Ladies and gentlemen, good day and welcome to the Tata Elxsi Limited Q2 FY23 earnings conference call. 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. Shashank Ganesh from EY. Thank you, and over to you, sir. Thank you very much, Faizan. Good afternoon to all the participants on the call. Good morning if you're logging in from the west coast site. Before we proceed to the call, let me remind you that the discussion may contain forward-looking statements that may involve known or unknown risks, uncertainties and other factors. Therefore, it must be viewed in conjunction with the businesses that could cause further result performance or achievements that differ significantly from what is expressed or implied by such forward-looking statements. To take us through the results and answer your questions today, we have the senior management of Tata Elxsi, represented by Mr. Manoj Raghavan, Managing Director and CEO, Mr. Nitin Pai, Chief Marketing and Chief Strategy Officer, Mr. Gaurav Bajaj, Chief Financial Officer, and Ms. Cauveri Sriram, Company Secretary. We will start the call with a brief overview of the past quarter by Mr. Raghavan, followed by a Q&A session. We would appreciate your cooperation in restricting yourself to two questions to allow participants an opportunity to interact. If you have any further questions, you may join the queue, and we will be happy to respond to them if time permits. Having said that, I would like to hand the call over to Mr. Manoj Raghavan. Over to you, Manoj. Thank you, Shashank. Good evening, everybody. Thank you for joining us this evening for the Q2 earnings call. I hope that you and everybody in your family is safe and healthy. I'm happy to report that we have delivered a steady quarter of growth. It was a good quarter for us, especially with our industrial design and system integration division too picking up on the growth momentum. Our revenues from operations during the second quarter was INR 763.2 crores, growing by 5.1% quarter-on-quarter and 28.2% over the same quarter of previous year. Our EBITDA for the quarter was INR 226.5 crores, growing by 23.4% year-on-year. The PAT for the quarter was at INR 174.6 crores, growing 39.1% over the same period of the previous year. As you would have noticed in our investor fact sheet released earlier today, we've added a net addition of 1,532 employees. That's the highest number of Elxians we have ever added in a quarter. To support that, we have also expanded our facilities in existing locations and added new locations to diversify our talent base. This is an investment that we are making to position us for growth in the coming quarters. On the other hand, these investments have impacted our quarter-on-quarter margin performance. Nevertheless, we still reported industry-leading EBITDA margins of 29.7% and PAT of 22.3%. In terms of our divisional performance, the EPD division, operating revenues grew by 3.1% quarter-on-quarter and 29% year-on-year in constant currency terms. The industrial design business witnessed a growth of 15.5% quarter-on-quarter and 15.4% year-on-year in constant currency terms. Our SI division had a strong quarter by growing 26% quarter-on-quarter and 41.7% year-on-year in constant currency terms. In terms of verticals, our transportation business unit reported a strong quarter with 4.6% quarter-on-quarter growth and 34.2% year-on-year growth in constant currency terms. We are seeing a good traction in automotive business led by our EV and ADAS capabilities. Our healthcare business growth remains robust, registering 5.1% quarter-on-quarter and 45.1% year-on-year growth in constant currency terms. Our Media and Communications business growth during the second quarter was 1% quarter-on-quarter and 19.5% year-on-year in constant currency terms. The Media and Communications business did witness some deferment of platform and some large service deals, but we are well positioned, you know, to win these in the coming quarters. While we continue to focus on EPD for product and digital engineering in our three key verticals, we are now seeing our design and SI business expanding and growing and happy with the growth in our SI, system integration and support business, even as we pivot their capabilities to run engineering ops and managed services, including some of our own platforms and products, especially in the media and communication industry. While this has impacted the numbers for the media and communication business for the quarter as we transition some ongoing work to the SIS teams, we believe this will create new and stable revenue streams for the company and this division. During the quarter, we were impacted by supply side challenges as a strong deal inflow and increased utilization of the past few quarters constrained our ability to immediately address new deals. While our employee engagement measures have helped improve overall attrition for a second consecutive quarter to 18.7%, we saw heightened attrition in our on-site employees, signaling the talent mobility that continues in key overseas markets, especially for technology and engineering resources. We are making strong investments in growing our leadership pipeline for delivery, technology and sales with lateral hiring and training programs right from technology leads right up to delivery heads and technology managers. This is essential for us to establish the next phase of talent to win, manage, and grow the increasing number of strategic accounts and new offerings we are bringing to the market. On the work from home front, senior leaders across the functions and delivery have been working full time from office for a long time now, along with employees in critical projects or where we had infrastructure dependencies. We have rolled out a hybrid work policies and guidelines across the organization, and most employees are now working from home two to three days a week. The average attendance, daily attendance is now above 50% across locations, with almost 70% of the staff coming into office at least once or twice a week. We will phase this out even as we commission new facilities and space for the increased, you know, employee headcount. We are entering the second half of the financial year with a strong order book, a healthy deal pipeline across key markets and industries, and customer confidence in the work we do. Importantly, we are investing in both capacity and capability to strengthen our ability to win, manage, and grow customers and business. With that, let me wish you and your loved ones a prosperous and happy Diwali and happy holidays. I will now hand over the floor to Shashank Ganesh for the Q&A session. Thank you very much. We will now begin with 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. The first question is from the line of Bhavik Mehta from JP Morgan. Please go ahead. Yeah, thank you for the opportunity. So I have two questions. Firstly, Manoj, the growth slowdown this quarter was mainly due to supply-side challenges, or there were also some issues where clients would have deferred project execution. Did that also impact the growth this time around? Secondly, you know, what are you hearing from clients for the next quarter or let's say for the next six months? How are they thinking about project execution given the macro? Are