Ladies and gentlemen, good day and welcome to the KPIT Technologies Limited Q4 FY 2022 earnings conference call hosted by Dolat Capital. As a reminder, all participant lines will be in the listen-only mode, and there will be an opportunity for you to ask questions after the presentation concludes. Should you need assistance during the conference call, please signal an operator by pressing star then zero on your touchtone phone. Please note that this conference is being recorded. I now hand the conference over to Mr. Rahul Jain from Dolat Capital. Thank you, and over to you, sir. Thank you, Faizan. Good evening, everyone. On behalf of Dolat Capital, I would like to thank KPIT Technologies for giving us this opportunity to host the earnings call. Now I would like to hand the conference over to Sunil Phansalkar, who is head of IR at KPIT, to do the management introductions. Over to you, Sunil. Thank you, Rahul. Good evening, everybody, and a warm welcome on the KPIT Technologies Q4 and FY 2022 earnings call. On the call today we have Mr. Ravi Pandit, our chairman, Kishor Patil, CEO and MD, Sachin Tikekar, our joint MD, Priyamvada Hardikar, CFO, and Sunil Phansalkar from Investor Relations. I hope you have all received our investor update and gone through it in detail. As we do, we'll have the opening remarks by Mr. Pandit on the overall performance of the company and the way forward. Post his opening remarks, we'll have the floor open for questions. I would once again welcome you all and hand it over to Mr. Pandit. Thank you, Sunil. Welcome to all of you. In my initial comments, what I would like to do is to talk about the last quarter, the last year. I'll spend a minute or so talking about the trends over the last couple of years. I would then want to talk about the global customer trends and the workforce trends, because I certainly would like to know how do we see the future of our work. Then I would like to talk about what is our next year's outlook and give you a flavor of the company that we are building. As Sunil has mentioned, post that, we can go into the question and answer session. As Sunil mentioned, you probably have already seen our investor update for Q4 2022 and FY 2022, and I hope you are happy with the performance that our company has delivered. If I were to look at the last quarter, we have had an all-around growth of revenue, EBITDA, PAT, cash, etc. The revenue growth was 5.2% on a quarter-on-quarter basis and 21% on a year-on-year same quarter basis at constant currency. This of course understates the volume growth to which I'll come in a short while. Our EBITDA grew 5.6% quarter-on-quarter and 30% on a year-on-year basis and is now at 18.6%. The PAT has grown 12.7% quarter-on-quarter, 50% actually on year-on-year same quarter and is now at 12.1%. The cash balance now is INR 1,038 crore. This is, you know, post the dividend payment that we made. If you remember, we did the interim dividend some time back. In this quarter also, as we have announced, we got a large deal of $125 million in addition to a specific large deal of EUR 70 million. We are ending the year with a staff of about 8,250 people. All in all the quarter was good. This kind of came on top of a good last year. Let me just quickly look at the last year. Our revenue for the whole year was $328 million. EBITDA of INR 438 crore. PAT up to INR 74 crore. The revenue growth was 19.7% constant currency. You know, I think it is important to recognize that this was accompanied by almost an 8% shift to offshoring. I think the volume growth was in the region of 28%. Which of course you have seen, you know, its result on the EBITDA and on the PAT. Our EBITDA grew by 41%, PAT by 88%. We have, as I said earlier, a healthy cash balance. Actually, 79% of our balance sheet is cash. The return on equity has improved from 12.1% last year to 20.9%. The EPS from INR 5.4 per share to INR 10.05. You'll be happy to note that we have increased our dividend from INR 1.85 per share to INR 3.1, while still having a conservative dividend payout ratio of roughly 31%. Our growth has been balanced. US now accounts for 39% of our top line, Europe 40%, Asia about 21%. Passenger car 74%, commercial vehicles 26%. The growth is spread across our practices both new as well as old, and we have integrated some new practices during the year to deal in fact with the needs of our clients. The key 21 customers on whom we have a large focus account for almost 84% of our revenues. That is really the summary of the last year. If one were to look at the last couple of years, so we have now delivered seven quarters of continuous revenue growth and margin expansions and 12 quarters of net cash increase. Over the last seven quarters, our EBITDA margin has grown from 13.4% to 18.6%. Net cash has grown from INR 0.9 billion to INR 10.38 billion, and the quarterly revenues have grown from $65 million to $87 million. Now we have top 21 clients who are really the who's who of the automotive world. For many of these, we are their core strategic partners working in areas that define their future. Since our strategic action of merger and de-merger, we believe that we have created value for our clients, for you, our investors, and for our staff. I would like to thank you for your continued support. Now, while we talked about the last year and maybe 2 years, I'm certain that you are keen to understand how do we look at the industry in which we are operating. I would like to spend a few minutes talking about the global customer trends, because that might give you a peek into how we look at our future. We believe that we are witnessing the most transformative period in the life of our industry, the mobility industry. This is so actually in the last 100 years, things have not changed as they are changing now. You will recollect that we have been talking for the past few years about CASE, which is, you know, connected, autonomous, shared, and electric as the drivers of change in the mobility industry. In the last one year, all these trends have been converging into a new phenomenon, which can be rightly called the software-defined vehicle. Until recently, we had computers inside a car. Now we have a car around the computers. The computers are actually becoming the core of every vehicle, which actually is very aptly described by the term software-defined vehicle. The question is, what changes are driving this? Why is it that people are talking? Why is it that the industry is talking about software-defined vehicle? I think there are a few reasons, a few drivers for this change. First is, of course, it's a desire to build an intelligent vehicle, a vehicle which is aware and responsive