Ladies and gentlemen, good day, and welcome to the Q2 FY 2024 Earnings Conference Call of Coforge Limited. 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. Should you need assistance during the conference call, please signal an operator by pressing star then zero on your touch-tone phone. Please note that this conference is being recorded. I now hand the conference over to Mr. Vikas Jadhav, VP, Investor Relations. Thank you, and over to you, sir. Thanks, Vikram. Good morning to all. You will have received our Q2 FY 2024 by now. They have already been filed with the agencies and also uploaded on our investor section. So we have with us today our CEO, Mr. Sudhir Singh, our Chief Customer Success Officer, Mr. John Speight, and Mr. Ajay Kalra, our CFO, and our Deputy CFO, Mr. Saurabh Goel. We begin the call with opening remarks from the management team, and post that we will open the floor for questions. Before we begin, please note that some of the statements made in today's discussion relating to the future should be constituted as forward-looking statements and maybe may involve risk and uncertainties. Please refer to the disclaimer to be set at slide number 2, that comes in our Q2 result presentation. With that, I would like to hand over the call to our CEO, Mr. Sudhir Singh. Over to you, Sudhir. Sudhir, you are on mute. Thank you, Vikas, and a very good morning, good afternoon, good evening to all of you across the world. Thank you for joining us today as we share our quarter two performance and the business outlook going forward. We meet today in the shadow of a material change in the shareholding structure of Coforge that has taken place since we met last quarter. As you're aware- Sudhir, can you start again? We lost you for a moment. Let me just do that again. We meet today in the shadow of a material change in the shareholding structure of Coforge that has taken place since we met last quarter. As you're aware, Baring Private Equity Asia, EQT, which was the promoter of the firm, has sold its entire stake over the course of the last three months. Consequently, Coforge has emerged as the only material board-governed, professionally run Indian IT services firm in the industry. We believe that as the Indian IT services industry matures, this ownership construct of professionally run firms will likely increase, and we take our responsibility as being the first board-governed, professionally run firm very seriously. It shall be the intent of my team to ensure that in the years to come, we set a benchmark around governance and performance, which will do justice to the trust that the investors have placed in us. Moving on, I'm pleased to report that in quarter two, the quarter under review, Coforge has delivered another strong performance despite the challenging and uncertain macroeconomic environment. At the end of the first half of the current fiscal year, our revenue has grown 16.2% in CC terms, 18.7% in INR terms, and 13.2% in US dollar terms. In quarter two, we recorded robust sequential growth. We've seen a significant sequential growth in our margins. We've sustained our large deal signing velocity. We have ensured broad-based growth across all verticals. We've continued with our net headcount increase, led by both lateral and campus fresher hiring, and we have also continued our investments in SG&A to sustain our growth trajectory in the coming years. At Coforge, we have always believed that superior execution is key to driving sustained performance. This quarter was again reflective of the execution intensity that is uniquely Coforge. With that preamble, let me move on to the quarterly performance and the revenue analysis. I'm pleased to report that during Q2 FY 2024, Coforge reported a revenue of $278.1 million, registering a sequential growth of 2.3% in CC terms. In US dollar and INR terms, the sequential growth was 2.3% and 2.8%, respectively. On a year-on-year basis, quarter two revenues grew by 14.1% in CC terms, 12.6% in USD terms, and 16.2% in Indian Rupee terms. I shall now detail vertical-wise growth for the quarter under review. During the quarter, our banking and financial services vertical reported again a sequential growth of 3.8% in CC terms and contributed 31.6% to the revenue mix. The insurance vertical registered a third consecutive quarter of strong growth, registering a sequential growth of 2.4% in CC terms. It contributed 22.6% to the revenue mix. The travel vertical grew 2.3% QOQ in CC terms and contributed 18.5% to the total revenue. The other verticals portfolio saw a growth of 0.6% in CC terms and contributed 27.3% to the total revenue. During the quarter under review, top five clients contributed 23.5% to revenues, while the top ten contributed 35.2% to the revenues. During the quarter, quarter two that is, offshore revenue contributions saw a further pickup and stood at 52% of the total revenues, versus around 51% in Q1, FY 2024. As I've noted earlier, in previous quarters, this shift towards higher offshore revenues over the last two years has been an important structural margin support for the firm. With that, I shall now move on to the margins and the operating profits discussion. During the quarter, we delivered an adjusted EBITDA of $48.8 million US dollars and INR 3,997 million in Indian rupee terms. This reflects an adjusted EBITDA margin of 17.6% for the quarter, which is an expansion of 160 bps over the previous quarter. Adjusted for the hedge loss in quarter two, the margin expansion would have been around 200 bps sequentially. We are satisfied to see continued expansion in our gross margin, which has gone up by 180 bps Q-o-Q, and 42 bps on a year-on-year basis. Again, is in line with our adjusted EBITDA margin guidance expansion of 50 bps for current year. Our Q2 SG&A, as a percentage of total revenues, stood at 14.9% and has now increased by 121 basis points year-on-year as we continue to invest in the business, which was the plan right at the outset. SG&A now stands at around 15% of revenue, which was the target that we had set for ourselves. Q2 EBITDA margin stood at 15.3% and saw an expansion of 33 basis points QoQ. Q2 saw a one-time increase in ESOP costs, and I repeat, a one-time increase due to acceleration in ESOP vesting. We expect the ESOP costs to normalize from quarter three onwards. Consolidated tax for quarter two stood at INR 1,810 million, which was a QoQ increase of 9.5%. Coming to order intake. We recorded an order intake of $313 million during the quarter under review. This is the seventh consecutive