Ladies and gentlemen, good day, and welcome to Sonata Software Limited Q1 FY25 Results Update conference call. As a reminder, all participant lines will be in listen-only mode, and there will be an opportunity for you to ask questions after the presentation concludes. Should you need assistance during this conference call, please signal an operator by pressing star, then zero on your touch-tone phone. Please note that this conference is being recorded. I now hand the conference over to Mr. Samir Dhir, MD and CEO, Sonata Software Limited. Thank you, and over to you, sir. Thank you, moderator. Welcome to this conference. We will discuss our strategy, the progress we have made in the recent quarters, our strategic plan, and the financial results for, for the quarter Q1 FY25 that just ended in on 30th of June, 2024. I thank you for joining us today. We appreciate your valuable time and support. It is my pleasure to share our progress regarding our vision and growth trajectory for Sonata, despite the macroeconomic challenges, geopolitical issues, and slowdown of tech spending and decision delays across some of our verticals. Let me cover an update on our strategic goals first, and then I'll cover the progress we made in Q1 FY25. First, on strategic goals. As you know, our objective is to be one of the fastest growing modernization engineering firms, powered by our unique platform vision framework. We aim to achieve revenue of $1.5 billion end of FY 2026 for the international business, with an EBITDA of low 20s. From a growth point of view, we outlined a few critical bets. We want to continue to win large deals. If you recall, we announced 14 large deals in FY 2024, and we're making good progress in that direction. We want to deliver strong M&A performance, and our most recent acquisition on Quant Systems has been successfully integrating with our core business. We want to leverage our partnership ecosystem with Microsoft, AWS and other key partners, and continue to win new clients that can scale to be $10 million, $25 million, $50 million clients for Sonata in time to come. We want to achieve these three goals of winning large deals, of doing successful M&As, and building strong partnerships in four verticals that we have called out: healthcare life sciences; banking, financial services, and insurance; retail, manufacturing; and high tech, CMT. With investments in its healthcare, life sciences, and BFSI verticals, we incubated these verticals in the second half of 2022. We also want to focus on their five geographies, which is North America, UK, Europe, India, and Australia. As you know, we modernize our clients' technology infrastructure using our differentiated Lightning tools, IP, and offerings. We're pleased to report that we're making significant progress towards our stated goals. However, we will need a few more quarters to reach our goal of $1.5 billion, as we outlined earlier. We probably will need two to four more quarters to reach to those goals, given the macroeconomic slowdown. With that, let me provide an update on each of the strategic vectors I just talked about. So let's talk about the large deals first. Our large deals pursuits are a significant part of our strategy, with 47% of our active pipeline coming from these high-value opportunities across our four verticals and geographies. Let's take a moment to celebrate the three significant victories we had in Q1 FY 2025. First deal is for a U.S.-based premier healthcare provider. Sonata will enable an optimum global delivery model and modernize their technology stack using hyper-automation and AI. Our teams will deliver cloud infrastructure, modernization services, and operations in a managed services model. This is an AI model-driven deal for us to modernize their technology infrastructure. As the client starts to move to a more managed model, we will move work from on-site to offshore in the coming two to four quarters. The second win we had is in the manufacturing and services industry in Australia. We have been chosen by the client as a partner to migrate legacy systems to the latest Microsoft technology platform for standardization and modernization, a move that will benefit the client in the long term. The third deal is for a banking financial services customer. We're very excited about this win. It's one of the top financial corporations in the U.S. Sonata has been chosen as a strategic partner to migrate on-prem-based applications to a SaaSified platform on cloud. This is also a modernization deal. These three wins of large deals in this quarter underscore our commitment, our investments, both in the Modernization Engineering space and AI. The deals with manufacturing and BFSI I just talked about are margin accretive for Sonata, both in the short and long term. The healthcare deal is not dilutive long term, but will have a short-term margin impact for the next 2-4 quarters as we complete the transition and make the upfront AI investment needed for the deal. Let me cover the second strategic bet that we have talked about is an update on AI. If you recall, we talked about we expect 20% of our revenue to come from AI services in the next 3 years. Currently, we have $65 million pipeline across 110 clients and are excited to have new wins worth order book of about $1 million in the most recent quarter. In parallel, we're also driving AI adoption within Sonata functions, from finance to HR, to operations, to sales and pre-sales.... We have invested in an AI cross functional organization led by Sharmila Sherikar, to drive AI across Sonata and partner with CTO and sales organization to accelerate our go-to-market strategies, partnerships, research, and continuous strategy refinement as Gen AI technologies are maturing. To give you an example, for the most recent win in healthcare, for our health tech client, we are harnessing the power of AI to ensure comprehensive and representative demographic coverage in clinical trials. Our client aims to eliminate bias on the sample of people covered during clinical trials. We will use AI to ensure regulatory adherence for the client, drive demographic coverage using Gen AI to gather new regulations and automate the adherence process with requisite approvals inbuilt. Our Harmony.AI infrastructure was pivotal in enabling this deal win and subsequent AI model implementation. Our responsible first approach prioritizes ethics, trust, privacy, security, and compliance, and continues to empower our clients to make the right decisions. Across several clients, we are enabling Gen AI-driven engineering scale, especially with our IntelliQA solution accelerator, which drives efficiency in the software development lifecycle itself. Approximately 67% of Sonatians are now Gen AI level one trained, demonstrating our commitment to upskilling and potential of AI across our operations. With that, let me move to the third update, which is update on scale. As you know, we have been focused on driving accelerated outcome for our clients using modernization. Within that, cloud and data is a significant bet that we made. We are continuing to make progress in cloud and data pipeline, and that now stands at 52% of our