Ladies and gentlemen, good day, and welcome to the Wipro Limited Q4 FY 2023 earnings call. As a reminder, all participant lines will be in the listen-only mode. There will be an opportunity for you to ask questions after the presentation concludes. Should you need assistance during the conference call, please signal an operator by pressing star then zero on your touch-tone phone. Please note that this conference is being recorded. I now hand the conference over to Mr. Dipak Kumar Bohra, Senior Vice President, Corporate Treasurer, and Investor Relations. Thank you, and over to you, sir.
Thank you, Yashashri. Warm welcome to our Q4 FY 2023 earnings call. We will begin the call with the business highlights and overview by Thierry Delaporte, our Chief Executive Officer and Managing Director, followed by a financial overview by our CFO, Jatin Dalal. Afterwards, the operator will open the bridge for Q&A with our management team. Before Thierry starts, let me draw your attention to the fact that during this call, we may make certain forward-looking statements within the meaning of Private Securities Litigation Reform Act of 1995. These statements are based on management current expectations and are associated with uncertainties and risks, which may cause the actual results to differ materially from those expected. The uncertainties and risk factors are explained in our detailed filings with the SEC.
Wipro does not undertake any obligation to update the forward-looking statements to reflect events and circumstances after the date of filing. The conference call will be archived and a transcript will be available on our website. Thank you. Over to you, Thierry.
Dipak, thank you. Hello, everyone. Thank you for joining our quarterly earning call. Joining me from Bangalore today is our CFO, Jatin Dalal, our Chief Growth Officer, Stephanie Trautman, our Chief Human Resource Officer, Saurabh Govil, and our Chief Operating Officer, Amit Choudhary. On this call, we want to share with you the details of our annual results, as well as our fourth quarter performance. I will share highlights of our sectors, markets, service offerings, and an overview of the demand environment. Finally, our business outlook for the quarters ahead. Of course, happy to also take on any questions you have for us. Starting on FY 2023. We closed FY 2023 with the strongest ever bookings recorded in a year. Our bookings in total contract value terms grew over 28% year-on-year.
We finished the year with two consecutive quarter of total bookings of over $4.1 billion each. Our revenues, they grew 11.5% year-on-year in constant currency terms, putting our full year revenue at $11.2 billion. Our operating margin for the year was 15.7%. The cash conversion was at 115% of net income versus 91% in the previous year. Our transformation journey continued in FY 2023. We made several strategic investments and acquisitions, and we've added new capabilities. Whether it is our account strategy, the large deal approach, or our sector and market mix, there's a clear and obvious difference between the Wipro pre-2020 and the Wipro of today.
Our top accounts are bigger in size, we have a more diversified pipeline, and we continue to make bold investments in talent to support our future growth. Now, coming to Wipro's performance in the fourth quarter. Total bookings for the quarter were $4.1 billion. In total contract value terms, quarterly bookings grew by 47% year-on-year in the Americas 1 strategic market unit, and by 33% year-on-year in Europe. The revenue for the fourth quarter was up by 6.5% year-on-year in constant currency terms. Sequentially, revenue declined by 0.6%. This is mainly due to the uncertainty in the market and the resulting slowdown in discretionary spending.
Our operating margin for the quarter was 16.3%, that is 60 basis points higher than the full year margin of 15.7%. Our IT Services profit was highest ever in absolute terms. Our CO team, under Amit's leadership, has brought in new rigor to the way we approach operations, the way we enhance delivery, drive client experience and efficiencies. We are already seeing the impact. Our utilization rates improved to 81.7% in Q4 from 79.7% in the previous quarter. Looking at earnings per share, EPS is expanded for the third consecutive quarter. We reported EPS of INR 5.61 for the quarter. Now, turning to our sectorial performance.
All four of our strategic market units recorded over 10% revenue growth for the full year in FY 2023. In Americas 1, revenue grew 6% in Q4 and 13% for the full year in FY 2023. There, growth was led by healthcare and medical devices at 10%, followed by consumer goods and life sciences at 8%. Americas 2 market grew 4% year-on-year in Q4 and 10% for the full year as well. Energy and utility revenues grew 8% during the quarter. Securities, capital markets, and insurance grew 7% during the quarter. We are seeing some softness in the banking and financial services space, no doubt, and in consulting due to the current macro environment. The bookings in terms of total contract value grew 27% in Q4. These are all year-on-year comparison figures, of course.