there any furloughs that you expect in this quarter or any let's say lengthening of the decision-making cycles which could lead to delays in deal closures? You know, any color on that would be very helpful. Second question to Gaurav is, you know, we saw a very sharp decline in margins this quarter. It seems like the headcount additions was much higher than the top line growth, which obviously impacted margin contraction. Were there also any other factors which led to such a sharp margin decline? You know, what's the outlook going forward on margins in case, let's say, the supply side issues persist? What are the levers you have to go back to, let's say, more than 30% margin levels? Sure. Let me take the first question. As you would have seen, you know, over the many quarters, you know, our utilization, you know, rates have been going up and you know, we have been winning pretty large deals and opportunities, and we have been able to maintain that momentum. However, you know, at the mid-management level and slightly senior level delivery managers and so on, as the number of programs that we've been winning, we faced a crunch at those levels on the supply side. What we've done this quarter is proactively we decided to go ahead, and looking at the outlook, we decided to go ahead and invest in resources because we're not looking at this investment for the next one quarter or two quarters. I think these investments that we're making are for the you know next four to six quarters. We are, you know, setting the plan for us to ensure that, you know, at those levels we continue to grow, right? Yes, in transportation business and if you look at our medical business as well as we look at industrial design business, we've had you know decent growth. In fact, the pipeline is also pretty strong, and we continue to be, you know, bullish there. There has been some deferment of projects in our Media and Communications business. There's been some softness in, you know, the top, you know, five accounts in that particular business. That is why, you know, we've seen almost like a flattish growth in constant currencies. I think this situation in the Media and Communications business, in our view, I mean, it has also affected the macroeconomic situation. You know, Europe as well as the high inflation in U.S. has affected to some extent. I think, you know, it could continue for, I would say, you know, maybe one more quarter. That is the visibility we have. Customers are a little cautious. We continue to engage with all the top customers. We continue to look for projections from them and, as of now, there is nothing for, you know, cause for concern or we're not hearing that, "Look, projects are totally going to be shut down," and so on. Even our customers are cautious with their spends. We need to wait and watch, you know, for at least a quarter here in this particular business. Gaurav, you can handle the margin questions. Yeah, sure. Hey, Bhavik, so you are right that margin for the quarter got, you know, impacted due to the highest number of the net add that we have done during the quarter, about 1,532. We have also onboarded the campus as part of this, you know, 1,532 headcount, and we did some campus onboarding during the, you know, end of the last quarter itself. Along with the campus, which has impacted and the lateral, which has impacted our margin and increase other people cost. There are certain other costs which has also, you know, come back, and we always expecting those costs to be, you know, back, you know, whenever we start our operations back from the offices. Our facility operations are now, you know, in full swing. I think as Manoj mentioned that we have, you know, asked our people to, you know, get back to office in this quarter. People are coming to office, you know, two to three days in a week. We have to have all the facility running at a full scale now. Along with that, I think we have, you know, over the last two years during the COVID, I think we expanded, you know, from our headcount almost, you know increased by double, 2X and all. We also need to add the new facilities that also we have, you know started and set up new facilities in this quarter. We started three new centers, one in Bangalore, one in Calicut, Kozhikode, and one small expansion in the Chennai. Along with that, I think there are certain discretionary spend, travel, recruitment and the training of the new hires that we have done. Those people will undergo various domain and other skill-related training for them to be, you know, ready for the productive billing in the quarters to come. All put together, you know, all those things you know have kind of, you know, impacted our margins. I think these are the expectation levels that we always knew that, you know, once we start our, you know, office and ask the people to come back, those would be the alignment or little bit switch or will happen from the margins that have been reported in the last two quarters. Okay. Got it. That's very helpful. Thanks a lot. Thank you. The next question is from the line of Sulabh Govila from Morgan Stanley. Please go ahead. Yeah, hi. Thanks for taking my question. Couple of questions from my side. First one to begin with is on the supply side challenges that you mentioned. Is there a quantification to that? Was there an impact on the revenue? How much did that impact come in in this quarter from that perspective? That's the first one. Related to that, you mentioned some deferment that happened in the media and the communication business. In the other parts of the business, which is transportation and medical, you mentioned that it continues to remain strong. In the new deals that you're signing or you're part of the discussions, are you facing some sort of challenges there with respect to closures or the way clients are thinking about it? Any color there would be very helpful. Yeah. I'll address the second question first. You know, especially in other businesses, including you know, transportation, medical, you know, even IDV, and SI, we don't see that. We don't see the sort of deferment and so on. We continue to close deals. We continue to you know ramp up you know customer engagements. We don't see any of that happening. It is specifically focused. The issue that we are seeing is primarily in our Media and Communications business. Both in the U.S. and Europe, we are seeing, you know, some of the deals take longer time to close, and in some cases, customers are also, you know, postponing the decision to the next quarter and so on. Regarding your first question regarding supply chain challenges from, yes, we have seen these challenges, you know, across, I would say the industry itself. Our growth rate could have been definitely higher if we had sufficient number of people at the, you know, mid-management to really, you know, ramp up some of the deals that we have won and really move forward. Right? We are taking measures to sort that out. We are pretty confident that the supply side challenges can be addressed. I wouldn't want to put a number there in terms of what we lost and so on, but we are on it, right? We understand the challenges, and we're working on it. Got it. The second bit from my side is on the cost side. One is I wanted to understand that within this 1,500 