Ladies, and gentlemen, good day, and welcome to Infosys Limited Earnings Conference Call. As a reminder, all participant lines will be in the listen only mode. There will be an opportunity for you to ask questions after the presentation concludes. Should you need assistance during the conference call, please signal an operator by pressing star and then zero on your touchtone telephone. Please note that this conference is being recorded. I now hand the conference over to Mr. Sandeep Mahindroo. Thank you, and over to you, sir. Thanks, Inba. Hello, everyone, and welcome to Infosys Earnings Call to discuss Q1 2023 Financial Results with Sandeep from the IR team in Bangalore. Joining us today on this call is CEO and MD, Mr. Salil Parekh, CFO, Mr. Nilanjan Roy, and other members of the senior management team. We'll commence the call with some remarks on the performance of the company by Salil and Nilanjan. Subsequent to which we'll open up the call for questions. Please note that anything which we say that refer to our outlook for the future is a forward-looking statement that must be read in conjunction with the rest of the company's answers. A full statement and explanation of these risks is available in our filings with the SEC, which can be found on www.sec.gov. I'd now like to pass on the call to Salil. Thanks, Sandeep. Good morning, and good evening to everyone on the call. Thank you all for taking the time to join us. We've had an excellent start to the financial year with 5.5% sequential growth and 21.4% year-on-year growth in constant currency terms. We continue to gain market share with our Cobalt cloud capabilities and our differentiated digital value proposition, driving a significant pipeline of opportunities for us. For example, a premier online retailer in the U.S. leveraged Infosys Cobalt to embark on a cloud-driven transformation journey to enhance the customer experience and improve their security posture. Another example is a European manufacturer who's reimagining their digital workplace and best-of-breed network security with IT infrastructure powered by Infosys Cobalt. There are examples like this all across the spectrum in different sectors that are driving Infosys Cobalt into the market. Clients continue to place an immense amount of trust and confidence in Infosys to help accelerate their digital transformation agenda, both on efficiency and the growth dimension of their business. The strong growth we have seen in the quarter lays a robust foundation for the year. Growth continues to remain broad-based across the segments, service lines and geographies. Each of our business segments grew in double digits, with several of them growing at 25% or higher. In terms of geography, the U.S. geography grew at 18.4%, and Europe grew at 33.2%. This indicates a healthy demand environment and is a reflection of how our industry-leading digital capabilities are relevant for our clients. Our digital revenues were 61% of the total and grew at 37.5% in the quarter in constant currency terms. Within digital, our cloud work continues to grow faster, with our Cobalt cloud capability seeing significant traction with our clients. Our overall pipeline remains strong. We do see pockets of weakness, for example, the area of mortgages in financial services. We keep a close watch on the evolving macro environment in terms of the changes to the pipeline. Within our pipeline, we also have focus in addition to the growth areas in digital and cloud, to the cost areas through automation and AI. Our operating margins were at 20%. We have completed the majority of our compensation review for this year. Nilanjan will also provide more details on the overall margin update. Some other highlights of our results are we signed 19 deals with a large deal value of $1.69 billion. This comprises of 50% net new work. Our onsite mix was at 24.3%. As we build capacity for the future, our utilization was at healthy levels of 84.7%. Our free cash flow was strong at $656 million. Our quarterly attrition declined. Historically, Q1 attrition increases at 3-4 points sequentially on a quarterly annualized basis. However, our attrition declined by 1 point on a sequential basis, reflecting the impact of various initiatives we have put in place. We had a net headcount increase of over 21,000 employees, attracting leading talent from the market. This is a reflection of our enhanced recruitment capabilities, solid brand, and deeper penetration into various talent markets. Our Cobalt cloud capability continues to be market leading. We have 360 technology and domain solutions. Five of our assets have over 50 clients each. We have 150 industry focused solutions, 20 Infosys Living Labs, 50 experimentation playgrounds, and 60,000 knowledge assets. Our One Infosys approach is serving us well to bring the best of Infosys and service to our clients' needs. Earlier this month, we announced the acquisition of BASE life science, a Denmark-based technology and consulting firm in the life science industry. BASE brings to Infosys domain expertise in medical, digital marketing, clinical and regulatory areas. With a strong growth in Q1 and our current outlook on demand opportunity and pipeline, we increase our revenue growth guidance, which was at 13%-15%, now to 14%-16% for the full year. We keep our margin guidance at 21%-23%. With the increased cost environment, we will be at the lower end of this margin guidance. Thank you. With that, let me hand it over to Nilanjan for his update. Thanks, Salil. Good morning, everyone, and thank you for joining this call on an early Monday morning. We had a strong start to fiscal 2023 with a robust year-on-year growth of 21.4% in constant currency. All our business segments and major geos recorded double-digit growth, with manufacturing, communications, on shore along with Europe region recording 25%+ growth. Sequentially, revenue growth was 5.5%, which was led by a healthy volume growth and some RTP benefits. Digital revenues now constitute 61% of total and grew by 37.5% in constant currency. Client metrics were strong, with increase in client counts across revenue buckets compared to the previous year. Number of $50 million clients increased by 10 to 69, creating the next potential centurions. Number of $100 million clients increased by four to 38, and the number of $200 million clients has grown by six in the last one year. This reflects our ability to deepen mining across our large clients. We had another quarter of strong employee additions of over 21,000 to cater to the growth opportunities ahead. The fresher addition was