Ladies and gentlemen, good day, and welcome to the HCL Technologies Q3 FY 2022 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. If you need assistance during the course of the call, please signal an operator by pressing star then zero on your touchtone phone. We now have the conference over to Mr. Sanjay Mendiratta, Head of Investor Relations. Thank you, and over to you, sir. Thank you, Aman. Good morning and good evening, everyone. A very warm welcome to HCLTech's quarter three FY 2022 earnings call. Trust you all are safe and in good health. We have with us today Mr. C. Vijayakumar, CEO and Managing Director, HCLTech. Mr. Prateek Aggarwal, our Chief Financial Officer. Mr. Appa Rao VV, Chief Human Resources Officer, along with the senior leadership team to discuss the performance of the company during the quarter, followed by the Q&A. In the course of this call, certain statements that will be made are forward-looking, which involve a number of risks, uncertainties, assumptions and other factors which could cause actual results to differ materially from those in such forward-looking statements. All forward-looking statements made herein are based on information currently available to the management, and the company does not undertake to update any forward-looking statement that may be made in the course of this call. In this regard, please do review the safe harbor statements in the common investor release document and all the factors that can cause difference. Over to you, CVK, and thank you. Thank you, Sanjay. Good evening and good morning, everyone. Happy New Year to all of you. I wish you a lot of health, happiness and prosperity in the new year. As we start the year, I am very grateful for the dedication, passion and service of all the HCLTech across the world who continue to do a tremendous job keeping the company high and positive despite the continuing pandemic. I'm delighted to share that Q3 2022 has been a spectacular quarter for us, with a very strong revenue growth, sustained margin performance and continued momentum in both booking and pipeline, reflecting in our overall strength in the market. We had a fairly large ramp-up in terms of our talent in the last quarter. We continue to invest in training to gear ourselves to address the current and future demand. Our employee brands have been very strong, that's been one of the very important aspects along with the talent strategy which has helped us attract a significant number of digital talent over the last 12 months. Our new services like digital engineering, cloud transformation, application and data modernization were the top themes in this quarter. We had some great success in our products and platform business, both renewals and new licenses. Our overall growth has been broad-based with momentum across all geographies, segments and all the industry sectors. In terms of numbers, our revenue grew 7.6% sequentially and 15% year-on-year in constant currency. We exceeded our expectations, but I always believed that we have the potential to achieve these numbers. In fact, this was the highest growth recorded in the last 47 quarters, and that too on a significantly large base, which is today almost four times larger than what it was in 2010. The growth momentum was fueled by both the services business and the products and platform business. Our INR revenue grew 8.1% sequentially and 15.7% year-on-year. Our operating margin saw a small five basis points increase, coming in at 19%. We signed eight net new large services deals and eight significant product deals across geographies and the industry sectors. We continue to invest in our clients with our capabilities, which is resulting in a number of incremental small deals in our existing clients, which helps us to continue to grow our top clients. Our net new booking remains strong at $2.1 billion, which is 54% year-on-year increase. There are also a lot of deals that are coming in, as what we call as rate card deals, which don't get quantified until we start, delivering them. When we add renewals of existing contracts to the above, we see a good, growth momentum in the medium term. Our client addition has again been spectacular across all categories, reflecting a strong, demand as well as, a strong relevance of our offerings to our clients in this, fast-changing world. Our $50 million clients increased by 11, $20 million clients increased by 13, and we added $51 million clients in the last 12 months. Our Mode 2 offerings grew 30% year-over-year and 6% sequentially in constant currency. Our pipeline is very strong. It's reflective of the demand environment. Our pipeline is broad-based across all dimensions, service lines, geographies, verticals. Even if you take a cut of large deals and mid-sized deals and small deals, it looks quite balanced. If we provide some color on the segments. On Engineering and R&D Services led the momentum with a robust 8.3% sequential and a 19.1% year-over-year growth in constant currency. Our IT and Business Services had about 4.7% constant currency growth sequentially. Cloud is a very important theme which is driving a lot of growth in the IT and Business Services. Cloud in two shapes. One is rehost and replatform, which is predominantly moving existing workloads to cloud. The second aspect is again a part of the migration to cloud journey, which is really modernizing applications and data. The third element is building more innovations once you are in a cloud platform. We participate in all the three areas in a very strong way, and this is continuing to drive good acceleration in this business. Overall, our services business grew 5.3% sequentially on top of the 5.2% in the previous quarter. If you look at our services business beyond the numbers, there are a few trends that stand out and worth talking about. We are seeing relatively smaller but faster deal cycles in the digital business, which is reflective of the quick wins that the clients are looking for, especially in the front office transformation. Especially in industries which were not very quick in adopting digital transformation in the last three quarters, we are really accelerating that journey. There are opportunities that are also opening up as our clients are filling talent supply gaps within their own organizations, leading to extension of outsourcing deals with newer scopes, particularly in the digital deals. For example, we entered into an engagement with a leading Swiss-based financial technology firm to help their global client base meet their digital transformation and cryptocurrency adoption needs. The second trend that we are seeing is we're seeing a lot of momentum in our Engineering and R&D business, led by IoT and Industry 4.0, semiconductors and telecom sector transformation. For example, a leading U.S.