Ladies and gentlemen, good day, and welcome to the HCL Technologies Limited Q2 FY24 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 touchtone phone. Please note that this conference is being recorded. I now hand the conference over to Mr. Sanjay Mendiratta, Head, Investor Relations. Thank you, and over to you, sir. Thank you, Yash. Good morning, and good evening, everyone. A very warm welcome to HCLTech's Quarter Two Fiscal 2024 earnings call. We have with us Mr. C. Vijayakumar, CEO and Managing Director, HCLTech, Mr. Prateek Aggarwal, Chief Financial Officer, along with the broader 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 that could cause actual results to differ materially from those in such forward-looking statements. All forward-looking statements made herein are based on information presently 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 formal investor release document and all the factors that can cause the difference. Over to you, CVK, and thank you. Yeah. Thank you, Sanjay. Good evening, everyone. Thank you for joining us today for our second quarter earnings announcement. Let me start with the business performance. This was a strong quarter across all dimensions. We executed very well. It's reflected in our revenue growth, significantly improved margins despite the challenges in the industry. We also recorded our highest bookings ever, which sets us up well for the growth in the second half of the year. During the quarter, our revenue grew 1% quarter-on-quarter and grew 3.4% on a Y-on-Y basis in constant currency. Our services revenue grew 1.6% QOQ in constant currency. Both our services segments, Engineering and R&D Services and IT and Business Services, grew 5% and 0.9% QOQ this quarter, respectively, in constant currency. Our ERS business grew strong on a QOQ basis, even after considering the ASAP acquisition that got integrated, for a month during this quarter. I want to take a minute to talk a little bit about our ASAP acquisition. Last quarter, we could not share details about this acquisition as it got signed right after the meeting. Our engineering services business historically has been very strong across many verticals, but not to the desired levels in the auto engineering, where there is a lot of growth spend. ASAP should be able to address that demand with 1,600 employees and serving top automotive OEMs and Tier One suppliers in Germany. ASAP works in areas such as autonomous driving, e-mobility, and connectivity. Our plan is to take these capabilities to other geographies and drive synergy. HCL's software revenues grew 3.6% year-over-year in constant currency, and the ARR, annual recurring revenue, has grown at 3.9% year-over-year, which is a good indicator for the future. Our operating margins recorded a 154 basis points improvement over the last quarter, led by a number of initiatives. We drove a lot of efficiency in our managed services operations, driven by our automation and AIOps capability. A lot of freshers who we have hired in the past 18 months, they, they got trained, and they finally got deployed in an economic manner during the last quarter. Our contractor subcontracting cost also optimized, got optimized during the quarter, resulting in our EBIT percentage reaching 18.5%. In terms of verticals, we had very strong growth sequentially in retail CPG as well as telecom and media. Our financial services business had a healthy growth along with life sciences and healthcare both sequentially and on a year-on-year perspective. Technology vertical continues to be weak though we are hopeful of growth coming back here in the coming quarters. Another good accomplishment last quarter was in terms of client count. We added three accounts in the $100 million category and seven accounts in the $50 million category on a year-on-year basis. What is also very encouraging is our addition of 46 clients in the $5 million category and 81 clients in the $1 million category. Amidst the current uncertainty in the industry, adding 12 and 24 clients in the $5 and $1 million category is also a very good indicator of the broad-based relevance of our proposition and really expanding our market share. Bookings, as you would remember, our bookings for previous quarters have been in the range of $2 billion. This quarter, our bookings hit a record high of $4 billion, $3.96 billion, to be precise. During the quarter, we signed a mega deal with Verizon. That is unlike all other deals signed in the industry, which are very internal IT and internal centric. The partnership with Verizon Business is a strategic business partnership, where we become the primary service provider for deploying all their managed services globally for their enterprise customers. While Verizon Business will lead sales, solutioning, and client acquisition, we will lead post-sales implementation and ongoing support, where clients will benefit from our managed network services offerings. We also see huge opportunities for us to reach out to some of the Verizon's global clients for the first time and help them experience the rest of HCLTech's offerings. I wanted to call out a few other wins we find during this quarter. A US financial services firm partnered with us to expand its scope for data services. HCLTech will lead cloud migration, platform