Ladies and gentlemen, good day and welcome to the Happiest Minds Technologies Limited Q4 FY 2021 earnings conference call. As a reminder, all participant lines will be in the listen- only mode, and 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. Hardik Sangani from ICICI Securities Limited. Thank you, and over to you, sir. Thank you, Faizan. Good morning, ladies and gentlemen. This is Hardik. Hope you are keeping safe and are doing well. Thanks for joining us today on Q4 FY 2021 earnings call of Happiest Minds Technologies Limited on behalf of ICICI Securities. I would like to thank the management of Happiest Minds for giving us the opportunity to host this earnings call. Today we have with us Mr. Ashok Soota, Executive Chairman; Mr. Joseph Anantharaju, Vice Chairman, President, and CEO, PES; Mr. Rajiv Shah, President and CEO, DBS; Mr. Ram Mohan, President and CEO, IMSS; Mr. Venkatraman Narayanan, Managing Director and Chief Financial Officer; Mr. Aurobinda Nanda, President Operations and Deputy CEO, PES; Mr. Sunil Gujjar, Head of Investor Relations; Mr. Praveen Darshankar, Company Secretary and Head of Legal. I will hand it over to Sunil for safe harbor statement and to take the proceedings forward. Thanks, and over to you, Sunil. Thank you, Hardik. A very good morning to all. Welcome to this conference call to discuss the financial results for the fourth quarter and year ended March 31st, 2021. We trust all of you are keeping well and staying safe. I am Sunil from the investor relations team. Ashok will begin the call by sharing his views on the business environment in the context of the pandemic and our results. Venkat will speak about our financial performance and operational highlights, after which we will have the floor open for Q&A. Before I hand over, let me begin with the safe harbor statement. During the call, we could make forward-looking statements. These statements are considering the environment we see as of today and obviously carry a risk in terms of uncertainty, because of which the actual results could be different as outlined in the earnings release, which is available on our website. We do not undertake to update those statements periodically. Let me pass it on to Ashok. Over to you, Ashok. Thank you, Sunil. Good day to all. The second wave of the pandemic is sweeping through the country, and we have, as a country, found ourselves terribly ill-prepared. The shortfalls include inadequacy of oxygen, hospital beds, ICU facilities, and now even the vaccine. The wave has taken a large human toll. We at Happiest Minds have had our own share of heart-wrenching losses of colleagues and family members. We pray that the second wave will start subsiding soon, and the country continues to build its health infrastructure to be better prepared for future calamities. We wish that all of you will stay safe and stay healthy. I would like to share my deep appreciation to our Happiest Minds, who did everything possible to support each other as a family, to our clients for trusting us with their most critical issues, and also to our stakeholders and extended communities around the world for their support. While India is suffering, the technology and IT services businesses are fortunate that we continue to work efficiently in a virtual environment, and business is growing. The highlight for the year FY 2021 for Happiest Minds was our successful IPO. We have been able to fulfill all our promises and are grateful to our customers, our team, and all stakeholders who helped make this possible. As we begin FY 2022, we will look to achieving 20% organic growth as indicated at the time of the IPO. Our quarter four results are also outstanding. I would be remiss if I do not mention that the quarter serial growth of 15.4% in dollar terms includes our PGS acquisition. The organic serial growth quarter-to-quarter of 8.9% itself is very creditable. FY 2021 was a year where every business unit, every geography, every Center of Excellence delivered excellent results. This is reflected in the average annual revenue per customer increasing from $615,000 in quarter one to $737,000 in quarter four. The business we derive from our billion-dollar corporations, from one-billion-dollar corporation customers, has gone up from 31% to 37% in the same period. None of this would have been possible but for the robust delivery structure we have created and the excellent organization built. Our customer satisfaction surveys gave us an NPS score of 57. The Great Place to Work survey had 92% of our persons saying that Happiest Minds is a great place to work. Both these numbers are record-breaking for us and in the top ranks for our industry. Before I pass on to Venkat, I want to close by sharing our conviction that technology adoption and advancement are imperative for a better world. We at Happiest Minds will leverage it to bring a meaningful difference to all our stakeholders. Thank you, and Venkat, over to you. Thanks, Ashok. Good morning, and I trust all of you are safe and well. I'll begin by giving an overview of our consolidated performance for the year ended March 31st, 2021, followed by that for the fourth quarter. We'll be slightly longer than usual. Our operating revenues for the year was $104.6 million, showing a growth of about 6.3% over the previous year. That's the only dollar number that I would be talking about as far as annual results go. All numbers, unless stated otherwise, would be in rupees. Our total income for the year was INR 798 crores, showing a growth of 11.7%, which is a solid number. This growth that we have shown is much better than what we had suggested or guided at the time of our IPO. We had said that we would be relatively flat given the pandemic situation, but very happy to state that we have done much better. Like Ashok mentioned, I, too, would be remiss if I do not highlight that our revenues for the year included revenue from the acquisition of PGS, the company we had acquired during January 2021. Our annual results has the effect of three months of net revenue from PGS, because as you will recall, PGS was a large customer of ours as well. Our revenue growth for the year was broad-based, and all our BUs have shown growth driven by the demand environment across our chosen verticals. Coming to margins, EBITDA margins for the year expanded significantly to 27% compared to the 15.8% in the previous year. As I've been continuously saying in earlier quarters, we have this improvement thanks to, one, growth in revenues, improved utilization and realization, lower attrition, and reduced SG&A costs on account of the scale that we are building up, and also the savings on account of reduced rentals due to the