Wipro (NSE:WIPRO) Q2 2020 Earnings Call

0:01 Ladies and gentlemen, good day and welcome to the Wipro Limited Q2 FY20 quarterly investor 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. Should you need assistance during the conference call, please signal an operator by pressing star then zero on your touchstone phone. Please note that this conference is being recorded. I now hand the conference over to Ms. Aparna Iyer, Vice President and Corporate Treasurer. Thank you and over to you. Thank you, Stanford. Warm welcome to our Q2 earnings call. We will begin the call with business highlights and overview by Abed, 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&A with our management team.

1:01 Before our bit starts, let me draw your attention to the fact that during this call, we may make certain forward-looking statements within the meaning of the Private Securities Litigation Reforms 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 uncertainties and risk factors are explained in our detailed filings with 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, Abid.

1:46 Thank you, Aparna. Good evening and good morning, ladies and gentlemen. I am joined here by my leadership team and it is a pleasure for us to speak to you. Let me quickly provide you an update on the Q2 performance, our view of the demand environment, and the progress on our strategy. We had a good in-quarter execution on both revenue and margins, considering the slow start that we had this fiscal year. Our revenues grew by 1.1% in constant currency terms at the midpoint of our guidance range. For H1, our growth was 4.8% year-on-year, In line with our expectations, our consumer business grew well at over 6% year-on-year, Srinivas Pallia, Anup Purohit, Sanjeev Jain, Nagendra Bandaru, Aparna Iyer, Jasjit Singh Kang We see an uptick in the demand for health outside of HPS.

3:26 Our subsidiary that services are ACA clients. And we've had some good wins in the digital space, in the healthcare clients. The demand environment remains unchanged from what I had shared last quarter, though there continues to be an overhang of macro uncertainty in certain sectors. Our US growth has been pretty strong while Europe continues to be weak. We continue to see a robust pipeline and the momentum of order book in Q2 has been better than Q1 and some of the deals that we had mentioned were delayed. Signing in Q1 have been signed in Q2.

4:13 The restructuring of our India and Middle East business is going very well and it is reflected in some of the deals We have delivered operating margins of 18.1% in Q2, which is comparable to 18.4% in Q1 after absorbing the incremental impact of wage hike for two months and investing in bench for growth. Our margins year on year have remained in a narrow band since Adjusting for the one-time impact of the customer settlement in Q2. Earlier this year, we sharpened our strategy into four pillars of business transformation, modernization, connected intelligence, and trust, which is enabled by talent engineering, IPs and platform, and open innovation.

5:09 In order to deliver on customer needs across these four areas of our strategy, we have been investing On building capabilities in digital cloud engineering and cyber security and risk services. I'll give you some updates on each one of these four big bets. Our global investments in digital have created the requisite presence, experience and scale to support transformation not just in our core markets where it started, but also in the emerging markets. We are winning integrated transformational deals In Canada, Australia, APAC and of course we continue to win deals in US and UK. In digital, our revenue grew 7% quarter on quarter and now digital contributes just under 40% of the company's revenues.

6:03 For example, in Canada we are working with a midstream energy company on their digital transformation journey to significantly enhance the working experience and job satisfaction Srinivas Pallia, Anup Govil, Aparna Iyer, Jasjit Singh Kang Second is cloud. Our business-first approach to cloud adoption and building domain-centric solutions with our cloud service providers as our partners has made Wipro a preferred cloud transformation partner for many of our customers.

6:58 We have heavily invested in cloud studios to help our customers move to cloud at an accelerated pace. It includes lift and shift, refactoring of applications, replatforming, and moving to truly agile and DevOps to leverage the power of cloud in a highly automated and industrialized approach. Our strength of our offerings and market presence and success is acknowledged by many industry analysts in their reports. As an example, a global US lifestyle apparel company has partnered with Wipro to Srinivas Pallia, Anup Purohit, Sanjeev Jain, Nagendra Bandaru, Aparna Iyer, Jasjit Singh Kang Engineering NXT continues to deliver these services by leveraging our innovative IP-driven solutions, rigorous engineering processes, and new-age crowdsourced and global shore delivery models.

