Q2 20/21

Oct 21, 2020

Ladies and gentlemen, good day, and welcome to the LTI Q2 FY 'twenty one 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, Luzhan. Hello everyone and thank you all for joining us today to LPI's Q2 FY 'twenty one earnings. The financial statements, press release and quarterly fact sheet are all available in our filings with the Stock Exchange and on the Investors section of our website. On the call today, we have with us Mr. Sanjay Jalona, CEO and Managing Director Mr. Sudhir Chaturvedi, President, Sales Mr. Nachiket Deshpande, Chief Operating Officer and Mr. Ashok Suntilya, our Chief Financial Officer. Sanjay and Ashok will give you a brief overview of the company's performance, which will be followed by Q and 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, Ramielah. Hello, everyone. I hope all of you are staying safe and keeping well. This quarter marks 5 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, solving for our customers, competing and winning against the world's best companies. In 2020, we saw also operating in a manner unimaginable in the past because of COVID. Personally, these 5 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 and 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 6 months have made it apparent that organizations need to reimagine their operating model 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 acceleration, a 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 resilience with clients in their journey to new operating models. New 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 Lenny. We are already working with some of the largest companies, helping them get more from cloud and data leveraging our IT. 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 their future. Let me now walk you through the headline numbers. We delivered revenue of $404,500,000 a growth of 3.6 percent 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 $40,000,000 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 the U. S. Has been recognized as a great places to work company. I also take this opportunity to thank you on behalf of Ashok, our IR team and myself for your nominations on the Institutional Investors 2020 All Asia Executive 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 BFS, we had double digitsequential 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 health vertical in the Q1 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 2.5 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. PPG 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 will be using intelligent automation to automate their core business processes, resulting in a faster than ever free new drug release process. IPeq 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 win 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 plan. We remain focused on our 3 by 3 strategy detailed during our earlier earnings call on customer first thinking, resilience in operations and predicting our P and L to deal with the impact of the pandemic. But in summary, if I have to talk about our outlook for the Q3, our 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 Q2 of FY 2021, starting with the revenue numbers. In the Q2 FY 2021, our revenues stood at USD 40 $4,500,000 up 3.6 percent 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 $29,984,000,000 was up 1.7% quarter on quarter and 16.6 percent YOY. Now coming to profitability, EBIT for the quarter was INR 5,950 $7,000,000 translating into an operating margin of 19.9% as compared with 17.4% in the previous quarter. The 2 50 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 4005 $68,000,000 which translated into a PAT margin of 15.2% this quarter compared with 14.1% in quarter 1. 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 FY21 to be in the 14% to 15% band despite salary hike in January 2021. Moving on to the people front, utilization without trainees was at 82% versus as compared to 79.6% last quarter and utilization including trainees was at 80.5% versus 79.4% in quarter 1. We continue to strengthen our workforce and during quarter 2 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 USD1030 million as of 30th September 2020 versus USD 1098,000,000 as of 30th June, 2020. While the on balance sheet hedges stood at USD 115,000,000 versus USD 111,000,000 last quarter. Moving on to the DSO in quarter 2, the build DSO improved significantly by 8 days and stood at 62 days compared to 70 days last quarter. The DSO including unbilled revenue was at 94 days, an improvement of 5 days over quarter 1. For the quarter, the net cash flow from operations was at INR 400,465,000,000 which was at 97.7 percent 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 35,472,000,000 compared to INR 34,256,000,000 as on 30th June. The effective tax rate for the quarter was 25.5 percent. And 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 1. Diluted earnings per share was INR 25.9 rupee versus INR 23.7 last quarter. On LTM basis, diluted earnings per share was INR 95.5 versus INR 90.1 in quarter 1. 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. Motilal Oswal Securities. Please go ahead. Thanks for taking my question and good performance to the management. The first question was on the margin improvement which we saw this quarter. A lot of this seems to be driven because of higher utilization and offshore shift. Can you just help us understand whether is this sustainable, especially the offshore shift portion? And while we understand that which 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? So look, Mukul, thank you for the question and thank you for your comments. There are many things that have gone in there and I'll just list a few. 1, operational efficiencies, 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. So there are many things that have been there. And I think we can sustain with the operational efficiencies through your specific questions on offshoring. Most of the deals actually today, there are deals where customers are we are able to pitch at 90%, 95% offshore ratios as well. So 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 with and drive growth with special focus