continued work-from-home scenario, reduced travel and visa costs, and many other administrative costs on account of the pandemic. Our profits before tax for the year was INR 186 crores at 23.3% of revenues. This has again shown a growth of 153% over the year. On PAT, we closed the year with INR 162.4 crores, a growth of 127% over the previous year. Our average tax for the year was about 12.7% compared to that of 2.7% in the previous year. With this year's profits, we have wiped out all our brought forward tax losses, and our average tax rate is likely to only go up from the next year. Some highlights for the year would be ROCE of 31% and ROE of 30%, industry-leading numbers. Revenue CAGR of 18% over the FY 2018 period. Healthy free cash flows of 99%. You can almost say almost all our EBITDA falling to our cash balance. For the year, we generated INR 215 crores of free cash flow. Healthy cash balance at year end of about INR 550 crores. We closed the year with 3,228 Happiest Minds, which is a net addition of 562 +, and diversity in our workforce is about 24.5%, a number which we want to take up and we are consistently working on. Coming to the quarter's performance. Operating revenues was $30.2 million, showing a sequential growth of 15.4%, year-over-year growth of 18%. I would like to bring to your attention that we had three months of Pimcore Global Services in these numbers. In rupee terms, our total income for the quarter was INR 224 crores versus INR 201 crores in the previous quarter, showing a sequential growth of 11.2% and year-over-year growth of 17.6%. Even if I were to remove the Pimcore numbers, our quarter-on-quarter and year-over-year growth for the quarter has been significant. Our EBITDA margin for the quarter stands at 26.3% and INR 59 crores compared to 29.7% and INR 59 crores in the previous quarter. In absolute terms, we have remained flat on EBITDA, and the decrease, in percentage terms, is primarily on account of drop in other income of INR 5.6 crores and also increasing in salary payout provisions. What's happening is we have started giving pay increases effective April 1st, but the effect of the increase or the quantum of increase takes into account our first quarter as well. As per accounting, we have provided for the portion of pay increase relating to that quarter in the quarter. That essentially is about INR 9 crores. As you will notice, if you remove the other income drop, our operational performance has been very good because it also takes into account the pay increase that I just talked about. On PBT, we were at about INR 49.3 crores and 22% compared to INR 53.2 crores and 26.5% over the previous quarter. In addition to decrease in other income and the pay increase that I just talked about, we also had an amortization of intangibles because we had acquired PGS. Came along with it are some intangibles from an accounting standpoint. We have to amortize that intangible, which is about INR 2.2 crores, and that has hit the PBT number. Coming to PAT, we closed the quarter with INR 36 crores, versus INR 42.15 crores in the previous. The drop is essentially on account of the pay increase that I talked about, other income drop, and the amortization cost of intangibles that we had in the quarter. To summarize, we have put a good and better operational performance for the quarter. That's what I would like to highlight. Another highlight for the quarter is we ended with 173 customers, a net addition of 23 from the previous. Addition of nine new billion-dollar corporations to our client list. Improvement in the profile of large clients, and also average revenues per client, which Ashok referred to. Utilization of about 83% compared to 81.6% in the previous quarter. Voluntary attrition continuing to drop, it's at about 12.4% compared to 13.1% in the previous quarter. Finally, basis our solid cash generation and after review of our capital allocation strategies, the board has recommended a maiden dividend of INR 3 per share. This will be a cash outflow of approximately INR 44 crores, this recommendation is subject to shareholders' approval at the ensuing AGM on July 7th. Coming to the outlook. We have exited the fiscal with a strong demand environment, reflecting in our strong order book and deal pipeline. A major part of our revenues are coming from economies which are slowly coming back to normalcy from the pandemic. With our strong positioning, which covers a large part of the digital spectrum, we believe we are well-poised to grab opportunities in the space. While our own country and home base, as Ashok mentioned, is reeling from record levels of infections since March. This is worrying, and we are keeping a close watch on the situation, including the pace of vaccination, and hope it picks up quickly. We are indeed facing our own set of problems with our own employees, Happiest Minds, as we refer to them, as getting affected either directly or indirectly. We also had two of our bright young minds being taken away from us by this cruel disease during the past few weeks, and our hearts and prayers go out to them. The company is extending support to our people in the best manner we can, including coming out with a plan which is in the works to help beneficiaries of the unfortunate Happiest Minds. From a business front, this pandemic has led to increase in absence due to people taking time to recover. This could have a slight adverse effect on our delivery timelines and billing. Considering the different moving pieces mentioned above, our aspiration is to continue growing organically in the medium and long term at about 20%, as Ashok had called out in the press release. As for margins, I've been consistently saying we aspire to have our EBITDA to be in the range of 22%-24% as a continued number, as some pandemic-induced benefits may normalize in the near or medium term. Coming to our profits after tax, our effective tax rate has moved up from 2.6% in FY 2019 to 12.7% in FY 2021, and should be in the range of anywhere between 20%-24% starting FY 2022, because we have wiped out all our past losses. I hope I've been able to give you a good overview of our financials. All these numbers and data points are available on our website. Investor presentation has been uploaded therein. Please do take time to go through that. Stay safe and well. With this, I open the floor for Q&A. Thank you very much. We will now begin the question- and- answer session. Anyone who wishes to ask a question may press star and one on your 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. Ladies and gentlemen, we will wait for a moment while the question queue assembles. Reminder to the participants, anyone who wishes to ask a question