modernization, data management, and data governance for their insurance division. We expanded our partnership with a Fortune 50 communication services provider to transform its billing operations, superior activation to billing experience to its customers. This would be done by leveraging advanced digital technologies, including GenAI. A Europe-based global leader in smart, safe and sustainable building solutions, selected HCLTech as a transformation partner to transform the client's end-to-end order-to-cash process using Oracle Fusion Cloud and Salesforce. The new platform will enable operations as a single, unified business globally. A US-based healthcare technology company selected us to set up an advanced product development and testing center by leveraging our med tech product development and digital engineering capabilities. I also want to mention a few opportunities, that we find this quarter in emerging areas like GenAI and sustainability. One of the largest global technology companies has selected HCLTech as a preferred partner for their product developer support lifecycle optimization by using AI and machine learning. We will help the client deploy next gen AI technology across various product cycles to result in faster triage and improved product quality and enhanced developer ecosystem satisfaction. A Europe-based financial services firm selected us to leverage GenAI to strengthen its global compliance framework. We will deploy large language models along with machine learning technology for proactive surveillance and risk detection. A global manufacturing company has partnered with us to accelerate its sustainability agenda. HCLTech will leverage its comprehensive suite of sustainability solutions in assisting the client build a robust, sustainable strategy, regulatory, and compliance framework. These wins gives us comfort and conviction that we have the relevant offerings to address future tech spend of clients, and I'm sure, these would set us for many more and larger deals in these emerging areas. In terms of pipeline, I'm happy to report that our pipeline continues to remain very healthy, while it is a little lower than earlier, as a mega deal is now converted into a booking. What is more important is that we are working with clients on hundreds of opportunities in emerging areas like GenAI and sustainability, which is very critical for our future growth and continued relevance in the market. Some of them have already converted to wins, as I mentioned earlier, and are in the implementation phase. In terms of people, we continue to adjust our people strength by one person during this quarter. Primarily, a lot of attrition has been backfilled with freshers who were already trained, and also some of the new work got done with people whom we had internally. Our investments over the last few years on freshers has really started showing results, and that's visible in this quarter's profitability numbers. Our attrition continues to come down. LTM attrition stands at 14.2%, down almost 10% on a year-on-year basis. On GenAI, I would like to give you a quick update on our internal initiatives, where we have a two-pronged strategy. One, client-facing, where we are working on generating early-stage opportunities, as we'll train our delivery organization to leverage GenAI for code development, deployment, testing, and managed services. Our software offerings continue to embed AI into their product offerings. I believe it's still early days as clients are still evaluating them as POCs, while ensuring their data strategy is right, as well as establishing the guardrails to ensure data governance and compliance requirements. The second aspect is we are leveraging internally GenAI across all our corporate functions, primarily to improve our employee experience and productivity. Various programs are in pilot phase across our people function, finance, risk and compliance, and sales and marketing functions. With respect to ESG, we had some very good accolades this quarter. We remain very committed to our ESG goals, as called out in our medium-term strategic objectives. I'm happy to report that EcoVadis has rated HCLTech Gold and placed us in the 94th percentile for our advanced sustainability performance. As you may know, EcoVadis is a well-recognized sustainability assessment and benchmarking platform used by many of our clients to assess our sustainability practices. During this quarter, we also launched the HCLTech Grant in the Americas, and have committed $5 million over the next five years towards this program, which is focused on climate action and funding NGOs, which are having disruptive ideas with respect to the climate challenge the world is facing. Looking ahead, based on the bookings and all the deals that we have signed, we expect very healthy growth in Q3 and Q4. This growth in Q3 and Q4 would be normally an extremely good growth, even in normal circumstances. But even in today's challenged macro environment, we expect to deliver very strong growth in Q3 and Q4. Now, for the entire year, when you combine it with a weak Q1 and a reasonably good Q2, it adds up to 4.5%-5.5% growth organically for services in FY 2024. While we have won some large deals and have been successful on gaining share on the cost optimization-led