-based telecom service provider signed a deal with HCL for network quality engineering to enhance customer experience, reduce cycle times, and optimize CapEx structures. We continue to see this as a business that will play a significant part in our medium-term growth. We continue to look for companies that can add to our Engineering and R&D services capabilities and the growth story. As you would have seen, we just announced the acquisition of Starschema, a leading provider of data engineering services, based in Hungary. Starschema provides consulting technology in managed services fashion in data engineering to some of the large G2000 companies. The acquisition combines Starschema's high-value capabilities and data-focused expertise with HCL's existing presence in industry segments undergoing data-driven transformation. In addition, we feel it strengthens its position in data engineering, which is an integral part of the company's digital transformation and engineering capabilities and the extension offerings. The third aspect is cloud. Cloud has become one of our key deal catalysts across segments, representing dominant winning outcomes. For example, a U.S.-based global life sciences company chose us for large cloud transformation engagement through our CloudSMART solution. Underpinned by a differentiated ecosystem partnerships with all the top hyperscalers, we've been able to penetrate into new accounts across sectors with our cloud offerings. This quarter, we expanded our capabilities in this area by scaling our AWS business unit significantly. We are also building deep domain and sectoral capabilities as a CloudSMART offerings. This quarter alone, we saw the CloudSMART team launch more than 40 new solutions. Coming to our products and platforms business, it came back very strongly with a constant currency revenue growth of 24.5% sequentially and 8.2% year-on-year. From a revenue perspective, while all the products did well, we had some excellent growth in commerce, digital experience, which is HCL DX, marketing, which is HCL Unica, and security offerings, which had some very good wins during the quarter. Despite the pandemic representing a challenge, as clients are diligently making consolidated platform investments, we are noticing a consistent growth in companies partnering with HCLSoftware as a very reliable and a client-friendly enterprise software product partner of choice to help accelerate their digital transformation. The Products and Platforms team delivered 1,500+ product releases since its inception. It enjoyed an inspiring Net Promoter Score of 70+, and that too with a massive base of 13,000+ clients. This is a testament to the solid product performance, product innovation and the support reliability we continuously deliver to our clients. Our product business is now close to $1.5 billion. Today HCLSoftware is well positioned as a reliable and client-friendly partner for iconic brands and large global corporations to leverage our products in their digital transformation journey. In terms of geographies, Europe led the growth with 9.1% sequentially, followed by Americas with 7.3% and ROW at 4.5%. All our verticals showed a high growth momentum from mid-single digit to high teens growth rates. Leading the pack was technology and services segment, which posted 13% sequential growth, followed by retail CPG and telecom and media, both of which grew double digits sequentially. All our verticals grew double digits year-on-year, with life sciences and healthcare leading the pack with a 21% year-on-year growth. We continue to see early growth in geographies that we had called out as focus in new frontier countries. Our investments in these markets are continuing and are getting into a complete structure with the right sized sales support and delivery organizations locally. Coming to the subject of talent at HCL, while we continue to onboard experienced domain and tech specialists, our strategy continues to lean more towards adding net new talent at scale through the fresh talent coming out of colleges and schools. Last quarter, our net addition was 10,143 people. Helping us on this mission are programs which have deep roots already because we started on the talent journey much ahead of the demand cycle. Initiatives like TechBee, New Vistas, Global Apprenticeship programs and scale-up skilling and reskilling programs, along with our value proposition for our employees, continues to position us very strongly for the future. We are in line to achieve our 20,000 campus hires target for this fiscal by having added more than 15,000 year-to-date. This has been made possible by a robust enablement process created for the campus to company life cycle and a strong brand that attracts college graduates to build a career with HCL. We intend to double our fresher hiring in the coming year, infused by the good demand environment that we are seeing all around. Our campus hiring program in some of our largest markets like U.S. are also accelerating, with plans to hire over 2,000 graduates in the next two-three years. We also had a reasonable attrition number, which is 19%, on an LTM basis. It is higher than what it was in the last quarter, but we expect this to continue for some more time before it moderates. Our LTM attrition numbers may go up before it moderates. In addition to all the recognitions that we've received from the global press over the last couple of years, like top 30 global employers, also the top-ranked professional services firm globally by Forbes. Recently, Avasant and Everest both published their reports where they've named HCL Technologies as a leader in talent readiness and digital talent capabilities. We continue to accelerate our New Vistas program, which is designed to establish innovation and delivery centers in emerging cities across the world. We've also seen an increase of 20% in our New Vistas headcounts in India, while countries like Sri Lanka, Vietnam, Costa Rica, Romania continue to expand at scale. We also opened a new center in Hartford, Connecticut in the U.S. this quarter, which primarily serves our flagship client, Stanley Black & Decker, as well as several others in the Northeast U.S. We expand to support clients across industries, including manufacturing, aerospace and defense, insurance, life sciences and healthcare, supported by a smart manufacturing lab. Let me also cover another important topic on ESG before I move on to the outlook. Guided by our mission of enabling harmony between people, planet and prosperity, we as a company have announced a pledge to limit our greenhouse gases emission, aligned to a 1.5 degrees pathway by 2030 and to reach net zero by 2040. This is our big step forward on contributing towards global effort on combating climate change and one that we will keep all of you posted as we progress. Looking ahead, we remain optimistic about the demand environment. I also feel very confident about our propositions and their time relevance, as well as our talent supply capabilities. Looking ahead, Q4 is a seasonally weak quarter for our P&P business. We had earlier guided for 0%-1% growth. We stayed with that growth. You will see the numbers in line with 0%-1% growth for the P&P segment. On the services side, we've grown 5.2% in Q2, 5.3% in Q3. We continue to see strong momentum in our Engineering and R&D Services, in IT and Business Services. Our