Ladies and gentlemen, good day and welcome to the Infosys 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 and zero on your touchtone telephone. Please note that this conference is being recorded. I now hand the conference over to Mr. Sandeep Mahindroo. Thank you, and over to you, sir.
Hello, everyone, and welcome to the Infosys earnings call relating to Q4 and FY 2020 earnings release. This is Sandeep from the investor relations team in Bangalore. Joining us today on this call is CEO and MD, Mr. Salil Parekh, COO, Mr. Pravin Rao, CFO, Mr. Nilanjan Roy, along with other members of the senior management team. We'll start the call with some remarks on the performance of the company by Salil, Praveen, and Nilanjan before opening up the call for questions. Finally, note that anything which we say which refers to our outlook for the future is a forward-looking statement, which must be read in conjunction with the risks that the company faces. A full statement explanation of these risks is available in our filings with the SEC, which can be found on www.sec.gov. I'd now like to pass it on to Salil.
Thank you, Sandeep. First, apologies from us for starting this off late. Good evening and good morning to everyone on the call. I trust each of you and your loved ones are safe in these extremely different times. The financial year that just ended very well for us. It was an exceptional year. We grew at 9.8% in constant currency, delivered 21.3% operating margin, grew our digital revenue by 38%, and for the digital revenue now in Q4 has become 42% of our overall business. We did this with $9 billion of large deals for the full year. Our earnings per share grew at 8.3% in dollar terms. We had, in fact, the highest cash collection for the quarter and for the full year in our history.
In Q4 itself, we grew our business 6.4% year-on-year in constant currency and delivered 21.1% operating margin with $1.6 billion of large deals, some of which in the last few weeks of the quarter. We closed the year with an extremely strong cash position of $3.6 billion and no debt on our balance sheet. As the last two to three weeks of March saw, the impact of COVID was significant. We had already activated our business continuity plans with an intense focus on employee safety and client service delivery. Today, we have 93% of our employees working remotely, a task that was performed with incredible efficiency and tremendous hard work by all of our teams. Pravin will share with you more color on this later in the call.
In addition to that, we have added financial security of the company and absolute focus on liquidity and cash. We have now activated a comprehensive program for cost control and reduction. Nilanjan will share some preliminary highlights of this later in the call. We, of course, anticipate near-term challenges in the business environment across a whole set of industries. We see increased interest from our clients in cloud virtualization, workforce transformation, and cost reduction programs. Our discussions with clients indicate they would like to consolidate their work with a strong player like us with exceptional service delivery, agility to reach 93% remote working, and an extremely strong balance sheet. I think those trends will hold us in good stead in the medium term. Let me spend a few minutes to share with you what we are doing outside of work, supporting our communities that we live and work in.
Via our foundation, we have dedicated INR 100 crore towards relief efforts, including half of it to the Prime Minister's CARES Fund in India to help enhance hospital capacity, provide treatment, ventilators, testing kits, PPEs for frontline health workers. In the U.S., we've opened Pathfinders Online Institute, an online learning platform for teachers, school children, and their families, so they can access high-quality computer science education from home for free. Coming back to business, given the uncertain environment with the global pandemic and client business being marred by volatility, we do not feel it will be appropriate for us to provide guidance for this financial year. As a result, we are suspending providing guidance on revenue growth and operating margin for FY 2021.
Given our strong performance in the just concluded financial year and our strong cash position, we are pleased to announce our final dividend for the financial year at INR 9.50 per share, bringing the total dividend for the financial year to INR 17.50 per share. I'm extremely grateful to our employees for their diligence through this stressful period and proud of the work they have delivered for our clients. While we are unsure about what lies immediately ahead, we have enormous strengths that we believe will help us navigate this period and emerge stronger from it. We have a sustained focus on client relevance, and we are now repivoting our efforts in terms of what clients are looking for, and we see good traction in that.
Our ability to work with clients across the entire spectrum of their needs, including accelerating their digital journey and extreme automation for cost efficiencies. A highly skilled workforce of 240,000 people passionately working towards making our clients successful. Unparalleled delivery capabilities. A INR 3.6 billion in cash on our debt-free balance sheet, which gives us ample liquidity. With that, I'll pause my comments and hand it over to you. Pravin, over to you.
Thank you, Salil. Hello, everyone. Let me start by summarizing key aspects of our Quarter four performance. Our operating parameters were steady during Quarter four. On-site, offshore effort mix remains stable sequentially, but improved by 110 basis points over quarter four 2019. Utilization dropped sequentially during the quarter to 83.5%, partly due to COVID-19 related supply constraints. Large deal wins were healthy at $1.65 billion for Quarter four, with the share of new deals increasing to 56%.
