Wipro Limited (WIPRO) Q3 FY23 Earnings Concall Transcript

Wipro Limited (NSE: WIPRO) Q3 FY23 earnings concall dated Jan. 13, 2023

Corporate Participants:

Dipak Kumar Bohra — Senior Vice-President, Corporate Treasurer and Investor Relations

Thierry Delaporte — Chief Executive Officer and Managing Director

Jatin Dalal — Chief Financial Officer

Stephanie Trautman — Chief Growth Officer

Analysts:

Mukul Garg — Motilal Oswal Financial Services — Analyst

Abhishek Bhandari — Nomura — Analyst

Gaurav Rateria — Morgan Stanley — Analyst

Nitin Padmanabhan — Investec — Analyst

Ravi Menon — Macquarie — Analyst

Surendra Goyal — Citigroup — Analyst

Manik Taneja — Axis Capital — Analyst

Abhishek Shindadkar — — Analyst

Dipesh Mehta — Emkay Global — Analyst

Presentation:

Operator

Ladies and gentlemen, good day and welcome to the Wipro Limited Q3 FY’23 Earnings Conference Call. As a reminder, all participant lines will be in the listen-only mode. There will be an opportunity for you to ask questions after the presentation concludes. [Operator Instructions] Please note that this conference is being recorded.

I now hand the conference over to Mr. Dipak Kumar Bohra, Senior Vice-President, Corporate Treasurer and Investor Relations. Thank you and over to you sir.

Dipak Kumar Bohra — Senior Vice-President, Corporate Treasurer and Investor Relations

Thank you, Inba. Warm welcome to our Q3 FY23 earnings call, and wish you all a Happy New Year. We will begin the call with our business highlights and overview by Thierry Delaporte, our Chief Executive Officer and Managing Director, followed by a financial overview by our CFO, Jatin Dalal. Afterwards, the operator will open the bridge for question-and-answers with our management team. Before Thierry 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 of 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 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 available on our websites.

Inba, you can open the call now. Over to you, Thierry.

Thierry Delaporte — Chief Executive Officer and Managing Director

Thank you, Dipak, and thank you everyone. Hello, good morning, good afternoon, good evening, to you all. Thank you for joining our third quarter results. From our entire leadership team, I’d like to wish you first a fantastic year ahead. We are optimistic about 2023 to deliver ground-breaking work for our clients and continue on a growth trajectory. We’ll talk about some of the opportunities that are ahead of us. Joining me today is our CFO, Jatin Dalal, our Chief Growth Officer, Stephanie, our Chief HRO, Saurabh, and I’m pleased to introduce you to our new Chief Operating Officer Amit Choudhary.

Earlier today, we reported our third quarter, as you know, I’m pleased to share that we have delivered one another quarter of double-digit revenue growth. Second, record order bookings of over $4.3 billion. led by large deals signing of over $1 billion, and margin expansion of 120 basis-points. It is a huge surge in cash conversion and the fourth straight quarter of lower attrition.

Looking at the macroeconomic environment, the macroeconomic uncertainty we discussed last quarter continues. There’s no doubt. However, tax spending remains robust. So in reality, our clients, they are looking for value driven transformation, tighter governance and improved return on investments.

Cloud transformation continues to be a priority even as we see a higher focus on returns. It’s against this backdrop that we have delivered our highest ever bookings in total contract value terms. Clearly, investments we’ve been making in our clients are [Indecipherable] to bring about a shift in our portfolio and proactively shaping are all paying off now.

On a year-on year basis, our bookings in total contract value terms grew 26% in Q3. We signed relevant large deals with a total contract value of over $1 billion. This strong booking trajectory translating to a 50% year-on year growth in our large deal bookings on year-to-date basis. And by the way, our pipeline of large deals is both strong and diversified.

Looking at the market, three of our four markets grew more than 20% year-on year in total contract value terms as well. Some interesting insights worth mentioning here. One, our strong bookings were driven by Wipro’s FullStride Cloud services and engineering services. These grew at 25% and 45% year-on year respectively. Second, our large deals include new and existing clients seeking a transformation partner or going through vendor consolidation. Renewals with existing clients are often accompanied by services expansion, taking market-share from us and frankly expanding into new areas of our clients businesses. The deepening of our relationships with our clients, driven by our innovative solutions has improved by improved delivery execution, by higher customer satisfaction scores and finally by a strong ecosystem partnership.

In fact, our customer satisfaction score has improved from a previous [Indecipherable] by 10 percentage points. The strong order booking proves frankly that our business strategy is working.

Third point, our expertise in business transformation coupled with decades of experience in delivering cost optimal assumptions is the combination our clients are seeking in this market. A good example of this is a recent deal we signed with a U.S.-based financial information analytics and ratings agency. The project involves integration and management of their infrastructure and security estate with their transformation partner. We will help them improve their future readiness at a lower cost.