ramp-ups continue to be over 3,000 people every quarter. We remain positive about the growth on the services side as well in the quarter four. Overall, we remain very enthusiastic and very buoyant about the market opportunity, while remaining a little cautious on the new variants of the pandemic, for which our global BCP and HR systems remain on standby, and we are well prepared to address any activating challenges. With that, I wish you all a great year ahead, and I'll hand it over to Prateek to provide more color on the numbers. Over to you, Prateek. Thank you, CVK. Good evening, good morning, good afternoon to wherever in the world you are. Also a very Happy New Year, happy Pongal, happy Makar Sankranti, and Happy New Year to all the people who are celebrating the festival season. It is a new year in many ways. Moving on to the numbers, giving you some more details. Firm sales growth has again given a 5%+ sequential growth for the second quarter running. The growth of this quarter is 5.3%, which is on the back of 5.2% last quarter. On a year-on-year basis, it's 16% year-on-year constant currency growth. Our P&P segment delivered a very strong, 25% growth on a sequential basis in constant currency, using the seasonal tailwind and recouping the last quarter business. On a year-on-year basis in constant currency, growth has come in at 8.2%. To give you a quick overall company overview, the company revenues stood at $2.775 billion, almost close to $3 billion. 6.7% in US dollar terms sequentially and 13.8% on the year. In constant currency was 7.6%, 14.0%. You would have seen all that. The other number to look at is EBITDA. In U.S. GAAP, EBITDA is 32.4%. The more comparable number, which is IFRS comparable EPS published, EBITDA is 34.2%. That is the difference in the GAAP of only 50 basis points, and that's a more comparable number. EBITDA is at 19%, which is basically flat, flattish, versus last quarter. It is five basis points up. On a year-on-year basis, it's 2.9% up. Net income for the quarter was 15.4% of revenue, coming in at INR 2,442 crores. There is an asterisk that we put here to explain the last December quarter; there was a one-timer benefit that we had on the tax expense line, which was a significant $59.4 million, due to a reversal of prior year provision. If you exclude that, the profit after tax of this quarter is down about 4.7% year-on-year in dollar terms. In rupee terms, it is down about 2.9% year-on-year, which is basically coming from the other lines. The key metrics for the quarter, deal wins $2,135 million TCV. Towards the end of this commentary, I will walk through some more details about how we sort of categorize and qualify and mention the TCV. We will give you some more details around that. This $2.135 billion on a year-on-year growth basis is 54%, which comes on the back of 37.5% growth in the previous two quarters. This is further backed by strong net hiring in this quarter of 5,000+ employees. In the last two quarters, we have brings that total up to almost 29,000 employees. Third-party contractors are on top of that number. Better account mining has resulted in the addition of one customer sequentially in the $50+ million category and 11 on a year-on-year basis. That's a very healthy large client group, as you can imagine. Just a quick word on the effective tax rate. For this quarter it is about 22.5%. For the full year, given that we have three quarters actual, we expect to land up in a narrow range of 21.5%-22% expected tax rate for this fiscal year. Margin walk, I think, important to discuss and I'll keep it real simple so that it's easy to understand. The overall margin at company level has remained flattish like we planned at 19%. The services margin, however, has dropped by 190 basis points from about 18.9% last quarter to 17% this quarter. P&P margins have obviously offset that and that solid revenue performance, except for the higher amortization cost, which is linked to the revenue, the rest of it has pretty much flown down to the EBITDA level. I will give you the services margin walk rather than going in for the total company margin walk. 190 basis points is what I am basically explaining here. There are six or seven factors that I'm going to call out. Number one is we gave a second set of the increments, salary increments this quarter. That took away 50 basis points from this quarter's profit. The second factor was the seasonal leaves. That is an impact of about 65 basis points. This is basically a seasonal impact which should hopefully come back next quarter because it is related to the Christmas break and the Diwali holiday and the Thanksgiving holiday and so on, so forth. The third factor is, we had a bunch of customers, new customers, where we are ramping up and there is knowledge transfer cost that we had to incur, which was not payable by the customers and we have to take that hit. A few other investments that we had called out at the beginning of the year. The total of that was about 40 basis points. The fourth aspect was basically the retention and attrition costs, targeted retention for the people who are with us. Higher backfill costs for the people who leave us. Higher bonuses to be paid, higher recruitment costs and all of that. That is the supply side issues that the whole industry is facing, which we are also going through. That factor alone amounts to around 55 basis points on the quarter. So these were the four main hits that we had, which were headwinds during the quarter. The last two factors were really the positives. We got 60 basis points positive impact from operating leverage, basically from the sales SG&A, sales, general, and admin D&A, depreciation and amortization. So that was a positive 60 basis points. Exchange also helped to the extent of about 20 basis points. So that is how the 190 basis points reduction in the services business breaks down. The guidance remains at double digit. I know some of you have questioned about double digit. Double digit does not mean any specific number. It is a range which obviously gives, it's a wide range. But double digit is what we have maintained right from the beginning, and that's what we are maintaining on the top line. On the margin guidance, most of the six factors stated above which are margin walk will remain there for some time and are expected to recover in the next fiscal. Only the seasonal leave impact of 65 basis points is what is expected to come back in the next quarter. The rest will probably take some time. Therefore, the full year EBITDA margin is now expected to be around the lower end of our guidance of 19% given earlier. Having said so, I must also point out that given the growth momentum in the market, which we are obviously seeing, and the supply chain challenges that we are wading through, if required, you know, we won't hesitate in investing or spending extra, even if that means that we might have to come in 10 or 20 basis points lower than the 19% mark. I just want to say that so that the expectations are clear moving forward. Moving on to the cash generation and cash