pipeline. To put this in perspective, more than half of the pipeline of Sonata is now from cloud and data. That number was about 15% two years back. Microsoft Fabric. As you know, Sonata is a proud, proud of being a featured and launch partner for Microsoft Fabric, a data analytics platform for the era of AI, which was made generally available in November 2023. Our expertise and unwavering endeavor helped us win 9 deals in Q1 of FY 2025. We continue to witness significant pipeline build for Fabric since its launch, with a $46 million pipeline across 80+ clients. Our team of 450+ Microsoft certified Azure data professionals and 150+ DP-600 certified professionals, enables our clients to leverage this new end-to-end analytics SaaS platform paradigm. Microsoft Dynamics, which has been the cornerstone of our success for many years. We won five mid-sized deals in the most recent quarter. The quarter witnessed success in continuous modernization in Dynamics and green shoots were seen in the CE space and Power Platform pipelines. For one of our clients with operations across 17 countries, 20,000 farmers members, and 21 large retail stores, our CPRM.AI IP, we will modernize their agri-platform, resulting in 27% more efficient operations and 15% reduction in farm to fork time to consumer, as part of Agro365 vision that we jointly created with the client. Our retail business, with its focus on annuity business, continues to deliver consistent strong growth, with industry-leading ROCE of 47.3% in Q1. In the most recent quarter, Sonata made its debut in the Brand Finance India 100 2024. We were adjudged as one of the top three fastest growing Indian brands, with an 83% increase in our brand value. Brand Finance is a world leading independent brand valuation and strategy consulting firm. Update on talent. We continue to focus our focus on attracting, engaging, and developing high caliber talent to help achieve our business goals. Sonata University has been at the forefront of our capability building initiatives and saw increased usage and acquisition of new skills as such as Gen AI. We're very proud of the progress we made on gender diversity. We have now reached 31%, an increase of 2% in the last four quarters on gender diversity. Our employee engagement and D&I programs have been recognized by ASSOCHAM or uncertain in the most recent quarter. With that view on the strategy and update on our strategic choices and investments, let me now provide an update on the Q1 FY 2025 performance. We are proud to be quickly back, bouncing back to growth after a decline in Q4 in FY 2024, due to largely between delays and associated costs. In Q1, the international services business grew 1.3% quarter-on-quarter. In constant currency terms, we have witnessed 1.4% quarter-on-quarter growth. In the most recent quarter, we saw an order book of $1.24, book-to-bill of 1.2 factor, 1.24 factor in the international services business. We are still pursuing another 49 large deals, which is an addition to the 3 deals we closed in the most recent quarter. In Q1 FY2025, the three deals we closed had one of the Fortune Fifty companies in the banking space. Our EBITDA, before other income on Forex, grew sequentially 1.4%, a significant improvement from last quarter on EBITDA front, from 17.3% in Q4 to 18.7% in Q1. In SITL, our gross contribution in domestic business grew 7% quarter-over-quarter, from INR 64.8 crores to INR 68.5 crores. Utilization remains steady at 87%. Quarter-over-quarter, our headcount increased by 198 FTEs, close to 200, with an overall attrition for the quarter being around 16%. We are now at 21 clients who have a run rate of more than $3 billion annually at Sonata. Last year, same time, that number was 16, so we increased by 5. We moved from 16 to 21 clients with more than $3 billion annual revenue run rate. In addition, we now have 12 clients with more than $5 billion revenue run rate. In summary, we were, and are optimistic about our long-term growth prospects. In coming quarters, we'll continue to face tailwinds and headwinds. The tailwinds will be due to the large deals and top client and HLS, healthcare and life sciences. We are very bullish about the progress we are making in large deals. We're very positive about the progress we're making in our top line in healthcare and life sciences. We have headwinds, too. On the headwinds side, the deal decisioning continues to be delayed. The project completion at our clients in the UK, Europe, and retail manufacturing will mean the slowdown in these three areas in the upcoming quarters. In addition, the large healthcare deal we just won will be dilutive for the first 2-3 quarters and will get to company profitability by end of the fiscal year. Team Sonata remains committed to judiciously accelerate the growth curve and build scale. Scale in terms of large clients, deals, markets, partnerships, and talents. I want to take this moment to thank all Sonatans globally for their commitment and hard work, work ethics, and quality outcomes they deliver for our clients. Thank you, and with that, let me turn it over to Jagan for his comments. Jagan? Thank you, Samir, for the overview. Good morning, good afternoon, good evening, all. Let me start with the update on international services business for quarter 1, 2025. International business, the revenue for Q1 was $82.7 million. Q-on-Q grew by 1.3%, and year-on-year, it was 6.9%. The Q1 rupee revenue stands at INR 688 crore, which is also 1.3% growth quarter-on-quarter growth, and year-on-year, 8.5%. In constant currency terms, the revenue witnessed 1.4% quarter-on-quarter growth and 7.5% growth year-on-year. Coming to profitability, international services, EBITDA before Forex and other income stands 18.7% against 17.3% in Q4 2024. This reflects the 1.4% improvement in the profitability in the current quarter. The impact for international services stands at INR 65.1 crores, which was actually mainly influenced by a Forex loss and a change in the taxation because of the SEZ coming, moving from a 5-year to 10-year bracket, resulting in impact on the overall profitability of the company also. The growth driven by top clients and the Quant Systems profitability, offset by a transition and AI investments in the large deals in the healthcare, the new healthcare deal what Sujit was mentioning now. At the international services level, the Q1 2025 ROCE stood at 18.8%, Q4 was 24%, and Q1 2025 RONW stood at 21.6%, compared to 26.7% last quarter. This major impact is because of three months of borrowing have increased for us from $43 million to $75 million. That was the reason for the impact. The returns have not reflected in spite of increasing in the profitability because of the loan amount increasing here. Domestic business. Now, I will talk about the domestic business. Our revenue for Q1 stands at INR 1,849.4 crore, grew by 22.1% quarter-on-quarter, and 32.9% year-on-year. The gross contribution in Q1 2025 stands at INR 68.5 crore, grew 5.8% quarter-on-quarter, and 10.7% year-on-year. Tax for Q1 was forty point five crores, which grew 0.9%, grew Q-on-Q at 0.6% year-on-year. The DSO continues to be very, very strong in domestic business. It