Third market, our Europe market unit delivered a year-on-year revenue growth of 9% in Q4, 12% for the full year. Growth in Europe was led by Southern Europe and Germany, which grew over 30% and 20% in Q4 respectively. Finally, revenues for the APMEA market unit grew at 8% year-on-year in Q4 and 10% for the full year. There, Southeast Asia grew above 25% year-on-year, and Middle East is growing in double digits as well. For the full year, bookings in TCV terms are looking healthy with 20% year-on-year growth. Also have ambitious growth plan for India. In fact, you should know that we have significantly improved our quality of revenue in our state run ex-enterprise segment over the last couple of years. With that, we have decided to merge that segment with our IT Services segment starting Q1 2024.
Now let's look at the performance from a service offering standpoint. Our iDEAS global business line grew 7% year-on-year in Q4 and 14% for the full year. Most of the service lines showed a healthy year-on-year revenue growth led by C loud Transformation, which grew 22% year-on-year and Apps & D ata grew 18% year-on-year. Our iCORE global business line grew by 6% year-on-year in Q4 and 8% in fiscal year FY 2023. Digital Operations and Platform led the growth with 7% year-on-year for the quarter. Against a weakening macro environment, our results underscore the efficiency and the effectiveness of our transformation and growth strategy and of how far we've come in just under three years. We are not only winning at a higher rate in the market, but the nature of the deals we are winning is changing.
Today, we have 19 $100 million accounts compared to 11 in fiscal year 2021. We are winning large transformation deals, benefiting from the consolidation in the marketplace, and expanding our relationships with existing clients. As an example, we expanded our long-term relationship with a multinational insurance company through a strategic transformation initiative. The growth-oriented initiative will enhance customer experience, simplify and digitize operations, and lower the cost to serve as part of a 10-year partnership. In another example, Wipro was selected by a leading global and professional staffing services provider to help them transform into a shared services product platform operating model. The new operating model will help accelerate the simplification of technology, applications, infrastructure, and risk management. Here, again, leveraging cloud as a key enabler for business scalability and agility.
In many of these deals, we are bringing One Wipro capabilities together in brand new and innovative ways, including introducing a product platform mindset and combining experience platforms and operations to drive business outcomes. As market conditions soften, we are deploying advanced technologies to help clients better manage costs and anticipate risks. We are building resiliency here and efficiency for our clients' businesses. For example, we've been selected by a leading North American financial institutions as a strategic partner for their data-as-a-service platform to accelerate their cloud migration. We will leverage our data analytics and artificial intelligence accelerators to expedite this journey and bring cost benefits. Our partnership strategy is yielding good results as we continue to build capabilities jointly with our strategic partners and drive large, complex deals.
The share of partner bookings as a percentage of our total bookings rose from 25% in FY 2020 to 44% in FY 2023. We believe our new organizational model of four strategic market units and four global business lines will further improve our market position. Organizing around our strategic priority areas, cloud, enterprise technology, engineering, consulting, will give us the agility to adapt to changing market conditions but also innovate even faster. Wipro FullStride Cloud is a significant growth driver for us, no doubt. Now, as a dedicated global business, it will accelerate growth, innovate with partners and clients, and deliver on the promise of cloud via differentiated futuristic capabilities. Our new enterprise featuring global business line will combine our enterprise technology platforms and enable digital operations and security.
By leveraging data and artificial intelligence as well as immersive technologies, this GBL will build a distinctly forward-looking view into our clients' operational and technology needs. Let me now turn to our most important asset, our people. In a highly dynamic business and technology environment, building the right skills across our organization is more important than ever. Over the past year, we've trained over 50,000 employees in demand-driven skills. Next -Gen Associates, formerly called freshers, continue to be a critical part of our talent strategy. The renaming of this group of colleagues is actually a reflection of their value to our business and of our commitment to their success. We hired over 22,000 Next -Gen Associates in FY 2023, here again, the highest ever in our history. Our talent transformation efforts are yielding results.
