Please note that this conference is being recorded. In our hands, the conference. Over to Mr. Sandeep Mahindroo. Thank you, and over to you, sir. Hello everyone, and welcome to Infosys Earnings Call for Q4 and FY24. Joining us on this call is CEO and MD Mr. Salil Parekh, CFO Mr. Jayesh Sanghrajka, and other members of the leadership team. We'll start the call with some remarks on the performance of the company, subsequent to which we'll open up the call for questions. Kindly note that anything we say that refers to our outlook for the future is a forward-looking statement, which must be read in conjunction with the risks that the company faces. A complete 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 evening and good morning to everyone on the call. For the financial year 2024, our revenue growth was at 1.4% in constant currency terms. Our operating margin for the full year was 20.7%. For large deals, we had an excellent year and the fourth quarter. For the full year, we were at $17.7 billion in large deals, comprising of 90 deals. For Q4, we had $4.5 billion in large deals. This is the highest-ever large deal value in a financial year for us. This is a reflection of the trust our clients have in us. We see good traction in cost efficiency and consolidation deals. For Q4, our year-on-year revenue growth was flat in constant currency and declined by 2.2% quarter-on-quarter. Our operating margin for Q4 was 20.1%. We had a one-time impact in Q4 that Jayesh will comment on. We're seeing excellent traction with our clients for generative AI work. We're working on projects across software engineering, process optimization, customer support, advisory services, and sales and marketing areas. We're working with all market-leading open access and closed large language models. As an example, in software development, we've generated over three million lines of code using one of generative AI large language models. In several situations, we've trained the large language models with client-specific data within our projects. We've embedded generative AI in our services and developed playbooks for each of our offerings. We're committed to ethical and responsible use of artificial intelligence. We became the first IT services company globally to achieve the ISO 42001:2023 certification, testifying to our commitment to excellence in AI management. All of our work in AI is part of our Topaz offering. Our cloud work is growing well. We continue to work closely with the major public cloud providers and on private cloud programs for clients. Cloud with data is the foundation for AI and generative AI, and Cobalt encompasses all of our cloud capabilities. Data is the other foundation for AI and generative AI. We see data structuring, access, assimilation critical to make large language models and foundation models to work effectively. We see good traction in our offering to get enterprises data-ready for AI. We are delighted to announce a strategic acquisition of a company in the engineering services space this quarter. Some examples of the work we are doing: for a large U.S. company, we've engineered an enterprise-grade generative AI platform that has been rolled out to over 60,000 users. We're working with a large bank and helping them roll out an internal, enterprise-wide, company-specific generative AI instance of a knowledge assistant. We continue our focus on our margin program. We saw good impact of this during the financial year. Our employee attrition was low at 12.6%, down from 20.9% in the previous year. As we look at the start of the financial year 2025, we see the discretionary spending and digital transformation work at the same level. We see focus on cost efficiency and consolidation continuing. Our large deal wins in the prior financial year will help us in financial year 2025 for our revenue. We also see normal seasonality as we plan this financial year in terms of guidance. With that, our revenue growth guidance for financial year 2025 is 1%-3% growth in constant currency. Our operating margin guidance for the financial year 2025 is 20%-22%. With that, let me hand it over to Jayesh. Salil, hello everyone, and thank you for joining the call. At the outset, I must say this is an incredible privilege and honor to be the CFO of this iconic organization and would like to thank Salil, Nandan, and the entire board for their confidence in me. As I step into my new role, my areas of focus will be further strengthen collaboration with business to increase our market share, work with Salil and rest of leadership towards tighter execution, and continue to steer Maximus program, expand operating margins, and improve cash flow in the medium term. Coming to our Q4 results, revenues were flat year-on-year in constant currency terms. Sequentially, revenues declined by 2.2% in constant currency and 2.1% in dollar terms. During the quarter, we had a renegotiation and rescoping of contract with one of our financial services clients, which led to slightly over 1% impact on Q4 revenues. While part of the work got rescoped, over 85% of the contract is still with us. FY 2024 constant currency revenue growth was 1.4%. Normalized for the impact of revenues from the FS client, the revenues for FY24 were within our guidance range of 1.5%-2%. Operating margins for Q4 were at 20.1%, a decline of 40 basis points sequentially, bringing the FY24 margins at 20.7%, well within our guidance band of 20%-22% for the financial year 2024. The major components of QoQ margin works for the quarter are as follows: headwinds of 180 basis points comprising of 100 basis points from the one-time impact of contract renegotiation and rescoping, 80 basis points from additional impact on salary increases, higher brand building, and visa expenses, partially offset by tailwinds of 140 basis points comprising of 60 basis points from lower post-sales customer support, lower provision for client receivables, etc., 40 basis points from Project Maximus, and 40 basis points relating to Q3 impact from cyber incidents. Headcount at the end of Q4 was over 317,000, which led to further increase in utilization, excluding trainees, to 83.5%. LTM attrition for Q4 reduced further by 0.3% to 12.6%. Unbilled revenues dropped for the fourth consecutive quarter to $1.7 billion. This is a reduction of $291 million in FY 2024, which is reflecting in increased cash flows. Free cash flows for the year were $2.9 billion, which is a 14% increase over FY 2023. Free cash flows for Q4 were extremely strong at $848 million, which is the highest in last 11 quarters. This is a result of our focus on improving working capital cycle. DSO for the quarter was 71 days compared to 70 days in Q3. Consolidated cash and cash equivalents stood at $4.7 billion at the end of the quarter. Yield on cash was at 7.1% in Q4, and return on equity improved to 32.1%. ETR for the quarter was 22.2%. After accounting for favorable orders, we expect the FY25 normalized ETR to be within 29%-30% range. We had another strong quarter in terms of large deal wins, $4.5 billion of TCV from 30 deals, including two mega deals. 