particularly strong, which resulted in drops in utilization to 84.7%. Onsite effort mix inched up to 24.3%. Voluntary LTM attrition increased marginally to 28.4%. Quarterly annualized attrition declined by another 1% from Q4 levels, despite Q1 usually seeing an uptick due to seasonality. As announced earlier, we have given competitive salary increases for majority of our employees from April. Given the supply tightness and high prevailing inflation, salary increases across all geos this year are higher than historical levels. The increases vary based on job levels and performance of employees, with top performers getting double-digit hikes. Salary hikes for the employees being done effective 1st of July. Q1 margins stood at 20%, a drop of 150 basis points versus previous quarter. The major components of the sequential margin movement were as below. Headwinds of 1.6% due to salary increases, 0.4% due to drop in utilization as we create capacity for future, 0.3% due to increases in subcon, third party and other costs. These were offset by tailwinds of 0.5% due to increase in RTP from higher working days, a reversal of a client's contractual provision in our FS segment, partially offset by discounts. 0.3% benefit from rupee depreciation benefits, partially offset by cross-currency headwinds. Q1 EPS grew by 4.4% in rupee terms on a year-on-year basis. Our balance sheet continues to be strong and debt-free. Consolidated cash and investments were $4.4 billion at the end of the quarter, after returning more than $850 million to the shareholders through dividends. This has led to an increase in ROE to 31%. Free cash flow for the quarter was $656 million, which is a conversion of 95% of net profits. Yield on cash balance remains stable at 5.3% in Q1. DSO declined by four days sequentially to 63. DSO including net unbilled was 82 days, an increase of one day versus Q4. Coming to segmental performance. We signed 19 large deals in Q1 with a TCV of $1.69 billion. This comprises of 60% net new. We had five large deals in retail and CPG, four in high-tech, three each in financial services and energy, utilities, resources and services, and two each in manufacturing and communications verticals. Region-wide, 15 were in Americas and two each in Europe and ROW. In financial services, clients are continuing to focus on digital customer experience, contact center transformation and virtual branches aimed at improving customer engagement. While the order pipeline remains strong across regions, we have seen some slowness in mortgage, industry and lending business due to increased interest rates. We remain watchful of impact of emerging global developments on budgets of clients. In the retail segment, the pace of digital transformation, large-scale cost takeouts and improving business resilience continues to be on the rise across various sub-segments. Our focus on proactive engagements has helped us in creating a robust pipeline. Clients are monitoring the emerging macro situation and the impact of that on their business. In communication segments, clients are focused on rapid digitization and protecting the assets from cyber threats. We see enormous potential to partner with them both on the digital transformation agenda as well as on the cost takeout front. Lead pipeline in energies, utilities, resources and services segments comprise of opportunities around cost takeouts, vendor consolidation, digital transformation, cloud-led transformation and asset monetization across industry subverticals. Manufacturing segment is seeing broad-based growth across geographies and industry subverticals. The sector is seeing traction across energy, IoT, supply chain, Cloud ERP and accelerated cloud adoption. In quarter one, we have been ranked as leader in nine regions in the areas of Oracle Cloud, SAP S/4HANA, public cloud, Industry 4.0, employee experience and automation services. In this supply constrained environment, we continue to invest in our growth momentum, which requires us to hire premium skilled talent while simultaneously investing in existing employees through competitive compensation increases across geos. Additionally, we expect normalization of costs like travel and other overheads. We will continue to focus on various cost optimization measures, including rationalization of subcons, flattening of the pyramid, increasing automation, reducing on-site mix and increasing pricing. While we retain our operating margin guidance of 21%-23%, we expect to be at the bottom end of the range. Revenue guidance for the year has been revised to 14%-16% from 13%-15% earlier. With that, we can open the call for questions. Thank you very much. Ladies, and gentlemen, we will now begin the question- and- answer session. Anyone who wishes to ask a question may enter star and one on their touchtone telephone. If you wish to remove yourself from the question queue, you may press star and two. Participants are requested to use handsets while asking a question. Ladies, and gentlemen, we will wait for a moment while the question queue assembles. Our first question is from the line of Surendra Goyal from Citigroup. Please go ahead. Yeah. Hi. Thanks for that. Good morning. Just a couple of questions from my side. Firstly, a clarification. Nilanjan, I believe you said that the contractual provision was largely offset by discounts. Could you please clarify a bit? Did you mean discounts to the same client or discounts in general? Curious because on one hand we are talking of a strong demand environment and potential price hikes, and at the same time we are also talking of discounts. Surendra, the comment was that it's not the entire 0.5% increase in RTP. The combination of three to four elements, the higher working days, the client contractual provision reversal benefits partially offset by discounts. It's not a direct linkage of discounts and client contractual provisions. It's not to the same client. This is generic discounts and these automatically keep on coming. But we have like I said, we have come down less in as we've started negotiating with our clients in terms of pricing. But that's a net impact of all these. Okay, sure. Just another question on margins down 360 basis points year-over-year. Operating profit growth YoY is worse than historical trends despite all the strong demand and the growth we are talking about. If you just think about this 360 basis points decline, how much of that is really investment which you think can be recouped as we go forward from here? Yeah. Like we said, when we were at 350, we knew we were having some benefits in a way of