Ladies and gentlemen, good day, and welcome to the LTIMindtree Quarter Four and FY 2023 earnings conference call. Please note that this conference call is being recorded. Today on the call we have with us Mr. Debashis Chatterjee, Chief Executive Officer and Managing Director, Mr. Sudhir Chaturvedi, President, Markets, Mr. Nachiket Deshpande, Chief Operating Officer, and Mr. Vinit Teredesai, Chief Financial Officer. Let me outline the agenda for today's call. We will begin with a brief overview of the company's quarter four and fiscal 2023 performance. After which we will open the floor for Q&A. During the call we could make forward-looking statements. These statements consider the environment we see today and carry risks and uncertainties that could cause our actual results to differ materially from those expressed in the today's call. We do not undertake to update any forward-looking statement made on the call.
I'll now turn the call over to DC for his opening remarks. Over to you, DC.
Thank you, Nitin. Good evening, good morning to everyone on the call. Thank you for joining us today. Before I start, I would like to take a moment to appreciate our 85,000 highly dedicated professionals distributed across 30 plus countries. Their vision, technical expertise, and superior execution capabilities continue to help clients reimagine outcomes, drive innovation, and realize cost efficiencies in a complex and convergent digital landscape. Their commitment to excellence ensures we take our clients to the future faster together. I'm happy to share that the merger between erstwhile LTI and erstwhile Mindtree was completed in a record time of less than seven months. We have started operating under a unified system and processes since first of April 2023, establishing the base for realizing the envisioned synergies.
It is noteworthy to mention that our robust performance is on the back of significant global uncertainties, macroeconomic challenges, and our merger integration. We reported a strong FY 2023 with a year-over-year revenue growth of 19.9% in constant currency and 17.2% in dollar terms. The growth was broad-based, driven by solid performance across all our verticals and geographies. The industry-leading performance was underpinned by the strength in our largest vertical, BFSI, which grew at 23% year-over-year in dollar terms in FY23, even amidst a challenging macro environment. We are also pleased to share that Hi-Tech, Media and Entertainment, our second-largest vertical, hit $1 billion in revenues for FY23, growing 14.5%. Geographically, North America continues to be our strongest market, registering a year-on-year growth of 21.5% in FY23.
Our business in this significant region has attained a substantial scale, accruing an annual revenue of $3 billion. For the full year, Europe grew at 14.1% year-over-year in constant currency. Due to the foreign exchange impact, reported growth in this geography was 3.9% in dollar terms. Speaking about Q4, our revenues came in at a healthy $1.06 billion, up 13.5% year-over-year in constant currency and 11.9% in reported dollar terms. Our EBIT margins for Q4 came in at 16.4%, up 250 basis points quarter-on-quarter, in line with the trajectory that we had communicated during our Q3 results. We added 31 new clients during Q4 and notably increased our count of $50 million plus customers by 2 to 13.
Our order inflow for the quarter came in at $1.35 billion, helping us close the full year order inflow at $4.87 billion. Our expanded and diversified capabilities, combined with enhanced scale, are creating significant cross-sell and upsell opportunities, cementing our partnership status as an industry leader with our existing clients. We are now a formidable contender for strategic partnerships with new clients through multi-year and multi-tower deals. While we do observe a cautious approach towards technology spending in general owing to macro uncertainties, clients' focus on leveraging technology for enhanced competitiveness remains intact. These client goals hold a significant long-term upside for our full stack end-to-end capabilities. We are already seeing a growing trend of deals where savings from efficiencies are being used to fund in-flight transformation projects. Let me give you an example.
