Ladies and gentlemen, good day and welcome to the Infosys Limited Earnings Conference Call. As a reminder, all participant lines will be in the listen-only mode. Should you need assistance during the conference call, please signal an operator by pressing star then zero on your touchtone phone. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star then one on your telephone keypad. To withdraw your question, please press star then two. 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, Inder. Hello, everyone, welcome to Infosys Financial Results for Q4 and FY 2023. Joining us here on this call is CEO, Mr. Salil Parekh, CFO Mr. Nilanjan Roy, and other members of the team and management team. We'll start the call with some remarks on the performance of the company for the recently concluded quarter and year by Salil and Nilanjan, subsequent to which the call will be opened up for questions. Please note that anything which we say that refers to our outlook for the future is a forward-looking statement that's not fitted in conjunction with the rest of the company's papers. A full statement explanation of these risks is available in our filings with SEC, which can be found on www.sec.gov. I'd now like to pass it on to Salil. Thanks, Sandeep. Good evening and good morning to everyone on the call, and thank you for joining us. For the full year, financial year 2023, we had a good performance, with growth of 15.4% in constant currency. Our digital business grew 25.6%, now being 62.9% of our overall revenue. Our core services grew as well at 1.9%. We saw broad-based growth across our business segments, with most in double digits. We had 26% growth in Europe and 12% in the U.S. We had 95 large deals with a value of $9.8 billion for the year, with 40% net new. Our operating margin for the full year was at 21%. We generated free cash flow of $2.5 billion in the year. Our attrition has continued to decline in each of the quarters through the year. We are leveraging generative AI capabilities for our clients and within the company. We have active projects with clients working with generative AI platforms to address specific areas within their business. We have trained open source generative AI platforms on our internal software development library. We anticipate generative AI to provide more opportunities for work with our clients and to enable us to improve our productivity. In Q4, we saw changes in the market environment. During the quarter, we saw unplanned project ramp downs in some of our clients and delays in decision-making, which resulted in lower volumes. We had some one-time revenue impacts. While we saw some signs of stabilization in March, the environment remained uncertain. This led to a Q4 year-on-year growth of 8.8% in constant currency and quarter-on-quarter decline of 3.2%. Our operating margin was at 21% for the quarter, and we had $2.1 billion in large deals in the quarter. We generated $750 million of free cash flow in the quarter. Our pipeline of large deals is extremely strong. Several of these are mega deals, and several of these opportunities are for cost and efficiency programs and for consolidation projects. Some industries, such as financial services in mortgages, asset management, investment banking, telecom, high tech and retail, are more impacted, leading to uncertainty in spend and delays in decision making. The U.S. is more impacted than Europe. Keeping in mind the current environment, we have further expanded our internal efficiency and cost program to work on our pyramid, onsite ratio, automation, travel, subcontractor, office consolidation, and on pricing. We anticipate this program will build a path to higher margins in the medium term. We are committed to investing in our people in this period. We are committed to working with our clients as we deal with changes in the economic environment. Based on our sustained momentum in financial year 2023, a strong pipeline of opportunities, especially focused on cost efficiency and consolidation, while also keeping in mind the uncertain environment, our revenue growth guidance for this financial year is 4%-7% in constant currency. Our operating margin guidance for this financial year is 20%-22%. Thank you. With that, let me hand it over to Nilanjan. Thanks, Salil. Good evening, everyone, and thank you for joining this call. FY 2023 was a year of two halves. Mirroring broader macroeconomic conditions, growth was extremely strong in H1 with 20% year-on-year constant currency, which reduced to 11.2% in H2 due to the slowdown in verticals like telecom, high tech, retail and parts of financial services. Q4 came in slower than expected due to some specific client ramp-downs in discretionary spend and delayed client decision making on new deals. We had some one-off revenue impacts, including project cancellations, et cetera. Despite the above, we closed FY 2023 with a strong 15.4% growth in constant currency, leading to continued market share gains. Operating margins for Q4 and FY 2023 were at 21% in line with our guidance. Free cash conversion to net profit for FY 2023 was near 85%. FY 2023 EPS grew by 1.3% in dollar and 9.7% in INR terms. Client metrics were strong, with the number of $50 million clients increasing to 75, 100 million client count increasing to 40, and 200 million client counts increasing to 15. Long-term LTM voluntary attrition declined to 20.9%. Quarterly annualized attrition reduced by over 4% sequentially and is the lowest in the last nine quarters. This is also well below pre-pandemic levels. Coming to Q4 performance, revenues grew by 8.8% year-on-year and declined by 3.2% sequentially in constant currency terms due to the reasons mentioned earlier. Utilization declined to 80% on the back of softness in demand. We expect the utilization to improve gradually in the coming quarters as pressures start getting deployed. We will calibrate the hiring for FY 2024 based on available pool of employees, growth expectations and attrition trends. Q4 margins were at 21%, which is a decline of 50 basis points sequentially. Major components