the back end of COVID. Our utilization was very high. We were really at 88%, which we have never operated before. You know, the benefits of travel, et cetera, now we are seeing that more and more that has been coming back. That's something which we were aware of, well aware of, in last year. As we see the demand volume ahead, I think we are very clear that in terms of our ability to support the demand, we firstly have to hire, we have to pay competitively. We actually did two wage hikes in calendar year 2021. Now this year we've already rolled out in March year. Within one and a half years, we've done three substantial CRs. Actually September last year also we did a skill base. We've been continuously investing behind that. We know that to capture this demand, we have to pay for premium skills. We have to go behind volume, in some cases, subcon cost. For us, you know, from an industry-leading 6.5% position, we are closer to 11%. But again, these are some things we know over a period of time. We have a lot of optimization levers, right? We don't want to leave a five-year demand on the table because of short-term cost pressures. These we can optimize, you know, over this year and over the future as well. In that sense, we are quite confident, and that's why we have talked about we will be in the 21%-23% at the bottom end of the range. Of course, if we are at 20% today, we will see that improvement as the year progresses. Sure. Thanks for that. I'll get back in the queue. Thank you. Our next question is from the line of Moshe Katri from Wedbush Securities. Please go ahead. Okay, thanks. Spectacular numbers, especially on the revenues side of the business. Just a follow-up to the last kind of topic or question about margins. We're getting a lot of pushback on that. From your perspective, you know, looking at the levers that you kind of highlighted, what do you think is the biggest potential lever here for you to be able to kind of catch up to the margin range that you mentioned? And then I have a follow-up after that. Yeah, Moshe, hi. I think firstly, if you see, you know, our margin profile, how it has changed, right? One of the costs has been this utilization and in fact hiring 21,000 net adds during the quarter, which is well above our volume. And that is to create the buffer so that when we put in freshers, we are able to train them and then over a period of time able to put them into production, right? You can't just hire freshers and expect them to start, you know, contributing from day one. And we are very vigilant about that. They go through our mandatory training and Lex, and then we put that. That's one big part of, you know, where we think we can start improving. As the hiring has caught up, automatically you'll see the stabilization of subcon costs, right? As a percentage of revenue, you are seeing this increase every quarter. Now you're seeing a sort of flattening out. Over the future, as we've got our recruitment acts together and been able to hire freshers, we should see benefits coming out of that. Pyramid benefits will continue to happen for us. While we have seen some adverse impact of the onsite movement, this is largely as travel overseas has picked up. We think this is more of a, you know, aberration in terms of uptick because the inherent story of we're taking costs out and having a more offshore mix in the entire cost optimization that should come into benefit, especially in this environment, where cost takeout is becoming a big theme across our clients. We know we can have multiple, you know, areas. Pricing is another thing we've been talking about. We have seen less impact of pricing in terms of discounts, et cetera. We are going back to clients in terms of COLAs, in terms of when our renewals happen. Now, again, these are much more, you know, longer-term, you know, impact decisions. I think at least the conversations have started in right earnest across, you know, all the segments. You can hear similar commentary across. I think these are the areas we continue to, you know, focus on. That's something we've done, you know, over the years. You've seen that we continue to be very, you know, forceful in terms of our cost, you know, efficiency exercises. Okay. Just as a follow-up, just remind us, what's your sensitivity for margins versus utilization rates? I.e., 100 basis points expansion in utilization rates, what does it mean to margins in terms of sensitivity? Thank you. Yeah. I think it depends on by which level we see utilization. It's quite complicated. It's, you know, you have a different utilization in onsite, different in offshore, and then the impact of pressures in the pyramid in that utilization. It's a bit complicated how the mix changes. I just can't give you off the number of, you know, what 1% will lead to. To give you a large impact, we lost in this quarter, I think 40 basis points because of utilization and margins. All right. Thanks for the color. Thank you. Our next question is from the line of Kumar Rakesh from BNP Paribas. Please go ahead. Hi. Good morning. Thank you for taking my question. My first question was continuation on the margin side. At the end of the fourth quarter, and not just Infosys, but across the industry, what the management commentary had indicated compared to that, the margin performance appears to be a sharper decline. Salil, what do you think could be the reason behind that? Is it driven by higher than expected demand and hence higher use of subcontracting than what you were planning earlier? Or is it more supply side driven that the pressure was higher than what we had planned for through the quarter? Yeah. Are you talking about us in particular or the industry? Anything, whatever you could give us color on, because the trend has been very similar across the years and. I think we don't operate in a vacuum. Yeah, we don't operate in a vacuum, and this industry doesn't operate in a vacuum. The attrition trends are pretty much very similar across industries. The good news, like we said, is that attrition is coming down. Our quarter attrition figure is actually below our LTM figures. As Salil said, we're already 1% down. On a sequential basis, we were 5% down in the previous quarter, and we were flat. I think this is more the reported LTM across is more of a catch-up effect. In that sense, you will see start stabilization. The pressures will start coming in and getting permeated. That benefit in a way should start seeping into the cost structure, right? Because end of the day, if you're putting pressures, you have less attrition. The stretch heights which