may press star and one at this time. The first question is from the line of Hardik Sangani from ICICI Securities. Please go ahead. Hey, hi. I have a couple of questions. Firstly, in terms of our guidance, even if I consider our monthly exit rate, 20% seems a number on a very conservative side. Am I correct in assessing that? In terms of margin, just wanted to understand what will be the impact of pay hike Q1 onwards. The third question is that our increase in our dollar billion accounts, so how quickly can we scale up to our $1 million accounts in this year? As we return to our growth trajectory, so any additional investments in sales and marketing needed to drive that growth? Thank you. I have follow-up questions, but I'll come back in the queue. [crosstalk] On the- Go ahead. Yes. Thanks, Ashok. On the revenue growth, we have been talking about 20% in the medium and long term. You are right, we had acquisitions which have been integrated in the first quarter. That's going to lead to a higher growth year-over-year when you look at FY 2022. That's obviously there. What I gave you as a 20% was a guidance for the longer and medium term. The word that I've used was organically trying to grow, you understand? We will not be able to split inorganic growth and organic growth forward. This is the first quarter, so we have the numbers, but as we integrate, the business becomes a whole. The split becomes a lot more difficult to determine. For FY 2022, we hope to show a higher growth. As you know, we have not been giving you guidance. On the margin front, like I said, the aspiration or guidance that we have been giving is 20%-24%, and we have hit 27% for the year. The impact of pay increase, I gave you the number. It's about INR 9 crores per quarter. That's the number that has hit us in Q4, and that would be the number that would impact us going forward as well. If you take out the impact of drop in other income, then the normalized operational performance is better than the last quarter. With revenue growth happening, that's only likely to improve as we go forward. Why I say this, I have to also caveat that there is a huge demand issue out there in the market. Not demand issue, I would say supply issue. While demand is strong and showing a huge amount of, I can't even use the word recovery, but it's coming back quite strongly. We will have supply issues, which will have an impact on the pay numbers that you pay for additions or for replacement. What was the third question, Hardik? Yes. Question on the million-dollar accounts, which maybe Joseph can take up. Sure. Yes. Yes, Ashok. In terms of million-dollar accounts, Hardik, as we've shared earlier as well, there is a structured process. We do use a land and expand strategy, and there's a structured process that we use for account mining and expansion in accounts, and we'll continue doing that with the account development plan and [cross view selling] being the fulcrums for this growth. Even though you see in the investor presentation that the number of million-dollar accounts has shown an increase from Q3 to Q4 of one customer, but if you take it on a quarterly analyzed basis, that number is higher by another two customers. This is something that will be a focus area for us, and we will look at how do we convert more of our customers into million-dollar customers. I could just add to that- Investment in sales- Can I just add a bit to your million-dollar observation, Joseph? Sure. A part from the fact that there has been this improvement in the total number of million-dollar accounts, I think if you see our fact sheet— and I believe we have given this data in the fact sheet also—t he $5 million-$10 million accounts, which were actually million FY 2020 have gone up to three accounts in FY 2021. You can see that there's an upward movement, even within the split of accounts, which is really also what has contributed to the average dollar revenue per customer having gone up. Number which both Venkat and I gave to you. Go ahead, Joseph. Sorry. That's fine, Ashok. Sure. The fourth question you had, Hardik, was on investment in sales and account management, and that is an ongoing investment. We're looking at, for some of our larger customers, the ones that are $5+ million or have the potential to get there. We're looking at having dedicated account managers, maybe dedicated to an account or to two accounts. That is an ongoing exercise where we will identify these accounts, either internally or from the market. Bring in people who have the ability to grow these accounts and take ownership for the client relationship. That will be an ongoing investment. Sure. Along with that, we're also looking at strengthening our domain and verticals so that we can play a more strategic role and be an advisor to our customers. That will be another area where we'll be focusing and investing during the year. Sir, thank you. We can take the next question. Thank you. The next question is from the line of Vimal Gohil from Union AMC. Please go ahead. T hank you for the opportunity, sir. F irstly, just a clarification. You said that the quarter-on-quarter growth organically was about 8.9%. Is that right? That's right, Vimal. Okay. Like I said, it's an approximate 9% in dollar terms. That's the dollar growth. Yeah, that's the dollar growth, operational dollar growth. Right. If I were to just derive the absolute contribution from Pimcore, the approximate number comes to about 1.7%. The acquisition has been integrated for the full three months. If I were to just annualize that number, that revenue comes to about $7 million. If I were to remember the press release that you had given when you had acquired Pimcore, that number was about $10 million. If you could just explain, has the revenue decreased or are we setting off the existing- No. Vimal, if you look at the press release, you would have also recollected that Pimcore was an existing $3 million account for us. Your numbers are in the ballpark perfectly right. You have an intercompany set off. We bill into Pimcore, and Pimcore bills to the customer earlier. From this quarter, we have to do the intercompany elimination. Perfect. Just a couple of data points. If you could just give me the subcontracting cost for Q4 FY 2021 and the pass-through license cost for Q4 FY 2021 and FY 2021. We don't have any pass-through licensing cost, and then subcontractors, we'll get back to you before the call ends. I'll just take that data point. Okay. We don't have pass-through subcontractors also. If that was the question, we don't have pass-through subcontractors also. You know the current demand situation and the travel ban from India to U.S., when there are requirements