In Q4, we were recognized by Top Employers Institute as a 2023 Top Employer in 11 countries, actually even securing a top three ranking in five of those countries. Finally, our attrition rates have been steadily declining throughout FY 2023. We ended the quarter with 14.1% attrition. Now looking ahead, the macro environment continues to be challenging. Our clients, our industry, and many sector are impacted by the prolonged uncertainty in this economic environment. These headwinds are impacting our business and projections as well. For the next quarter, we are giving a sequential guidance of -3% to -1% in constant currency. On margins, we expect to be in the similar range that we delivered in recent quarters. To summarize FY 2023, we closed the year with the strongest ever bookings recorded in a year.
Our revenues grew 11.5% year-on-year in constant currency terms, taking our full-year revenue to $11.2 billion. Finally, our IT Services operating profit is the highest ever at $1.7 billion for the year. By most accounts, we've closed our fiscal year at a significantly improved place than where we began. We're getting stronger operationally, taking a more futuristic approach to our solutions. We have the growth mindset and the right organizational structure and talent, giving us the resiliency for long-term success. With that, let me turn it over to Jatin for his comments. Thank you.
Thank you, Thierry. Good evening, good morning. Thank you all for joining this call. Let me start with the revenue growth for fiscal 2023. We grew 11.5% in constant currency terms. Our operating profit as Thierry mentioned, was highest at $1.7 billion, and that was a growth of 1.2% year-on-year. In quarter four, our net profit was INR 30.7 billion, which was 0.7% sequential. We continue to have a very strong cash conversion. For FY 2023, we converted operating cash flows were at 115% off our net income. We exited the year with $4.9 billion of cash gross of gross of debt and $3.1 billion net of debt.
We exited the year, we had $3.8 billion of forex hedges, in quarter four, the realization rate was 81.63%. I'll quickly talk about buyback details. We have shared in our press release, the buyback quantum is INR 12,000 crores, including taxes, approximately INR 14,800 crores, which translates to $1.8 billion. Buyback price has been set at INR 445 per share, this is subject to the shareholder approval that we will duly undertake. Thierry mentioned, we have also brought ISRE segment as part of the IT Services segment, our guidance for quarter one includes ISRE both in the base for quarter four and the growth which we are projecting. The performance of quarter four was excluding ISRE.
The guidance was given as such, and we have delivered within the guidance range, excluding ISRE in quarter four. With that, we are happy to take your questions.
Thank you very much. We will now begin the question-and-answer session. Anyone who wishes to ask a question may press star and one on their touch-tone telephone. If you wish to remove yourself from the question queue, you may press star and two. Participants are requested to use handsets while asking a question. Ladies and gentlemen, we will wait for a moment while the question queue assembles. We have our first question from the line of Sudheer Guntupalli from Kotak Mahindra Asset Management. Please go ahead.
Yeah, good evening, everyone. Jatin, firstly on the guidance of -3% to -1% in constant currency. What are the underlying assumptions here between the growth rates of our Consulting book of business and other services book of business? I know maybe a little difficult to apportion it very precisely, but broadly, if you can give some indication as to what is the declines we are expecting in Consulting and x of that, let's say, what is the rate we are expecting in other services?
Yeah. Sudheer, as you know, we don't, we will not be able to break this down between Consulting and rest of the business. I would request Thierry to give a color on overall business.
Absolutely. Sudheer, let's look at different elements. First is, what is the performance in bookings? What do we learn when we look at what we've done in Q4 or Q3? Two very strong quarter of bookings, among the highest one, actually highest on large deals. Very strong performance, significant growth, 27% growth, year-on-year. This is clearly showing that we continue to see opportunity in the business, that we win, and that we are growing our backlog for the quarters to come.