of sequential margin movements are: we had tailwind of 50 basis points on cost optimization, including reduction in subcon, 60 basis points benefit from reduction in TCTS, which is post-sales customer support, offset by a headwind of about 70 basis points from a drop in utilization. The balance, 90 basis points is a combination of revenue one-timers, as mentioned above, partly offset by other savings. Q4 EPS grew by 0.2% in dollar terms and 9% in rupee terms on a year-on-year basis. Our balance sheets remain strong and debt-free. Consolidated cash and equivalents stood at $3.8 billion at the end of the quarter. Free cash flow for the quarter was robust at $713 million, with a conversion of 95% to net profits. Yield on cash balance was 6.6% in Q4. The board has recommended a final dividend of INR 17.50 per share, which will result in a total dividend of INR 34 per share for FY 2023 versus INR 31 per share for FY 2022, an increase of 9.7% per share for the year. Including the final dividend and recently concluded buyback, we have returned 86% of FCF to shareholders over the last four years under our current capital allocation policy. In Q4, we completed the open market share buyback of INR 9,300 crore, buying back 1.44% of shares at an average buyback price of INR 1,539 versus a maximum buyback price of INR 1,850. ROE increased to 31.2% in FY 2023 from 29.1% in FY 2022 as a result of higher payouts to investors. Coming to segment performance. Large deal momentum continued and we signed 17 large deals in Q4. TCV was $22.1 billion with 21% net new. Five large deals were in manufacturing, four in SS, three in CRM, two each in life sciences and high tech, and one in EURS. Region-wise, this was split by 10 in Americas and seven in Europe. In FY 2024, we signed 95 large deals with TCV of $9.8 billion with 40% net new. Coming to the vertical segment performance. Financial services vertical was impacted by budgeting delays at the start of the year, led by macroeconomic uncertainties, coupled with softness in mortgages, asset management and investment banking. Our strong pipeline and large deal wins in areas like infra, production support, cybersecurity and business operations is helping in better visibility for FY 2024. We have a very diverse portfolio of clients in the U.S. and hence, exposure to multiple regional banks is less than 2% of our overall revenues. We do not anticipate any material impact on our operations as a result of recent news in regional banking segment. In retail, there is heightened focus on accelerating digital transformation to enable top-line growth with rigor in ensuring budgets get spent on right programs to maximize ROI. While there is some pressure on discretionary tech spending, companies are prioritizing investments in key areas such as e-commerce platforms, supply chain management systems and customer engagement tools. Manufacturing segment continues to see ramp up of large deal wins and benefits of vendor consolidation. There is increased focus on digital spend, including opportunities on ER&D, 5G and Industrial IoT. Increased energy prices and interest rates, coupled with sub-continued supply chain disruptions, is impacting spend on the run side of the business, especially in Europe. Communication segment is witnessing increased OpEx pressures, cost-cutting ramp downs and delayed decision-making. Demand for ideal solutions are moving from cost takeout to revenue growth side with heavy focus on customer success. Cloud and mobility remain top drivers for 5G adoption. Overall pipeline remains strong, which gives us the confidence of growth opportunities in the coming quarters. The positive momentum in energy, utilities, resources and services for FY 2023 was supported by large deal wins. Our renewed strategy to repivot our offerings and developing integrated energy-as-a-service solution and a focus on journey to net zero initiative has positioned us well ahead of competition. While we are seeing delays in kicking off discretionary spend projects, the cost takeout and vendor consolidation initiatives continue to pick momentum. We expect our revenues to grow by 4%-7% in constant currency terms in FY 2024. Our pipeline of large deals remains extremely strong with increased focus on cost takeout programs. Operating margin guidance stands at 20%-22%. The margin guidance factors in growth assumptions for FY 2024, impact of utilization, employee cost increases, further normalization of costs like travel, utilities, et cetera. We continue to focus on various cost optimization and efficiency improvement measures. As we look beyond FY 2024, we believe we have various levers to generate more efficiencies like improving utilization, reducing subcons, improving pyramid, apart from growth acceleration and potential pricing increases which will enable us to aspire for higher margins over time. With that, we can open up the call for questions. Thank you very much. Ladies and gentlemen, we will now begin the question and answer session. Participants who wish to ask a question may press star and 1 on their touchtone phone. If you're using a speakerphone, please pick up your handset while asking a question. This is required to ensure optimum audio quality on the call. Should your line have any disturbance, you may be asked to return to the question queue if you do not have a clear connection. Ladies and gentlemen, we will wait for a moment while the question queue assembles. Our first question is from the line of Yogesh Aggarwal from HSBC. Please go ahead. Yeah. Hi, good evening. A couple of questions. Firstly, while the quarter was weak, the guidance at the upper end still looks very solid when we, you know, just mathematically look at the sequential build up from here. Is that 7% based on some macro pickup or is it what you see today, 7% is possible? Related to that, Salil, in general, the demand and the growth picked up post-COVID. Are we back to pre-COVID growth rates of 5%, 6%, 7% or FY 2024 is one-off and we can see a pickup from FY 2025. I have a follow-up please. Hi, Yogesh. This is Salil. I didn't