44% of this was net new. We signed eight large deals in communication, six each in BFSI and retail, four each in manufacturing and life sciences, two in EURS. Region-wise, 16 were from North America, 10 from Europe, and four from the rest of the world. We ended FY 2024 with our highest-ever large deal TCV of $17.7 billion, comprising of 52% net new and eight mega deals. This is a clear validation of relevance of our service offering, deep client relationships, and leadership strength. The board has declared a dividend of INR 20 for FY 2024 along with a special dividend of INR eight per share. With this, the total payout for FY 2024 will be 85% of FCF in line with our capital allocation policy. The board has approved the capital allocation policy for the next five years. Effective FY 2025, the company expects to continue the policy of returning approximately 85% of free cash flows cumulatively over a five-year period through a combination of semi-annual dividend and/or share buyback, special dividend, subject to applicable laws and requisite approvals. Under this policy, the company expects to progressively increase its regular dividend per share. Project Maximus, our comprehensive margin expansion program, continues to run well across five pillars. This is reflected in more stability in margins for FY 2024 over 2023 compared to the previous years despite the headwinds from lower growth in FY 2024. Some of the tracks where we have made progress are value-based selling, automation and AI, and sub-tracks within the efficient pyramid like lower subcons higher utilization and higher NISHO. We continue to focus on optimizing various tracks to increase operating margin in the medium term. Coming to the industry verticals, we continue to see macroeconomic effects of high inflation as well as highest interest rates in BFSI. This is leading to cautious spend by clients who are focusing on investing in services like data, digital AI, and cloud. Financial services firms are actively looking to move workloads to cloud. Pipeline and deal wins are strong, and we are working with our clients on cost optimization and growth initiatives. Manufacturing witnessed a double-digit and broad-based growth in FY24. There is increased traction in areas like engineering, IoT, supply chain, smart manufacturing, and digital transformation. In addition, our differentiated approach to AI is helping us gain mind and market share. Topaz is resonating well with the clients. We have a healthy pipeline of large and mega deals. In retail, clients are leveraging GenAI to frame use cases for delivering business value. Large engagements are continuing as for HANA and along with infra, apps, process, and enterprise modernization. Cost takeout remains the primary focus. Clients in the communication sector continue to be cautious with growth and challenges. New CapEx allocation remains under check while the budgets remain tight. We see opportunities in cost takeout, AI, and database initiatives. Growth in coming quarters will be led by ramp-ups of previously won deals. EURS clients are taking a cautious approach with focus on cost optimization and AI-driven efficiencies. We are witnessing more deals around vendor consolidation and infra managed services. The deal pipeline of large and mega deals is strong due to our sustained efforts and proactive pitches for cost takeouts and digital transformation, etc., across the subsectors. Micro concerns in Hi-Tech continue leading to delays in deal closures, decision-making, and clients repurposing spend. Discretionary programs are kept on hold. In FY 2025, therefore, we expect growth to accelerate from FY 2024 levels in financial services and telecom verticals due to large deal wins. Manufacturing sector, while still showing healthy growth, will see lower growth than FY 2024. Hi-Tech is expected to remain soft. Driven by our current assessment of business environment, including continued software discretionary spend and ramp-ups of mega deals, won earlier, we expect FY 2025 growth to be 1%-3% in constant currency terms. Our operating margin guidance for the year is 20%-22%. Guidance for FY 2025 does not factor in today's acquisition of in-tech. With that, let me open the call for the questions. Thank you very much. We will now begin the question and answer session. Participants who wish to ask a question may press star and one on their touch-tone 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 or do not have a clear connection, you may be asked to return to the question queue. Ladies and gentlemen, we will wait for a moment while the question queue assembles. The first question is from the line of Moshe Katri from Wedbush Securities. Please go ahead. Thanks. Jayesh, welcome and congratulations in terms of your role at Infosys. Sorry to interrupt you. Your voice is not coming clearly. May I request you to speak a little louder, please? Yes. So my first question has to do with the June and September quarters that tend to be seasonally the strongest in the industry. Can you provide any color on sequential growth for March and June given your guidance for fiscal 2025? Thanks. So Moshe, this is Jayesh here, and thank you for the wishes. If you look at within our guidance range of 1%-3%, we expect normal seasonalities, which means that H1 would be stronger than the H2. Okay. And then given you indicated that the fact that the Fed's cutting rates is going to be kind of delayed and pushed out, and that's impacting demand for discretionary spending, are clients also talking about the past few weeks, the political instability in the Middle East that's also kind of one of those negative headwinds there? Hi, Moshe. Salil, I think I understood the question. We spoke a little bit about the outlook