is thirty-five days compared to thirty-six days previously. The ROC for domestic business has increased at 47.3% from 41.7%, mainly because of improved profitability, as well as one of the loan amounts, which was taken for our working capital purpose has been repaid. The consolidated business our revenue for Q1 stands at INR 2,527.4 crore. It grew by 15.38% quarter-on-quarter, and 23.4% year-on-year. Tax at consolidated business stands at INR 105.6 crore. It reflects a degrowth of 4.3% quarter-on-quarter and 12.1% year-on-year. Consolidated EPS for quarter four was 3.81 per share. Quarter one was 3.81 per share, up by 4.33 per share last quarter. At consolidated level, ROC stands at 23.5%, and RONW stands at 27.7% in this quarter. Moving on to some important operating metrics. Total headcount moved from 6,416 in Q4 2024 to 6,619 in Q1 2025. Net addition for this quarter has been 203. This headcount addition comprises campus addition of 150 people at offshore and ramp-up onsite towards the large healthcare deal. Utilization in Q1 25 stood at 87%, last quarter it was 87.4%. Drop in utilization is mainly due to campus addition. Added 14 new customers in quarter one 2025. Top ten clients contributed revenue share of 50% compared to 52% last quarter. The number of clients more than $3 million run rate in quarter one 25 is 21 customers, compared to 16 last quarter. The vertical mix in Q1 25 is as follows: CMT is 36%, retail and manufacturing is 34%, HLS is 10%, and BFS is 16%, and emerging is 4%. Revenue by top GTMs are data is 16%, Dynamics is 25, and cloud is 39. As mentioned by Samir, our data and cloud also occupies more than 50% of our pipeline at this year. The Q1 2025 order book stood at 1.24x of international services business. Our international services DSO for Q1 was 45 days, which is same as the last quarter. In summary, we continue to remain optimistic about our long-term growth prospects. Thank you. With that, let me turn to moderator for question and answer. 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 touchtone telephone. If you wish to remove yourself from the question queue, you may press star and two. Participants are requested to use handsets while asking your question. Ladies and gentlemen, we will wait for a moment while the question queue assembles. Participants, you may press star and one to ask a question. The first question is from the line of Dheeraj Dave from Samvat Financial Services. Please go ahead. Dheeraj, sorry, your voice is not clear. Can you please come in a better reception area, please? Sure. Can you hear me now? Little better. Yes, go ahead. Yeah. So my one question is, basically, we've seen this healthcare deal kind of resulting into EBITDA margin, and management also suggested that it would... Like, margins would be resuming to normalcy by end of FY 2025. Can you mean, basically, what are the factors, basically, why we have seen the decline in profitability, and where by what time we shall expect the previous levels, whether we are striving to reach that? Management is some color. Maybe what is the basis point decline because of the EBITDA margin, which can be explained by new deals or whatever? Yeah. Hi, this is Jagan here. This is a large deal of seven-year deal, which it is one of the largest deals in the recent time. What we have agreed with the customer is it's a monetization deal, and this involves in the development of an AI platform in the initial three years, and that will be deployed in continuous in their system for some time, and then hand over the IP to them. In this model, secondly, they have their own employees also. We are dispatching them employee, onsite employees in the initial period, and over the next few quarters, we will be doing more offshoring in the coming days. These two components of onsite, more onsite in the initial days and the investment for the AI platform development, are going to increase the, decrease the profitability from this, this deal. It's not lost, it is only decreasing the profitability from the deal. It will recover back to the com- towards more to the company average. After three or four quarters, it will move towards the company average. Overall, the deal is very much, like, above the company's average margin also. Thanks a lot. And secondly, Jagan, basically we do get this C-suite link also, and there we find couple of slide things which are not appearing in your presentation. So my suggestion would be if you can integrate and give one presentation, because I will actually every time I get confused when financing comes, we have four or five slides which are not part into the main deck. So rather than two presentation in two ways, why can't we have a consolidated presentation? And that will make everyone, so means, basically we can focus on concall as well. Otherwise, we are looking at one presentation, some slides, data points which you talk, they come in C-suite slide, but that's not available into the main presentation. So my request is, if you can integrate one and give only one presentation, that would be good. Wish you all the best. Yes, thank you. Thank you. you. Thank you. Definitely, we'll consider that. Thank you. Next question is from the line of Akshada, from Vivog Commercial. Please go ahead. Yeah, hi. I have a couple of questions. So far still, international growth has still kept and been a little under what we would have or I would have expected. So why, why is that the case? I do understand there were some deferments, but are we expecting those to continue? And my second question is regarding the guidance. Do we maintain the guidance for FY 2026? Yeah. Thank you. Okay. I want just to give a clarification on this. I'll start with the guidance for the year. Our guidance has been, our growth will be industry-leading growth. We have not given any specific numbers for the growth in this year. ... No, I mean the FY 2026 guidance. That is meeting of $500 million and $1.5 billion target? Correct. Correct, correct. That will be delayed. I've been telling you for the last at least one quarter that that will be delayed at least by couple of quarters more. That is our expectation now. Okay. Coming to this deal, the momentum and the revenue growth, pipeline is strong, order book is strong, but we, as we said, the revenue momentum, particularly, for, for BFSI and for health, healthcare will bounce back, but BFSI will take a little while. So we expect the momentum in the revenue growth to come by Q3 of this year, but, it will be a positive growth for, Q1 and Q4. Actually, let me just add to what Jagan said. So, if you recall, back in May, when we talked about we guided, that we'll be between 1%-3% for Q1 and Q2, which was our expectation, and I think we come from within the range of what we had guided for in the first half of the year. We fully expect to come back on growth to our old growth rates by the third quarter of this year. I think that's something that we're working on. We're very excited about the pipeline and the order book that we have. But the first two quarters of the year, we had, we have seen that back in January, March quarter, that these will be little softer quarters for us. That's