catch the second one. I'll go with the first question, and you can just repeat the second one. On the guidance, what we have built it with today is what we see with the deals we have sold and the ongoing work that we have, and then put the range between 4% and 7%. There are different scenarios in which different things happen. We've widened the band to 3 points, given the uncertainty in the environment. We also have a very strong large deal pipeline, with some mega deals in the pipeline. Of course, these are always binary, but given the strength of the pipeline, we believe that there is ways that we can achieve the high end of the band of the guidance. Got it. I was asking the second question was 4%-7% is almost going back to pre-COVID growth rate. Is it like the new normal again or we can expect some pickup again from FY 2025? That is one. Also, Salil, I wanted to ask you on the recent management exits. Just recently you had two presidents and a COO. Now, all three are not there for the whatever reasons. Has it impacted the business by any chance? Is it what's the new structure? Are you going to replace them or is it is the new structure doesn't need presidents and a COO? On the first one, as of course you know, we don't provide a view or a guidance beyond this financial year. Underlying the way we see the business, we see two growth drivers. We are well positioned on growth in terms of capabilities and track record. One is on digital transformation, comprising of cloud and other elements, and one is on cost efficiency automation, and an additional element which is on consolidation that comes in through that. We see both of those drivers working. We've seen a reduction in the digital transformation work today. We see more in the cost and efficiency and consolidation play today. Going through, depending on where the client is, what the environment is, we feel comfortable for both of those drivers to work over time. In terms of the structure, we have put in place a structure for the delivery organization, which is already rolled out. In the next few weeks we'll roll out the new structure for our SS team. We feel good with the leadership pool that we have within the company, who are moving up to take a broader role and a larger role, that they will step up and deliver what we are driving to. Very helpful. Thank you so much, Salil. Thank you. Our next question is from the line of Bryan Bergin from TD Cowen. Please go ahead. Hi. Good evening. Thank you. Wanted to ask on the growth outlook first. At the midpoint of your 4%-7% range, can you give us a sense on how much of the backlog is already in hand versus having to go out and convert upon the pipeline to achieve that growth target? Do the amounts that you have to sign in that pipeline to hit the target differ relative to prior years at this time? Hi, this is Salil. Thanks for that. We don't have a specific sort of number there that we share externally. What I can sort of share is: We see through this past financial year, we've had a good large deals booking, $9.8 billion with 40% net new. We see a set of very strong active relationships, some of them expanding through the year through other work. And then we saw in Q4 during the quarter some ramp downs. Keeping those factors in mind, we've built the guidance of 4%-7%. We see that we have the ability to deliver on that guidance. Okay. My follow-up is kind of on margins here. You cited internal efficiency programs that you're going to progress upon and I think you're omitting office consolidation and other items. Is there a stated target of cost reduction that you're expecting to achieve? Is there a runway about for op margin expansion? Just trying to get a sense of how you think about the structural margins of the business, assuming the efficiency initiatives you cited. There, we've put together an internal plan with targets and, let's say a roadmap for each of the subcategories that we outlined and a few others. We have a view to drive that through the next sort of a period year in the coming quarters. We've not shared that target externally, but our view is to, you know, make sure that we put in place, execute on that program, programs in place, and deliver to that in the medium term. Thank you. Thank you. Our next question is from the line of Ankur Rudra from J.P. Morgan. Please go ahead. Hello. Thank you. The first question is on, I just wanted to get a bit more color, if you can, on the reasons for the very sharpness on revenues and margins versus the guidance. Why did this surprise you? How much of the demand environment has existed through the quarter, or versus what probably came in the last 30 days? That's the first one. This is Salil. What we saw there was during the quarter, as the quarter progressed, we saw on some clients ramp downs on programs, and this was across different sectors, telecom, retail, high tech, and parts of financial services, mortgages, investment banking, asset management. That is something which were unplanned as we went through. Then, additionally, we had some one-time impact which we saw in the quarter as well. Would you be able to elaborate on the one-time impact, Salil? Yeah. I think firstly the majority of the, you know, decline is volume led. The balance of the revenue is one-timers, which is a combination of specific client issues, including, the impact of cancellations as well, which is just a top line impact, more and more over and above the volume impact. You know, that's the state of play, really for the quarter. Okay. Thank you. On the guidance, I just wanted to get a sense. Looking at, you know, what happened in the quarter and the uncertainty in the environment, are you turning more conservative for the guidance setting process for FY 2024, both on the revenues and the margins versus what you may have done before? Also, along with that, if you can share what's the visibility that you have at the moment for the full year versus what you may have had, you know, at the beginning of last year? There on the guidance, we took into account, you know, what we see typically, as