in terms of discretionary and digital. And I think your question is, is the current Middle East situation what clients are talking about? So in general, the sense we've had in discussions with clients is on the discretionary work and the digital transformation work, it's about the same mindset as it was in the past financial year recently, like in Q4, Q3. Now, I'm sure we've not specifically heard any commentary on this situation, but I'm sure that's something that people are thinking about. But it's one among many factors that are playing out, is my guess. Understood. Thank you. Thank you very much. Next question is from the line of Ankur Rudra from J.P. Morgan Chase and Company. Please go ahead. Hi. Thank you and welcome, Jayesh, on the new role. The first question is, Salil, the environment clearly appears difficult. Now, the main thing that we find a bit difficult to understand despite that is the lack of revenue acceleration despite very impressive large contract signings that you've enjoyed for close to a year now. Could you maybe elaborate a bit more on the persistent disconnect and if the large deal signings is something that we should pay attention to if this environment continues? So thanks, Ankur. It's Salil. What we are seeing first on large deals is especially for cost efficiency and consolidation, we are proving to be a good choice for clients. And that's where we're seeing a tremendous benefit for what is going on. In terms of what we've given as guidance, so first, what we see is the digital transformation or discretionary thinking from clients is remaining similar, which was slow in the past in Q4, Q3. We see that continuing on. So that gives some of the ways where revenue is less within our guidance outlook. The large deals prove a positive part of that outlook. And those are the puts and takes. Now, we see in financial services, the coming year appears better. This is not on digital or discretionary alone. It's across the industry. Whereas on manufacturing, we are seeing which we had a good growth in financial year 2024, we'll still have growth but a slower growth in financial year 2025. And those are the sorts of puts and takes which give us this type of guidance with some things which are supportive and some things which are constraining. No, thank you for the additional color. I mean, maybe just ask in another way. You just reported your large contract signings on your contracts above a certain threshold. If we were to look at the overall contract signing, would the momentum there be more similar to the revenue momentum we see? So there, we don't, as you know, disclose the other non-large deal signings. Again, the overall color of the pipeline and the deal wins is good. But what it doesn't take into account is when some things on a digital transformation or on discretionary slow down. So that doesn't come into the game when you look at some of the deal wins at whatever size. Those are the puts and takes that we see as we build the forecast for next year. Understood. Just one last clarification. The 100 basis points impact you highlighted, Jayesh, is that revenue impact a combination of the impact of the rescoping, which is probably one-time, and a penalty because it seems a lot more than 15% of one client? Hi, Ankur. Thanks for the wishes at the beginning. That 1% impact or over 1% impact of revenue is reflecting into the margin pretty much directly in terms of 100 basis points. That's the vast majority of the impact. Okay. So that's not a revenue impact. That's a margin impact, to clarify then. No, it's a revenue impact. That's what I said. It's a revenue impact of 1%, which is flowing down to margins directly. Okay. Let me repeat. My question was, 1% seems a lot more than 15% of one client because I think you've said you've retained 85% of scope. So this seems to be more than the impact of rescoping. Is that a one-time impact which will reverse and then the rescoping only will be part of this? That was the question, essentially. Yeah. So Ankur, when you rescope 15% of the impact, doesn't mean that the I mean, 15% of the work doesn't mean that 15% of the revenue goes away in one quarter, right? It depends on how much of work you have done, how much of the impact you are therefore taking, right? There's no penalty per se. It's a question of how much of work I've done and how much of that goes away, pretty much. Okay. Thanks. On that whole of 1%, 15% has gone away in one quarter, right? So it's the 15% of the overall work which got rescoped. Okay. Appreciate it. Thank you, investment partner. Thank you. The next question is from the line of Kawaljeet Saluja from Kotak. Please go ahead. Okay. Hi. I have a couple of questions or maybe slightly more than that. The first question is on the guidance in itself. It has been more of quite a series of misses in FY2024. What are the learnings you have incorporated when you basically have taken a stance or taken another stab at guiding for FY2025? Yeah. That's the first question. Hi, Kawal. This is Salil. So what we've attempted to do in the guidance is look at what we have seen, for example, on digital work and discretionary work, which is reducing or slow in the coming financial year where we don't see the change, and then layer in what we see in terms of the large deal wins into the financial year 2025. And then, as in sort of most years, we have a view of seasonality where the H1 is stronger than the H2 for us at Infosys. Typically, we see that impact with a slower Q3, Q4. So that's how we have attempted to build the guidance that we put in 1%-3%. Okay. Is the first. If I may add, when we started the year last time, we were also coming from a very high-growth environment, right? We had that kind of exit trajectory that was also helping from a guidance perspective or that was getting baked in our guidance perspective. Today, when we are looking at it, we are coming out of a 1.4% growth. Therefore, I believe that kind of a tailwind is not there in any case in the guidance. Okay. Fair enough. The second question that I had is that can you detail the reasons or factors that led to the rescoping of projects with a large client? Typically, your large deals do carry execution risks. So what are the learnings from the past large deals that you have signed, which you have incorporated, in the current crop of large deals here? This is Salil. First, I think what we have seen across the board is we