quarter where the firm has reported an order intake of more than $300 million. In terms of geographic regions, Americas contributed $118 million, EMEA, $138 million, and the rest of the world, $57 million to the Q2 order intake. While the macros and the IT spend environment continues to remain challenging, we signed three large deals in quarter two. In addition to these three large deals, we secured a $10 million TCV cross-sell based contract in our BPS business, and we secured our first sizable transformational win in the Guidewire space for a large U.S. auto and home insurer. Our executable order book, which reflects the total value of locked-in orders over the next twelve months, now stands at $935 million, and it is up 16.6% on a YOY basis. Coforge also signed eight new logos during the quarter. People metrics now. At the end of the second quarter, headcount stood at 24,638 employees and saw a net addition of 414 sequentially. I think it's important to point out that in the first six months of the current fiscal, our net headcount has grown by 1,414. You will have noted that this quarter, our net headcount grew 1.7%, following a sequential growth of 4.3% in the previous quarter. Utilization, including training during the quarter, stood at 80%, compared to 81% in Q1 of FY 2024. There's a slight drop on account of campus fresh graduates addition. We continue to do campus fresh graduate addition, as I said last time as well. Last 12 months, IT services attrition during the quarter stood at 13%. Employee attrition at Coforge continues to remain amongst the lowest across the Indian IT services industry. As you're aware, we fully rolled out the annual salary increments for our employees on time, on April 4. We had honored all commitments and continue to do so to onboard campus and lateral hires, and we had again paid out in full, on time, the annual bonuses for fiscal year 2024, 2023 in Q1 2024 itself. With those comments, I shall now request John Speight, Chief Customer Success Officer, Coforge, to walk us through capability and delivery highlights. John, over to you. Thank you, Sudhir. I shall now touch upon the highlights of the quarter related to our delivery operations. In our BPS business, we've successfully implemented a new system at a major European bank to replace their UK-based legacy mortgage retention platform. This has reduced the turnaround time to process mortgage applications by more than 50% and increased offers released to customers by 25%. We also created a class-leading portfolio aggregation service for our largest banking technology client. This has enabled them to target large private banks who manage client assets in-house and via custodians. For the same client, we successfully migrated over $250 billion assets under management with a major US bank onto their wealth management hosted platform, the largest migration to date. insurance sector, our ongoing commitment to expand our Guidewire capabilities has resulted in Coforge being selected for a multi-year deal by a major U.S.-based carrier to transform and then support their personal lines business. A tier one specialty insurance carrier appointed us as a strategic integration partner to design, develop, and deploy more than 350 business services on Microsoft Azure over the next 18 months. Our Insurtech, Advantage Go, closed a major deal with a global specialty reinsurer to implement their new product, Underwriting Workbench. It's a class-leading solution that consolidates all information in a single pane of glass to enable efficient underwriter decision. For a large travel technology client, we successfully migrated more than 40 global airlines and 9,000 travel agencies onto a new Passenger Name Record system hosted on Google Cloud, GCP. The company has received a notice from a client in the North America region regarding the client's intent to seek indemnification for- On low-code, no-code providers such as Salesforce, Tableau, and ServiceNow. For example, today, we now have eight solutions available on the Microsoft Azure marketplace and are currently working with GCP and AWS to host our solutions on their equivalent marketplaces. I would now like to hand over to Ajay for further details on financials. Thank you, John. Let me provide a few more details on the financials. Total cash and cash equivalents as at September 30, 2023, were at INR 3,259 million, compared to INR 5,699 million as at March 31, 2023. This was lower by INR 2,240 million during the period. This reduction of cash was due to payment of dividend amounting to INR 2,322 million, and a payment of INR 3,723 towards acquisition of additional stake in our subsidiaries. Our OCF to EBITDA for Q2 stands at 49%, and our H1 OCF to EBITDA was at 1%. Looking at the cost trends, we generate most of our cash flow in the second half of the year. In the first half of the year, we have significant payments for the annual compensation for the full-year, interest payment for the full-year for the NCDs, and certain vendor advanced payments. We expect our OCF to EBITDA ratio to be in the range of 65%-70% in financial year 2024. Our days sales outstanding at the end of the quarter stood at 64 days of sales outstanding compared to 70 days in 2024 last year. Our CapEx for H1 is at $12 million. As Sudhir has mentioned in his opening remarks, our SG&A costs have increased this quarter due to one-time cost on account of accelerated vesting and achievement of a certain milestone. Hence, it could be approximately 30 basis points higher than what we had in this year. However, we expect this to be lower next year. With that, I will hand over the call back to Sudhir for his comments on the outlook. Thanks very much, Ajay. As I said earlier, at the end of the first six months of the current fiscal year, we have registered a revenue growth of 16.2% in CC terms, 18.7% in Indian rupee terms, and 13.2% in US dollar terms. We believe that sustained growth is a function of both winning large deals and equally importantly, ensuring that existing business is retained. Over the last six years, the order executable that we announce every quarter, and we have this quarter as well, has correlated very strongly with the actual revenue and growth that we have actually seen in subsequent quarters. This has happened because not only has the large deal median size and velocity gone up, but also because our repeat client business at 93%, our ability to retain that business is best in class for a firm our size. The ability to sign large contracts and also at the same