Wipro Q3 will be better than both Q1 and Q2: Abidali Neemuchwala
I would not even go to Q4 right now. I would just talk about Q3 which we feel pretty good about.
Abid, while you are upbeat on demand and largely in-line set of numbers for Q2, you are also optimistic for the remaining two quarters. Going ahead, some macroeconomic factors will influence business. Take us through the impact that you expect from these developments?
Abidali Neemuchwala: Our guidance reflects our optimism that Q3 will be better than both Q1 and Q2. The macro environment creates a level of uncertainty which we have to watch continuously. I have talked about the uncertainties around the US trade agreements -- be it NAFTA or China, Brexit and the developments in Europe -- the interest rate revisions. Rather than interest rates going upwards, they are going downwards. All of those are the macro which affect different industries. For example, the interest rate affects the banking and financial services industry primarily, but then it has a ripple affect everywhere.
The trade agreements impacted industries which have big global supply chains like manufacturing, auto industry and so on so forth. Right now, I would say that while the pipeline looks good, in our first quarter, we have a couple of large deal wins but they did not get signed. The customer told us that we won the deal but took three months to sign it. We are fortunate it got signed in Q2 and that is why we saw strong deal closures in Q2. If something like that happens in the quarter, I would not even go to Q4 right now. I would just talk about Q3 which we feel pretty good about.
Jatin, the margins trajectory has been solid and some of the gains stood in the quarters but the trajectory has been largely good but with subdued growth. Considering the next two quarters are seasonally weak even while you are upbeat about overall business, what will the trajectory look like going ahead?
Jatin Dalal: We have delivered well in quarter two within a narrow bench.
You had the wage hike impact as well..
Jatin Dalal: Yes, invested in wage hike -- incremental bench as well as big bet investments. Going forward, our focus is to remain invested for growth and hence we will do everything that is needed to deliver a superior growth trajectory. I am not calling out a particular range for operating margins, but I will just say that we have not let it go. We have remained very resilient and focussed on delivering a good outcome on margins every quarter over the last six quarters. We will remain focussed on that going forward too.
Even as you go out and make those investments in crucial areas?
Jatin Dalal: That is correct but if I have to make a choice, I will pick growth.
Bhanu, you have indicated that while digital deals are looking good there is some bit of a softness as far as capital markets are concerned. Take us through healthcare which you could see bottoming out last quarter. When do you expect a turnaround in the area of communication and manufacturer?
Bhanu Murthy: All the business units delivered positive year on year growth for us. Three of them delivered better than the Wipro average growth rates. The growth is reasonably secular. On the BFSI side, we are heavily invested in the digital transformation of the BFSI customers and with the uncertainty and the slowness that you see, there is one uncertainty overhang there right now. Consumer, where we are doing really well again with high digital option, is in line with what we are investing. So, that is a great story again.
In healthcare, we are looking at the whole business overall and we are seeing that uncertainty being overcome by the other direct investments that we are making in that sector right now. We have seen a movement around communications, we have relooked at the solutions that we have in that market and we do see a good deal momentum in those sectors right now.
Saurabh, things are really looking better as far as attrition is concerned. Talk to us about one or two factors that you have heavily invested in for a turnaround. Do you want to close this year at 15% as far as attrition is concerned?
Saurabh Govil: Abid will love it but so you know the attrition story. It has been played out over the past few quarters and it has been a well thought through thing of investing on employees over the last few quarters. As a result, we are seeing some traction today in terms of investments in salaries, bonuses, rolls, hiring, in terms of training, technology, the various things which we done across the globe. All that has now resulted in seeing that workforce, especially the junior workforce, being much more engaged and that is what is delivering results for us.
We cannot take our eyes off it. Sub 15% is what we would like to be. We are not there yet, we will keep trying it but we will definitely be in a very narrow band as we move forward. It will help deliver us from predictability to growth.
ET Now: Bhanu, while you have indicated a robust pipeline across the board, you had also indicated that as far as ramp-ups are concerned, they are taking time. Is that a trend you see continuing? How would that pan out in the next two quarters?
Bhanu Murthy: The deal closures in quarter two was better than what we saw in Q1. These deal closures will definitely lead to rampups and the execution of those projects will happen right now. The third quarter traditionally has furloughs and other headwinds. It is a shorter quarter in terms of working days. That is why you would see volume uncertainty during the course of the quarter. Otherwise, our deal execution in Q2 has been better than in Q1.
As far as sub contracting expenses are concerned, has anything really changed? Will that have on impact margins also going ahead?
Jatin Dalal: It has come down slightly, but I would call it the first step towards being more self-reliant on supply chain. But we have significant more opportunities there. Also, sometimes it is more pragmatic to use subcontracting to capture demand and then subsequently build it through our own supply chain. We will remain very practical and pragmatic around the way we use subcontractors all over the world.
Abid, you have been betting big on the digital side of the business. It is close to 40% now . When do you see this reaching 50% of the business?
Abidali Neemuchwala: I am very satisfied with both our investment and the market success that we are having. A number of analysts have rated us in a leaders quadrant or very high on our digital capability across design which we lead with user experience and then coming into agile dev ops CI/CD -- all things which determine the execution of digital.
A couple of trends in this area would be a) now digital is becoming default. If 100% of your pipeline is digital today, then soon you become 50% digital and then the percentage keeps going up as we get invited to a lot of digital deals. b)Digital is very close to business transformation. The second trend is also how you are interacting with and building relationships with stakeholders across the business. We are getting some very good success over there as we retrained our sales organisations and improved our stake holder coverage. That is an important trend as we transform to be a truly digital provider.
The guidance for Q3 this financial year will look better than last financial year?
Abidali Neemuchwala: One quarter at a time.