deals, the market is still weak on the discretionary spend. At the start of the year, we had expected it to come back at least partially by now, but given the macros, it has not yet come back. When I include ASAP's inorganic contribution and HCL Software growth, we would end up with 5%-6% growth at a company level in FY 2024. On the operating margins, we are confident that we would be able to come within our stated guidance of 18%-19% for the year. With that, I will hand it over to Prateek for some more details. Thank you, CVK. So before I get into the numbers, there's an announcement I need to make. First of all, is the change in the IR head, Investor Relations head. As some of you already know, most of you probably, Nitin Mohta has joined us a couple of months back, and will be taking over as the new IR head. While we continue to have Sanjay with us until 31 January 2024, then he will be superannuating. We thank him for his 15+ years of dedicated service to HCLTech, and wish him all the very best for his future endeavors. And at the same time, I welcome Nitin, who I'm sure a lot of you would know from before, from his days in Goldman Sachs, Macquarie, and LTIM. And he's just joined us recently in the last few weeks. And wish you all the very best, Nitin, as you assume this important position. And thanks, Sanjay, again. Getting into the numbers then. HCLTech revenue, $3,225 million, $3.225 billion, up 1% sequentially, 3.4% in constant currency terms. That includes 50 basis points from ASAP contribution of one month during the quarter. As you probably saw, we announced the acquisition closed on 31st August, so it's one month of revenue therein. HCL Software was up 3.6% year-on-year in constant currency terms, and ARR, annual recurring revenue, continues to be at $1 billion plus, and in this quarter, grew by 3.9% year-on-year in constant currency terms again. Services revenues stood at $2,922 million, up 1.6% Q-on-, and 3.4% year-on-year in constant currency terms. The ASAP acquisition on the services revenue base had an impact of close to 60 basis points. ITBS came in at $2,406 million, up 0.9% sequentially, 0.9% sequentially, and 4.6% year-on-year in constant currency. ERS, after a couple of tough quarters, showed a good 1.6% constant currency growth organically during the quarter, and including ASAP, grew at 5% in constant currency sequentially. The EBIT came in at 18.5%, which is an improvement of 154 basis points Q-on-Q, and 50 basis points on a year-on-year basis. In many ways, that is one of the highlights of the quarter and sets us... well on our way to meet the 18%-19% EBIT guidance that we had given and continue to maintain. The services margin on a sequential basis, Q-on-Q, actually increased by 212 basis points, and also the growth on a year-on-year was also very healthy. The net income, the profit after tax for the quarter, came in at $463.5 million, which is up, fourteen point- which is a 6.4% increase over the previous year in dollar terms. In rupee terms, it is up 9.8%, and that was 14.4% of the revenue numbers for the quarter. I would like to spend a minute on ROIC, return on invested capital. As you know, this is one of the big metrics we are focused on, especially in the last couple of years. The last twelve months, ROIC is now at 32.2% for the company, which is up 3.5% year-on-year, 350 basis points. And services ROIC is now at 39.4% and software at 16.2%. We have also been calling out incremental ROIC over two-year and three-year time frames in some of our interactions. Over the last few quarters, we have actually reduced our capital deployed significantly, so much that the incremental capital deployed over the two-year or three-year period is now negative at a company and at a software level, thereby showing very favorable incremental ROIC. I mean, mathematically, it will be negative, but it's actually increased NOPAT at a lower capital deployed, so very, very favorable. As far as services business is concerned, it has kept on growing, and the incremental ROIC in services over the two-year and three-year period is now 73% and 85%, respectively. To give you some color on the movement of the EBIT from last quarter to current quarter, the margin walk, as we call it, 150 basis points has been the improvement sequentially. Services margin up 212 basis points, like I said, most of it coming from productivity and utilization, about 100 basis points. Largely from a reduction in third-party contractors, which you might see has reduced by 70 basis points sequentially, and close to 200 basis points over the two years, sorry, year ago period. And other discretionary cost optimization, largely travel, recruitment, legal costs, and so on and so forth, gave us another 50 basis points on a services level itself, and overhead reduction gave us additional 70 basis points. The acquisition, ASAP, as the purchase price actual allocation goes and intangible amortization goes, actually gave us a hit of 10 basis points, which was offset by a minor exchange benefit of 10 basis points. So that is the margin walk for the guidance for the quarter. The guidance, CVK has already talked about it, so at a company level, it's 5%-6% for the full year, and 4%-5% being the organic growth at a company level. At a services level, it's 4.5%-5.5%, and