or when there are gaps in what we need to deliver, we have local people coming in and joining us for delivery. That's the subcontractor cost. We'll give you that number before the call ends. This number in the last quarter was about INR 18 crores, so that is what I'm referring to, just in case. Sure. I know. We'll give you both. The software license cost that I'm referring to is about INR 12 crores last year in FY 2020. Maybe if you could just give me the same numbers for FY 2021, maybe we can take it offline as well. W e could take it offline because we don't have any software resale at all. If at all it is there, it would be part of some integrated delivery that we are doing for the customer. Accounting-wise, if you have called it out, I'll give you that number. Venkat, wouldn't that number include Microsoft licenses for our internal use? No. This is for billing to customers, Ashok. O kay. I didn't know what number he was referring to, so that's fine. H e's referring to buying and selling of licenses. Okay. Sir, if I were to just look at your metrics closely. This quarter, you had about 100 basis points improvement in utilization. You had about 400 basis points increase in offshore. Obviously, you have had this impact of pay hike. If you just take me through this margin bridge, what were the other negative impacts apart from pay hike? Because your offshore increase and utilization increases seem to be very strong. Despite that, if I were to look at your bottom quarter EBITDA margin, excluding other income, it is a slight fall. If you could just help me explain what led to this fall, because these two tailwinds for [offshore] are fairly strong in my view, sort of negate the wage hike impact. EBITDA margins, if you put back the INR 9 crores of pay increase that I talked about, we are better than where we are last time. That's the first point. You have obviously removed the other income number, drop of INR 5.6 crores. Second is INR 9 crores of pay increase. Otherwise, there is no other significant change in the business model, which comes to my mind, which I need to highlight. We have pretty much stayed the same. There is obviously, between EBITDA to PBT, we had the amortization of goodwill. We could have had some costs like the acquisition cost under Ind AS, we cannot capitalize, so you write it off. There is some of those costs which have come, which are all one-time costs. Which we are taking it as a running cost rather than calling it out separately. The real standout numbers are the pay increase that we have factored in and this drop in other income, which obviously you called out. The third is the amortization of intangibles. There are a few one-time, like there could be some contract delays because of which we would have taken the cost but not taken the revenues. Those are all— They get regularized over a period. You have provided for the wage increases in this quarter. Does that mean that in the next quarter, there could be a possibility of margin improvement on a sequential basis? No. Okay, how this happens is the wage increase takes effect from April 1st. While communicating and calculating the budget that was allocated for wage increases, we said that we are taking effect from January 1st. What happens is then you have to spread it over five months starting January. That's what we have done. Five quarters. Got it. Five quarters. Sorry. Got it. Sir, lastly, you had a pretty good year in terms of cash generation also. You've already made one good acquisition in Pimcore. If you could just highlight, I understand that valuations are very expensive right now, any other acquisitions there in the pipeline? What are we looking at in terms of acquisitions? Joseph, would you want to add? Yes. We continue to engage with our investment bankers, and we've shared our criteria for them. Once we make progress on this, Vimal, we will share that with you all. That's an ongoing process. We are talking to a few possible candidates, and we have a criteria laid out that the leadership team, the EB, has put together for the candidates that we would like to consider. We're following a structured process, and we'll get back to you when we make progress. Sure. I might also add, there's no immediate closures in the offing, and you really never know how these things go. Sometimes it may take you eight months to negotiate a deal, and you look at 20 companies before you close one. It's a typical case of an acquisition where we need to be very careful. You're also absolutely right that valuations are running high. Clearly nothing that needs to be factored into anything that is likely to happen in the course of the near future or the next few quarters, for that matter. Understood, sir. Fair enough. I have a few more questions, but I'll come back in the queue. Thank you. Thank you. The next question is from the line of Rishit from Nomura. Please go ahead. Hi. Thanks for taking my question. Congrats on a good growth this quarter. The first question is to Venkat. Venkat, you just mentioned that you've taken a INR 9 crores impact on wage hikes in this quarter. Is that correct? That's right. If I take that off, our wage hikes have increased by 3% quarter- on- quarter. Our headcount has increased by about 12% quarter- on- quarter. How should we sort of look at that [bridge]? Is it large part of the hiring has happened towards the end of the quarter, is it? We added 528 people across the year. Wage hike is based on their tenure within the company. You have the tenure within the company, the various grades. You can't do a straight allocation of that sort. If you really look at it's INR 9 crores into INR 5 crores. The impact for the year would be about INR 45 crores-INR 50 crores would be the wage hike that would have to be factored in. I didn't get how you came to the 3% number. No. Our employee benefit expenses is INR 123 crores versus INR 110 crores last quarter. Now, if I take off INR 9 crores from this number, it's an incremental number of INR 3.5 crores, INR 3.4 crores. That's a 3% QoQ jump. Versus headcount has increased by 11%-12%, in fact, QoQ. From 2,885 to 3,228. No, no. Okay. Headcount increase also has the Pimcore numbers, which has happened because of the integration. Which would be at 150 headcount, right? No, that is more than that. Almost 86, 89... Fresh, about 107 people. Additional 107 people. Okay. [18] + 89 people. They'll still be in the employee benefit expenses, no? Okay. No, no. What's your question? Are you saying that the pay increase looks lower? No. The question is, it appears that possibly the large part of the headcount hiring would have happened towards the end of the quarter, and that's possibly one of the reason