bunch of people that we've added this quarter, what's the breakup of freshers versus laterals that we've taken in this quarter and the associated impact on utilization that we've seen Q-on-Q basis. The second related question is on the cost structure. As you mentioned that now we are running full scale on some of the facilities and we are ramping up so that the people that we've added can become productive and billable. Just trying to understand that from a cost perspective. Now, this is going to be a steady state cost which is there in the P&L. As and when these people become billable, you get benefit from the revenue that they generate. Is that the way to think about it? Okay, regarding the headcount that we have added, you know, roughly around, I think 1,100-1,150 odd is the sort of fresh people that we have added and about 350 odd laterals that we have added. Regarding costs. Gaurav, can you address that question? Yeah, sure. So Sulabh, I think Manoj mentioned that out of INR 15 million or INR 11 million or something was campus and rest was lateral. In terms of the cost impact, I would say that campus would have you know impacted our margins by 120 basis points. Lateral, along with some you know the correction that we have to do for the on-site people in this quarter would have impacted the 60 basis point. Rest of the you know the impact in the margin are because of the facility expansions and the operationalization of you know the facility for the people to come back to the offices. You know and other travel-related expenses and the training and the recruitment for those things. So that is the kind of the breakup. At the same time, we have some gain from the cross currencies and the USD, you know, improving in our favor. There is a 30 basis point, you know, gain from the currencies. That's how, you know, that work from the quarter-to-quarter perspective, you know, itself. Sure. Got it. Just a quick follow-up, Gaurav. I just wanted to understand the line items like other expenses and depreciation. Is this more of a steady-state number from here on, or you expect further increases in the coming quarters on this as well? See, our business is not like a proportionate linear business. There are certain costs that will continue, and all those costs also depends upon the scale and the volume at which we are growing. See, I think all these costs are not the expense for us. These costs are basically the kind of an investment and the right capability and capacity that we need to add for the future growth. These people campus take somewhere from six to nine months to go through the various training, domain trainings and all those things. We continue. I mean, some of these costs will continue. Some of the costs, yes, there are certain costs which may be, you know, some different shade of, you know, cost could be there in the next couple of quarters to come because there would be certain costs that had gone significantly behind, you know, hiring and, you know, onboarding and training of those people. Yes, I think what we feel that, you know, with as we continue to have a, you know, positive demand outlook, some of these costs will get normalized over the quarter. Of course, there would be other levers, but there could be other costs also that can come back because we don't want to, you know, cut down on the cost and, you know, and don't invest in the right technology, right product and all those things. There will be a balance between these two. Understood. Thanks for taking my questions. I'll get back into the queue. Thank you. The next question is from the line of Vimal Gohil from Edelweiss Asset Management. Please go ahead. Yeah, thank you for the opportunity. Sir, my question on margins and OpEx has been answered. Just wanted to check on the hiring outlook. We've done close to 2,500 for H1. What is the expectation for H2? I think we will, you know, our utilization has, you know, dropped to around 78%. 78.9. 78.9, almost 79%, and so on from about, I would say 83 or 84%. I think the first focus for us is to get back our utilization back to above 80%. We will continue to hire, you know, especially for either specialized, you know, capabilities and so on. But we'll be careful about, let's say, bulk hiring and, you know, generic skills and so on, till our utilization picks up. There will be a balance. Perfect. Thank you so much, sir, and all the best. Thank you. Thank you. The next question is from the line of Chirag Kacharia from Ashika Institutional Equity. Please go ahead. Hello. Sir, I have a question. Like in last two quarters, we have posted a very good set of numbers and also received a good amount of order inflow in first half of this fiscal. Is there any one-off which we experienced in revenue as well as in order inflow due to disturbances in the peer operation in war-related territories or any softness you expect in the H2 due to seasonally weak season? Your thoughts on same. See, it's very difficult to comment on the war and the macroeconomic situation in general, right? I think it is prudent for us to be a little bit cautious about it. What we are doing is proactively going and talking to all our top customers in Europe, especially in Germany, which you know could be affected if the war escalates and so on. We are really trying to understand and really trying to have regular, you know, meetups and connections with them to understand if there is any change in their own thought process, you know, and if they are going to be affected? You know, winter is coming, energy prices are going up in Europe, so will there be any cut in, you know, in budgets and so on? These are the questions that we're asking our customers. As of now, none of our top customers there are stalling any of the committed investments, right? Anything that they've already committed and where we have already onboarded resources and those projects are ongoing, they are ongoing. We don't see too much of an issues. If at all there is any slowness, it is in the new opportunities that we are going after. I think customers in general are being a little cautious. You know, the time to closures are going up, and that's something that we are, you know, watching closely. One never knows, you know, when situation goes out of control, what will the customer behavior, how will the customer react, right? The good thing is, you know, I think 95% of our revenues in the quarter come from our existing customers. We are keeping a close tab on them and then we don't see any sort of uncertainty at this point in time. Having said that, it's, you know, we have to watch it really month-on-month we have to watch. We have to talk to our customers. We have to really keep close to them. That's as much as I can talk about the macroeconomic situation at this point in time. Okay. One more question. Like India is, you know, all PLI schemes and all government focusing on making India manufacturing hub on global trends. Do we find opportunities of our ER&D space offering within India later on? No, absolutely. That is, I mean, we are having discussions with few customers who are utilizing the PLI scheme, launching, you know, products. Earlier they used to just import products from China or anywhere else, and they just used to brand them and sell them in India. Now many of these companies