Onsemi, a global leader in intelligent power and image sensing technologies, has chosen LTIMindtree as a strategic service provider for developing its next generation enterprise IT support platform. This multi-year deal will involve LTIMindtree collaborating with onsemi's IT team to drive innovation and increase efficiency. The IT transformation is part of onsemi's broader strategy to streamline operations. Invest in growth areas such as electric vehicles, ADAS, alternative energy, and industrial automation. With our robust next generation delivery capabilities and continued focus on innovation and agility, we are confident that we will capitalize on several such exciting opportunities that FY 2024 will present. For instance, one next generation capability where we have made significant investment and progress is Generative AI. We firmly believe that Generative AI will create the next phase of the autonomous enterprise.
We have launched our Generative AI platform, which will allow enterprises to accelerate their concept to value journey with a focus on ethical use of Generative AI, sustainability and data privacy. Several marquee customers include a top global bank, a multinational CPG leader, and a leading insurance brokerage are already leveraging it for their unique needs. With that, let me now turn on to our businesses. Our banking, financial services, and insurance business grew 20.1% year-over-year in Q4. The banking industry is currently focused on cost takeout programs with an emphasis on cash conservation. Some clients have temporary hiring freezes in place. In insurance, the core modernization and consolidation programs that we are currently part of give us growth visibility. Our BFSI deal pipeline is promising with several large deals in the final stages.
In Q4, our Hi-Tech, Media and Entertainment business grew 2.8% year-over-year. The High-Tech industry is focusing on customer support, subscription management, and product engineering. While the decision-making timelines remain unextended, vendor consolidation has been driving up deals. Driving up deal sizes. We are favorably positioned here, evident from our success with our new logo, onsemi . Our manufacturing and resources business grew 12.4% year-over-year in Q4. In the automotive space, we look forward to gaining from vendor consolidation and expanding with our unique industry solutions. In the energy industry, stable commodity prices are incentivizing clients to persist with investments towards digital transformation. We are seeing this trend across the energy value chain of upstream, midstream, and downstream, with focus on improving operational efficiency, health and safety, and lowering carbon footprint.
For Q4, our retail CPG, travel, transportation, and hospitality business grew 9.5% year-over-year. Higher interest rates and sticky inflation has led to reduced consumer confidence and spending. This has an impact on the IT spend in retail and CPG. We are helping clients achieve operational resilience through automation and OpEx reduction. Our focus on omni-channel and commerce capabilities continues to give us unique opportunities in the current business environment. In the travel, transportation, and hospitality business, airlines, hotel, and car rental companies continue to see strong business activity. Our health, life sciences, and public services business grew 6.8% year-over-year in Q4. In healthcare, we will maintain our emphasis on value-based care and expand our coverage across product engineering and testing.
In the life sciences industry, the focus is on aggressively cross-selling and upselling our ERP, CRM, and digital engineering services. In terms of geographies, America contributed 71.9%, Europe contributed 15.4%, and our rest of the world contributed 12.7% of our revenues for the quarter. There has been no significant cancellations or deferment of projects from any of our clients, indicating the strength of our client relationships and our value proposition. There is also considerable activity in SAP digital and data services, especially the move to the cloud, which presents exciting opportunities for the company to expand. As a people-powered organization, we value our employees and their contributions to our success. We remain grateful to our dedicated team of skilled professionals who have ensured client satisfaction and flawless delivery, even in the midst of a large merger and integration.
Our attrition continues to trend lower, largely in line with what the industry is also experiencing. Our quarterly annualized attrition stood at 13.7%, a significant improvement of 440 basis points over the previous quarter, bringing our LTM attrition down to 20.2%. Our return to office program is progressing well. Opening new satellite offices has proven an effective talent strategy, and we remain committed to regularly reviewing and refining our approach. We have been recognized as one of the best organizations for women in 2023 by the Economic Times. I'm also proud to inform that we have been recognized at the DivHERsity Awards 2023 for the top 5 most innovative practices in the Women L&D Programs. Top 20 most innovative practices in the women returning programs categories.
These recognitions validate our tireless efforts in building a truly inclusive environment where every individual feels valued, respected, and empowered regardless of gender and other differences. With this, I will now turn over the call to Vinit for the financial highlights.
