Q1 20/21

Jul 16, 2020

good day and welcome to the LTI Q1 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, Raymond. Hello, everyone, and thank you all for joining us today to discuss LTI's Q1 FY 'twenty one earnings. The financial statements, press release and quarterly fact sheet are available in our filings with the stock exchanges and on the Investors section of our website. On the call, we have with us today Mr. Sanjay Jalona, our CEO and Managing Director Mr. Sudhir Chaturvedi, President, Sales Mr. Nachiket Deshpande, Chief Operating Officer and Mr. Ashok Santalya, our Chief Financial Officer. Sanjay and Ashok will give you a brief overview of the company's performance, which will be followed by a Q and A session. 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 the results. Over to you, Sanjay. Thanks, Sunilah. Hello, folks. We hope you and your loved ones are keeping safe and staying well during these extraordinary times. We at LTI are deeply saddened by the impact of this crisis on lives and livelihoods. Our thoughts remain with the affected, and we show gratitude to those who are at the frontline of this battle providing essential services to communities and helping governments and health organizations. In these unusual times, we continue to focus on the safety of our employees and keeping our promises to customers. I want to thank all of our LTIs who have ensured business as usual during these unprecedented times. In a quarter marked by a challenging environment, we have been able to limit our quarter on quarter degrowth. We delivered revenues of 390 $300,000 a decrease of 4.8 percent quarter on quarter and growth of 9.5% year on year. In constant currency, these translate to 4.7% quarter on quarter and a growth of 10.6% year on year basis. We remain focused on our strategy to deal with the impact of pandemic. As discussed during our last earnings calls, we have developed a 3 by 3 strategy to ensure we respond to this crisis in a holistic manner. Our strategy covers these three aspects: customer first thinking, resilience in operations and predicting our P and L. In each of these three areas, as I had talked last quarter, we have defined ACMA our plan now goals, develop defense and offense playbooks and set up war rooms as well as win rooms for programmatic execution of our strategy. Let me run you through some steps we have taken in each of these three areas. In today's difficult times, grit is a quality that defines new leaders, those resilient enough to keep going and emerge stronger, more determined, focused, inspired and energized. In our customer first thinking, we have positioned ourselves around the GRIT Alliance framework with a strong focus on growth, increasing resilience, innovation and teamwork. At the core of this framework is our ability to work closely with clients to drive the cross functional paradigm shift needed to help them achieve their new goals quickly and seamlessly operate in the new normal. With this in mind, I would like to highlight an initiative we have recently developed and launched. Known as LTI Canvas, this initiative brings to life our XF Edge or Everything From Home framework. As discussed last quarter, XFETCH is LTI's approach to working from home. It outlines our journey not only simply of being operational from home, but growing from home. LTI Canvas is an integrated platform in partnership with Microsoft and drives technology and business outcomes at a time when teams are operating in a very distributed environment. LPI Canvas streamlines processes like software development, support, transition, information security, knowledge and infrastructure management and provides for the same to be delivered and executed remotely. It consolidates capabilities across cloud, agile, DevOps and design thinking, leveraging AI, ML and analytics. Talking about increasing resilience in operations, our XSSH model has been very effective and we have seen productivity improvements as we have learned and adapted to the new normal. We are planning to gradual planning a gradual and calibrated approach towards a hybrid model of return to office for our staff around the globe. We are currently 99% enabled to work from home. As we return to office in future, keeping social distancing in mind, we are expecting that we'll operate our facilities with maximum 30% to 50% occupancy based on individual facility design in the medium term. All locations will be prepared to shut down or reduce occupancy as short notices as well. While there is no fixed timeline on return to office date as the situation is changing and evolving every day, we are preparing for this eventuality. We have launched LTI Safe Radius, a GDPR compliant return to work app. This enables organizations to analyze information across locations on LTI's self serve analytics platform, Mosaic Lens. Key features include high risk profiling, seating allocations, staggering work shift schedules, transport management, real time alerts on accidental congregation, highlighting hotspots and contact tracing. Currently, several of our employees are using this app and we have also launched this externally for our clients. On predicting our P and L, we have acted swiftly as demonstrated by delivery of stable operation margin sequentially. We have provided some of our customers with specific time bound commercial concessions that will enable them to continue their IT programs with us. These are largely one time discounts, which will enable us to revert to the earlier commercials once things settle down. We'll continue to focus on driving operational efficiencies in the coming