Ladies and gentlemen, good day, and welcome to the LTI Q2 FY 2021 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. Please note that this conference is being recorded. I now hand the conference over to Ms. Sunila Martis , Head of Investor Relations. Thank you, and over to you, ma'am.
Thank you, Lizanne. Hello, everyone, and thank you all for joining us today to discuss LTI's Q2 FY 2021 earnings. The financial statements, press release, and quarterly fact sheet are all available in our filings with the stock exchange and on the investor section of our website. On the call today, we have with us Mr. Sanjay Jalona, CEO and Managing Director; Mr. Sudhir Chaturvedi , President of Sales; Mr. Nachiket Deshpande , Chief Operating Officer; and Mr. Ashok Sonthalia, our Chief Financial Officer. Sanjay and Ashok will give you a brief overview of the company's performance, which will be followed by Q&A. As a policy, LTI does not provide specific revenue or earnings guidance, and anything said on this call which reflects our outlook for the future or which can be construed as a forward-looking statement must be reviewed in conjunction with the risk that the company faces.
Let me now invite Sanjay to talk about our results. Over to you, Sanjay.
Thanks, Sunila. Hello, everyone. I hope all of you are staying safe and keeping well. This quarter marks five years for me at LTI. These years have been very turbulent and transformative at the same time for the world. We at LTI have gone through our own transformation to create an identity for ourselves, build world-class capability, strong partnerships, solve for our customers, competing and winning against the world's best companies. In 2020, we're all also operating in a manner unimaginable in the past because of COVID. Personally, these five years have been an exhilarating experience, overcoming challenges and celebrating multiple milestones, making it one of the most fulfilling periods of my professional journey. My team and I are filled with deep gratitude for all the support we have received during these years from all our stakeholders, our clients, employees, and investors.
Thank you to you all. We will continue to do the best in the years ahead. While the unfortunate impact of COVID continues in the form of lost lives and livelihoods, as well as rising income inequalities, we are also seeing an increasing dichotomy between weak economic indicators and growth delivered by technology sector. This is because the past six months have made it apparent that organizations need to reimagine their operating models and embrace digital transformations to ensure that they remain relevant today. Banks need to onboard customers remotely. Insurance companies need remote sales and distribution. Retailers need to have online-to-offline capabilities in order for customers to order online and pick up at curbside. Technology has been a redeemer in these difficult times. It is no longer the preserve of only large companies and industry leaders, but has become a necessity for all companies of all sizes.
We are seeing business accelerate the digitization of every aspect of their operation, from their core functions to their customer-facing capabilities to their workplaces. Our go-to-market strategies around digitizing the core, operate to transform data-driven organizations, and experience transformation are finding even greater resonance with clients in their journey to new operating models. Two areas have emerged as huge opportunity areas based on the convergence of market trends and the capabilities we have been building. Firstly, it is the Cloud business with the work we do along with the hyperscalers like AWS, Azure, and GCP. Secondly, the Data Products business with our market-leading platforms and products, namely Mosaic and Leni. We are already working with some of the largest companies, helping them get more from cloud and data leveraging our IP.
To further fuel this momentum and bring our missionary commitment to these areas, we are setting up a unit dedicated to building this business. This will be a key investment area for us in terms of sales, marketing, alliance, and capability build. We believe that most industries are in the foundation stage of truly leveraging these capabilities, and this unit will focus on helping clients realize that future. Let me now walk you through the headline numbers. We delivered revenue of $404.5 million, a growth of 3.6% quarter-on-quarter and 11.2% year-on-year. In constant currency, this translates to 2.3% and 10.5% year-on-year basis. We continue to receive positive feedback from clients during COVID times on the performance and commitment demonstrated by our employees. Safety of our employees and fulfilling our promises to our customers remain our top priority. During this quarter, we launched Canvas PolarSled.
This is an automated cloud migration and modernization framework to help enterprises accelerate their data move to cloud with Snowflake. We have a very healthy deal pipeline, which is about 22% up a year ago. We see broad-based demand across verticals. Our win rooms continue to be busy. We added 26 new logos across all the verticals during the quarter and won a large data and analytics-led transformation deal with net new TCV of over $40 million. Our large deal pipeline is stronger than last quarter. Large deals, due to their complex nature, are taking longer than usual to close. I'm also happy to state that we added a new Global Fortune 500 logo to our list of clients, taking the total Fortune 500 logos to 68. I'm also delighted to share that LTI in the U.S. has been recognized as a great places to work companies.