8:26 Historically, Wipro's engineering service practice, as you may be aware, was quite focused on the tech vertical. With Engineering Next, we are expanding our services across many more verticals where we are seeing some very good traction. As an example, a US-based global medical device leader has awarded Wipro a multi-million dollar deal to enable compliance with the European medical regulatory norms, leveraging expertise of Wipro Engineering Next. And the fourth big bet is cybersecurity. We are focused on building cyber defense assurance platform and expanding to IoT security practice to address demand due to expanding attack surfaces with connected systems.

9:13 Cybersecurity as a service offering grew 16.6% year-on-year in Q2. As an example, a large US-based bank has selected Wipro to bolster its cybersecurity defenses and address issues identified during various internal and external audits. Wipro will design and implement appropriate security controls besides providing incident management and support optimization of the existing risk and control mechanisms Self Assessment Process of the Bank As you are aware, we have made a number of venture investments from Wipro Venture in this space which are all leveraged to provide these services. We continue to focus on client mining and drive digital and business transformation in accounts that bring together design, domain and consulting capabilities and help us engage in strategic conversations proactively and various business stakeholders within our accounts.

10:20 As an example, a leading North American bank with whom Wipro has strategic relationship has awarded a multi-year application development and support contract which is the entry of a new service line cross-selling into this account aimed at getting products to market faster and improving customer experience. Our strategy that I articulated is supported by our M&A, our IP and platforms, talent reskilling and localization across the markets that we work, where we continue to remain very focused. We are building a robust pipeline of large deals proactively to meet our ambitions of growth.

11:05 In an environment with ever-changing technology, people remain our primary assets. Our voluntary quarterly annualized attrition rate has dropped from about 17.9% to 16%. We continue to drive localization and now U.S. is just under 68% local workforce for us. And we continue to do campus hiring, deepening employee engagement, and make significant investments in training and reskilling our workforce. On automation, The work done by bots in fixed price projects has improved from 15.3% in Q1 to 16.5% in Q2. In conclusion, despite the current macro environment, we continue to see an improving quarterly growth trajectory which is reflected in Q2 performance and Q3 guidance.

12:04 I will now request Jatin, our CFO, to give you an update on our financials. Thank you, Abhis. So, as you all know, we have come at the midpoint of our guidance. Our margins have remained stable above 18% at 18.1%. As you know, there were tax changes which happened during the course of this quarter whereby we had our ETR at 18.3% this time. This and the one-time impact we had taken in quarter 2 of last year has resulted into the overall profit growth of 35.1% and an EPS growth of 36.7%. If you see our forex hedges, we have 2.7 billion of forex hedges.

12:53 Our realization rate for quarter 2 was 71.56 compared to 70.39 in quarter 1. We continue to create and convert good cash of our business. Our operating cash flow was 107% of our net income in quarter 2. We have guided for quarter 3, 0.8 to 2.8% sequential growth and we'll be happy to take your questions from here. Thank you very much, sir. Ladies and gentlemen, we will now begin the question and answer session. Anyone who wishes to ask a question, Please press star then 1 on their touchstone telephone.

13:40 If you wish to remove yourself from the question queue, you may press star then 2. Participants are requested to use handsets while asking a question. Ladies and gentlemen, we will wait for a moment while the question queue assembles. To ask a question, please press star then 1. The first question is from the line of Mukul Garg from Haithong Securities. Please go ahead. Thanks for the opportunity. First, I wanted to just understand the decline which we have seen at the top client this quarter. Now, in your meeting interview, you mentioned that this was basically the end of a couple of projects. So was this in line with your expectation?

14:29 When can this come back or are you still seeing a pause in the spend at the top client? So Mukul, as you know, we've had quite good success in driving digital transformation in the banking and financial services sector. Our top client happens to be a bank and we've been doing a lot of digital work for them Given the current macro uncertainty, as some of our projects got over there in digital, we are seeing a little slowness on renewal of some of those projects in terms of the next phases of the digital programs. I personally believe it's more a matter of time when it comes.