We won two large deals in quarter four, out of which four deals were in retail and energy, utilities, resources, and services, and one deal each in financial services, communication, manufacturing, and high tech. Region-wise, seven were from Americas and five were from Europe. Encouragingly, many of the large deal closures happened in the last two weeks of the quarter, despite the COVID-19 situation. Attrition on a standalone basis was slightly higher at 18.2%.
However, voluntary attrition reduced further to 15.1% from 15.6% last quarter. Higher involuntary attrition during Quarter four was mainly on account of separations that occurred as a result of yearly performance reviews, which closed in December. This is part of our focus on ensuring a high-performance culture. Moving into FY 2020, we finished the year with a strong 9.8% constant currency growth in revenues, despite the impact of COVID-19-led slowdown in March. Volume growth for the year was 8%. Five of our business segments, communication, energy, utility, resources, and services, manufacturing, high tech, and life sciences, recorded double-digit growth in FY 2020. Similarly, both of our largest regions, North America and Europe, clocked double-digit growth in constant currency. We had large deal TCV of more than INR 9 billion in FY 2020, which is 44% higher than in the previous year. Moving to the business segments.
We see near-term weakness across the board, especially in the area of discretionary spending. Clients are focused on ensuring safety of their employees and maintaining business continuity, while at the same time conserving cash. This is bound to impact near-term performance as they reprioritize and delay some projects and reduce volumes. However, we see long-term opportunity as the focus on digital and core transformation gets accelerated. Financial services segment is seeing the impact from interest rate decline across the world, which has severely compressed the net interest margin. The banking sector is also expected to experience increase in loan losses in the near future, which will have impact on their profits. Insurance may also see increased pressure due to higher claims. Post COVID-19, we expect a strong opportunity for cloud data services and creating new digital bank capabilities.
Retail segment has been hit hard, especially non-grocery, apparel, lifestyle and fashion, logistics, etc . On a sequential basis, we have seen positive performance in the last quarter, and there was a healthy level of large deal wins from this segment. We expect significant pressure on spend for the segment in the coming quarters. The deal pipeline is strong, but the conversion rate is expected to slow down. Large deal wins in communication segment has led to stellar performance in the last fiscal. We expect relatively stable performance from the telecom players, the media and entertainment industry is seeing pressure due to stoppage of outdoor events and general squeeze in advertising spend. Spend on 5G rollout and B2B use cases of 5G may also get delayed as the industry players reassess capital allocation priorities.
Energy, utility, resources, and services vertical reported strong growth in the last year with many large deal wins across geographies. With low energy prices and demand and supply chain issues in other sub-segments, the performance is expected to be weak in the near term. Manufacturing segment recorded double-digit growth in the last year despite weaknesses in automotive segment and supply chain pressure due to trade wars. COVID-19 spread, exacerbated by supply chain disruptions, has resulted in widespread closure of production facilities across the globe. Stoppage and probably reduced travel in the near future will also affect the aerospace industry in terms of order book and deliveries. Digital is growing strong, with share of revenue reaching 41.9% at the end of quarter four FY 2020, from 33.8% in quarter four FY 2019. Growth in digital revenue in the last fiscal was 37.8% on constant currency.
While the global pandemic is having widely varied impacts on different industries, the demand for business reinvention around digital is universal and increasingly urgent. From building more flexible supply chains, to supporting new models of employee experience, to urgently enhancing e-commerce offerings, clients are being forced to accelerate their pace of change. Technology is essential to support that change. Automation and efficiency is essential to fund that change, and design and experience are essential to unlocking value from those changes. Clients continue to see the need for investment around digital transformation and need partners who can help them navigate the strategic and technological complexity they face.
Infosys remains that critical and trusted partner, now more than ever. In the last year, we have been rated as leader in 26 services related to capabilities around Digital Pentagon by industry analysts, which is a testimony to our digital capabilities. Our BPM services had a standout year and crossed INR 1 billion revenues at industry-leading margins. Additionally, revenue per employee improved thanks to automation and we featured in multiple external awards. With that, I will hand over to Nilanjan.
FY 2020 earnings call. I'll start with a quick overview of Q4 and a recap of FY 2020 before moving to how we are preparing to secure our future in these challenging times. Quarter four operating margins were 21.1% compared to 21.9% in quarter three, a drop of 80 basis points. These included 90 basis points margin headwinds due to COVID-led utilization and RTP decline. There was an additional headwind of 30 basis points this quarter for H-1B visas in the U.S. for FY 2021 due to the change in the USCIS lottery approval process, where the lottery were declared in the March quarter. In addition, we took a hit of receivables provision account of ECL and higher CSR for the quarter of 50 basis points.