I also take this opportunity to thank you on behalf of Ashok, our IR team, and myself for your nominations on the Institutional Investor 2020 All-Asia Research Team Survey. This recognition is a testimony of the faith and trust that our investors have reposed in us, and we are truly honored. Let me provide briefly some color on the performance of our verticals. BFS, we had double-digit sequential and year-on-year growth in this vertical at 11.7% and 22.5%, respectively. Our top client continues to grow and grow well. Insurance vertical registered a decline of 3.4% quarter-on-quarter and close to 5% year-on-year basis. This vertical continues to struggle with the impact created by COVID. Manufacturing was our hardest hit vertical in the first quarter, and we have seen good recovery from there. This vertical grew 6.4% quarter-on-quarter and 10.2% on a year-on-year basis.
Energy and Utility verticals saw 2.1% increase quarter-on-quarter and a decline of 2.2% year-on-year. Recovery is tepid, even though oil prices have stabilized but at much lower level compared to pre-COVID. CPG, Retail, and Pharma saw a marginal sequential decline and a growth of 6.3% year-on-year basis. Our Global Fortune 500 client that we have added belongs to this vertical. We'll be using intelligent automation to automate their core business processes, resulting in a faster and error-free new drug release process. Hi-Tech and Media saw 5.1% decline and 9.5% growth year-on-year basis. The decline during the quarter was on account of reprioritization of work due to COVID on one particular account. We see this vertical returning to growth in coming quarters. Other verticals, which include Defense and Professional Services, registered 8.7% growth quarter-on-quarter. Our large deal when announced this quarter also falls under this vertical. Briefly touching on outlook.
World continues to be in a difficult place. Macroeconomic issues continue to exist, and we are keeping a close watch on the trajectory of the virus spread. We remain focused on our three by three strategy detailed during our earlier earnings call on customer first thinking, resilience in operations, and protecting our P&L to deal with the impact of the pandemic. In summary, if I have to talk about our outlook for the third quarter, a healthy deal pipeline and sustained client mining makes us optimistic. We have already surpassed our Q3 FY 2020 revenues this quarter, and we will surpass our Q4 FY 2020 revenue in Q3 itself. We remain committed to deliver top quartile growth in FY 2021 as well. Additionally, we would also roll out salary hikes from January 1st. We are working out details and would be communicated subsequently.
With that, let me hand it over to Ashok now.
Thank you, Sanjay. Hello, everyone. It is great to be back with you again. Let me take you through the financial highlights for the second quarter of FY 2021, starting with the revenue numbers. In the second quarter FY 2021, our revenues stood at $404.5 million, up 3.6% sequentially and 11.2% on a year-on-year basis. The corresponding constant currency growth was 2.3% quarter-on-quarter and 10.5% year-on-year. Reported INR revenue of 29,984 million was up 1.7% quarter-on-quarter and 16.6% YoY. Coming to profitability. EBIT for the quarter was INR 5,957 million, translating into an operating margin of 19.9% as compared with 17.4% in the previous quarter. The 250 basis point increase in the margin can be attributed to improvement in on-site offshore mix and utilization, higher working days, and operational efficiencies.
Reported profit after tax was INR 4,568 million, which translated into a PAT margin of 15.2% this quarter, compared with 14.1% in quarter one. Exchange loss and lower other income have partially offset increase in operating profit. Based on our strong performance in face of the pandemic and enhanced visibility for the rest of the year, we feel confident to reinstate PAT margin guidance for the full year FY 2021 to be in the 14%-15% band despite salary hike in January 2021. Moving on to the people front. Utilization without trainees was at 82% as compared to 79.6% last quarter, and utilization including trainees was at 80.5% versus 79.4% in quarter one. We continue to strengthen our workforce, and during quarter two, we added 978 people on a net basis. The total manpower stood at 32,455, of which our production associates were 94.5%.
In this quarter, attrition has improved to 13.5% versus 15.2% last quarter on LTM basis. Our cash flow hedge book stood at $1,030 million as at 30th September 2020 versus $1,098 million as at 30th June 2020. While the on-balance sheet hedges stood at $115 million versus $111 million last quarter. Moving on to the DSO in quarter two. The bill DSO improved significantly by eight days and stood at 62 days compared to 70 days last quarter. The DSO, including unbilled revenue, was at 94 days, an improvement of five days over quarter one. For the quarter, the net cash flow from operations was at INR 4,465 million, which was at 97.7% conversion of the net income, despite the fact that like every other year, we paid our annual incentive during the quarter.
At the end of the quarter, cash and liquid investments stood at INR 35,472 million compared to INR 34,256 million as on 30th June. The effective tax rate for the quarter was 25.5%. Now coming to the EPS and dividend. The board of directors at their meeting held yesterday have declared an interim dividend of INR 15 per equity share. Earnings per share for the quarter stood at INR 26.1 as compared to INR 23.9 in quarter one. Diluted Earnings per share was INR 25.9 versus INR 23.7 last quarter. On LTM basis, Diluted Earnings per share was INR 95.5 versus INR 90.1 in quarter one. With that, I would like to open the floor for questions. Thank you very much.
