Nitin Padmanabhan

Nitin Padmanabhan inquired about Wipro's deal-to-revenue conversion for large BFSI consolidation wins and its impact on future growth, as well as the margin outlook considering transition costs and the target band. He also asked about the resumption of paused SAP implementation projects, the recovery outlook for the EMR vertical, the distribution of the strong deal pipeline, and the current outlook on furloughs.

Answer

Aparna Iyer, CFO of Wipro, explained that BFSI large deal wins from Q4 and Q1 are expected to ramp up, with Q2 deals being largely renewals, and noted BFSI growth was led by Europe and APMEA. She stated that operational improvements and favorable forex helped maintain adjusted operating margins at 17.2% in Q2, within the narrow band, despite headwinds from large deal ramp-ups and the Harman DTS acquisition. Srinivas Pallia, CEO and MD of Wipro, clarified that one specific SAP transformation program remains paused due to tariff difficulties, but Wipro sees good traction for SAP HANA. He noted the EMR sector's degrowth but highlighted opportunities in outsourcing, energy consulting, and SAP S/4HANA. Mr. Pallia described the H1 deal pipeline ($9.5 billion bookings) as robust and evenly distributed across large and small deals, driven by cost, speed, and AI-led efficiency, and confirmed a similar approach to furloughs as last year.

Nitin Padmanabhan from Investec inquired about Wipro's deal-to-revenue conversion, specifically how large BFSI consolidation wins from previous quarters would flow through and contribute to future growth momentum. He also sought clarity on the margin outlook, including the impact of transition costs.

Answer

Aparna Iyer, CFO, Wipro, explained that BFSI large deals from Q4 FY25 are expected to ramp up in Q3 FY26, with some taking 6-8 quarters for full ramp-up. She noted that a significant Q2 BFSI deal was largely a renewal. For margins, Ms. Iyer highlighted Q2 positives like rupee depreciation and operational improvements (utilization, attrition, fixed-price programs, SG&A optimization), while acknowledging headwinds from large deal ramp-ups and Q3 seasonality. She reiterated the endeavor to maintain adjusted operating margins in a narrow band of 17-17.5%, noting a 50 basis points one-off provision for client bankruptcy and a projected 60 basis points dilution from the Harman acquisition.

Nitin Padmanabhan of Investec India asked for an outlook on operating margins, questioning if the current levels are sustainable given that the execution of newly won large deals will likely have a negative margin impact.

Answer

CFO Aparna Iyer stated that Wipro does not guide for margins but acknowledged that the large vendor consolidation deals have a weaker margin profile and will require upfront investments, creating pressure. However, she emphasized that the company will continue to leverage its operational levers to offset these pressures, pointing to their track record of margin improvement over the last eight quarters. The immediate focus is on converting the strong deal bookings into revenue.

Nitin Padmanabhan inquired about the verticals most affected by the current economic uncertainty and sought a detailed outlook on the Banking, Financial Services, and Insurance (BFSI) sector's performance and spending trends in the U.S. and Europe.

Answer

CEO Srinivas Pallia identified consumer and manufacturing as the most impacted sectors. For BFSI, he noted strong traction in the U.S. and APMEA, driven by Capco, but acknowledged headwinds in Europe. Mr. Pallia explained that while the deal pipeline is strong, clients are cautious with discretionary spending, slowing down decisions. He highlighted opportunities in IT modernization, BPS, cybersecurity, and AI-powered solutions, emphasizing the synergy between Wipro and Capco.

Nitin Padmanabhan asked about the key drivers behind Wipro's margin expansion, particularly the initiatives offsetting wage increases and revenue headwinds. He also questioned the outlook for a return to sustainable growth and whether the company is seeing an increase in smaller, faster-converting deals in its pipeline.

Answer

CFO Aparna Iyer detailed that margin levers include improved utilization, offshoring, G&A optimization, and synergies from acquired entities. Both Aparna and CEO Srinivas Pallia described the return to sustainable growth as a 'work in progress' that requires stronger performance from Europe and APMEA. Srini Pallia confirmed the deal pipeline is healthy and contains a mix of large, mid-sized, and smaller deals.

Nitin Padmanabhan from Investec inquired about the drivers behind flattish volumes and growth primarily from realizations. He also sought details on the Versant joint venture, including its expected closure timeline, historical revenue, and margin profile. Additionally, he asked about anticipated furlough levels compared to the previous year and any observed pickup in smaller deals.

Answer

CFO Jayesh Sanghrajka attributed growth from realizations to higher working/calendar days and Project Maximus's efforts to drive effective pricing increases. Regarding the Versant JV, Mr. Sanghrajka stated it's pending regulatory approvals, expected to close this year but not yet in guidance, with last year's revenue at AUD 210 million (margins not disclosed). He anticipated furloughs to be similar to last year and noted no unusual pickup in small deals, with the pipeline remaining strong.

Nitin Padmanabhan of Investec India asked for details on the Mitsubishi partnership in Japan and how the order backlog entering FY'26 compares to the backlog at the start of FY'25.

Answer

CFO Jayesh Sanghrajka clarified that it was not a new JV; rather, Mitsubishi was inducted as a strategic partner into an existing JV, with Infosys diluting its share by 2%. Regarding the backlog, management explained that while the quantum of deals ramping up is different from last year, the nature and tenure of the deals also differ. They noted that the mega deals signed in FY'24 have now largely ramped up and reached a steady state.

Nitin Padmanabhan asked if the improved pipeline for smaller deals has translated to higher closure rates in the current quarter, and inquired about the breakdown of increased software package costs between third-party and internal sources.

Answer

CFO Jayesh Sanghrajka clarified that while the pipeline for deals under $50 million has increased, there has been no significant change in the decision-making timeline or closure process. Regarding software costs, he explained that third-party costs for hardware, software, and licenses are an integrated part of large deals and are not broken out further.