15:16 Normally, some of these digital programs are done in multiple sprints, and every sprint we would get an SOW for the next sprint. Anup Kumar, Anup Kumar, Anup Kumar, Anup Kumar, Anup Kumar, Anup Kumar, Understood. And the other part of the question was, you know, was this something which you anticipated at the start of the quarter or was this a bit of a surprise?

16:07 And if you can kind of, you know, expand this to also include the rest of the outlook on the BFSI vertical, you know, are you seeing weakness across the board? Yes. So we are seeing weakness in the BFSI vertical. And as you notice, we've come in the middle of our guidance range. which means that we had built this uncertainty in our guidance so it has not come to us as a surprise but we would have been happier if this slowness would not have played out we could have come higher than middle of our guidance range so that is why when we give the guidance as a range we incorporate some of these uncertainties so I wouldn't call it a surprise it is something that we anticipated and it played out Understood. The other question was on top two to five clients.

16:57 That has also seen a decline of about 5% QOQ. So what sectors are you seeing the impact coming in or is this also a client-specific correction this quarter? I think in our top clients, almost 50% of our top clients are in the BFSI segment. So I think the answer is more that some of these clients are also seeing The same macro impact that our top client has seen. If you notice, for the last many quarters we've grown double digit in our top 10 client segment, far higher than the company average. And this time we've grown about 7.4%. So the other clients have done well, but the softness is visible in the banking and financial services clients.

17:48 Understood. And if I can squeeze in one final question for Jatin. Jatin, this quarter's margin management was quite impressive. You had a wage hike, lower utilization and good employee addition, but still you have kept margins broadly stable. Is this something to do with a better pricing or hyper-automation? What really helped you guys? So I would say this was the quarter in which we were able to drive cost optimization from some of our lines, which is visible in the P&L. Some of our marketing events are concentrated in quarter one. Those did not recur, so we got some upside on those spends.

18:37 We executed well on collections, so PDD were lower. We also got certain benefits on certain cost lines which we were able to generate as an upside to margin. On the other hand, we used this to invest on some of the bench which we believe will be critical for us for our growth. We had two months impact of wage hike which also I would say is an investment in people. and lastly we have spoken about our big bet investments and some of those big bet investments have been made to create additional capabilities on domain, solution building, architecting, architecture side.

19:27 Those have also sort of been invested in and that have adversely impacted margins. So and within this too we were able to keep the margin in a broadly narrow range. Understood. Thanks for answering my question. I will get back into the queue. Thank you. The next question is from the line of Moshi Khatri from Wedbush Securities. Please go ahead. Hey, thanks. Looking at your guidance for the next quarter, is there any contribution from an acquisition? So, i.e., is the guidance purely organic or is there anything else beyond that? And then on top of that, can you talk a bit about the pluses and minuses that kind of resulted in your margin decline sequentially?

20:15 Thanks. Sure. So there is approximately, we completed an acquisition of IDI on 3rd of October. That will flow through in our revenue for quarter three. The contribution of that is likely to be around 0.3%. that is factored in our guidance. The other aspect of other question which you asked, our margin had really three components. We had one time benefit in form of other operating income of 0.5 in quarter one which did not recur in quarter two. All the investments on bench, salary increase and big bets we made was adverse 1.2 Amit Kumar, Amit Kumar, Amit Kumar, Amit Kumar, Amit Kumar, The question is whether they are kind of getting worse in terms of some of these kind of uncertainty related to the overhang, or they kind of remain consistent,

21:47 i.e., are you continuing to see delays? Are these accelerating, getting worse? Any color there will be helpful. Thanks a lot. So, Musha, this being the last quarter for a lot of the financial services, As you know, some of the financial service organizations have also started doing furloughs, like the manufacturing and tech organizations. So for at least Q3, I would say it will be same or slightly more worse because of the furlough. I am hopeful of an uptick once the IT budgets are decided. I will be able to give a better picture, which in the best case would be around end of the year, but normally in the last couple of years we've seen We get clarity only early next year.