EBIT 18%-19%. Cash generation is another highlight I would like to focus your attention on. Cash generation continues to be very robust. Last twelve months, operating cash flow is at $2.8 billion, $2,820 million to be precise, and free cash flow is at $2,662 million, $2.7 billion almost, which is 151% of net income and 142% of net income, respectively. Very, very proud to have delivered that kind of cash flow to the company's shareholders. Balance sheet continues to remain very strong. Gross cash is now $2.85 billion and net cash of $2.56 billion. The cash generation improved substantially this quarter as we reduced the DSO by 5 days, including unbilled. DSO now stands at 83 days, which is an improvement of 5 days Q-on-Q and 6 days year-on-year. From a shareholder's perspective, the EPS last twelve months, diluted EPS is almost at INR 57, INR 56.95 to be precise, which is an increase of 11.8% year-on-year and 2.3% on a Q-on-Q basis. Given the improvement in EBIT and net margins and the improved cash flow generation, the board has declared dividend at an enhanced rate of rupees twelve from the quarter, up from the typical INR 10 per quarter that we have followed for the last couple of years now. So INR 12 per quarter. The record date for the dividend is 20th October, next Friday, and the payment date for the same is 31st October. With this increased dividend, the last 12 months payout ratio will continue to be at 88%, which has been the run rate in the last couple of years, so we maintain the same run rate. That's all I have for now, and happy to go into the Q&A. Operator, back to you. Thank you very much. Thank you. We will now begin the question and answer session. Anyone who wishes to ask a question may press star and one on their touchtone telephone. If you wish to remove yourself from the question queue, you may enter star and two. Participants are requested to only use handsets while asking a question. Participants are requested to restrict to one question at a time. You may join back the queue for follow-up questions. Ladies and gentlemen, we will wait for a moment while the question queue assembles. We have a first question from the line of Vibhor Singhal from Nuvama Equities. Please go ahead. Yeah. Hi. Good evening, sir. Thanks for taking my question. So my question was mainly on the overall IT services segment, excluding the ER&D. So on the ER&D segment, of course, we have seen a good ramp-up in this quarter, including the ASAP acquisition as well. And of course, we were bottoming out, we were recovering from the bottoming out in the last two quarters. In the IT services segment, just wanted to understand, apart from, of course, the strong deals that we have seen, what is the overall status on the discretionary spend in the existing deals? Are we seeing continuous rundowns, as some of our peers are kind of basically suggesting that they are, the discretionary part of the existing deals is being hold- is being put on hold. Is that a continuing traction? Are we seeing an acceleration or deceleration in that process because we've seen last few months or last couple of quarters? And what is the outlook on that? When do you think this could maybe start tapering off in the year or maybe in the coming future? Vibhor, thank you for that question. I think it's none of those, you know, all those things that you kind of mentioned. And this is pretty visible from our notes to the accounts. Our assets revenue has actually gone down by $25 million, which on the services base is good 75- at a company base is 75 basis points. So, yes, it is 0.9%, reported, but if you sort of add that back, then the number would be very different. And more importantly, I think, you know, the guidance that we've given Q1, Q2 is what it is, but in the CQGR terms for the balance half of the year, it actually translates to... I mean, there are three numbers, so I'll just sort of stick to the services number. It does translate to about 3%-4% between organic, inorganic. So I mean, even if you take just the organic, I think the number is 2.6% to close to 4%. So we are confident of delivering that. That is the revised guidance we have given. So, and like CVK covered in his opening remarks, you know, 3%-4% is a very good growth in at any point in time, especially in these kind of macroeconomic scenarios. Got it, sir. Got it. So I think you're absolutely right, that I think the, the CQGR that we are targeting for the second half is definitely very strong. But my question was more to understand the overall demand environment that we are kind of facing. I mean, of course, our deal flow has been quite strong. But, overall, are we seeing the client conversations around, maybe, more, holding back on cutting discretionary spend, as CVK mentioned in the opening remarks, or the situation is stabilizing? I mean, just literally trying to understand the direction in which the discretionary spend, is moving at this point in time. Yeah. So, Vibhor, I think, the discretionary spend continues to be there, and, obviously, a good part of the booking that we've done, contains some of the discretionary spend. But I think, the spend is a little lower than what we would normally see, and that reflects in, in some kind of, reprioritization or optimization. And that's why- that's what you