why maybe employee benefit expenses growth looks lower, and maybe some of that impact will come in the next quarter, is what I'm trying to guess. No. If you look at it, you are right, which is what I said. 2,658 Happiest Minds at the end of first quarter. It ends with FY 2021 Q3 at 2,885. You've got addition of about, let's say, 200 people. By the end of the fourth quarter, we have gone up to 3,228. Okay, understood. I'll take this question offline. Over. You're right, you have a higher number of people added in towards- In the last quarter. ... second half of February, end of March. End of March. It's in Q4, Venkat. Within Q4. That's right. Headcount was increased by 12. We had more people added in towards the end of second half of February and in March. Correct. That cost will come into play in Q1. Q1, correct. Right. Okay. Hired at the market- They are hired at market wages. That is fine. That makes sense. From a margin perspective, we're exiting at 26.3% on EBITDA. Going into the next year, when I look at, let's say some of the benefits will continue related to, let's say travel, maybe operating expenses that you sort of highlighted. We could be materially above the guidance of 22%-24%. Is that assumption correct? Or do you think that maybe attrition could be a factor, maybe war for talent could be a factor which could lead us to closer to our band of margin level? Rishit, the question that has often come is what do you think is a sustainable margin? When I give you 22%-24%, that's a sustainable margin number based on business model. The things that could change in favor or against that are your manpower cost, people cost or the billing rates, all of that, which is typical of the business model that we have. What we see in addition to that is the pandemic benefits, the change in business model, working from home right now, how quickly we come back to office. Those are almost nil travel overseas, making do with video conferencing and Teams and Zoom and all of those facilities. All of that is happening, and that's adding to the margin. The question that has often come up is, what do you think, Venkat, is the sustainable margin? That's the number that I've been saying. One number which I'm happy to be proved wrong, but the number on sustainable margins happens to be 22%-24%. Okay. This is from an FY 2022, some of these benefits will continue, that essentially means you could be at a higher level, but when these costs come back is where this is more like a sustainable number. Sure. Yeah. That is absolutely right. I might just add one thing here. To offset that, there's a likelihood, as we've indicated, that the market for talent is very high. There's going to be a pressure on attrition, and to that extent, it can offset that one advantage that we've been highlighting. Okay, understood. Super. Just if you could provide a little bit of color on the TCV and pipeline. I think during the IPO, we kept mentioning that a large part of those deals are sole source. Are you seeing an increase in RFP invites for us in general, which would mean that some of the deals could come on the table a little more in an indirect way? Joseph? In terms of RFPs, we do have a few RFPs that we are responding to, maybe a little more than usual. We've not seen a huge move or shift towards RFPs, at least in the segments and the type of customers that we are working with. We don't really track TCV, we mentioned that earlier as well. What I can mention is that the pipeline did see good growth during the quarter Q4 over Q3, and we saw a 10% increase in pipeline quarter-on-quarter. That's something that we've been tracking. Year-on-year as well, if you compare it to March 2020, there's been a good growth in pipeline. Which we now need to work on and convert into deals during Q1. I would like to add that frankly, I hate this number of order booking which people give and we don't give. Also I don't like that pipeline number. The reason is this, when people give you the order book, you don't know whether that order is going to be executed in year one, year two, year three. Particularly with the larger players, many of them are very large orders which get executed over a period of time. We also have annuity business which comes in. Unless you split that, that number gives you no idea of the real growth. Likewise with pipeline. Though Joseph has told you that it's gone higher, which is a good thing. The pipeline itself has to be analyzed. How much of it is weighted average probability of converting that? These things can be so binary that you really do not know what that number will translate to. I think a far better indicator of where we are heading is the sort of guidelines that we've been giving you as we've talked. Although we give no formal guidelines, we've talked about 20% organic growth. You already worked out amongst yourselves what the net increase that will take place due to the Pimcore acquisition. You know pretty much where we are heading in terms of growth. I think that is a more relevant number than saying, hey, where are we on pipeline? All of that can turn out to be either a bonanza or fiction. You really don't know which way those given orders and pipeline orders will go in terms of when it comes to conversion. Understood. That's fair. I'll come back in the queue. Thank you. Thank you. Reminder to the participants, anyone who wishes to ask a question may press star and one. The next question is from the line of Dipesh Mehta from Emkay Global. Please go ahead. T hanks for the opportunity. I just want to get one clarification. You said salary hike with effect from April. Why it get impact to your own JFM quarter, which I am not very clear. If you can help me understand that part first. Heard that. Sorry, I was on mute. What happens is we announce the increase to people saying that we will be doing it effective January 1st, but it will be payable from 1st of April. That's what happened. Essentially, there was a communication to the group saying that we are doing this, but because of conditions and we couldn't complete the work, what we'll do is we will take the budget of January, February, March, assume that that number is available to us, put it into the budget, which is effective April 1st, and give it to you, roll it out from April 1st. From an India's account- Employee will get from January only? From April only. T hat is- Cash flow is from April. No, cash flow I understand, from employee perspective, they get even for January, February, March hike in their salary in April month. Yes. You can take it like that. It doesn't work in the arrears system as you do it in the Government of India. What happens is that pool is made available. See