quarters as well. Let me now cover business highlights for the quarter. Despite some delays and deferrals in our pipeline, our large deal team and win rooms continue to be busy. We added 16 new logos across all verticals during the quarter and won a large deal with our BFS logo in UK. A multiyear deal with a net new TCV of $20,000,000 is a wealth management firm to provide remote infrastructure support, cybersecurity services and migration to IBM Power Cloud from their legacy wealth management platform. In a quarter marked by a challenging environment, I'm happy to state that we also added a new global Fortune 500 logo to our list of clients, taking the total Fortune 500 customers to 67. We remain positive as we expect to close and share with you some large deal wins in Q2 as well. I also want to share with you that LTI has been recognized as one of top 5 IT brands in India as well as top 100 brands in the country as per India 100 2020 report by Brand Finance. I'm happy that Brand LTI has secured a place amongst India's most valuable and strongest brands. Let me now provide you with a color of performance of our respective verticals. In BFS, we grew 9.5% year on year and declined 4.2% sequentially. While our top client continues to grow, Q1 performance in this vertical had an impact from delays in securing work from home approval from a key customer and also one time COVID related commercial discounts, both in Europe. Given the magnitude of this global pandemic, we expect banks to invest in their risk and liquidity management systems. Given our strength in finance risk and compliance space, we expect to partner with our BFS customers in this area. Our large deal even in the UK market also belongs to this vertical. In Insurance, we registered a 3.9% year on year growth and declined 2.7% sequentially. With increased exposure, lowest ever interest rates and slowdown in economic conditions, insurance companies are facing significant economic challenges. Many of them have had to deal with a challenging sales environment and also resort to activities like refunding part of the paid premium for P and C to retain customers and higher medical costs for health insurers. Manufacturing was our hardest hit vertical, which declined 16.5% quarter on quarter, but grew 13.9% year on year basis. Sequentially, this vertical was also impacted due to absence of pass through revenues in Q1. This vertical has performed in line with our expectations as many manufacturing facilities were shut during the due to COVID-nineteen and hence IT was a distant thought for these factories. We are seeing some activity here as there is broad based realization for the need to accelerate digital adoption. We have capitalized on the opportunity to help customers with strategic cost reduction, while gaining market share during the quarter. Global Fortune 500 client, which we have added, also belongs to manufacturing vertical. Energy and utility verticals saw a decline of 10% sequentially and a 9.6% increase year on year basis. As guided last quarter, this vertical was impacted due to a combination of COVID-nineteen and commodity prices falling as well. CPG Retail and Pharma saw a marginal sequential decline a growth of 13.4% on a year on year basis. Slight decline in this otherwise resilient vertical was driven by reprioritization of work and resultant delay in discretionary projects and specific customers. High-tech and Media was flat sequentially and grew by 1.6% year on year basis. The others vertical, which include defense and professional services, registered a 29.6% growth quarter on quarter and 29.1% growth year on year. The small base and certain India specific programs were the key reason for the growth of this vertical. Our large deal win announced with a key government ministry in Q4 FY 2020 falls under this vertical and is ramping up well. Talking about outlook, let me now turn and give you a description of that. Our Q1 performance was driven by the resilience of our diversified portfolio. This was supplemented by the fact that LTI has near zero exposure to travel, hospitality and a limited footprint in retail. We continue to win large deals, add new logos and work with Global Fortune 500 customers. We have not seen material delay in any of our ramp ups and we continue to meet client expectations. Cloud acceleration has been a common theme across all of our verticals. Both new and old age age old companies are adopting digital ways of working and that unlocks a world of opportunities for us. However, we also need to acknowledge that there are lots of moving parts and many unknowns today, given the unprecedented and extraordinary situation caused by the pandemic. The number of people impacted the virus continued to spike in several key geographies as we speak. A further spike or second wave infections could cause both governments and corporates to act very rapidly and we may see further lockdowns affecting business adversely for the industry. Having said that, based on what we know of our customer situations, pipeline and large deal momentum, we believe that Q1 was the trough for us and Q2 would be flat with a positive bias. What I can say for certain today is that we remain committed to lead with our expertise and create a niche for ourselves as a leading global organization that is powering the breakaway enterprises across industries. I have no doubt that LTI would be in the industry leadership quadrant for growth in FY 2021 as well. Let me now hand over to Ashok to give you the financial details. Thank you, Sanjay. Hello, everyone. Let me take you through the financial highlights for the