to the environment. Second is the need to build agile systems which are highly responsive, which can be changed over the air. The auto companies now believe that data monetization is their way forward. They are not looking at a situation where there is a one-time sale of a vehicle, and thereafter there is no connect with the customer. Instead, now there is a realization that the automotive, the car delivers data all the time and the auto OEM would like to partake in the monetization of that data. There is also a need for better cost control, and there is a need to drive the speed of change. Now, all these drivers are actually being, t hey are actually making a big change in the automotive industry. What are the changes that are now being made? Clearly there is a change in the vehicle architecture. You know, from a situation where there was decentralized computing inside a car, sometimes having almost 110 or 130 ECUs, now there is a movement towards a zonal architecture where you may have four or five computers, and this is on the way to go to a central compute platform. This means a big change in the computer architecture and a large opportunity for a company like us to participate in this transformation. There is also a movement towards agile technologies because, you know, the world is realizing that this industry is going to change fast. That means all the software functionalities in a car will have to change fast, and therefore, the technologies have to be agile, and therefore, it is going to get a change in the programming languages that are there. There is a huge change in the industry interfaces. There is now a much tighter linkage with the semiconductor industry. We all have heard about the semiconductor shortages, and we also heard about the desire of a lot of auto companies to get into at least some kind of semiconductor manufacturing. Over and beyond that, there is a need for a much closer collaboration and cooperation between these two industries, which again creates opportunities for a company like us, which is really engaged in the world of integration. All these changes in the architecture or in the way in which the cars are going to be operating is also making a change in the organizational structure inside the auto companies. There is a consolidation of embedded software programs across the application domains, and there is an increasing complexity because of this. This calls for deep domain knowledge, the appropriate technology assets and skills. Now, it is important to note that these changes are happening both in bad cars as well as in good cars, both of which are our clients. What does it mean for a software developer and integrator like us? You know, it means that now our clients are clearly seeing need for partners and not for vendors. Now, this has just been our philosophy of working with our clients. We have been looking at these partnerships, and now there is a growing realization on the part of the auto companies also that they need partners who would work with them through long period of time. They're also looking for partners who bring deep competency, which is what we have been investing in when we are looking at platform tools and accelerators. As we have been telling you that over the years, we have been making investments in this year after year. The car companies look for a partner who can be depended upon. Our credo is actually reimagining mobility with you, that you really stand for the partnership that is at the core of our working. This is a reimagining mobility for which you for a cleaner, safer, and smarter world. Our goal, which is what we stated a few years ago, our goal has been to build a company focused on mobility, a company which knows software better than any auto company, and which knows auto better than any software company. That is the area where we are playing. I think now we see greater and greater potential for a role like this. We believe that we are at the right place and right time, and we are making every effort to play our rightful role in these exciting times. Now this is what is happening in the overall industry. Just as there are changes in the industry, there are changes in the workforce, actually very tumultuous changes. Aided by electronics and telecommunications revolutions and accelerated by COVID, major changes are happening in the world of the workforce. We believe that the days of large centralized workplaces with fixed work times are changing. These changes in many industries, whether in mobility industry or finance, whether in logistics or even food, is creating huge demand for software talent. We now have a situation where the demand for talent far exceeds the supply. This is resulting in the high attrition and turmoil that we see across the industry. We believe that this will take a few years to calm down. We expect that the attrition will continue to be in the mid-twenties. We are learning to deliver our growth despite the staff situation. We are looking at multiple ways in which we will handle this. We are looking at global centers. We are looking at local centers. We are looking at hiring of freshers and training them rapidly. We are working on diversified staff complements, accounting for lifestyle changes in different life stages of our people. We are tapping our alumni network. We are strengthening our reference programs. We are doing a lot of work on automation and also better processes for work management in the new paradigm. We believe that this new paradigm is going to stay, and we are working our way forward to succeed in this new area. Now let me look at the next year's outlook. As we have stated, we are looking at growth between 18%-21% constant currency in terms of revenue, 18%-19% EBITDA margin, and about 25% volume growth. You know, embedded in this is all the continuous investments that we have been doing to make our growth in the long term sustainable. I would urge you to look at our company beyond our numbers. You know, we have set out to build a company which has deep social commitment and a commitment to integrity. Our social commitment is for every society in which we work, whether it is USA or Germany or China or Japan, and we are working in the area of education, environment, energy and engagement. These are the areas which are very core to us. We have been working on education, especially in the field of science and technology, because we believe that the society cannot improve without the use of science and technology. I would urge you to look at the work that we are doing for educating people, students at various levels from school to college to PhD, for improving the knowledge of science and