are desiring to start manufacturing, desiring to design their own, you know, products in India and manufacturing. I think this scheme is positive for Tata Elxsi and then we are in discussions with a few customers to see how we could be the design arm because many of these companies don't have the design capabilities. They earlier used to just import from China and just put their brand. now a lot of companies are, because of our design heritage, they are talking to us to see how, you know, we can support them in their, you know, new product R&D. Okay, sir. All the best. Thank you. Thank you. The next question is from the line of Sandeep Aggarwal from Naredi Investments. Please go ahead. Thank you, sir. My question is, where expenses increased to INR 102 crore from INR 82 crore Q on Q? Is there any one-off item or any recurring in nature or what type of expenses increases? The second- Sorry, I think your expense, line item is not clear. On which line item of expense you are referring this to? The other expenses increased to INR 102 crore from INR 82 crore Q-on-Q basis. Okay. Is there any one-off item or recurring in nature? No, there are both. I mean, there are certain, you know, recruitment related, you know, onboarding related one-time items also. But there would be, you know, ongoing expenses also like travel cost, all those things and facilities and all those things, maintenance, utilities that has come back. It's a mix of both. My next question is regarding so we have 32% income from Europe region and 43% from USA. How currency movement impact our company in this particular quarter? Any specific number regarding currency losses in dollar and euro? On an overall basis, I think, if you see, we have, on a revenue side, a 40 basis point benefit from the USD moving in our favor, and partly which was offset by, you know, the dampening of the pound and the euro. Overall, at the top line basis, we have a 40 basis points gain. On a margin basis, I think it translates because we have certain costs also into those respective currency. On a margin basis, it is 30 basis point kind of a gain on a bottom line. Okay. Thank you, sir. Okay. Thank you. The next question is from the line of Sameer Dosani from ICICI Prudential AMC. Please go ahead. Thanks for the opportunity. Just one clarification, sir. Freshers, I think you mentioned that we have added freshers, but is this at the end of the quarter? Is my understanding correct? Towards the end of the quarter? No, no. We have added it throughout the quarter. In fact, on top of this, I think we had added about 250 freshers in Q1 towards the last month. I mean, that full quarter impact is also there this quarter. Okay. Also, you know, just generally speaking, this industry as a whole, you know, Q3 is a weaker quarter because of furloughs. What do you see, is there some impact that we are expecting some normalization? If you can just throw some light on us on that. Thanks. Yeah. Q3 traditionally, yes. If you look at our, I think last financial year Q3 also, we did a pretty good, you know, growth. Yes, we are waiting and watching. We have not really seen furloughs and so on yet from any of our customers. That is something again, we are closely, you know, watching and talking to these customers. We hope we will continue the trend like last time. Okay. Understood. Glad to hear that. Also on the facility and travel expenses, as you explained, right, there's an impact. Do we see more expenses coming through our way, going forward in Q3, Q4? Any idea on that you can give? Yeah. See, facilities, you know, as I mentioned earlier, you know, we have actually mandated a hybrid work for our employees from October first. Earlier there were about maybe 25-30% of employees who were coming to work in Q2, and a little lower number in Q1. Right now, if you look at an average number of employees in a particular week, right, unique people who are coming in, we are almost touching 68-70%. which means hopefully in this quarter we will increase that number to almost 80% or so, which means we are almost back to our you know even pre-COVID numbers, if you look at it. we were maybe 6,000 or 6,500 people at that point in time. with all these employees coming back, we will definitely exceed that number. We'll grow to maybe people in the office being to about 8,000-8,500 and so on, right? associated expenses, utilities, you know, employee related expenses, you know, employee drop expenses, cafeteria related expenses, you name it. All the expenses that will be associated with work from office, all of that will come back. I think if you ask me, I think that's a positive. I wouldn't consider that as expenses and, you know, I won't be worried so much because these are needed for us to deliver, you know, value to our customers. I think that is something that we will have to take into account. Right. Completely understand that these are necessary expenses. But additionally, do you think there are some expenses that would come because we already at, you know, at a respectable number in terms of, you know, coming back to office and we already have facilities that we've taken up. Do incrementally I was just understanding. It is possible that either in Q3 or in Q4 we may have to add to office spaces because of the headcount that has come back, right? We would need to take additional office spaces, at least in a few locations. We are evaluating that depending on when you know individuals will come back and so on. At this point of time it is okay, but there could be additional leases that we would need to sign to accommodate for you know the growth and the new employees who are coming back. Okay. Lastly, on the transportation segment, you already explained media has some, you know, caution in terms of clients. How do you see, you know, revenue or how do you see traction in your transportation business? Because, you know, auto, yeah, auto as a whole, you know, is, I mean, you know, it's the traction has been good, right? Is what we hear. So if you can give some color, whether it will accelerate from here or, you know, you see momentum continue from here. Thanks. Yeah, we definitely see momentum continue, and we want to accelerate, and we want to really push that, you know, push the pedal down because we have, you know, large opportunities that we have signed off. For us now it's a question of really how from a supply side, how do you handle that, especially around what I talked about, the mid-management and, you know, the senior management folks who can manage, you know, customers who can really, you know, handle some of these large programs and so on. That is a place where we are really investing in and really seeing how we can, you know, expand that, right? Again, in that business, demand is not an issue for us. Supply at that critical level is a little bit of an issue. Junior people, we have no issues. We have a number of them available. That's something that we're working on. Both Q3 and Q4, we will put a lot of focus. In Q2 also we have done a lot of focus and really brought in a huge number of resources in that bench. Hopefully all that will help us accelerate our business in Q3 and Q4. Last question, if I may squeeze in. What is the timeline that you expect? Obviously you've hired a good number of freshers in Q1 also. Have