and more investments in the areas of cloud and data products. So 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 go along. Great. And one more question is on the deal even number, the large deal even which you announced this quarter. Now if you go back to the commentary from Q1, there were a few deals which were in pipeline and which got pushed out in Q2. If you look at the bleeding number from FY 2020 quarters, this seems a bit tepid. And I think you also alluded that the large deals are getting delayed. So if you can just offer some more perspective on this? Sure, Mukul. I think I wish I was standing here announcing the deals as we normally do. But if I were to reflect back and think whether if you had asked me these questions when in March or April, whether we would be at the same pace, I don't think anybody would have imagined that we'll be talking as confidently with the pipeline. So coming to pipeline on large deal, I think it continues to be strong. It was actually stronger than last quarter as well. Absolutely acknowledge that we were a little tepid and soft than our normal announcements. But these deals are typically don't help in faster closures. But we are confident about growth. Again, I go take you back to 4 things that I always talk about, growth accounts, invest accounts, new account openings and large deals. And where we stand, there are obviously, it's a little difficult different world than what we typically operate, but be confident on all four of them. Great. I think that's all from my side. I'll get back into the queue and best of luck to the management for the rest of the year. Thank you. Thank you, Mukher. The next question is from the line of Sudhir Kuntupalli from ICICI Securities. Please go ahead. Yes. 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 Q o Q basis or even tepid growth even on a year on year basis. And 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 QoQ and YY basis. So how do we read these trends? Nachiket, why don't you go ahead and answer, then I'll add on to it. Sure, sure. Thanks, Sanjay. So I'll answer it in 2 parts. Let's first talk about the analytics, AI and data part. There we had some specific the account problem that Sanjay talked about reorganization part that also was in this particular service line. We also see that we had a particular Mosaic license component in Q1 in the same service line as well. So hence there is an impact on Q on Q basis. And 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. So the growth you see in the ADM space also as well as our enterprise solution space also has a lot of new edge services embedded in that which we don't separate out anymore. Sure. But analytics, AI and cognitive and even enterprise integration and mobility, even on Y o Y basis, it looks a little different. Yes, just to add, probably on a Y o Y basis, we also had a fairly large analytics program in our India customer that we talked about which ended last year that has an impact on this year's number and the new deal that we have announced this quarter is also in the analytics space. So we expect in future quarters for that deal to pay out. Sure. That's helpful. And Sudhir, this is Sanjay. Yes, Sanjay. Sorry. Sorry, go ahead, Subir. No, no, that's okay. Go ahead. Yes, yes. My second question is on the impending management change at the top account, seemingly with a focus on cost restructuring. Historically, what we had noticed in some of your competitors is that whenever such an event happens at top accounts, there will be 3 to 4 quarter kind of sluggishness in terms of receiving sign offs and project spends, so on and so forth. So how do we see the situation panning out now? You're talking about your line is breaking a little bit. You're talking about high-tech, Sudheer? No, Sudhir. Have you talked about reprioritization of the work? No, no, no, no. I'm talking about the impending management change at the top account, seemingly with the focus on cost restructuring. So what I was asking was historically, whenever there was a change the top accounts of some of your competitors, we had noticed 4 quarter kind of sluggishness. No. Look, top account is growing and growing handsomely. The areas that we work in are very critical in these times. And 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 situation even more differently, not only from customer onboardings remotely, but also our financial risk and compliance is a lot more rigorously in these times. Also distribute monies that the government is making 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? Yes. Sanjay, absolutely. I think, there are 2 elements and this applies to top account and I think more broadly PFS as well. So we are seeing a significant shift from multiple perspectives from a technology perspective. For example, if you look at onboarding of customers on to whether it's new customers on to the on to any of the bank's products or existing customers on new products. All of this has to be done digitally now. There is so 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 has leading to new growth opportunities. So 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 will be slightly more enhanced, especially on the credit risk side. So, I think BFS has had we've had good growth this quarter and we see a continuing pipeline in the future as well. Thanks, Subhi. Just one point from my side. Sorry to interrupt, Mr. Kuntupali. Yes, sure. No problem. Thank you. Ladies and gentlemen, in order to ensure that The next question is from the line of Shashi Bhushan from Axis Capital. Please go ahead. Yes. Thanks for taking my question and congrats on a good quarter. GCB announced in this quarter was 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? And do you think there are enough small deals that got closed in the quarter to take care of growth momentum in the near term? Yes. Sashi, so the revenue will not get impacted, though we agree. We wish we were announcing a lot more. And with regards to base, we still have time before we meet you in December for the Analyst Day. So, I think we are very confident on growth on existing accounts, new account openings, as well as the large deals