have had tremendous success in the large deals and the various delivery of that. Some of the learnings we are putting in place in general, not from a specific deal, is more to do with how we understand complexity, how clients look at complexity, and how we make sure that we remain aligned in that. On the specific deal, there is no other comment. We've made a statement in all our press notes, but there's no other comment on that specific situation. Okay. The final question that I had is to Jayesh that last year, there was a mention that the endeavor would be to expand operating margins. I think the guidance band for FY25 is unchanged. Is there a timeline within which you intend to expand or increase your operating margins? And what are the factors or the type of environment that is required to push through the margin expansion as such? Yeah. So Kawal, even if you remember, the last time as well, we had said our endeavor is to improve margins or operating margins in the midterm, right? And we still maintain that. We haven't changed from that. The Project Maximus is in works. We have seen encouraging results, as you can see, even from the walk of this quarter or the previous two quarters. We have called out the benefit that we have got from Project Maximus. If you look at FY25 guidance, then the puts and takes of those guidance is we do take back in the revenue growth that we are envisaging. On top of that, we had a comp flow-through of last year. We did our comp increase from November. So there's a full-year impact or additional 7-month impact coming in in the next financial year, plus the comp that we will do for this financial year. So those are the headwinds. And in terms of tailwinds, our utilization is still tight below our comfort level of 84%-85%. Our subcons are still higher from where we think we can operate in an optimum level of 5%-6% efficient pyramid. We can improve role ratios. In an ideal scenario, if the growth is better, the ability to improve role ratio is much better. But even in a constrained environment, we are improving role ratios. So those are the factors on efficient pyramid. On the GenAI and automation, we have done a lot of progress, and we are doubling down on that. I think all of those are baked in the current guidance of 2020-2022. But our endeavor continues to improve operating margin in the midterm. Okay. Thank you for answering my questions and wish you a good 2025. Thank you. Thank you. Next question is from the line of Kumar Rakesh from BNP Paribas. Please go ahead. Hi. Good evening. Thank you for taking my question. My first question was on BFSI. [audio distortion] Hi. Is this better? Yes. Please go ahead. Sure. My first question was on BFSI. Even if we adjust for this contract renegotiation, the vertical seems to have still declined by about 3%-4%. While some of your peers have started talking about recovery in BFSI, and they have also saw the recovery in the March quarter. Is there something outside of this contract renegotiation also which happened in the vertical which is specific to you? So Kumar, if you look at BFSI, I think one is we have a larger BFSI portfolio. Second is our discretionary share on the BFSI has been higher. And that is what is impacting our overall portfolio from the growth perspective. I don't think it's significantly different from the companies' overall headwinds. BFSI also has a similar headwind in terms of discretionary work that we do with the clients. In addition to that, we do have exposure to mortgages, etc., which has, as we have called out earlier, which has remained softer in this environment. But as you hear from us, we have called out that we expect BFSI in FY 2025 to be better than FY 2024. So we do see some encouraging outlook there. Okay. And from the renegotiation part itself, is the impact fully reflected in this quarter, or there could be more impact going into the next quarter? The impact is completely taken in this quarter. Okay. Got that. And my second question was around the margin guidance which you have spoken about. So your global peers as well as domestic peers, all of them usually have spoken about margin expansion, confidence around margin expansion this financial year itself. So I appreciate your target of medium-term margin expansion. But would you say you are confident of margin to have bottomed out around the levels where you currently are seeing, or the kind of mix you have in the order book holds you back from giving any directional sense on that? So again, Kumar, we're not guiding which part of the 2022 we will be. As I said earlier, our endeavor is to improve margins from where we are. But we are not giving the financial year 2025 guidance. If you go back to the puts and takes, we do have some headwinds in terms of compensation, some of these large deals ramping up during this year, as well as we have tailwinds coming from pricing, coming from efficient pyramid, the automation and GenAI we are deploying. So we will not leave any stone unturned on this project, but we have not guided in terms of where we will end up in this year within this band. Got it, Jayesh. Thanks a lot and best wishes in your new role. Thank you, Kumar. Thank you very much. Next question is from the line of Keith Bachman from Bank of Montreal. Please go ahead. Hi. Good evening and good afternoon. I also wanted to ask two questions that are related, and I'll ask them together. The first is, could you just talk about how you see utilization trends unfolding this year? It seemed to me that with the labor market fairly weak, that your utilization should go higher. And similarly, that wage hikes, with the market being fairly weak on the employment front across many parts of tech, that it seems to me that wage hikes should be lower. And maybe I'll just stop there, and then I'll ask my follow-on question. If you could just talk about those specific puts and takes that would influence margins. Yeah. So Keith, if you look at our utilization, our utilization including trainees was at 77% last year, which has gone up to 80.7% for the full year, and we are exiting at 82%. So that clearly shows a significant five-point increment from the utilization perspective. We have been able to deploy all the freshers, a large number of freshers, back to production. So that's on utilization. Our comfort level on utilization, including or excluding trainees, is around 84%-85%. So we still have some headroom