technology. We also do a lot of work on environment. Of course, the work for improvement of environment is embedded in every software that we deliver, whether it is really into a clean software, clean automotives or connected automotives or shared automotives, et cetera. Environmental considerations are also embedded in the way in which we work. We work for green energy, and in all these areas we have a deep commitment of our own people. It's our commitment to build a company which is a good global citizen. This is to tell you about how we see the recent past, our future, immediate as well existent, and what is the type of company that we want to build. I want to thank you for your patient listening. We are now open for any questions that you may have. Thank you. Thank you very much. We will now begin the question and answer session. Anyone who wishes to ask a question may press star and one on their touch-tone telephone. If you wish to remove yourself from the question queue, you may press star and two. Participants are requested to use handsets while asking a question. Ladies and gentlemen, we will wait for a moment while the question queue assembles. A reminder to the participants, anyone who wishes to ask a question may press star and one at this time. First question is from the line of Karan Uppal from Phillip Capital. Please go ahead. Yeah. Thanks for the opportunity, and congratulations on a very good set of numbers. First question is on the deal wins. Deal wins you reported this quarter was about INR 125 million. Just wanted to check that whether you are winning all are from the T21 clients or have you started winning deals outside the T21? What is the normal deal wins for any particular quarter? If you can give us some sense. What is the pipeline overall? Our focus has been on T21, say 25 as we say, and T21 currently figured out. Most of these wins would be for T21. Even the large deal which we have mentioned is also about the, you know, from this client. We have not been reporting any other numbers in terms of the pipeline. You know, the business from this quarter was we have decided that we will start sharing the number in terms of business during the quarter. In line with that, we have announced that. Every quarter we will give you this number. I think this is what we can share, which should give you some idea about the business environment. As we are giving the clear outlook on the revenue and the EBITDA margins, we would request you to go by that. This at least gives you some confidence about the direction in which we are focused. Okay. Yeah, thanks. I really appreciate you sharing the business numbers with me. The second question was on the margin guidance. A very strong guidance from your side. I just wanted to understand what are the levers to sustain the margins at current levels, you know, despite, you know, the costs like travel and facility and overall high attrition environment continuing. What are the levers for you to sustain the margins? As Mr. Pandit mentioned, we have shown the increase in the EBITDA margins over last seven quarters. There are two, three things which will really drive the margins. The number one, of course, is the revenue growth, which obviously gives you a lever. The second, which is very important as we talked about our volume growth is higher, and that really drives better margin. The third is a higher realization. I think we have been in a position to. We do work in multiple ways. We use our assets. We use our different business models, and the productivity by which bringing a high realization. As we have mentioned, more and more you know projects we are undertaking, which are more managed services as well as the other business model, which allows us to increase our realization. Most of our work is also in a very pretty, if I would say, cutting-edge technology that allows us to also increase our realization. With that, we believe we should be in a position to absorb the additional cost, which we have. We do have other leverages on the cost side also. Still, I believe, as compared to many other cases, I think, we have a margin, we have an ability to still bring more operating efficiencies, which we will bring during the year. Okay. Thanks. Thank you a lot for answering my questions and all the best for the year ahead. Thank you. Thank you. The next question is from the line of Chandramouli Muthiah from Goldman Sachs. Please go ahead. Hi, good evening, and thank you for taking my questions. My first question is around the headcount increases. I think we've gone from 6,700 employees a couple of quarters back to almost 8,200 employees now. I understand most of these are freshers. Just trying to understand, as you compete for talent at colleges in India, what are some of the skills in addition to coding that you're looking for in the workforce that you're hiring from campus? Any color there would be helpful. There are two, three things. First, we have also built a relationship just like clients with universities. We have developed some of these relationships much before. You know, we run many contests. We have a program which basically starts from the days when the people are doing innovation in their college days. From there, they start engaging with the people from when they are in the year 2 or 3. That is a general, what you can say, skill development program we have. In the 4th year is when we make the offer. We actually have a pretty well connected with the, you know, students, in most of the cases, not all the cases, but in most of the cases. Generally, learnability is what we are looking for. We are looking for passion for automotive. These are the two very important reasons why we hire people. Got it. That's helpful. Second question is just around what percentage of business today would you say is from new age OEMs and semiconductor companies? I understand you're working on pilot projects with companies like Rivian, Lucid, NIO, Renesas. If you could just give us some clarity on, you know, at this point, what percentage of your revenue is coming from these two segments? Hi. This is Sachin Tikekar. As we mentioned, we are actually testing the waters and we are in the process of defining our strategy. In the meantime, there are a handful of new age clients that we are working with. Currently, I would say it's about 3%-4%. Obviously, over a period of time, the revenue will go up. However, what is most important at this point in time is we clearly define our value proposition to them and create large orders that will create a sort of tremendous value for them. Over a period of time, that becomes a tremendous growth engine for us. As of now, as you can say, the