being closed in shorter staff. And any color on the smaller deals? I mean, those momentum have picked up or accelerated compared to the previous quarter that would 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 a 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 so the customers, whether it's remote distribution of insurance or telemedicine or onboarding, as Veera and I spoke about our customers in BFS. You have seen Mulan being launched not in theaters, but on Disney's OTT for $30 a pop. There are these things which are imperatives for all customers. It's not even only the leaders doing that. It's everyone needs to do that to compare to compete and forget compete to existential survive, you need to use technology. So 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. So yes, the pipeline is strong enough for us to have the confidence. Sure. Thanks. Very helpful, sir. Do you want to add anything? Yes. Think all I'd say is on the large deal front, we do have deals in final stages where contracting contracting is one activity which requires essentially negotiation and discussions and it's a little it takes a little longer when you're doing that remotely. So, I think that's a factor in some of the delays, but as Sanjay said, right, our 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. And just last one from my side. Sorry to interrupt Mr. Bhushan. Sure, sure. Thank you. The next question is from the line of Nitin Padmanabhan from Investec. Please go ahead. Yes. Hi. Good evening, everyone. Actually, from an outlook perspective, historically, we've always said it as we see it. And 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. So 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? Nathan, 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. So it's just a statement of fact that we will cross Q3. Or Q4 numbers and Q3 results as well. It's not to say that we will just cross it, right. 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. And do you think that the off road shift that we have seen in the current quarter from the rate of shift that will continue over the next 6, 7 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 peer segment, you will always see that. And 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. And it took a COVID for the industry to 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. But we don't 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, Nathan. The next question is from the line of Manik Taneja from JM Financial. Please go ahead. Hi. Thank you for the opportunity. Just carrying on with a question that a few other participants have asked. So given the strong pipeline that you're seeing in terms of more operationalization, do you think at some point of time maybe in 12 to 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. So 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. So we 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 that we continue to hire even during the last quarter, Ashok mentioned the net addition. And the our fresh selling intake also continued as original plan. So 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're seeing between U. S. And Europe on this sector? Sorry, I missed that question. Can you say that again, Manik? So 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 much more broad based on our cross you? I'm not sure whether your question if 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 will always that has always been lesser compared to the U. S. But I think globalization has actually helped it over the years and we have seen more and more companies do work offshore. In the beginning, when COVID happened, obviously Europe wasn't really slow to start with, especially getting approvals for data coming out of Europe. But it has picked up and that's one reason why you have seen our growth in Europe this quarter. And 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 showing that Indian companies actually have performed better during COVID with lot more productivity, lot more SLAs being met compared 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 Anandrati. Just one question on your U. S. Top clients growth. So we saw a decline in 1Q and then a relatively slower recovery in 2Q. So what is the readout from your pipeline? Should we expect U. S. To catch up with Europe going forward? And this holds true for your top clients. Top clients, you have specified, but 2 to 10, which is typically what I'm referring to. So U. S. Will definitely grow faster, in my view. Europe base is smaller as well. So you can't equate growth percentages, but we are optimistic about what we see in U. S. As a good and healthy pipeline across. In top clients, we have already commented. We feel very confident about the growth there. Sir, top client you have commented, but 2% to 10% was also relatively on the slower side compared to 1Q? That is correct. And if you really look at it, lots of we have a mixture of clients, which are insurance and some manufacturing clients, which these are the sectors which are still not out of trouble completely. And that is where you have seen a little bit of softness. But the pipeline that we see on certain sectors gives us the confidence that we would be able to grow effectively rather 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 Philip Capital. Please go ahead. Yes. Good evening, sir. Thanks for taking my questions. So two questions from my side. As in the Insurance segment, you mentioned that it continues to be the 1st week last quarter as well. So just wanted to pick your brains on what exactly are we seeing in insurance? What are the clients putting their CapEx on hold or other basically, the there's de scoping of what's happening? And when do you think, with your estimation of this sector, would we see the sector bottling out? And also secondly on the pricing front, how do we see how are we seeing the pricing front from different clients? Is higher offshoring also leading to clients demanding more price cuts? And 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, yes. You might be talking on mute. No, no, yes, sorry. Yes, so I think overall pipeline, right, if