July marked yet another tough quarter for Wipro, India’s fourth-largest software services firm. Subdued numbers, weak growth guidance, and a decline in headcount for the third consecutive quarter. A volley of questions followed from the press and analysts, many of which were addressed by CFO Jatin Dalal. He stressed that the company’s “journey and focus will continue to move” towards the company’s medium-term goals even as it struggles at the moment.
Very few had an inkling that he would step down barely two months later.
Abrupt exit
On September 21, Wipro announced that Dalal had resigned, and the role would be taken over by Aparna C Iyer from September 22. In his letter of resignation addressed to Wipro Chief Executive Officer Thierry Delaporte, Dalal stated that he is “eager to pursue” professional goals outside of the organisation.
The announcement set off disquiet amid analysts and company trackers, several of whom say such a move was unexpected. Multiple analysts said that Dalal was a reliable hand at Wipro, having risen through the ranks to CFO. He was described as sharp, and a person who took on the tougher questions posed by analysts and the press. He was also well-entrenched in the system and had the confidence of the promoter Azim Premji.
Wipro veteran speaks out
Suresh Senapaty, a former board member of Wipro and one of Premji’s most trusted advisors, expressed his disappointment at CFO Jatin Dalal’s abrupt exit, urging the IT firm to work harder to retain talent.
In an unusually candid statement that Senapaty sent to Moneycontrol, he said, "Jatin's departure is sad and disappointing to me personally. I am sure he has chosen a career for him where he can contribute far more. A huge loss of talent for Wipro."
He further said, "According to me, Wipro must regain its intolerance toward losing great talent by working more deeper in understanding of its talent repository. That’s critical for regaining its success trajectory of growth which has been subdued compared to industry for quite some time now.”
"I wish Jatin all the success and Wipro, which has very deep talent. Congratulations to Aparna (the new CFO), a great talent. Wish her all the best," he added.
These remarks assume significance because this is the first time that a top leader of Wipro has spoken out about the company’s senior management attrition and slowing growth, especially in the last few years, since Thierry Delaporte took charge as CEO.
It’s also important because Senapaty is one of Wipro’s most senior leaders, having been associated with the firm since 1980 and is a key lieutenant of its promoter Azim Premji.
He is still associated with Wipro at multiple levels. He’s been on the board of Wipro Enterprises since 2013, and Wipro GE Healthcare since 1995, while also playing an advisory role in Premji Invest, the investment arm.
Loss of key leaders
In a strongly worded note, analysts at Kotak Institutional Equities said the high senior management attrition in the past several months is a concern. It further added that while some changes may have been necessary to check underperformance, "the loss of key leaders continuing into the fourth year of turnaround since Delaporte took charge will not be viewed favourably."
“Wipro is struggling in its turnaround effort, has a weak mega deal pipeline and is vulnerable to vendor consolidation. We expect the company to underperform peers on growth in FY2024E and in the medium term,” the note said.
Exit timing
The timing of Dalal’s exit also set off murmurs, with one analyst terming it as a knee-jerk reaction, especially as Dalal stepped down as CFO the same day that his exit was announced with no period of transition. Officially, Dalal leaves the company on November 30.
Everest Group CEO Peter Bendor-Samuel said that Dalal’s exit comes “as a significant surprise”. “At this time, it is unclear what has driven this decision. However, it comes at a bad time for Thierry and the leadership of Wipro, which is already under significant market pressure,” he added.
At the same time, Phil Fersht, CEO of HFS Research, said, “Dalal has been a pillar at Wipro for over two decades, and his exit comes at a difficult time for the firm in this challenging market. However, it's also truly exciting to have such a talent as Aparna Iyer take the CFO reins and be an example for other Indian heritage tech firms to follow, by appointing more smart women in real leadership roles.”
Wipro’s woes
Wipro’s revenue growth in constant currency on a year-on-year basis has fallen steeply since Q4Fy22, and the guidance for the quarter ending September 30 also does not inspire confidence, with the company expecting CC revenue growth between -2 percent and 1 percent in Q2.
Margins too have been a pain point for Wipro as they are among the lowest when compared to its peers, and is only slightly above Cognizant’s. While it has managed to keep it above 16 percent for the last three quarters, the company’s aspiration is a level above at 17 percent.
While these business challenges have continued to plague Wipro in an unfavourable demand environment, what is perhaps more concerning is that this is the ninth top-deck exit in this calendar year alone from the Bengaluru-based company, and the fourteenth since September 2022.
Two analysts held that it is unlikely that Dalal’s performance has been the reason behind his exit. “The CFO doesn’t drive business performance. He has a fiduciary responsibility, a stewardship responsibility towards the business. Jatin is a seasoned hand, and has made the best of whatever performance Wipro has shown,” one of the analysts said.
Questions loom large on CEO’s second term
With the company's performance continuing to struggle versus peers, questions are now mounting on whether Delaporte will get a second term. The CEO’s five-year term ends in July 2025.
After Wipro’s first reorganisation post Delaporte taking up the top job, the Times of India reported in January 2021 that it led to the exits of 75 senior VPs and VPs.
There has been a steady stream of exits at the company since. To stem attrition, Wipro in January 2023 said it promoted 61 people to the position of vice-presidents and 12 as senior vice presidents, taking the total number of VPs and senior VPs to 275, which was the highest number of VP promotions the company has ever made.
It did yet another reorganisation effective April 2023, splitting the business into four business lines from two. This reorganisation came after Rajan Kohli, President of the iDEAS (Integrated Digital, Engineering, and Application Services Business Line) business that brought in significant revenue for Wipro, also exited.
In Wipro’s Executive Board of 11, six have joined and taken up their positions post-February 2021, additionally raising concerns about whether the newer entrants know the business well enough. The CEO, who was brought on board from Capgemini, has since gone on to hire many others from the French IT firm, including COO Amit Choudhary, APMEA CEO Anis Chenchah, and Southeast Asia BFSI head Frederic Abecassis.
Wipro’s hard choices
The company has maintained publicly that the exits are not a concern, with CHRO Saurabh Govil stating that it is not particularly a matter of concern. Speaking to Moneycontrol in July after the company’s Q1 earnings on exits, Govil had said that the splitting of business lines from two to four was about people creating a deeper impact but some people did want scale. He added that the company has enough leadership bench strength and leadership infusion.
Significantly, Wipro’s Chairman Rishad Premji endorsed Theirry Delaporte during the company's Annual General Meeting on July 12, stating that he has his full support. “Thierry has my full support and the full support of the Board as he takes the company forward," Premji said in response to a question to a shareholder on the company's share price, which has fallen and the company's performance.
It remains to be seen if the company can stanch senior management attrition and bolster operational performance in the coming quarters.
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