conventional pipeline is tremendous. It's focusing on the conventional OEMs that we have. The growth will be propelled by them for the next few years. We believe that, you know, we will continue to keep at the new mobility, and in the next few years, that will sort of create more growth opportunities for us. Does that answer your question? Sure. Sure. Thanks, Sachin. Just my last question, if I could just squeeze in, is around cash balance. I think we've raised the cash balance by about 4x in the past 3 years. Just trying to understand from a capital allocation standpoint, how would you define your capital allocation priorities if you were to sort of just bucket it between M&A, dividend payout and the investment in the business? We have a dividend policy, and we have mentioned about in the next few years we'll get to about 35% of a payout ratio. We have been increasing slowly that number. We feel comfortable with that number as a payout for dividend. We do believe that for the growth we are looking at, and you know, if in case of certain new technologies and areas where we may find suitable acquisition company, then we will go for it. We are very careful about it because frankly, right now, we do have client access, and we are in a position where we can reach out to any client in automotive and mobility and get that client. Unless we find that there is a very niche technology which has been developed, and which will be very useful, for our clients and for future, that's when we will look for acquisitions, if at all. Naturally, these will be high-quality companies. We, you know, as and when these opportunities come up, we will use this judiciously for this. Got it. Thank you very much, and all the best. Thank you. Thank you. The next question is from the line of Nitin Padmanabhan from Investec. Please go ahead. Yeah. Hi, good evening. Congratulations on the strong quarter. I had a few questions. One is, the large deals that we have won, I think historically you have mentioned that, when you get into software architecture deals, it's not only it requires stitching multiple partners into the deal. In that sort of scenario, when we think about the profitability of these deals, are they very similar to the existing business? That was the first question. Or is it better or worse? That's what I want to understand. Many of these deals certainly are where there are more than one parties involved in many cases. The revenues which we are recognizing and the revenues which we are reporting, the purchase order is something which KPIT will deliver to the client. This is, you know, at least the profitability will be the same as what our normal business is. Sure. That's helpful. Second is, I think this year, compared to the beginning of last year, it appears the visibility is quite strong, and we have had this last year as well. Historically, I think over the last 10, 15 years, whenever KPIT has given a guidance, even as a combined entity, you have historically started the year and then Q3 was usually a phase whereby when you would get incremental visibility and then sort of change it. That's at least been history. Now, when we go forward, I just wanted your thoughts on, in terms of the underlying momentum on revenue and deals. What is it that's sort of giving more comfort? Is it the pipeline of larger deals, or is it the existing velocity of business itself is so high, that even, you know, without the large. I think fundamental to the visibility and our business, as Mr. Pandit mentioned, is we are. First is our focus on clients. Basically, we are focusing only on relatively short number of clients, right, T25. That basically is the core of our strategy. Because of that, we have strategic relations with the clients. They are looking at us as a partner. We are engaged very deeply with them. Apart from the fact that we are engaged with their most of the long-term projects, specifically in software-defined vehicles and some of these areas. That gives us a better understanding and visibility in terms of client spend as well as, you know, client spend. In addition to that, what we have mentioned, as you have seen our orders, which we have won during the quarter, along with the large deals, gives us that confidence. I think over the period, when we started, 3 years back, I think we talked about T25 strategy. More and more every year, I think, naturally our relationships have grown stronger with more and more clients. With more and more of these T25 clients. That is giving us more visibility and confidence. Sure. That's helpful. Sorry, your question? Yeah. Yes. Probably yes. Just one data point, if I may ask. You mentioned EUR 12 5- odd million dollars of deals apart from the EUR 70 million deal. Could you give a sense in terms of how it was roughly last year? Is it much better than last year on that number, excluding the large deals? This is what we closed during the quarter, and I think we will consistently give what we have closed during the quarter. I would not say this is abnormally high or low. Sure. Fair enough. Thank you so much, and all the best. Thank you. Thank you. The next question is from the line of Ankit Agarwal from Yellowstone Equity. Please go ahead. Yeah. Hello. Thank you for the opportunity. My first question is, I know we are mostly into integration services, but what about the other segment, verification and validation services? Just wanted to understand, like is there any overlap between integration and verification, validation? Are there any synergies, and are there any revenues you're generating from verification and validation segment? I think it's a good question. When we say we are our role is that of a software integrator, if you look at a V-cycle, we operate on both cycles, both sides of the V. We start with the requirement, actual development, and the other side of the V-cycle is actually validation and verification. When we say we are a software integrator, we work on any part of the V-cycle or all of the V-cycle, depending on the program. The short answer to your question, validation and verification is a key area for us, and we've been working on it for many years now and will continue to do so. You know, in new vehicles as they get launched with new features, verification and validation becomes more and more critical, especially going forward when we put you know, new technology such as autonomous driving, it actually calls for potential amount of verification and validation. Also, if I may add, on the looking at the complexity of program, this becomes a very critical activity of integration. Actually, it takes more time than the development before it gets into production. That's where