they started getting deployed, and what is the client feedback overall? That is one thing. You know, what levers? Is it a big lever that we look for in our margins? Thanks. Last. No, for us it is not margin. We are not looking at freshers from a margin perspective. We are really looking at building the bench strength for us, you know, for the next, you know, few quarters, right? How are we able to grow our, you know, overall, you know, revenues and so on. I would say, you know, out of the number of people that we have hired, maybe less than 100 odd freshers have been made, you know, billable. That's because these guys have interned with us and worked with us and, you know, they've already been trained and, you know, they could hit the ground running. So that has really helped. The other set of, you know, freshers, I think it'll take at least, you know, two quarters to get a majority of them built. So we would look at, you know, maybe in Q2, we could target maybe another 200 or 250 people from that batch. Sorry, in Q3 to get built. Subsequently within Q4 and Q1, we should have a majority of them built. Okay. Thanks for the answers. Good luck for the future. Thank you. Thank you. Ladies and gentlemen, in order to ensure that the management is able to address questions from all participants in the conference, please limit your questions to two per participant. Should you have a follow-up question, we would request you to rejoin the question queue. The next question is from the line of Debashish Majumdar from BNK Securities. Please go ahead. Good evening to the management team. One question that I have is if I see the IT service company from NC- Sorry to interrupt you, Mr. Majumdar. Please use the handset mode. The audio is not clear from your line. Am I audible clearly? Yes, sir. Yeah. Some of the IT service companies have clearly called out that there is a pressure on the discretionary spending and clients are moving towards more maintenance projects. If I understand correctly, the ER&D as a business is more discretionary in nature. For the hiring planning, it seems to be we are not seeing that kind of pressure there. Any client types that we are dealing with today or the clients in the discretionary level are maintaining their budget despite having uncertainties at the economic level. Yeah, I know. I think I've answered that. Look, you know, most part of our business we see customers continuing to invest, and we don't see any, you know, slowdown and so on. The slowdown, if any, is because of our, you know, supply constraints and we're working on that and that will be sorted out. On the media and communication business, we do see some slowness and that is where we are looking at, you know, seeing how, you know, we can, you know, go to the customers and see what budgets they have and where we can, you know, expand our services, right? To that extent, yes, in a part of our business we see some effect. But it's too early. I think it's a question of really, you know, you know, talking to customers and, you know, really understanding, you know, what is causing this deferment of projects and hopefully it's just a one-quarter issue and, you know, the confidence will come back and we'll be able to, you know, ramp up our business back. Yeah, I think we are working on it. Just a related question, sir. The growth that we are getting is because of the market share gain or the overall market itself is up? It is both, right? You can't say it is only one or the other. The overall market is definitely growing with a lot of you know digital opportunities you know especially in all the areas that we are working in. At the same time, yes, we are also winning you know market share from our competition, right? It's a combination of both. Okay. One last question, if I may squeeze in. If I just read the fine print, it seems to be that some of our media entertainment projects related to India and APAC has slowed down. Any specific color on that front? Is it like one-off or it is like a permanent loss of business? I'm not- Reduction in call. I'm not really sure whether that is true. You know, our majority of our business in the Media and Communications is from the US, and the slowdown that we see, you know, is definitely, you know, a lot in the US and some in Europe. India, yes, is also a important market for us and I don't say it is specifically APAC and so on, right, that is causing this sort of a slowdown. It's across. Thank you. Yeah, thank you very much for answering the question. Thank you. The next question is from the line of Akshay Ramnani from Axis Capital. Please go ahead. Akshay Ramnani Hi. Thanks for the opportunity. Manoj, you mentioned about deal wins and pipeline being strong, but you also talked about delayed decision-making environment to close those deals. I wanted to understand what are the clients indicating in your conversations, especially your top ones. Any sense you're getting on the visibility of their spending over the next four to six quarters or CY 2023. Because looks like you've made a very strong investment in hiring to fulfill demand over the next four to six quarters. Of course, there would be some visibility that you might be having to make such a strong hiring commitment. I wanted to understand your thoughts on visibility of demand over the next few quarters. Absolutely, Akshay. I think we have been talking to, you know, all our top, you know, 20 customers, you know, pretty closely. If you look at it, you know, from a top five customer base and our top 10 customer base, you know, we have been steadily, you know, growing, you know, there is. I don't think there is any, you know, cause for, you know, concern there. We have done this investment primarily based on the sort of, you know, pipeline that we have, from our, you know, top customers. You're right, this hiring is not for, you know, this quarter or the next quarter and so on. It's for the next four to six quarters and that we are in alignment. Customers are definitely, you know, not indicating, especially in our transportation business, medical business as well as in our industrial design business. We see strong traction. We see a lot of requirements, you know, coming in. In the media and communication space, I believe it's an issue just, you know, in this quarter, maybe next quarter also. You know, there are a lot of transformation happening in that market. Our customers, you know, cannot just, you know, stop the innovations that they're doing. We strongly believe that some of the work that has been deferred will come back. You know, it's a question of a quarter or two. I think the general discussion with our customers in the media and communication space is they value our relationship, and these relationships, especially with our top customers, have been for the last 15, 20 years. Then we have seen this sort of a situation, when the macroeconomic situation is not very clear. Sometimes the customers, you know, take a pause. When I say pause, it is not on the existing projects that they're executing, right? Those projects continue in full steam. It is the new opportunities or the new areas that they're looking at. There it's just a pause, and I'm sure in a quarter or two that'll come back. We are still pretty bullish there and you should imagine that