Thank you. Ladies and gentlemen, we will now begin with the question and answer session. Anyone wishing to ask a question may please press star and one on your touchtone telephone. If you wish to remove yourself from the question queue, you may press star and two. Participants are requested to use handsets while asking a question. Ladies and gentlemen, we will wait for a moment while the question queue assembles. The first question is from the line of Mukul Garg from Motilal Oswal Securities. Please go ahead.
Thanks for taking my question and good performance to the management. Sanjay, the first question was on the margin improvement which we saw this quarter. A lot of this seems to be driven because of high utilization and offshore shift. Can you just help us understand whether is this sustainable, especially the offshore shift portion? While we understand that wage hikes will be having a drag from Q4 onwards, where do you see margins settling down given the constant improvement in margins over the last one and a half years?
Look, Mukul, thank you for the question and thank you for your comments. There are many things that have gone in there. I'll just list a few. One, operational efficiency, speed, utilization. We have increased offshoring. Obviously, lesser COVID discounts have also helped it. Sales and marketing expenses have also been debited. An extra day of working also helps in this whole process. There are many things that have been there. I think we can sustain with the operational efficiencies. To your specific questions on offshorings. Most of the deals actually today, there are deals where we are able to pitch at 99.5% offshore ratios as well. It is sustainable. Margin percentage-wise, Ashok has in his speech given you where we want it to stay.
You've also heard in my speech, we want to focus and invest back in the business and drive growth with special focus and more investments in the areas of Cloud and Data Products. Go with what Ashok has given in terms of margin guidance. Operational efficiencies, especially offshoring percentage, it can be sustained, and will continue to drive growth as we scroll on.
Great. One more question on the deal win number, the large deal win which you announced this quarter. If we go back to the commentary from Q1, there were a few deals which were in pipeline and which got pushed out to Q2. If you look at the deal win number from FY 2020 quarters, this seems a bit affected. I think you also alluded that the large deals are getting delayed. If you can just offer some more perspective on this.
Sure, Mukul. I wish I was standing here announcing deals as we normally do. If I were to reflect back and think whether if you had asked me this question in March or April, whether we would be at the same place, I don't think anybody would have imagined that we'll be talking as confidently with the pipeline. Coming to pipeline, on large deal, I think it continues to be strong. It is actually stronger than last quarter as well. Absolutely acknowledge that we were a little tepid and soft than our normal announcements. These deals are typically very complex and obviously not being in front of customers don't help in faster closures. We are confident about growth. Again, I go take you back to four things that I always talk about, growth accounts, invest accounts, new account openings, and large deals.
Where we stand, obviously, it's a little difficult, different world than what we typically operate, but we're confident on all four of them.
Great. I think that's all from my side. I'll get back into the queue and rest of it up to the management for rest of the year.
Thank you.
Thank you, Mukul.
The next question is from the line of Sudheer Guntupalli from ICICI Securities. Please go ahead.
Yeah. Good evening, gentlemen. Thanks for giving me this opportunity. There appears to be an interesting dichotomy in the growth of service offerings. Those offerings which are perceived to be new age in nature, like let us say analytics, AI and cognitive and enterprise integration and mobility. They seem to have reported either declines on a Qo Q basis or even a tepid growth even on a year-on-year basis. Some service offerings like ADM and testing, which are typically perceived to be legacy in nature, they seem to have reported very strong growth both on Qo Q and Yo Y basis. How do we read these trends?
Nachiket, why don't you go ahead and answer, then I'll add on to it.
Sure. Thanks, Sanjay. I'll answer it in two parts. Let's first talk about the analytics, AI, and data part. There we had some specific account problem that Sanjay talked about, a reorganization part, that also was in this particular service line. You will also see that we had a particular Mosaic license component in Q1 in the same service line as well. Hence there is an impact on Q- on- Q basis. As regards to the ADM part that you talked about, if you see across our service lines, we don't report Cloud revenues separately because we believe cloud is there in all service lines and all pervasive across many service lines. The growth you see in the ADM space also as well as our enterprise solution space also has a lot of new age services embedded in that which we don't separate out anymore.
Sure. Analytics, AI, and cognitive, and even enterprise integration and mobility, even on Yo Y basis, it looks a little tepid.
Yeah. Just to add probably on a Yo Y basis, we also had a fairly large analytics program in our India customer that we talked about, which ended last year, that has a impact on this year's number. The new deal that we have announced this quarter is also in the analytics space. We expect in future quarters for that deal to pay off.
Sure. That's helpful.
Sudheer, this is Sanjay.
Yes, Sanjay. Sorry.