KPIT's expertise is very critical to the client to shorten this time. We have developed multiple technologies, specifically areas where you see a semiconductor shortage and other areas where the availability of the infrastructure is limited. During that time, how we can conduct this kind of validation and testing virtually is where KPIT has invested a lot and has a very deep expertise. It's a very much part of our software integration service. The reason I was asking is that I was looking at one of your older presentations from August 2019, where you have given the McKinsey study statistics, and the market size for verification and validation is shown as $10 billion in 2020 versus $4 billion in integration. Is it fair to say that our target market is like $10 billion + $4 billion, so $14 billion, as of 2022? That is right. Okay. In that case, our market share would be around, like 2%-3%. We are barely scratching the surface. Does that mean that we like how much of this market size is available to us, like for our kind of services? It's a very difficult question. We do track for our T25 clients specifically. What we see generally is, I mean, very difficult to give you the numbers because they vary. What I can say is the way we work with the T25 clients is where we engage at least in two areas, if not three areas, specifically in a very involved way on the key projects with the client and where typically our wallet share is the highest for that client. That's when we call a strategic relationship, and that's how we have decided on T25 clients. Naturally, there is headroom both in terms of some of the new services we can introduce, also gaining higher market share from the newer spend. Okay. Understand. Very helpful. Just one more question. In the past, you have mentioned some of the platforms like Maximus Pro, JRM. Could you give, like, you know, like. Sorry to interrupt you, Mr. Agarwal. The audio is breaking from your line. Please check. Can you ask the question again? We couldn't hear you well. Yeah. Yeah, sure. Am I audible now? Yes. Yeah. In the past, you mentioned some of the names of your platforms like Maximus Pro, JRM. Can you elaborate more on them, like what kind of capabilities do they have? We don't hear those names. We have not heard those names in a while, just trying to understand, like what are those platforms still there? As you know, after we brought in the Propels, I think there are we are focusing more on passenger car and commercial vehicles. Some of these platforms which we have developed are very important from the future business models of the client. Where they are looking at monetizing the time of passenger in a car or a vehicle. That's where we call it where the clients our clients are trying to change the business model. They are looking at how they can as Mr. Pandit mentioned, how they can get more revenue by delivering services rather than having revenue only at the point of sale of the vehicle. During that process, some of these platforms are repurposed or reused or used in this way. We do have one or two clients, where we have even licensed these projects, products, or platforms, I would say, and there are certain revenues coming from them on ongoing basis. Looking at where our key focus and if you look at the wallet share of the client or wallet share of in different pockets, this is a small percentage of our revenue for now. Okay. Understood. Are we also looking to get into, get more into design and development of, products over time or will you focus more into services only? We are focusing more on software integration services, as we discussed. We help in accelerating development on the new platform and specifically in the new architecture platform for the clients. KPIT has invested consistently and you know consistently over the last many years in terms of building platforms, accelerators, and tools, which allows to accelerate the development of our clients. That is what we would do. We would not have shrink-wrap projects, products. That's not what we are looking at, and we are looking at helping them to develop their applications quicker, faster, better, and integrate that so that they can be taken to production quickly and with dependability. Okay. Understood. Thank you for answering all my questions and best of luck. Thank you. Thank you. The next question is from the line of Dave from InvestYatra. Please go ahead. Hello. Hello. Am I audible? Yes. Okay. Yeah. Yes. Thank you for taking my question. Initially we see that engines were the main drivers for automotive. Now software is driving the vehicles, right? OEMs will also develop their own in-house capability. Don't you think that your side of business will get shrunk when OEMs they start delivering or doing in-house development of their software? You know, it is true that OEMs would like to do their own development of software. The rate at which the software technologies are changing, and the rate at which the complexity is increasing, it is not very easy for every OEM to build those skills. That's why they have recognized that they need partners. Our role is that of a partner, which helps our client, the OEM, to succeed in this marketplace. I believe that it is very unlikely that every part of the software integration will be taken in-house by every OEM in times to come. Oh, okay. Thank you, sir. Thank you. Thank you. you. The next question is from the line of Sangeeta Purushottam from Cogito Advisors. Please go ahead. Yeah. This is Andrey, Sangeeta's partner. I have two questions. First of all, you know, your revenue per employee or revenue development per employee has shown a slight decrease over the past quarters. Could you explain what is that reason? Yeah. I mean, if you look at the commentary, our offshore has been increasing over the last four quarters or so. The revenue per employee obviously is a function of the mix of revenues between on-site and offshore. As a result, the revenue per development employee has gone down due to increase in offshore, but you can see the effect on margins, where margins have improved because of this shift. Yeah. The other point is, during this period, we hire a lot of freshers. Onboarding happens. Well, they become productive a bit later in our case. That also has an impact on this. Right. My second question was actually among the more into the future. You know, in this global inflation becoming a concern across the world, are you beginning to see that conversation seeping into your discussions with OEM? Is there any flavor of that you can share with us? Is there any impact on your business? On the one hand, I would say you are far more into long-term development