Thank you, DC. Good evening and good morning to everyone on the call. It is great to be with all of you again for our quarterly and annual earnings. We ended the fiscal year 2023 on a strong note. The revenue stood at $4.1 billion, registering a growth of 17.2% in dollar terms. The corresponding constant currency growth was 19.9%. EBIT margin was 16.2% compared to 17.8% in FY 2022. PAT margin was at 13.3% compared to 15.1% in FY 2022. The absolute PAT was INR 4,410 crores. EPS for the full year was INR 149.10, an increase of 11.5% over FY 2022. The effective tax rate for the full year was 23.8%.
Let me now take you through the financial highlights for Q4 FY 2023. Our revenue stood at $1.06 billion, up 11.9% on year-on-year basis. The corresponding constant currency growth was 13.5%. The Q-on-Q growth was 1% in dollar terms and 0.7% in constant currency terms. EBIT margins came in at 16.4% compared to 13.9% in the previous quarter. We had indicated last quarter that our margins would expand by 200 to 250 basis point, we are pleased to deliver at the higher end of that range. The following three factors equally contributed to the sequential improvement in margins. Absence of furloughs and higher working days in Q4, 80 basis points. Lower integration cost compared to Q3, 80 basis points. Operational efficiency and productivity improvement, 90 basis point.
Net forex loss for the quarter was $6.4 million compared to a gain of $5.9 million in the previous quarter. PAT margin for the quarter was 12.8% compared to 11.6% in the previous quarter. The effective tax rate for the quarter was 22.9% compared to 23.6% in Q3 FY23. Basic EPS was INR 37.70 for the quarter compared to INR 33.80 in Q3 FY23. In Q4, the bill DSO stood at 60 days compared to 61 days in the previous quarter. The DSO including unpaid revenue was at 91 days compared to 90 days in the previous quarter. For the quarter, the operating cash flow to PAT substantially increased to 88.5% versus 65.8% in the previous quarter.
Our robust cash management led to cash and investment balance of $1.02 billion or INR 8,355 crores compared to INR 8,086 crores in Q3 FY23. This increase in ending cash balance is post-payment of INR 591 crores as interim dividend during Q4. Return on equity for the quarter was 28.6% versus 30.3% in Q3. Our utilization, excluding trainees, in the quarter was 81.7% compared to 82.9% in the previous quarter. As of March 31, 2023, our cash flow hedges stood at $3,840 million. Hedges on the balance sheet were $441 million.
The board of directors has recommended a final dividend of INR 40 per share, subject to shareholders' approval, taking our overall dividend for the full financial year to INR 60 per share. As DC mentioned earlier, effective 1st April, we are operating under one unified systems and policies. In line with this, we are also refreshing and publishing our ESG goals as LTIMindtree. The same is detailed in our investor deck. Let me share some key goals that we have set for ourselves. The top one on sustainability includes replacing 85% of current energy usage with renewable energy by 2030. 100% waste recycling and becoming water positive by 2030. We are pleased to share that in Q4, our Bengaluru and Chennai facilities were awarded the CII National Award on efficient energy usage.
These awards validate our commitment to the goals we have pledged on ESG front. I now hand it back to DC for the business outlook.
Thank you, Vinit. Looking ahead, we remain optimistic about our prospects. While Q1 FY 2024 performance may see some impact of continued slow client decision making, our strong value proposition, robust order book, and steady pipeline buildup gives us confidence that we shall still be able to deliver industry-leading double-digit revenue growth for FY 2024. One of the areas that we are particularly excited about is the cross-sell and upsell opportunities in existing accounts and our concentrated mining efforts on our Focus 100 accounts. By leveraging our expertise and scale across a range of industries and technologies, we have been able to create positive momentum and drive growth across our client base. In addition, our unified transformation solution is helping customers in their transformation journeys across value chains, stacks, and ecosystems. This is particularly important as businesses continue to face increasing pressure to do more with less.