Sorry. Go ahead, Sudheer. No, that's okay. Go ahead.
Yeah. My second question is on the impending management change at the top account seemingly with a focus on cost restructuring. Historically, what we have noticed in some of your competitors is that whenever such an event happens at top accounts, there will be three to four quarter kind of sluggishness in terms of receiving sign-offs on project spends, so on and so forth. How do we see the situation panning out now?
Your line is breaking a little bit. You're talking about high tech, Sudheer?
No, sir.
The one that we talked about reprioritization of the work.
No. I am talking about the impending management change at the top account seemingly with a focus on cost restructuring. What I was asking was, historically, whenever there was a change in the top accounts of some of your competitors we had noticed three to four quarter kind of sluggishness.
Look, top account is growing and growing handsomely. The areas that we work in are very critical in these times. Where we stand today, we feel there are more opportunities for growth for us at the top account. The new management is even more tech-savvy and wants to do a lot more with tech. Banks have to deal with the situation even more differently, not only from customer onboardings remotely, but also cover financial risk and compliance a lot more rigorously in these times. Also distribute monies that the government is making available and so on and so forth. With the management and what we understand and the pipeline that we see, we are very confident of the growth in the top account as well. Sudhir, would you have something to add here?
Yeah. Sanjay, absolutely. I think there are two elements, and this applies to our top account and I think more broadly BFS as well.
We are seeing a significant shift from multiple perspectives from a technology perspective. For example, if we look at onboarding of our customers, whether it's new customers onto any of the bank's products or existing customers onto new products, all of this has to be done digitally now. The entire digital onboarding space is something that we are seeing growth in across the board. Similarly, loan management and the credit risk that comes with loan management, the entire analysis of that, the reporting of that, the risk management of that is leading to new growth opportunities. Essentially what we are seeing is, and this will continue to be the case even in our top account. In fact, in our top account, it'll be slightly more enhanced, especially on the credit risk side.
I think BFS, we've had good growth this quarter, and we see a continuing pipeline in the future as well.
Thanks, Sudhir. Just one point from my side.
Sorry to interrupt, Mr. Guntupalli.
Yeah, sure. No problem.
Thank you. Ladies and gentlemen, in order to ensure that the management is able to address questions from all participants in this conference, we request you to limit your questions to two per participant only. The next question is on the line of Shashi Bhushan from Axis Capital. Please go ahead.
Yeah, thanks for taking my question, and congrats on a good quarter. TCV announced in this quarter was-
Thank you.
slightly lower than our historical average from the pre-COVID. Now, with deal pipeline seeing sharp improvement, are there few deals closer that got pushed to November or December? Do you think there are enough small deals that got closed in the quarter to take care of growth momentum in the near term?
Yeah, Shashi. The revenue momentum will not get impacted. We agree, we wish we were announcing a lot more. With God's grace, we still have time before we meet you in December for the analyst day. I think we are very confident on growth on existing accounts, new account openings, as well as the large deals being closed in a shorter span.
Any color on the smaller deals, those momentum have picked up or accelerated compared to the previous quarter that could result in improved visibility?
See the overall pipeline, I will open, and Sudhir, you can comment a little bit. Overall pipeline, as I said, is I think 22% higher than what we have seen. We have seen large deal pipeline also increase proportionately. We are seeing enough pipeline in all accounts. As I said, technology is imperative. There is no dialogue whether spend needs to be done because that's the only way companies can operate in the new normal and serve the customers, whether it's remote distribution of insurance or telemedicine or onboarding, as Sudhir and I spoke about for our customers in BFS. You have seen "Mulan" being launched not in theaters, but on Disney's OTT for $3 0 a pop. There are these things which are imperatives for all customers. It's not even only the leaders doing that.
Everyone needs to do that to compete, and forget compete, to existentially survive, you need to use technology. There are many, many deals which are there. We have depth in our verticals that we operate in. We are co-creating solutions with customers in these areas at these times. Yes, the pipeline is strong enough for us to have the confidence.
Sure. Thanks. Very helpful, sir.
Sudhir, you want to add anything?
Yeah. I think all I'd say is on the large deal front, we do have deals in final stages where contracting is one activity which requires essentially negotiation and discussions, and it takes a little longer when you're doing that remotely. I think that's a factor in some of the delays. As Sanjay said, the pipeline is up on the overall basis as well as from a large deal perspective, and that's what we're continuing to focus on.
Thanks. Just last one from my side.
Sorry to interrupt, Mr. Bhushan.
Sure.
Thank you. The next question is from the line of Nitin Padmanabhan from Investec. Please go ahead.
