Q2 21/22

Oct 13, 2021

Ladies and gentlemen, good day and welcome to Wipro Limited Q2 FY 'twenty two Earnings Conference Call. As a reminder, all participant lines will be in the listen only mode and there will be an opportunity for you to ask questions after the presentation concludes. Please note that this conference is being recorded. I now hand the conference over to Ms. Aparna Iyer, Vice President and Corporate Treasurer. You, and over to you. Thank you, Stanford. A very warm welcome to our Q2 FY 'twenty two earnings call. We will begin the call with business highlights and overview by Thierry, our Chief Executive Officer and Managing Director followed by financial overview by our CFO, Jatin Dalal. Afterwards, the operator will open the bridge for Q and A with our management team. Before theory 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 uncertainty and risk factors are explained in our detailed filings with the SEC. Wipro does not undertake any obligation to update the forward looking statements to reflect events and circumstances after the date of filing. The conference call will be archived and a transcript will be made available on our website. Over to you, Thierry. Hanna, thank you. Hello, everyone. It's really good to be able to speak to you again this quarter, especially As you join us today during the festive time, I know that in many parts of India are celebrating Navraty and So thank you for joining us. We'll make sure not to keep you here for too long, okay? Joining us today on this announcement is my leadership team. So our Chief Human Resource Officer, Sohrab Govil Chief Financial Officer, Jatin Dalal and then our Chief Growth Officer, Stephanie Trotman. For me, personally, this is a special earnings call to be able to speak to you from Bangalore. This is my First official visit to the India offices since I took charge in July last year. In the last 3 days, I've met with our senior leaders and teams in India and it's absolutely been incredibly energizing. Your panace and your hospitality I've experienced in India has always been very welcoming, but you can imagine My eagerness and anticipation to meet our teams and see our campus is here, and they did not disappoint. It's been great so far. Of course, I've only just started to travel, essential travel, of course. I was in the U. S. Last week Meeting with our regional CEOs and GBL leaders, our Chief Growth Officer and other key leaders of our business, Each of them, I must say, has steered Wipro through a very difficult time during the pandemic. And I'd like to Thank everyone of our 220,000 colleagues across the world for their commitment, their trust and their dedication to our customers' success despite the challenges of the pandemic. It is very encouraging that over 85% of our employees globally are now vaccinated With the first of the COVID-nineteen vaccines and over 50% are fully vaccinated with the recommended 2 doses. In many parts of the world, we are starting to return to our offices in a staggered manner. For example, In India, our fully vaccinated senior colleagues can now come to office twice a week. The return to work will be a Careful and gradual process as you can imagine. We are really keeping the safety of our employees and the needs of our customers in mind as we planned this, right? In the Q2, I'm happy to share with you that Our annual revenue run rate has surpassed the $10,000,000,000 mark, the $10,000,000,000 mark. It will be interesting for you to note that $2,400,000,000 of this was added just in the last 12 months. This revenue milestone assumes greater significance because we achieved this while undergoing our largest ever internal transformation. Our revenue growth during the quarter was 8.1% in constant currency terms. You may recall this as being well ahead of the top end of our guidance range of 7%. And even if we exclude our 2 recent acquisitions, that is Capco and Ampeon, we grew over 4.6% in constant currency terms. This marks the 2nd consecutive quarter of 4.5% plus growth. It signals the underlying demand and the execution momentum we have generated and majority of our growth was volume led. We've experienced secular growth across all markets, All sectors and global business lines. Our recent acquisitions too, I must say, have performed ahead of expectations. The demand environment continues to be very strong and our pipeline is a clear reflection of that. In fact, our pipeline is among the highest in recent quarters. We have a good mix of large and medium sized deals. There are, in fact, many midsized deals and slightly smaller sized transformation deals in the market right now. This is All good news for us. Our order book in terms of Annual contract value has jumped 28% in H1. And in terms of TCV, The order book is up 19% year on year. We have strengthened our large deal team And brought in specialized expertise there, so I'm really confident our participation and win rate of deals will accelerate. Let me come to the operating margins now. I'm pleased to share that in Q2, we have sustained Q1 operating margins adjusted for the onetime gains we had in the last quarter. And frankly, We have maintained our operating margin despite absorbing the full impact of our recent acquisitions of Capco and Ampeon And in spite of investing heavily in our business across sales capabilities and talent, An additional point to note here that we've also offered a salary increase covering 80% of