this is the business that has really helped us, you know, during the COVID time, right? When our automotive business was really, you know, not doing well, the media and communication business was one that really pushed us forward. We have really had a tremendous run over the last eight quarters in the media and communication business. I think, you know, it's just a pause and they are reevaluating their, you know, overall strategy and so on from their end customer perspective and from their market perspective. Our relationships are extremely strong and I don't see a cause for concern. However, we are in very, very close discussions with all our top customers. I strongly believe it's a matter of time before we get back that growth. Yes, we are investing for the future and not for, you know, just the next quarter and so on. Great. That's good to hear. Why I ask this is because historically we have seen volatility in revenues in an environment where decision-making slows down. Just wanted to understand, has it had something changed this time around, which is giving you a higher visibility in an environment where decision-making is slowing down? Maybe some larger deals which are getting added into your order book, which is giving that visibility? How should one think about it because versus the past and this time around? Sure. Sure. No, I think over the last two or three quarters, right, we have closed some large deals and so on. Naturally there's a ramp-up plan for all those deals. The resourcing that we have hired in this quarter is to really address those ramp-ups that is going to happen in the next quarter and the next quarter, right? We are actually getting ready, prepared to ensure that, you know, we have that just to meet the pipeline and the ramp-up that has already been closed, right? That's what we are doing. Then I think we are there, right? With this sort of a ramp-up that we have done. It's just a question of how quickly we can get these people, you know, ready for customer engagements and how quickly we can, you know, get them into billable roles. That's what the focus will be for the next, at least one quarter. I think the teams are working, you know, pretty hard along with the customers to make that happen. Great. Just a small one. What's the outlook on offshoring? What are clients talking about offshoring? Any return to on-site or they want to still increase offshore in an inflationary environment? Your thoughts there, please. Offshoring continues to be strong. In fact, I'm not sure if you heard it from anybody else, but the on-site environment has become very, very difficult, right, in U.S. and Europe and so on because of inflation and so on, right? You know, the salary levels are going up like anything. One of the issues, I think, one of the things that also hurt us in our M&C business is, we've had a lot of attrition, you know, on-site. You know, if one person quits on-site, it's almost like two or three offshore revenue that gets hit, right? On-site attrition definitely is an issue. You know, these are guys, you know, going or, you know, joining an Amazon or a Google or, you know, at maybe 2x or 3x salaries and so on. These are things that, you know, totally disrupt, and it's very difficult for us to really hold such people back. That is a little bit of a challenge that we have. But the good part is, as you all know, our on-site presence is anyway, you know, about 10% or so of our workforce is on-site. We continue to pivot with our customers strongly on the offshore. I think this quarter also ratios have not been very different from the last quarter. I think customers are okay. No, I don't think they're asking, you know, that we need to return back employees to on-site and so on. We have not seen that trend so far. Thank you. Mr. Ramani, may we request that you return to the question queue for follow-up questions. Ladies and gentlemen, please limit your questions to two per participant. Should you have a follow-up question, we would request you to rejoin the question queue. The next question is from the line of Navin Bothra, individual investor. Please go ahead. Yeah. Good evening, sir. Congratulations for a steady set of performance and continuing to grow the TTN performance even in this challenging environment. My first question is regarding if you can throw some more light on the India business, because just in this quarter it has been quite soft around 2% down. When we see for the last four to six quarters, it has grown recently from INR 50 crores per range to around INR 125-INR 130 crores. If you can throw more light on the India business and as well as in the last phone call you said that rest of world like China, Korea and Japan you did not see. Some new deals closing there. If you can throw some light because we are seeing 3% growth over there in desktop revenues. Both these geographical areas, if you can throw more light currently and as well as the environment for the coming second quarter, it will be quite helpful, sir. Question for Mr. Manoj Raghavan. As well as the second question is regarding the healthcare, our TEngage vertical to Mr. Nitin Pai. Because we have been marketing in this vertical since the March quarter. If you have seen some commercial closures or orders, in fact, we have started, it will be quite helpful, sir, regarding TEngage. Yeah. So yes, our India business has been pretty soft. I would say it is not because we don't have order inflows and so on. There is a lot of order inflows in the India region. Unfortunately, you know, because of the supply related issues, we had to sort of prioritize some of our overseas customers and we had to really move so that we earn better, you know, realization and so on. I think that's a you know a very simple reason why India business is down. There is a lot of opportunities in India and we are being a little selective given the sourcing situation as to how do we you know address that. Regarding other markets, China, Korea, Japan. China continues to be down because of COVID and all the issues. I mean, we sort of, you know, really not focusing on China. I think same with Korea. Our Japan business, you know, we are definitely ramping up. There have been some good deal wins in Japan in the last quarter, and there are some good funnel this quarter also. We're pretty positive, hopeful that Japan business will definitely grow. On TEngage, Nithin, would you want to? Sure. Hello, Mr. Bothra. On TEngage- Yes. I just want to comment that we ought to look at that as a strategic platform, right? Why? Because this is a make or buy decision that customers make. Yes. It's really about will you license TEngage? Will you use this as the primary platform, you'll build your products and services on top or will you build your own? To that extent, because these represent strategic budgets, we never expected anything to close in a quarter or two quarters soon. Yeah. In fact, our view is that most likely it has to be part of the new budgeting cycles because it's a strategic spend. I would expect something that happens in Q1, 2023. When I say Q1, I'm talking of calendar year. Why? Because typically our primary market being targeted is U.S., so it is really the first quarter of the calendar year there that accounts for budgeting. Having said that, we already have