on.

Okay. Okay. And just last question, overall, in terms of cloud and infrastructure, which contributes as big as 25% of the Wipro's revenue, most of the peers are saying that the demand recovery, rebound acceleration has been largely driven through migration to the cloud. Despite Wipro being a sizable player, we are not seeing that Wipro is benefiting out of the same. So what is the strategy behind that?

Yes. I think what we have seen is 2 things. We've had an acceleration of our cloud business, but we've seen also a reduction of our legacy infrastructure business. So I think you really have 2 trends that are different. And you should see a better growth on the cloud side in the quarters to come because, I agree, there is an increasing demand. There's no doubt.

(Operator Instructions) The next question is from the line of Diviya Nagarajan from UBS.

Congrats on the good execution during the quarter. Thierry, my question to you is you have outlined your strategic priorities as well as your outlook on balancing profitability with growth, but what kind of a time line are you looking at for this to play out. In the sense that what is the time period looking at for the organization to come back on a sustainable accelerated revenue growth rate?

Yes, that's a good question, Diviya. This is a good question. There's no doubt. So you remember, last quarter was my first time with you in this role. I could only comment on an expectation of stabilization for Q2 and even want to project ourselves and guide for Q3. So Q2 has turned to be a rather good quarter, and we are now in a position to project for Q3. I'm not projecting and guiding beyond. So that is clear.

But it doesn't mean that we are not working on a trajectory that goes beyond the quarter. The objectives are being clear. The objective is to resume, to get back to the level of growth of the best of our competitors. And we will get there. How many quarters will it take? Future will tell, frankly. I'm not in a position to tell you it's going to take X or Y quarters. But we will gear up driving those 5 pillars. We will see how we are getting there. But I'm very confident that we will be there at some point in time. Quarter-after-quarter, we will reduce the gap.

Fair enough. I'll probably try a different angle when we make the strategic discussions.

Sure.

Just a couple of bookkeeping questions, maybe Jatin can take this. What is the inorganic component embedded in the Q3 guidance? And secondly, what's the thought on wage hikes, either system-wide or selective that you're planning?

Sure. Jatin, you want to take this one, or Saurabh?

Yes. Jatin will [take the first one].

Yes. So Diviya, there is 2 things. One is that the acquisitions which are already done, they are in the run rate, they have been factored in the guidance there. As you know, they are very strategic, but they are not like large acquisitions. So we are not calling that number out. And similarly, Eximius that we have announced is going to get closed in quarter 3. So whatever it comes, we have factored in the guidance. Again, we are not calling out these are not large acquisitions, which swing the numbers meaningfully.

And Diviya, to your -- on wage hikes, number of employee interventions planned in Q3, one is that we will be doing promotions for eligible population out. It is 80% of eligible population. And the increments, which we will give them would be what we gave last year pre-COVID 8% to 10% offshore and 4% to 5% on site. So that's what we'll do. Second is we will also take care of the freshers we've hired and their increment. So these are the actions which we were taking and ring-fencing critical employees. So all our high performers, good talent people, we will make sure we are taking care of.

Sorry, and this is effective 1st October of this year. Is that correct?

1st December. 1st December.

The next question is from the line of Sudheer Guntupalli from ICICI Securities.

Thierry, first of all, congrats and all the best for your new innings. For quite some time now, Wipro has been targeting to reach industry matching organic growth rates. Now that you have finished your deep dive into the underlying potential of the company and articulated your strategy changes, et cetera, how confident are you on driving Wipro towards that goal post over the next like, say, 2 to 3 years? And what are the challenges you anticipate in your journey?

Sudheer, I am confident. I am confident because I know well this industry and I know that there is nothing that is a miracle in this industry. But when you apply a certain level of discipline around the key drivers of growth, you get growth, okay? Wipro is a very strong organization. It has all the assets it needs. We have wonderful people. The values of Wipro are unique, and our clients know it. We are working with a unique sense of purpose that has been transmitted by the founders. And frankly, we have very strong assets.

I am absolutely confident that working on these different axes, we will continue to accelerate. And I think that is what is required. There is no -- I don't think there is a -- nothing in these 5 priorities are going to go up against each other. There is a complementarity and alignment. When I speak to the teams, I feel that there is a very, very positive mood, and people are really excited to engage on those fronts. And so at the end of the day, I am confident. Absolutely.

Sure, Thierry. While I do understand and agree with your response to your previous question on how P&Ls do not matter much to the clients, as we reduce the number of P&Ls, and as I understand that it may lead to some sort of reversal of the current level of delegation in the organization. In that case, or in that picture of a centralized One Wipro, don't you foresee the risk of, let's say, internal bureaucracy increasing? And some of the erstwhile owners of P&L actually becoming disgruntled. I'm asking this question because one of our close competitors who had been very successful, often side their highly delegated organization structure as one of the key reasons behind their success. And last part of the previous question, which is the challenges that you foresee, sir?

No, no, I'm a believer of power in the field. I'm a believer of decentralized power. Alignment centrally, power decentralized. This is how you are driving entrepreneurship culture. And where you're empowering people to make decisions, people are good, they are moving forward as opposed to having organization that are frozen because people are waiting for someone at the center to make a decision.

So there is no doubt, in my mind, that the decision must be the closest to the client, the closest to the field the decision must be. It doesn't mean that this is a big democracy where everybody is doing what he wants. That's the power of alignment. That's the power of alignment. That's why creating a One Wipro where there's a common strategy, there is common objectives set, there is a clear understanding from every one of the directions allow people to really understand each of those targets. But the people who are in front of the client must be able to make decision to react and to move ahead. So I hope I'm -- I hope you follow me. For me, there is no question that the power -- the decentralization of the decision process is critical to drive a culture of entrepreneurs and accelerate the speed of decision.

Sure, Thierry. Any challenges and risks that you see for your changes or for your strategy?

Thank you.

Ladies and gentlemen, that was the last question for today. I'd now like to hand the conference over to Ms. Aparna Iyer for closing comments. Thank you, and over to you.

Thank you all for joining the call. In case we couldn't take your questions, please feel free to reach out to the Investor Relations team. All of you have a nice day. Stay safe. Thank you.

Thank you very much. Ladies and gentlemen, on behalf of Wipro, that concludes this conference. Thank you for joining us, and you may now disconnect your lines.