conversion. OCF was $584 million, $130 million more than last quarter. So was the free cash flow, $252 million. Being the OCF was 128% of net income and the free cash flow was 114% of the net income. On the last 12 months, this is for the calendar year, OCF is at $1.95 billion, close to $2 billion, being 117% of net income. Free cash flow is at $1.7 billion, which is 104% of net income. Our balance sheet remains strong, with gross cash of $2.7 billion and net of $2.14 billion. You should remember this is after three significant cash payouts that we had during the quarter. First of all, there was the additional dividend we paid out, INR 10 per share, versus the old INR 6 that we have been following before. That took away $146 million of extra dividend payout during the quarter. The second was we paid for the 19.6% remaining stake of Actian. There was $1 million that we spent on purchasing that. The third aspect was pursuant to the RSU plan, we used the trust to purchase back from the secondary market treasury shares of roughly $95 million. All this put together is $341 million, which is the gross and net cash position is virtually the same as last quarter, just $30 million lower after having spent this $340 million extra. Just a few other updates. The last 12 months diluted EPS is at 47.5. This is leaving out the milestone bonus, which was a one-timer which we had paid in January of last year. As you know, dividend declared for this quarter continues to be at INR 10 per share. This is the 26th consecutive quarter of dividend payout. As already mentioned, 5.5 million shares, 55 lakh shares, were bought through the stock exchanges for INR 95 million on 24th of December for the purpose of the implementation of the RSU plan. As already CVK mentioned, we announced the acquisition of a new company called Starschema, which is a Hungarian limited liability company. We will be paying $42.5 million for the acquisition, which is in the data engineering space and also helps, you know, set up an accelerator, Eastern European or nearshore, presence, on the right areas of data engineering and digital engineering, which are all multiple services. This transaction is expected to close by March. That's the sum and substance of the update I have with you for you today. Thank you very much. Operators, back to you. Thank you very much. Ladies and gentlemen, we will now begin the question and answer session. Anyone who wishes to ask a question may press star and one on your customer telephone. If you wish to remove yourself from the question queue, you may press star and two. Participants are requested to use mute while asking a question. Ladies and gentlemen, we will take a moment while the question queue assembles. First question is from the line of Mukul Garg from Motilal Oswal. Please go ahead. Thank you. Congratulations on a great growth quarter, CVK. I have two questions from my side, one which was to CVK and Prateek. CVK, you know, if you look at the P&P business, if you could just help us understand the growth profile during this quarter. There was some spillage last quarter. How much of the growth was weighted because of that? And what portion is due to the increase in throughput you are seeing at new clients? If you can also help give some sense of how we see 2022 for the vertical, especially given that like now you don't have a leadership in place right now. The second question for Prateek, you know, two-part question, Prateek. On the margin front, if you look at the IT services vertical, the margin dip was a bit unusual given that, you know, historically you have been able to absorb the wage hikes. Given the supply challenges, what levels do you have to return to, you know, the 19% type of margins for IT services vertical? You know, are the margins for P&P seasonal, or do you expect them to stay around 30%-40% levels? Okay, Mukul Garg, let me address your first part of the question. This is on the P&P growth. Yes, we called out close to $20 million of deals that slipped in the last quarter. Most of it came in this quarter. That, of course, one important incremental revenue. But even outside that, we had a pretty good growth this quarter for the P&P business. It's been led by a lot of new wins. Many of them we worked through the last year and built strong value propositions, demos, proof of concepts, and usually they get included in December. That's what happened. We are very happy and we came in a little better than expected. Now, in terms of the growth profile, I mean, I've always said that this is a very strong business in terms of the stickiness of the clients and the quality of the products that we have. There is tremendous amount of innovation that we have done on these products. Many of them are finding very good acceptance. Like the newer versions that we launched in DevSecOps and the newer versions that we launched in some of the containerized version of our products, they have seen some good traction in this quarter. Some of them are still small in their base, but they offer a pretty strong growth potential in the future. We have to interpret that in terms of two dimensions. One is the renewal rates, another one is the new license growth. I think we have a good grip on the renewal rates, and we will start disclosing the renewal rates starting the next fiscal. We will also overlay it with the new license. Maybe we intend to also provide you a group of three or five product teams around which the revenue is built up, which will give you a good perspective to create a good growth model. At this point, I'm not giving any commentary on FY 2023. The leadership, we have a strong leadership. This team had a good leadership within the team, and we have an interim leadership who are running and executing very well. We will have a new leadership structure in the next few months. I don't see that impacting growth because we have some interim model in place. It's taking a little more time from some of the other leaders to manage it, but we're not gonna let that suffer, let the growth suffer because of that aspect. Prateek, over to you for the second question. Before, Prateek, simply just a clarification. Are the growth challenges which you saw last quarter, which caused you to, you know, bring your guidance down from 0% to 1% behind us or, you know, we are still facing them? Yeah. You see, Mukul Garg, that is very. One important aspect of this business is, there is close to 50% of new license sales for the quarter happens in the last week of the quarter. That is the nature of the business, and I think it's true for a lot of companies, which sell software licenses, and they have a perpetual licensing model. I think this is the nature of the business. That can swing either way. Like for example, this, fifty percent new license in the last week, can have a 10%-15% impact on our overall revenue for the quarter. A 5% growth quarter could become -10% growth quarter. They will come back because it's just a matter of timing. There is this one aspect we have to keep in mind, based on the experience that we had in the last quarter. We've