we close the year in March on what we've had in new large deals and overall new deals, and the ongoing work that we have across our client base. That basically becomes the foundation of our guidance. Typically, again, as you know well, we don't have a detailed view of Q3 and Q4, so we have more typically estimates from other years that we use. That's the same approach we use this year from what we see as we look out. The same on margin. We finished the year at 21%. Utilization in Q4 is low compared to what we want to target. We have a very strong efficiency and cost program, but within that program, we are very clear that from an employee perspective, we will continue with our commitment with employees. The utilization will go up through the quarter, but in the medium term, we will get that impact back into the margin. That's how we build the 20%-22% margin guidance. Understood. Just the last question on the leadership. I think this was attempted before, but my stab at it would be, I mean, clearly there's been departures as you know, acknowledge. Some of them have gone to competition, probably will drive hungrier, you know, peers going forward. Do you think you're losing muscle and increasing the roles and responsibilities at a more concentrated leadership team? At least I've seen from the outside at a time where the industry is facing a tougher period this year. Sorry, Ankur, I didn't follow. You said will we have concentrated leadership? What was the question? Yeah. I mean, yeah, concentrated leadership, as in basically more roles and responsibilities as an example of your role or Nilanjan's role versus having three other very senior leaders helping you with the wider leadership team. Okay. What we have seen, and what we know is, you know, within the company, there's a very strong set of leaders across different roles. Many. So on delivery, many of them have now stepped up. And clearly any role, as you start to or step up to, you know, delivery leadership within a large company like Infosys, becomes more concentrated. That has been announced and rolled out. And the same will happen with FS, where we are rolling that out in the coming weeks. The FS segment, of course, you know, is a large segment for us. Those will be concentrated in that sense. We will have a leadership structure with a very strong responsibility for several other senior leaders. Understood. Thank you, and best of luck. Thank you. Our next question is from the line of Kawaljeet Saluja from Kotak. Please go ahead. Yeah, hi. I have a couple of questions. The first question is on guidance once again. You know, is it back-ended or, you know, the guidance as you even grow through the course of the year? A related question to the guidance is that given the deterioration in the macro environment, along with the huge miss, in 4Q, along with weak signings, do you think you are being, you know, more, I would say watchful in your guidance for FY 2024? You know, have the process been tightened? Any thoughts on that would be welcome. Hi, Kawaljeet. This is Salil. On the revenue growth guidance, there the thinking is really spread over the four quarters. I'm not sure I would say it's front or back, but it's based on what we see in the large deals today, and also in the pipeline that we have, where we do have some mega deals in the pipeline. That gives some weightage to the guidance given where those deals will come. It'll be later on in the year itself. The second one. Sorry, Kawaljeet. Are we more conservative? Is that the point? No, no. Has the process of guidance been tightened or rather, you know, the forecasting process, has it been tightened given the magnitude of the miss in revenues in the quarter, which obviously would have shocked you as well? You know, have you basically, I mean, built in better cushion, greater cushion in your guidance for FY 2024 or is the process and the underlying assumptions the way it used to be historically? We have tried to put in place what is a changing or let's not changing and uncertain economic environment which where we saw some of these impacts. Those factors have been taken in as we build this guidance. Okay. The second question I thought that I had was on profitability. You know, every company would, you know, I mean, want to operate at a certain base level of profitability. Now in Infosys' case, you know, the profitability has been drifting down and the profitability guidance is down to 20%-22%, which is a kind of a new low. You know, how should one think about, you know, the underlying operating assumptions behind deals, deal wins, you know, and the process of bidding for large deals, and how does that deal in with the underlying base or profitability aspiration, rather, you know, assumption that you have? You know, is this, you know... How should one think about structural profitability, if you may? Hi, Kawaljeet. Yeah. I think if you step back a bit into sort of the last year and a half, I mean, basically the whole chasing of this, you know, demand side, you know, three, you know, compensation hikes in 15 months, set salaries, you know. All that in a way has made our structure a bit inefficient, right? In a way, part of that today is the reverse, that you're sitting with, you know, 80% utilization, whereas you want to be at much higher levels. The pyramid is not as efficient because you had to get talent from anywhere, when the market was hot. We've seen a lot of these sort of things during this, you know, you know, period, where we can identify these pockets of cost, you know, rising to 11.5%. I mean, we were clear that we had to go behind, you know, this, the getting the volumes in, right? We knew we had time to correct the margin structure, right? Therefore, that's fundamentally what we still believe in. Our guidance is just today at a midpoint at the end of the year at 21%, and we have enough flexibility in this guidance between 20%-22%. In a way, 21% is just the midpoint of that. To take care of, you know, firstly, of course, there may be some headwinds coming, because of compensation. There