what happens is you have the delivery teams, the entire operational team. They are given a pool to distribute amongst the teams basis the appraisal rating or whatever. The pool, if it is 10%, goes up to 12.5%. That's what has happened. Understand. Broadly, employee will get from January. You are saying it is not arrear kind of thing, then how it works? I'm not very clear. Because JFM you are providing INR 9 crore. No, that's exactly what I said. Supposing in the normal course of events, I would have done it from January, I would have given a 10% increase from January. Correct? The next cycle comes up next January. We couldn't complete the process during the month of January, February, March. What we said is, we'll do it effective April, but the budget that is given to the teams is effective from January. We gave it, that 2.5% was added to the budget of April and given— Effectively, it's 12.5%. I'm just giving you a number, which is effective April 1st. We had to accrue it in quarter four. Has to be accrued. Correct. That extra 2.5% gets distributed across the entire year from an employee standpoint. Correct. Instead of giving, let's say, in Venkat's example, instead of giving a 10% increment, you'll give a 12.5% increment. They'll get that money over the entire 12 months. Understand. Rather than giving normal, we give some extra salary to adjust for JFM delay. Understand. Second question is if you can? That's right. Understand. Second question is about the outlook. If you can help us provide some perspective about major vertical where we operate, EdTech, BFS. If you can just run through how you are seeing demand trend across vertical. Any differences in geography perspective in terms of strength in demand. Thank you. Sure. I'll take the geo, and if you look at the revenues and breakup across geos, you'll see that Middle East has done quite well for us because we had a large account from Pimcore that got added, and one of our customers has grown quite well. We're beginning to see good traction in Middle East. Europe also has grown well, and we continue to see traction. I think the period of December, January, there was uncertainty there, especially in U.K., where we have a stronger presence. With the vaccination going up over there, we're beginning to see business slowly come back to normal. U.S. continues to do well. India will have to see. I think Q1 will be a little muted given all that's happening out there, even though we do have a few discussions going on. That's from a geo perspective. If you see the verticals, EdTech continues to do well for us. Just the fact that there's been such a huge shift in the way both schools and colleges are educating, and they need to support multiple digital mediums and channels for education, more hybrid. EdTech continues to do well for us. We are seeing retail as well, a fair bit, especially with the Pimcore acquisition. If you see the percentage of revenue, retail also has gone up. We continue to see opportunities around digital marketing, personalization. Also the fact that many of them are moving away from high-cost software to more open source, which leads to more opportunities for a company like Happiest Minds. In industrial manufacturing, Jan, I think customers were sort of making sense of what's happening. We've seen them starting manufacturing more around factory automation, doing assessments, which should lead to work down the line. We are seeing more activity in the mid-sized customers in industrial manufacturing. High-Tech continues to do well. It's one vertical which recovered very quickly in Q1 of last year, and it continues to see a fair bit of investment. I'll just add one more thing. Please. Yes. One more thing on top of you. I think that both of our CoEs of center analytics and IoT has also grown significantly over the last year or so as well. We continue to see more and more demand for those sets of initiatives that we had invested much earlier, both from Internet of Things as well as analytics. While supported by our verticals, supported by CoEs, I think the positive sentiments, I think we see growth in most of our verticals as well as in geographies. Just to add, automation is growing pretty well, and we are seeing a significant growth from quarter three to quarter four. We also are seeing a good increase in the security services as well. Understood. Thanks. Thank you. The next question is from the line of- If I can just give the data point on subcontractors so that Vimal, if he's on the call. We had INR 19.21 crores in Q4 compared to INR 18.03 in Q3. Thank you. Thanks, Faizan. The next question is from the line of [Ramesh Natarajan], individual investor. Please go ahead. I'd like to know whether there is any clear-cut demarcation on succession plan and appointing somebody to take care of the business in next one decade or so. Thank you very much. No company has spelt out its succession plan as clearly as we have. There was a very nice article in The Times of India, which by a coincidence is right here in front of me. The title was, "Soota Restructures to Give Happiest Minds a Long Life." The article highlighted— and we also went at pains to highlight this, by the way, in our presentations during the IPO—whereby we said we've got perhaps the strongest top management that you can actually visualize, and it was actually put in place earlier. The restructuring on how that will fit into the succession planning is what got defined around the time of the IPO. We have an executive board which individually and collectively function as the CEO of the company. If you will see the results of the company in the last three years, this completely coincides with the period that the Executive Board has been in place. They turned it around from what suddenly ran into a loss. There were really two years of decline, of which the second year was a loss, three years of absolutely fantastic growth after that under the leadership of the Executive Board. In addition, we've also now got an Executive Vice Chairman and the MD and CFO roles, which were created as we were going public. As a succession structure, it is really as complete as anything can be. You talked about is there something planned for a decade? I should also tell you, this is really work in progress, we've always had a five-year vision in the company. Our 10th anniversary is 29th August. This time we decided— and we had a first discussion on this only with our board just yesterday, for that matter, and it takes a lot of doing— it's more important for us to look ahead than ever before, and therefore we are actually going to articulate a vision for the next decade. We will do that before our 10th anniversary, which is 