With our deep expertise, commitment to innovation and collaboration, and focus on delivering value to our clients, we are confident that we will continue to drive growth and success in the future. Let me now open this call to questions.
Thank you, D.C. A few points while we wait for the question queue to assemble. All participants will be in listen-only mode during the Q&A. If you would like to ask a question, please use the Raise Hand option on your screen. You will then be prompted to unmute your line and ask the question. Request you to please state your organization's name before asking your question. I request that you keep your question to one and a follow-up, as that will allow us to take more participants for Q&A. The first question is from the line of Sandeep Shah.
Yeah. Thanks. Thanks for the opportunity. Just wanted to understand, entering into FY 2024, is there any large client-specific issue which you foresee within your top 20 clients? Can you explain the same with the decline in this quarter within top five clients and top 11-20 clients? What has led to this as a whole? Also outlook for the High-Tech, entering into FY 2024, with some of your large clients are announcing layoffs at a regular interval. Will it be a spoilsport in terms of the growth rates for FY 2024 in terms of Hi-Tech for you versus company average as a whole?
Second, in terms of the margin outlook, how do we see from a Q4 levels how the margin will shape up in the first half as well as second half of the financial year?
You asked many questions, Sandeep. Let me just go one by one. Your first question was any specific issues with any clients in the top 20. I don't think there is any specific issue with any of the clients. I think things are... In fact, if you look at the overall revenues of the clients from, you know, from FY 2022 to FY 2023, you will see that the revenues have grown, which means our efforts of mining is working very well with those clients. In terms of, you know, what was your next question?
Yeah. In terms of, is there no large client-specific issues, how are you also witnessing the same within the Hi-Tech vertical as a whole? One of your large clients has been announcing layoffs at regular intervals.
In fact, we, as of now, again, you know, if you look at our overall Hi-Tech portfolio, there is, again, I will say the same thing. There is nothing which is specifically bothering us. In fact, for some of our clients, there could be opportunities for us. Only one thing I can say is that, you know, some of the decision-making in terms of start of the project, they have been a little delayed. We are actually, we have won opportunities where we need to just, you know, get them started. Overall, again, I don't think there is any specific concern or specific, client-specific concern in terms of, you know, our High-Tech portfolio. In terms of margin, let me ask Sudhir to answer that.
Sandeep, as we have mentioned this in the past, our aspiration is basically to return to the same margin levels as what the both the independent companies were operating before the prior to merger. That is at, in the 17%-18% range. Though we don't want to call it out, but I'm given that this mathematics is publicly available, that's the aspiration at which we want to operate. We'll have probably a little bit of a slow start, and we'll catch up during the year and get to that 17%-18% range.
Okay. Thanks. Last follow-up, DC, your comment about this year's growth rate being double digits. The ask rate, if I'm not wrong, on a constant currency for the next four quarters is 2.7%, with 1 Q growth is likely to be tapered. There would be a heavy lifting required from 2 Q to 4 Q. What gives you confidence regarding the same?
I think, you know, if I look at the deal activity, which is happening currently, that gives us the confidence and I will let Sudhir also chime in. Overall, our pipeline is very strong. Our order book is very strong. The, you know, couple of things that I called out in my opening remarks is, for example, we have good opportunities in BFSI, but couple of clients have kind of gone through some freeze. We are hoping that by end of Q1, those freezes will be, they will be kind of opened up. We should be able to begin and we should be able to ramp up.
overall our deal activity is very, very strong. Sudhir, do you wanna comment?
Absolutely. DC, as you said, the order intake is up, you know, between quarters by 21% to $1.35 billion in Q2. The large deal pipeline, you'll remember that we shared a number of $3.2 billion during our investor day. That's up to $3.6 billion now. The combination of order intake and continuing activity on the large deals is what gives us hope.
Cool. Thanks.
The next question is from the line of Mohit Jain. Mohit, you can please go ahead.