could be something on travel. At the same time, you have levers of improving our utilization at 80% really, which is, you know, probably on the lower side scene. We have other opportunities of improving the pyramid because, you know, the higher bench comes with a double whammy of cost. One is you have the idle cost of the bench. At the same time, we have a very rich pyramid. The moment you start moving freshers into the pyramid, you get a double benefit of cost that the ID cost goes away from the bench and your quality of the pyramid improves on the production side. Right? You're sitting on in fact two inefficiencies now. These are the levers we start using. Pricing, et cetera, are still going on with conversations, how we build in COLA. Our aspiration continues to be that we continue to look at improving margins from where we are. The guidance is just a reflection of it gives us the flexibility in this uncertain year, and we've entered at 21%, as you saw consistently during this last year as well. You know, sorry to interrupt you, Nilanjan, over there. You know, see, uncertainty might be there in revenue, but on costs, right, there are only tailwinds. And there are a number of tailwinds that you listed out, and I presume that the labor market has also cooled off. So why bring down the lower end of the band, actually? Yeah. I think also some of these levers will take time to put in because it's a different situation of how much sort of room you have to deploy levers when you're growing at 10% versus what when you're growing at 4%-7%, right? For instance, your freshers, how fast can you deploy them when you're growing at 4% is a different pace versus what is you are deploying at 7% versus what you're deploying at 10%, right? All that will still weigh into the structure. It's not that you can immediately say I'm gonna overnight change my utilization, you know, from 80-85, you know, or shift the on-site offshore. In a way, a slower volume regime, you know, has that, you know, you know, overhang on how fast can these deploy. Like I said when we started, that we are sitting on these inefficiencies and it's very visible to us. We know we can deploy many of these, you know, sort of levers which we have to continue to aspire for higher margin profiles. Mm-hmm. Okay. Got that. Thank you so much. Thank you. Our next question is from the line of Pankaj Kapoor from CLSA. Please go ahead. Yeah. Hi. Thanks for the opportunity. Nilanjan, just continuing on Kawaljeet's question around margins. two things. One, what kind of a timeframe are you looking at for this year's wage hike? Are you sticking to first quarter? What kind of a quantum are you expecting? What kind of a margin impact do you foresee of that? Will it be similar to last year, or do you think this could be lower this year? Yeah. This will be continuously evaluated. We have built in, like I mentioned, into our guidance, compensation, and we will take a decision during the year as we're looking at the, you know, market context, the competitive context. No decision has been taken as yet. The hike may not happen in the first quarter. Is that what you're saying? At this moment, no decision has been taken for the hike. Understood. At the lower end of the guidance, are you keeping a buffer for some kind of a potential pricing pressure that might come in during the course of the year? Is that the headwind which you see as a major one when you are guiding for a 20% growth? I don't think, I mean, specifically in terms of pricing. I think it's just that we are, you know, at 21%, and the midpoint is between 20%-24%, just happens to be 21%. Like I said, there may be some headwinds, there may be some tailwinds. Of course the aspiration is continuing to do better than, you know, our margins as well. Nothing specific like that in terms of, you know, pricing, you know, contingency or something. Okay. Salil, if I look at the net new deal wins, probably this was the lowest since we had from the start of the pandemic. I mean, was this mainly due to clients delaying decisions on deal awards towards the last, say, 30 days? Are you building any kind of a conversion of this to get to that 7% at the upper end of the guidance? There, one of the things we have seen in the pipeline, is a slowing in decision-making, so, large deals, staying in the pipeline, longer. Having said that, the net new or even the quantum of large deals as we've discussed in the past, there is always volatility because these are only deals, over $50 million and not everything. It's not a full, let's say, booking value. We've always seen that volatility, in the past. We think with the large deal pipeline that we have today, which happens to be a very large pipeline, and some mega deals in it, we have the ability to drive, to our margin... sorry, our growth guidance, as we run through the year. Just to clarify, at the upper end of the guidance, we are expecting some of those mega deals to convert during the course of the year? I would not be too specific, in that, to say, what it is based on. We do have a large pipeline with mega deals. We anticipate that some of those will allow us to get to the higher band of the guidance. Understood. Thank you. Thank you. Our next question is from the line of Abhishek Bhandari from Nomura. Please go ahead. Yeah. Thank you for the opportunity. Salil and Nilanjan, you know, this quarter we had certain unanticipated, you know, external events, you know, that led us to miss our guidance of 16%-16.5%, especially, you know, after we had upgraded at the end of Q3. Do you think you could have considered issuing a profit warning, you know, citing reasons that are beyond your control? because this time the miss seems to be fairly, you know, sudden and, shocking in the third, fourth quarter. No, I think if you see the full year, we said 16%, and we are at 15.4%, and we said 21% margin, and we were at 21% as well. I'm not sure what's the question references. No, I get where I was coming from. You know, we had raised the band at the end of Q3. You know, we signaled, you know, we possibly had better