you and it goes back to the point we're making earlier. So what we are seeing is in 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, but also due to clients shifting priorities on transformation spend. So, if the question is from a pipeline perspective, we see we're talking about 20% increase in pipeline, which is in sync with what we expect to see. Despite still a sort of uncertain macro environment. So 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 batch. Actually, Sumeet, my question was on pricing. Rupaul, your question was on insurance, right? Was your question on insurance or overall pipeline? So the first question was on insurance, how the vertical feedback and second is on the pricing of the end. Okay. Sorry, I maybe I misheard you. So in U. S. So insurance, if I just have to say, they are seeing 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. But this is a significantly large industry and we have, I think, a good pipeline. And the focus will be on closing this pipeline because this sector can potentially grow well for us as well. Sure. And on the pricing, Sam, if you could answer your question. Sorry, Ethan, to wrap Mr. Singhal. Sudhir, the question is on pricing. I mean, I am not Sudhir, the question is on are you seeing any pricing difference? No. I mean, what we are seeing is obviously clients looking for newer models of execution, but not pricing per se. There is, I wouldn't say there is a pressure on rates, etcetera. What they are looking for is different models of execution, which includes how the from 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 different 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, The next question is from the line of Sandeep Shah from Equita Securities. Yes. Thanks for the opportunity, and congratulations on a great execution. Just Sanjay, I wanted to understand that if I look at FY 'nineteen and FY 'twenty, your large deal new business PCV was upwards of $200,000,000 $300,000,000 respectively. While if you look at the 1H, it has been more than $40,000,000 So I'm not asking for any numbers, but this that TCV in 1H versus last 2 years makes you feel slightly more pessimistic about FY 'twenty two when you budget about the growth? Or you believe still there are 2 more quarters to go and TCV can catch up and you can continue to remain in a leader's quadrant beyond FY 'twenty one as well? Yes. Sandeep, as I again repeat 4 things, large deal is very important, one of them. So I will not underrate it by any manner. Obviously, you're answering the question as well. So we also have 2 quarters to go. But we have enough pipeline that gives us the confidence that we are setting ourselves for a strong FY22 as well. It's still some days off. World is still not a very stable place. We are seeing second and third degrees of lockdowns in the world. But 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 together today, I agree, I can't agree with you more that I wish we had closed a lot more deals, but I also want to acknowledge that I wouldn't have none of us would be here given the situation we saw ourselves in at the start of pandemic in March April. We will see how FY 2022 pans out. This is a plug for me 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 Sunil will send it out. We will probably address a little bit drawn FY 2022 growth, but I just want you to be aware, large deals alone don't drive that, right. We'll drive based on all the 4 things, growth accounts, invest accounts, new accounts, as well as large deals. Okay. Fair enough. And just to ask the bookkeeping question. Sorry to interrupt, Mr. Shah. Sunil, we requested you return to the question. Thank you. Okay, thank you. Thank you. The next question is from the line of Dhruvay Shah from IDDI FedRAMP. Please go ahead. Yes. Hi, Sanjay. Am I audible? Yes. Yes. One question is over to Ramesh. Sorry, I'm asking it for the first time. Sorry. May I? Yes, yes, yes. Yes. So I was actually trying to understand, as you rightly mentioned, that a lot of deal negotiations are operating on the front of offshore or 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 the EPS accretive? And if yes, can we look at the utilizations of offshore improving and how would that be? Thank you. Ashok and Nachiket. I think okay, I will answer Ashok here. Dhruvay, 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 2 result. If quarter two result is giving you any confidence, we are offshore on-site 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. And in a continuation with that Thank you, Mr. Shah. Sir, may we request that you return to the question queue. The next question is from the line of Ashwin Mehta from Ambit Capital. Please go ahead. Yes. Hi. Thanks for the opportunity. Sanjay, just wanted to get a sense in terms of your outlook on manufacturing, which saw a smart recovery this quarter as to how sustainable that is and what is the outlook on energy and utilities? Sudhir? So, okay. The outlook on energy and utilities, let me start with that first. So, I think we are beginning to see some come back in the energy space, but I think overall for the full year, we'll still see it will be from a 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. Look, before that, sorry, which vertical did you refer to? The one was manufacturing. Manufacturing. So I think on manufacturing, what you are saying is growth in fact across regions as well. We are beginning to see growth come back in the U. S. As well as Europe. Partly this is due to the return to operations as factories come up and supply chain start to work again in a new normal as they say. So 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 to distributors. There are multiple other business model changes that they are seeking to make. And I think that is going to be another growth I mean, the next growth opportunity in that space, especially as we look forward to effect on it. Sure. Thanks and all the best for the future. Thank you. The next question is from the line of Sandeep Agarwal from EDELWEISS. Please go ahead. Yes. Thanks for the great quarter and also wish you all good health. Sorry to interrupt Mr. Agarwal. Sir, your voice is breaking up. Yes, sorry. So can you hear me now? So thanks for the opportunity and congrats on great quarter to the management team and wish everyone a good help. So Sanjay, I have a very simple question for you and Sadeep. Thank you. And 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. So do you think the argument of upfronting of spend has any merit or you think it is a more structural change? 