Yes. First was related to pricing for the quarter, specifically Q4. Now headcount is slightly down, utilization lower, revenue's up. How should we read this disconnect? Is there a different base or some other revenue that you've got during the quarter which is pulling this number up? I'll have a follow-up.
See, if you see, Mohit, the main reason for the headcount difference is the attrition, as you would see, has significantly dropped in Q4. Because of that, our net headcount, and by the same time as we were combining both the organizations, we had reduced our lateral intake in Q3 and Q4 as the bench from the organization was coming together and we were getting a better idea about the skill distribution of that bench. That's kind of resulted into reduced headcount.
Is there a volume drop during the quarter? Or pricing is stable and there's a volume increase of 0.7%.
Pricing is pretty much stable. Just remember, as DC has mentioned, that, in his opening remarks, that the nature of the deals and the revenue profile is changing from the transformation to the cost add-ons. To that extent, that's the change that is coming in. Otherwise, the pricing that we are getting is pretty much stable.
Okay. The follow-up is on vertical. Like, I was really scared of BFSI, but you did well. I thought Hi-Tech will be okay, but Hi-Tech was really bad during the year. What is exactly happening there? Do you expect this to reverse in 1Q? Like when you say there's a freeze, et cetera, is it primarily in BFSI or do you think that will continue in Hi-Tech as well?
I think, you know, if I look at BFSI has grown for the full year at 23%. Hi-Tech M&E together has grown around 14.5%. I think both the verticals have done well. you know, we just talked about onsemi, which is a deal that we have signed, which is in the Hi-Tech. Essentially, there are more opportunities in Hi-Tech. The activity is pretty strong. All that we are saying is, what we will see a bit of a lull in the Q1, purely because of the fact that some clients are going through some freeze where we know that we need to start this engagement, but we cannot. It's a delayed start rather than anything else.
We are very hopeful that all these issues will get resolved in Q1. We should be able to get up to the rhythm as far as Q2 is concerned. Otherwise, we are still very confident about overall situation with respect to the pipeline that we have in BFSI as well as Hi-Tech. Sudhir, you wanna add?
It will grow in 1Q, right? That's what you're looking at.
I would say don't look at us on a quarter-on-quarter basis, look at on a year-on-year basis, and that's what I think so what DC was alluding to. We have consistently grown. One quarter might be up for one vertical, one quarter might be not as good as another. Look at it.
No, sir. What I mean to ask is at the company level, we'll still expect you to grow in Q1, whatever is the number.
Yeah. Yeah. Yeah. Definitely.
Okay, great. Thank you, sir, and all the best.
Thank you. The next question we will take from the line of Sudheer Guntupalli. Sudheer, can you please, go ahead? Go ahead.
Yeah. My, my question is to Sudhir.
Yeah. Go ahead.
Yeah, yeah. Can you hear me?
Yes, we can.
Yeah, yeah. No, I was asking, standing out from the rest of the industry and, despite going through the integration process, your deal booking on a sequential basis has been very good. I was just trying to understand, is there any seasonality which helped you here? Because we don't really know the prior year Q3 to Q4 deal booking sort of trends. Is there any seasonality that helped you here? Or it is just that closures you have just seen closures to be very good despite the challenging macro and that's what is resulting in the numbers?
Yeah, no, there's no seasonality. There's no seasonality here, Sudheer. You know, I think what we have is we do have renewals in this, which is actually a good sign, right? Which just means that, you know, that our client satisfaction is good and we're renewing these contracts, which also gives us, you know, that stability of our, you know, both from an order intake perspective as well as a future revenue growth perspective. I think, you know, that's really reflected in both. The deal wins are starting to show, especially as you see this quarter's, the, you know, the Q4 order intake is which reflects some large deal wins, like the onsemi deal that DC just spoke about.
Got you. If you were to just look at the net new part within this and any broader color, if even if you don't want to quantify them, how the trend has been from Q3 to Q4?