execution, you know, under control. Of course, things have changed. There are macro situations beyond our control and, you know, there were some cancellations. As a good practice. Yeah, this evolved during the quarter, right? The situation also has evolved during the quarter. It's not as if suddenly on one day, you know, we wake up and suddenly see that the volumes are down. This is the situation during the quarter as well. Okay. The second question is, you know, Salil, I think in this press conference you mentioned, you know, M&A could be an opportunity where, you know, some of the, you know, global companies could consider selling their captives. Do you foresee a, you know, meaningful deployment of capital for that particular purpose this year? Are there enough number of, you know, such captive conversations in your pipeline? As on M&A, I think we have with a strong balance sheet the ability to do something small or medium or large. Today we are in. Let's say we look at many opportunities. We will see how those fit in. There are various sort of components to it. Strategic fit, of course, valuations which are much more reasonable today, cultural fit of those companies and the ability for us to integrate that in. All of those we keep in mind, and if it sort of, you know, meets those points for us, we will look at those opportunities. Thank you, Salil, and all the best. Thank you. Our next question is from the line of Ashwin Mehta from Ambit Capital Private Limited. Please go ahead. Hi. Thanks for the opportunity. Salil, what is the nature of this one-off, client issue? Will this reverse out like we saw last year in the same quarter, where we took a client, contract provision? Secondly, is it a single client or multiple client issue that we are talking about? In which segment, have you seen this client issue? I have a follow-up. Yeah. Like I said earlier, this is, you know, one-off client issue, revenue issues, and they are number of clients. It's a mixture of clients, and some of it is a provision against them. Some may come back, some may not come back, and some of it is also linked to cancellations, right, because the revenue impact also beyond the volume impact of cancellations. Yeah, I mean, it is there's a mixture of clients there. The 10% decline that we've seen in U.S. telecom, is it related to this, these client issues? That appears to be a pretty steep decline. 10% decline in? In the U.S. telecom business of yours. Yeah. Yeah. No, I don't think anything specific in coming out of these issues really. Okay. The last one is, if I look at your guidance, it implies a 2.9% sequential growth over the next four quarters. The last we saw this ex of the COVID surge was in FY 2016. What drives such a high growth comfort for us, in an uncertain, environment? Sorry, just say that again, please. I didn't follow that. The CQGR requirement for your top end of guidance is around 2.9% sequential every quarter. This is something that ex of FY 2022 we've seen last in FY 2016. So in an uncertain demand environment, what drives such a high growth comfort? There, what we've seen with our guidance is, we have some good large deals that we closed in the previous financial year, and we have a pipeline which gives us large pipeline, several of them mega deals. The opportunity to have those come into our mix and give us a flow through the year. Would you say the sub $50 million deal flow is where the traction is much stronger than what appears in the greater than $50 million deal flow that we announce typically? We don't have a view that we share typically on the non-large deals. Our large deals is one of the components that we use to build out the guidance. Sure, Salil. Thanks a lot and all. Thank you. Our next question is from the line of Gaurav Rateria from Morgan Stanley. Please go ahead. Hi, thanks for taking my question. First is, conversion of the order book to revenue. If I look at your fiscal 2023, you entered the year with a net new deal win of roughly $3.8 billion, which generated incremental revenues of $1.9 million. You're entering fiscal 2024 with a net new deal wins of $3.9 billion, which is pretty similar to last year. The guidance implies, incremental revenues of $1 billion at the midpoint. Just trying to understand that what has changed that is driving significant downtick in the incremental revenue with a very similar net new deal wins in your book? Yeah. I think also part of it is the net new wins and the phasing of that, right? I think in FY 2022, you would have seen them more towards the, you know, throughout the year. If you're seeing in FY 2023, I think the four last quarter, for instance, somebody has also mentioned you know, as being a weaker quarter because there's usually a four to six month gap between that deal win, right, before it comes into revenue. I think partly is the phasing, but the underlying, I think we've had strong deal wins on both sides and a percentage of net new. I think part of the quest answer is the way the net new has flown in during the year. It's to do with the ACV growth being weaker than the TCV growth. Is that like a fair understanding? Could be, could not be. Timing of it, right? I'm just saying that in the net new, like for instance in Q4 as somebody has mentioned, is about 22%. That will reflect in FY 2024 going forward initially. Of course, as new deals ramp up, that's a separate volume impact. The phasing of the wins within that is also to be seen of where did the net news come. Got it. The second question is around the comment that you made around the stabilization that you have seen in March. Is it fair to say that your guidance is assuming things are likely to improve sequentially from here on and this is the worst, or it's difficult to say that the worst is behind us? At this stage, we are not saying any of those things. What we are saying is we saw some signaling that the environment is uncertain, so we are watchful and agile. And one of the reasons we've expanded the growth guidance band to 3 points is to take that into account. Got it. Last question from me