you have to give for lateral hires should come down. The joining bonuses, in fact, that impact should come down. These are the things which will play, you know, in our favor. Like I said, you know, you're seeing these numbers of declines pretty much across industries. We have, I think, a very, very sharp cost optimization program in a way which will go and offset these headwinds. Got it. It appears the supply side pressure was higher than what we are expecting. My second question was on the- I think there's no question about that, you know, in terms of if you're, you know, see our attrition and add our net add, the gross hiring has been very high. Of course, in that tail, in terms of our stretches and all we have to offer. It is a overall industry issue led from the demand side. Sure. Thanks. My second question was on BASE acquisition. We already have a pretty strong life sciences practice with more than $1 billion scale. What exactly we are looking and targeting to get help from this acquisition? On BASE, you know, there are multiple things. This is a business which is very high end in the life sciences area. When we launched our strategy a few weeks ago, just at the start of the quarter, we had shared also a new focus or expanded focus on Europe. Denmark for us is a very strategic market. The whole Scandinavian market is a very strategic market for us. That's the second area that it benefits us in. We also see clients are using the capabilities of BASE as a starting point, and then that leads to large technology transformation, digital transformation. That helps us overall in terms of scaling up that segment. That's a segment which we feel is a strong segment for the future and where we are in our view underweight in percentage terms. We wanna enhance that with our deep existing capabilities. Got it. Thanks a lot for that, Salil. Thank you. Our next question is from the line of Keith Bachman from BMO Capital Markets. Please go ahead. Hi. Thank you very much. My first question is I wanted to get your views on how you think wage inflation will impact the balance of the year. What are the, you know, what are the tensions on that to your margin model? You mentioned that attrition has in fact moved lower. Do you think attrition continues to move lower? How do you think wage inflation will unfold over the next call it three, four quarters and be a force in the gross margin equation? I have a follow-up. Yeah. I think like we started last year, we were very clear that we have to be competitive in the markets. We did the first hike in January of 2021, then we did the next hike in July of 2021, then we did a follow-up on the upskill talent in September of 2021. In a way, we have not waited one year. We've actually gone ahead and done our majority of our wage hike from 1st of March or 1st of April this year. There's a little carry on effect in terms of the more middle to senior, higher middle to senior folks, which will happen in July, but not in the same margin impact of quarter one, which was very broad-based. Other than that, I think we think these are quite competitive. You know, of course, if you see in the mix, we also get a lot of laterals and where there's a hidden cost of hiring laterals because they come at stretches. In a way, your compensation overall, weighted average compensation in any case is going up across. I think overall this is a very competitive hike in terms of in India, it's more like high single digits. In overseas geos also, because of high wage inflation across, we have given very competitive hikes, something which we've not done in this kind of wage environment and inflation environment before. These are very much higher than what we've given in the past. We think this is something which is going to stand us in good stead in terms of attrition. Like I said, we've seen like sort of three quarters of the attrition benefits, you know, over a period of time flowing in. Okay. We cover a number of software companies, and software companies have started to say they're seeing pockets of weakness with demand elongation on sales cycles. It doesn't sound like I know you made one very specific industry comment, but it doesn't sound like you're seeing the same, any kind of deterioration on the demand side, particularly on the negative side. If you could just clarify, are you seeing any elongation on the new business front? Yes or no. If the macro does weaken, will that in fact help your wage situation? That's it for me. Thank you. Thanks for that. This is Salil. Couple of points that you raised. I think what we see on the demand, the pipeline that we have today for our large deals is larger than what we had three or six months ago. Having said that, we of course recognize what is going on in the global environment. We mentioned a couple of areas. Nilanjan talked within retail. He also mentioned, I shared, within financial services mortgages. We see pockets where we see some impact. On the overall deal discussions, we see a little bit where it's slowing in the decision-making. However, the pipeline remains strong for us today. We've also got two types of deals. One is deals which are on digital transformation or cloud, which are growth-oriented for clients driving to what they wanna do with their customers or in their supply chain, how they want to make an impact there. The second is on cost. We have a very strong play on cost and efficiency, through our automation work, through our artificial intelligence work, where we can really impact the cost base, in the tech landscape of our clients. Those are areas which we are already very active with within this environment. Given our positioning, we feel good that those will start to come into play, as and when the environment changes. Today, this is how we are seeing the demand situation. Now, your other question was will that have a change on the wage or if the macro evolves? We don't have a clear view on where that will go because it's a function of, you know, how the macro evolves and what happens. Of course, we are seeing attrition starting to come off a little bit. That will clearly have a positive impact for us with respect to compensation. But the timeline is not clear. It depends on how the macro evolves. Okay, great. Many thanks. Thank you. Our next question is from the line of Nitin Padmanabhan from Investec. Please go ahead. Hi, good morning. Thanks for the opportunity. I had two questions. One is from a margin perspective, whatever we saw as one-offs in the previous quarter, which included Visa and these contract provisions, both of them have been sort