Now, let’s turn to revenue growth. And first I’d like to note that over the last 10 quarters, we have grown at a very rapid pace. Our revenues have grown 45% and head count has grown by 40%. Well, now much bigger in scale and size is the breadth of service offerings and deeper client relationships. In Q3, we recorded our seventh straight quarter of double-digit revenue growth. We grew 10.4% on a year-on-year basis, and 0.6% sequentially in constant-currency terms. Our sequential growth was impacted by shallows [Phonetic] as expected and lower discretionary spending by clients.

We have continued to turn the tide on margins. The hard work we’ve put into improve our supply-chain to delivery excellence, operations, automation has actually resulted in greater efficiencies. All this has contributed to margin expansion of 120 basis-points quarter-on-quarter. Our operating margin therefore is now at 16.3%, that was 15.1% last quarter.

We will like to ask Jatin to talk to you in more details about margin. But, I do want to mention that this margin expansion is after absorbing the impact of three full months of salary increases that we’ve offered to our colleagues. Also factors quarterly promotions as well as the restricted stock units were granted to our senior employees.

Another good news has been on the cash conversion side. We saw robust cash conversion for the third quarter at 143% of net income.

I will now share of some details on our service offerings and sectors and how we are continuing to increase market share, market by market. One, our Americas one business grew 11% year-over-year in Q3. And inside the fastest-growing sector in that market was communication media and information services which grew at 14% year-on-year. Looking now at Americas two business, grew 9% year-on-year in Q3. And manufacturing led the pack with more than 18% year-on-year growth. Besides, energy and utilities, securities, capital markets and insurance also recorded good growth of more than 12% each. Order bookings grew 40% year-on-year.

Our business in Europe also has continued to be a strong growth provider, double-digit growth for seven quarters in a row. Europe delivered a year-on-year growth of 12% in this quarter. Almost all the markets in Europe grew double-digits, led by the Nordics, U.K. and Ireland, Germany and South Europe. The order book in total contract value terms grew also at 25% on year-over-year basis.

Finally. Our APMEA, which stands for our Asia-Pac, Middle-East and Africa region, grew at 7% year-on-year in the third quarter. Regions that did, I must say, particularly well during the quarter were Southeast Asia, but also the Middle-East. Our transformation efforts in this region have started yielding results that is very visible this quarter. We closed one of our largest deals in this market. The order bookings grew 22%, and looking forward, the pipeline is strong.

Overall, I would say, we’ve continued to strengthen existing client relationships, and I’m pleased to share that our top 10 clients grew 15% year-on-year, which also here confirm our strategy around growing large accounts.

Now let’s look at the service offerings, iDEAS [Indecipherable]. First, our iDEAS global business line grew 12% year-over-year in Q3. This growth was led by One cloud, the cloud transformation part, which grew 27% year-on-year, apps and data, which grew 18% year-on-year, Digital Experience which grew 16% year-on year, and finally, engineering services, which grew 12% year-on-year.

Now looking at the iCORE part of the house, the global business line grew 8% year-on-year in Q3, cyber security led the growth at 16% year-on-year, followed by digital operations and platform, growing at 9% year-on-year for Q3.

From a total contract value standpoint, cloud infrastructure, our CIS business line grew over 50% year-on-year. CIS revenues now are lower as we continue to rotate our existing portfolio and move towards the cloud, which is very in-line with our strategy as you know. At the same time, we are signing long-term deals with clients in this business.

We are continuing to evolve our FullStride Cloud services business, creating new industry offerings, working together with partners, which has in fact expanded our market coverage. FullStride Cloud services continued to be the high-growth area for us, contributing over one-third of our total revenues today. Our cloud expertise spans the entire spectrum of cloud services, from cloud strategy, migration, modernization to full stack industry solutions and running and optimizing cloud.

Partnerships continue to be a source of growth as well. Bookings with hyper-growth partners in Q3 continued to be strong, nearly $2 billion. That’s a 35% year-on-year growth. Bookings through hyperscalers today stand at 44% of Wipro’s overall booking in terms of total contract value.

Besides cloud, we are expanding capabilities in artificial intelligence, in data and engineering, increasingly going to market as One Wipro, and these investments are getting noticed. A U.S. -based energy company has selected us to build an end-to-end greenfield fully automated warehouse in Europe. The project will allow the clients to manage large sums of chemical storage, while maintaining strict health and security requirements. This win, if we look at it, brings together our domain, our engineering, digital, cybersecurity and health and safety capabilities. But it also underscores how our advisory capabilities, technical and engineering expertise are differentiators for us in the market.

Let me now turn to our most important asset — our people. I am pleased to share that attrition continues to drop for the fourth straight quarter. In Q3, attrition dropped to 21% on a trailing 12-month basis. Our quarterly annualized number which dropped 360 basis-points quarter-on-quarter are now at 17.5%, and we are confident that our focused talent strategy will result in continued moderation of attrition in the coming quarters as well frankly.