This was offset by the rupee depreciation of 2.1% against the U.S. dollar during the quarter, which helped margins by another 50 basis points, another 50 basis points of lower travel costs and other cost optimization measures. Our DSO dropped by four days to 69. Our sustained focus on collections was demonstrating in OCF of $684 million for the quarter, which is a year-on-year increase of 17.3%. Free cash flow grew 27% year-on-year to $593 million. Let me talk about full year FY 2020. Our operating margins were at 21.3% for FY 2020, within our guidance band of 21%-23%. The 1.5% drop in operating margins over FY 2019 were largely due to compensation increases, higher visa costs, and lower realization, partly offset by our cost optimization measures, where we exceeded $150 million targets for the year. For FY 2020, operating cash flow grew 15.4% to $2.611 billion.
Free cash grew 12.1% and crossed INR 2 billion for the first time. Driven by a robust cash generation and healthy cash balance of INR 3.6 billion, the board has recommended a final dividend of INR 9.50 per share, which will result in a total dividend of INR 17.5 for FY 2020, which is the same as FY 2019. Yield on cash balance was 7.06% in Q4 compared to 7.7% in Q3. Looking ahead, our yield in FY 2021 will be impacted further due to the declining interest rate regime in India. These are unprecedented times, and we're taking multiple measures to ensure execution excellence of our operations. First, liquidity and cash management is a top priority. This includes rigorous focus on working capital cycles, including collections, receivables, and any other blocked cash. Secondly, reduction in CapEx, barring any committed or non-discretionary spends.
A debt-free balance sheet and a superior local currency credit rating of A3 from Moody's gives us an enormous advantage during these times. The second area of focus will be agility in operations. We will need to be extremely nimble, yet measured in our decision-making process to counter the uncertainty which the current situation presents. We will balance short-term margin pressures with long-term sustainability by making no regrets moves. Our third big focus will be accelerated cost takeouts. While we have made enormous progress on this during the last few years, this is even more critical for FY 2021. We have embarked on a series of steps to address near-term margin pressures emanating from lower utilization due to supply and demand mismatches. These steps include deferring salary increases and promotions, delaying the hiring process and timelines, complete freeze on discretionary spending.
We will also continue to look at the entire gamut of other cost levers we have as the situation evolves. Our ongoing strategic cost optimization levers around automation, pyramid rationalization, on-site offshore subcontractors will of course continue as in the earlier years. We are confident that our proximity to our clients and our superior talent engine will enable us to weather the storm. With that, we can open up the call for questions.
Thank you very much, sir. Ladies and gentlemen, we will now begin the question and answer session. Anyone who wishes to ask a question may press star and one on their touch-tone telephone. If you wish to remove yourself from the question queue, you may please press star and two. Participants are requested to use answers while asking a question. Ladies and gentlemen, we will wait for a moment while the question queue assembles. Thank you. The first question is from the line of Ankur Rudra from JPMorgan. Please go ahead.
Hi. Thanks for taking my question. The first question is, Salil, if you understand the need to drop guidance this time, but based on your current visibility on demand, I know it's an exceptional year, and the order book and the conversations you've had, how should we think about when you get back to normalcy, in the sort of the rhythm you were in before, either in terms of the revenue profitability levels last seen in December or March, or how the shape or seasonality of revenues might turn out this year? Thanks.
Hi, Ankur. I'm Salil. What we are seeing today is, overall, there is no real clarity on when things are going to be back into a situation where we have a clear view to give a guidance. Today, we definitely see in the short term some concerns where the business environment is extremely difficult. When we start to see this business environment starting to stabilize and we have visibility, we'll be back with what we see in terms of guidance. We don't have a clear answer today whether this is for X quarters or Y quarters. Our sense is the first-order effect, I think, is visible all around in the sectors Pravin shared specific detail on them. There'll probably be some second order effect, and it also depends overall on how the medical situation evolves. We are not commenting on the timeline yet.
What we are very clear is. These are already discussions that many of us within the leadership have had with clients. There's a strong interest in consolidation with strong partners like us. There's a strong interest in looking at cloud movements and making changes in virtualization. There's a strong interest in looking at could there be some captives that could become more available. All of those areas we're exploring. In the medium term, given our strength in terms of delivery, our financial strength, and the overall interest that clients have in consolidation, I feel positive. In the near term, we see some weakness going ahead.
Thanks for that, Salil. In the near term, do you think there will be any changes to your capital return policy just to keep the powder dry for acquisitions or other movements you may have to make?
I'll take that. I think our capital allocation is quite clear. It's linked to our free cash flows. I think, like I said, we have enough of headroom, and we'll have to see if any assets which come up which interest us during this period. We are open to everything at this stage.
All right. Thank you, Investec.
Let's take the next question.
Yeah, Mr. Rudra. Thank you. The next question is from the line of Keith Bachman from Bank of Montreal. Please go ahead.