Second is, no doubt that there is, you know, if we look at some sector trends, there are sectors that have seen a little bit more of headwinds or, you know, seen some more macro uncertainties. Banking and insurance, there we go, technology are sectors where we have seen a slowdown or cut in discretionary spend over the last weeks. Fundamentally, we remain positive given the volume of business that we are delivering. We are possibly waiting for the uncertainty to clear, but the current guidance we are showing for the quarter reflects really the view. On one side, you know, other sectors where there's growth, those sectors where discretionary spend is being, you know, cut, and the performance on bookings.
You asked questions about Consulting, I will say the following. Yes, we have increased the percentage of our revenue coming from the Consulting business over the last years. We've done it for strategic reason. The strategic reasoning behind these decisions hasn't changed. Indeed, the acquisitions we have made have absolutely allowed us to transform, to change the game in our interaction with clients in those fields, whether it is in the security space, in the SAP space, or in financial services. By the way, all these acquisitions in the consulting space have delivered performance that were ahead of the plan, built at the time of the acquisition.
Having said that, I think it's in line with what we've said a quarter ago, we know that those business are early cycle and typically feeling first reduction in discretionary spend, but also the ones bouncing back the fastest. That's in line with this prediction last. If we are looking at the performance of these businesses compared to, you know, the market, the consulting market, I think, you know, those business are holding pretty well as well. That's the color I would give you on our guidance for Q1.
Yeah. Thanks very much, Thierry, for that. Just one follow-up, if I may. There is this question in the last quarter also as to why the strength in deal bookings is not necessarily converting into revenue and forward-looking outlook. Does that also have to do with the fact that, let's say, some of this Consulting book of business is where, which is more discretionary in nature, it's where we are seeing a bigger pain, especially in the current macro backdrop, and then given the geographies that some of these entities are operating in?
What is clear, Sudheer, is that we don't have any client situation, any one event, any cancellation, any, you know, loss of client, delivery issue or anything that would have played in this projection. This is not that. It's really that on one side, you have the intense activity of the sales team driving, you know, wins and allowing us to, you know, obviously expand our position in those accounts. On the other side, you have decisions, very short term often the times from clients to cut discretionary spend, because we know that this is what they're doing in time of uncertainty. That's what we're observing.
On one end, we see the consequence of that, you know, indeed leading to the guidance we show for Q1, but also give us quite good confidence in our ability to rapidly bounce back in the following months.
Yeah. Got it, Thierry. Thank you very much, for the very insightful comments and all the best.
Thank you.
Thank you. We have our next question from the line of Sandeep Shah from Equirus Securities. Please go ahead.
Thanks for the opportunity. The question is follow-up to what Sudheer has asked. I fail to understand why such a low correlation of a high book-to-bill ratio, which we have in December 2022 at 1.5x, March 2022 at 1.5x. Is it fair to say that the discretionary portfolio or project-based portfolio in the book has increased so materially that it is not helping us to convert the won deals into better growth as a whole? Q3 was disappointing, Q4 was disappointing, Q1 guidance is disappointing. While the order book in all these three periods have been really heartening.
Yeah. Sandeep, thanks for your question. I will try and articulate this. You know, there are clearly two engines or two legs to our revenue performance. The first is the new deals and the large deals that we sign every quarter. As we have shared, that growth has been very robust. That growth has been for FY 2023 across geographies. The, the largest was upwards of 30%, but even the smaller of the three was 27%. Across geographies the growth has been very robust. The deals that we have won is converting into revenues. The second leg of our growth is also a lot of discretionary work which continues to happen in project extension mode from our customers in an ongoing manner.
As we articulated, there is a pause in some of the discretionary work. This discretionary pause is around reprioritization of where the customers want to spend their money in a changing macroeconomic backdrop, which is quite, I would say, common in our industry, and that is having an impact for us in quarter one. That's a sort of a quarter of adjustment that we see. That's what it is. I would argue that in fact the deal wins that we have had in last two quarters, in fact increases our ability to withstand some of these volatilities which has been coming through the discretionary side. Our focus will remain to continue to push whatever we can do to improve our deal win trajectory.
Lastly, if I see the backlog that we are carrying, it's definitely reflective of the success in the deal wins that we have had in last few quarters.