Second, we are recognizing and rewarding of talent, promoting a record number of colleagues in FY’23, the highest ever in fact with numerically 30% more promotions than in FY’22. Our leadership teams [Indecipherable] expense, high-performance standards and strong collaboration continues to fuel our growth and our transformation.

And finally, I’m encouraged to see more diversity in our leadership ranks, which has been a focus for the past several years. And definitely, we have more work to do here. We know that, but one promising change worth sharing with you is that we have more than doubled the number of women in senior leadership holds at Wipro as this visible impactful years progress their career where they demonstrate the impact, diversity has on our clients, on our business and on our people.

We’ve been strict about maintaining that focus on talent quality, high-performance, orientation and inclusion in our graduate hiring as well. Year-to-date, we have hired and onboarded more recent graduates than the whole of previous years than actually ever before.

Now, as always, I will close with an outlook for the full year. We expect full-year revenue growth to be at 11.5% to 12% in constant-currency terms. On margins, our Q3 numbers is now the new base, and we will look to improve it further.

In summary, I’ll say that we had an excellent quarter with record bookings, sustained growth and deliver excellence. Our strategy continues to pay off, and we will remain on course.

With that, I will hand it over to Jatin now for his comments.

Jatin Dalal — Chief Financial Officer

Thank you very much, Thierry. I will quickly summarize the financial highlights for the quarter. We grew 10.4% year-on-year on constant-currency terms. Our margins expanded 120 basis-points to 16.3 percentage points. If you see our ETR, it was 22.9, compared to 21.5 last year, so that impacted a little bit net income conversion. But despite that, sequentially we delivered 14.8% growth in net income and 2.8% on year-on-year basis.

Cash-flow remained strong at 143.5% of operating cash-flow as percentage of our net income. Our cash at the end of the quarter was $4.6 billion gross and $2.7 billion net. This is a volatile year and quarter on Forex. We had about $4 billion of Forex hedges, and our realized rate for quarter three was 82.24. As Thierry mentioned, we have guided for 11.5% to 12% growth in constant-currency terms for the full-year ’22-’23 at the exchange rates which are mentioned in our PR.

Thank you very much for joining, and we’ll be very happy to take your questions from here.

Questions and Answers:

Operator

Thank you very much, sir. Ladies and gentlemen, we will now begin the question-and-answer session. [Operator Instructions] We take the first question from the line of Mukul Garg from Motilal Oswal Financial Services, please go ahead.

Mukul Garg — Motilal Oswal Financial Services — Analyst

[Technical Issues]

Operator

Mr. Garg, could you switch to a handset mode, we can’t hear you that well, sir.

Mukul Garg — Motilal Oswal Financial Services — Analyst

Yeah, is this better?

Operator

Yes sir, thank you.

Mukul Garg — Motilal Oswal Financial Services — Analyst

Yeah, sorry. I have two questions. The first one is for Thierry and Stephanie if she is there. I just wanted to better understand, how should we look at the PCV number, the total number, not just the large deal, because if you look at the Q3 print, we have PCV up $4.3 billion implies a book-to-bill of almost 1.5 times. You have been growing the PCV number quite handsomely over last few quarters as well. How should we think about the duration of the deal wins which obviously will convert into revenues, and when should that impact starts flowing through? And B, the revenue in last four quarters has — the incremental revenue has been barely about $18 million, whereas your deal wins continues to grow in 25% to 30% range. So is there something which is kind of impeding the conversion of these bookings into revenues over the last four quarters?

Thierry Delaporte — Chief Executive Officer and Managing Director

So, Mukul, this is Thierry, I will take your question, and, Stephanie if you want to add of course, feel free, but Mukul, you are right. I think the performance in bookings has been good for several quarters, this quarter has been outstanding. I think we’ve really done a great job of not only developing our pipeline of deals, but also converting them into deals or contracts for us. So, we’ve actually seen — we’ve shown two things during this quarter, two confirmation if you like, one is that we continue to see a lot of opportunities for us in the market, which confirms that this is still a robust market for us. And second, that we continue to win well over the competition. We continue to show healthy levels of win rate, if you like. From a type of deals standpoint, I would say, yes, the investment made on large deals now, that was 18 months ago is paying off a little more every quarter. It’s the reality. It started with one big deal, and then you know few quarters later another one and then, we are gaining in volume, but also in consistency. And we will hear from Stephanie that it’s across the organization now. So, this is really reassuring because we get a lot of comfort from that end. I would add that there is also a promising volume of largely [Indecipherable] in our pipeline.