point number one. Point number two, when we guided for being a $1.5 billion company, that was about two years back, and then the market scenarios were different. So we do expect about 2-4 quarters delay on the original plan, but we're still very much pushing and working towards getting to the $1.5 billion with maybe about 2-4 quarters delay on the overall revenue we talked about earlier, actually. So as we are able to book more contracts, it's just that we are facing a little bit of delay in order to start those said contracts. And because we are also, you know, making expenditure to fulfill the contracts, that's why margins have also been a little hampered and revenue has been pushed back a couple of quarters, at least, as in the... It has been what you've been facing so far. That is correct. So if you recall, our earlier large deals were closing in about 1-2 quarters. Average was about 2 quarters. Right. The time for closing has now become about 3-3.5 quarters. So we are definitely seeing the decision delays impacting our ability to close large deals from a longevity perspective or duration point of view. However, because we have, like I said earlier, we have 49 large deals, so we're still very optimistic about the momentum to keep catching up as we address this decision delay that we've been seeing in the marketplace. That's what is explaining the Q1, Q2 softness that we've seen or compared to our own run rates. So that's what we guided earlier. We have seen that coming. That's why we guided the market that for 2 quarters we'll see slightly lower than expected growth of our own run rate. As far as the margins are concerned, clearly, the healthcare deal that we won, like Jagan alluded to, this is a transformation deal with AI built in. So we're going to make an investment in the deal itself in the next three quarters to make sure that we can transform the AI estate. And also, this is a largely on-site deal right now. So we have to move the work from on-site to offshore. And as we move the work from on-site to offshore, our profitability will kick back in, latest by Q4 of this year. That's what our expectation is right now. What is the expected revenue for the USA healthcare deal that we were just talking about? We can't disclose, unfortunately, the revenue size of the deal- Okay. but it's, in our parlance, it's a large deal, Ashika. Okay. Okay. Can- It's an important... Just one more quick point. It's a very important deal. It's a seven-year program. We took a conscious call to take a short-term hit for the long-term benefit of the company. We think it's a strategically important deal. It's one of the, one of the key premier providers in the U.S. market, so it opens up a whole provider market for Sonata as we move forward. As you know, healthcare vertical was incubated by us about two years back. For us to open a seven-year large contract is very significant step for us. Yes, it's a dilution for three quarters, maybe two to three quarters, but we fully expect this will be accretive to company come late Q4 and, definitely Q1. It is the largest deal in the recent past for us. Okay, that's great. So my last question is, the decision delay that you've been facing and the industry has been facing, do we have, you know, any, you know, any momentum that can tell us, that in the next two quarters, things would get better? Or is it more of an industry assumption so far? It's largely the industry headwind. Industry pretty broad, Ashika. For the markets and the industry that we operate in, the verticals we operate in, which is healthcare, banking, retail, and high tech, we're definitely seeing some delays, and we think in the client base and in verticals that we operate in, it's catching up. The delay cycle is catching up, and as the pipeline builds up, we'll be back on our old growth rates. Okay. Okay, thank you so much, and all the best. Thank you. Thank you. Next question is from the line of Suraj Malu, from Catamaran. Please go ahead. Sir, can you please provide what is the employee expense, other expense, other income? ... Can you speak a little louder, please? Am I audible now? Yes. Yeah, can you please share the, for the domestic business, what is the employee expense, other expense, and other income for this quarter? So, this quarter, there is no exceptional other income or other expenses for this quarter in domestic business. It's a regular one, normal investment income and Forex, whatever it was there. That is the only component in other income. Other expenses also doesn't have anything more. Employee expenses is in line with the business growth. We have added, you know, few more people in the business, so the cost is reflective of the in line with the revenue growth normally. Slightly more, few more people have been added. ... is it possible to share the absolute amount? Difficult here. I, we don't share it outside because that, for one quarter if I share, I have to share for every quarter. This will be, there's nothing to hide, but, it, for that business, the product cost is more important than the employee cost. So we continue to, you know, hold at that, stand. Okay. Thank you. Thank you. Next question is from the line of Mihir Manohar from Carnelian Asset Management. Please go ahead. Mihir, may I request that you unmute your line and go ahead with your question, please? Hello, yeah. Am I audible now? Yes, now you're audible. Go ahead. Thank you. And sir, I wanted to understand on this absolute EBITDA. I mean, when I see the full press release, or the full press release for international business, the EBITDA is INR 143 crore. The EBITDA for 1QFY25 for the international business in the press release is INR 129 crore. So in that context, there appears to be a 9.9% degrowth versus the 9.5% growth that you have mentioned in the press release. So how, how to understand it? Is there any typo or anything like that? Can you come again on the question? Yes. So basically, I mean, when we see 4Q 2024 press release, the international business EBITDA is INR 143 crore. Hmm. This particular quarter, international business EBITDA is INR 129 crore. Okay. That is one important change we have done. We have put a star and given that. This is what we have started giving is EBITDA before other income and forex, because everywhere else we disclose only EBITDA before other income and forex. We synchronize that in line with the all other presentations, hence we change this also. Okay. Okay, understood. So last quarter, INR 143 crore had other income and forex. Income and forex, this quarter, it doesn't have. Okay, understood. Sure. Second question was on the fact, you know, last time we were saying that there were some undeployed resources, which were there on the on-site, because of the healthcare deal, one of the healthcare deal that did not ramp up on the expected lines. So, I mean, have we deployed these undeployed resources which were there, or is there some part of the impact still pending? So let me take that. And, just on the first point as well, Mihir, the EBITDA for international business is up by 1.4% quarter-on-quarter. So in terms of percentage, we have definitely gained ground on EBITDA, just to