analyzed the data over several quarters and this kind of situations can happen in this business. Right now I'm staying with the 0%-1% growth that we had guided for, and I'm not changing anything at this point. Next year we'll give you more data points to help you create the right model for this business. Thank you, CVK. Yeah. Mukul, you had a two-part question for me. The first part being on ITBS business where obviously the margin drop has been the highest. You're right, typically, absolute volume of the rate hike, we have typically been able to absorb, over a period of one or two quarters, after the hike. This year obviously, you know, it's a very different supply situation out there, and therefore, you know, it's not like normal year. Your question about levers going forward, obviously we would like to return to those 19-ish kind of margins like we had last quarter. It would take time, like I said earlier. There are various levers. Obviously automation and other productivity measures are the biggest levers. At this point in time, particularly for the higher end work, and the work which is usually given out as a T&M type of business, we are approaching our customers to get some higher rates for the services that we provide. Over a period of time, the new geographies, the seven plus five new geographies which we started and the five focus geographies should at some point going into the next fiscal year start giving us some return on that investment. This year has been, as we called out right at the beginning, a year of investments, and that should start yielding the results hopefully in the next fiscal. Some of the. Like I explained while going through the margin of what some of the things like seasonal 65 days should come back next quarter. There are some other things like the new customer ramp-up and those kind of things typically for those customers will come back next quarter. You know, given the growth phase that we are going through, I'm quite sure there will be some other customers for which we might have to incur that kind of startup ramp-up cost. Growth that we are obviously chasing and getting has its own cost. These are some of those costs which are exacerbated at this point in time because of the supply side situation that we have as an industry. That combination is what is affecting the margins and the results. P&P margins, no, you should not assume the 32% will continue because, you know, you should realistically look at the last 12 months, and that is the right expectation to set going forward as well. I would not, this quarter is obviously getting a much higher revenue, which is, most of it is slowing down through the EBITDA, which I pointed out while I was giving my commentary. Definitely don't take this quarter's EBITDA percentage as the benchmark going forward. Sure. Thanks for the clarification. Just one more thing I want to add is the whole lever of freshers. As I mentioned earlier, we intend to double the fresher intake in 2023. That'll create a cost bump for some time. It should eventually help us to increase the percentage of freshers versus platforms in the gross revenue numbers. That would also be a margin lever. That's a good one. Thanks, Prateek. Thank you. The next question is from the line of Ankur Rudra from JP Morgan. Please go ahead. Thank you. Good evening, and great quarter, great execution here. The first question to CVK, clearly we continue in a very strong demand environment, and it continues to be a market dominated by smaller deals. How is HCL positioning itself to capture more of these type of deals versus your historical ability? And are you making any changes to your, you know, medium to long-term strategy to maintain this growth momentum going ahead? Ankur, thank you. I think the pipeline has a good mix of large and small deals, though the skew towards smaller deals is a little higher. Traditionally, our Engineering and R&D Services have a very large number of small deals, which really contributes to the growth. I think the trend is continuing and there's nothing changing, and the team is well equipped to deal with it. A lot of IT services had several large deals. We still have several of them in the pipeline. The volume of small deals has gone up, and that's being handled by augmenting our client partner teams, significantly, including some amount of, the CoEs and the solutioning teams are getting dedicated to several accounts to kind of ensure that the solution and the handholding, all of that are done in a nice way for our clients. It's really rebalancing some amount of, center of excellence and, delivery and, client partner teams to really handle more volume. I think the large deal momentum are caused by the cost-led proposition. I think it's still intact. Maybe we don't have billion-dollar deals or $500 million deals. There are several $200 million-$300 million deals in the pipeline, which are either the large product outsourcing deals or end-to-end integrated infrastructure and application outsourcing deals. The hosted flavor is still existing and it's technically not. It's all only small things. understand. How do you feel about, like, you know, we've obviously had very impressive TCV numbers for the last four quarters. It seems like it took us a while to see the growth pick up. From where you are right now, what's the confidence of maintaining this sort of momentum going forward across the services business? Until I think the best leading indicators are the TCV win and the net hiring that we are doing. I think as you will see the trend and that's reflecting. Like, we've grown about 5% in net new in the last three quarters, and our revenue is also growing in that range in the last two quarters. I think that could be the right indicator as long as there is growth in the total TCV that we are doing. Overall positive and it's one of the best demand environments that we've seen. A lot of programs we've been doing, a lot of stress testing to see the longevity of the demand, and we seem to be comfortable. A lot of this work is going to be around for at least a couple of years. Understand. Thank you, CVK. Thank you. Thank you. The next question is from the line of Sandeep Shah from Equirus Securities. Please go ahead. Yeah, thanks. Thanks for the opportunity. Just a question about CVK. A few quarters back, you made a comment that FY 2023 could be better than FY 2022. Can you give us color in terms of where we are standing both for services business as well as Products and Platforms? You said you may return because this is a year of investment in FY 2022. We may return to high single-digit growth in the Products and Platforms in FY 2022. Sandeep, yes. Okay, let me first address the Products and Platforms. This was a year where we scaled up our sales teams, and that's showing very impressively in the bookings that we could deliver in the most important quarter, which will be growing in the quarters that followed. We expect some of those investments to start delivering results even in the subsequent quarters. As the composition of mature products or declining