see. And, we still think the discretionary spend is not anywhere closer to what it used to be. So- ... That, that's what I would say on the discretionary spend at this time. But our pipeline continues to remain very strong. Obviously, it is not at the highest because we've had a tremendous booking last quarter, but it's probably maybe 10% below our peak. So which is also a very strong position that we are in. And we have a number of deals in the final stages. We continue to, we'll continue to deliver strong bookings in the rest of this year, which will all feed into the next year. Important point. Just one more element I want to keep in mind is, when we talk about booking, we do not include rate card deals where the ramp ups are relatively slow. We only consider them as booking after the ramp up has happened. So, all the bookings that we have are firm TCVs with a committed transition timeline and execution timeline, and net new. They're all net new, because renewals are excluded from these numbers. Of course. Thank you for the detailed explanation. Just one small, Mr. Singhal, I request you to join back the queue, sir. Okay, fine. Thanks a lot. Thank you. Thanks, Govardhan. Thank you. We have our next question from the line of Sudheer Guntupalli from Kotak Mahindra AMC. Please go ahead. Yeah, thanks for the opportunity. CVK, congrats on a good set of deal wins. Both for HCL and the industry, we are seeing record high deal wins, but for the reasons well known, it is not immediately translating into revenue growth strength. So question here is, given the strong order backlog, pipeline, and the fact that some of these mega deals are ramping up towards the latter half of FY 2024, is it fair to assume FY 2025 could be potentially a COVID period kind of high growth year, if the macro stays stable henceforth? Just looking for your directional qualitative assessment. I appreciate that you don't give FY 2025 guidance yet. Yeah, Sudheer, the overall environment is quite volatile. So if you see, I mean, every 2-3 months, the overall commentary is also changing, so I would hesitate to take a view on FY 25. But of course, given where we are and the growth that we anticipate in Q2, Q3 and Q4, we will have a strong exit. There is no doubt about that. But of course, how will FY 25 pan out will depend on, of course, the deal wins in these two quarters. But again, the client spending, which is largely the discretionary spend, of which I think it's very early to even get a sense. And I doubt even if we will get a sense of what the discretionary spending client budgets will look like, even in the Q1 of, Q1 means calendar Q1 next year. I think we want to take it one step at a time, and it's very difficult to do long-range planning in these circumstances. Got it. Got it. And thank- Thank you. We have our next question from the line of Gaurav Rateria from Morgan Stanley. Please go ahead. Hi, thanks for taking my question. So the first question is, just to understand if things really worsened on flow business towards end of the quarter, which is leading to the guidance cut? And, like, what really have you factored in, in the flow business, in your second half? Is that one of the reasons for driving a strong CQGR that you mentioned about, or is it largely driven from, purely from your order book converting into revenues? Yeah, I think I don't think there was anything which happened in the end of the quarter which made us change the guidance. I think, of course, Q1 was weak, which makes the Q2, subsequent part of the year, challenging. I mean, we expected a little more growth in Q2. We would have ideally loved a 2%+ services growth, which obviously was impacted due to some more strain on the discretionary side. Now, coming to the second half, I think there are three components which really make up the second half of this year. First is, of course, the large deal ramp up, which we expect to go live on first of November, which is absolutely on track. I think this will contribute a significant growth in Q3 as well as Q4. The second aspect is, Q3 is a strong quarter for our software business. You will see a spike in revenues, and that definitely adds. And the third component is the ongoing business, which is a combination of deals that are under transition, which will go into steady state and some amount of discretionary spend. And I think one more aspect which gives us confidence is, I mean, even if you see the Q2, I think our couple of deals really propped in revenue only in September, so that will also give us some sequel in Q3. Thank you. We move to our next question from the line of Surendra Goyal from Citigroup. Please go ahead. Yeah, thanks. Thanks, good evening, everyone. So CVK, just one question on the guidance again. You delivered a decent 2Q, and are guiding to a strong 3Q and 4Q, and yet the upper end of the guidance is revised down by 300 basis points. So just wanted to understand what changed between July, when you had retained the guidance, and today, when you have lowered the guidance at the upper end by 300 basis points? And secondly, what gives you the confidence that this guidance- ... is going to hold? Thanks. Yeah. Yeah, I think, a weak Q1 primarily has contributed to this, and we did have a little bit more optimism on some of the things that