The conversion equation, so the conversion of the revenue of bookings to revenue that you are asking. I think this is a reflection of a couple of points. Point one is, there is no doubt that while the market continued to be good and the investment in tech continues to be good, there is a change that I called last quarter, macroeconomic environment tied to certain volume of uncertainty, and that exist. There are sectors, everybody will be surprised to hear that the tech sector is a sector that has certainly felt quite [Indecipherable], felt the impact of this change in macroeconomic environment. Secondly, is probably the fact that there is a potential of slowdown of, more I would say volatility of the discretionary spend from clients. Third, what we are seeing is that there is not necessarily a slowdown of the decision process, if that was the case maybe we wouldn’t have had such a good quarter in term of bookings, but I think the time it takes to launch and ramp-up those programs beyond may take a little bit of time, and we have to go with the pace of our clients in this context of uncertainty. An example of that is typically deals where there has been a consolidation of vendors that we have won, and then there is a period of transition for the business to go from one partner to another, and I think it is a fact of life that we have reflected in our projection, but certainly the performance in bookings, the volume of deals, but also the quantity of our pipeline give us quite a nice level of confidence for the for the next year as well. Stephanie?

Stephanie Trautman — Chief Growth Officer

Yes, Thierry, I would just reinforce your comment in terms of the health of our pipeline, the types of deals that we’re winning. It is a mix of new clients. It’s a renewal of existing clients who are expanding our scope, we’re taking market-share and vendor consolidation, and it’s also a pivot of our portfolio to the new. And you’ve heard us talk about the growth in FullStride Cloud services. So very, very happy with our pipeline, the health of our pipeline for Q4 and even going into next year. So, I think our growth will continue and we’ll start to see the revenue converts in future quarters.

Mukul Garg — Motilal Oswal Financial Services — Analyst

Understood, thanks. And I said once quick one for Jatin. Jatin, I was a little bit confused the employee cost number which you printed this quarter, if you look at the cost per employee, excluding the subcontracting expenses, this was a quarter where two months of the wage hike was going through. We also had promotions, which kind of took place, but then employee cost per employee in INR terms have been flat and actually declined almost 2% versus the last quarter in USD terms. So, what really is leading to this flattish kind of say cost, which actually has been managed quite well. What are the drivers which are helping you kind of keeping this under check, given that, I think last few quarters have been exceptionally tough in terms of overall expenditure of all employees.

Jatin Dalal — Chief Financial Officer

Yeah, so, I think the most foundational reason, Mukul, and that three reasons, I will go through each of the three. One is, the most foundational reason is that we have improved the way we manage our supply-chain, we have far more of freshers who are part of our pyramid, so pyramid has continued to improve quarter-on-quarter. Our second is the attrition is lower, which helps us manage the cost better, because to that extent there is an impact of premium which reduces of lateral hires. So overall, the most foundational reason is that we have managed our cost structure much better. The third and — of course the other third component is that we have released a lot of efficiency gains from our fixed-price projects, and those get redeployed for our TNM and other work, and therefore, you don’t need — your employee cost remains a constant, whereas you are able to add revenue. So, these are the more foundational, that I say, the cost structure improvements that we have made. The second is also that if you look at it from a consolidated Wipro Limited standpoint, there was a restructuring cost which was sitting in the employee cost line, which was not counted towards the segment margins of 15.1% in quarter two, but it was sitting in consulted line, which is not present now, so that reduced — that shows a downward path on the employee cost, so that is the second. And third is quarter three typically, the employee cost also has certain amount of accruals related with leave and other provisions, which takes it up or down, but if you want to model it, you model it based on the first reason that I shared, which is the more foundational improvement in the cost structure of our employees, and we’ll continue to work on that. The second and third factor, the second factor was one-quarter impact, which will not recur. And the third impact is seasonal, which will come back in next December, but won’t recur in the future quarters.

Mukul Garg — Motilal Oswal Financial Services — Analyst

Well, that’s quite helpful. Thanks for taking my question and I’ll get back into the queue.

Operator

Thank you. Our next question is from the line of Abhishek Bhandari from Nomura. Please go ahead.

Abhishek Bhandari — Nomura — Analyst

Thank you and happy new year to the entire management team. Thierry, I just had one question.

Operator

Mr. Bhandari, I’m sorry to interrupt, your audio is a bit muffled, sir. If you’re on a speaker phone, switch to handset, please.

Abhishek Bhandari — Nomura — Analyst

I hope this is clear now.

Operator

Yes, thank you.

Thierry Delaporte — Chief Executive Officer and Managing Director

Yes, yes, it is clear, Abhishek.

Operator

Well, it looks like Mr. Bhandari’s line has just got disconnected. If he joins the queue, we will take his turn. In the meanwhile, we will move to our next question, that’s from the line of Sandeep Shah from Equirus Securities. Please go ahead. Your line has been unmuted, please go ahead with your question, sir. There seems to be no response from this line. We will take our next question that’s from the line of Gaurav Rateria from Morgan Stanley. Please go ahead.

Gaurav Rateria — Morgan Stanley — Analyst

All right, thank you for taking my question. Happy New Year, Thierry. First question, any color on the percentage of renewals in PCV, is it consistent with the historical last few quarters or anything has changed? And how should one think about timing of ramp-up of these deals that you have signed in the current quarter? Would it be like 1Q phenomena, would it be more like a 2Q phenomenon? How should one think about the timing?