initiatives, so it should not concern you overly in the short term. I just wanted to get a sense from you as to whether this discussion is happening at all. I'm sorry, we didn't understand the first part of the question. You know? You talk about the global what? Increasing inflation. Is there any impact on your business? I think that's, Yes. You know, I was talking about global inflation. Global inflation entails higher interest rates and therefore a reduced demand in the auto industry as a whole. Is that in any way playing out in your conversations and this is what we see basically? Right now, as we mentioned, I think we are largely working on the programs which are for 2025, 2026. We are not working on the vehicles which will be manufactured and delivered next year or year after. Most of our programs are 2025, 2026 and beyond. There is some work which is there, but which is very essential to the continuing of the vehicles on the road for this. Large part of our business is very dependent on that for this kind of a work. I think that gives us that comfort. Okay. Thank you. Congratulations for a great set of numbers not just for this quarter, but for the last so many quarters. Thank you. Thank you. The next question is from the line of Sandeep Shah from Equirus Securities. Please go ahead. Yeah, thanks for the opportunity, and congrats to the management for a great quarter and a great outlook. The first question is in terms of the FY 2023 outlook. Is it factoring a slowdown in the European geography, because of geopolitical issues, second being rising inflation? Because we are reading that Germany may be on the brink of recession, and we get a chunk of revenue which is invoiced in euros as a whole. Do you believe this can lead to some negative surprises, or we are already factoring this into the guidance? Why I'm asking this is, even in the COVID times, when the world has gone into recession, we also had an impact despite we may be working on models which are likely to be launched in the future as a whole. It's a valid concern, but I think there are two points I would like to say. First is in case of at the time of COVID, when our revenues went down for two quarters specifically, it was for three specific clients. That was the impact we had. It was largely in case of these three specific clients, our revenues had gone down. Most of the impact was due to that. Right now, if you really ask me, I think things have moved much beyond. Actually, the COVID has accelerated these long-term programs. What the companies are looking at for two things. First is, as I mentioned, they are already late, they are behind at least 4-5 years as compared to some of the disruptors, which are eating into their market share, specifically the electrification. The pressure which they will get in terms of retaining their market share as well as changing their business model is very big. If you look at all the announcements, the large companies have announced very significant investments for these programs. These are the programs which are long-term, which are well-funded. When we have identified our clients, generally that is a very specific care we have taken for the companies who can go through and, you know, different periods and sustain these investments. Naturally, to your point, I think, fortunately, we work in all the geographies. We are very strong in U.S., we are very strong in Asia, and I think we have a balanced growth and portfolio to really take care of any short-term glitches, if any. Okay. Just further to that, whether guidance factors this or as of now we cannot factor this as none of the client negotiation indicate any macro impact. No, we have taken to the best of our understanding right now. Just another connected question. Some of your global competitors who also has a higher delivery base in Russia and Ukraine. Is there an opportunity for a player like India where I think clients are looking to diversify their delivery base through vendors outside these countries to other countries, including India as a whole? See, I mean, what we have seen in the past as well as this, I mean, companies do not move projects with any glitches in some of these areas. I mean, there will be some cases where they may ask us for more help, but I think what we believe is that will help us in having more share of new opportunities with the clients. That's where we see the opportunity. Okay. Just in FY 2023, can you share what could be the wage headwind for the whole year? Because I think Mr. Ravi Pandit's comments indicate that because of your niche skills, attrition may take another couple of years to come down. Is it fair to assume FY 2023 wage hikes as a headwind on margin could be higher than FY 2022? And what could be that quantum, and when will it come? And how will you compensate that, being factored into the margin guidance? I think we have answered this question already. I think what are the ways in which we will offset this. Naturally, we have considered that when we have given the guidance. This includes we have long-term incentives, we have higher increments we had given even last year. I think it will be more in line with the increments we had given last year. I think and we have different levers which I just mentioned sometime back. Okay. It may be close to ±300 basis points. Yeah. Yes. Okay. We will find a way to offset it. Okay. Just last two bookkeeping question. If I look at in the cash flow statement, last year we are having a outflow worth INR 25 crore for the non-minority investor payout as a whole. What are the nature of this payouts as a whole? In the current financial year, there was a minority stake in the company that we acquired in 2017, MicroFuzzy that was acquired in first quarter. That was the only investment that we did and now it is a 100% subsidiary. Okay. Madam, just in your guidance, what are you factoring in a cross-currency hedging for FY 2023 as a whole? As a FY 2023 as a whole, we have a target hedge rate in consideration. As per our forex policy, we have considered the hedge rate and we are working on the plain vanilla and forward contracts for the same. That is what we have considered for our annual operating plan. What I'm asking is the impact on our revenue growth. From a constant currency growth guidance of 18%-21%, what are you factoring the cross-currency hedging? What could be the reported $ growth guidance if you need to convert into that? I think, Dilip, it's very difficult to say what the reported $ number would be right now. That is a very detailed guide we have talked about recently. Okay. Thanks and all the best. Thank you. Thank you. The next question is from the line of Vimal Gohil