our colleagues in September 2021, marking a second salary hike in this calendar year. There is significant traction across all our markets, as I said, leading to broad based growth. Americas and Europe, our top two markets grew at 15% and 29% year on year respectively, even without the recent acquisitions. In Americas, 1, we grew 20% year on year With most of the sectors showing strong growth, consumer, tech, communications, health, All have grown at 5% plus sequentially. In Americas, 2. We grew 31% year on year, led by growth in our unique business as well as benefits from our acquisition of Cavco. Most sectors registered healthy growth of 4% plus sequentially. Our European business has delivered a year on year growth of 48% on the back of several large deals and thanks to the boost of our acquisition, Capco. U. K. Benelux Germany led organic growth, growing at 12%, 10% and 10% respectively in sequential terms. Our APMEA market grew moderately at 8% year on year. We are now seeing improved traction in Australia and New Zealand, in India, in Japan and the Southeast Asian markets. The pipeline addition in these markets have been very healthy. Middle East and Africa were weak in Q2, but we are Encouraged by the pipeline that is shaping up. Our teams have We doubled their focus on our existing clients and that is leading to strong growth in our top customers. Our Top customer grew 29% year on year. Our top 5 customers grew 33% year on year And our top 10 grew 32%. In the last 12 months, we have added Four new customers in the more than $100,000,000 bracket and we have added 5 more customers in the more than $50,000,000 bracket. This we feel is the start of a significant shift. When I meet our customers, They actually tell me they see a change in how our teams approach their business and the value we bring to them. This recognition reflects Wipro's changing mindset and our bold and confident approach to business. Customer satisfaction scores, as measured by an independent survey, has also Reason considerably. From a service offering standpoint, Our IDS global business line grew 11% sequentially and 37% year on year. Most of the sub practices showed a healthy growth. Our engineering business grew over 25% year on year in Q2 And at a compounded quarterly growth rate of over 5% in the last four quarters, Our Icore global business line grew by 5% sequentially and 18% year on year. All of the sub practices grew in double digits on a year on year basis. We launched Wipro Fullstrike Cloud Services, which integrates our consulting and technology capabilities along with Our club studio based assets, this integrated ecosystem positions us As an orchestrator that delivers transformational solutions together with our partners To address our client business challenges, the cloud ecosystem, which is about 30% of our revenue, grew 27% plus in the first half. And for the first time ever, our cloud pipeline has crossed $8,000,000,000 And that's reflected in the deals we are winning too. Let me give you a few examples. 1, a global software product and cloud services company has awarded Wipro a multimillion dollar contract for product modernization, Spanning AI, Cloud and Cognitive Business Products. We'll leverage our Engineering NEXT product pod solutions to rapidly scale and migrate the clients' products to cloud. 2nd, a multinational oil and gas For connecting with cloud and software vendors, microservices and proprietary solutions, Working with Wipro Fullstrike Cloud Services, the solution significantly reduces subsurface data analytics timelines. On to a quick update of our recent acquisitions. With Capco, we continue to build good momentum on our joint go to market. The pipeline is building well and we've started seeing some early wins. We have won 10 deals during 1st 100 days of transaction closure. Initial days, yes, sure. But I have congratulated the Capco team for leading this from the front. We're also pleased to have completed the acquisition of Ampeon, an Australian based provider of cybersecurity, DevOps and quality engineering services. This will definitely help us expand our footprint in one of our priority markets. Let me now give you a quick glimpse of how we have transformed ourselves. Apart from, I would say, moving to a simpler and more customer centric operating model and an organizational restructuring, We have made substantial progress on leadership transformation. I have said that in our previous interaction that talent will be a critical success factor. So we have worked on 2 key aspects of leadership overall. 1, by building a contemporary and diverse senior leadership, including our client facing global account executives and 2, by moving the leadership closer to clients. Consequently, we have reconstructed our leadership with a good mix of internally promoted talent and lateral hires. 