Thierry Delaporte — Chief Executive Officer and Managing Director

This is — Gaurav, first of all, happy new year. And to your question, I would say, first of all, regarding the balance, I was trying to remember, the balance between the new and renewal, I would say this is as expected. There is a healthy balance, I would say. From one standpoint, the deals that we got, we managed to extend them to sometimes widen the scope, increase our presence, that’s also, in particular, when we’d been able to consolidate some positions, but we also had a good volume of new deals which is quite comforting, because we know that we will be able to continue to expand and growing those new accounts as well. So this is a good balance, I would say, a good a good balance between the two.

The second question that is about the time things will take to ramp up, it’s a difficult question if we are sticking to the rule that we’re only guiding for the next quarter. But what I would say is that, for sure, we are seeing growth ahead of first graph. So this projection for Q4 certainly reflects for the reason that I mentioned before, little bit delay we are seeing ramp-ups happening, but it can only go up.

Gaurav Rateria — Morgan Stanley — Analyst

Got it. Thank you. Secondly, you made a very interesting point on percentage of the order book coming through hyperscalers, has — how should one think about the nature of these deals? You see contract profitability similar to regular deals, or there are different kind of nuances one has to keep in mind?

Thierry Delaporte — Chief Executive Officer and Managing Director

Well, so the first point, remember that in mid 2020 when we started to lay out our strategy, partners was at the center of it. And — the way Wipro was connecting and engaging at the strategic level with partner was insufficient, and we’ve clearly organized ourselves to be able to be a lot more relevant to them. So, we have built these teams globally with local connections under the leadership of our CGO function. And this is paying off every single quarter ever since. At that time, I remember that the revenue we were getting from our top five or six partners was not exceeding a quarter of our bookings. And today, as you heard, we are not that far from half of the bookings coming from hyperscalers only. So, it gives you a feel for the volume of growth that we’ve been driving with them, but in a very strategic way, so going to clients together, developing solutions together, literally developing strategy and going after the markets as real close partners. And that is — now you can ask what type of deal? Typically, obviously, hyperscalers are involved in most of our cloud transformation deal. So, the whole strategy that we’ve developed around FullStride has been paying off as well. And so, how you should see it as a relation that is accelerating, that is gaining muscle every day, and we’ll continue to drive growth.

The margin profile actually is rather good. And as you can imagine, if we are improving our operating margin so significantly, it’s because the margin we are getting from our deals is going in the right direction. I think it’s also — we all know that, and it’s actually visible in our books that every time we are taking — winning a deal that is more where it’s more value-based, if you like, we are able to deliver better margins as well.

Gaurav Rateria — Morgan Stanley — Analyst

Great. Thanks for great expansion. Lastly, if I can squeeze on FullStride, TCV grew 25%. This is in context of what we are kind of hearing in the market that cloud spend is likely to moderate because of the macroeconomic involvement. So, would it be more of a phenomena of market share gain for you, or you fundamentally believe that slowdown in cloud spend may not necessarily have happened as it was feared? Thank you.

Thierry Delaporte — Chief Executive Officer and Managing Director

It’s interesting, your question is a good one, Gaurav. I have a view on that, and let me tell you what I’ve observed, and I spend a lot of time with the hyperscalers personally, is that there was a gap in our — there was a shortage in our ability to deliver a [Indecipherable] on their demand just because of the magnitude of the size of this market. And so, the fact that they are slowing down doesn’t necessarily mean much in terms of impact for us. I believe that with the size of these hyperscalers, even when they are growing few percentage less, we can still grow more at the same speed. I remain very bullish that — talking about cloud and what is representing today north of a third of our business will continue to gain, growing in terms of proportion of our revenue mix, if you like, going forward. So, market may slow down, we may not slow down around cloud.

Gaurav Rateria — Morgan Stanley — Analyst

Got it, very clear. Thanks a lot and all the best.

Operator

Thank you. Our next question is from the line of Nitin Padmanabhan from Investec. Please go ahead.

Nitin Padmanabhan — Investec — Analyst

Hello.

Thierry Delaporte — Chief Executive Officer and Managing Director

Nitin, hi.

Nitin Padmanabhan — Investec — Analyst

Yeah, hi, good evening, and very happy new year. I had a couple of questions. First is on Europe. So, I think it’s been a little counterintuitive. Almost everyone has been showing very solid growth out of Europe. And the geographies which we thought were relatively stronger are actually much weaker. If you could give some color on what exactly are the dynamics at play here. That’s the first question, and I have one more after this.