of offset in this quarter. Is that a fair understanding? That's the first. The second is, in terms of salary increases, is it only for the associate level this quarter? If so, then the question is that we have 145,000 associates JL three and below, and 130,000 people in the mid-level. General understanding is mid-level, obviously, the as a percentage of the employee comp cost, it should be higher. The thought process was shouldn't your margin even be higher next quarter? If you could just help with that thought process, that'll be very helpful. Those are two concerns, questions. Thank you. As I said in the margin walk, we had a benefit of 50 basis points from in RTP, which is a combination of working days clients, contractual provision reversals, partially offset by discounts. We've seen a benefit there. Now there's no, in a way, what you said that has been eroded. We have got the benefit of client contractual provisions clearly. The other one on visa travel, I think they were largely, you know, offset against each other. What was the other question? On the outlook on wages. Yeah, like I said, we've done it for most of our employees, right? Which is up to mid-level. More at the senior levels is what we're going to roll out in July. That impact will be far less than, you know, our 1.6%, which we've done, which is a much more broad-based across. Sure. Both associates and mid-level happened this quarter itself. It's not only associates. Yeah. That, that's- No, no. Sure. Associate and mid-level, correct. Perfect. That's very helpful. Thank you so much. Thank you. Our next question is from the line of Bryan Bergin from TD Cowen. Please go ahead. Hi, thanks for taking the question. I wanted to just dig in on the commentary around pockets of weakness. Heard you mention mortgages, I guess, a subcomponent of retail. Can you just give us a sense, maybe quantify what mix of your business is actually seeing some slowing decision-making? You know, is it 5%, is it 10%, is it less? Even just help frame or quantify areas that are seeing pockets of weakness. Thanks for your question. This is Salil. We don't quantify typically, you know, what part of our financial services, mortgages or the other areas which are impacted. We're now seeing pockets. This is not across our whole business. The way I would sort of look at it is, with all of that, given our pipeline, we've increased our revenue guidance. The majority of our business is still seeing good demand. It's really pockets without quantifying. That's how I would give a context to it. Okay. Just a follow-up on margin. You gave sequential changes. Can you give us what the year-on-year change is in operating margin to different categories? Yeah. Largely we know it was the comp-related hike that's nearly about 350 basis points. That was one of the biggest ones. This was offset by some rupee benefits, which was also a benefit. There was cross-currency as well, which offset probably half of that. Then we got some benefits of cost optimization. We got some hits on lower utilization. These were the broad things. The biggest one was comps, which was about 370 basis points. All right. Thank you. Thank you. Our next question is from the line of Sudheer Guntupalli from Kotak Mahindra Asset Management. Please go ahead. Good morning, gentlemen. Thanks for giving me this opportunity. I have just one question on margins. Ideally, the strong growth at the headline level should have translated into some operating leverage, but that doesn't seem to be happening. Nilanjan, we seem to be of the view we'll chase growth for now and focus on margin optimization at a later date. What is the risk to that hypothesis? Because this growth- margin paradox seemed to be a mere reflection of what is happening in U.S. and U.K. now, a very tight job market, very high nominal growth, but very little benefit trickling down to the bottom line level. Sooner or later, these nominal growth rates may cool off and onsite job markets and some supply costs may auto recalibrate. Back in India, job market may not be as much of a free market as it is in U.K. and U.S. There may be some sticky elements, both at headcount and wage level, translating into negative operating leverage as demand moderates. What is the risk that margins will remain structurally lower than even the pre-COVID levels going ahead? Because demand tends to be more cyclical, while some of the supply costs tend to be more sticky. Yeah. A couple of things. One is that many of these cost increases can't be passed on to client on day one, right? If I have to give a wage hike on all my existing base, right, they will come up for renewals, right? That's the time when you have a wage discussion. When you're doing new deals, automatically we will build it and the industry in a way builds it into their wage profile. These things will automatically be slowed back. There's no free lunch for anybody, right? That's one thing which will happen over a period of time. That's more of a, you know, a generic point I'm making. In terms of, say, sub-con, right? We've operated at 6.5% of sub-con. Today, we're sitting at, what, 11.1%, right? There's no reason for us to be at these levels because we know once wage markets, the overall demand environment, our recruiting picks up, we can replace these sub-cons with our own headcount, put more pressures into projects. This is something we've been doing very well in the past, as well. I think these levers are well known for us. We know how utilization works. We know how pyramid works. We're quite confident in the go-forward model of taking our costs from our overall structure. Just one more question, if I may. When we say the pipeline is larger now, just curious if the pipeline is getting bigger and bigger because some of the decision-making is getting slower, is there any correlation you see between the two? There is, Salil, the pipeline what we are seeing is there is appetite, and you go by different industry for digital transformation programs, for large cloud programs, for programs which start to relate to cost and efficiency. That's what is in the pipeline. It's not a function of the timeline, which the delay that you referenced which is causing an increase. It is where we see traction with more and more client discussions as of today that we see. Now, we will see how that evolves, but that's the outlook we have today. Thanks, Salil. Thanks, Nilanjan. That's it from my side. All the very best. Thank you. Our next question is from the line of Ankur Rudra from JP Morgan. Please go ahead. Thank you for taking my question. First