58% of our leadership are in the regional markets with increased proximity to our customers. Naturally, we will continue to change and hold our momentum, but I'm happy with the pace and the quality of change we have achieved so far. But one of the issues that we must cope with as we build talent at scale is attrition. Our customers too are grappling with increased attrition. Wipro acknowledges this changed talent landscape and has adapted quickly to the new world of work. The hybrid work environment is definitely a part of this mix. We have doubled down our fresh air intake with 8,150 young colleagues Joining us from campus in Q2, we'll continue to aggressively build on this and I'm happy to share that we are well positioned This quarter, we have guided for revenue growth 2% to 4%, which will translate into a year on year growth of 27% to 30% in constant currency. To summarize, I would say that the demand environment continues to be strong and our growth chart over the last few quarters reflects this. It also reflects our improved execution engine. Together with the investments we've made in capabilities And with the talent over the last 9 months, I'm confident we will be able to participate and win at a greater pace. On that note, let me hand over to Jatin for his comments on the financials. Jatin, over to you. Thank you very much Thierry and good evening, good morning to all participants. I will share some financial details now. As Thierry mentioned, for the first half, our TCV win has been quite healthy at 18% And our ACV wins have been 29%. We have signed In quarter 2, 9 deals with a TCV of $580,000,000 Our quarter 2 revenue growth was 8.1%, which as you know is significantly ahead of our guidance range of 5% to 7% and that reflected in constant currency 28.8% healthy year on year growth. Our operating margins for the quarter were 17.8% and it was a good sustenance Considering the 1% that we received as benefit one timer in quarter 1 on sale of our EnsoNo business. Our tax rate improved compared to last year where we closed at 22% versus 22.5% of last year. Therefore, our net income increased by 18.9% In quarter 2, and our EPS increased at 23.8% year on year. If you see our cash flow performance, operating cash flow was 81% of our net income. We had $2,700,000,000 of net cash on the balance sheet and $4,300,000,000 gross cash on the balance sheet. We had a good realization of $75,100,000 at the end of the quarter and we had $3,300,000,000 of Forex hedges. We have guided as CRE articulated 2% to 4% sequentially and the constant currency exchange rates are mentioned in our press release And we'll be very happy to take your questions from here. Thank you. Shall we open up for Q and A? Absolutely. Thank you. Ladies and gentlemen, we will now begin the question and answer session. Participants are requested to use handsets while asking a question. The first question is from the line of Divya Nagarajan from UBS. Please go ahead. Hi, congrats on the strong quarter and thanks for taking my question. Just a couple of things. I think if you were to kind of rate how you're seeing the progress of your strategy in the last few months and separate it out from bottom up strategic gains versus the overall demand counts that you're seeing right now, Where would you put the contribution of either? And in terms of the strategic Pat and Ruth that you would like to take, how far do you think the organization has reached and what is left to be done? So Divya, this is Jatin. If you don't mind, can you repeat your question? Your line was slightly blurred. We couldn't follow your question. Okay. So my question basically was that how much of the growth right now would you attribute to your bottom up Strategic initiatives and the results that they are producing and how much would you basically say it's the demand lift that you're getting because of what's happened Overall, to digital. And the second part of that question is that from a strategy point of view, what is The progress in terms of the milestones that we've been tracking and what has left to be done? Thank you. Okay. Divya, I'll try to respond to the two points. The first one is difficult one, obviously. It's difficult To disconnect the impact of a market and What's more specific to Wipro itself, I think there is a real adequation between a Good market and an organization that is very aligned to the priorities of our clients. And so the bottom line is that, Yes, we are benefiting from a good market. We are seeing that the market continues to be good, if not continue to get better. But we're also seeing that we are having a better impact with our clients that we are having a better impact And that we are actually performing better on the deals we are going after. And so I think at the end of the day, I cannot split Scientifically, but there is no question that this performance is the result of the performance of We're in a good market. The second point around the impact of our strategy. The strategy that we had laid out, Divya, about 15 months ago now was 1, a strategy of Obsessive focus on growth. And that's what we've done by allowing our teams To focus the time for the clients in the market, we've simplified the model, we've simplified organization, Spend more time with the clients. We have adjusted our ambition and really Redefine where we felt we wanted to play with our clients And really be their partner in their transformation and this is what we've been doing day after day. And then 2 more things or 3 more things. We have been very clear on the fact that we wanted to focus our investments around our top accounts. That's what we've done. And the result is that what you're seeing today is that we've increased significantly the number of deals over 100 of Account over $100,000,000 We've increased the number of accounts over $75,000,000 or over $50,000,000 So We've increased the size of our large account. Those accounts have been growth engine for us. We have been clear on the fact that we wanted to further invest and Bet big on the power of