there. On the compensation, whenever we decide on compensation, we take multiple factors into account: inflation, peer practices, etc. So we will take all of that into account during the year when we decide on compensation. At this point in time, we haven't decided on the quantum of the timing as we just did our last compensation in November last year. Okay. It just surprises me more. I'll make a statement, and then I'll ask my follow-up question. That, with sort of tepid revenue growth, I'm surprised that margins wouldn't go higher during the course of the year relative to this past year, given those sources and others. My following question, though, relates to GenAI. And there's two parts of GenAI. There's demand side and supply side. So I'm not asking about demand. My supply side is, are you factoring in increasingly GenAI as you're undergoing software development activities on behalf of your clients? Is that helping your productivity yet, or is it still too early? And along with that, if you are using GenAI to facilitate or enhance your efficiency on code development, is that a negotiation that's starting to unfold with your clients that they're asking for lower billing rates, if you will, related to that efficiency? Is that happening yet, or is it still too early? So thanks for that. This is Salil. On generative AI, on the projects we are working on, we are starting to, we have already seen benefits on productivity in software engineering. What we've seen there is, so it's really more focused on a narrow dataset, in this case, the software capability within an enterprise, within a client base, not sort of broad-based today. And there, we are seeing impacts and benefits. What we see is typically we've not seen so far the rate discussion, but we can certainly see, in some instances, benefits where clients can do more work in terms of creating more output for the same type of an effort. So there is definitely a productivity benefit, but we've not seen something which has come back on the rates in that sense. Okay. Perfect. Many thanks for your help, and best of luck during the year. Thank you. Next question is from the line of Gaurav Rateria from Morgan Stanley. Please go ahead. Hi. Thanks for taking my questions. My first question is with respect to the ramp-up of some of the mega deals that were supposed to start towards the back half of fourth quarter. Have you seen them starting on time, and do you expect these to kind of create some momentum in the coming quarters? Hi, Gaurav. So what we had envisaged at the beginning of the quarter of the mega deals starting in Q4 have started as planned. Got it. Secondly, on guidance visibility, typically, when you start the year, you have a certain level of visibility. Maybe, let's say, 65, 70, whatever that number is. Given that you are entering this year with significantly larger deal wins, would it be fair to say that visibility would be slightly higher than a usual year for FY25? So Gaurav, if you look at over the years with the portfolio mix changing, where our discretionary portfolio has become larger in terms of our portfolio mix, the visibility has obviously come down from the annual perspective. Some of these projects are short-duration, etc., and discretionary in nature. So to that extent, you do have that lack of visibility, if I may use that word, versus the years earlier. But yeah, compared to that, if you look at the large deals, large deals do benefit from a long-term perspective. So you do have a foundation of large deals, but at the same time, you do have smaller deals which are discretionary and can be where we are still seeing some of them are being reduced or being stopped or scaled down. Okay. Last question on your comment on one of the drivers for margin, medium-term improvement was GenAI-related automation-related savings. How confident you are to retain these savings as quite possibly these get renegotiated over a period of time, and the clients kind of extract that back from the vendor? So just trying to understand, is this going to be sustainably an important driver for margin improvement in the medium term? Thank you. So Gaurav, I think things will evolve over a period of time. At this point in time, we are able to retain part of the automation, AI, GenAI, part of the work that we are doing. But yeah, how it will evolve over a period of time is yet to be seen. Gaurav, do you have any follow-up questions? Thank you. That's all from me. Thank you. Thank you. The next question is from the line of Bryan Bergin from TD Cowen. Please go ahead. Hi. Good evening. Thank you. First one on the workforce. So understanding you have still some room for utilization to move higher, but do you expect that the June quarter headcount might stabilize, or may that still be declining sequentially? Bryan, on the utilization, we are currently at 82% excluding trainees and 83.5% including trainees. We still have a headroom there. As I mentioned earlier, we think we can go up to 84%-85% utilization. Okay. So implying headcount may continue to decline sequentially if that's the case and just run normal course on attrition? Yeah. And coming back to your other question on headcount, if you look at through the year, we started the year with 77% utilization, and the demand environment was different, so we had a different expectation. Through the year, that demand environment has changed, so that has impacted the headcount, the need of the headcount. The attrition has significantly come down. We are now trending at around 12.6%. Plus, we got some benefit from our value-based selling in terms of pricing. So all of that has also resulted in a lesser requirement in terms of headcount. And that's why you see a net negative. Going forward, again, as I said, we still have some headroom on utilization, so we will tap into that. We will look into demand. Over the years, we have moved to an agile hiring model where we can hire a large number of freshers off the campus. We will tap into that as required as we go through the year. Okay. Okay. Appreciate that detail. And then just on backlog. So you've continued to post really strong large-deal signings. It's clearly not yet converting to revenue at the same pace, but maybe we can dig in a little bit on backlog trends. Has there been any material backlog degradation or leakage? Is it just significant widening in average duration? Just anything you do to help us understand some of