question is, what's the level of conservatism or realism infused into both the revenue and the margin guide this time? Part of that is on the revenue guide, we've given the potential macro headwinds ahead of us and the ask rate from the second half of this year. Similarly, on margins, we still have another round of wage hikes which could impact margins by maybe as much as 100 basis points if I look at the wage hike impact so far, and a similar ratio between the first and the second rounds in the previous years, and also creeping up travel and facility costs. Thank you. Hi, Ankur. Thanks for the question. This is Salil. Let me start off, and then Nilanjan may have a few points to add. On the guidance for growth, as we've shared in the past, the approach we take is we see how things are as we look at the financial year today. What we saw is in Q1, we had extremely strong revenue growth, 5.5%. We also had underlying volume growth that Nilanjan referenced, which was very strong. Then we see the outlook, where we have clarity looking ahead for some period of time, and then a set of estimates that we have for the rest of the financial year. Looking at how typically H2 works versus H1, and then putting in some views on where the end of the year could be. Based on that, we felt comfortable to increase the revenue growth guidance. Whether it's conservative or realistic, you know, that is the approach we take to make sure that we then share what we think the revenue is gonna look like for the year. On the margin, I'll start off, and then Nilanjan will talk a little bit about the wage component and what we've done. Overall, on the margin, we've made sure that we work to get all of the levers in place. The approach to driving cost efficiency is in place. Several levers that Nilanjan mentioned, one of the bigger ones, we've got the bulk, the vast majority of our compensation increase already done in Q1. Yes, there's a small component, but it's not merely a huge component that will come up. We see steadily other areas which will help us. There are areas where we can focus on how the subcontracting works. There are areas where we can focus on discussions with clients vis-à-vis wage increases and COLA. There are areas where we're doing work which is driving significant impact for clients. We think there are a set of those levers that can help us through the margin discussion that will be focused on this financial year. Our approach very much is to make sure that we remain a high margin business, and that's the underlying theme that we are working with. Given where we are, given the inflation around the world, we thought it was clear to make sure that we communicated that, in the way we see the market. Anything else you wanna add? No, no, that's it. Okay. Just a quick follow-up, if I may, on margins. Nilanjan, are there any one-offs in the margin this time? Asked another way, what would be the pro forma margins if the provision reversal was not to happen? Related to that, can you say that 20% in Q1 should be the bottom of margins going forward so that you can get back to 21% for the year realistically? Yeah. I think we've mentioned the margin walk at the beginning of the call. If we are at 20% and we are, you know, guiding at the bottom end of 21%, mathematics dictates that we have to improve some way forward. Absolutely. From 20%, we will have to see the improvement quarter-on-quarter. Okay. Thank you, and best of luck. Thank you. Our next question is from the line of Ravi Menon from Macquarie. Please go ahead. Thank you. Gentlemen, congrats on a good set of numbers. First, what are your thoughts on how growth rates in North America, you know, we've not seen, I think such growth rates grown, sustained for a long time. Though you called out some headwinds in BFS side, even that still added quite a bit of revenue. If you could give some color about how sustained the demand environment is there. Secondly, you know, on the pyramid, you know, we've already seen a large intake of fresh graduates last year, so had hoped that some of that would have come into production and, you know, helped us offset the margin headwinds to this quarter. Looks like, you know, given the utilization as well, it doesn't look like much of that has happened. If you could give some color on that. Hi, Ravi. This is Salil. I didn't catch the first part of the question. I think it was about demand, but maybe you can just say the first part. Yeah, sure. It was around the demand. You know, we've seen broad-based revenue addition across verticals in North America, and you know, if you're seeing the pipeline also along similar lines or are there any specific verticals where you see some softness starting to come in? The softness. As we referenced, we see some pockets of softness within our overall business. We want to be very clear that is something that is visible. The couple of examples we've shared were on financial services and retail. There are areas where we see that weakness. However, once we say that, we also have a view and we see it in our pipeline. The overall pipeline is stronger. There are areas where we see some good traction as well. It's a mix of the growth and the cost opportunities within our pipeline. I think the second one was about the pyramid, I think. Yeah. Yes, we've hired a lot of freshers last year, and many of them also have gone into, you know, training pipeline because as we had the previous year, there was nothing really in the pipeline in terms of hiring. In fact, if you see our utilization, there's a 2% gap between the excluding trainees and including trainee numbers on a year-on-year basis as well. We continue to deploy them into projects and like I said, you can't overnight in all projects put freshers in and that's why it's important to build the pipeline in advance. Make them go through the training, so then put them into production bench and then, you know, move them into projects as well. That benefit will come in and it's. We are seeing that slowly coming in. It's important to invest ahead, right? If you just have in time, you'd be probably, you know, suboptimizing in terms of how fast you can deploy. That's why we have made these investments because we know it will take time for these freshers to go in, but it's important to make the investment ahead. Thanks, gentlemen. One follow-up to Nilanjan Roy on this, last quarter's contractual revenue. You know, did you recognize all of that this quarter or is there still something pending? Yeah. It was all recognized this quarter. Thanks. Best of luck. Thank you. Our next question is from