products go down, I think the growth profile of the business fundamentally will change. We will provide you more metrics in the next quarter, which will help you model it. In terms of overall, FY 2023 versus FY 2022, I think when I talked about it, our FY 2022 growth was at a certain level, and now it's significantly higher. I cannot comment on it now. We have to do a detailed planning and the leading indicators are booking and net new additions, that's what we should go by. If there is any more updates, we will let you know in the next quarter meetings. Okay. This question to Prateek. I think what I understood is, this year we are saying we may be 10 or 20 basis lower than the lower end of the guidance and EBITDA at 19%. That means we could be at 18.8, 18.9 if required investments are there. That's why your fourth quarter margin could be actually lower by 50-100 basis, on a Q-on-Q basis, despite the tailwind of 65 basis you are saying will come back in the first quarter. It would lead to almost like a 80-100 basis kind of a Q-on-Q drop in the fourth quarter margin. What could be the reason? What are the headwinds and tailwinds? Is it the ESOP cost which you are factoring as an incremental headwind in the fourth quarter and going forward? Just color on the ESOP cost for coming quarter as well as FY 2023, 2024 as a whole. Sure, Sandeep. First of all, I think, you know, you have to take the seasonality of P&P out. Like I explained, when I talked about the margin walk, the P&P business at a company level has given, you know, something like 175 basis points. That has, you know, offset the negative of 190 basis points on the services side. The benefit offset 173, not the entire 173, but a smaller number will be going into the next quarter. I mean, I don't remember what the margin for the March quarter in P&P last year was, but you know, this is a year-on-year basis business. You know, the margin for next quarter will certainly not be 22% like this quarter. The right way to look at next quarter is to look at the services business, and that is why I broke out the services 190 basis points in that much detail so that you understand that you know, next quarter could be lower. We would certainly try to keep it at 19% and beyond. You know, if the environment requires both on the demand side as well as on the supply side, then you know, I just wanted to clarify that our guidance remains at 19%, 19%-21%, and that is what I repeat, that is what we would certainly hope to achieve and target to achieve. You know, we still have three months to go, and if the situation warrants and requires, we could come down to that 18.9 or 18.8 on a full year basis. You can do the math, whatever it means for the balance, that's simple to calculate. Yeah. Comment on the ESOP cost. ESOP, there is no, you know, I mean, like we have said when we went to the shareholders very clearly that ESOP is something which is part of the LTI plan that we have, and we are just converting roughly about 30% of that cash element into the RSUs. ESOP is not something which is really an incremental cost per se. There could be some quarter-on-quarter swings, but that's not something which is, you know, really making a huge new thing. Okay. Sir, last related question. You also made a comment, Prateek, that FY 2023 guidance band on margin of 19%-21% can have an upward bias. Is this what we try to indicate? I'm sorry, are you talking about FY 2022 or FY 2023, sir? FY 2023. Because in your comment you said that the guidance band of 19%-21% for FY 2023 may have an upward bias, because of the investments and the growth momentum you foresee. FY 2023 could be a year of yielding results from the investments. Sandeep, we are definitely not giving any guidance for FY 2023 at this stage. We'll come back once again later in April, and we will guide it for next quarter on whatever we decide to do at that point in time. You know, what I said was more a directional kind of a thing, which basically I mean, there is a reason why we are investing and it has a lead time. At the beginning of FY 2022, we did mention that this is an investment year, and I think we are investing at the right time because when the demand is there, if you don't invest then, when are you going to invest? We are investing at the right time, and we certainly hope that we will start getting the feedback of those investments, hopefully in FY 2023. At this moment of time, I'm not giving a guidance. Okay. Fair enough. enough. Thanks and congrats on good set of numbers. Thank you, Sandeep. Thank you. The next question is from the line of Sandip Agarwal from Edelweiss. Please go ahead. Yeah. Hi, good evening to the management team, and thanks for having me for the question. CV, I have one small question. If you see our business model, it is slightly different than the other companies in the sector which we compete with. I wanted to know where you see, like, you know, I have generally seen that we have a long decision cycle when we start winning the deals and how they convert into revenue. Will it be fair to assume that, you know, after every kind of momentum we have seen in this quarter, we are probably starting to see the momentum from here on? The reason I'm asking you this question is because, you know, we have seen in the past that once our momentum starts, we start doing extremely well and our growth picks up very substantially. Because eight-nine months of lag impact, the lower growth actually gets easily compensated in the coming quarter. Do you see that trend for us going forward or you think the growth will be volatile and the past may not be the same for the future? How do you look at it? Thanks. That's all from my side. Yeah. Sandip, see, I think, of course, the booking is the best indicator. But within the booking, there can be two types of deals. One are large infrastructure outsourcing type of deals. Then the other one would be, the cloud transformation and digital and application modernization, lot of product development and sustenance type of opportunities. The first category generally takes longer, to realize the revenue because of the transition and some of the data center migrations and things like that. In the second category, all three or four deals that I called out, the conversion happens relatively faster. Now, the mix of this will determine the speed at which revenue conversion happens. Given the commentary that we already said, the smaller deals are more, you should see a slightly better conversion. Speed compared to what we saw in the past. The rest has to be extrapolated based on the net new TCV that we announced every quarter. Okay, thanks. That's all from my side. Best of luck for the current quarter. Thank you, Sandip. Thank you. Next question is from the line of Mihir Manohar from Carnelian Asset Management. Please go ahead. Yes. Thanks for giving the opportunity and congratulations on such a great set of numbers. You talked about your partnership with the hyperscalers. If you could throw some more light on that, and how should we see the partnership, and what kind of revenue performance