from Union AMC. Please go ahead. Yeah, thank you for the opportunity, sir. Most of my questions on the demand environment are answered. Just a balance sheet related question. Basically what I notice is in your other financial liabilities have gone up quite sharply from INR 85- odd crore to INR 189 crore. There are higher provisions versus last year from INR 33- odd crore to INR 65 crore, which is probably helping some of your cash accretion. If you could just help me the reason behind the sharp changes here. The liabilities include primarily two reasons. One is as Mr. Patil explained, we have given, in terms of our, retention strategy, some long-term incentive, and those have been accrued in non-current as well as current, other liability. Apart from that, based on the recent acquisition that we made, there is a non-current, a non-controlling interest is also accrued into books. The majority portion of the increase that you see in the other financial liabilities is basically the, accrued incentive cost and the non-controlling interest purchase. Non-controlling interest purchase would be for the FMS acquisition, right? No, that was for PathPartner Technology, where we are consolidating the entity, but it is right now at 60%. The balance non-controlling interest is 40%, which is what is being accounted for. Right. Ma'am, what about the higher provisions? About INR 65 crore of higher. No, those are normal provisions. If you compare, you know, our overall scale, that has increased. For the provisions, they are mainly for leave encashment and gratuity, where the headcount has gone up and so has the wage bill. It will have impact on deferred tax assets as well as the provision too. Right. Sir, just a question on your 25% volume growth guidance versus a 21% revenue growth guidance on the top end. Basically this could imply further increase in offshoring, which probably explains your bullishness on margins. After this, you know, could we, sir, then assume that FY 2023 will probably see sort of a ceiling in terms of our offshoring revenues? Or do we still expect after FY 2023 offshoring to continuously increase? I think it's. I must say that naturally it will. It can't grow with the speed in which it has increased in the last years. There will be opportunities in multiple ways in terms of more offshoring, but I'm sure there are other opportunities in terms business model, high realizations in some other ways. To your point, offshoring will continue to increase. I mean, that's what we think there will be some different business models which are evolving also based on nearshore, et cetera. You know, there are some other levers which may come up. Got it, sir. Got it. Sir, just one more question. Basically, the question on revenue per employee was answered, but if I were to look at the cost per employee, is that also explained by higher fresher addition and offshoring or is there something else to it? Cost per employee, if I see, has gone down by almost 6.5% on a YOY basis. What explains that? Pyramid. Pyramid. It is mainly pyramid. The other part which we have done is offshoring, where we had mentioned that for many of the projects, we were in a position to move people offshore from onsite. I think both of those things are happening. Right. sir, lastly, my question on your overall strategy, while I do appreciate you being with the top 25 clients and focusing on them. Most of those clients I believe would be the OEMs. sir, how about targeting some of these global tier one auto ancillaries? I guess the spending intensity for some of these auto platforms is also high there. Any intention of getting into those or getting aggressive for getting those clients? When we talk of T25, it has large number of OEMs. It also has some tier ones. Obviously, when we engage with OEMs, we get long-term visibility of larger programs, and we engage with them in a strategic manner. Obviously the planning and everything becomes easier working with OEMs. Having said that, there are also handful of tier ones who take a similar partnership approach, and we've been engaging with them for several years and will continue to do so going forward. Right. Great, sir. Thank you so much for answering all my questions. All the very best. Thank you. Thank you. Thank you. The next question is from the line of Kshitij Saraf from Tusk Investments. Please go ahead. Hi. Thank you for taking my question. I want to know more about the other segment. What clients are here? This segment is seeing good growth, so could you shed some light on the growth prospects and what KPIT is doing for these clients? Sure. I think you're talking about the growth in the other segment, right? Other clients or other. Segment. Yeah. You said practices, right? And Mr. Pandit, is that correct? You're alluding to practices, right? The growth that you've seen in other practices. Actually, both other practices and clients, yeah. Sure. Other clients, if I'm to narrow it down further, yeah. When you say other, what do you mean? Other than what? That will be very helpful. Let me address both. First, speaking of clients, as Mr. Patil said, and at the beginning Mr. Pandit also talked about, there is this tremendous demand at this point in time from our T25 clients, especially the OEMs. They need help and the demand exceeds the supply. Given this, it becomes even more important for us to continue to focus on T25, and that revenue percentage will grow of T25 substantially in the coming years. I hope that answers your first question. Second question is about others in terms of our offerings and practices. Mr. Pandit talked about the move towards software-defined vehicles, where we are actually working on the architecture. What happens is when you work on the architecture, it's a program by itself, and once the architecture is in place, different practices, you know, business to the different practices flow, whether it's autonomous driving or body or some of the other or even intelligent cockpit. The shift towards software-defined vehicles is actually getting reflected in the growth that we see in the other, coupled by also our there are fundamental changes in the vehicles because they're becoming because of CASE. That has also sort of given traction to our growth when it comes to our vehicle engineering design practice. It's the combination of two. That's why you see very high growth coming from others. What we'll have to do now, since this is sort of a permanent shift, we'll have to revisit the categorization so that we are able to reflect what we are doing more accurately to all of you. Does that answer your question, or am I making it more complicated for you? Yeah, that's very