developing partnership with Technology companies like AWS, Microsoft, Google Or SAP and this is what we've been or ServiceNow, this is what we've been doing. And you also we've been getting remarkable growth Over the last quarters and finally, we have a strategy to go after big deal as well and that's With that in mind that we've organized our big deal team around our Chief Growth Officer, Stephanie. And so I would say that when you look at the way we have Built, if I can say, if we the way we have produced this growth, it's fully aligned to the it's the absolute Result of the strategy we've been driving over the last 15 months. Ms. Nagarajan, do you have any further questions? Yes. Just a follow-up to that, you had earlier spoken about the Chief Growth Officer driving the large deal engine and how it is nearly complete. Given that we've had a little bit of a slowdown in TCV in the last couple of quarters, I appreciate the ACV has gone up, but is that the total deal value? Are you happy with where it is right now? And What should we expect in terms of the deal trends going forward from your initiatives? I'll take it a little bit and then I'll ask Stephanie, to build on it. For sure, we are happy with the performance in bookings. I mean, the quality of the Deals we've closed this quarter with our top clients, a good mix of large and mid sized deals. There's a good volume of activity that is fueling this growth. We didn't have a mega deal this quarter and we knew it. So it's not like you're turning an opportunity into An opportunity into a mega deal in a few months' time. Those deals typically take more time. What we've done is The other DNG and the Big Deal team to start to produce more opportunities in our pipeline For the foreseeable future for the next quarters and that's absolutely what Stephanie has been doing with bringing in a lot of Top talent recently. Stephanie, you want to build on it? Yes. Thanks, Thierry. From a large deal team perspective, in the first few months of building out that We've been focused on the current pipeline, so everyone on the team is actively involved in deals. We've seen some clients Slow down a bit in their decision making and others who have perhaps broken the opportunities into smaller opportunities, but we're still engaged. And then we've also pivoted towards more proactive origination of large opportunities, working closely with our client base and also our partners to create opportunities as well as respond to opportunities. So I think That is what is informing our pipeline moving forward. Absolutely. Thanks, Stephanie. And just to conclude on your point, just facts, you mentioned ACV and TCV, Divya, so ACV has jumped 28% year on year in H1. TCV has dropped 19% year on year. So from those two aspects, We are growing well as well. Got it. I have multiple follow ups, but the business declined. I will come back into the queue. Thanks and wish you all the best for the rest of the year. Thank you. Thank you. We take our next question from the line of Mokul Garg from Motulal Oswal. Please go ahead. Yes, hi, answering my questions. Gary, I just Wanted to focus a bit on the supply side of the equation. The demand environment definitely looks very, very favorable and you guys have been growing ahead of your own expectation, but at some point of time, the high attrition And the high addition of pressures would have some drag on the incremental growth opportunities, which is there in the market. Do you think you've already started seeing some of that right now? Or is that something which can lead to delays in Business to a quarter down the line, if the attrition remains dis elevated. Mukul, I will start by answering the following. The guidance given for Q3 does not assume an improvement of attrition, okay? So said in different terms, if attrition would go down, We could potentially do a little better. Now, I frankly don't believe that attrition will improve, if I can say so, reduce In the next quarters. I actually believe that given the environment, we'll continue to face the High level of attrition at least in the next 2, 3 quarters, okay? Yes, we have obviously reacted on it in many ways. You've heard I've mentioned the fact that we have initiated a new cycle of Compensation increased for 80% of our people in September. But besides that, we've also We ramped up our Freshers strategy and going for A lot more we've revised frankly the level of ambition of our Freshers intake. To that, I'd like to ask Thank you, Saurabh, to maybe jump in and tell us also from Fresher standpoint, not only in term of numbers, but also in term of Strategy, what we've decided to do? Thanks, Thierry. So Mukul, as you called out, the demand environment is very strong and Supply side, we have to work on. And the interventions which we are looking at is more long term and is more In-depth. So it's not only adding numbers or adding more people. It's also making sure that how do we make Upskill them and also retain them for a longer period of time. So for example, for Fresher as we go on For our true to the campuses this year, and we just concluded a national talent hunt test load for India, Where we had more than 200,000 people applying for it. We are having a communication and a plan that I think is unique where We not only share with them what happens as a compensation when they join, but also a plan for them in terms of the carrier and compensation over the next 5 years. And that's built