22:37 Understood. Thanks a lot. Thank you. The next question is from the line of Divya Nagarajan from UBS Global Asset Management. Please go ahead. Hi. Thanks for taking my question. You spoke about a few banking wins. Could you kind of talk about where those wins are coming from? Is it from existing clients? Are you gaining market share? And if these are market share gains, are you getting it from in-house teams or is it coming from third-party service providers? So Divya, both we are having wins. One of the wins, as I mentioned, is... ICICI Bank in India which is a new client for us. We continue to win new clients in US market as well. They are pretty much in the mid-tier bank space and then we continue to get win projects in existing clients. As you know, over the past couple of years, we've had significant market share gains in the BFSI space This quarter, our overall BFSA revenue would be about 31%, which was about 5% or 6% lower just a couple of years back.

24:06 So that has been because of market shirkins. I know we don't really guide on margins, but given that we've had a fairly decent margin despite the wage hikes, What kind of a trend should we be looking at for the rest of the year? And assuming that you do get growth at these levels, because we've been stuck in this early single-digit organic growth range for a while now, how much more leverage is there for us in terms of margins from here on? So, Divya, like I mentioned in the beginning of Quarter 2, that our priority as an organization remains growth. and we will remain invested in the commitments we have made on big beds as well as we will remain committed to some of the work we have done on building right capabilities in form of bench, etc.

25:08 That commentary remains and will remain consistent with that. So I don't want to guide for margin for quarter 3, quarter 4 but I do want to say that We have managed it in a trajectory so far and our endeavor would be that we don't let go of margins. But we will not hesitate to invest if there is a need to invest if it gives us revenue growth in two quarters from now, for example. Thanks and all the best for the rest of the day. Thank you. The next question is from the line of Vibhor Singhal from Philip Capital. Please go ahead.

25:54 Good evening, sir. Thanks for taking my question. So, Abhisar, my question to you was majorly on the kind of growth that we have seen in this quarter. So I think after a long period of time, we've kind of seen a broad-based growth, which you also mentioned in the opening remarks. Though it is still, I would say, below the industry average, but I think we're still getting there. And the key verticals of healthcare and energy and utilities, which were dragging the growth down, Srinivas Pallia, Anup Purohit, Sanjeev Jain, Nagendra Bandaru, Amit Kumar, Malay Joshi, Rishad Azim Hasham Premji, Saurabh Govil, Aparna Iyer, Jasjit Singh Kang Srinivas Pallia, Anup Purohit, Sanjeev Jain, Nagendra Bandaru, Aparna Iyer, Jasjit Singh Kang So, you know, I'll go vertical by vertical.

26:48 Banking has been industry leading for us last few quarters, but right now we are seeing softness. We continue to monitor the macro environment on the BFSI space. In communications, I feel pretty good. Our global business has delivered double digit growth. The numbers that you see of about 2.4% in constant currency year on year. Amit Kumar, Anup Kumar, Anup Kumar, Anup Kumar, Anup Kumar, Uncertainties that we'll have to watch out in terms of projects getting over and new projects which are likely to start but we have had a good quarter and on a year-on-year basis as you see we've grown well except for macro and the time sometimes it takes between two projects.

28:03 I feel pretty good on ENU. Health as you rightly pointed out outside of HPS and you know HPS we were de-growing for a long time. I think it is now which essentially means that although HPS will have a denominator effect, but we are winning well in the rest of the business and hence we will continue to see growth in the health vertical. Manufacturing, we are still undergoing our restructuring and rejuvenation of that business. I see strong pipeline. Some of the bets we have made as I have outlined around engineering, around IoT, some of the ADAS and others in the auto industry.

28:58 We are doing a lot of engagements, pilots with customers. So I am quite hopeful of a turnaround in that business. But I would give it a couple of quarters. Technology, we... Saurabh Govil, Aparna Iyer, Jasjit Singh Kang and we'll have to take it one quarter at a time.

