IT major Wipro Ltd has resumed its sequential revenue growth guidance after two quarters of refraining from it due to uncertainties caused by the pandemic. It expects its revenue for the third quarter ended December to grow 1.5-3.5% sequentially on the back of strong demand from digital and key geographies. In an interview with Mint, Jatin Dalal, chief financial officer, Wipro speaks about resuming guidance, growth drivers and its deal pipeline. Edited excerpts:
On what basis did Wipro resume its revenue growth guidance? What does the outlook?
Our resumption of guidance is really a reflection of our visibility into the business and certainty of outcome. It’s not so much about our performance. In last 20 years, we have had quarters where we did wonderfully and there were quarters where we did not do too well. Still, we continued with our practice of provide quarterly guidance. So, the certainty is the cornerstone of guidance. If you don’t see certainty and if the environment is so fluid that you can’t really put a finger on and say anything for certain, then it is better not to guide. That’s a call we took at the beginning of April. Now, we definitely see certainty and a good traction. It is however difficult to say if we are in a pre-covid world. I would rather go a step further to say that we should not worry about pre-covid times. We should worry about what is our reality of today and we should do our best in today’s circumstances.
Which verticals and geographies are driving the growth momentum for Wipro?
Except energy & utilities and technology, we have seen growth across verticals and that is a very positive sign. Our BFSI (banking, financial services & insurance) growth has been very healthy at 3.7% q-o-q, communications is at 4.6% q-o-q, and consumer business unit is growing at 4.5% q-o-q in constant currency. We feel quite comfortable with our sectors. On geographies, we see strong momentum in Americas followed by rest of the world. In UK, we have a little bit of volatility which impacted the growth in the second quarter. We actually remain comfortable even in Europe. Overall it has been a good quarter wherein except few, all key sectors showed strong growth momentum for us.
How has growth and demand in digital services been?
Overall, we feel very comfortable with the growth prospects in all three segments of digital, cloud, and cyber security. We continue to see good traction in the market in all of these. The reason we discontinued calling out digital revenues separately is because the clients’ priorities are changing rapidly in that space. So, we had to really think through as to what would be the right indication that reflects the prospects of future growth and a metric that we can track consistently that gives us an indication of the priorities of the new world. At some point in time, we may come back with a number which we feel is reflecting the priorities of our customers.
What are the levers to improve margins?
Our levers are around utilization which stood at 76.4% in the second quarter which has been higher than any other quarter. If you see our offshore revenue mix, it has improved to 50.4% in the second quarter this year from 46.7% in the corresponding quarter of last year. So it is nearly a 4% improvement in offshore revenue, which is always more profitable because of the cost of resources and also in terms of scale. Overall, we feel comfortable that we have executed very well. We also put a very good amount of work on reduction of subcontractors which we use as part of our variable workforce for business continuity.
How is the deal pipeline and what’s the average deal size?
Average deal size is a difficult parameter for us to share. But we are certainly seeing a healthy traction in the $20-100 million deal size in the marketplace and winning many of such deals. These deals are across verticals and we are certainly seeing a much better traction in comparison to the first quarter.