in their contract. So it's very clearly driving a plan that we increase the retention of these people because we are seeing a high attrition in this 3 to 6 year category. And if you're able to retain these pressures And build right culture in the organization retained over a long period of time is going to long term impact and help us on the supply side. So it's a very different shift. It's not only about adding numbers. It's a very strategic think through that we will be able to Increase the retention of our pressures for a longer period of time and look at both cost and attrition as a long term play here. Sure. Thanks. The second part of the question was on how should we look at The attrition and the pricing for both traditional or legacy part of the business as well as Cloud and new part of the business, historically, the legacy portion has obviously been more profitable, Although growth is not there, but with more people getting trained on new technologies where The wages are obviously higher. Do you think higher attrition has started creeping up there as well? Although definitely we are getting a significant growth From those areas that you are referring to, it's true. Today, we are Significant part of our growth is coming from cloud area, from data, from digital Transformation from Engineering Services from Cybersecurity. And again, this is based on this revenue mix We have based our assumptions for the guidance for Q3. But, Mukul, just to add to what Thierry is saying, yes, these are hot skills today and there is a high attrition. So If I see this is one area where we are working towards where the upskilling part will help. But it is an area where we have huge demand and there is a Supply and skill deficit. So it's not about it's that the demand is much more than what we require in the industry. It's an industry issue which we should Yes. So to this is Jatin. Just to add, Mukul conceptually, If the demand is high as Saurabh has mentioned and there is constraint supply today, if more people get trained in that area, in fact, It will overall reduce the pressure on attrition in that area over a period of time, though that specific individual may be more marketable in the with the new skill set. Okay. Fair enough. I think thanks for taking my question. I'll get back in the queue. Thank you. The next question is from the line of Sandeep Agarwal from Edelweiss. Please go ahead. Yes. Hi, good evening. Thanks for taking my question and congrats on a good quarter. I have a small question, Thierry that when you see your current clients Work progress and execution and the way technology is getting adapted across horizon, what is your sense at what stage of Implementation we are is it very early stage or you think that we are somewhere in the middle of it? So that was 1. And second, I wanted to understand that while you said that attrition may not cool off in the next quarter, will it be fair to say that the peak of attrition is behind us? Thank you. So on the first point, which is you want to understand at which stage of transformations. If you want to think about the potential that technology can represent for an organization, for company in terms of transformation of its ways of working, I think we are The best of the transformation is ahead of us. I mean, the potential of if you look at cloud, so first of all, if you look at cloud transformation, What I'm reading and is quite consistent here. We probably have touched, say, 20% of the cloud transformation wave. And so the biggest part of it and the largest part of it is ahead of us. If you're looking at security, there is no question that security will continue to represent budget increase for our clients in the next years. If you look at data, I mean data, The way we are leveraging data to drive insight for better decision making is You know, an immense potential represents an immense potential for a lot of industries. And here again, The best is ahead of us. Finally, if you look at Engineering Services and other areas where we are Investing significantly and getting nice growth. We know that this is an area where in many and across many industries, Companies will have to invest in their R and D and will need support from companies like us to support and augment their R and D Investments. And so across all these different areas, The bulk of the transformation is ahead of us. On the attrition, which is your second point, I actually don't believe that the worst of attrition is behind us. I think it will, as I said, it will continue to possibly increase in the next quarters before cooling down. Again, that's at least our assumptions as of today. Okay. Thank you. The next question is from the line of Apoorva Prasad from Elara Capital. Please go ahead. Thanks for taking my question. Thierry, Couple from my side. So how durable is the demand environment? And is the conversation around Scope increase with your large customers giving you that confidence of durability of demand and the continuity of current growth momentum. And I ask this in context of Higher ACV growth versus TCV growth? So on the first point, I mean, I would answer a frank yes. Yes, the demand is strong And we'll remain strong. Just based on the previous points I just covered, there's so much transformation Ahead of us, our clients are placing investment in technology as among their top priorities To a point, Apuva, where it's not anymore a topic for the CIO Only it's a topic for