Thierry Delaporte — Chief Executive Officer and Managing Director

You know, Nitin. Indeed, I am aware of, and I should not necessarily comment on relative trends versus the competition. I think in the case of Wipro, what is clear is that over the last years, we have completely changed speed, focus, attention, and our impact in Europe is different. There’s no doubt. I think the organization we’ve put in place with a focus on key strategic markets, the leadership that we’ve either hired or promoted in these regions, the organization that we have reinforced, the connections that we have built with our clients, the intimacy, the ability to combine the power of our global network and very strong impactful legal leaders in this market is making a difference. And yes, Wipro is a different competitor in Europe today than it was some years ago. Is it paying off? I’m assuming, yes, it’s clear that, yes, we continue to grow, we continue to see nice deals. We have a nice portfolio of clients in Europe, and we will continue to gain market share in Europe.

Nitin Padmanabhan — Investec — Analyst

Sure. The second one was more of a clarification. So, I think the deal wins have been sort of pretty — in the last three quarters have been pretty decent compared to the earlier quarters. And you mentioned that the conversion was low because of the environment. And then if I just look at how we typically grow in Q1, apart from one of the years where we had large deals and we grew pretty well. Do you believe, is the understanding correct in terms of the commentary that you think the level of build in terms of the deals won is sort of sufficient enough that despite those headwinds, we’ll actually see an improvement next year from a trajectory perspective, on a sequential growth rate, if you look at it that way? Or alternatively, maybe the flip side of the question is, do you think the cautiousness by clients and the view on discretionary expense and all of those, you think that cautiousness should sort of dissipate as we get into the new year or in the next fiscal?

Jatin Dalal — Chief Financial Officer

Yeah. So, Nitin, this is Jatin. Hearing you I was smiling because this is one way to talk about Q1 numbers that we don’t want to talk about. So, we will give it a pass. We understand your question precisely, it’s a great question, but we are not at a point in time we would answer that. But directionally, the fact that we are winning large deals of TCV, the revenue, the backlog is improving, and it will convert into revenue. It’s difficult to pin point a specific quarter that will get the boost out of it.

Nitin Padmanabhan — Investec — Analyst

Sure, fair enough. Thank you so much, and all the best.

Operator

Thank you. We’ll take our next question from the line of Ravi Menon from Macquarie. Please go ahead.

Ravi Menon — Macquarie — Analyst

Hi, thanks for the opportunity. Firstly, on the overall deal [Indecipherable], it looks like that’s really strong. So how do you think about the market demand especially given say north of $50 million [Indecipherable] disclosure of large deals. So, could we continue to see that momentum even over the next quarter or do you think that is moving, it’s largely going to be on hold?

Thierry Delaporte — Chief Executive Officer and Managing Director

Ravi, your voice came a little muffled, so I hope, I understood the question, but I believe you are asking some — our views on the market itself, okay. Am I correct?

Ravi Menon — Macquarie — Analyst

Yes, that’s right. I was just asking about the deal pipeline; do you think that position basically could slow and the four deal wins could get a little softer next quarter.

Thierry Delaporte — Chief Executive Officer and Managing Director

When it comes to projecting bookings, you can certainly base your level of confidence on the quality of the pipeline and on your trend of win rate over a certain period of time. If I base my judgment on that, I see that we have another solid quarter of bookings coming ahead of us. Will it be as good as the one this quarter, that I don’t know, I cannot tell. Sometimes it depends on the one deal and it makes a big difference, so I think you know, very confident that it will be another solid quarter in term of bookings. Let’s see how it goes, okay. But a little bit of reflection on the markets. Again, the softness of the economy, the uncertainty of the macroeconomic environment is a reality. I said it in this room three months ago, Ravi. At the time we are not necessarily saying it, but this hasn’t changed. This hasn’t changed. In this context, I can only recognize looking at the performance and the activity in the field from our sales teams that the tech spending remained robust, that’s clear. You know, I take obviously control from the fact that we are winning, and that we are winning nice type of deals. And if you look at being a little bit more — looking at the type of deals, you probably have noticed that we are talking about total contract value. We also look at the annual contract value. What’s interesting is that the total contract value has been our highest ever, the annual contract value performance has been also our highest ever. And what it says to me is that we have a good volume of large deals, good volume of medium deal and good volume of small revenue. I think this tax –I don’t know if we call it to tax, this good pyramid of size of deals also reflects also the fact that our backlog for the quarters to come is reinforcing and is getting stronger. So, reasons for us to be optimistic for next year.

Ravi Menon — Macquarie — Analyst

Thanks [Indecipherable] It’s a bit of a revenue and margin question. If the demand is strong, why are we looking at Middle East geography where you talked about investing in it. You used to think about the Middle East as a relatively lower billing rate and lower profitable geography. So why not focus on the developed markets if supply is still tight there?

Thierry Delaporte — Chief Executive Officer and Managing Director

You know, Middle-East is a very important market for us. Very important market, and in fact you know by size, Wipro is one of the big players in the Middle-East. So, we are very proud of our business, we continue to invest in this business, such that we decided to establish the headquarter of the region in Dubai, for APMEA region in Dubai. And so, we have invested in innovation lab in capabilities, we have just decided to launch our Capco business in the Middle-East also a few weeks ago. And, we are very bullish about our — the outlook of Wipro in the Middle-East over the next quarters. It will continue to surprise.