Hi. Thank you very much. I wanted to ask about any boundaries or any signposts that you could give us on your margins. Even if we stay away from revenue comments, is there any kind of minimums or floors you think the business could sustain even in the face of what is obviously incremental revenue pressure? You mentioned that there was 90 basis points of COVID impact in the current quarter. Is there any incremental COVID impact that we should be thinking about in the June quarter? Just some broader comments on just margin trends or boundaries or things to consider as we're looking at our models.
The impact of COVID was largely about INR 30 odd million, INR 32 million. Two-third of that was supply led, which was as we were ramping up our enablement of work from home. About a third of that was demand led, partly from clients who have started now giving us approvals to work from home, and partly because of some ramp down. That was the equation for the last quarter. That pretty much fell into the quarter margins as well, like I mentioned, 90 odd basis points. As we are looking into this quarter, of course, initially, we are maybe trying to improve the work enablement. The figure of 93% of staff on the on-site is much, much higher and slightly lower in offshore.
That's number one for the supply side of the equation, so that we don't leave any money on the table. In terms of the Q1 near-term outlook, without looking ahead of how much of revenue, et cetera, are going to happen, we've already started making the margin moves, like I said, which we call no regret moves. We've talked about the whole moving out of the hiring season, the freeze on the promotions, the freeze on the salary hikes. Those are the things we've already started off to. There will be pressure. As you know, that the entire industry, in effect, around the world did not gear up for a sudden stop. The people hired, etc , as we close the quarter for different set of volume.
There will be natural attrition during the quarter as well, which will help us for the first. Near-term impact, of course, is going to be on the utilization because of the supply-demand mismatch. That will iron itself out as the quarters progress. We will continue, like I said, on our margin optimization strategically well in terms of automation, in terms of the pyramid, the onsite pyramid, which we are only the ones who are capable of doing that because of our full stack DCs in the U.S. context.
Our sub con costs, how do we rotate them? These are a number of levers which we will look at. Discretionary expenditure, that's completely stopped now, whether it's discretionary CapEx. A number of levers, both from a margin preservation of cash, making sure that our liquidity cycles continue to roll, early warnings in terms of any stress on any clients in terms of defaults. Like I said, quarter four is anything to go by. We had a very strong collection quarter.
Okay. My follow-up question then is, I wanted to ask something that TCS mentioned last week, in that the comment was that the financial crisis was, at least from a growth perspective, a relevant benchmark. In other words, the first quarter of the financial crisis, revenues dropped ±10%. I just wanted to know, is that an industry perspective that you would endorse? What I mean by that is just the sequential drop for industry-related revenues as investors think about the June quarter, is the financial crisis when that first struck. Is that a relevant benchmark, or do you think this is different from the financial crisis? Thanks very much.
Hi, this is Salil. Let me try to address that point. I think our sense is this situation is somewhat different from what transpired in the financial crisis from a few years ago, in that this is across all sectors and all geographies. Equally, there's an incredible financial stimulus that at least the U.S. have put together, and which there's strong indication that several European countries or certainly the European region will join in. Those are some distinctions that we see between the actual crisis from an economic perspective. With respect to how that impacts Q1, it's therefore not a straightforward comparison. I think what is clear is there will be, obviously, some impact in Q1, and then we'll have to see how this plays out, because there are counterbalancing forces.
If the fiscal stimulus force becomes more dominant versus anything on the medical side, there's one set of outcomes. If the medical side has sort of a second wave, there's another set of outcomes. That's part of the reason why we don't have a sense of what is the sort of quarterly progression here. We are very focused on ensuring, as Nilanjan shared, a very aggressive cost plan. We're very focused in this view where Pravin shared we have real operational capability to do delivery one. We have extreme strength that we think will emerge with all the consolidation in the medium term.
Okay, thanks very much. That's it for me.
Thank you. The next question is from the line of Divya Nagarajan from UBS. Please go ahead.
Hi. Thanks for taking my question. Just a follow-up to the previous couple of questions. If you were to kind of look at the 2008-2010 timeframe, and I do get your point that it's not really apples to apples here. Typically, in downturns, we do see a fair amount of pricing pressure. Could you kind of give us your sense on how this could be the same or different to last time? We're clearly in a very strong technology cycle. What I'm trying to understand is that could that offset some of the typical pricing pressures that we see in spending environments that are stressed?
Let me start with that, and Nilanjan might have other points to add to it as well. On pricing, there's obviously, depending on the industry of our clients, their segment, there'll be different levels of cost stress among them. Equally, as you mentioned, and Pravin shared earlier, we have some real strength that we see, for example, in telco, in high tech. We see some strength in life sciences, in the Consumer staple, grocery. There are pockets of strength, and there we see some positive activity as well. Some of the service offerings where we see a real shift from a client buying perspective, we see strength there as well. We believe that we've actually got a good set of investments there, whether it's cloud or virtualization or workforce transformation. We think those will be a positive.