every CXO in an organization, right. The CMO is investing more in technology. The Head of Supply is investing more in technology. The business expressed strong demand for technology. And obviously, All the different functions, HR, finance, operations, all are Pushing for programs to be developed. So the demand will continue to remain strong. Got that. And just on this point of yours on strong demand and in context of the current Tight supply environment, what do you think is the propensity for getting rate card increase? And what part of the portfolio in your opinion is amenable to that increase? Or is it the case that this is more stable and the benefits are Flowing through more by means of greater offshoring and volumes. Well, Apoorva, I think there's opportunity today. There is opportunities to have these discussions with our clients. In this current context, our clients feel the same. They are also Exposed to attrition. They have exactly the same phenomenon. And so I think it's a reality that more important for them today is the ability to continue to drive those program Without slowing down. Now from a portfolio standpoint, I would say I would still talk about a certain level of stability of the pricing. Got it. Thank you and all the best. Thank you. Thank you. Ladies and gentlemen, in order to ensure The management is able to address questions from all participants in this conference call. Please limit your questions to 1 per participant. For any further questions, you may come back for a follow-up. The next question is from the line of Gaurav Arya from Morgan Stanley. Please go ahead. Hi, congratulations on great performance. First question for Thierry. Where are we right now in the whole Organizational restructuring process, have you seen any material change in the top 100, top 200 heads as far as the global Executives are concerned and or is this something which is ahead of us and these changes are likely to happen in the coming quarters? Gaurav, excellent question. Thanks for that. One is, in terms of operating model, organization changes, We have implemented the new operating model, new organization on January 1. And you know, we had given ourselves a quarter to stabilize this organization model. It's actually been Incredibly efficient rapidly. And frankly, I don't want to be overly Optimist I mean, positive about it. Every new model requires a certain amount of A progression, but frankly, very positively surprised by the level of maturity of The model after a few months. We have today a model that the organization and all our Leaders Considered is the model that is working and actually delivers the Upside that we were expecting in term of simplicity, in term of reducing the number of Silos inside the organization, the ability to create a One Wipro mindset and getting actually freeing up time for our people to spend more time with Customers, the second part of your question, which is about the rotation or if you like the Evolution of our leadership organization. What I can tell you is we have Upgraded, if I can say, about 25% of our account executives around the world, Okay. And the second aspect is that if you look at our top 200 leaders across the organization, 2 years ago, we had only 1% of them were account executives. Today, 8% of them are account executives. There is a significant change in the mix of leadership Towards client facing people. Got it. Second question, I'll put it in 2 parts. 1, Thierry, you mentioned couple of quarters that one of the key jobs which you had to do was to build a pipeline actually. And last few quarters have been good on the conversion. So just I want to understand where are we in this journey in terms of broad basing of our participation in the deal. And the second part of the question is for Jatin with respect to understanding The levers to manage margins in the second half, is it fair to say given the supply environment being tied, margins should be lower in the second half compared to first half? Okay. So I'll take the first one on the pipeline. We've seen the pipeline progression quarter after quarter. It's been a consistent progression. The trend has been positive. But more importantly, I would say 2 things. The quality of the pipeline has improved. We have a pipeline now that is more aligned to our Strategy in term of priorities, in term of focusing on offerings where we want to invest and also focused around our key accounts. So 1st, the proportion of our pipeline coming from our top accounts is a lot bigger than what it was 3rd quarters ago. So from that standpoint, it's all positive. Finally, I would say in term of deal conversion, I think we are Also here seeing a positive trend. We've improved the way we are qualifying our deals. We've improved the way we are mobilizing the One Wipro organization to win these deals And the laser focus in line with our strategy Around accounts and specific offerings has allowed us to invest into talent, into top capabilities and this is Definitely helping us converting this pipeline into deals. On the second question, Jatin? Yes. Thanks, Thierry. So the answer to the question is yes. There is a tremendous, I would say competition for great talent and that means that we need to remain very invested In our talent, we need to make sure that our supply curve is properly supporting our growth curve and in fact ahead of our growth curve. So we are capturing every demand that comes in. For all of that, in