time sustain existing book of business, gives us comfort that in fiscal year 2024 and in the years beyond, we shall deliver sustained and robust growth. This is our performance to date. We reiterate our annual revenue growth guidance of 13%-16% in CC terms for fiscal year 2024, and the guidance of adjusted EBITDA margins being similar to FY 2023 and FY 2024 also as well. With that, ladies, gentlemen, I conclude my prepared remarks, and my team and I look forward to hearing your comments and to addressing your questions. Thank you. Thank you very much. We will now begin the question and answer session. Anyone who wishes to ask a question on the audio bridge may press star and one on their touch-tone telephone. If you wish to remove yourself from the question queue, you may press star and two. Participants are requested to use handsets while asking a question. Participants connected on video link, please click on the Raise Hand icon available on the toolbar, or you may click on the Q&A icon to raise hand. Ladies and gentlemen, we will wait for a moment while the question queue assembles. Our first question is from the line of Abhishek Pathak from HSBC. Please go ahead, sir. Yeah. Hi, morning. Thank you for the opportunity. So, Sudhir, my first question was around deal activity. Most large players have reported healthy- We are unable to hear you. Hi, can you hear me? Hello? Hello? Yes, sir, please go ahead with your question. Hello? Hello. Yes, sir. Hi, am I audible now? You are audible. Please go ahead with your question. Yeah. So, Sudhir, my question was around deal activity. So most large players have reported healthy multi-billion-dollar deal wins, but as we've been around cost takeout, saying that the appetite for smaller deals and the deal velocity has become quite slow. Now, despite that, Coforge and even some players of similar size have continued to report healthy deal wins. So how do we reconcile this? And for Coforge specifically, what offerings are clients willing to spend on, current backdrop, which they are not going to pause or stop? And assuming this macro uncertainty persists, you know, what type of conversations you expect to have in FY 2025? Would they be material to what we are seeing right now? And how do you think about the need of demand in FY 2025? Thank you. Thank you, Abhishek. Thanks for the question. I can say state of the brand that we do not relate to what you talked about as commentary that you've received from some of the larger players. We continue to see a deal velocity that continues to be very robust. We continue to see median deal size climb up, and when we look at the funnel even going forward, we feel very confident around the fact that it's going to be terrific, and the probability of closure around large deals for us specifically stays very strong. So I mean, that's how I would characterize everything that we're seeing right now. We continue to see, if I were to actually parse out where we see where we see large deals in the order going forward as well, we continue to see digital transformation as a theme, not as a theme that has not really played out 100% or as a theme that has petered out despite the cost constraints that are there. Product innovation, legacy modernization, cloud migration continues to hold, and deals continue to come in to organizations that are resilient and adaptable. We continue to see a very significant focus from organizations across sizes and client enterprise organizations to very seriously consider challenger organizations like Coforge, which have crossed a billion-dollar threshold, are by no metric small and are active, strong, domain-focused, and tech-focused challenger organizations. We continue to see opportunities in GenAI and advanced analytics. So if I were to just put this all together, productization, legacy modernization, product innovation, cloud migration, the ability to look at challenger organizations as organizations that have both the capabilities and the customer centricity, differentiated customer centricity and hunger to satisfy enterprise client demand, is what is causing us to see the number of deals that we are seeing, and more importantly, converting them at scale. Thank you. Thank you. Thank you. Our next question is from the line of Sandeep Shah from Equirus Securities. Please go ahead. Yeah, thanks. Thanks for the opportunity. So the first question, any recent conversation with the client gives you any change in view on outlook?... some of your other peers globally, like, Globant has been booking a recovery in the second half of the current year. Are you expecting any green shoots getting emerged? Sandeep, in BFS, we see green shoots, but we're trying to balance them against the geopolitical uncertainty that prevails. Insurance within the P&C space, we do see productization, product vendors like Duck Creek, Conpro, even Guidewire, that John talked about during the Guidewire, the call. Yes, this is where demand is seeing a clear up. Within the travel space, we're looking at productization, customer experience, and security as potential areas where we see emerging green shoots. So those are the sub-segment-wise views. Overall, on the macro front, the macro, I do want to reiterate, continues to be challenged and demand will continue to be stressed. Okay, fair enough. And last quarter, you said to achieve the midpoint of the growth guidance, you have to grow at 2.5% from this Q1 view from Q2 to Q4. This quarter is tagged lower despite the great deal wins in the first quarter. So do you expect the customer growth in second half? Because some of your peers has been also calling out as a normal furloughs. So how do you see second half, and when do you expect the first quarter and second quarter deal wins, first quarter, particularly, the short robust to start converting into revenues? See, unlike a lot of our peers, our deal wins have converted into revenues. So we're not one, I think it would be very unfair to start characterizing our performance, where we've grown 16.2% of the first at the end of the first half, and trying to conflate that with what you're hearing from some of our other peers. 