29:45 On Q3 I feel quite good and you know as we progress we will keep you updated. If I could just harp a bit more on two specific verticals. One is on the consumer vertical. I think as far now as we see the couple of peers, your couple of peers who have reported numbers have actually reported quite weak numbers in the retail segment and have also cautioned In terms of future outlook, because of the ongoing global trade war, the clients are deferring their spend. Do you also foresee that kind of scenario playing out that might impact our consumer business? And in BFSI, if I just may scratch it a bit more, how close to bottom do you think, how close to bottoming out do you think we are in terms of our top client?

30:35 So I will answer the BFSI question and then I will let... Srini talk about consumer but you know I think a lot of the engagements that they wanted to pause have been paused so I feel quite good about the top client now so you know we should have we would wait definitely through Q3 and then we would have a commentary early in Q4 as we see their first quarter playing out and how the IT budgets get defined. I'm sure all of you are from the financial services industry so you'll have an insight on that as well. On consumer, we're doing pretty well because like BFSI, we have led through our digital proposition and every part of the consumer business is digitally transforming itself. So I feel good and I'll let Srini give a little more color to our consumer verticals.

31:34 So, thanks Abit. You know, I agree with you, especially on the retail side of the business, it has a very strong correlation to global macro indicators, and obviously that reflects in some of our customer spend. But if you look at one of the largest markets for retail in the US, for example, there are mixed signals, whether you talk about the interest rate or trade or unemployment. But having said all that, as far as we are concerned, we see traction like Abit talked about, Srinivas Pallia, Anup Purohit, Sanjeev Jain, Nagendra Bandaru, Aparna Iyer, Jasjit Singh Kang you know the supply chain reimagination also the customer journey mapping which is becoming very very critical for us so the whole aspect of customer convenience whether it's returns management or reverse logistics those are some of the areas that you know we are kind of getting engaged well and also the consumer brand companies right you know they are driving D2C you know what I mean by that is direct to consumer and in some of them I think Abid called out one of the wins that we had this quarter We are setting up a greenfield technology and creating operating platforms. So it's all about building the state-of-the-art digital footprint

33:04 and also modernizing their entire IT landscape across applications, infrastructure, and security. And this actually we're doing for a large global apparel company. And some of the things we're doing, very creative stuff, leveraging our crowdsourcing. We actually, one, this has also been talked about, Firebase. They're doing a crowd-powered AI and data consulting engagement for one of our large customers, which are more into retail and distribution as well. So broadly, retail as an industry is going through transformation, also sometimes turbulence. The way we see it is the challenges, for example, if you look at the sub-segments, the challenges of the fashion retailers, which is very different from a grocery retailer, or if you look at the priorities of discount retailers from an online retailer, it's very different. Big Boss Retailers, they have their own challenges, they have their own strategies to counter this turbulence.

33:58 So it's an interesting time from a technology point of view to help right through the wave, if you will, for the consumer industries across retail, CPG and others. So that would be my short answer to your question, Amit. Sure, thanks, Srinivas. So if I were to summarize, is it okay to say that given the mix of our clients in the retail segment, I know projecting long term is difficult, but at least given the mix of our clients, In the short or the very near term, we don't see any significant headwinds in the retail segment? I would agree with Abhishek's comment. Sure. Thanks a lot, sir. I wish you all the best. Thank you. Thank you. The next question is from the line of Sashi Bhushan from Access Capital.

34:44 Please go ahead. Thanks for taking my question. We have gone through the restructuring in Middle East and India business over the last few quarters. In that context, can you please tell me what was the rationale behind Vara Infotech deal and what actually was the value proposition of that deal that attracted us to the asset? So, as I have said before, you know, We have and we had market leadership in both India and Middle East. But over time, the kind of services that we were providing did not fit the overall company strategy, which is essentially, as you know, around driving digital. And these markets are very rich opportunities for digital.