clarify that point. Sure. On the point about the deal in itself, so while we have closed the healthcare deal, there was another healthcare deal that we had mentioned in last quarter. That deal has actually gone on hold at this point in time, so customer is not taking any decision at this point. So we have withdrawn all the investment from the deal, and those investments have been redeployed into other areas, including this new large deal that we just announced. Sure. Understood. Just, I mean, just two questions. I mean, one, I mean, is the wage hike impact there for the full part of the year? I mean, when will the wage hike given? And last question was on the margins of the domestic business. Now, when we see margins in domestic business, there's only 2.6%, which is like close, close to, I mean, 11-12 quarter low. So how to understand the margins in the domestic business? You know, why they have corrected this particular year? When we see the absolute EBITDA for domestic, it's like 16% down. So how to see margins for domestic, and, yes, and those are the questions. Yeah. Okay, please don't measure the business with percentage of margin. You have to take the absolute amount of gross contribution. It was around INR 64.5 last quarter, it's INR 68.4 this quarter. The gross contribution as absolute gross, gross contribution has grown up. So that is the way we measure the business. We don't see this, because most of this business, the margin, absolute amount of margin will grow only with volume. So this quarter, if you see last quarter, the revenue was somewhere around INR 1,346 crores. Now, this is INR 1,826 crores type of revenue we have got. So you have to measure this business only on the absolute amount of gross contribution. We don't see the percentage of profit because that is not the way we are, we see this. This is volume-driven, high-volume business with low margin. We are, so depending on the mix of the product, each quarter it will vary. You can't measure it exactly with that. Sure, sure. Other question? Yeah, wage hike. I mean, when is the wage hike effective from? Pardon? Wage hike. Sorry, wage hike. Q2, we are planning for wage hike for the junior management, and Q3 will be for middle managers and senior managers. Sure, sir. Understood. Okay, that's it from my side. Thank you. Next question is from the line of Chirag from Kotak Institutional Equities. Please go ahead. Hi. Just one question. You mentioned that three years down the line, we are expecting 20% of the revenue from generative AI and all. So, what sort of margin and operating profile of work we looking in this area? Yeah. So I think the margin for current wins in the pipeline that we have is accretive to the another average margin. So we are definitely seeing an uptick, because these are, generally speaking, more business-driven deals than IT-driven deals, because most of the sale and projects we're winning is really working with the business stakeholders directly. The example I talked about, the healthcare client, is also a sell into the business side of the house. So margins are accretive to the average another margin. Okay. One more question. As we expect, H2 is likely to be better than H1, which vertical and geos do you think will push the growth or, you know, accelerate the recovery in comparison to H1? So there are two points. I think we expect H2, the growth to be higher than H1, based on our recommendation. But we'll see gross margin pressure because of the large deal we just talked about. We'll see some pressure on that for only two, three quarters, like we mentioned earlier. But revenue definitely will be higher than the first half, with our current estimate at least. As far as the verticals are concerned, we are seeing very good momentum in the high tech vertical. I think overall in the high tech, especially with the largest client of Sonata, we are seeing good momentum there. I think that momentum we fully expect to continue going into the second half of the year as well. Vertical is definitely in the upright now for us. We had a good successful first quarter with we expect it to continue to grow as we move forward. And then banking and financial services, not insurance so much, but banking side of the business, we are definitely beginning to see some green shoots there. I think that will kick up again. On the not so good side, like I said earlier, the retail business is going to be soft in the next two to three quarters. Generally, what I've seen in the commentary of the other peers in the market, that they are more, you know, experiencing stability kind of spending from a stable kind of spending from an insurance set of client, and where we see some sort of a muted sort of profile based on your commentary. So why such a divergence with that? Because our portfolio on insurance is relatively small. If you look at our BFSI portfolio, I think the insurance portfolio is about 20% of it. So we are not a very scaled insurance provider, so our comment is very specific, in that sense. But banking side, we are definitely seeing the, the momentum coming back up, including the large business announcement. Within banking, can you highlight the Sorry, you're breaking up. I mean, within banking, which areas you think accelerate the momentum? Within banking, the bulk of the work we're doing from a technology perspective is in the data and cloud side. But on the... If you look at the division of banking, it's largely the retail banking side of the equation. Okay. Thank you. All clear. Thank you. Next question is from the line of Parin Nandu from Edelweiss Alternative Asset Advisors. Please go ahead. Yeah. Hi, Samir and Jagan. A few questions. So when you say this new deal is margin dilutive for first few quarters, what is the base that you are assuming to be margin dilutive from? Because in last two quarters, we are trending at a lower than Sonata's average in terms of margin in our international business. And this quarter, you have changed the definition of EBITDA margin as well, the way you report it. So when you say dilutive, are we looking at dilutive from mid... Oh, sorry, low 20% kind of a number, or from the current levels of margins? If you can clarify that. Yeah. A couple of points I have to share with you. We have not changed the way that EBITDA is reported. EBITDA was reported in all the places, investor presentation, earnings presentation, everywhere. It was reported as EBITDA before Forex and other income. This was also an input from, you know, a couple of analysts like you, who earlier gave us the input that we measure only by EBITDA before other income and Forex. So we started reporting in that way. It is almost like more similar to EBIT, what we, what you people measure on that. So we are synchronized. We thought that P&L is having after other income and Forex, so we've standardized that. The second point is, we have headwinds in this Q2 and Q3 due to salary increase, wage revision. The third point is, this deal is also little dilutive on the margin compared to company margin. It is not, it is not a loss-making deal, but it is little dilutive compared to the company average, margin level. Hence, we said there