on that? Yeah. Thank you, Mihir. I think we were one of the first in the industry to build hyperscaler-specific business units. Right? We were pretty much the first SI to build Google Cloud ecosystem unit, Microsoft, AWS, and even other large ecosystem providers, whether it is HP, whether it is IBM, Dell, Cisco, we have dedicated units. The focus on an ecosystem as a big enabler for all of its segments is very high within HCL. This is led by our CTO, Kalyan Kumar, who leads the cloud and ecosystem units. We go to market with them. They take us to a lot of clients. Of course, a lot of these opportunities come as a small stream of work. Depending on the quality of the execution, they continue to stay and ramp up. We see this as a good enabler for our growth, and we've been investing in it for the last three-four years. Now we have a very strong ecosystem partnerships across hyperscalers and other technology ends. Sure. I think my understanding is that post the cloud adoption, this IMS is a would emerge as a strong opportunity, right? Absolutely. I've always said that cloud is a tailwind for the infrastructure business and not a headwind. That's the broad theme. We are continuing to invest. There's lots more emphasis on building scale for cloud delivery capabilities, because these cloud migrations, as it picks up speed, it really needs to be in a factory model. We are continuing to build hyperscalers-specific migration and managed services factories to scale it. We see this as a great tailwind for our growth. Yes. Okay, sure. Just last question from my side. I think there are some talks in the media regarding the bonus. I mean employee bonus and there's drawback on the bonus side for some of the remaining employees. If you could clarify and what is the margin impact because of that? It's very insignificant and this was really it was misunderstood. The annual bonus, which would have been paid at the end of the year based on performance, it was a good employee practice that we practiced, where we paid them in advance every month. This was made for a small set of employees and we have taken some corrective steps as well. Because in this environment, we wanted to be absolutely sure that we are doing everything to support our existing employees and our former employees. I don't see any impact to our anything. Nothing meaningful to really call it out as an impact. Okay. Yeah, sure. That's true. Yeah. That's it from my side. Thank you. Thank you. Thank you. Before I take the next question, I'd remind our participants to submit their question to one per participant. If time permits, you may join the queue for any follow-up. The next question is from the line of Surendra Goyal from Citigroup. Please go ahead. Hi, CVK. Happy New Year and a good quarter. Just a couple of questions. Firstly, your comment on P&P for the year guidance seems to imply a significantly bigger than the usual seasonal decline that one would expect in the March quarter. Are you just being conservative given the inherent volatility or quarterly volatility in this business, or is there any other reason for it? Secondly, one for Kalyan Kumar, on the seasonal leave impact point, was it something particular this year or maybe a bigger than usual impact this year? Because I'm not sure if you have really called this out in the past. Thanks. Surendra, Happy New Year, and thank you for your question. P&P, Jason, I think, called out, there's a lot that happened in the last week of the quarter. We guided for 0%-1%. We will stay with that. It all depends on how the season progresses and what really gets committed in the last week of the quarter. That can make a difference either way. We've just taken that into account to stay with the guided range. I think Prateek could answer the question on seasonality. CVK, before I answer that, I will just add that, you know, we had publicly said about the end of the DXC relationship on the program products. So that's one more thing which is affecting the P&P revenues. And that was one reason why we reduced our guidance from our earlier guidance to 0%-1%. So that's one more aspect. Now coming to the lead part, Ashwin, you are right. I mean, it's not usually different from what happens in the second quarter in other years. Other years we don't have the supply side situation like we have in this year. And that is why it has not been easy to sort of absorb it amongst, you know, 10 or 20 things that are happening. That's the reason, you know, even increments, like I mentioned earlier, I think somebody asked that question. Increments also, you know, we have been able to absorb over a couple of quarters, three quarters. This year is different. It's just a very different supply side situation that we are all facing. Thank you. Participants, a reminder again, limit your question to one per participant. If time permits, you may stay for any follow-up. Next question is from the line of Kawaljeet Saluja from Kotak. Please go ahead. Hey, Kawaljeet from Kotak. Congratulations on a good, you know, revenue growth. I guess the question will not be on revenues, but on margins, which seems to be the area of focus for everyone. You know, Prateek, you did mention that, you know, in response to one of a participant's question that, you know, growth has a cost. When you're referring to growth has cost, were you referring to pricing or some other investment or was it related to larger transition costs? Hi, Kawaljeet. No, I was referring not to pricing. Pricing, in fact, as I mentioned, is one of the levers we are looking to absorb cost increases. What I was referring to is knowledge transfer and ramp-up cost for a lot of the new customers that we won in the last three or four quarters. Those ramp-ups are something which in today's day and age don't get paid upfront or even over a period. It takes a long period to sort of recover those costs. You have to bear them upfront, and that is the lumpy cost that I was referring to. Prateek, on the transition front, you hardly had any mega deals in the last two years, and most of those deals that you did are $100 million-$200 million or even lower than that. Shouldn't the transition costs be absorbed in the normal course rather than calling it out separately? Kawaljeet, I'll just say that, you know, we have not seen this 5% on a sequential basis. That also, you know, continuous quarters running for quite some time. Like, if I called out days after 47 quarters, 12 odd years, that's actually 8.7%, 7.6% kind of growth. That is what is basically making it a little difficult to bear these costs. Not difficult in the sense, I mean, that is affecting margins, which we all believe is a cost to be borne in the short or medium term. Over a longer period of term, we will definitely, like, come back to our, you know, usual range of 90-21 kind of thing, which has not been possible in this quarter and may take, maybe one or two quarters or maybe even three quarters, to come back to that kind of a level, which we would obviously aspire to work towards target, but, can't commit to at this point in time. Got you. The