Yeah. Hi. Good evening, everyone. Actually, from an outlook perspective, historically, we've always said it as we see it. From what you're saying for the next quarter in terms of Q3 surpassing Q4 of last year, looks tepid relatively, whereas Q3 has historically been very strong quarters for us. Anything that I'm missing in terms of from an outlook perspective, and if it's tepid, then what's driving the sort of softness overall?
Nitin, I don't want to give any more guidance. There was a lot of debate whether in the last call a quarter back, when did we cross Q3? It's just a statement of fact that we will cross Q3, our Q4 numbers and Q3 results as well. It's not to say that we will just cross it. Where we stand today, we are confident of the growth to be in the leaders quadrant for the year. I'd like to leave it at that.
Sure. Fair enough. That's helpful. Do you think that the offload shift that you have seen in the current quarter from the rate of shift, that will continue over the next six, seven months in terms of the pace that it is, and that is something that could sort of lead to slightly lower growth outlook, but maybe better sort of margin performance. Is that how we should think about it?
Nitin, I think we have always had a sharp focus on increased offshoring. If you look at our PA segment, you will always see that. Whenever you ask me about issues with protectionism, issues with what's happening in the world, we have always said we have to be operating as local companies, but also have the ability to use technology in order to do the work, even more from India and offshore locations. It took a COVID for the industry to believe and us to also execute that effortlessly in our model. I think we will continue to see that growth. The primary focus for us is to make sure that we are client-centric. We are solving big for our customers in the area. We are available to work and have overlap of times, so we have shifts that we have people working on.
Maximize the dollar in these turbulent times for our customers to make the most out of it so they can invest in creating new operating plans. This trend is going to continue, a bit slowly now in times to come, but this is an important area to look at.
Sure, that's very helpful. Thank you so much, and all the best.
Thank you.
Thank you, Nitin.
The next question is on the line of Manik Taneja from JM Financial. Please go ahead.
Hi. Thank you for the opportunity. Just carrying on with the question that a few other participants have asked. Given the strong pipeline that you're seeing in terms of more offshoreization, do you think at some point of time, maybe in 12-18 months timeframe, we start seeing some pressure from a talent or a supply side perspective?
Look, we inducted 1,000 fresh trainees this quarter. The quality of people that we are getting, the day zero slots that we are getting from the campuses, and the kind of people who are wishing to come and work for us, I think it's a testimony of what a position that we have created to be a growth leader and give an environment to people to grow in the organization. The kind of talent that one gets is an after effect of, it's a lagging indicator for the differentiation and growth that one creates in the market. I think we're getting a lot more positive. Having said that, we are also seeing there are many startups and a lot of global companies are not hiring as much as they did in the past. If we continue to perform, we'll create modules and opportunities for getting more people there.
Nachiket, would you like to add anything to that?
Just one data point. I think you mentioned it. We continued to hire even during the last quarter. Ashok mentioned the net addition. Our fresh training intake also continued as original plan. We believe this is actually a good opportunity for us to attract a better talent in the market, and we continue to focus on those.
Sure. Thank you. If I can ask one more. Just wanted to understand some geography-wise trends in terms of what you are seeing between U.S. and Europe on this factor.
Sorry, I missed that question. Can you say that again, Manik?
Sanjay, basically just wanted to pick your brains on if you are seeing that incremental acceptance of offshoring primarily in Europe, given the under-penetration there, or this is something that is a much more broad-based phenomenon across U.S.
I'm not sure whether your question is related to COVID. I don't know whether I'm seeing anything specific trend because of COVID that the Europe customers are accepting offshore. I think that has always been lesser compared to the U.S. I think globalization has actually helped it over the years, and we are seeing more and more companies do work offshore. In the beginning when COVID happened, obviously Europe was a little slow to start with, especially getting approvals for data coming out of Europe. It has picked up, and that's one reason why you have seen our growth in Europe this quarter. There is a lot more acceptance in doing work. We've also seen that India has operated very well during pandemic.
All Indian companies, when you talk to customers, they always say that India has actually led the way in ensuring that Indian companies actually have performed better during COVID, with lot more productivity, lot more SLAs being met compared to companies outside.
Sure. Thank you and all the best for the future.
Thank you.
Thank you.
The next question is from the line of Mohit Jain from Anand Rathi. Please go ahead.
Hi. We saw a decline in 1Q and then a relatively slower recovery in 2Q. What is the readout from your pipeline? Should we expect U.S. to catch up with Europe going forward? This holds true for your top clients. Top clients you have specified, but 2- 10 is specifically what I'm referring to.
U.S. will definitely grow faster, in my view. Europe base is smaller as well, so you can't equate growth percentages. We are optimistic about what we see in U.S. There's a good and healthy pipeline across. Top line, we have already commented. We feel very confident about our growth there.
Sir, top line you have commented, but 2- 10 was also relatively on the slower side compared to 1Q.