some discussions going on in terms of RFPs, RFIs where we are part of the conversation. What it has more importantly brought business in is services business where customers are saying, "Look, we are not gonna buy, we are gonna make. Your relevant capabilities are already proven with your platform, so we would like you to take up services work. That we have already actually won some deals on. Okay. Just a follow-up regarding the India business. As we are saying that in the media vertical we are seeing some softness or deferrals. You said that the resources were used in the other overseas markets and all these things, so that's why some softness in India business. Going ahead in this second half, do you see India business because you say that demand is quite good, pipeline is also good. If you can throw some more light regarding the half two India business execution in view of the supply challenges and all these things. Yeah. Since we have also ramped up, you know, hiring and so on, some of the resources that we ramped up and if we are, you know, able to convince our customers in India to make use of those resources for billable engagements and so on, yeah, we will be able to, you know, service those requirements that we have not been able to service the last quarter. That's something that we're working on, Mr. Bothra. Okay. Thank you, sir. Thank you very much. All the very best and happy Diwali to all at Tata Elxsi. Thank you, sir. Thank you. Same to you. Yeah. Thank you so much. Thank you. The next question is from the line of Urmil Shah from Ageas Federal Life Insurance. Please go ahead. Yeah, thanks for the opportunity. Good to see you know you being the only company to see a double digit employee addition in this quarter. Just about more clarity on the softness which we talked about in the media and communication business. It's more on the communication sub-segment side or in the media side or you know we have seen a difference in both the sub-segments? That's a good question. I would say a lot more on the media side. Communication still picking up. We are looking at investments in 5G and so on. We are investing there. A lot of our, you know, a lot of our current business is on the media, on the OTT, on the, you know, operator side. That is where we are seeing a little bit of a softness. On the communication side, I think there are a lot of opportunities that are coming up and we are investing there. Yeah. I think media is where some amount is slowed down. Was this different mode also towards the end quarter phenomenon and you know that could provide a positive surprise if not in Q3, in Q4? I didn't get the question. The difference was more to return towards the end of the quarter. Once the clients have more certainty, the spend might come in, and that could provide a surprise in Q3 or Q4. It was towards the mid or the start of the quarter itself? I think it's very difficult to say whether it is the end. I mean, it is. We have been seeing this weaknesses for some time now. To my mind, it's a one or a two-quarter issue and, you know, these are not gone, right? These are deferred. We are still engaged with the customers, and this will come back at, you know, some point in time. Just last question is, as regards- Mr. Shah, the audio is not clear from your line, so you. Is it better now? Yeah. Yeah. Just the last question, as regards, you know, the commentary of your larger peers on insurance, it's more of an uncertain kind of impact right now. What would be your commentary on both the media and communication and the transportation segment, specifically in the European geography? Yeah. Again, you know, to repeat the same thing, right? We don't see any concerns on our transportation business. We hope that we have definitely a good pipeline and customers that we have actually closed deals with. For us, it is a supply side there and those are the steps that we have taken to address the supply side, and hopefully we should continue that growth. On the media side, definitely there is some slowness that we are watching in the marketplace itself. That is something that we hope it is just a one or a two-quarter issue, and we'll get back to our recovery path. Oh, sure. Thank you for answering my question, and wish you and your team happy festivity. Thank you. Thank you. Request to all the participants to please limit your questions to one per participant. Should you have a follow-up question, we would request you to rejoin the question queue. The next question is from the line of Salil Desai from Marcellus Investment Managers. Please go ahead. Hi, Manoj. Manoj, this, when you're moving now to a hybrid model from October first. Can you just throw some light on what, you know, deficiencies are you trying to plug to get people back into offices? Is this across all geographies or is this specific to, say, India or to some cities within India? Since I'm not sure if I understood the question right, but 90% of our resources are in India only, right? This applies to all our resources that are there in India, right? What we have mandated is definitely, you know, I think, in Q2 and even in Q1, the mandate was at least, you know, all the senior management used to come to office. Wherever there are some infrastructure-related, you know, projects and so on, which needed certain infrastructure that can't be shipped outside the office, you know, those teams were working from office. If there are, you know, very tight projects, schedules are very tight or there are customer escalations and so on, we've mandated all those teams to come and work in office. That was how we were managing. You know, about 25-30% of the team used to come to office. Come October first, we have said, "Look, you know, we employees have to come back to their you know base location and you know at least two to three days they have to be in office in a hybrid sort of scenario." We have... Yes, we still have a few set of employees that continue to work from home due to whatever, you know, there are certain issues that they have and, you know, medical emergencies or, you know, young parent and so on and so forth. But apart from that, you know, almost close to about 90% of our, you know, employee base now comes to office. So I'm not sure if I've answered your question. Yeah. Just to kind of clarify, you think that there's a, you know, perceptible productivity differ- Mr. Shah, the audio is breaking from your line. Please check. Sorry about that. Just to clarify, you would think that there's some productivity enhancement you'll see when you're calling people back to work? Okay. No, no. That should reflect in some metric somewhere down the line, right? Yeah. That's. Very. Okay. Got it. Thank you so much. Thank you. The next question is from the line of Apurva Prasad from HDFC Securities. Please go ahead. Yeah. Good evening. Thanks for taking my question. Manoj, could you quantify how much would be the impact of the lower growth in IDV arising from the supply constraint and the on-site problem that you referred to? Would there also be an impact from lower IP contribution in the current quarter vis-à-vis the previous quarter? Sorry. You mean lower IP? Yeah. I mean, would Q2 have lower IP revenue as compared to Q1, which had impact on revenue and margins? If you could quantify how