16.2% growth in the first half of a year like this, with the kind of challenges that the industry has, even though we paid ourselves, is exceptional growth. So we wouldn't really want to go back and try to take what we've already done, conflate that, and contrast that with what the other peers have done. As far as we are concerned, every time we've called out large deals, we've also shown revenue growth post that. Look at the last four quarters of results. Look at the first six months of results. We believe large deals have to continue to translate into revenue growth for us. Going forward, if we grow to hit the lower end of our guidance, all we need to do is grow 1.6% sequentially for two more quarters. To get to the higher end, we have to sustain the revenue growth that we've been seeing. We're already at more than 16% growth at the end of the first half. The backlogs are stressed. We believe that 13%-16% will hold under almost every situation, and that's why we're going with the given range that we gave six months back when the year started. Okay, fair enough. And last question, in terms of margins, to achieve the adjusted EBITDA margin being at flat, the ask rate is still at 1.5, 1.3, with Q on Q improvement in the next two quarters. So what levers which will help us to pull out, such a big margin improvement over the quarter in this year? And is it fair to assume the ESOP cost on a full-year basis would be close to 1%-1.1% versus 0.7% last year? So, let Ajay take the second question. As far as the first question is concerned, Sandeep, we're not planning to do anything this year, which is very different from what we've done in the last years. Second half, there is a significant growth. Q3 to Q2 sequentially, we will see a very significant growth. We've already seen a 160 sequential growth. We expect the growth again to be very significant, around 100 basis points or higher, Q3 over Q2. So there's nothing this year by way of a new lever that we plan to flex in order to get to the guidance that we've given. Prospectively will continue. The one point that I do want to add is last year, at around this time, when the firm was heading into the second half, we were looking at hedge losses. This year, given the currency movements, we are looking at hedge gains starting Q3 on. So that's, that's why we feel, we feel confident, as I said at the outset, of getting back around the same adjusted EBITDA margin levels as last year. Ajay, over to you for the ESOP question. Thank you, Sandeep. Sandeep, as I had mentioned in my opening remarks, the cost would be approximately 30 basis points, and we have discussed. You are right, we hit 30 around in the range of 1%-1.1% for the full-year, for the financial year 2024. Okay. Thanks, thanks, and all the best. I will come in to follow up. Thank you. Thank you. Our next question is from the line of Manik Taneja from Axis Capital. Please go ahead, sir. Thank you for the opportunity. I had a question with regards to our offshore revenue mix. We've seen a significant increase post-COVID, and we've got this type of growth here. How should we be thinking about this metric going forward? That's question number one. The second question was with regards to the outlook on the travel and transportation sector. You've had some commentary from global companies in terms of some cost pressures or demand coming off. How do you see this target business outlook for us from a 12-month standpoint? Manik, let me take your questions in order. The first question was around offshore revenue. When we hit 48 odd%, this question was popping up and we tried to be very conservative and say that we don't expect it to climb immediately, but it continues to climb. Going forward, we expect the climb to be far more gradual, but we still believe, given what's happened over the last 4 quarters, the number will continue to climb, but it will climb a little far more slowly than it has over the last 8-12 quarters. As far as travel and transportation is concerned. The commentary that you talked about is commentary that we empathize with, we relate to to some extent. Travel transport, we are seeing pockets of spend coming up. They are centered around security. Spend is centered around digitization, they're centered around prioritization, and they're also centered around spend being directed towards customer experience-based projects. Having said that, there are initial signs of, I wouldn't say stress, but of a normalization in spend going forward. We would expect our travel verticals going forward over the next 12-18 months, to continue to grow in line with the broader comps growth, but not to outpace. Sure. One last one, if you could also talk about the board that has happened at the company? I'm sorry, I lost you, Manik. Could you please repeat that question? Sure, sir. Around the reinforcement of the board post-ownership change. Yes, Manik, as I said at the outset, the leadership team, the board, the leadership team, believes it's a privilege. It's a, it's a very serious responsibility for us to have emerged as the first professionally run, board-governed organization. Today, during the board meeting, two of the directors from Baring Private Equity Asia have stepped down. We've called it out as part of our results back as well. Going forward, we are working, the board is working, the NRC of the board is working. All of us are working towards, reconstituting the board, and we would expect that process to get consummated or largely be in shape over the next one year. We will update you on the next board meeting around that. Sure. Thank you very much. Thank you, Manik. Thank you. Ladies and gentlemen, a reminder to all participants, you may press star and one to ask a question. Participants can click on the Q&A tab and click on the Raise Hand icon. Thank you. Our next question is from the line of Ravi Menon from Macquarie. Please go ahead. Thank you. So you've shown pretty strong growth across all verticals. Can you explain BFS, where most people have struggled, but you actually shown pretty good growth? That's right, Ravi, as we said, there are green shoots, even though the macros are stressed. Digital transformation spend has not necessarily gone away to play around product innovation, to play around legacy modernization. The acceptance of challenger organizations like Coforge at a $1 billion-odd, close to 55%-60% of our revenue comes from financial services, has really picked up. So we are seeing growth from some of the areas that I talked about. We are seeing growth also because of our ability to penetrate increasingly at scale into tier one financial services organizations as a very credible challenger. We also continue to see growth across BFS in areas like advanced analytics. John, would you like to add to that? Yes, I would actually. There's a few things on this, and it's been feedback from some of our tier one banking clients. When we've been working