will be an impact of it. So coming to the EBITDA margin, we, we said the last quarter margin was the lowest point of margin. It will not, you know, we have improved this quarter, and we are trying to be in this range of margin, but, we may not be at the 20%, early 20s% margin we will reach by end of this financial year. That we have committed earlier, and we are still positive towards that plan. So this is, this will be a range bound between what we reported in Q4 and the direction of the EBITDA will be in this range from here. No, thanks a lot, Jagan. That's clarified. Now, coming to the point of, you know, you mentioned there are some green shoots in BFSI domain, more in banking. This is a thing that most of the other of your most of your peers have also highlighted. They have also highlighted that, you know, there is some green shoots even in discretionary spends. But going by your comment, it seems like the decisiveness in terms of closure of deals is pretty much at a similar level, where it was in last quarter. So, is there any reason for this divergence? One is that, and secondly, you know, related to BFSI, we had a deal in Quant Systems also, which, or Fintech deal, if I'm not wrong, which was delayed. So, where are we on Quant Systems, and are we completely on top of how the seasonality works in that acquisition? So yeah, a few questions, but, you'll get the gist of it. Yeah. Let me see if I can answer each of them one by one. So the large deal that we just announced is the joint Quant Systems and Sonata deal. To answer your question, so that's the one that we just announced, the third deal. We're very excited about it.... Now, as far as your question is concerned of seasonality, I think, yes, absolutely, we have factored in seasonality. If you recall, in Q4, January-March quarter, we did see softness in the Quant Systems business, and that was largely seasonality driven. And I think even in the next Q4, our Q4, January-March, we'll see seasonality effect in Quant Systems again. That's just the cycle of the business that Quant Systems runs. So that's on the seasonality side. The third question that you had was on the discretionary spend. So the growth that we are seeing in banking is largely on the discretionary side. What my comment was on the large deals. So large deals are taking still longer time across verticals, but the discretionary spend is opening up in small to mid-size projects. But we still continuously largely taking time as much as... It's not closing as fast as they were probably closing earlier. So in addition to that extent from industry, the discretionary spend has definitely opened up. May not be in big deals, but definitely the signs are there, it's opening up in banking. Great. Thank you for that. Last question is on Microsoft. Right? I mean, that's one of the biggest clients for us in terms of selling to and selling through Microsoft. Now, if I listen to the conference call of Microsoft, I see a 20% kind of a jump in terms of Fabric paid customers for Microsoft on a quarter-on-quarter basis. So when we think about monetization of this relationship that we have specifically on Fabric, how should we look at this paying customers for Microsoft and monetization opportunity for us? That is one. On Dynamics also, if I'm not wrong, what happened last quarter was, you know, the F&O vertical, which is finance and operations, there were some, you know, headwinds there, while sales were of course doing better. What is the situation there? If you can highlight some data on Microsoft, that would be very helpful. So let me read the second part of the question and then come to the first part. So the Dynamics, as far as F&O is concerned, we're definitely seeing a stronger order book in Q1, and I think that will reflect in our coming quarters in Q2 and Q3 both. So I think the Dynamics business is back on the growth rate that we had anticipated. So we're not concerned about the Dynamics part per se. As far as your question is concerned on the Fabric side, now, what Microsoft has done is they have really combined their Power BI and Fabric businesses largely, and the number that you're seeing is a combination of Power BI and Fabric. What we are talking about is the Fabric on its own, not Power BI included. We continue to see some good momentum in the Power, in the Fabric side. So some of the new logos that we opened recently, we announced a few last quarter. In this quarter, we opened several new logos. Fabric is helping us open those logos with a very differentiated Sonata offering at this point in time, so it is helping us scale it out. Now, with Fabric, what happens is you get into a client, a new client, you do a proof of concept, which takes about two to three quarters, and then you start to piece up to a larger deal of data transformation overall. So we're still in that phase of the first part of the data project coming up. In fact, we just closed another mid-size deal on Fabric, which is a multi-year contract on data modernization because of Fabric. So the Fabric initial momentum is beginning to build up. To be honest, I would not say that we are seeing very large deals on Fabric right now, but it's beginning to see some deals coming up on mid-size at this point in time. Great. Thank you. That's it from my side, and all the best. Thank you very much. Next question is from the line of Vibhu Kumar from Sumangal Investment. Please go ahead. Hi. Thanks for the opportunity. So my question is, what should be a sustainable margin for the company? Because, we are trending lower and lower as far as margin is concerned, from low 20s to now we have reached around 18.5. So what should be the sustainable margin for the company? First of all, we have clarified this, that the medium-term outlook is low 20s only. We will continue to aim to achieve the low 20s. We are expecting that by end of this year, we will reach a low 20s margin level. So, we don't have a... No, our plan continues to be there, for that. The second point is, we are not trending lower. Compared to last quarter, we have improved by 100, 100+ basis points this quarter, which is, which is like a significant jump for, in the EBITDA trend. And we have been telling from last quarter that it will take 2-3 quarters for us to improve the margin. This year, because of couple of large deals, as well as the investments for our long-term growth and our continued investments in AI and Microsoft Fabric, it has impacted the margin over a period of time. Plus, the softness in the growth of Quant, particularly with the high-margin customer, it was also not helping us in improving the margin. However, in the past, just to give a confirmation for you, the company margin will be in low twenties only, and we in the couple of quarters will reach there. Sir, how do you define a large deal? It is more than INR 5 million, means? Yeah, more than $5 million is what we have internal metrics for large deals. That's exact the criteria. Would it be possible to share, total TCV, like all your large deals share? So we have not disclosed, but we said out of the total pipeline, more than 40% is constituted by large deals. What we have announced at the healthcare