the moving parts that better affect the signing to revenue growth. I don't think there is anything beyond what Salil mentioned earlier in the call in terms of discretionary coming down. There are no material large deals being stopped, etc. So it's just a discretionary rundown that is resulting into this. Okay. Thank you. Thank you. Next question is from the line of Ashwin Mehta from Ambit Capital. Please go ahead. Hi. Thanks for the opportunity. Would like to ask this question a different way. You have close to $9.2 billion of net new deals in FY 2024. In addition, you will have net new from smaller deals as well, which you do not report. And in addition, there'll be more deal signings in FY 2025. Plus, we'd indicated most of the 2Q deal flow will ramp in FY 2025. So assuming whatever duration, ideally, the guidance should have been more. But where are the leakages in the existing business, and is discretionary demand worse in FY 2025 versus FY 2024? Hi, this is Salil. Let me start. I think the point on the discretionary outlook or digital transformation outlook, we find it's similar to what we've been seeing in this Q4 and Q3. We don't see a change in that. That's what we factored into how we've built the guidance, keeping in mind some of the benefits of the large deals. Okay. My second question was, in terms of the 100 basis points impact on margins because of renegotiation, will that reverse immediately for us in 1Q, or will it take time in terms of recovery? Ashwin, this is Jayesh here. This is one-time impact because of rescoping and renegotiation. There is no reversal happening of this. Okay. Okay. And the last one, if I can squeeze, the agile model of hiring is for freshers, which would typically take six to nine months to get productive. So is there a need to hire laterals as you go forward, or from this year's perspective, given where our guidance is, lateral hiring will be pretty limited? Yeah. So I mean, see, lateral hiring, you don't really need to plan a year in advance, right? In offshore, you can hire technically laterals two to three months ahead of time. On onsite, you can hire 1-1.5 months ahead of time. So that's how we keep tweaking the model as we go through the year. So there's no I mean, we have baked in what we see in terms of demand today. And if the demand environment changes, the hiring numbers will change accordingly. Okay. Fair enough. Thanks a lot, and all the best. Thanks, Ashwin. Thank you. The next question is from the line of Sandeep Shah from Equirus Securities. Please go ahead. Yeah. Thanks. Thanks for the opportunity. My question is in terms of the impact on discretionary projects. If you look at the pace, the growth slowdown for Infosys and maybe for the industry has started from Q4 of FY 2023. And most of the reasons cited by you and the others are decline in discretionary spend, which is impacting five quarters in a row for the industry in terms of the discretionary spend. So the question is whether the pace of decline, the leakage in the discretionary projects entering FY 2025 would be similar to what we have seen in whole of FY 2024, starting with the Q4 FY 2023 weak exit rate? Hi. This is Salil. I think what we are seeing is the way clients are looking at their discretionary work or digital transformation work is quite similar to the recent quarter. So we have no comments specifically on things which were from three, four quarters back. We are more seeing how it's changing or not changing in Q4, Q3 versus what we are seeing today for the next period in financial year 2025. The second question, Jayesh, just wanted to understand regarding the reversal of 100 basis points on the revenue, what could be the impact related to 1Q, 2Q, 3Q, or earlier quarters which has been accounted in the fourth quarter, which could have been reversed in the first quarter of FY25? Sandeep, this is a renegotiation and rescoping that has happened this quarter, and the impact is taken in this quarter. We haven't broken down into how much of this quarter and how much of the prior quarters. Okay. But is it fair to say fourth quarter will also include some reversal of the earlier quarters? We are not breaking it down further, Sandeep. Okay. Thanks. Thanks. And congratulations, Jayesh. Thank you, Sandeep. Thank you. Next question is from the line of Vibhor Singhal from Nuvama Equities. Please go ahead. Yeah. Hi. Thanks for taking my question. Some of my questions was mainly on if I could basically get an idea on a line item, which is your third-party items bought for service-related clients. Now, I know we mentioned in the past that it's become a strategic part of our business. But if I look at this number comparatively over the last two years, it has gone up from around 4.5% of our revenue to around 7.5% today. It's a sizable number at this point of time for the full year that I'm talking about. And typically, these things would come at very little margin. Is this increasing part of this as part of our revenue hampering our ability to expand margins to what we could do? What I need to say is that this becoming a part of our strategic business strategy, is that in some way hampering our ability to expand margins from the levels that they are? Vibhor, it was very difficult to hear you. If you could come closer to the mic and repeat your question, please. I'm so sorry. Am I better now? Is it better audible? Yeah. Yeah. Okay. I'm so sorry. So what I wanted to ask was that if I look at this line item called third-party items, bought for service delivery to clients, which is essentially what we called as pass-through revenues, now, that has increased significantly over the past three years from 4.5%-7.5%. Now, I know in the earlier quarters, you've called it out that it's now a strategic part of our business. Be that as it may, this changing nature of our business in which this is becoming an increasingly higher part of our revenue, does that impact our ability to expand our margins from the levels that they are at today? Because as far as we know, these come at very little margin as compared to the overall company margin. Is this a trend that we can expect to continue and this line item to continue increasing as a percentage of revenue going forward as well? So Vibhor, if you are undertaking transformation, large mega deal, it comes with all the costs. It's not only effort costs. It comes with hardware, software costs because you are taking