It's a bit of a mix in terms of the overall view, therefore, on pricing.
Got that. It's impressive that you and the entire industry has gotten to this work from home situation in a very short period of time. How do you see this model evolving for you in the medium to long term? How does that tie into some of the longer-term cost savings that you could get from a model like this?
I'll start off, and Pravin will provide more color. I think what we are extremely proud of is this very rapid transition that we've made. We believe with 93%, that's a really strong number. As Nilanjan was sharing earlier, that's moving north every day. There's tremendous amount of infrastructure, security, bandwidth capability, that we had already put in place and that we further enhanced to make all of this happen. In terms of how we see the future evolving, let me pass it on to Pravin. He can share with you more color on what we see in the coming weeks and months.
Thanks, Salil. As Salil mentioned, in a very short span of time, we were able to get about 93% of our people globally work from home in a remote fashion. From that perspective, I think we have demonstrated resilience and agility in doing it, and the feedback from the clients have been extremely positive. From a technology perspective, I think now it's proven that we can do this. Obviously, we have to make sure that we invest in infrastructure, we invest in security controls, we invest in productivity tools, collaboration tools, and other things. One of the positive thing is, if you are able to demonstrate good security and good productivity, I'm sure many clients will be much more open to doing this. That means that, in future, some of the things around ODCs, air gap ODCs, and constraints around that could potentially disappear, at least.
It may take some time, but some of those things could disappear. It will result in probably having much more virtual ODCs rather than any physical ODCs. Ability to work remotely also means that it doesn't matter whether you are in India, whether you are in a different part of the world. It's possible to leverage people capability wherever it exists. It's also possible to start looking at gig workers and things like that in a way. I think fundamentally this new normal. The ideas I'm talking are nothing new, but this crisis has really enabled some of the acceleration or increase in adoption of some of those thoughts. From that perspective, obviously, there are opportunities for cost takeout. You don't have to invest as much in real estate.
Your travel costs may come down. You have to invest lot more in technology, lots more in security, and other things. Net-net, I think it's a very positive thing that has happened. Whether eventually the new normal means 20% office, 80% home or whatever, I think that will only take time to tell. It, again, it can vary from risk perceptions of the client, risk perceptions of the industry. Definitely it will probably be much different than what we have seen today.
Sorry, just as a follow-up, could you quantify the cost savings that you will get, at least in the immediate next quarter, from savings in travel facilities, subcontracting, and other savings you might get because of the reduced activity? Contrast that with what you might lose in terms of utilization and pricing?
Yeah. These are bit premature. I think many of these, like I said, will be cost avoidance, as well. There'll be some cost optimizing per se, which is about, like I said, automation pyramid, et c. It'll be difficult to give a number where we'll end up on utilization. That will also depend on how demand works out. Like I said, we are continuing to make sure that we are taking decisions early, making the non-regret decisions, and of course, monitoring how the overall demand situation, and then take appropriate action. I think I can leave it at that.
Thanks for taking my questions. All the best. I'll come back if there's time for follow-up. Thank you.
Thank you. The next question is from the line of Edward Caso from Wells Fargo. Please go ahead.
Hi. Thank you. Good evening. I was curious if you could differentiate your clients' discretionary spending. How much of it is work that you would have been doing, say, a month or so ago, and how much of it has sort of shifted over to business continuity, help move their workforce remote, et cetera? Has there been a change in that, and is that sort of coming to an end?
Hi, this is Salil. I'm not sure I fully followed the question. I think I'll try and answer it, but if there's something more, please ask a follow-up. The question was, what was the discretionary a month ago, and how is it today? That's the question. We don't normally split up our discretionary project work from our overall revenue. Of course, some of the discretionary work is where we see some slowing in the near term, if that's what you're asking about. If there's something else, just let me know. I didn't follow the first question right.
I guess I was trying to understand if the makeup of discretionary spend has shifted to more survival work by your clients. Therefore, as they settle into this new normal, whether we'll have sort of a drop-off after that. Will you get a continuum of discretionary spending in the short run and then have it fall off after that?
I think, for us, we've not quantified how that might play out. We certainly see there is some amount of that sort of work. I wouldn't say survival. It's much more focused on what could be benefits that can be achieved as they want to do, let's say, more virtualization or more move to the cloud. I don't know if it's discretionary, it certainly seems, in this new environment, what would be much more strategic for those clients. I don't have a sense whether that's going to stay or fall off. At this stage, we do see there's different, more of a recession playbook and different sets of discussions that I shared earlier that we're having with our clients. Some of that gives us confidence in the medium term.