Ravi Menon — Macquarie — Analyst

Thank you and best of luck.

Operator

Thank you. Our next question is from the line of Surendra Goyal from Citigroup. Please go ahead.

Surendra Goyal — Citigroup — Analyst

Yeah, hi Thierry, just one question. How should we think about the correlation between TCV and growth? And the reason I asked that question is, for the past six quarters, whatever metric you have disclosed ACV or TCV is up greater than 24% year-on-year, while growth in that period has gone from 25% plus Y-o-Y to a guidance of around 8% at the higher end in the coming quarter. So just wanted to understand how should we think about the correlation between TCV and ACV? Thanks.

Jatin Dalal — Chief Financial Officer

Surendra, this is a little mathematical view. I will take it, Jatin here.

Surendra Goyal — Citigroup — Analyst

I understand maths as well.

Jatin Dalal — Chief Financial Officer

Okay, Surendra. So, I would — I mean it didn’t have a demand color but more conversion points, so I would take it. The key issue is that, I mean, we have mentioned in last third quarters that in the first-quarter, we said our TCV growth is 32 and 28 and this quarter also has been very robust growth. The conversion has two components, it has a future timing component, when does it convert, and second is clearly the immediate component which is it converts into next quarter or in a two-quarter phenomenon, etc. You have to appreciate the fact that we have one, a very large component of PCV and something that we also covered in Thierry’s speech, is that a large component of that is in cloud and infrastructure services, which are typically long ended contracts over four to five years. So we can give you comfort that as we enter every quarter, we are entering with a superior backlog than what we are carrying in the previous quarter. And the uncertainty around discretionary spend or the conversion of large deal will continue to payout in the immediate quarter, so you are not seeing this correlation in an immediate three-quarter period that of ’22, ’23 that you have seen the results of. But as we model it for future, we feel very comfortable that we are moving in right direction of securing a better book to carry as we enter ’23, ’24.

Surendra Goyal — Citigroup — Analyst

Jatin, the ACV that you were disclosing in Q2, Q3 and Q4 of last year was all in excess of 24% also. So, this question was more around — like I’m sure deals which would have been done then should have converted by now. So just wanted to understand it better if you want to kind of take it offline.

Jatin Dalal — Chief Financial Officer

Yeah, And we take your point, Surendra, we can — even in next quarterly commentary, we can cover this point specifically, but we feel comfortable that the bookings in the current environment is the only way to continue to grow, because uncertainty will always mean that in our business, there is always — there is certain amount of projects coming to an end and only way to continue to grow is to add more on the top. So, we feel comfortable, but we can cover it as we go forward.

Surendra Goyal — Citigroup — Analyst

And just need one clarification. On your comments on the margin work, you mentioned like something in the employee cost, which kind of moved away from the cost of employee — per employee cost for IT services. Could you just kind of elaborate on that? And could you also quantify it for us?

Jatin Dalal — Chief Financial Officer

So, Surendra, it is quite straightforward. When you see our employee cost numbers, you’ll see it on a consolidated basis for entire Wipro Limited. As you know that we had a restructuring cost, which was sitting in the company book, so it was sitting in quarter two employee cost. But when we published our segment results and IT services, it was sitting not in IT Services segment. It was sitting elsewhere, and clearly that restructuring costs has not recovered in quarter three, and that has reduced from quarter two to quarter three, that much cost in the employee cost line, when you look at consolidated Wipro Limited book.

Surendra Goyal — Citigroup — Analyst

Could you quantify that, Jatin, just for our convenience?

Jatin Dalal — Chief Financial Officer

Yeah, I can quantify it, but you can also see it in last quarter’s numbers or Aparna or Abhishek will give you the chart.

Surendra Goyal — Citigroup — Analyst

That’s very helpful, Jatin. Thank you so, much.

Jatin Dalal — Chief Financial Officer

It’s about 130 crores.

Surendra Goyal — Citigroup — Analyst

Thank you Jatin.

Operator

Thank you, Our next question is from the line of Manik Taneja from Axis Capital. Please go ahead.

Manik Taneja — Axis Capital — Analyst

Hi, thank you for the opportunity. I actually just wanted to get your sense around the margin improvement trajectory, given the fact that over the course of last 18, 24 months apart from acquisitions you’ve invested in terms of [Indecipherable] when it came to freshers. And now it is getting much more moderated…

Operator

I am sorry to interrupt. Mr. Taneja, it looks like there’s an audio break from your connection. If you are on a handsfree mode, please switch to handset and speak, and you might have to repeat the question, sir.