29th August. Thank you so much, sir. Thank you. The next question is from the line of Rahul Gupta from Fidelity. Please go ahead. Hi. Thanks for taking my question. Just one clarification on this wage increase again. The way you mentioned it, what my understanding is that, let's say this INR 9 crores quarterly impact for 4Q will be paid out in next four quarters in equal installments in a way. Let's say INR 2+ crores in next four quarters. Is that the right understanding? That's right. Okay. For this quarter, the INR 9 crores impact that we have taken in the P&L, the provision has been adjusted from other income. The INR 123 crores employee benefit expense does not include that INR 10 crores, right? No. Not from other income. It goes into operating expenses. Okay. Other expenses, which is like INR 424 crore system, right? Yes. If you look at the SEBI format, it goes into employee benefits. Got it. The incremental impact from wage hike would be, let's say, INR 2.5 crores next quarter, which is like —No. Okay. That's already been taken. Got it. It will be lesser by INR 2.25 crores or INR 2.5 crores. Understood. Thank you. That's it. Thank you. Thank you. Thank you. The next question is from the line of Karan Uppal from PhillipCapital. Please go ahead. Thanks for the opportunity, and congratulations on a good set of numbers. Just two questions from my side. Firstly, what are the hiring plans of the company for FY 2022? We have seen a very strong hiring in FY 2021 g iven that we are seeing an increasing risk of attrition given the very high active hiring market. That's first question. Secondly, in terms of the travel, media, and entertainment vertical, how are you seeing the demand shaping up given that we are seeing an increase in the domestic travel in U.S. and Europe? Joseph- Good morning. S ure. Fine, S ure. Fine, Nanda. Please go ahead. Sure. Coming to the attrition and hiring plans, great question. Our attrition level for FY 2021 was around 12%. Given this increment that we have been speaking about so far including that advancement that happened to the April month, we do not really expect any significant increase in attrition levels going forward. With respect to hiring, we have multiple strategies at this point of time to fulfill the demand that we are seeing at this point of time. That includes recruitment on our own as well as increasing our intake of fresh graduates. We have also built an ecosystem of partners from whom we are taking in partners. Our intake of partners has increased significantly in Q4, and we expect also to continue in the year ahead also. Besides that, we'll also be continuing in our cross-skill and up-skill of people within so that we'll be able to fulfill these demands that are coming up. The second part to the question- You asked about TME- Yes, Ashok. I'm taking that. You asked a question about TME, and let me break it up because we have travel and media entertainment together over there. That's how we classified it. As we've mentioned earlier as well, the revenues from travel is minimal to nil actually for us. Really worked out well for us in FY 2021, especially the earlier part of the year, because that was a vertical and segment that was hit quite badly. On media and entertainment, our focus has been more on digital media, the Hotstar and the Netflix, and also the media companies that are building such platforms. More of OTT and streaming companies, which is where a lot of the digital technologies that we are experts in around cloud, around big data analytics, AI, ML, things like that are very relevant out here. We continue to see quite a lot of demand out there because most of the media companies are trying to reinvent themselves and move more towards streaming and subscription models. This is where our focus is. Okay. Thanks a lot and all the best for FY 2022. Thank you. Thank you. The next question is from the line of Harit Shah from KR Choksey Shares and Securities. Please go ahead. Hi. Thank you very much for the presentation. It was a fairly comprehensive understanding of the business, thank you very much for that. Just one point. We had mentioned about the subcontracting issue. Do we have that figure now with us? It was about INR 18.6 crores, I think, last. Have we been able to get down that figure? That number I just mentioned is gone up to about INR 19 crores this quarter, Harit. Okay. Wonderful. I guess I may have mixed it out there. Secondly, obviously now as you mentioned about the issues in terms of [ATV] supply side and the requirement for obviously for talent given the kind of [LPO output] ahead. What would you say would be your stable utilization kind of a range that you are only comfortable with? Last time you were at 82.6%. You think this could go back to maybe 77%-78% kind of a range that would be a sustainable number to look to? I would like request Nanda to talk about utilization. Nanda, I think the question was, what's a sustainable number on utilization? The sustainable numbers of utilization would be around 80%, between 77%-80%. That's what we have been targeting. Given the demand and all that stuff, the current utilization is at around 83%. It may go up and down a couple of percentages depending on the demand and our ability to fulfill. We'd like to retain it between 77%-80%. Okay, great. I think that was my analysis question. Thank you very much, sir. Thank you. The next question is from the line of Rahul Jain from Dolat Capital. Please go ahead. Thank you for the opportunity. I just have two questions. Firstly, any plan to scale up revenue and delivery capability in the onsite location as we scale up our size of the business? Do we see the need of that? That's an area that we've been focused on. In fact, in Q3 we started an initiative to see how we can strengthen our hiring capability, recruitment capability in U.S. to start off with. We've actually brought a senior leader on board to lead that effort in U.S. who's based out of U.S. We're beginning to see initial traction. This is important for a couple of reasons. One is, as Venkat was mentioning, the ability to have people travel from India is still limited, and for the foreseeable future, it'll be limited, not because of visa, but more of pandemic reasons. Sure. At the same time, in many of the digital initiatives, it will be useful to have people close to the customer to help them with some of the strategizing as well as to help with understanding the customer better and account expansion. We will be looking at strengthening, beefing up our numbers and capabilities onsite. Again, from a domain and vertical perspective, it would be good to have some of these domain experts who can work closely with