My other question is around H-1B and L-1 visas. It appears the Trump administration is sort of taking advantage of the current environment and further tightening the ability to get visas and move people around. Are you seeing that both from an impact on your operations, but also maybe a positive in the sense that as people, other H-1Bs at other firms lose their jobs in the U.S., can you pick those people up to help you meet onshore demand? Thank you.
On the H-1 situation again. Yeah, go ahead, Salil. Please. Yeah, Salil, I can take that. Okay. Post-COVID, we have not really seen any changes. Whatever changes we have seen in H-1, L-1, the new lottery system, all those things happened much earlier. I don't see any changes in this regime. Even today as we speak, even for some of our own employees, given that all travel is cut off, some people have been out of status, and we are talking to the U.S. administration to make sure that they get some relief and so on. In the long run, obviously, it's a question of, if there is a lot of people are letting go and there'll be probably a lot more availability of talent. Whether we will be able to take advantage of it really depends on the nature of demand, right?
It will be a pure function of demand. From our own perspective, in the last couple of years, our approach has been to de-risk ourselves from H-1, L-1 thing. We have invested, as you're aware, a lot in terms of our U.S. talent strategy. In the last couple of years, we have recruited more than 10,000 U.S. nationals. We have created six hubs. These hubs are in different parts of the U.S. They are not only delivery hubs, but they are also our innovation hubs. We are, in some sense, we have invested a lot, and today a lot of our people working in the U.S. are local nationals. From that perspective, we are probably less dependent on what happens on the H-1, L-1 thing. Obviously, if there is a demand and there's availability of talent, right talent, we will be always open to pick them up.
Thank you.
Thank you. The next question is from the line of Sudhir Guntupalli from Motilal Oswal Financial Services. Please go ahead.
Yeah. Good evening, gentlemen. Thanks for taking my questions. You highlighted in the press briefing that you were winning deals as late as in the last two weeks of March and even in the first two weeks of April. Probably this would be a closer proxy to the expected deal activity over the near term. In that context, it will be very helpful for us if you can give us some more characteristics of these deals which were won over the last 30 days. Which geographies are these? Which verticals? Which service areas? Is there also any discretionary spending in this?
This is Salil. Want to share it? Salil, you want to go ahead? No. I can start, and if Mohit is on the call, he can also probably add some color. As I mentioned earlier, we won 12 large deals. Four of them was in retail, four of them were in energy, utility, resources, and services, and one deal each in financial services, communications, manufacturing, and high tech. Total TCV was INR 1.65 billion, and 66% of it was net new. Again, from a geography perspective, seven were from Americas and five were from Europe. As you can see, these deals have been across several industries and geographies as well.
The fact is, as we mentioned in the last two to three weeks of the quarter, even after COVID had set in, we were able to close many of these deals. From that perspective, it was very encouraging for us that we have not seen postponement of at least some of the deals that were in the pipeline. Mohit is on the call, he can probably provide more color.
Sure. I'm here, Praveen. I think Praveen has covered it in great detail. The only thing I'll add is that we were obviously concerned that the signatures on these deals may get delayed because of the infection. Thankfully, given the relationships and given that we are fairly advanced in the deal, we've been able to push ahead and close. It's a mix of deals across segments and across geographies, and really across service lines as well. There are cloud deals in this. There are traditional application maintenance and application development deals. There are infra services deals for the workspace. Moving ahead as well, obviously, we have an existing portfolio of a pipeline for launch deals, and we continue to push ahead on those. The dialogues with the client are continuing, and we are working to make sure that we don't lose momentum.
Sure, sir. You mean to say that even in the last two weeks, whatever deal activity happened, or even in the first two weeks of April, it's more of a broad-based kind of a deal activity and not characterized towards any one particular segment?
That is correct. It's not one single deal.
Okay.
It's multiple deals.
Sure, sir. Secondly, our exposure to time and material contracts has been comparatively higher at around roughly 47% of our revenue as per our last reporting. In the feasibility that clients have to ramp down the workloads in these contracts, are we seeing a higher trend or impact in the T&M portion of our portfolio than otherwise?
This is Pravin. I can answer. It's early days. I don't see any distinction between T&M or fixed price. Obviously, clients are really looking at In these times, initially clients were probably more worried about ensuring business continuity, safety of their own employees, and so on. In these situations, again, conserving cash is a very critical element, and obviously they'll start looking at each project, the business case or the projects, whether in the current situation, whether it's priority or not. I think the decision will be taken on that basis. Every project will be evaluated for a business case and in the new context. That is a decision they will probably take. T&M or a fixed price on a managed services is more a commercial construct.