Actually, you know, we look at order intake, right? We are seeing good all-around order intake. You know, it's across verticals and it's across regions, which again, which is, you know, the broad-based growth comment that we made.
The thing with the order intake is the only color the additional color I'll provide is that this is more in the, you know, efficiency space, the cost takeout space. Therefore, you know, these involve transitions and these will involve a slower ramp, you know, across the year, right. As you know, these kind of deals are usually take over from, you know, either vendor consolidation or clients consolidating their own operations. It does take a little bit of time to ramp up as well as, you know, make sure that, you know, the transition's complete first and then we start to bill these clients. That's the only difference in terms of the order or the additional color in terms of order intake.
Sure, Sudhir. One last question to DC, if I may. DC, we have always been guiding for As individual entities, we have always been guiding for industry-leading growth, but now our base has almost doubled, so there is some mathematical optics related to it. Despite that, it's impressive that you are still calling out for industry-leading growth. One more thing this time peculiar in FY 2024 about the industry is that there has been a huge divergence with some companies guiding for 3%-6% growth all the way up to mid-teens. When you talk about industry-leading growth in that kind of a backdrop, and with a much higher base, again, any further color on that? That's it for now.
Well, I think when I say industry-leading, it is not. I mean, what we mean by that is the, in the industry-leading quadrant. I mean, are we one of those companies which are, you know, showing the growth in that quadrant? We are very confident that we want to stay there. That's why I said that in spite of, you know, we may see a little bit of, you know, softness in Q1, but we are very confident that we should be able to get into a double-digit growth. We want to convert that double-digit growth into industry-leading as far as FY 2024 is concerned.
Thanks, DC. All the very best.
Thank you, Sudheer. Next we will take the question from the line of Vibhor Singhal. Vibhor, can you please go ahead?
Yeah. Hi, I hope I'm audible.
Yes.
Yeah. Thank you, sir. Thanks for taking my question. Congrats on a very strong margin expansion. DC, my question was to maybe you and Sudhir. As already, we've discussed, we've had a very strong deal flow in this quarter, as compared to Q- on- Q at least. One of the concerns that is paramount in the industry at this point of time is that while deals are being awarded, I mean, we ourselves won deals, had two large deals announced very recently. A lot of the competitors are also announcing large deals. The concern that is there is that many of these deals are being awarded, but their execution timeline is not very certain.
The client is not yet giving a certainty as to when to start execution of the, on this deal. This might get delayed or let's say maybe, I mean, cancel of course will be worst case scenario. Are we also facing that in our deal flow that we are looking at the deals that we have won? Is that what is adding to the uncertainty in FY 2024? A related question is that we've always talked about size helping us win large deals. We've announced couple of large deals in the past month or so. I mean, any more color on that as to how the progress on that front is happening in terms of our increased size helping us win more large deals?
Too many questions, but let me try to answer. First of all, let me just give you a color of what is happening in the marketplace. If you look at large deals, many of the deals that we are pursuing right now are more efficiency play, which is, in other words, cost takeout. Many of these cost takeout deals, as Sudhir articulated, has a transition. When you do the transition, you kind of ramp up the deals, and then the real billings takes a little bit of time to start. What we are seeing right now is in certain situations, everything is decided, but, you know, the start date is a little delayed.
We are very hopeful that will ease up over a period of time. That's the situation. It's more cost takeout deals, more, which is, in a way it is good because these deals tend to be multi-year, and which is exactly what we are doing with onsemi. It's more of a delayed start rather than anything else. That's what the scenario is, which probably is very similar across the market, across the industries. In terms of size, we are very confident that the size and scale and the capabilities that we have, it's not just the size, it's the capabilities that we have as an integrated organization is something that will help us in terms of getting a seat on the table.
Whenever there's a large deal, we should be able to compete, you know, with any kind of situation. I think that's what we mean. We are already seeing some results, and we are very confident that as we go along, we will be seeing more of these scenarios. Sudhir, if you said you want to add anything?