customers, India time zone, and travel when possible. Okay. And also- Yes. This is Ram here. Also as Joseph mentioned, that we are growing significantly in Middle East. Our endeavor is also to get more and more people onsite there locally so that our turnaround time and providing services quickly will be helpful. We are looking at more and more local and onsite recruitment as we move forward. You're trying to say across the delivery level, not just at the subject matter expert level or sales level, right? That's right. That is correct. Sure. Right. Thank you. Another question was, we have a long tail of clients. Do we plan to clear them over time, or do we see potential as well as bandwidth with the company to scale them over time? Rajiv, you want to take this? Yeah. We go through quite a bit of rigorous process. E ven when we sign the contract, we look at the three-year projections and what is the potential, not projections, but potential of that customer from growth perspective. We are quite diligent on that aspect. At the same time, if we don't see that growth coming through, or if we are not able to add value to the customer's standpoint, we do decide to give up the partnership or relationship with the customer. There is a well-defined process for a long tail set of customers and in most of our businesses or all of our businesses last year, we took a very strong and fresh look at all the long tail accounts that we had, and we have pruned off quite a bit as well. Right. This three-year- If you notice, the average revenue per customer at the beginning of the year was $615,000. We've ended the year at $737,000. That's reflecting the strategy or approach we've taken towards our customers. Right. Lastly, any flavor you would like to give on likely growth driver for you in terms of vertical? I think you gave clarity on the media, other verticals if you could talk about. Joseph, I'll start and then- Sure. I think a couple of things. One is that with our acquisition of PGS, we see in more than 80% of the client base is retail CPG world. Other 20% was on manufacturing side. Leveraging and complementing the strengths of each other, and now it's fully integrated, we see a larger growth in some of those areas. At the same time, I think that industry itself, retail CPG, was really reevaluating their model and the business drivers last year. I think that now there is a little bit of clarity as far as which direction are they taking. With PGS, at the same time, maturity of the model itself that the industry has specified, we see a growth in those areas. Manufacturing, I think again, the same thing from alternative ways of supply chain logistics, integrated devices, et cetera, connected devices will drive a larger growth for us as well. Of course, our core verticals, RegTech and High-Tech continue to see alternative business models that we are part of the customer's larger digital transformation journey. We'll see continued growth on those verticals as well. Right. Just lastly, a clarification. Venkat, you said the sustainable margin for us are 22%-23%. Was that number right? 22%-24% is what I've been mentioning. Okay, this is the three-year, five-year kind of aspirational band you would like to be in. Correct. Yes. Much appreciated. Thanks a lot and best of luck for the year ahead. Thank you. Thank you. Ladies and gentlemen, we will take the last question from the line of Shivam Saxena from ICICI Bank. Please go ahead. Hi, thank you for taking my question. In the presentation, you have mentioned that the COVID-19 pandemic could decrease our customers' technology spend. Are you seeing any early trends on billing rates, the customers with renegotiating in any segment wise, any color on the vertical wise decline in spends right now? I wasn't clear on the question. Is there a decline in spend in any of the verticals? Yeah. Focus on the rate, I think, Joseph, on the question, which fortunately is not happening. Go ahead. Sure. In terms of demand, all the verticals that we are present in, we are seeing demand in all of them. It could vary across verticals, but all of them have increased demand, even as compared to Q3 or in Q1 as compared to Q4. That's because most of the companies have realized that digital is the way for them. It's not a competitive advantage, it's a necessity now. What they were thinking of doing over maybe two, three, four years, they've realized they need to really accelerate because consumer behavior has changed, and it's also being driven by their competition. Demand is good across verticals. In terms of rate increase, while there could be one or two customers who could be asking for rates in some deals, but overall, we've not seen any pressure on rate. Just given the demand and also the space that we are in. In the digital space where the demand has been quite high for the last six months. We don't anticipate rate pressure in FY 2022. Don't you see the retail segment asking for low because of malls being shut down, so retail segment not asking for some decline in spends going forward? Rajiv, you want to take this one? No. We have not experienced anything from the rate negotiations or customers asking. In the pandemic situation, I think there is increased need for them to adapt to digital technologies that may at the same time looking at the alternative business model. I think from an overall run the business, probably support maintenance areas, there is a reduction in overall spend. From the newer technologies perspective to take advantage of positivity that is coming in in the U.S. and European markets, I think that we have not seen any renegotiation from rate perspective. Rajiv, wouldn't our retail include all our e-commerce business, which is of course growing and added on further? Yes, correct. If that is the case, then it is under the premium and not at any discount. Okay. Very correct. Thank you. Thank you. Ladies and gentlemen, that was the last question. I now hand the conference over to Mr. Hardik Sangani for closing comments. Hey. Hi. Thank you, Faizan. Thank you, everyone, for joining us on the call. I thank management of Happiest Minds for giving us the opportunity to host the Q4 earnings call. Now, I hand over the call to Sunil for the closing comments. Thanks, Hardik. Thank you for joining us today. We thank ICICI Securities for hosting this call on our behalf. We look forward to interacting with you. You can reach out to us on ir@happiestminds.com. Stay safe and healthy. Bye-bye. Bye. Bye. Thank you. Bye. Bye-bye. Bye. Thank you. Bye. Thank you. Ladies and gentlemen, on behalf of ICICI Securities Limited, that concludes this conference. Thank you for joining us, and you may now disconnect your lines.