on the margin. How much of the margin downtick is primarily a cost-led issue which will rectify over a period of time, and how much it is kind of flexibility you have given to yourself to go after the deals which may have a fundamental different contract profitability? Thank you. Wow, that's a fantastic question. like I said, I mean, we explained how we've done the margin guidance. We've ended at 21%. That is the midpoint of 20%-22%. We have some headwinds, we have some tailwinds. This margin allows us that flexibility as well as possible computer power to improve that. Thank you. Thank you. We'll take our next question from the line of Sudheer Guntupalli from Kotak Mahindra Asset Management. Please go ahead. Good evening, thanks for giving me the opportunity. Couple of clarifications. Due to unplanned rundowns and cancellations, as you said, we have seen a sharp 3.2% fall in the revenue. Margins fell just 50 basis points. Even based on the apportioning of margins you gave, utilization and cancellation might impact even so much in proportion to 3.2% fall in revenue. Logically, this decline of this magnitude should have entailed a much bigger margin impact given the cost recalibration is difficult in the near term. Just curious, is there any sizable pass-through elements which should have gotten rolled off, which would have also led to the revenue decline? Is there any deferred cost component which will come and hit us in the subsequent quarters? No. We, as we went through the margin walk, earlier, if you go back to our script, we explained the four key elements. I think they're quite clear of how the margin has moved from 21.5%- 21%. Sure. The second part of the reason why I'm also asking about this pass-through component is the SVB scare and the sentiment overhang sort of unfolded from 10th March, post which there were 12 -1 5 working days and the revenue was almost 3.5%-4% short of guidance or expectations, which means there is a $180 million revenue stream. Looks quite a bit for 12-1 5 working days of invoicing. Again, put it conversely, is there a deferred revenue component which can come in the subsequent quarters since you also mentioned somewhere about a provision reversal of some amount? No, I'm not getting clear your question, Sudheer. No, what I was asking was, the in general macro sentiment overhang unfolded, in the last- No, no. No, no. I think, if you say that whether all this shortfall of 3.5% have happened in the last, like, month or something like that? No. Yeah. You're saying the 3.5% shortfall is, evenly spread from the beginning of the quarter itself and not necessarily... That was even. Yeah, of course. The one-timer is a different issue, the majority of the drop in revenue is because of volume. like Salil said, this was pretty much after fifteenth, and we've actually seen March stabilizing. it was in the initial half of the quarter. Okay. Thanks very much. Thank you. Our next question is from the line of Surendra Goyal from Citigroup. Please go ahead. Yeah. Hi. good evening. my first question was on the revenue guidance. Just wanted to confirm that the guidance is all organic in nature. Yes, the guidance is all organic. Yeah. Second question is on margins, for Nilanjan. While I understand that your guidance is always annual, but how do you really think about medium-term margins, right? The common question we have been getting from investors, given the direction of margins, is can it be 18% couple of years down the line? I know you can't quantify it, but just wanted to understand how you guys think about medium-term margins. Yeah. I think I explained it earlier in the question to Kawal as well. You know, if you have to step back and you see, you know, during this period of COVID, you know, for us to go after in a very talent constrained environment, the impact on the cost structure of the company all across, you know, per capita cost went up. Pyramids got, you know, with a combination of compensation, stretches, pyramids got, you know, skewed. You know, basically, fundamentally, you are going behind these large deals. We wouldn't have time to really optimize on all these levers, up fronts, you know, that record 11.3%. All these inefficiencies we saw, but like we have continuously said during that period that we knew that we had to go and grab that volume, and we would have enough time to subsequently, as we start, you know, unwinding those inefficiencies. This is a cost optimization program we run throughout, you know. That's where we still think these inefficiencies still exist across. Utilization is a classic one, and we're sitting today at 80%, as we mentioned. Yeah, it's got a double whammy on costs, like I mentioned earlier. These are things we will continue to target on and aspire to improve our margin. 2020 to 2022 really gives us that flexibility, and 2021 just happens to be the midpoint where we ended the year. Sure, Nilanjan. I get the annual guidance. My question was more medium term because in good demand scenario, margins go down because of supply side issues and in bad demand scenario, possibly they go down because of either pricing or whatever other reason. Maybe I'll just take it offline. Thanks. Thank you. Our next question is from the line of Keith Bachman from BMO Capital. Please go ahead. Yes. Thank you. I had two questions also. Could you talk about what the growth rate of the backlog in the pipeline was during the March quarter and how that differed during the December quarter? I'm just trying to understand the magnitude. You called out volume as the major driver, but how did it, you know, impact the overall backdrop? Within that context, you called out there were several one-time events for customers. Could you give a quantification about what that was in the quarter? Yeah. We don't quantify that, but like I said, the majority has been because of volumes and the balance has been because of the one time of the cross clients, some of them related to cancellation and other, you know, reasons. Okay. Do you want to give a characterization of that one, you know, those