No, D.C. I think you're covered.
Sure. Just one small follow-up question, to either Nachiket or Vinit if I can. With the increased size on the workforce, the integrated workforce, do we expect the subcon expense to come down? I know it's not, basically, exceptionally high as compared to industry for both the individual companies that we had. Do you think with the integrated workforce, we could see that coming down as a % of revenue over the next couple of years?
Vibhor, as you indicated, it is already, you know, relatively low for us as compared to some of our peers. We continue to remain focused on trying to reduce that. Some bit of bench availability will, hopefully also help that. That is a ongoing program for us. We're not targeting a particular % or a reduction, but we continue to look for opportunities where we can reduce.
Sure. Yeah, great to hear that. Thank you, gentlemen. Thanks a lot for taking my questions. Wish you all the best.
Thank you, Vibhor. We will take the next question from the line of Sulabh Govila. Sulabh, can you please go ahead?
Yeah, sure. Thanks for taking my question. My question, first question is regarding the revenue growth this quarter. I'm just trying to understand, given that the furloughs have reversed, which were there last quarter, and there were no major cancellations and deferments that you mentioned earlier. What's the reason for a sequential soft revenue growth this quarter? I mean, you mentioned there's some freeze in BFSI, but could you elaborate on nature of softness that we've seen in Hi-Tech vertical? I mean, this is within which service lines within Hi-Tech, and is that concentrated to few clients or it's more broad-based?
Yeah. I think if you look at this quarter, right, you'll see that, you know, the things that we talked about, the delayed decision-making is what. You know, the slower pace of some of these ramp-ups, as well as the freezes. That's the reason why, you know, there are some hiring freezes in place as clients are, you know, their own, they're going through their own cycles. They have certain clients have some hiring freezes in place. That's what's reflected in this quarter. You know, we've been focused on making sure that our order intake remains strong and that we, you know, our book of business across the board, right, including, you know, our existing book of business remains.
You know, we have, it remains intact as well as we grow it with the new order intake. That's been the focus. As these, you know, as the environment, the macro environment improves and we see clients start to, you know, release budgets, we will start, you know, which we expect in, you know, in the coming quarters, that's when we'll start to see some of that, you know, which is what gives us the confidence for the full year growth as well.
Sure. Then with respect to Hi-Tech, any comments on the Hi-Tech vertical with respect to...
See, I think, you know, if you look at High-Tech, right, they're also going through a cycle of efficiency, as DC said. We are focused on the deals activity that we are seeing in the Hi-Tech space. Frankly, we're seeing some good deal activity. That's the nature. You know, I think, see quarterly phenomenons, you know, you'll have cyclical, you know, there'll be some ups and downs. As DC said, you know, on a year-on-year basis, Hi-Tech grew 14.5%. We are seeing some good deal activity. On a full year FY24 basis, we still think we'll have a, you know... there's good potential for us to grow Hi-Tech. It's a $1 billion-plus business for us, and we have really strong presence and strong capabilities. So we'll continue to leverage that.
Sure. Just a quick follow-up on the outlook. One is that this outlook that we provided for the full year, do you think that is gonna be more broad-based across verticals, or it's specific to one vertical versus the other? Plus on the 1Q softness that we talked about, is it going to be related to 4Q performance or versus the historical 1Q trend that we've seen?
I think the, you know, as far as the first quarter performance is concerned, I think some of the behaviors that we have seen, in terms of as Sudhir articulated, some of the freeze and all those things, that is kind of continuing. We are hoping that all those things will ease off by the end of Q1. That's where, you know, we feel that there could be some softness. I think at this point of time, it is fair to assume that we are just talking with respect to the economic conditions that's existing in Q4 kind of extending into Q1.
I think this is just one build on it that, you know, we do have a license component that exists in Q4, which we will not have in Q1. You know, what we are focused on is the like-for-like services growth in Q1.