Jatin, is it fair to say, 1Q could be the last quarter or you believe, it all depends about how macro shapes up and if macro concerns continues to remain muted post 1 Q, this phenomena may continue where, pause on discretionary will keep impacting us despite we are firing on the deal TCV numbers?
Yeah. Sandeep, the fact remains that the macro remains reasonable. As all of us know, it is not in a very adverse scenario. Especially in U.S., you see that the employment rate continues to be good, inflation continues to come down. There is a reasonable growth assumption for 2023 and 2024. The interest rates have potentially peaked. It may go a little more up, there's certainly not another three percentage point increase that we are seeing on the horizon. Macro environment remains reasonable. Now, what has happened in previous quarter is that there has been certain events which has led to a greater cautiousness in client spending than what it was existing before beginning of quarter four.
We have to see how this situation pan out for next couple of quarters. If there is no more situation of an adverse nature, I think the growth could come back. If there is something else, you know, it could get paused. Right now I would say it would be too early to call that Q1 would be the last quarter. Like you, we will also watch what happens very close.
Just the last question. In the opening remarks, Delaporte has said that we would like to continue with current margins in a range going forward. Is it the commentary for 1Q or for the whole of FY 2024? Don't you expect that current level of margin is still lower on a YoY basis, so there could be more upside potential on a QoQ basis on margins, or that is too optimistic to assume looking at the soft growth year in FY 2024?
Sandeep you are right. It is the revenue volatility which is of importance right now. Given the current revenue volatility, we have said we'll keep it around the ranges that we have seen in previous few quarters, and that will be our endeavor. Our focus would be to get back to a growth momentum as early as we can.
Okay. Thanks and all the best.
Thank you. We have our next question from the line of Mukul Garg from Motilal Oswal Financial Services. Please go ahead.
Yeah, hi. Yeah, I hope I'm audible.
Yes, sir. Please go ahead.
Thank you. Jatin, I just wanted to, you know, briefly understand, you know, has there been any change in thought process, in terms of, how much cash on book you guys will be holding? The, you know, the buyback quantum has been quite substantial and, you know, you guys, if I look at, you know, how much cash you will probably be left with, including incremental cash which will be generated, it will be, you know, a bit lower than the employee expenses you guys incur on a quarterly basis.
While, you know, this used to be one of the defense, maybe a few years ago and might not be really valid, but, you know, with this kind of a buyback, you know, how the overall thought process is over the next few years in terms of either business investments or inorganic acquisitions?
Mukul, as you, as you rightly called out, we will by the time we complete this buyback, we will still have $1.5 billion of cash, net of debt on the balance sheet. As you know, we continue to generate healthy cash flows every quarter, anywhere between $300 million-$350 million. We will continue to generate cash even as we go. The reason the buyback is at a particular size is to make sure that we align with our payout strategy that we have articulated, which is 45%-50%. We are broadly aligned with that number.
The fact that we are doing it at an interval of roughly two years and one quarter, and that the fact that buyback is lumpy by design and you can't have it at a frequent intervals, we felt this was the right size to go for.
Right. Jatin, just to again clarify on this, you know, you don't think that, you know, the thought process about holding a certain amount of cash on books, to either take care of expenses or inorganic investments is something which is, you know, valid in this environment. I'm just also trying to understand, given that the macro environment is relatively tougher, you know, this also would imply that, you know, down the line, your ability to kind of go with a similar sort of a cash return to shareholders will also be impeded. How should we think about this, the capital allocation, you know, from next year onwards?
Our strategy for capital allocation remains what we have articulated, which is 45%-50% of our net income over a block of 3 years. We feel we will be comfortable with that. We of course, have evaluated the cash position at the end of this buyback and the need for us, either for expenses or for inorganic opportunity which could come in our way. I think we would be well covered with the capacity that we would have. Again, I would just reiterate saying this is an lumpy and I can't have it at a frequent intervals. Hence we have gone for the size that we have gone for.
Understood. 1 question for Thierry, and again, Thierry, on the Consulting side. You know, while, you know, the business obviously will rebound once demand picks up, in the meanwhile, you know, is there some portion of that business which is relatively more resilient in nature? Or, you know, do you think if demand environment remains weak, you can see continued moderation in the Consulting revenues over the next maybe one or two quarters?