35:37 They were focused more on commodity business. So we put together a new team about a year, year and a half back. We gave some investment to the team. We gave them the ability to finish the projects that we had already taken successfully for our customers and then pivot the business into the new areas aligned to our strategy. And the second thing that we wanted to do is historically Wipro had A separate what used to be called as Wipro Infotech, a separate brand and a separate entity to service India and Middle East. Whereas we saw that there is a much bigger opportunity to be able to bring the global expertise into this part of our business to be able to be successful over here.

36:31 And the ICICI deal that you referred to is a great example of vindication of that strategy because as banks or and other enterprises truly adopt what I would put under Digital India. There is a lot of experiences that we can bring from the global markets which they may or may not be getting from their current providers. So that is why they have signed a deal with us with a revenue commitment so that we take over their current landscape and then drive the transformation Srinivas Pallia, Anup Purohit, Sanjeev Jain, Nagendra Bandaru, Aparna Iyer, Jasjit Singh Kang Anup Kumar, Malay Joshi, Rishad Azim Hasham Premji, Saurabh Govil, Aparna Iyer, Jasjit Singh Kang Pretty interesting, sir. You said that deal pipeline in Q2 is stronger

38:11 than that was in Q1. Any quantitative color for the same would be helpful? While the pipeline is stronger, I talked about the order book was better in Q2 compared to Q1. So if you recollect in Q1, we were a little surprised because some of the deals that we were declared as being the winner, Amit Kumar, Anup Kumar, Anup Kumar, Anup Kumar, Anup Kumar, On margin front, we have shown commitment for investment in some of the newer areas and newer strategic initiatives. So where are we in terms of investment and was there any impact of the same in this quarter also?

39:24 That is right, Sashi. We have said that we have developed Anup Kumar, Anup Kumar, Anup Kumar, Anup Kumar There is a significant addition there and some of that is for the big bet. That number remains, it goes up and down, but this quarter you will see a meaningful increase in that number, sir.

40:15 All the very best for the rest of the year, sir. Thanks. Thank you. Thank you. The next question is from the line of Sandeep Shah from CGS CIMB. Please go ahead. Yeah, thanks for the opportunity. Just one clarity, Abid, just wanted to understand within the top client, is it fair to say most of the ramdowns is done and over in the Q2 and you believe that you have to wait for Q3 in terms of an uptick or you still believe there is some tail pending in terms of the ramdowns in second half? So Sandeep, as Abid commented earlier, This segment of customers is difficult to predict in the last quarter of the year.

41:01 So I would not hazard a guess right now. We of course have an indication, but we will see how the quarter pans out. Right now I would say it's still uncertain outlook where exactly it will end at the end of quarter. Just further to that, is it these ramdowns started at the end of the quarter or is that being started from the July itself? Sandeep, I wish we could share that many details but you can see that if it has impacted revenue for the quarter that it is certainly not the end of the quarter ramdowns. Okay, okay, okay. And Jatin, just few things. If I look into the cost line item of miscellaneous expenses, it has come down significantly from a quarterly average of 150,190 crores to as low as 70 crores. So most of these savings are recurring or how should we look at it?

41:59 Because your sales and marketing expense ratio is at multi-quarter low. Even your G&A expense is at multi-quarter low. So how to model those expenses going forward? So I think the right way to model would be that they would go back to their run rate numbers. Some of these cost savings are because we have put additional effort, for example, I will come back to miscellaneous, for example, PDD is lower because we have indeed done very well on our collections in certain part of our government business in India as well as we have done very well on our collection in certain parts of Middle East business. and that has resulted in our provision for doubtful debt being reversed and that has given us an uptick in GNA line.

42:48 Miscellaneous expenses was certain cost credits that we could see it coming and we have invested that as part of the people cost bench investment that we think were right to be invested in the current quarter. While this cost will come Back to their normalcy to a great extent, I should say. But we would be able to use the lever of the utilization of our pyramid and most importantly our automation, which we spoke about in our press conference, to manage our margins going forward. Okay, okay. Jatin, just wanted to understand what does exactly mean the cost credits? Why these line items remain volatile on a queue-on-queue basis?