over the turnkey project from the client. And that becomes an integral part of the project delivery. And as a result, you have to procure some of that and provide the end-to-end services to the client. And that's where you see this cost. The good part about this is that these kind of businesses become very, very sticky businesses with the client and long-term commitments from the client. And so it's a long-term business. So far as we are making overall margins on the deal, that's how we look at it. We don't look at it whether it is third-party cost or subcont cost or effort cost only. We look at it, whether we are making an overall margin on the deal while deciding whether we want to go for a deal or not. More importantly, most of these deals that we have taken, we have got much more work from them or significantly more work from them in the surrounding environment from the client, which is how we look at it as a portfolio of the business. We don't have a view in terms of whether it'll remain at the same level or elevated level. It'll depend on the kind and nature of deals come and how we sign it in the future. Got it. I think you preempted my next question. Thanks for that. But just one more question on the subcontractors. Subcontractors have actually come down over the past couple of years from an overall percentage point of view. But it's still, I would say, higher than what we have historically done pre-COVID numbers. So where do you believe we are comfortable with this number? And given that generally, at this point of time, given the revenue growth is quite low, the demand environment in terms of our work that we require is not that high given our guidance of 1%-3%, do you believe there is scope for further reduction in the subcontracting cost from the current levels, or do you believe at 8% that we are today, we've kind of hit the bottom and it's probably going to stabilize at this level? Yeah. So Vibhor, this is one of the tracks under Project Maximus, under the efficient pyramid of reducing subcontractors. We have reduced subcontractors from the peak of last year by almost 3%. Historically, in the past, we have operated in 5%-6%. So we believe there is some headroom to bring that down. Got it. Got it. Great. Thank you. Thank you Thank you so much for taking my questions. That's all from my side. I wish you all the best. Thank you. Thank you, Vibhor. Thank you. A request to all the participants, please use your handsets while asking a question. The next question is from the line of Surendra Goyal from Citigroup. Please go ahead. Good evening, everyone. So I joined the call a bit late, so apologies if this has been answered before. But this case of project or a contract restructuring, rescoping, is this an isolated instance, or are you seeing multiple examples with this being the only significant one to really call out? So Surendra, this is one. We have called it out. It's one-time impact of a large contract in financial services client. It's impacted our revenues by over 1%, and therefore, margins are impacted by 1%. It's a renegotiation and rescoping of an existing contract. But at the same time, if you look at it, over the last few years, we have got additional work from the client, and the 85% of the work under this deal is still continuing with us. So that's all I can offer at this point in time to comment on this specifically. No, Jayesh, my question was, is this an isolated instance, or are you seeing more such deals getting rescoped and impacted? I mean, the reason I say there is one-time impact is it's an isolated impact. We have not really seen any other large contract being rescoped or renegotiated. Right. Does GenAI have any role to play in such rescoping of contracts? There is no, I mean, the reason behind this rescoping or renegotiation has nothing to do with GenAI. One last question, how do you really bake such things into your guidance process, right? Would you be kind of baking in some kind of contingency into the guidance? Because obviously, rescoping seems to be a common theme. It It was mentioned by another large peer of yours recently. So is there additional kind of impact built-in, or this is a risk as it comes along? So when we give guidance, Surendra, we look at what is visible at this point in time. We bake in everything in terms of we know that the discretionary is going, so we have baked that in. We know the large deals that we have signed, so we have baked that in. We don't expect this is one-off incident, so we don't expect any large incidences like that. So that's not really baked in. Fair enough. Thanks a lot, Jayesh. Thank you. Thank you, Surendra. Thank you. The next question is from the line of Nitin Padmanabhan from Investec. Please go ahead. Yeah. Hi. Good evening. Thanks for the opportunity. So Salil, you mentioned that the discretionary spending environment is similar to that of Q3 and Q4, and there's no change. Is it considering that Q3 and Q4 have seen higher declines versus the other quarters of FY 2024, is it fair to assume that Q3, Q4, from a discretionary spending perspective, has been the worst versus the whole of FY 2024, and we are basically assuming that that kind of a situation is sort of continuing through FY 2025? That's the first question. So on what we saw in Q3 and Q4, there's obviously in a normal year, there's differences between Q1, Q2, which are typically stronger, and Q3, Q4. So those are things to be layered into any view that we have. Looking backwards, we don't have any specific comment on which quarter or where things were. We talked, as you know probably, starting with Q1 or even Q4 of the prior year, this sort of a view. But we had not given, let's say, quantification of which quarter was where in that sense. Having said all of that, the general perception, the general observation we have is things change little by little by industry as well, and things evolve across geography as well. So there's not one picture that is there. We are more looking at it from that immediacy of the recent sort of discussions we've had with clients to what we are having now for the future work. Yeah. And is this discretionary headwind more specific or, let's say, more pronounced in BFSI? Is there any such trend, or is it broad-based? No, nothing which is like that very specific onto FS. Sure. And lastly, see, our utilization is at 83.5% including trainees, and we think it can go up to 85%. Now, usually, at