deal, it's the largest deal in the recent past. ... Okay. Lastly, sir, I mean, I think that if you leave out Quant Systems, we have de-grown organically. So, is that observation correct? Not exactly. We have clarified, we have told multiple times that you cannot take Quant Systems separately. That's a legal entity reported for the purpose of the earn-out calculation. However, we have integrated both Quant Systems and Sonata very, very tightly now. There are project papers signed in Sonata, delivered by Quant Systems, and Quant Systems signed papers in Quant Systems papers, but signed, delivered by Sonata. It is very difficult to split this and then measure the growth, growth in the, the revenue. Okay. Thank you, sir, and all the best. Thank you. Thank you. Next question is on the line of Dipesh from Emkay Global Financial Services. Please go ahead. Yeah. Thanks for the opportunity. A couple of questions. First, about the healthcare deal which you referred. So just want to understand ramp-up plan, because it is fairly large, a long seven-year deal kind of thing. So how one should look from ramp-up perspective? Because it is rebidding, obviously it would be immediately revenue contribution kind of thing. But as we develop AI platform, how we expect revenue model to be on that platform side for us, and then subsequent, how you expect it to trend? Second question is about the large deal. So overall TCV, which we said 1.24x, considering healthcare deal might be disproportionate to the way we give order book, 1.24x. Any adjustment made pertains to it, or it is including that healthcare deal in the number? Third question is about Quant Systems. Now, Quant Systems has some earn-out linked performance, right? That is how we have taken some hit in the last year. Whether it is tracking those expectations? Thanks. Okay. I'll take the third question first. Quant Systems has come back to the growth track now compared to last quarter. However, their major growth, as with every year, comes in the second half of the calendar year for them. So quarter two and quarter three, we expect them to bounce back in the growth trajectory. Your second question was on... Order Book. Order Book. 1.24x, what we do is, any deal beyond INR 25 million, we take only the annual revenue for the purpose of calculating book-to-bill. In this 1.24x also, we have factored only that much, for the purpose of calculation. The first question, Samir will take that. Yeah. So I think your question about large deal ramp-up, it's a, it was a rebidding deal, so the rebidding activity has happened in late June and early July. So that is behind us at this point in time. But we are ramping up offshore now and, ramping up the AI, delivery model for them, so that we can build engine out for them. So that ramp-up is happening. I would say a large part of the deal is going to be fully baked into the Q2 run rate as we move forward. My question was about the... Because I think subsequently you are supposed to develop AI platform for the client. What will be the revenue model for us? So it is like, any T&M thing kind of project, and then we will not benefit from the activity on that platform, or we have some upside to the platform activity also? We have upside to the platform. That's why the margins will accrete in about two to three quarters from now, because we are investing upfront. But come Q1 of next year, that will be accretive to the company. It will accrete. For two reasons, one, we are moving work from on-site to offshore. That's one vector. And second point is that the AI power will kick in, and hence we'll be able to do the work more efficiently. So both the factors will then benefit Sonata. Understood. In seven years, any other subsequent uptick is expected, or then it would be more steady-state deal kind of thing? There is an uptick expected because they are part of their business is being hived off to a new entity. So we are in conversations with them to be a service provider to the new hived off entity as well. But that will probably take another two, couple of quarters to materialize. We have created upside. Understand. Thanks. Thank you. Next question is from the line of Mayank Babla from Mirae Asset Capital Markets. Please. Hello, am I audible? Yes, you are. Go ahead. Good evening, Samir and Jagannathan, sir. Thank you for taking the question. Hope you're doing fine. The first question is to Samir, regarding your comment on retail and manufacturing. So you said we are expecting some softness for the next quarters. I wanted to understand the softness will be with respect to, you know, in perspective with the Q4 and/or Q4 FY 2024 growth or Q1? Mayank, sorry, we are losing your audio midway. Better? Yeah, go ahead. Uh, hello? Yes, go ahead. Can you comment on retail and manufacturing? I wanted to understand the softness in growth, will be, you meant that it will be softer compared to Q1 FY25 growth or Q4 FY24 growth? Yeah. So I think, there are two parts. It's not just with reference to one particular quarter, Mayank. I think, we... Our other businesses have, like especially in high tech and healthcare, are in a nice space growing up. We are seeing, sometimes sluggish, some quarters are declining, some quarters are marginally up. So we're now seeing the kickback of growth in retail, retail and manufacturing at this point in time. The comment was not with respect to one quarter or two quarters, a general trend that we are seeing. Retail, if you recall, four quarters back was one of the strongest growing vertical for us, but has definitely slowed down since. But the good news is, TTH and healthcare are back on the growth phase. Sir, the line for the participant dropped. We'll move on to the next participant. Next question is from the line of Suraj Malu from Catamaran. Please go ahead. Sir, for the international services business, if we look at EBITDA, including other income, it's around INR 138 crore, and the net profit after tax is INR 65 crore, sir. Can you help reconcile these numbers, like, the line items between the EBITDA and net profit? Can you just give, help with the numbers for those? Sir, there will be definitely forex and other income will be there. Then amortization of intangibles is there, then depreciation is there, and tax is there. So amortization and intangibles, we have given in our earnings press presentation. Every quarter we give that, how much is the amount is there. You can take it from there. That is a major portion because it's an acquisition. Because of Quant Systems acquisition and the earlier acquisition, the amortization amount will be there. It's almost like a 55-54 crores of amortization will be there, apart from depreciation, tax, and forex and other income. This quarter, forex and other income would have been other income will be positive, but forex will be a negative impact. Net-net, that total other income will be around INR 9 crore, right? Other income was, I don't remember offline the number, but the forex there is, there is a loss for this quarter. One second, I'll just tell you. The total other income and forex together is, about INR 9 crore, correct. Got it. Okay. Got it. Thank you. Thank you. Next