were expected to happen in Q2. So a weak Q1 and, even though, I mean, maybe our Q2 performance met market expectations, probably, but it was a little below our own expectations. So just adding up mathematically, the ask rate becomes quite high for Q3 and Q4. And, we did a realistic estimate of all that is, possible, and, and then, of course, as the first half is over, second half, you will obviously narrow down the range. So that narrowing down the range, probably upper end has become, lower by 3%. The facts are what it is, Q1 and Q2, but our Q3, Q4 will be very strong. Our services organic growth, to achieve the guidance, will be between 2.6-3.8, and a good, good part of it will be contributed by the large deal ramp-up. Of course, including ASAP, it will be between 3.3-4.5. I think these numbers, we feel reasonably confident, they are safe numbers for us to go after. Thank you. We have our next question from the line of Ravi Menon from Macquarie. Please go ahead. Hi, thank you. On the software side, you know, we've seen year-on-year CC growth of 3.6%, but still the margins are down slightly. I wanted to understand, is this because some sales investments or is there anything else? Because on the R&D front, I don't see much of an increase in spending. Yeah, it's... I mean, on a – I'm not sure whether you're looking at year-on-year or sequentially. Sequentially, it is the weakest quarter in the year for software, historically and also in this quarter. So sequentially, it's but natural. As far as the year-on-year is concerned, that also was a tad weaker, but that's largely on the back of initiatives that we are driving, which should hopefully continue to give us the 3.6% kind of growth and even beyond. So, Prateek. can we say that the margins for software could expand, you know, like, with continued growth, that we are at a steady state of expense? I would, I mean, our guidance is obviously at a company level, EBIT guidance. Don't necessarily want to lock myself up with the segment-wise margin guidance, but it would be in the similar range as what we delivered last year, is all I'll say and leave it there. I think, Ravi, one significant comforting factor this quarter is, all our assumptions on how we will deploy pressures, how will we optimize on our managed services engagements, all of that actually we had started sometime in March itself, all of them delivered results. So I think our long term, as we have been talking about 19%-20%, I think it feels much more realistic, based on the accomplishments of the quarter. So I think that, that's what you should really look for, while this year is 18%-19%, but we do hope to continue all our initiatives with a significant focus to improving our margins. That's one of the strategic objectives that we continue to drive, 19%-20%. Thank you. We have our next question from the line of Sandeep Shah from Equirus Securities. Please go ahead. Yeah, thanks. Thanks for the opportunity. The first question is, generally in Q3, with seasonal strength in the Production Platform business, the margin also takes a big lift. This time we will have a Verizon cost deal ramp up, correlated to same. So do you expect, still, despite that, the margin will have an upward bias on a Q-on-Q in 3Q? And Prateek, just, based on my estimate, it looks like there is a implied guidance downgrade in the Production Platform, from earlier upper end of 3.6 to now 1.5%. Is it true? If you can give us what is the implied Production Platform growth guidance for this year. So, Sandeep, let me take your second question first. We are not really giving you a P&P guidance. We are giving the company guidance and, services guidance. But if you do back calculation, it will be around the same percentage increase which they showed last year. I'll leave it there. So it's like the, the previous question was on margins. Your question is on software growth. I would expect the same kind of growth, the same kind of margins, is my simple answer. I don't want to get more specific than that. Coming back to your second question, yes, simple answer to the, to your first question, rather, is yes. And, you know, I don't know why this question keeps arising about Verizon and all, but. I mean, it's a huge deal. It's giving us good revenue, and we are going to deliver the 18%-19% with that. So I don't think there's any reason to sort of look a gift horse in the mouth. Thank you. We'll move to our next question from the line of Nitin Padmanabhan from Investec. Please go ahead. Yeah, hi, good evening. I just wanted some color on the, cost. So I think this quarter, the fall in a lot of cost items seem very sharp, almost like, there's an intentional cut on these costs. So travel, for instance, is down almost 30% sequentially and 13% year-on-year. And similarly, we have seen that in training and a lot of other things. I was just wondering, is there... what, what is the context to this? Is there anything specific, or was it macro, or was it, just about, or something has really changed here in terms of the way we are doing things? So, Nitin, let me simplify it for you. I mean, even our last quarter, I mean, last year, Q1 was 17, and so was it this year. The Q2 last year was 18, and it is 18.5% this year. You can ascribe a large part of that 50 basis points is to the deferral