43:37 Just wanted to understand that. Yeah, so, you know, these are, you know, on an ongoing basis, you are carrying certain costs. And when you make an assessment that certain costs as an expense line you need not carry for this quarter, you don't no longer take the provision for that Thank you for watching. Thank you.

44:31 The next question is from the line of Ashwin Mehta from IDFC Securities. Please go ahead. Yeah, I had one question in terms of the effective tax rate. What should we model in for FY20 and 21 going forward? Sorry, can you repeat? Yeah, I want to get a sense in terms of what the ETR would be for FY 2021. I think it will be, you know, we are still studying the tax proposals, but I would say that between 20 and 21% would be a good estimate at current point in time. Okay, okay. And secondly, in terms of your SNM costs, given the sales and support headcount increase, Srinivas Pallia, Anup Kumar, Malay Joshi, Rishad Azim Hasham Premji, Saurabh Govil, Aparna Iyer, Jasjit Singh Kang I would say from an S&M standpoint there will always be some quarter uptake or some quarter reduction because there are certain marketing spans which remain lumpy in our business.

45:56 Now I would correlate that with a sales and support headcount which is higher but a lot of that support headcount is really part of our cost of goods sold and not part of S&M because these are many of these Investments are people who do both pre-sales and delivery and therefore they are classified as cost of goods sold and hence it is difficult to correlate the sales and support line as an aggregate with the just S&M number. Okay, okay. So as such, from an S&M perspective, there doesn't appear to be a material uptake expected there.

46:43 That is right, yes. Thank you and all the best. Thank you. Two questions. First on the geographic wise, if one look at Europe and rest of the world, now weakness persists for both the segments, which is roughly 40% of our revenue. If you can help us understand what is leading to persisting weakness in these two geographies and how you expect it to play out over near as well as medium term. The second question is about the segmental margin which we report in BFSI and communication. If one look at segmental margin, we have seen some weakness in segmental margin of these two verticals.

47:35 If you can provide some perspective, despite doing well in communication side and even mixes some kind of favorable shift towards developed markets, it seems to have some weakness on margin side. Thank you. Yes, I'll answer the question. First question and then I'll let Milan and Angan address the margin question for their segments. So essentially in Europe, primarily the uncertainty around Brexit is one area and second is the overall impact of, we have a lot of banking and capital market customers in Europe. So both of those and the intersection of those two are contributing to the weakness These are all part of some of our large accounts. So while we have robust new accounts being added over there, but some of the drops coming from there are resulting into a negative growth that you see in Europe.

48:42 A bit by when? Because it is now for some time. So now do you expect, because we expect some of the top accounts closer to bottoming out, Do you expect, let's say, now Europe should turn around in next couple of quarters for us? Yes, you know, our base business in Europe still coming from some of the banking and financial services customers. I don't know as, you know, we answered in the earlier question for the top customer. We don't know, you know, how next year will pan out. So I would kind of go quarter by quarter. As I said, our new deal wins Srinivas Pallia, Anup Purohit, Sanjeev Jain, Nagendra Bandaru, Amit Kumar, Malay Joshi, Rishad Azim Hasham Premji, Saurabh Govil, Aparna Iyer, Jasjit Singh Kang Srinivas Pallia, Anup Purohit, Sanjeev Jain, Nagendra Bandaru, Aparna Iyer, Jasjit Singh Kang The weakness on the India side was also from the margin perspective.

50:24 And therefore, that is what is impacting the overall number. On the global side, we do not see any significant challenge on margins. And on the BFSI side, because the revenue has decelerated over Q1, we have seen certain impacts on margin. So we'll have to watch this space over the next couple of quarters, how the revenue shapes up. And only then we will be able to comment in terms of how the margin looks. And as you know, for the global business, the employee base is quite redeployable. So some of the deals that we would get, for example, in the consumer segment, a lot of the digital resources and data resources from from BFSI are redeployable. So in the short term, you see a margin impact.