with many of these clients, it's been very focused in very specific areas. We haven't spread ourselves across the whole enterprise. We've focused on very, very key business-aligned areas, and many of those are in the non-discretionary spend areas. So we're heavily involved in a number of tier ones around payments processing, as you may be well aware, there's some major changes going on at the moment. There's also in the regulatory and compliance space, two areas where we're heavily involved in the transformations going on at banks. The combination of us being very, very focused and therefore very, very competent in key areas, along with it being within the non-discretionary and transformation areas, has meant we've been able to grow where others have struggled. Thank you, Ravi. Wonderful. Well, May, you know, your BPS business also has done pretty well. You know, I know that you only have obviously a small exposure to market. You just talked about it before the change. Think about what are the areas that are growing well in the BPS business? In the BPS business, Ravi, one of the overriding premise behind doing the SLK acquisition two years back was because it was a banking-only focused BPS business. Our premise was that we would be able to extend that business more actively into insurance and travel verticals. It has happened. We were also convinced that we could take the BPS capabilities across the other financial services clients of Coforge, and that again has happened. Today, when we talked in the commentary section around new wins, we talked about three large deals, but equally importantly, we talked about a $10 million BPS deal. The fact that we've been able to get new leaders both at the front end and at the back end over the last two years after the acquisition was consummated, the fact that the team has seen very significant investment come in, the fact that it is possibly an exceptionally stable, not just management team, but a, but a business with possibly the lowest attrition across any BPO player, and the fact that our AI and analytics business have been able to work very closely with the BPO team to make a difference, has really helped. John, any other comments on that? ... Yes, one comment I'd like to make there is the fact that we've combined automation technology with our BPS. We haven't just focused on people on seats. We've actually focused on how we deliver value to our customers, and that's resonated very, very well. Thank you. Thank you. Thank you. Thank you. Our next question is from the line of Shraddha Agrawal. Please go ahead, ma'am, from Asian Market Securities. Congrats, Sudhir, on a steady quarter. Two questions from my side. Can you highlight more on the 3 large deals that we've done? As in, what is the proportion of net new or deal contribution, and any highlight on which sectors have you won this deal in? And the second question is to you, Saurabh. I mean, when you said that you just fixed the hedge loss, which have become margin, we would see the expansion of 200 bps. But when I look at the hedge loss number in absolute term, it seems to be flat quarter- on- Q business. So how does the margin expansion of 200 bps come through then? Thanks, Shraddha, for both the questions. Saurabh, would you like to take both questions, one around the three large deals and the hedge loss question? Saurabh, you're on mute, sorry. Go ahead. Yeah, now you're good. We can hear you now. No, we can't hear you now. Can you unmute yourself? Can you hear me now? Yeah, we can. We can hear you. So three large deals came in. One was from the BFS space, which was a new account, and this was an account which we were kind of going after the last six months. So it's within the BFS, in, in the BFS space, so within banking. So that is one. It's a new, new logo, 100% new revenue. Then the other two large deals came in, one from the travel vertical within the EMEA space, and one was a renewal. Yeah. And as Saurabh said, one of the two travel deals, one was with one of the leading Middle Eastern airlines, and the other one was with another possibly third leading European airline. So that's where the two travel deals came from. And as Saurabh said, again, Shraddha, what was interesting about the BFS win was this is a large deal. We opened a new client in BFS last quarter, despite everything that's talked about around the uncertain macros, with a large deal. It's not an incremental scope. Saurabh, would you like to address your agenda, the hedge loss question as well? So hedge losses in the current quarter were flat as compared to the previous quarter. Next quarter, going forward, these hedge losses will convert to hedge gains. So we will, assuming the currency remain at the current levels, we at least assume there'll be a 50 basis points flip on the margins, just because of hedge losses being converted to hedge gains. So, that's where we are today. Currently, we are at almost INR 10 crore of hedge losses in quarter two, which at current levels, will get converted by just to mark to market, close to 3 odd crore hedge gains. So there'll be a flip of 13 odd crore going forward as we move to Q3 and could be even more in Q4. To be honest- Got it. Got it. Yeah, got it, got it. And, on the last question from you, Sudhir, on the, certainly, one of, some of our larger peers have been indicating, stress in their existing book of business because of discretionary projects being on hold by certain accounts. So do we see a similar situation for our discretionary book, or, how do we see our existing book of business altogether? So, Shraddha, I believe you're right, the macros are stressed, but we've also always maintained that for robust growth to happen as a firm and as a team, we shouldn't just be signing large deals. That's critically important, but we should be focusing equally strongly on retaining the existing book of business. Otherwise, the book fancy stuff gets done, large deals are announced, and when you look back at subsequent quarters, you don't find revenue going up. And that's largely because the quiet drift that keeps happening around delivery, because of client dissatisfaction or a lack of client delight, more than negates whatever good comes from signing large deals. So what has worked for us is the fact that our repeat business for a firm our size is possibly one of the highest, 93%. Just summarizing the answer, yes, everyone's right when you talk about the macros are stressed. But are we able to retain our business? I think the answer is yes, and that answer is