terms of impact or risk on margin, yes, there is a risk on margin. And I think that's not just Wipro, but that's the And I think that's not just Wipro, but that's the industry fact. Having said that, we executed, As you know this quarter well, we were able to drive operational improvements in realization, utilization and offshoring. And that covered effectively the impact that we had to take for 3 months impact on salary. So I think it's going to be a growth going forward, which will and how do we balance The effort that we put on our operating levers to be able to cover for the margin is That is going to be a balance that we will have to continue to fight on. But we have done well, which we are proud of in quarter 2. But there are clear investment agenda on talent going forward, which we have to remain cognizant and that's what we are baking in as we think about second half. Isn't that what we are baking in as we think about second half? Thank you, Jatin. Thank you, Thierry. Thank you. The next question is from the line of Sandeep Shah from Aqara Securities. Please go ahead. Yes. Thanks for the opportunity. And I understand and acknowledge the growth of TCV, which is 29%. But if I look at the first half PCV and even if I assume close to 75% being a new business and assume a 4 year tenure, Then the actual new business as a percentage to the first half sales comes to around 5% as of all. So Does that worry you in terms of the growth profile going forward? Or do you believe for the industry as of whom the growth profile is changing where we have to look beyond the large deal sign ins, where larger deals are getting converted into smaller deals. And there are enough number of less than $30,000,000 deals, And second question to Jatin. Jatin, this time, I think EBITDA margin decline is close to 75, 80 bps, Right. Depreciation savings has been higher than 50 to 70 bps. So what is causing this? And whether depreciation will normalize in a going forward basis. Sure. So Sandeep, this is Jatin. I will try and respond to both questions, if you are okay. On the first one, there is the strength of the performance is reflected In quarter, two numbers. It is what we think we can do is reflected in the guidance which we have given. Of course, you can look at the likely performance in many ways, and You have a point of view that we respect. But you must always see that our industry runs On 2 fuels, one is the day to day volumes that we are able to add because we see demand And we fulfill quickly and that adds to our revenue and second is large deals. And as you can see, the first Engine has really been very, very productive in last 9 months, and it continues to fire very well. And We did not have a mega deal as Thierry spoke about it, but we have very strong first engine, which is firing. So we feel comfortable as we speak. We feel comfortable that we have pipeline for large deals, and that will convert at some point. So overall, we are quite Okay. And well placed is the way we see, Sandeep. And the second question on EBITDA versus EBIT, as you know, we do have certain cycles of amortization related with the specific cost for which that particular item is getting amortized on. And as and when those cycles come to an end In the natural course, the amortization ceases to come in the P and L and that's reflective of that. And what you see now It's something that can be the basis for your future modeling. Okay. Okay. Thanks and all the best. Thanks. Thank you. The next question is from the line of Vipur Singhal from Philip Capital. Please go ahead. Okay. I just had one question from my side. And my question was pertaining to our And the growth that you see in the European geography, I mean, we know that the Indian companies have done really well in the U. K, Scandinavia and some different geographies, but the Continental Europe had something was a region which I think was the Indian companies were not able to make so much of wind roads We've tried to overcome that over the past year with lot of local hiring. How do you see pandemic changing that equation? Has it kind of as it has over the entire world, has it kind of lowered those entry barriers for us As the Indian IT companies and Wipro specifically as well, do you see more deals coming in through geographies like Germany, France? Are the local European companies like your Stadia, Sofia, Teatroivry and all these guys able to ramp up and give us good enough competition, which they have not been over the past decade. So how is the growth trajectory in the European geography looking like with all these factors at play? Look, there's my response, Vibhor, would have just 2 aspects to it. The first aspect is there's no doubt that companies have Learn to work with teams that are working remotely. And when you're working remotely, whether you're working 2 miles away or 5,000 miles away, doesn't change anything. You're working with teams that are not on-site. And from that standpoint, there's no doubt that a lot of Companies across industries in the European market have learned And we'll be more comfortable leveraging global delivery models, if you like. But the second aspect for me is Equally important, in Europe more than anywhere else, there are major cultural Specificities that requires deep understanding of the local markets. And The local market of Sweden is not the same that the local market in Finland or in Norway. And I think The companies that are doing