next question is from the line of Deepak Shah from Savart. Please go ahead. Hi, good evening. Thanks for taking my question. My question is regarding it was mentioned that we are going to change the employee structure. Currently, we have a very low segment in the freshers. How are we exactly planning going ahead that currently compared to the existing employees, we don't have that kind of freshers, but we are gradually ramping up. How is this going to benefit us in terms of basis points which we are considering for the overall margins in terms of EBITDA margins in the period that would come ahead? Thanks. Sorry, I don't think I fully understood your question. What I'm basically saying is as we are changing retention and hiring recruitment has kind of costed 80-80 basis points over the 190 basis points margin fall in this particular quarter in the service segment. We are planning for going ahead to increase the overall freshers that is currently not available in the employee structure. How is this going to benefit and to what extent we can see that will expand the margins or at least minimize the fall that we have recently recorded? It's difficult to kind of generalize on this call. The broad parameters that I can give you are generally higher freshers. They can be billable as early as four months to, in some areas it takes over nine months. You should take an average of six months of cost for freshers before they become billable. When we bill it, there is going to be an increase in cost, but it will eventually reduce the direct costs in the projects. That's the broad model. I mean, just because there have been a lot of questions on margins. Fundamentally, the industry cost structures are changing, right? I mean, we can have the fresher lever for some more time. Fundamentally cost structures are changing, and I don't think it's going to normalize anytime soon. The most sustainable lever that we believe which will help us will be to really get rate increases. We are already we increased our prices. All the new bids going at a much higher price. We have approached all our clients. Our clients are also responding quite positively, and that's where our maximum focus from a margin improvement or sustainability perspective. We will continue to incur all these costs, whether it is pressures from transition or some additional training, recruitment. These are going to be headcount for some few quarters, I can see it going away. We are constantly now focused on how to reprice rates. I think that's what the industry is doing across the board. Thank you. The next question is from the line of Abhishek Shindadkar from InCred Capital. Please go ahead. Hi. Thanks for the opportunity and congrats on a great execution. I just have one question on, you know, the increase of property, plant, and equipment, the $60 million payment in the cash flow. Is it a CapEx, or what, you know, unplanned item? Could that have any bearing on the growth of products business in this quarter? Thank you for taking the question. Yeah. Thanks, Abhishek. This is the normal run rate we have, Abhishek, across most quarters. It is of the region of $60 million-$65 million. Typically, most of that tends to be you know IT equipment, either laptops, servers, and those kind of things. Sometimes it has some component of facilities, but that has not been a large component in the last few quarters. It is a typical normal CapEx. It does not include any intellectual property purchase or you know acquisition or anything like that. Thank you. The next question is from the line of Susan Donofrio from UBS. Please go ahead. Thanks for taking my question, and congrats on a very strong quarter. Most of my questions have actually been answered, so I'm just gonna ask one. CVK, I think we've seen these ups and downs on the software side, and I think your earlier comment is that you said that we still could be looking at inter-quarter volatility in this business going forward. That makes it more difficult to kind of comment on what year-over-year growth could be for next year. Given what you know about this business right now, how would you reassess strategy and plan for more stability in this business? How would you kind of go about establishing some modicum of stability or less volatility in the software business knowing what you know now? Yeah. Really a great question. I think the fundamental nature of this business, it has a lot of perpetual licenses. That's the model which is prevalent for these products and with these clients. I think changing them to some kind of subscription and term license will be one way to make the product business more predictable. That's a long journey. We've seen some very good success even in the last two years converting a lot of clients from perpetual to subscription-based revenue model. Especially when we are upgrading the products and we are containerizing them, selling them as a overall end-to-end service, they become more predictable and more annuity type of revenue. However, like in all other software product businesses, this business model transformation is a long journey, and we are going to give you some right metrics to track it. We will probably be able to give that to you in the next quarter, and you will be able to track how we are doing. There will be one component of revenue which will see a lot of stability and incremental growth, and that will be the subscription revenue. Once we break it up, I think you'll have better clarity. That's all I can share at this point with you. Thank you. The next question is a follow-up question from the line of Surendra Goyal from Citigroup. Please go ahead. Yeah. Hi. Hi, CVK. Just wanted to clarify something. Such strong services growth and fairly sharp margin compression sequentially. Just wanted to confirm that there was no pass-through component which helps growth but impacts margins or anything like that, which will kind of create an impact in the following quarter in terms of growth, et cetera. Nothing, nothing unusual. I mean, usually there is some material revenue that is there every quarter, but nothing unusual in this quarter. Thank you. Ladies and gentlemen, that would be our last question for today. I now hand the conference over to Mr. C. Vijayakumar, MD and CEO, for closing comments. Thank you, and over to you, sir. Thank you everyone for joining us today and for the confidence you've placed in HCL over the last, several years and quarters. I would like to also thank all our investors and customers with their investments. As we look into the horizon, digital technology will continue to play a very big role in improving human life while making the planet sustainable. HCL is well-positioned to innovate and partner with our global clients across industries who are making it all happen. I'll talk to you again during our Q4 FY 2022 earnings call. Thank you, and have a great weekend. Thank you very much, members of the management. Ladies and gentlemen, on behalf of HCL Technologies Ltd., this concludes our conference. Thank you all for joining us. You may now disconnect your lines.