helpful. Thank you so much. Thank you. Thank you. The next question is from the line of Ramesh Murthy from Vitol Capital. Please go ahead. Murthy, your line is in talk mode. Please go ahead with your question. Mr. Murthy, please unmute your line from your side, if muted. As there is no response from the current participant, we'll move on to the next question from the line of Amit Agarwal from Burman Capital. Please go ahead. Yeah. Thank you for taking my questions. First is, regarding the TCV announced during the quarter. Of this INR 125 million, what would be the new deals and what would be the contribution from the renewals? I think, we would not be in a position to give that. We would report every quarter the total deals won, includes the new as well as renewals. Okay. In terms of, will the majority be from new deals? Any broader indication? I think the reason why it's very difficult for us to give you the breakup is because it's mixed. More and more engagements that we work on, they're actually transforming into larger work, so it's very difficult to segregate for us. That, you know, that's kind of difficult for us to break down for you even further. Got it. Any broader color in terms of the same number, how this has grown year on year or sequentially how this number has grown? As Mr. Patil said, you know, from as compared to where we were a year ago, there is no dramatic shift. I think, you know, at this point, we just feel that the guidance, it's sufficient for the guidance that we have provided for the year. Got it. The last question from my side. Sequentially, how the velocity in the pipeline for the new deals have changed, sequentially? I think what we see is all the discussions, all the opportunities, we see a very strong demand. That's what Mr. Tikekar or the reports are leading to. There is a pipeline, and there is certain discussions which tells us that very high growth environment from our existing clients. Has this further improved sequentially? You know, I think as Mr. Patil said, I think the demand continues to grow every quarter. It's just that we have to be very mindful about creating long-term value for our clients. The business that we want to engage is actually considering the pipeline is gonna be constrained by the supply that we have. Got it. Thank you. Thank you. The next question is from the line of Dhanshree from Anvil Share and Stock Broking. Please go ahead. Hello? Yeah. Yes. Am I audible? Yeah. Yes. Congrats for the good set of numbers for the management. Yeah, my question is again on the demand side. I would like to understand how we feel the growth for KPIT from medium to long term, considering the long-term projects that we are seeing currently in automotive. I wish to understand how the trends are happening. If you give some color on how that would happen in on year-on-year terms in like a couple of years. Some color on the nature, the kind of trends that are happening in automotive. That would be helpful. Yes, ma'am, I spent some time in my earlier comments about what is changing in the world of automotive. We believe that the changes in the automotive are driven by software. We believe that the industry is changing, the structure of the industry is changing, and there is a huge role for us to play in that. The reports that have come about the overall software domain from multiple external agencies talk about multi-billion-dollar market. Not all of that belongs to us, but, you know, a large part of that is accessible to us. On a long-term demand basis, we really see no issue on demand. Our concern, as my colleagues have been talking about, is how do we deliver on our promise to our customers, so that, you know, he succeeds in his marketplace. Our concerns really are on the supply side, and I also spoke about what is it that we are doing to ensure that we deliver value to our clients. Okay. That's it from my side. Thank you. Thank you. Thank you. I think we have already overshot on the timing. We'll just take one more question and, please, if you have any more questions, please feel free to write to me, and I'll be happy to get back to you. Should we take the last question? Yes. We can take one more question, and then I think we should stop. The next question is from the line of Pankaj Kumar, Individual Investor. Please go ahead. Hi. Thanks for taking my question. Are you able to hear me? Yes. Yes. Yes. My question is regarding the guidance. You have given a guidance, revenue growth guidance of 18%-21% and volume growth guidance of 25%. My question is, with increased offshoring, the guided margin has still remained the same 18%-19% band. Are you being conservative over here? Because in the last year, with 19.5% revenue growth and 28% volume growth, the margin has improved by 300 basis points. That is my question. Are you being conservative over here in the guidance, margin guidance? As we talked about, and actually many people ask about. The question is in the increasing costs, how we will maintain the margin. I think this is one of the levers we have. I think, you know, we have considered different costs, which we may have to incur. Apart from the fact, I think there are three areas in which we continue to invest much more than our increase in the revenue. One is the technology, where new practice areas, we continue to invest consistently, and that is higher, especially looking at data monetization which is happening, which is higher than our revenue growth, generally. That is one area. The second is the infrastructure and technology areas. I think that is again area where we invest. The third is, of course, cost on the people side. Looking at all this, I think, based on that, we have factored this in when we have given the margin guidance. Okay, sure. Thank you. I have just one more question. What is the offshore on-site ratio in quarter four? We do not give these numbers. As we have said, that the way our programs happen at different points of time, it happens differently. I think we have not never given these numbers. Okay. Thanks a lot. That's it from my side. Thank you. Thank you. Thank you. Thank you. Ladies and gentlemen, we will take that as the last question. I would now like to hand the conference over to the management for closing comments. Thank you very much for your active participation on the call. Again, I would request you that if you still have any more questions, please, feel free to write to me, and I'll be happy to answer all of them. Thank you once again. Thank you. Thank you. Thank you, everyone. Ladies and gentlemen, on behalf of Dolat Capital, that concludes this conference call. Thank you for joining us, and you may now disconnect your lines.