Wipro's top brass believes that the company's margin will remain in a range at least for the next two-three quarters. What about their medium term aspiration of 17-17.5 percent margins? CFO Jatin Dalal says its too early to talk about the medium term.

In an interview with CNBC-TV18, CEO Thierry Delaporte, CFO Jatin Dalal, and CHRO Saurabh Govil spoke at length about the September quarter results and the road ahead.

Here is an edited transcript of the conversation:

Reema: Why did you declare a modest guidance for the coming quarter?

Thierry Delaporte: The reality is that we have grown pretty strongly in Q2 - 4.1 percent acceleration after Q1. If you look at the performance in bookings, very strong performance in bookings in Q2 after a strong Q1. So actually, we have the volume of business to continue to grow in Q3. What we factored in our guidance is also a certain reflection of the evolution of the market and the reality of the market. No one will question the fact that the market has changed from about a year ago. And in this context, we will discuss and we are discussing with our clients to see what is possible and what are their expectations. But I think, in a market condition where uncertainty exists, and I think it's true for most of the sectors across Europe and America, we just felt the need to be cautiously optimistic. And that is the context of the guidance we have taken; maybe we have been slightly cautious, but that is where we felt we were right now and we will continue to observe the evolution of the market. For now, the demand continues to be strong and certainly, if we look at the volume of deals to close in Q3, we are also optimistic and positive about the fact that we can deliver another strong quarter in bookings.

Reema: What should we expect on the margin front in Q3 and Q4? Because at that time there will be no residual impact to wage hikes. How much can you expand margins from the current level of 15.1 percent? What could the exit margin rate look like?

Jatin Dalal: For two to three quarters we believe that we will be in this range. And despite having made an investment of a month of salary increases, plus the promotions that we gave from the beginning of the quarter, happy to report we are slightly higher than where we were in Q1. Commentary remains the same for Q3, we will have two monthly impacts of salary increases and we believe that we will remain at 15 percent or slightly above the number that we shared in past and we continue to see that. It is difficult to call right now for Q4. You know we do not guide, but clearly, the endeavour for the medium-term is to continue to improve that trajectory.

Reema: Your medium-term margin aspiration is 17-17.5 percent. Given the gap between where you are currently and what your aspiration is, do you think this guidance will be difficult to achieve even in FY24? What according to you is next year's projection on margins?

Jatin Dalal: I would rather not hurry in answering it now. I think we have guided it clearly for Q3 and we will execute on that, but we will come back at right time to talk about that margin aspiration.

Also Read: Wipro Q2: Management certain of double digit growth for the full year despite modest guidance

Reema: Besides the wage impact, are there any other cost pressures that you are seeing? Besides compensation and wage hike, is there pressure on deals, on account of competition?

Jatin Dalal: Wage pressure is the largest one. In fact, I would say that if the attrition moderates, it will reduce some of the pressures that we have seen or the industry has seen over the last six to eight quarters where we had to hire a lot more at higher costs. So, I would say some of those pressures which were existing in the prior period are moderating.

Reema: This quarter’s hiring number looks very low, at just 600 versus the more than 10,000 that you have been clocking in over the last couple of quarters. Is part of the reason at least on account of the uncertainty, the changing reality of the market as Thierry Delaporte put it. I know part of it is because of the base and you have hired a lot of people in the last few quarters, but is part of it anticipating weaker demand?

Saurabh Govil: As we had called out and Thierry Delaporte had very clearly said in Q1, we are investing ahead of time and that is exactly what we had done with very clear clarity that as we invest in hiring a fresher, we will take time to train them and make them ready. What has happened in Q2 was the plan. We had invested ahead of time in Q1 and we have made sure we balance it out in Q2. Going forward, it will be a very conscious effort to make sure depending on the business in an uncertain environment, whatever the requirement. The only thing I can say is that the supply side will not be a constraint in driving the growth agenda.

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