Wipro investing in supply side too as it prioritises capturing growth: CFO

Jatin Dalal cautions Q2 will have elements like pay hikes in September, ongoing Capco consolidation, that could exert pressure on margins

IT services major Wipro delivered one of its best three-monthly results in the last 38 quarters, and continuing to capture this momentum will be a priority instead of being overly focused on maintaining margins.

“We should see this as a year of opportunity and we should all go out and capture the market. We have maintained that growth is the priority for the company and we will do everything that is needed to capture this momentum from the market. Hence we are investing in the supply side too,” said Jatin Dalal, CFO Wipro.

The company reported margins of 18.8 per cent for the first quarter of FY22, which were impacted by almost 200 basis points due to supply side ramping and also the impact of the Capco acquisition. Though the company had stated that post the acquisition of Capco it expects margins to be impacted by 2 per cent in the first year and will be in the range of 17-17.5 per cent. Compared to this band, Q1 margins were better.

“We feel that there are enough levers for margin expansion, such as automation, offshoring, trying to get better fixed priced project, rotation of staff in a strong demand environment is a possibility and hence pyramid improvement and all of this will get played out in the rest of the year and we will have to balance finely between the fact that we capture growth and manage margins,” explained Dalal.

He also cautioned that Q2 will have elements that could act as pressure on the margins. These include salary increases that come into effect in September and the Capco consolidation, which still has an additional month.

Though the company had reported a sequential revenue growth rate of 12 per cent on a constant currency basis, the TCV for Q1 was much lower at $715 million, when compared to Q4. “We did have a mega deal in the TCV of Q4. Also we have spoken about this in the past too that we want to, as a practice, have at least one mega deal every quarter. But it is difficult to time it and these deals are binary and big decisions for the clients. We will continue to add some amount of rhythm to it. It does come with its own uniqueness though,” he added.

Speaking on pricing, Dalal said that new age deals led by cloud, digital and cybersecurity are at a premium. “Pricing is superior for some of the new age deals. Deals that are focused on cloud, digital and cyber security are certainly priced higher because there is a premium for the work that we do in these segments and also there is scarcity of talent in that segment, and there is scarcity of end- to-end business provisioning,” said Dalal.