51:22 Over a medium term, we are able to repurpose and redeploy the deployable bench. And last, just clarification, in BFSI, do we see weakness also in US side or it is largely Europe for us? Yes. So in BFSI, the weakness is more in Europe than in the U.S. But if you look at sectorally, from a sector perspective, I think it's more on the capital market side. Understood. Thank you. Thank you. The next question is from the line of Abhay Moghe from Bajaj Alliance. Please go ahead.

52:09 Good evening. The question is to Abed. It's been almost four and a half years that you joined Wipro. Now, you've had some unfortunate experiences like HPS acquisition or client bankruptcies, and some fortunate things you and your team were able to execute good on the BFSI and some good acquisitions like Designit or Appirio. My question is, what's your point of view on where you are in an overall journey to bring Wipro to industry-leading growth? Saurabh Govil, Aparna Iyer, Jasjit Singh Kang Anup Kumar, Anup Kumar, Anup Kumar, Anup Kumar, Anup Kumar, Anup Kumar, and make sure that

53:46 even in some of the macro spaces there is always an opportunity in some of the slowdowns and some of the economic cycles and we need to just make sure that we make the most of those opportunities. Okay, thanks. Thank you. The next question is from the line of Girish Pai from Nirmal Bank. Please go ahead. Yeah, thanks for the opportunity. I just want to circle back to the margin question. Jatin, are you kind of implying that the 18 to 18 and a half is like kind of peak margins because you mentioned that whatever savings you're going to get, you're going to reinvest back into the business. So from a three-year perspective, would the 18 and a half be like the kind of peak margin that you're going to see?

54:35 It's difficult to call from a three-year standpoint. Our aspiration certainly would be to go beyond 18 and 18.5% range. My comment was vis-a-vis the fact that we had a certain visibility of cost credits and cost benefits that we were able to execute in quarter two, which we have invested back. Some of those may not continue in quarter three, but we will execute on other levers for quarter three. Also, our overarching commentary on margin is that we have to remain invested to get the growth to a better trajectory. And once the growth comes, as we all know, you know, margin always follows. So that's the overall hypothesis with which we are working with Gresh.

55:24 Difficult to call out specific numbers or ranges, you know, beyond that. Okay, my second question is probably a little basic. It's to do with your realized INR rate. I think for many years now, the pros had a much higher realized rate in INR. What exactly is playing out there? Is it your treasury? What exactly? Why are you getting like a rupee more than your peers in the market? Girish, we can certainly explain the cash flow hedge accounting that we do. Maybe Aparna or Abhishek from Iyer team can explain that. We have remained very consistent with our hedging policy as I have articulated every quarter, and that certainly has played out well for us.

56:13 I am unable to compare with others, but we can certainly explain the accounting methodology that we use for our segmental reports. Okay, my last question is regarding pricing or slash gross margin in your digital business. How much more would that be with your company level margins or say if you want to talk about pricing, how much higher would say digital services pricing be with your normal on-site pricing? Yeah, so Girish, the pricing both on-site and offshore is definitely higher than the traditional services. However, these resources also are more expensive. So we get into a better trajectory of margins as we get into larger projects and on a more sustained revenue stream.

57:14 There are also, I would say, marketing capabilities Digital experience kind of investments that we have done in digital pods all over the world and some of that also reduce our profitability of our projects but overall pricing is certainly significantly superior in some of the projects, superior in other projects. Can I squeeze one last question in this regarding your order book? Order in flow. In the last few quarters, has it been more renewal type order in flow that you're getting or it's like make new kind of order in flow?

57:59 So we don't break that out but if you reflect on the comment I made that there were certain deals which were delayed which have got signed in Q2. and we are starting new projects which is reflected in the revenue guidance that we have given that is incremental revenue. Those would be new deals. Thank you very much. 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 all for joining the call. In case we couldn't take Thank you for joining us and you may now disconnect your lines