Manik Taneja — Axis Capital — Analyst

Sure, thank you. I am on handset only, I’ll repeat the question. So, the question was on margins. Over the course of the last 18, 24 months, we have seen transition in our margins because of the investments that we made around our delivery in terms of — especially in terms of freshers as well as some of the acquisitions that we made. So now given the fact that growth actually is slowing down and hiring essentially coming off, is there a timeline that you would want to essentially suggest as to us getting back to 18%, 19% EBIT margins?

Jatin Dalal — Chief Financial Officer

Okay. So Manik, thanks for your question. And as you can see, we have made a substantive move on margin in quarter three, certainly, we will protect this base and make an incremental effort for future. But right now, I don’t think we should go ahead and quantify the quarter or year in which we’ll reach a particular threshold. Our effort clearly as we articulated in past also, is that we will — these are not the margin we are satisfied with from a medium-term standpoint, and our trajectory for our goal for medium term is higher, and we’ll continue to make an effort. But please be mindful that in quarter three, we have made significant movements, and will have to sustain that and on that build it incrementally in next quarters.

Manik Taneja — Axis Capital — Analyst

Sure, thank you. All the best for the future.

Operator

Thank you. Our next question is from the line of Abhishek Shindadkar from [Indecipherable] Capital, please go-ahead.

Abhishek Shindadkar — — Analyst

Hi, thanks for the opportunity and Happy New Year. Thierry, in the preparatory remarks, you mentioned about modest slowdown in the discretionary spend, was this comment related to Capco by any chance? And given the fact that you have a solid U.K. European presence. One of your competitors had highlighted that H1 could see some of the deals delayed, deals could convert in the first half. Anything that you would like to comment on the same? Thank you for taking my questions.

Thierry Delaporte — Chief Executive Officer and Managing Director

When I was referring about to discretionary spend, Abhishek, I was not referring to any units specifically. It’s a reality that applies to all kind of discretionary spend. As you mentioned, Capco, let me tell you one thing. The acquisition of Capco that we’ve done, when was that now? 18 months ago, was an extremely strategic acquisition. The purpose of this acquisition was to game change for us in the BFSI market, be able to suddenly completely transform the type of conversation that we’re having with clients in order to be able to really engage with them at a strategic level and drive larger program. This is exactly what has happened. The performance of Capco quarter-after-quarter over the last 18 months has been very good, actually higher than what we had anticipated or expected at the time of the acquisition, and that the nature of — the strategic nature of the acquisition is a reality on the ground every day. So that’s — I just wanted to be clear about this — the Capco since you mentioned it.

As for our discretionary spend, I think it’s — the type of deals that the clients feel they can stop at any moment in time, and this happened with every kind of clients across sectors.

Operator

Thank you. We’ll take the next question from the line of Dipesh Mehta from Emkay Global. Please go ahead.

Dipesh Mehta — Emkay Global — Analyst

Thanks for the opportunity. Just on the deal related question. So if I look now, press release contain note four, which include detail for only gross deal intake and any subsequent cancellation, termination and reduction is not the part of the number. So, do we see any different trend, let’s say, over the last few quarters, particularly on the termination, reduction side, which could have implication about revenue growth trajectory compared to the deal intake trajectory? Second question is about the growth trend or demand trend. If you can provide some sense about communication, BFSI and consumer? Thank you.

Thierry Delaporte — Chief Executive Officer and Managing Director

Okay. Dipesh, thanks all your questions. So, the first one, if I understand well, is about, has there been more cancellation or termination? Is it what — that’s what I understood, right? The answer is we have not — let’s be very clear, we have not lost one single — it’s not like we — there was a question earlier in another form about is it structural. It’s not — we have not lost a client. We have not lost a — there hasn’t been a big termination or anything. So, it’s not like there’s been a particular loss. That’s the nature of the discretionary spend or the nature of a slightly slower ramp-up that is more explaining the revenue profile. Jatin, you want to add?

Jatin Dalal — Chief Financial Officer

No, you’re good, okay. Dipesh, if you are okay, I wanted to also clarify the earlier question by Surendra so that we conclude this call answering every question. Surendra’s question was for clarification, I will mention that Q2, Q3, Q4 Wipro’s ACV growth was quite high, and that was — I’m repeating 31%, 22% and 33%. And if I take the average of the three, it comes to around 28% growth in ACV, and that — if you see our ’21, ’22 growth in revenues was also 28% plus. So, our ACV growth did reflect in our revenue growth. Both numbers included Capco, so they are apple-to-apple. And therefore, we continue to see a strong correlation of our booking business with revenue. And if there are any other questions on this slide, IR team will be very happy to take it after the call.

Dipesh Mehta — Emkay Global — Analyst

Sorry, the second question, if you can answer.

Jatin Dalal — Chief Financial Officer

Sorry, Dipesh. Can you ask me again?

Dipesh Mehta — Emkay Global — Analyst

So the second question was about the demand trend, what we are seeing in communication, DFS [Ends Abruptly]