of increments that we did last quarter. That's one way to look at it. So that sort of puts it in context, if you like. Coming to your specific question, yes, of course, there has been very deliberate action on a number of fronts, and it is visible in the detailed cost page that we have given. The biggest cut is obviously in third-party subcontractors, which is part of the overall outsourced cost budget, that is 70 basis points. Travel had gone up in the June quarter to some extent and has been cut down to reasonable levels. And I would like to maintain it near these levels, maybe not exactly these levels. So that's given us almost another 50 basis points. Actually, training that you mentioned, we have not cut training. It's just that we are hiring less people, so it's the recruitment part which has been reduced because, you know, we have hired so many freshers, like Ram also explained at the press conference, and they are all ready and eager to get into projects and deliver. So, we have just not backfilled all of the attrition that continues to happen. Some of it has been sort of not backfilled because we have these freshers coming in. So those are the kind of reasons. Obviously, there is a 18-19 guidance that we had given, and we want to be well within that range. Just to kind of put it in perspective, our training costs have only increased this quarter. It's only because the recruitment costs have reduced. And that also is kind of some of the recruitment that you do, there is a lagging impact, and that's why you see the impact now. In fact, mostly the recruitment reduced even last quarter, so it's related to people joining and things like that. And also, our cost of hardware and software, that also is reduced per person. That also helps. Thank you. We have our next question from the line of Ashwin Mehta from Ambit Capital. Please go ahead. Yeah, hi. Thanks for the opportunity. Just one question. In terms of wage hikes, what's the timing for your wage hikes, and what is the impact that you see in terms of margins coming in from wage hikes? I will request Ram to respond to that. So the salary increases, which usually happens in the July month, will now happen in the October month. That's the one-quarter deferral that we spoke about last time. So it'll be effective October. Prateek, you want to talk about what's the impact? Yeah. So it will be around 60-65 basis points or thereabout, and there will be a small impact in the March quarter as well, which will be another maybe 25-30 basis points. Thank you. We have our next question from the line of Chirag Kachhadiya from Ashika Institutional Equities. Please go ahead. Hello. I just want to know that, what gives us confidence that the H2 will be better compared to H1, and your outlook and, expectation with FY 2024, FY 2025, in terms of growth, revival or recovery? Yeah. So no comments on FY 25. It's really a long-term, kind of, FY 25 view in the current environment. As I mentioned, the second half recovery is I explained it in a very granular fashion and for one of the earlier questions. But to kind of summarize it, there are three components. Of course, one is, the large deal going live in, first of, November. That will give us good growth in Q3, and on top of that, there will be good growth in Q4. The second aspect is the software seasonality. There will be a spike in revenue and software in Q3. And the third aspect is the continuing revenue, the full quarter impact of whatever has happened in September, and some amount of flow-through revenue from the new bookings that we have done. So these are the three elements which makes up the forecast for Q3 and Q4. Thank you. Ladies and gentlemen, that would be our last question for today. I now hand the conference back to Mr. C. Vijayakumar for closing comments. Thank you, and over to you, sir. Yeah, mm-hmm. In closing, I think we delivered a very good quarter on all dimensions. We continue to remain very confident of the pipeline and its conversion. We expect to deliver strong bookings in the rest of this year. Given all the good work that we have done, we've tremendously improved our margins. We remain very focused on improving our margins. Most importantly, for us, quality of revenue is a very, very important metric, which we've been maniacally focused on, because that is what is going to give us sustained growth in the long run. We remain very committed to the quality of revenue as well as capital efficiency. Our internal operational rigor has helped us improve our DSO significantly in the last quarter. And I think it's not a just a one-time impact, it's a result of significant amount of work that has happened in the past few months to improve our processes. So we are very committed to capital efficient growth, improving our return metrics, all of that. And, so, we expect to see strong growth in the second half, and we are committed to deliver 5%-6% growth, for the rest of the year, for the full, full, financial year. So with that, thank you for all your support, and, wishing you a happy festive season, and enjoy as much cricket as you can, and have a good evening. Thank you. And win the cup. Yeah. Thank you, sir. Thank you. On behalf of HCL Technologies Limited, that concludes the conference call. Thank you for joining us, and you may-