You know, I think the, we're observing the evolution of the Consulting business. You know, there's a lot of activity on the Consulting side for deals around transformational deal, cost optimization deals, you know, where the, you know, where we are building business case and so on for clients. I think, you know, there's quite a bit of activity. We are seeing also a very significant demand in some area. You know, I mentioned security in, you know, in SAP, for example, where we've made an acquisition with Rizing few months ago. We have a very significant demand and the business continue to be good. In some sectors, you know, in particular, you know, banking, financial services and technology.
There's, you know, there's a more, there's more slowdown coming from a reduction of discretionary spend. To your point, we consider that this is temporary and it will bounce back rapidly because in most of my interaction with our clients, you know, it become more and more evident that, you know, they have a lot of programs that they still want to drive. They've been able to postpone or wait a little bit while to better understand the evolution of the macro environment, you know, there's also some pressing need from the market and from the business, sorry. I think it's, you know, we should see a rebound.
Sure. Thanks for the clarification. Thank you.
You're welcome.
Thank you. We have our next question from the line of Surendra Goyal from Citigroup. Please go ahead.
Yeah, thanks. Good evening, everyone. Just wanted some insights on how the January, February, March quarter progressed. Did it get worse towards the end of the quarter, which prompted you to have unusually low first quarter guidance? Any vertical nuances within the broad comment. Any insights would really be appreciated.
On the first question, Surendra, no. I don't think we can say that it's gotten any worse in the quarter. You know, we believe that it's the opposite. That's for the trend. You know, frankly, clear that, you know, it certainly did not get worse towards the end of the quarter. Sector-wise, I mentioned them, right? This is, you know, financial services market. This is technology market. Actually two markets where technology is key, where, you know, investments are required, where, you know, there's always been demand, and where I would say, you know, talent is always in need. You know, to balance with the temporary slowdown on discretionary spend again.
If things were stable to getting better, then what? How do we reconcile the unusually low first quarter guidance? Like, again, just to kind of maybe put it in context, the two businesses which you have added on the discretionary side, my sense is that they wouldn't be more than 10%- 12% of revenues. Are we saying that those businesses are totally falling 15%- 20% sequentially? Is that what it is? Again, I know you can't share numbers, but any thoughts would be appreciated.
Yeah. Surendra, there is always the lag of intimation versus revenue reduction in our business. While you continue to get intimation through the quarter, but the impact really flows through as quarter comes to an end, and you are seeing it now more profoundly, I would say, than what you saw in quarter four. It's not that overnight you see a reduction in revenue. You get an intimation about a pause and after 15 or 21 days, two to three weeks is when you see the actual effect of the pause.
Thanks, Jatin. Since I have you, could you just share some color on what percentage of your portfolio in the fourth quarter would be consulting-oriented that you would have added in the last couple of years? The reason I ask that is that part of the portfolio would obviously have seen some pressure over the past few quarters. Broad thoughts. I know you won't share a number, but any broad thoughts.
You know, Surendra, I don't think you should draw any conclusion that, you know, the discretionary spend are coming from consulting only. I don't think it's the case at all. Again, as I was saying, there are some areas of consulting where we are growing really well. There's demand in, you know, I can tell you there's a real nice growth in the security space, for example. There's nice growth in Consulting business, SAP business we acquired and so on. Even in, you know, financial services, we have areas where we are growing well. There's discretionary spend also across the organization. It's the reality.
Got it. Got it, Thierry. Thanks, Thierry and Jatin. Very helpful.
You're welcome.
Thank you. We have our next question from the line of Manik Taneja from Axis Capital. Please go ahead.
Hi. Thank you for the opportunity. My question was an extension to what Surendra asked. Unlike some of the peers, we have seen some weakness in our revenue growth from Europe. Is that largely a function of the consulting piece or is there something else as well?