cancellations or a quantification of it? No, I don't think anything else we have to add there. Okay. Okay. My second question then relates to pricing. The previous question I think was trying to get at this, and I'm not sure I understood the answer. If you think about the guidance that you provided, on the one side, perhaps I would think that you get COLA benefits associated with your contracts, but a lot of your customers, frankly, are experiencing the same economic weakness you are and therefore could negotiate any tougher pricing as we look out over the next 12 months. In other words, want price reductions because they're experiencing economic pain as well. Maybe just talk, how are you thinking about like-for-like pricing as you look out over the next 12 months in terms of the forecast that you provided or the guidance, excuse me, that you provided? I think if you see pricing in generic, and I won't say, you know, you know, how much of the pricing element has been built in. This is a program we started about a year and a half back. And it is a combination of two or three things. One is, you know, the renewal discounts which clients come back when, you know, programs are ending. And, basically our productivity increases at the renewal stage, which we are just loosely calling discounts. That is something which we have really curbed over the last, you know, few years, basically pushing back on the renewal because there are other ways we can get productivity as well. That's something which has actually, you know, stemmed quite a lot. In fact, clients understand that we have to also provide for our own talent in this, you know, hot talent market, to compensate their teams. That's something which we've learned to appreciate as well. That's one part of it. Second is a program which we run, on basically digital pricing, where we're going after new digital deals. This is a combination of, you know, how we've changed our pricing models into linking it. For instance, the newly acquired subsidiaries which have higher pricing, it could be more product-based pricing, outcome-based pricing. There are new innovative pricing constructs. That's second. Third is simple hygiene work of, you know, having pull-out clauses into our, you know, MFAs. Of course, how much you can execute and implement is a different question. At least with that in deals going in, at least you have a starting point to negotiate with the client as well. It's all three we look at in terms of existing deals, new deals and renewals. Of course, you have clients where we are able to push this through gate level. Some clients ask for that to be plowed back into the employee set. Some clients, it depends on markets, of course, who are going through their own, you know, sort of, concerns on their environment. It may be more difficult. Therefore it's literally horse before cart in which we go literally client by client to see where we can get an improvement in the underlying RTP realization. What is the underlying assumption associated with the guidance for FY 2024, and how is that different, on what you've experienced in the past? Yeah. Yeah. Absolutely. We don't break down our guidance into volume and price, if you wanna call it that way. Mm-hmm. That's all entered into the overall guidance. I have to say, yeah, more just directional. Is it, you know, the same, better or just kind of directional parameter? Yeah. We would expect pricing to improve, right? Now, you know, I can't give you a sense of, you know, versus last year how much we anticipate to improve. Yes, we have the pricing improvements baked into our overall plan. Okay. Fair enough. Many thanks. Thank you. Our next question is from the line of Abhishek Kumar from JM Financial. Please go ahead. Hi, good evening, and thanks for taking my question. We've seen some divergence in the client behavior that we have talked about versus what some of our larger peers have spoken about. One, we have seen March stabilizing, while what we heard yesterday out of March actually deteriorated. Second, the discretionary spend, you know, some peers have actually got deferred and not canceled. While we have seen certain cancellation in the projects. In that context, just wanted to understand the nature of, you know, these projects which are being canceled. Are these discretionary or there are also vendor consolidation deals where we might lost to larger peers? The, what we shared was some of the projects or programs were stopped in an unplanned way during the course of the quarter. These are not resulting from vendor consolidation. These are resulting from decisions that the clients have typically made on their spend given the environment that they face. Okay. Okay. sure. thank you, and have a good day. Thank you. Ladies and gentlemen, that was the last question for today. I now hand the conference over to the management for closing comments. Over to you, sir. Thanks, thanks everyone for joining us. As we shared through the call, first for the full year, we had good growth, good margin, good cash collection. We saw during the quarter some situations which were new situations during the quarter with the changing environment. We have a strong guidance for next year, 4%-7% of growth. We have a good guidance on margin. We've put in place even more emphasis on cost and efficiency plan, which has many components at a detailed level. We look to see that benefit come through over a multi-year period and aspire to higher margins. And we have an extremely strong pipeline with large deals and some mega deals, especially on cost efficiency automation. With that, we feel the business remains in a good position and we have the ability to work through different environments on digital transformation and/or on cost efficiency consolidation as the course of the year develops. We look forward to executing on that and connecting with you at the end of this Q1. Thank you. Thank you. Ladies and gentlemen, on behalf of Infosys Limited, that concludes this conference. Thank you for joining us. 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