That is correct. If you really look at it, we have a mixture of clients which are insurance and some manufacturing clients. These are the sectors which are still not out of trouble completely. That is where we have seen a little bit of softness. The pipeline that we see on certain sectors gives us the confidence that we would be able to grow effectively well in Q3 and Q4.
All right. Thank you, sir, and all the best.
Thank you.
Thank you.
The next question is from the line of Vibhor Singhal from PhillipCapital. Please go ahead.
Yeah. Good evening, sir. Thanks for taking my question. Sir, two questions from my side. As in the insurance segment, you mentioned that it continues to be weak first week, last quarter as well. Just wanted to pick your brains on what exactly are we seeing in the insurance verticals? Are the clients putting their CapEx on hold or are there basically the de-scoping of work that's happening? When do you think with your estimation of the sector, could we see the sector bottoming out? Also secondly, on the pricing front, how have you seen the pricing front from different clients? Is higher offshoring also leading to clients demanding more price cuts? Are the newer deals coming at a slightly or a lower rate than earlier, or is it the same as before?
Sudhir, you want to take that? Sorry, yeah. You might be talking on mute.
No. Yeah, sorry. Yeah. I think overall pipeline, right. It goes back to the point we were making earlier. What we are seeing is across verticals as well as geographies, we are seeing a pretty secular increase in our pipeline. Large deals are essentially being led by a combination of factors which are to do with clients looking to cut costs in several areas. Also due to clients shifting priorities on transformation spend. If the question is from a pipeline perspective, as I said, we're talking about a 20% increase in pipeline, which is in sync with what we expect to see despite still a sort of uncertain macro environment. I think overall, I would say pipeline is in good shape. What we need to focus on is conversion and the speed of conversion of that.
Actually, Sudhir, my question was on pricing.
Vibhor, your question was on insurance, right? Was your question on insurance or overall pipeline?
The first question was on insurance, how the vertical sees that, and the second is on the pricing of deals.
Okay. Sorry. Maybe I misunderstood you.
U.S. insurance, if I just have to say. In second half, they've seen impact by COVID-related insured losses and premium volumes have declined. They have also seen significant hurricane and wildfire losses which have been a threat to the industry. This is a significantly large industry and we have, I think, a good pipeline, and the focus will be on closing of this pipeline because this sector can potentially grow well for us as well.
Sure. On the pricing front, sir, if you could answer the second question.
Sorry to interrupt, Mr. Singhal.
Sudhir, the question is on pricing. Sudhir, the question is on are you seeing any pricing difference?
No. What we are seeing is obviously clients looking for newer models of execution, but not pricing per se. I wouldn't say there is a pressure on rates, et cetera. What they are l ooking for is different models of execution, which includes how they, f rom an automation perspective, for example, or from an offshoring perspective, or how are we using, for example, in our cases like LTI Canvas, our new mechanisms for executing these projects in a hybrid work environment. That's where most of the focus is.
Sure. Thanks a lot.
Thank you. Ladies and gentlemen, in order to ensure that the management is able to address questions from all participants in this conference, we request you to limit your questions to one per participant only. The next question is on the line of Sandeep Shah from Equirus Securities. Please go ahead.
Yeah. Thanks for the opportunity and congratulations on a great execution. Just, Sanjay, I wanted to understand that if I look at FY 2019 and FY 2020, your large deal new business TCV was upwards of $200 million and $300 million respectively. While if you look at the 1H , it has been more than $40 million. I'm not asking for any numbers, but that TCV in 1H versus last two years makes you feel slightly more pessimistic about FY 2022 when you budget about the growth, or you believe still there are two more quarters to go and TCV can catch up and you can continue to remain in a leaders quadrant beyond FY 2021 as well.
Sandeep, as I again repeat four things. Large deal is very important, one of them, so I will not underrate it by any manner. Obviously, you are answering the question as well, so we also have two quarters to go. We have enough pipeline that gives us the confidence that we are setting ourselves for a strong FY22 as well. It is still some days off. The world is still not a very stable place. We are seeing second and third degrees of lockdowns in the world. We are also seeing technology as being the enabler of sorts for companies to operate in this new normal. There are many things which we are doing differently and investing in areas like cloud and data in order to address what will be foundational for growth for these companies in their existential or being the leaders of the future.
Where we sit today, I couldn't agree with you more that I wish we had closed a lot more deals, but I also want to acknowledge that none of us would be here given the situation we saw ourselves in at the start of pandemic in March and April. We will see how FY 2022 pans out. This is a plug-in for me to say we will have our analyst day in December. You will have save-the-date issue. Save the date for December 10th or 12th, I forget, but Sunila will send it out. We will probably address a little bit on FY 2022 growth. I just want you to be aware, large deals alone don't drive that. Right? We'll drive based on all the four things, growth accounts, invest accounts, new accounts, as well as large deals.