No. Manik, the answer is no. In fact, our European business is actually holding pretty well. Okay? We've done a solid quarter. You know, there's good business going on. Again, you know, I would be a little more cautious on the BFSI side, but, you know, most of the sectors are holding well. If we look at the deals we've closed in Q4, very solid performance from our European business as well. No, don't draw any conclusion between Consulting business and performance in growth.
Sure. Thank you, and all the best for the future.
Thank you.
Thank you. We have our next question from the line of Girish Pai from Nirmal Bang Institutional Equities. Please go ahead.
Yeah, thanks for the opportunity. Sitting today, if you look out into the rest of FY 2024, do you see growth picking up in the second half?
Yeah. Girish, thanks for the question. You know, one certainly hopes that the growth picks up in the second half.
You know, we don't guide for the full year. Environment continues to remain uncertain. We are not calling out that specifically. I spoke about this before. The macros are reasonable. Current cautiousness are led by events. It all depends how, you know, next few months go.
Yeah, agreed. Girish, my view on that sharing, I mean, my perspective on this, obviously in line with what Jatin says is, again, look at the performance in bookings. This is real stuff. This is real, you know, deals that we've won and, you know, it's all quarters where we are performing well. We have also a very good outlook in bookings for this quarter. You know, we are positive. You know, just assuming that, you know, the cut in discretionary spend will slow down, growth will be back. Jatin?
Stephanie might.. .
Stephanie? H old on, Girish. It's, you know, we have also our Chief Growth Officer, Stephanie, with us. Few words on what you're seeing in the market.
Yeah, I think, you know, I think, Thierry, after two very strong quarters of bookings, as we look into this fiscal year, we continue to have a very robust pipeline. We still have a lot of very large deals in the pipeline. I'm still very bullish that our growth strategy will continue to work, and once, you know, our clients start spending more in discretionary spend, we'll see that growth flow through.
Yep. Thank you, Stephanie.
Yeah. On the discrete, you kept referring to discretionary spend being put off. Outside of Consulting business, what constitutes discretionary spend? If you can give some examples, say, in BFSI or some other sectors.
Girish, I would give some example. Certainly on our application side, some of the feature developments or extension of digital work that the customer has already carried out and would rather wait for the next steps to perform than pursue it as if there was no change in environment those extensions would have gone through. We are seeing a pause on that. It's not customer is not wanting to pursue it. It's just a pause before they decide where they want to spend their budget for 2023.
Lastly, salary increases. Would the quantum be the same and the timing be the same as you did in FY 2023?
Girish, we gave our last salary increase in September of Q2. We'll be looking at a salary increase in Q2. It's too early for us to, you know, comment on actual increase.
We'll keep you posted.
Keep you posted.
Thank you.
Thank you. We have our next question from the line of Dipesh Mehta from Emkay Global. Please go ahead.
A couple of questions. First, about the divergence between deal intake and revenue. I think earlier participant also tried to get sense. Whether we are seeing any material delay in project start or subsequently restructuring in deal sizes. Whether we do, let's say, any restructuring or deal cancellations happen when we report next quarter deal intake, whether we net it off or we don't net it off. Second question is about EBIT margin-related outlook. If I look your utilization offshore mix, offshore mix has 10% seen in last few quarters. Utilization also seeing improvement. How one should look your EBIT margin outlook and how one should build optimal level of utilization offshore mix? Thanks.
Yeah. I would respond to the first question and I'll request Amit, our Chief Operating Officer, to speak on the utilization. You know, we do have a process whereby we systematically look at when if a fixed price project has got restructured or has got extended early, that we reduce the booking, which was earlier covered or shown as booked before we book the new bookings through that. There is an adjustment that we make for our fixed price projects.
On the utilization, what I would like to add is, as per our strategy, we want to continue to stress on internal build of talent as opposed to buy of talent. As a result, we had hired talent including the Next-Gen Associates. The focus in the current quarter and the future quarters will be to make sure that whenever the demand comes in, we first give priority to internal fulfillment. While we have already seen some improvement on utilization, we will keep pushing it more aggressively to get much more out of it and start projects from inside.
Broadly I just wanted, what would be the optimal target range which, let's say, company trying to achieve from utilization perspective and offshore mix, whether you still believe it is further scope for expansion?