much would be the miss on EPD growth from the supply constraints that you referred to. Maybe I will. I don't have the data immediately. I'll check if Gaurav has the data. I don't think there's a perceptible difference. Yeah. in, because of IP. It's not as if, in Q1 we had a lot of IP deals and Q2, you know, the IP deals, dipped and so on. Yes, there were some IP deals that we are hoping to close that they have been, deferred, especially in the media and communications vertical. Gaurav, would you have that number? It's very difficult to, Apurva, to put a number to it. I think as Manoj mentioned, I think it was some of the deals are taking a little longer on the IP side to get close. From that perspective, I think there will. We are hoping those, you know, still get closed and, you know, accrues revenue in the quarter to come, basically quarter three and quarter four. But, I mean, any which ways I think our IP revenue as we, as you know, is not, you know, significant, so it doesn't really, you know, impact much on the, from the growth perspective. What led to IDV growth, sequential growth, this quarter? Finally, on the fresher addition for full year, would you still hold on to the 3-3.5 thousand targets set earlier? Sure. IDV definitely after the design digital event and, you know, the general focus on including IDV capabilities in our overall sales pitch, especially to the top 20 customers. We've had focused campaigns, you know, going after our existing customers with the IDV capabilities. I'm happy to announce that at least half of these customers have strongly embraced the IDV capabilities, and we are seeing some good design wins there. I hope this would continue. I'm pretty satisfied with the way IDV is now moving and, you know. The good part is, we have a lot of our EPD sales, you know, fully engaged in selling, you know, IDV services and so on. That's definitely a positive for us, you know, in this quarter. That's something that we have been working on over the last two quarters, and I think we've seen the results of that this quarter. From a fresher addition perspective, I think we would have added, in the financial year, almost about 2,000 freshers to date. Yeah. Yes, we have a pipeline of, if I'm not mistaken, about another 750 or 1,000 freshers that there is a plan to onboard. We will be looking at the business growth and specifically in the sort of areas that we are really growing. In those areas we'll definitely bring in those, you know, freshers, especially in transportation and in the medical business. That's something that we will, you know, focus on. Over the next two quarters we'll bring in the remaining freshers. Okay. Thank you. Thank you. The next question is from the line of Bharat Sheth from Quest Investment Advisors. Please go ahead. Hi. Good evening, Manoj and Nitin. Manoj, correct me if I'm wrong. In last three quarters we have just added almost a lateral plus fresher around 30% of total head count we have. Prior to that, our top line revenue growth was much higher than the addition of head count, but in view of this bigger opportunity. When do you think again, those kind of, I mean, revenue growth growing faster pace than the headcount addition will start, expect to start seeing? I think whatever headcount that we have added, Mr. Sheth, I think in the next two quarters we should be able to really utilize them, right? The thing was, I think with the growth that we've seen both in Q1 and Q2 and utilization, I think one was reaching 85% and so on. There was really, you know, sort of no room, you know, especially at the, as I said, the mid-management level and the senior management level. We've sort of, you know, though we've done a number of things to, you know, groom people and get them to that level, the sort of inflows we have seen were far higher than what we have projected. We were caught a little bit there. That's something that we are correcting and I think in the next couple of quarters, we should be able to. We are actually preparing, you know, in a way not to get into the situation that we are in in Q2 to be able to really, you know, encash, you know, all the opportunities that come our way. We will take it a quarter at a time and then, you know, looking at, you know, maybe end of next quarter, we will once again relook at our resourcing situation and take a call if we have to accelerate for the next, you know, four quarters. Okay. One more question for Nitin. Nitin, you said that in past, I mean, our customer are looking forward to build a new platform than using our own platform and uses the services. In this challenging macro environment, do you think that can be a most cost-effective solution that we can give it to our client and hence maybe our platform business getting a more traction? Or this kind of a operating leverage they can have? Yes, Mr. Sheth. On one hand, what you're saying is absolutely logical, that, instead of making a make-or-buy decision, which then involves investment that takes some time and risk, a buy makes much more sense. Buy also has other advantages. If it is a SaaS model, you can also pay as you grow. You don't have to pay a lump sum right at the beginning. Right. Having said that, both of them are strategic decisions because if you look at TEngage especially, it is a business platform. It is not a productivity platform. It is not a test automation platform. It's not to improve something that you already have. Right. In that sense, I think we will still see some slowness in adoption. Why? Because companies still have to make that big decision of are they going to run a new business and are they then going to do it themselves or are they gonna license the platform? I would still say that it's a strategic call. Logic says that we would actually be a better choice when the environment is tougher because there is lesser risk and you can choose to pay as you grow. Okay. Thank you and all the best. Thank you so much. Thank you. Ladies and gentlemen, that was the last question for today. I would now like to hand the conference over to the management for closing comments. Thank you all for the time today and, I think, in spite of all the difficult macroeconomic situation and supply-side, you know, challenges that we had in parts of our business, I think we have done reasonably well, you know, from a quarterly, you know, top-line perspective. Bottom-line has been hit a little bit because of the investments that we have made, preparing ourselves for the subsequent quarters. I think personally, we're pretty comfortable and confident with the numbers, you know, that we have achieved. I think we have you know sort of done all the right investments whether in resources whether in office spaces and so on to really help us you know in the next two to four quarters right? We will continue to execute our strategies and then hopefully you know we will continue to deliver you know results that delight you know our investors. With that I'd like to thank you all and you know happy Diwali and happy holidays to all the investors and look forward to you know talking to you again at the Q3 investor call. Thank you so much. Thank you. Ladies and gentlemen, on behalf of Tata Elxsi Limited, that concludes this conference call. Thank you for joining us. You may now disconnect your lines.