Okay. Fair enough. Just a last bookkeeping question?
Sorry to interrupt, Mr. Shah. Sir, may we request that you return to the question queue?
Okay. Thank you.
Thank you. The next question is on the line of Dhruvesh Shah from IDBI Federal. Please go ahead.
Yeah. Hi, Sanjay. Am I audible?
Yes. Your one question is over, Dhruvesh.
Sorry I'm asking it for the first time. Sorry. May I?
Yes.
Yeah. I was actually trying to understand, as you rightly mentioned, that a lot of deal negotiations are operating on the front of offshore rather than price cutting on the onshore. I would just like to know whether such deals are EPS accretive at the end of the day. I understand they are margin accretive, but are they EPS accretive? If yes, can we look at utilizations of offshore improving and how would that be? Thank you.
Ashok and Nachiket.
I think, okay, I will answer, Ashok here. Dhruvesh, I think it is well established in our industry that offshore leads to better margin and better profitability, not in terms of margin, absolute amount also, which you can see in our quarter two result. If quarter two result is giving you any confidence, where offshore onsite ratio have played an important role in the performance which we have put in. I don't think there is any contradiction or conflict into that. It will be EPS accretive.
Sure. In a continuation with that-
Sorry to interrupt, Mr. Shah.
Sure.
Sir, may we request that you return to the question queue? There are participants waiting for their turn.
Sure. Thank you.
Thank you. The next question is on the line of Ashwin Mehta from Ambit Capital. Please go ahead.
Hi. Thanks for the opportunity. Sanjay, just want to get a sense in terms of your outlook on Manufacturing, which saw smart recovery this quarter, as to how sustainable that is and what is the outlook on Energy and Utilities?
Sudhir?
Okay. The outlook on Energy and Utilities, let me start with that first. I think we're beginning to see some comeback in the Energy space. I think overall for the full year, we'll still see the spends in that segment are going to continue to be impacted for this financial year. Hopefully we begin to see some recovery from Q4 onwards from an Energy perspective. Before that, sorry, which vertical did you refer to?
The one was Manufacturing.
Manufacturing. I think with Manufacturing, what we are seeing is growth, in fact, across regions as well. We're beginning to see growth come back in the U.S. as well as in Europe. Partly this is due to the return to operations as factories come up and supply chains start to work again in a new normal, as they say. That's partly due to it. I think what will drive the growth in Manufacturing going forward will be the move to new operating models. Sanjay referred to new operating models. We are seeing, for example, Manufacturing clients going direct to customers rather than through distributors. There are multiple other business model changes that they're seeking to make. I think that is going to be the next growth opportunity in that space, especially as we look forward to FY 2022.
Sure. Thanks. All the best for the future.
Thank you. The next question is on the line of Sandip Agarwal from Edelweiss. Please go ahead.
Yeah. Thanks for the great quarter, and also wish you all good health.
Sorry to interrupt, Mr. Agarwal. Sir, your voice is breaking up.
Sorry. Can you hear me now? Thanks for the opportunity, and congrats on great quarter to the management team and wish everyone a good health. Sanjay, I have a very simple question for you and Sudhir.
Thank you.
It is only one question, that how do you see this pandemic? Because this pandemic has been for a long time, so people habits would have changed. Do you think the argument of up-fronting of spend has any merit, or you think it is a more structural change? Second, which is a part of this question only, is that, are you seeing that with digital becoming more relevant than earlier and size of deals in digital being slightly smaller than traditional, we will see more stability versus lumpiness in past, better and quicker decision-making, and also it will lose lot of relevance on the price negotiation? That's all from my side.
What was the first question? Man, you asked three questions. Digital, price. What was the first question?
I'm just saying that the pandemic has stayed for quite long.
I mean, Sanjay, pandemic Okay, at least the way I understood is, because the pandemic has continued for so long, so our clients sort of not Is that the new model now?
No, my point basically is that, because the pandemic has stayed so long, so the adoption of technology will be more permanent than being only a temporary phenomenon and up-fronting, which lot of people have that argument. What is your sense on that? Because with such a long pandemic duration, their habits should have changed permanently, right?
Okay. Look, there are sectors which deal very differently in the marketplace. For any company which can operate remotely, I think it has worked very well. For people who need to travel and stay in hotels, the airlines, the manufacturing companies where the shop floor needs to work, the product needs to be sold and used in the marketplace, it's a totally different world altogether. Three complex worlds of sorts. Frankly, if you were to ask me whether we would ever go back to 100% being remote, or whether we'll go to 100% being at work, will also not happen, right? There will be a hybrid model that will evolve in the future. Having said that automatically leads to newer operating model that we've been talking about for companies to exist and do things very differently, right? We gave you some examples of customer onboarding.