Understood. Thanks for taking my question.
Okay. Thank you, Sulabh. Next question we'll take from the line of Manik Taneja. Manik, can you please go ahead.
Thank you for the opportunity. I just had a question with regards to the way our headcount metrics have been trending. Through the course of last or in FY 2023, you were adding freshers across both the Heritage Mindtree and Heritage LTI organization, and this quarter we've seen headcount decline. How do you think about our delivery going into FY 2024, given the bench that we have? If you could also talk about any plans for fresher additions for the next year.
Manik, as I said, I think, we had paused our fresher intake in Q3 and Q4, as well as reduced our lateral hiring in those two quarters as we were consolidating bench from both the organizations and getting better visibility into the skill sets that are available as a consolidated company. Which we have, you know, done over this quarters. As I said, previously, we are now going back to our usual campus onboarding plan. Going into FY 2024, we will continue our FY 2024 onboarding plan as earlier set out. We typically onboard most of our freshers in the first three quarters of the year, that's what would be our plan in FY24 as well.
Sure. One last question for Vinit. I was just looking at your segment profitability. If you could help us understand what drove the sequential increase in terms of margins on the Manufacturing Resources side and simultaneously the increase on the Health, Life Sciences and Public Services side.
No, I think so it's, there's no specific, I would say, seasonality or anything or a change in the trend. It's, as the, new people get added, the average cost keeps on moving. Sometimes the on-site offshore ratio changes. That's also sort of changes the overall margins, but no structural changes into any of these, profiles here.
Thank you.
Thank you, Manik. We will take the last question from the line of Surendra Goyal.
Yeah. Am I audible?
Yes.
Yeah. Just a couple of questions. Good evening, everyone. Firstly, what is the services growth in 4 Q? Because if I heard it correct, Sudhir did allude to some license component as well.
We don't call that number out specifically.
Okay. Fine. Okay. Sure. Secondly, Sudhir, a question for you. The pipeline has been consistently strong, and you guys have obviously done a terrific job there. Even the recent slowdown was not preceded by any slowdown in the pipeline. What gives you comfort that the growth beyond 1Q will be strong to enable you to get to double-digit growth? Is it more hope that things improve, or is it based on any data points that we should be aware of?
See, I think, you know, as you said, right, there are three reasons why we feel that, you know, there's broadly. We've got, you know, pipeline is up. Large deal pipeline is up. Conversions are up. Order intake is up. I think what's holding us back is, as I said, the, you know, delayed decision-making and some of the freezes. That's really what we are seeing. We are expecting some of the hiring freezes as clients, you know. It's actually a reflection of how they wanna manage their financial year 2023 budget. We expect that to start to ease off by, you know, towards the end of May, of this quarter rather. The reason is that, you know, clients still have a book of business to do.
We've got, you know, we've been very close to our clients. We've been meeting them, and there is work to do. Except that budgets are being, you know, slight, you know, right now held back, but we expect that to come back. You know, obviously our deal ramp-ups that we expect to see, you know, ramping up from Q2 onwards as part of this. You know, because we are currently starting these transitions, right? We've announced to publicly, as you know, on the onsemi and Currys that we've announced publicly. In addition to these, there are several other deals that we have won. That's, you know, why we feel that, you know, we will start to see this pick up from Q2 onwards. As you've seen, traditionally, Q2, Q3 have been our stronger quarters, and that's what we are focused on.
Sure. Thanks a lot.
Thank you, Surendra. We'll just take one question from the Q&A bridge that we have got. Nitin Padmanabhan from Investec has asked, what's the wage hike? When is the wage hike expected?
We are planning to do the wage hike in the second quarter of the financial year. It's expected to be obviously as per the market, what the market demands. If I want to just call out from a year-on-year perspective, it will be on percentage terms, significantly lower than what was in the past two years.
Well, thank you all for joining this call.