Yes, there is a further scope for improvement.
Yeah. With, you know, always dangerous to set a precise target for utilization because Dipesh, if you remember for example what we did about three or four quarters ago. If you remember we had a quarter where we had a lower operating margin and the reason we did that is it was, you know, a conscious choice because we knew it was an investment for the following quarters. We wanted to, you know, develop capacity and then including, you know, a significant boost of our Next-Gen Associates program. Which we've done. Typically, when you do so, your utilization is going down on quarter one, and then you are building back up.
As we stand right now, for sure, you know, we are aware, although we are, you know, improving utilization, as you can see versus previous quarter. There's still room for, you know, higher utilization. We continue. We are also making sure that it's not restraining our ability to grow when required.
Thank you.
Thank you. We'll take a last question from the line of Gaurav Rateria from Morgan Stanley. Please go ahead.
Hi. Thank you for taking my question. First question is for Thierry. On discretionary spend, the projects that are on pause, what gives the confidence that it would not eventually translate into budget cuts, but it'll eventually come back? If you could highlight the nature of some of these projects, which gives you confidence that it will eventually come back.
Yeah, that's a good point. That's a good point. So a couple of points. One is... I think what I've always tried to do with Jatin when we are looking at, you know, the projection is we really try to keep a very fair look at, you know, the macro environment. You know, if you remember back in October, we started to talk about a certain level of volatility that we could feel in the market. I think, let's be clear, Gaurav, everyone, not everyone in our industry has felt it. It's the reality, right? Look at every, you know, growth trajectory. You know, there has been a change in the market environment that probably started somewhere, you know, in Q3 for us and then materialized in Q4.
Second is, as always, what do we see in our pipeline and in our deals? One, is the pipeline reducing yes or no? Second, are we winning more or less, and what kind of deals? From that standpoint, we get a lot of comfort, right? We are feeling rather good because frankly, we've won nice deals, large deals. You know, we feel that, you know, although until it's signed it's not won, but we feel good about what we are seeing in our pipeline for Q1. Finally is, you know, indeed, the fact that sometimes discretionary spend may happen more or less unexpectedly, if you like. You know, because we have a very close connection with our client, we completely understand the need they have to do that in some cases.
We feel that, you know, the level of uncertainty that we have felt is, you know, we don't see it as deteriorating any in any way ahead of us. You know, the perspective is more into a restart of some of these program, if you like, or a re-acceleration. Again, we are in March, in April, sorry. In speaking with our clients, they have priorities to deliver, they have targets to deliver, and they are very conscious of the fact that they need talent in order to drive those actions. That's, that's how we are reading it, Gaurav.
Thanks for the detailed answer.
You're welcome.
Second question is for Jatin. Last year, our ability to get the margins back to 17% range got impacted due to supply side challenges and our investments in building the fresher capacity. With some of these things already behind us and attrition issues coming down, we've kind of covered quite a bit of a journey in our fresher induction program. Do you think that margins going back to 17% is a reasonable target to assume? Will it be more like a FY 2024 phenomena? Will it be more like a little bit more medium-term target? Thank you.
Gaurav, as you know, we don't guide on margins for the year or definitely in a range, but we give an indication. You know, the current challenge we have is you are right, it is not on the supply side. I think we have done very well in quarter four in terms of improving utilization, improving the way we induct our Next-Gen A ssociates into our projects. The challenge in quarter 1 is around the volatility and revenue that we'll have to mitigate as we work through the margins. Therefore, we are saying we'll around the range that we have delivered in previous quarters, previous two quarters.
Right now our focus would be to get to a revenue stability and then we could work through the margin trajectory.
Thank you.
Thank you. As there are no further questions, I would now like to hand the conference back to Mr. Dipak Kumar Bohra for closing comments. Over to you, sir.
Yeah, thanks. Thank you all for joining the call. If you need any further clarification or information, please feel free to reach out to investor relations team. Have a nice day. Thank you.
Thank you. Bye.
Thank you.
On behalf of Wipro Limited, that concludes this conference. Thank you for joining us, and you may now disconnect your lines.