also borne by the fact that not only have we been calling out over the last four quarters largely, but we've been backing it up with actual revenue growth and material growth consistently. Thank you. That's another question. Thank you. Thank you. Our next question is from the line of Rishi Jhunjhunwala from IIFL Institutional Equities. Please go ahead. Yeah, thanks for the opportunity. A couple of questions. You know, one, couple of the levers that you talked about in terms of margins over the medium term, one was, you know, the initiatives around, reduction in ARC and second is, increasingly offshore, mix towards closer to 55% versus 52%, where we are today. So just wanted to understand, on both these metrics, how much... Of course, you know, offshore mix, we can see. But on ARC, how much, we have progressed in-... by when do we expect how much, you know, expansion coming from that? Then on the offshore side, any timelines in terms of, by when do you expect to reach that 55% plus? Let me, I'll give it a good shot, and then I'll request Ajay also to chime in if he has other comments. 55% offshore is what we're heading towards, but I don't believe it's gonna be a very rapid, upward line towards 55. So it's a little difficult to call out how many quarters it will take. But we do think that's where we are likely to wrap up and get to. As far as ARC is concerned, we are not happy with the progress that we made on the ARC. Second half is when we expect to be very aggressive around ARC drops. I called this out earlier also, we were possibly one of the few, if not the only, tech services firm that on the first of April gave 100% of the increments. We gave very high variable payouts as well. So when I look at ARC, are we at the midpoint of the year on ARC, where we wanted to be at the beginning of the year? The answer is no. But are we equally committed that we will deliver on the ARC promise before the end of the year? The answer again is a very strong yes. So long story short, we are not happy with the cost curve that has happened so far. We are now gonna be heads down, working on making sure that the ARC drops more significantly in the second half going forward. Ajay, would you like to add to that? Sure, Sunil. As you mentioned, Sunil, we are working on the ARC and we are focused to drive it down. It has not happened till now. However, there are action that we are taking, and we believe that by the end of the year, we will be at the targets that we had set out ourselves for. That's another lever that we have for margin improvements for the second half. The second question is just on your, you know, other vertical outside of AFS and transportation. So I guess you had in the past thought about splitting it up, sometime in the near future. But just, among the two or three verticals within that, can you give some color in terms of how, you know, the momentum is building there? Yeah. Retail really seems to be doing well, much smaller base, but material growth that we've seen. Public sector has already scaled up. It's only to the numbers, but it's almost about 7%-8%, roughly about 7% of our aggregate revenues. And that business continues to be robust. We do expect it to go up. You're absolutely right about the fact that we have committed to carving out a new vertical and calling out those numbers. We will start doing that starting next year, because end of the year might be a logical time to start making changes to the reporting structure. All right. Thank you for all this. Thank you. Our next question is from the line of Saurabh Sanswani from Samsara Capital. Please go ahead. Hi. So despite the furloughs, in Q3, you expect a margin expansion of 100 basis points. So I understand partially it's just the hedge gains expected, but what are the other levers? So let me, let me just be very clear. In Q3, we expect revenue growth to be separate because all of us, all four of us out here, are not standing and talking about the fact that we will not see significant furloughs. We will, like any other organization. Revenue growth will be second. Margin expansion will be significant, which is the point that Saurabh made, 100 bips, possibly higher, around 100 bips to 6. One, driven, as you rightly said, because of the hedge gains, the reversal on the hedge, fund that we talked about. Second, driven by what we just talked about, the ARC initiative that Ajay and I were talking about. We expect that going forward to be also a significant lever. Did I miss anything, Ajay, Saurabh? Yeah. So, I think that we also, every year, either towards the end of September or beginning of October, do a client event. So, that will again add almost 40-odd basis points, and so the margins next year, so next quarter. So I think as we move to from Q2 to Q3, one is hedge losses converted to hedge gain. Second is the impact of a client event, which happened in Q2, which was an event, one annual event, which will again hit the margin set up, next quarter. Third thing is, ARC initiative has seen slow movement, but whatever actions have been taken, some benefit of that will start flowing in from Q3 onwards. That benefit will start coming in. So I think those benefits will offset the impact of the furloughs and give us at least 100 basis points+ margin improvement. So that's how we're looking at it. Saurabh, Saurabh, just to build on what your namesake, Saurabh, talked about, what we normally did was, our annual client event used to happen in quarter three of a year. Saurabh said we did that in quarter two, and that's a... For a firm our size, that's a material spend. We would like to invite some of you to attend it. We'd like to think it's a very good event. Because that event happened in Q2 and the cost have been fully booked by Ajay, Saurabh, and the team, that is not gonna be a cost impact in Q3, and hence, the 40 bips of time that we saw. Okay. Okay. Thank you. Thank you. Our next question is from the line of Abhishek Kumar from JM Financial. Please go ahead. Yeah, hi. Thank you. Good morning. Sudhir, my question is on events, you know, BFS. From what I hear, what we hear from most of the players is that most of the deals out in the market are kind of vendor consolidation cost takeout deals. At the same time, we continue to win new logos in BFS space. So I just want to understand, who are we winning against? Are we kind of consolidating local contractors, or are we winning against, you know, some of the larger tiers in this space? So both John and I will attempt to answer. So we say in the real world, right, other