Sure, sir. My last question is regarding the on-site pyramid. As you said, we currently have around 10,000 local employees in U.S. Even before COVID-19, we were seeing some utilization/productivity challenges over there, given that we have recently hired these guys and they were going through the ramp-up curve. With the demand expected to take a sharp hit, what is our thought process around managing the utilization of these employees? Some damage control measures which we could have possibly taken in the case of H-1Bs may not be very realistic right now. What are your thoughts on how this could be impacting our margins, as in this particular first element?
Yeah. This is Pravin again. See, so far I think our utilization on-site has been fairly good. It's in line with what we had planned. Obviously, we had also tried to balance in slightly lower utilization with building a pyramid there and that had worked out well for us. In the new context, we have to see in light of demand and other things. Obviously, we will go slow on hiring in this coming year in all geographies. We'll hire only on a need basis, and any incremental hiring will be based only from a skill perspective. We also have opportunities to rotate out of town and replace them with our own people.
There are two levers still available where we can still try to improve the utilization. Again, we have to evaluate all options to make sure that our costs are under control. We still have not taken a call on this, and we have to wait on how this situation will unfold, and we'll have to take a view, particularly if the utilization drops down dramatically. We have enough levers. As I said, the subcon replacement, a lot of things possible to fix utilization up.
Sure. Thanks, gentlemen. All the best. Thanks. Take care.
Thank you. The next question is from the line of Moshe Katri from Wedbush. Please go ahead.
Hey. Thanks for taking my question. Is there any way to kind of differentiate in terms of the services that are getting impacted here? Obviously there's a lot of talk about discretionary that's impacted and non-discretionary that's not impacted. Can you give us some color in terms of what's included in what you call discretionary, and is that also including what we call digital in terms of the impact in the slowdown? That's my first question. Thanks.
Hi, Moshe. It's Salil here. I think in terms of services, some of the points we sort of discussed earlier, I'll elaborate on those. I think we definitely see some of our services as relates to areas around cloud and virtualization actually gaining traction. We will see some other services
Which relate to some more project-level work, which is discretionary, which will probably be slower. Overall, we are now getting into looking at how that plays out given the speed at which this is new. We start to develop a sense from all of that into what becomes the focus for Q1 going ahead. My sense, again, as I shared earlier, is we definitely see the conversations many of us are having with our clients that relate to some benefits accruing to us from consolidation, some benefits accruing to us from cloud, some benefits accruing to us from workplace transformation. Those are the sorts of services that will be positive.
Those areas, virtualization, cloud, workplace transformation, all form a part of digital. That's one of the elements of digital that we see some traction. Everything that helps clients to move more and more of their work into the remote working approach. There are other elements of digital, potentially, which are more project-related, which we think will become slower in this kind of world.
That's helpful. My follow-up here, there were some questions on pricing. To frame it the right way, are you seeing any sort of effort or efforts on behalf of clients to try to restructure contracts at this point? Maybe it's too early for us to get there, but is there any concern that this is where we're going to get to? Are you seeing any potential competitors employing any sort of disruptive pricing out there that could impact the industry competitively? Thanks.
On the competitors, at this stage, we don't see any moves. In fact, where we do see some activity is what I shared earlier around vendor consolidation, which is even for some larger competitors of ours, which are not potentially as efficient in their delivery model as we are. We see some advantages accruing to us there. In terms of pricing, again, in the sectors where clients are, or the sectors are most impacted, I'm sure we'll hear about some of these discussions. We anticipate some of that to happen. Usually, those discussions are also coupled with different delivery models that Pravin was sharing earlier, and also consequent consolidation discussions that come about. At this stage, we don't have a quantified view on that, but my sense is we'll see some of those discussions start to come up.
All right. Thanks for the color.
Thank you. The next question is from the line of Nitin Padmanabhan from Investec. Please go ahead.
Yeah, hi. Thanks for taking my question. Post the last crisis, actually, because it started with financial services, we saw a lot of spends around M&A integration and, let's say, risk and compliance and so on and so forth. If you just look out and visualize now, what do you think would be the key areas of spend that people would go out and do once there is some sort of recovery?
Sorry, you broke up a little bit, but I think you were saying M&A spend. Was that the question?
No. What I was referring to was, during post GFC, we actually saw a lot of spends during the recovery phase come in terms of merger and integration spends of those banks and risk and compliance-related spends.
Oh.
When you visualize a recovery this time around, which area do you see spends really coming out in a big way?
My sense is even through this period, but especially as things come back to a different new normal, the spend on digital will continue to accelerate. There's different components of it which are active. As I shared earlier, we see some of that already going through this, and especially the focus around the broader cloud discussion. The bigger moves on digital will absolutely come back as that shifts. In addition, there will be transformation initiatives, which we will see more and more of, my sense is, as and when we see that sort of recovery phase starting to come back in.