Look at Mulan being launched on OTT. Look at Snacks.com with Pepsi selling snacks online. There are many things which we have never seen in our lives that will happen. The only way these things will happen and occur in the marketplace would be through technology. Fundamentally, five things are the ones that customers are doing. One, they are looking at direct to customer, whether it's B2B customer, B2C customer, everyone wants to touch the customer directly. Second place, customers are looking at doing workplace modernization because it'll never be 100% on-site or 100% offshore as well, outside of office, right? Remote. Work from home. Third is generate new operating models for them and discover, co-create new models using technology. In order to fund all of this cost savings from operations need to be there.
Fifth thing is when people are working so remote all the time, how do you work on cybersecurity? The focus on cybersecurity takes prominence as well. We do believe this has created opportunities for technology companies, and these are not going to disappear in shorter timeframe, but a longer timeframe. A longer view has to be taken. Digital is mainstream. As far as pricing goes, I think there is no discussions on price. You've got to bring value, right? More focus is on how much can you automate, what can you do with data and analytics to be put for you to make intelligent decisions based on the data automatically rather than 10 people doing report writing in the past.
Price is not an issue, but how do you use technology, AI, ML, et cetera, to bring value to the customer is very important. The areas that will continue to be important is data cloud ERP. I also believe the definition of digital in times to come will get very complex because it is going to be everywhere. Today, it's very difficult for us to say why our ADM is increasing by a double-digit on a year-on-year basis. Simply because cloud and data is everywhere. Lots of things are getting done. It's getting very difficult for us to classify what is digital and what is not. These are the things which are here, you guys, and that's a great opportunity for the tech industry.
Sanjay, thanks a lot. Very crystal clear answer, and best of luck for the current quarter.
Thank you.
Thank you, Sandip.
The next question is on the line of Abhishek Bhandari from Macquarie. Please go ahead.
Yeah, Sanjay, first of all, congrats on your fifth year work anniversary. I had one question with two parts.
Thank you.
First is, Sanjay, if I look at now the digital sales becoming kind of a normal process, what kind of changes have you made to your sales team to make them more comfortable talking to clients? And what kind of client communications do you think could be improved to accelerate your deal closures? That's one. Related question on second one is, you mentioned about 26 new accounts getting opened this quarter. How does it fare compared to your historical averages? Thank you.
Look, we did talk about transformation of sales as one of the activity that we had initiated five years back. Obviously, the pace has accelerated to a major speed right now, and time to market and speed is the most important today in the marketplace. I would even reckon to say that it's more important than price in order for customers to launch products and platforms. Many things. You have to have people in sales who can co-create with the customer. People with design thinking principles. Salespeople who focus more on identification of problems than co-creating solutions with customers. People having the ability to partner and co-create are very important. A specific change that we have just announced today in my speech, we are going to create a separate unit to focus on two areas. One, cloud. AWS, GCP, and Azure.
This will include different ways of doing business. There will be pods which will be created where you can co-create with the customers in an iterative model. Selling more models is entirely turning on its head. We have several cloud-certified sales practitioners today. Many things are changing on cloud and data products. This is what we are trying to do. Your second question was on NAO. NAO, guys, please remember, historically, if we look at it, we have been opening over 20-odd customers per quarter. I think we are seeing similar numbers of activity happening in the marketplace right now. Sudhir, you want to add some more color on NAO, new account opening?
I think if you look at the numbers, they're in line with what we've been doing previous stage. I'll just cover a little bit about the previous point. There's significant amount of training effort. We have a platform for cloud training, for example, called A Cloud Guru, which the entire sales organization has been through. As Sanjay mentioned, we have several certified sales practitioners from a cloud perspective. We are also partnering very actively with the product companies in this space. Not just the traditional partners of ours like SAP and Oracle, but also increasingly the Snowflakes of the world, where we are creating joint sales factions, including go-to-markets, enablement, et cetera. The whole space has undergone a shift, and that's what we are also doing at the same time.
As Sanjay said, the next step is to create a dedicated sales unit just focused on this.
Thank you, and all the best.
Thank you. Ladies and gentlemen, that is the last question. I now hand the conference over to Mr. Sanjay Jalona for his closing comments.
Thank you all for joining the call today. Please do take care of yourself and your families. Wear a mask. I also want to request you. You'll get a mailer from Sunila very soon. Please save the date. We will have our Analyst Day on 10th of December. I normally cherish and look forward to seeing all of you guys face-to-face, but this time we will do it remotely. I look forward to seeing you there on that day. With that, take care of your health, and we'll see you next quarter. Bye-bye.
Thank you. Ladies and gentlemen, on behalf of LTI, that concludes this conference call.