than analyst reports, mid-tiers don't compete with mid-tiers. So Coms are high. If I look at 19 out of our top 20 clients, our biggest competitor there is a scale IT player. Could be anyone from Accenture to Deloitte to the TCS of the world. These wins are coming against those players. They always have, and I suspect they always will. You would very rarely, if at all, have a mid-tier competing with a mid-tier at scale in an enterprise IT client. So that's the ground reality. John, would you like to add to that beyond the point? Not too much, but, yeah, I mean, we are winning against the tier ones significantly. And I think it's down to the fact that we're able to execute so well. We've got a recent case in Australia, where we won against a tier one and took part of the business. Because the ability to actually execute so well, we're actually taking more and more business. That's just a classic example of what we're achieving. Okay. Maybe on the smaller deals, you know, a significant part of our deals still constitute of, you know, smaller deals. Just wanted to color on, you know, if the kind of deals which we are winning here, these are largely renewal or, you know, we are also getting a net new deals. And any change in, the type of deals here, and the pipeline that we have in the smaller, you know, deal space. So, Abhijit, to the point that John made earlier, the smaller deals are one on the back of execution. No client asks a vendor that is delivering well ever to leave. That's, that's an axiom in our industry. That's where most of the growth comes from. The headlines come from large deals, the growth comes from delivery. So the reason why we're signing large and small deals, and I think it would be very unfair to start characterizing them into three or four buckets. These deals are contextual, depending on the client, depending on where they are on their journey, depending on where they are on the budget constraints. They are of all kinds. I know it's fashionable these days to bucket them into cost consolidation or something else. They include cost consolidation deals, they include a lot of productization deals, they still include innovation deals. To your question around MM, as I said, one of three large deals that we signed during the quarter was signing a new client with a $20+ million contract straight off the bat. John, would you like to add more color to that? Not too much there. I mean, coming back, and you mentioned the execution and quality. And what we're finding is a lot of our, the CXOs that we're dealing with are actually turning around and saying, "You're different because of the quality of your execution." And what is helping us is, as we're seeing in the public sector at the moment, certainly in the UK, is where those CXOs, they tend to move around every few years, but into other parts of the public sector. And they're actually reaching out to us as soon as they get into those new organizations to say: How can we get you into our organization? And that's helped us develop. But it's all on the back of execution. One last clarification. So you mentioned you expect Q3 to be tepid. Then, you know, in that case, that would really increase the ask rate for Q4 significantly. I just wanted to understand, are we seeing that kind of pick up, you know, as we stand today? Or, you know, or maybe in other words, you know, are we still confident of achieving even the upper half of the guidance? So to say, I think, what we are absolutely crystal clear on is that the guidance that we gave at the beginning of the year, which was very aggressive guidance, 13%-16% growth, is the guidance we will deliver on. Q3 is gonna be soft, and I think it will be soft for the industry. It... others this year have been very aggressive. We believe, and we've always said this, we believe that we always have very-- we have a very strong fix, given the execution that John talked about, on two quarters here on. So we at least internally know the broad number we will land at in Q3, which anyway, almost one month out of three is gone. Even Q4, we have a clear fix. Q4 should see a material upside compared to Q3. Tepid, of course, is a qualitative term, so our intent is to make sure that it's not terribly tepid. We'll try to be on the higher end of tepid in quarter three for now. That's how I would put it for now. Sure. That's helpful. Thank you, and all the best. Thank you. Thank you. Our next question is from the line of Rahul Jain from Dolat Securities. Please go ahead. ... Yeah, hi. Thanks for the opportunity. Just one question, that since, of course, you mentioned some of the things that will benefit the profitability near term and for this year. But as a, as a measure to protect margin or to cost optimization, is there an active program, given that there is a potential risk of growth slowdown at some point? Or you are saying that since the momentum for you is continuing, you don't focusing more on the cost optimization, but more on the growth side of the business? Well, we always look at cost optimization, but we do not do cost optimization on the back of cost cuts that impact our employees. We believe that is counterproductive, and those kind of optimizations are attempted by firms that are not confident of growth. We are crystal clear, we are a growth firm. We will deliver growth, not just in FY 2024, where the guidance is 13%-16%, but in FY 2025, 2026, 2027, and then on. So cost optimization, are we focused on? The answer is a definite yes. But please also remember, we're possibly the only IT services firm that on the first of April this year gave 100% increments, gave exceptionally high variable payouts for the previous year, and we will continue to follow that path. The cost optimization, will we do it? The answer is yes. Will we do it at the expense of things that in the long term will help the growth trajectory of the firm? The answer is no. Sure. That's very encouraging. Thanks. Thank you, John. Thank you. The next question is from the line of Vibhor Singhal from Nuvama Equities. Please go ahead. Yeah, hi. Thanks for taking my question. I'm sorry, I joined the call late, so I don't... I hope the question has been answered. So just one question is on the margin guidance. I think for long, we have kind of guided margins on the adjusted basis. But at the end of the day, the ESOP cost that we give, I think the ESOP cost that we give is a part of the business model. It's part of the compensation that we give to the employees. So any roadmap or any outlook as to when we could