the line of Pankaj Kapoor from CLSA. Please go ahead. Yeah. Hi, thanks for the opportunity. Salil, can you give some color on the overall order book since the reported TCV what we give that covers only $50 million + deal and may not really be representative. Any quantitative or qualitative comment on the scale and how the overall order book has grown, that will be helpful? Thanks. Thanks for the question, Pankaj. As you know, we share the large deals win number. We don't publish the overall deal wins. Having said that, the main sort of context I would put is the increase in the growth guidance that we've provided. That factors in that sense all of the inputs that you may be looking for, which then comes from essentially a very strong Q1 execution, the 5.5%, 21% growth. Then a view that we have on what we see in the coming quarters and then an overall view of how we look at H1, H2 in our mix within the company. That is sort of broadly how we looked at it. On the large deals, we've shared this in the past. Typically this is a number which is a little bit more volatile because we only report deals which are larger than $50 million in our large deals. That's really the way maybe to look at it. Fair enough. My second question is on the profitability in the manufacturing vertical where the margins has been coming down and in fact, last three quarters probably they have halved despite a very strong revenue growth. I understand this could be because of a very large deal which is still ramping up there. Can you give a sense how the profitability curve in this vertical could shape over the next two, three quarters? What I'm trying to understand is that has it bottomed out now or you think that this could potentially go down further? Thank you. Yeah. I think without specifically commenting, I think, you know, on anything particular deal, I think firstly there is, you know, you've seen the revenue growth, which has been quite spectacular in this segment. This has been led by large deals. As we've talked about our large deal approach, you know, from day one, a lot of clients would like to see savings, but we are very clear that over a period of time that we have a lot of cost optimizations because on day one you can not pivot the cost structure, right? Whereas clients may ask for the savings. We know over a period of time the levers which we continue to deploy on all these, you know, large deals and if I go back to the last three years, you know, four years in fact when the large deal sort of strategy started, we've actually seen an increase in margins over that. There's been no, you know, there's no historical correlation in terms of saying whether large deals are diluted because we continue working on taking out costs through the system and these are factored into our entire, you know, bid process. We look at, you know, how we're going to optimize on-site offshore. Many of these projects require dramatic automation. We can inject that through all our services, which we're providing. We know how the pyramid works. These are things which we know, you know, over the lifetime of these large deals. That's something we know we can, you know, deploy. That's, you know, something you know, without getting into specifically manufacturing, what we do well. Got it. Thank you, and wish you all the best. Thank you. Our next question is from the line of Gaurav Rateria from Morgan Stanley. Please go ahead. Hi. Good morning. Thank you for taking my question. Firstly, is there any difference in the client decision-making behavior in U.S. versus European clients? The reason is that I'm asking is U.S. is seeing fair bit of broad-based growth across segments, but when we look at Europe, there is a weakness specifically in retail and communication vertical, whereas the other two verticals, energy side, high tech has grown very, very well. Just trying to understand, are there any client specific pockets, especially in Europe, where you kind of see decision-making behavior has changed compared to the U.S. market? Thanks for that question. Today, we are not seeing that, which is more geography based as you're describing. We see some which is more globally industry-based and our client base, as you know well, is mainly U.S., Europe, and Australia. Not so much color, which is more geography related. Yeah. Okay. Second question on margins. Your margin outlook at the lower end, you explained very well the supply side and cost related factors, which has led to this. Is there also an element of expectation of pricing increase that has been tapered down, which has led you to now take the margin outlook to the lower end? And is it fair to say that with all the cost levers that you have in place, the exit margin should be better than the lower end of the guidance? Thank you. Yeah. I think when we do our sort of margins, you know, forecast with a combination of factors we look at, and that equation keeps on changing. I mean, it's more dynamic, you know, what happened in the previous quarter? What do we see as outlooks? What's happened on subcon wage inflation? That mix continues to change and evolve. Sometimes we have to push harder on some pedals in terms of accelerating some programs. Going back to the whole, you know, if we are today at 20% and we are saying we're gonna be at the bottom end of 21%, I think that should give you a good sense of the margin trajectory for the rest of the year. Thank you. Thank you. Our next question is from the line of Ritesh Rathod from Nippon India Mutual Fund. Please go ahead. Yeah. Hi, everyone. Just on this margin, within a quarter you have to lower your guidance on the margin side. This is despite rupee depreciation benefit, despite attrition coming down in last two quarters. What has surprised internally in your expectations so that you have to bring it down to the lower end? Yeah. I think, like I just mentioned this is a very dynamic and moving, you know, if I could, you know, forecast completely what is the impact of attrition, how much wage hike will come in for new hires. It's very dynamic, how the pricing play out. In that sense, this is a very fluid situation. The 21%-23% we said we are within that, but of course at the bottom end of it. We remain committed, you know, from where we are today at 20% to do all our various cost optimizations, factoring the cost impacts of what we see in terms of wage inflation. There could be potential benefits of the rupee, et cetera. It's a combination of all this into the forecast. What would have been a bigger surprise element? Would it be the wage or would it be the pricing