well are the ones who understand that and who are able to leverage at the same time The power of global organizations and develop a strong local connect And that's the reason why we have so significantly invested into local leadership in Europe And this has been paying off pretty much immediately. Right. So would you say that we are on track with our strategy of that of what we've done? You're happy with the outcome, could have been better or Do you think do you expect it to be even better in terms of growth rates and in terms of big wins going forward? My team would tell you that I always consider that we could have done even better. But I think I'm satisfied, broadly satisfied With the progress we've made, the consistency, the alignment to the plan, the execution, if you like, of The strategy and the fact that we are doing what we have said we would do and that I like this Consistency. Got it. Great. Thanks for taking my questions, Kavi, and wish you guys all the best. Thank you, Vibhav. Thank you. The next question is from the line of Manik Taneja from GM Financial. Please go ahead. Hi, thank you for the opportunity and congratulations for the great execution. Thierry, I wanted to pick your business on a couple of things. Number one thing is around the fact that While we have seen a significant shift in terms of offshore mix of revenues over the last several quarters, that has also played along with significant increase in utilization, which is contrary to what one has seen in the past for the industry. Do you think at some point of time the normal tendency around utilization cooling off As more for gates delivered offshore starts playing out or you are seeing some different engagement models emerge in the industry because of which So, offshore utilization rates are holding up quite well. That's question number 1. The second question was around the fact that typically second half is much stronger for us What's the first half in terms of sequential growth rates? Do we expect something similar to repeat this year as well? Thank you. I mean, so I'll start with the point number 2 and I'll come back to the first one after. There's always a little bit of seasonality in our industry for sure. And That's why when we talk about sequential growth, we need to take into account seasonality. The guidance of 2% to 4% growth sequentially in Q3 takes into account this Seasonality. It remains that if we look at our growth, 2% to 4% Growth in Q3 would actually represent 27% to 30% growth year on year, which is quite Elsie. Elsie. On your first point, which is trying to identify trends or evolution of onshore and offshore mix. I would be a little cautious with drawing conclusions. I think the reality, Manik, is that the mix is a factor of many things. The evolution of the mix depend on the type of deals that you are selling. Depending the level of the cycle of where you stand in the transformation, You're going to need either more local presence or more offshore presence. And so I think it's not necessarily A trend that is systematic, I think it's you can see an evolution depending on The mix of deals in a particular sector in a particular geography. So that's the point I would make. Yes. Typically offshore utilization is lower than the utilization we have onshore and that will certainly remain true Even in a market of high demand, utilization tend to be higher. That's pretty mechanical. With the attrition going up, that also impacts some inflation. And do you think So most as customers get much more acceptable of global delivery or offshore delivery? I believe you were breaking out a bit, so I hope I understood your question. But Your question was do you believe that clients are more open to offshore? Is it what you're saying? So I was saying are there more innovative engagement models emerging around offshore delivery as clients get much more Acceptable around or get much more are more acceptable of offshore delivery? Yes. No doubt again that what we've learned over the last 15 months through the pandemic is You know, we'll change the way the ways of working. There's no doubt I would leave you with 2 views. 1 is, we know that A significant portion of our employees will spend some days per week working from home, so therefore remotely wherever they leave. And it's absolutely the same reality that applies for our clients' employees as well. In every from my interactions with clients, We are talking about it and I think it's an evolution of the workforce to last. And the second thing again is that being more being exposed and having developed the technology that support Remote working in a secure way opens new opportunities to clients To think about new operating model and new ways of working with companies like ours. So yes, For those two reasons, there's no doubt that operating model will continue to trend towards more Flexibility between physical and virtual. Sure. Thank you. Ladies and gentlemen, that was the last question. I now hand the conference over to Ms. Aparna Iyer for closing comments. Thank you, Stanford, and thank you all for joining us. In case we couldn't take any of your questions, Please feel free to reach out to the Investor Relations team. Wish you all a very happy festive season ahead and have a nice day. Thank you. Thank you very much. Ladies and gentlemen, on behalf of Wipro Limited, That concludes this conference. We thank you all for joining us and you may now disconnect your lines.