question is from the line of Tushar from InCred Capital. Please go ahead. Am I audible, sir? Yeah. Yeah. So it's more, sir, regarding the AI engagement to the top line. So it is predominantly with the sell-to, or are you seeing engagement with the sell-with segment also? And regarding the rebidding, so most of large part of the rebidding is done in the monthly employee days, or some rebidding will be coming in Q2? Yeah. So let us take the AI question first and then answer the healthcare deal question. So on the AI side, we are seeing good momentum both on sell-to and sell-with. On the sell-to side, we are helping our client transform their customer support operations using AI and enabling the efficiency of the customer support desk of our customers. We're also helping them move other data sources and enabling from a Microsoft AI perspective the other data sources coming up and enabling that whole infrastructure for them. So it's a significant part of the work. There's a significant volume of work being done with from a sell-to perspective at this point in time. From a sell-with perspective, like I said, we work with both AWS and Microsoft to sell with the clients from an AI and the health tech example that we just talked about earlier, the travel example that we talked about entire quarters, they're all examples, or the telecom example the quarter before. They're all examples where the sell-with is kicking in to help us transform the customer estate using AI again. That's on the AI side of the question. On the rebidding side, like I said earlier, the large part of the rebidding is behind us at this point in time. There might be a few, few pieces left, but largely late part of June and early part of July, the rebidding is done. That's it from my side, just this. Thank you. Next question is from the line of Vikrant Gupta from ICICI Prudential Life Insurance. Please go ahead. Vikrant, may I request you to come in a better reception area? Your voice is breaking. Yeah. Vikrant, we are unable to hear you. May I request you to come in a better reception area, please? Sir, the line for the participant dropped. We have the next follow-up question from the line of Mayank Babla from Mirae Asset Capital Markets. Please go ahead. Yeah, thank you. I got the answer to the first part of my question. Samir, if you could, highlight, you know, which subsegments are you seeing softness in the retail and manufacturing, please? Yeah. So I think on, on the retail side, generally, consumer-facing retailers, mostly online, is where we have seen the softness, Mayank. And manufacturers, I would say, across the board, we have seen some softness. Okay. Okay, sure. And sir, my second question was to Jagan sir. There was a loan taken for the Quant Systems acquisition, and we had planned to gradually pay it off through FY 2025 and 2026. Could you give us an update on that, sir? Sir, we have taken a loan of around $55 million when we acquired Quant Systems. We were expecting the RBI issue, which is a procedural issue, to be completed, but it's still going on, and it may take a couple of quarters more for us to come out of that issue for us. It's not able to use the corporate pool of money here in India to repay the loan. So we are continuing the loan, and we have to do an additional borrowing now in the month of March 2024- Okay. To pay the first installment amount of loan, which is about very close to $55 million. So we have increased the loan. $55 million was paid, around $12-$13 million was paid, and the balance was $43 million by end, when we converted the loan to a $75 million dollar loan. Okay. which helped us to pay the loan, and the balance amount was funded internally. Okay. Okay. Fair enough. So thank you for taking my question, and best of luck. Thank you. Next question is from the line of Jay Daniel from Entropy Capital Advisors. Please go ahead. Yeah. Can you hear me, sir? Yeah. Yeah. So you have given your long-term vision of going from $1 billion to $1.5 billion. Earlier, you said you'll get there by FY 2026, but your presentation now says it'll be 3-4 years, which means FY 2028. That is just a 10% CAGR over 4 years. So, I mean, can you, you know, reconcile these two numbers? No, it was 3-4 years sometime back. Originally, when we put the slide, we have not amended it. The FY 26 target, what we have updated is, it'll be delayed by couple of quarters. Two to- Okay. 4 quarters, it will be delayed. Okay. Okay. Sir, in respect of your pipeline, what is the total value of your pipeline? We have not disclosed the total value of pipeline. Yeah, because last quarter, I think you said $60 million was your pipeline for AI, right? Correct. And that was some 20% of your total pipeline. So your pipeline comes to around $1.1 billion. We are not giving the percentage as such. We told the total absolute value of the pipeline, and that pipeline has grown a lot this quarter. It definitely has been growing. This quarter, we have mentioned that more than 50%-62% of our pipeline is data and cloud. We have not mentioned the value for the same. Your conversion rate is 35%-40%? Conversion rate is 35%-40%. Correct. Okay. And in respect to the salary, you're saying there's going to be a hike in Q2 and Q3 of this year. Correct? But your salary is already up 13% Q on Q and 11% year on year. No, 11% Q on Q and 13% year-on-year. So, the total salary increase for the year, as we mentioned, we have added 150 headcount additions during the quarter, as well as the attrition replacement, plus onsite rebadging of the people. So all these things have added to the cost of salary for us. Okay. So now in Q2 and Q3, this will go up from the INR 369 crore that you mentioned? It will go up depending on the salary increase is one component to it. Depends on how much addition we have, attrition we have. Various other factors also play a role, but it will go up. Okay. And, in respect of, you know, the deals that got delayed, one was a large healthcare deal, which now you're saying it's put on hold and, not likely to be revived. There were other deals also, which had got delayed in, Q4. Any updates on that? Those, those are some of the deals that converted this quarter. So the healthcare deal is announced today, while the second healthcare deal got parked right now. It's not lost, but it's parked. Some of the deals that we announced were in the pursuit in Q4, they got closed in Q1. And like I said, there are other 49 deals that we are still in pursuit for. Okay. Thank you, Vimal. Thanks. Thank you very much. As there are no further questions, I'll now hand the conference over to Mr. Samir Dhir for closing comments. I just want to take this moment to thank all of you for joining us today. We appreciate all the support and your time today. I also want to take this moment to thank all the Sonatans globally for their commitment and hard work to keep moving Sonata in the right direction in terms of our strategic vision. Thank you all for joining us today. We'll speak to you in a quarter's time. Thank you very much. On behalf of Sonata Software Limited, that concludes this conference. Thank you for joining us, and you may now disconnect your lines. Thank you.