actually look at providing a margin guidance on a reported basis? Because, I mean, the gap between two, I think, expected even for this quarter, for multiple quarters, and eventually that was just, translate people down to the profit numbers and eventually, the profitability of the company. So, any color on as to when we could probably move to more of a reported basis margin guidance, which could help probably, get a better understanding of the report of the company? That's a fair question, Vibhor. Ajay had pointed out earlier in the call that this year there's been a spike in quarter two. We expect the cost to normalize quarter three onwards. Next year, as Ajay said, we expect the ESOP cost to come down. Ajay, correct me if I'm wrong, by about 30-40 basis points, from wherever we likely to land up in fiscal year 2024. We've taken note of your suggestion, and we will work on that, and then we will see you in the future around giving reported EBITDA guidance. That's very interesting. Thanks a lot. Thanks, dude. That's it from my side. I think most of the questions have been answered. I wish you all the best. Thank you, Vibhor. Thanks a lot. Thank you. The next question is from the line of Ashish Dash from Mirae Asset Capital Markets. Please go ahead. Hi, good morning, and thanks for this opportunity. So, Sudhir, I just want to understand. Usually, you see that Q2 used to be stronger in terms of revenue growth per year. And now, this quarter we have, the growth is moderated from Q1. And, so just wanted to understand your view, why it happened this time, that Q2 growth is not so strong? Well, I mean, Q2 growth, 2.3%, has still meant that at the end of the first half, we're growing 16.2% over the first half last year in CC terms, Ashish. That 2.3% growth comes after a 2.7%, a 3.7%, and a 4.7% growth. So if you look at the last four quarters, sequential growth has been between 2.3%-4.7%. If you were to ask me why is there been a slight deceleration, the answer is the same that we've heard in the call repeatedly. The macros are tough, and that's why we are at the number that we are right now. At the same time, as we've also said, and I think it's important to reiterate, what we said at the beginning of the year, the guidance we gave, we will deliver on. That we continue to maintain. We have maintained, and we will continue to maintain. Even at the end of Q3, you will not hear me, Ajay, John, Saurabh say something different. We will deliver on the guidance given at the beginning of the year, which was an aggressive guidance. That's how I would, that's how I would respond to that question. My second question is, I look at top accounts, I just reprice your client, the decline quarter-on-quarter basis. Is it correct there? No, Ashish, I wouldn't read much there, because last quarter, the top five accounts, if I remember right, went up 12.5% sequentially. Saurabh, keep me honest on this, but it was about 12.5%. There was a massive spike. That was normalized. Top accounts, relationships are solid. Growth on a secular long-term basis will continue to be solid. Okay, great. Thank you. Thank you. Thank you. Our next question is from the line of Sandeep Shah from Equirus Securities. Please go ahead. Yes, sir. Just a clarification. Sir, you mentioned and quantify about the hedge gains in the Q3 and Q4. Sorry, I missed it. If you can repeat the same, it would be helpful. ... Okay. So I mentioned that in current quarter, we had a hedge loss of INR 10.5 crores. Which, at the current, if the currency stays at the current levels, don't move much, we should be seeing a hedge gain of INR 3 crores in the next quarter, and it will only expand in Q4. So that's what I said. Okay. Okay. So that may drive the 30-40 bps kind of if you want to build it? Absolutely. Absolutely. Okay. 50 odd bps, assuming the currency stays at the current levels, it should be 50 bps still. Okay. So Sudhir, in that scenario, that plus no client event, which will have a tailwind of 30-40 basis points, margin actually could be higher than our guidance in the Q3, right? Well, I hope you're right. That's the intent. It's a valid question, Sandeep. That's going to be our intent. But as Saurabh said as well, right? A lot of it will also play into currency movements as well. Hence, we've said broadly about 100 basis points. We will attempt to try to make it beyond 100 basis points sequentially. And Sandeep, what will happen is we all know there'll be furloughs in the next quarter. So benefit of this, a part might get set off against the furlough impact. Three levers. One, the hedge losses getting converted to hedge gains. Second is the client event, and bit of actions that were taken in Q2 around ARC. Some benefits will start flowing in. That will get set off against the furlough impact that's coming in. Net-net, we're still looking at 100 bps at least, and then looking at beyond that. So that's how I will think about it, quarter four. Thanks, Saurabh. Ajay, you were trying to say something. Would you like to add to that? Hello, Sudhir, I was just trying to mention the point about the furloughs, because that's gonna offset the gains that we are going to do. So, yeah. Ajay, sir, is it fair to assume ESOP costs may decline by 30-40 basis points by FY 2025? Yes, they will decline if no further inputs are given. At current levels, they will decline at around 30, 30-odd basis points. There's a high probability, as Ajay said, Sandeep, that it will decline by about 30 basis points. Okay. Thanks. Thanks a lot. Thank you. Ladies and gentlemen, that was the last question of our question and answer session. I now hand the conference over to Mr. Sudhir Singh, CEO of Coforge Limited, for closing comments. Ladies, gentlemen, thank you very much for your time. It's early morning in India and late evening in the States. Thank you very much for your time, for your interest, for the commentary and for the insights that you give us, right? I just wanted to point out that, over the last few quarters, we've also started doing this, the investor call over video. We're not much to look at, but if you do want to join the video link going forward, we would really appreciate seeing you as we answer your questions. We will make sure that, the video transcript is also uploaded immediately after the conversation on our website. Thank you once again, and I'll be looking forward to seeing you next quarter. Bye-bye. Thank you. On behalf of Coforge Limited, let's conclude this conference. Thank you for joining us, and you may now disconnect your lines.