Sure. As a follow-up to that, if you see the recovery phase last time, we saw a lot of these services that were built over the previous 10 years sort of go through a commoditization. This time around, if you look at digital, I think it's now a reasonable part of portfolios of most vendors. Do you envision some sort of a commoditization there in some form? Do you think that because there'll be far more transformation projects and so on so forth, you'll actually see a shift to larger vendors from smaller vendors? How would you visualize the changes this time around?
The commoditization, more difficult for me to comment today. We have to sort of wait and see, in part, how the demand supply looks at that. In terms of movement, it's very clear already to us that there's a movement from the smaller or the less capable vendors to larger or the more capable vendors. We definitely see with our strength, we believe we'll benefit from that.
Sure. Thank you so much. All the best.
Thank you. The next question is from the line of Bryan Bergin from Cowen. Please go ahead.
Hi. Thank you. I wanted to ask a clarification on the remote capability for the first quarter. Do you still have supply constraints that will limit your one Q revenue potential, or is it all demand-driven going forward?
I'll start off, and Pravin is going to add if I miss something. We still have some supply constraints which we're working through. We have internally the target to get to essentially what we call 100% capability, where we have all of our clients initiatives. Pravin is going to add something since.
Yeah. If you look at the remaining 7%, a very small percentage are areas where clients have not given us permission to operate from work from home. It's a very small percentage. In the context of a lockdown or an extended lockdown, we will continue to be challenged from a supply perspective, because we'll not be able to get people to come to office and work. That's one percentage. We also have, in a lockdown situation, some percentage of people who have gone home who are not in our locations, and they don't have any personal assets or company assets with them, they are also stranded.
I think only during this period of lockdown we would anticipate some kind of supply issues, but once the lockdown gets relaxed, we should be able to get people back to office and equip them either with assets or wherever clients have not given permission, they should be able to come and work in offices.
I just want to add that when you're looking at 93%, if you know onsite, most of it is nearly 100%. Onsite, as you know, our billing rates, et cetera, are much higher. 93% doesn't mean that we're losing 7% of revenue due to supply.
Okay. That's helpful. The large deal signings you've had in late March and early April, for the new deals that you closed, are those projects ramping up and starting on a normal timeframe, or are any of those delayed?
In fact, I'll make one comment on that, and then Praveen and Mohit can also add to it. We had one of our largest projects ramping up in literally the middle of all of this activity, late March, early April, the European project. We saw how through all of this remote working, we could manage to ramp that up extremely successfully and on schedule. That's one of the positives that we've seen. For more color on the specific deals there, Praveen, if you want to add something, and then Mohit.
I think, I mean, you explained. The challenges initially would have been only around transition and ramp up. In the deal which Salil mentioned, we in fact had rebadging, and we were able to get a significant number of client people onto Infosys, whereas we were able to do onboarding on a remote manner. Similarly with another client in U.S., again, we were just about to start the project when this COVID situation and lockdown happened. We were able to use tools and other things and start working on a remote transition plan. We had a few days where we had to rework our plans on things.
There are few examples like this which has given us confidence and comfort that even in situations like this, using technology and collaboration tools, we should be able to do the transition. From that perspective, going forward, I don't see too much of a challenge in terms of ramp up unless clients want to slow down on some of the ramp up given the current situation. Mohit, anything to add?
Okay.
No, I think-
That's helpful.
We're trying to ramp up where we can, in many cases, we have seen even the remote ramp ups happen or remote transition, remote DT happen. That is obviously a positive thing for us. There will be instances where a remote transition is not possible in the situation of a complete lockdown, we might need some percentage of people to be at the client location. Those might get slightly delayed. On the whole, we are not seeing any of these programs sort of being structurally delayed because clients are now working back their commitments.
Okay. If I could squeeze one more in here. You mentioned vendor consolidation conversations that you're having with clients. In what industries is that occurring?
I'll start with that, and many of our leadership have had that sort of discussion. We've had that, at least I've had those discussions across multiple sectors, so it's not specific at this stage to a sector. There have been areas where it's related more to where clients see some small vendors potentially having challenges as they went to remote working, challenges on financial stability in the medium to long term. In other cases, we've seen this with large clients where they want to make sure that the benefits of automation are more sort of streamlined into their work. It's not specific to at least any industry in the discussions I have had and our leadership have had.
Okay. Thank you.
Thank you. Ladies and gentlemen, this was the last question for today. I now hand the conference over to the management for their closing comments. Over to you, sir.
We'd like to thank everyone for joining us on this call. Look forward to continuing our conversation over the course of the quarter. Thanks, and have a good day.
Thank you very much, members of the management.
Thank you.
Ladies and gentlemen, on behalf of Infosys, that concludes this conference call. Thank you for joining us, and you may now disconnect your lines.