benefit not coming through? Any one highlight in comparison to what you expected at the start of the year? It's a combination of various things. I won't say surprise. I think, like I said, it's a fluid situation and we have to remain agile. That's more important, rather than anything else. Coming to pockets of weakness which is pointed out, retail and mortgages, can you give some color? Are clients taking a pause in decision-making? Are the new deals not getting converted or are the existing deals which have been won, they are not getting ramped up? What's the exact sense on the weakness over there? There, within the areas of that pockets that we described, there we see a slowing. For example, if you look at the mortgage situation, the volume there in the market, meaning the client volume, at the macro level has gone down in the European, U.S. market. Our work there is proportionally reduced. The overall point, which I shared earlier, we see some slowing in decision making, but nonetheless the pipeline remains today in a good position and that allows us to increase the guidance. Okay. Maybe last one on your deal wins. On LTM basis, your deal wins are down sharply, if you see last trailing four quarters versus the previous four quarters. Even if I adjust the base because of the high value deals which you've won in a couple of quarters, four quarters back, you're still down minimum by 15%. What? How do you c onnect those two dots that your LTM basic deal wins are down, but your deal pipeline is all-time high. Are the deal conversion ratios dropping from what they were historically? On the large deals, we typically always share we see some volatility because these are deals which are larger, the ones we share in this number which are larger than $50 million in value. We do see the pipeline being larger than where it was and what we referenced in some areas, a slowing of it, but we don't see any change in the other parameters on the pipeline. Okay. Thank you. Wish you good luck. Thank you. Our next question is from the line of Manik Taneja from JM Financial. Please go ahead. Hi. Thank you for the opportunity, and sorry for harping on the margin question once again. I just wanted to understand how should we be thinking about the segmental or the improvement in segmental margins for manufacturing vertical, given the sharp drop that we've seen over the last three quarters, and how does that feed in terms of the overall margin outlook? Thank you. Yeah. I know, like I just somebody else has asked a similar question and, like without going into any specifics, we have seen that growth, coming out of large deals in manufacturing. Like you said, as we look at the tenure of these large deals, in some cases they start off with, lower than portfolio margins, because clients may ask for, you know, savings up front. We have a very, you know, structured plan in terms of over quarter- on- quarter what do we need to do to bring back profitability, because from day one clients come to us because they know we can optimize the cost structure. That's something which is, you know, generally what we've been doing since we started the large deal strategy, right? We've seen margin improvements over that period. I think we are quite, you know, confident of the future profile of these businesses. Sure. Thank you. Thank you. Our next question is from the line of Apurva Prasad from HDFC Securities. Please go ahead. Yes, thanks for taking my question. Salil, this is on mega deals. While the industry frequency tends to be low and it's been a while for Infosys, it'll be good to know your comments on mega deals from a pipeline perspective. Secondly, on pricing, how is the ability to get price increase versus last quarter? Do you see any changes to that? From the mega deals, I think, again, we don't share anything specific in terms of what we publish. The color from our side is we have mega deals in our pipeline, if that sort of gives you a context. On the pricing, we've seen pricing currently holding in our deal values for Q1. My sense is we have seen examples that Nilanjan was sharing earlier, where we have worked with clients to demonstrate to them the impact of compensation increases, and that has translated to COLA or price benefits. We've had examples where we've had increases which are related from more of the digital high value work that we are driving for clients. We now have to make sure we take that across our whole portfolio and see the benefits coming into our business. Typically the salary increase happens, you know, at a periodic time. These things where we've not seen a high inflation environment like this for over 40 years in the Western markets that takes a longer time. That's what, as Nilanjan shared, is part of what we've put in place to support our margin as we go ahead. Thank you for that. Thank you. Ladies, and gentlemen, that was the last question. I now hand the conference over to the management for closing comments. Thank you everyone. This is Salil. Thanks again for joining for this call. I just want to summarize with a few points. First, we've had industry-leading growth in Q1, 5.5% quarterly, 21% year-on-year. We clearly see tremendous market share gain driven primarily by the strength of our digital and the cloud Cobalt capability set that is resonating with our clients. We highlighted there are pockets of weakness and we are aware of the environment around us. We see in our pipeline both growth opportunities in digital cloud and cost opportunities in automation. With all of that, we increased the growth guidance for the full year. We are now seeing attrition coming down on a quarterly basis. We see many of the initiatives we put in place starting to create some impact. We have levers for the margin, several that Nilanjan shared. Large programs will transition to a steady state. COLA because of increases in compensation costs through pricing. Pyramid adjustments as we have college hires joining the productive environment. Subcontractor usage, and then several others on the cost side. Given all of that, we feel we are really well positioned to work with clients on their growth and cost opportunities and have a margin profile that is something that sustains the high margin approach of the company. We are looking forward to this year with strength and optimism. Once again, thank you all for joining us, and catch up in the next quarter. Thank you. Thank you, members of the management. Ladies, and gentlemen, on behalf of Infosys, that concludes this conference call. Thank you for joining us, and you may now disconnect your lines.