2nd, 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. So that's all from my side. [SPEAKER SRINIVASAN VENKATAKRISHNAN:] What was the first question? Man, you asked 3 questions. Did you tell, I guess what was the first question? So I'm just saying that the pandemic has stayed for quite long. So, yeah. I mean, Sanjay, the pandemic is at least the way I understood is, so the pandemic has continued for so long, so our clients sort of not look I mean, 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 upfronting, which a lot of people have that argument. So what is your sense on that? So, because with such a long pandemic duration, the habit should have changed permanently, right? Okay. So look, it's there are sectors which deal very differently in the marketplace. So any company which can operate remotely, I think it has worked very well. But for people who need to travel and stay in hotels, the airlines, the manufacturing company 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. So, it's a very complex world of soft. And 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. So there will be a hybrid model that will evolve in the future. Having said that, that automatically leads to newer operating model that we have been talking about for companies to exist and do things very differently, right? We gave you some examples of customer onboarding. We look at Milan being launched on OTT, look at snacks.com with Pepsi selling snacks online, which 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. And fundamentally, five things are the ones that people are customers are doing. 1, they are looking at direct to customer, whether it's B2B customer, B2C customer, everyone wants to touch the customer directly. 2nd place, customers are looking at doing workplace modernization because it will never be 100% on-site or 100% offshore as well, outside of office, right, remote work from home. 3rd is generate new operating models for them and discover, co create new models using technology. In order to fund all of these cost savings, some operations need to be there. And 5th 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. So we do believe this will create this has created opportunities for technology companies and these are not going to disappear in shorter time frame, 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. Customers, 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 the port writing in the past. Price is not an issue, but how do you use technology, AI, ML, etcetera to bring value to the customer is very important. The area 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 improving, 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. So these are the things which are here to 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, Sandeep. Thank you. The next question is from the line of Abhishek Bhandari from Macquarie. Please go ahead. Yes. Sanjay, first of all, congrats on your 5th year work anniversary. I had one question with 2 parts. First is, 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 you think could be improved to accelerate your deal closures? That's one. And related question on second one is you mentioned about 26 new accounts getting opened this quarter. How does it fair compared to historical averages? Thank you. Look, we did talk about transformation of sales as one of the activity that we had initiated 5 years back. And this is obviously, the pace has accelerated to our major speed right now. And time to market and speed is the most important today in the 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 the design thinking principles and sales people who are looking problem not only identify who focus more on identification of problems and co creating solutions in my speech, we are going to create a separate unit to focus on 2 areas. 1, cloud, what we do with scalars, AWS, GCP and Azure. And this will include ways different ways of doing businesses, right? So there will be pods which will be created where you can co create with the customers in an iterative model. Selling more model will entirely turning on its head. We have several cloud certified sales practitioners today. So 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, this is historically, if we look at it, we have been opening over 20 odd customers per quarter. And I think we are seeing similar numbers in activity happening in the marketplace right now. Subhir, do you want to add some more on color on NAO, new account opening? Yes. So I think if you look at the numbers right there in line with what we've been doing previously, I think what I'll just cover a little bit about the previous point, right. So there's significant amount of training effort. So we did this platform for cloud training for example called Earth Cloud Guru, which is the entire sales organization has been through. And 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. So not just the traditional partners of ours like I said in Oracle, but also increasingly the Snowflakes of the world where we are creating joint sales traction including go to markets, enablement, etcetera. So the whole space of Amazon has shifted and that's what we are also doing at the same time. And as Sandeep said, the next step is to create a dedicated sales unit just focused on Thank you and all the best. Thank you. Ladies and gentlemen, that was 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 to you'll get a mailer from Sunilha very soon, but please save the date. We will have our Analyst Day on 10th December. I would have I normally cherish and look forward to seeing all of you guys face to face, but this time we will do it remotely. But I look forward to seeing you there on that day. With that, we'll 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. Thank you for