least over the last many years, pullback in discretionary has always been pretty sudden. So are we risking opportunity by maximizing on utilization? Is that something to worry about? It's just a question out there. So Nitin, so as I was saying earlier in the call, we have moved to an agile hiring model, right? If you look at an FY 2023-2022 numbers of fresher hiring, more than half of the freshers were hired through off-campus cycles, right? So we have that ability to dip into. We are at 82% including trainees and 83.5% excluding trainees for the quarter. So that's where we are exiting. So we still have if you look at including trainee numbers, we still have 2%-3% of headroom. Our attrition is still at much subdued levels of 12.6%. So we don't see that as an additional stress as well. So we will calibrate this as we go through the quarter and year and take corrective actions. We don't really think that and of course, if there is a need, we can always dip into subcontractors to capture the demand and replenish that through hiring. So all of those tools are available to us to capture demand if there's a sudden change. Sure. And lastly, from a margin perspective, at least in the near term, those 100 basis points will be a tailwind, and non-recurrence of visa costs will be a tailwind. So there should be a pickup in margin at least in the near term. That's a fair assumption to make. Or do you foresee any other headwinds? Yeah. So if you look at, I did give a margin walk at the beginning of the call as well. We had some tailwinds in this quarter as well from the lower provision for doubtful debts or provision towards client collectibles as well as post-sale customer support. So those are the headwinds—I mean, tailwinds—this quarter, which will become headwind in the near term. So I think you have to factor all of those when you're looking at headwinds and tailwinds, so. Sure. Perfect. Thank you so much, Jayesh, and all the best for and congratulations for the elevation. All the best for the year. Thank you so much. Thank you. Thank you. The next question is from the line of Prashant Kothari from Pictet Asset Management. Please go ahead. Yeah. Hi. Thank you for the opportunity. My question was on this contract renegotiation, rescoping thing. For one contract to make such a large difference of 100 basis points on revenues could mean that the contract needs to do 6%-7% of our revenue base, which seems just impossible to me. What am I missing here? If you can help me understand, please. Prashant, it's a renegotiation and rescoping of a large contract. I don't think we are giving any further color on this. It's a large financial services contract. Those 100 basis points, is it an accumulation of impact of several quarters in this one quarter, or this is just pertaining to this quarter alone? When you renegotiate a contract, you will have one-time impact on that coming from that, right, if it is a fixed-price contract. So when you renegotiate, that is likely to happen irrespective of whether it is accumulated or not. Okay. Understood. The second question was on your margin kind of trajectory. Salil, when you joined in, the margins used to be a band of 23%-25%. I think it was low to 22%-24% soon after you joined. And now we are operating in a band of 20%-22%. Just want to understand what has been—I mean, is it a function of the large deals that have gone up a lot in our business mix or something else? Just kind of looking from that point to today, what has changed in the business complexion which is leading to this lower margin, obviously, over a number of years, not just overnight? I think, Prashant, there are a number of factors on that, right? I mean, when we had an elevated level of attrition as well as an elevated level of demand, we had to hire employees at a premium from the market. Demand-supply equation had changed the last two quarters. So that was one factor even during the high-growth environment. The other factors are the business mix as well, the pricing pressure that we had on the core part of the business. I think there are multiple factors that have played over a longer tenure period that you're talking about. I've been here for almost 11 years, so I'm assuming that you're talking about since I joined. But coming back to your questions in terms of where we see, our endeavor is to grow margins from where we are today. We have said that in the medium term, we want to expand our margins from where we are. So there's everything that we are doing to improve margins. All right. Okay. Thank you much. Thank you very much. Ladies and gentlemen, we will take that as our last question. I will now hand the conference over to the management for closing comments. Thank you. Thanks, everyone, for joining in. A few comments from my side. This is Salil. First, we are really excited. Our large deals were at $17.7 billion in the year, largest that it's been in any financial year. Very focused on cost efficiency consolidation with 90 deals overall. Second, we are doing incredible work in generative AI. We are really excited with the opportunities here. We are working across different areas of impact. One of the examples of three million lines of code that we've developed through generative AI, large language model, is just amazing types of results we're seeing at this early stage of the generative AI opportunity. Next, our margin program is working well. We are excited about it, and we want to keep our focus on it with a view to expand our margins over time. We are really excited about the acquisition we've done in engineering services. It's a phenomenal growth area. It's in a market we understand well. We're doing quite well in the European market, and it's a space even within engineering services, more narrowly in automotive, which looks really good. One of the things we didn't talk maybe a lot about in the call that I just want to highlight was we had extremely strong cash generation at $2.9 billion for the full year. With all of that, we're really looking forward to delivering our growth and margin guidance for this coming year and looking forward to more and more work that we see through all of these different activities. Thank you all for joining us, and catch you at the next quarter call. Thank you very much. Ladies and gentlemen, on behalf of Infosys, that concludes this conference. Thank you for joining us, and you may now disconnect your lines. Thank you.