Q1 of FY 2021, starting with the revenue numbers. Our revenues stood at USD 390 point $3,000,000 declining by 4.8% sequentially and was up 9.5% on a year on year basis. The corresponding constant currency decline was 4.7% quarter on quarter and growth of 10.6% year on year. Reported INR revenue of $29,492,000 was down 2.1% quarter on quarter and up 18.7% Y o Y. Now coming to profitability, EBIT for the quarter was INR 5,139,000,000 translating into an operating margin of 17.4% as compared with 16.7% in the previous quarter. Pressure on margin due to revenue decline was more than offset by tight cost controlling SG and A, currency movement and lower product pass through. Reported profit after tax was INR 4,164,000,000 which translated into a PAT margin of 14.1% this quarter compared with 14.2% in quarter 4. Lower foreign exchange gain and higher income tax expenses than the last quarter has offset increase in treasury income resulting in minor drop in PAC margin even though there was an increase in operating margin. Moving on to the people front, utilization without trainee was at 79.6% as compared to 80.6% last quarter and utilization including trainees was at 79.4% versus 79 point 3% in quarter 4. Our net additions to manpower in the quarter was 40. The total manpower stood at 3 100,477, of which our production associates were 94.4%. In this quarter, attrition has improved to 15.2% versus 16.5% last quarter on LTM basis. Now moving on to our hedge position. Our cash flow hedge book stood at USD1098 1,000,000 as of 30th June 2020 versus USD 10251 1,000,000 as of 31st March 2020, while the on balance sheet hedges stood at USD 111,000,000 versus USD 91,000,000 last quarter. We have been consistent in executing our hedging strategy in a measured manner, keeping market uncertainty in mind. Now talking about DSO, working capital and cash flow. It was 2nd consecutive robust quarter for cash collection and DSO improvement. In quarter 1, the build DSO stood at 70 days compared to 77 days last quarter. The DSO including unbilled revenue was at 99 days, an improvement of 7 days over quarter 4. The net working capital has improved by 2.5 percent to 13.8 percent of revenue as on 30th June 20 20 over the last quarter. For the quarter, the net cash flow from operations was strong at INR 6,347,000,000 which was at 152.4 percent conversion of the net income. At the end of the quarter, cash and liquid investments stood at INR 34,256,000,000 dollars adding INR 6,818 million dollars to our liquidity during the quarter. The effective tax rate for the quarter was 25.5 percent. Earnings per share for the quarter stood at INR 23.9 per equity share as compared to INR 24.5 in quarter 4. Diluted EPS was INR 23.7 per equity share versus INR 24.3 last quarter. On LTM basis, diluted EPS was INR 90.1 per equity share versus INR 86.6 percent in quarter 4. With that, I would like to open the floor for questions. Thank you very much. Sure. Thank you very much. We will now begin the question and answer session. The first question is from the line of Sudhir Kuntipalli from Motilal Oswal Financial Services. Please go ahead. Yes. Good evening, gentlemen. Congrats on a great performance in the current context. Sanjay, we understand that you do subscribe to the thought process that scale will not be a meaningful differentiator as long as you have a very strong value proposition. But in the current context, are you seeing any early changes in the industry structure, be it consolidation in favor of large companies versus a mid sized players? How do you see LTI position on this front versus both our larger players and even the smaller ones? So, here, how are you doing? Hope everybody at home is safe and sound. I continue to believe in that very strongly. If you have value proposition, you will have your story will be heard and you will continue to grow it. Obviously, in these times, logical thinking says that consolidation would happen. But as I've been telling you guys for the last 4, 5 years since we've started talking that where LTI plays, we play in the mature market. Our typical customer base is of the large companies. We also don't believe that there are Tier 1 partners and Tier 2 partners. So we fundamentally strongly believe our size today allows us to bid for the largest deals because also the deal size has shrunk in a meaningful way. So we continue to believe in that. We have always been disrupted disrupting the market. We have we like to be in a position of being the underdogs and we strongly believe that we'll continue to gain share. Sure. And the large deals in this quarter seem to be much lower than the typical run rate. Of course, we do understand that these may be the deal wins over a truncated period of 2 months and not the entire 90 days. But how comfortable are you with the large deal win numbers this quarter and the current deal pipeline? Deal pipeline, Suneel, continues to be strong. As I said in my initial commentary, the win rooms continue to be extremely busy. And we do hope to give you some news on some of the latter deals in Q2 as well. So lots of activities, obviously, as you can expect, some amount of forward activity has also happened. But by and large, what we see is there's continued activity on large deals and customers are continuing to go on that path. Sure, Sanjay. One last question to Ashok. So you managed margins quite well in a quarter, which is heavily disrupted. So does that leave you with a good headroom to roll out salary revisions and bonuses in the near future? And given that now you may be having a better visibility on revenue trajectory and cost structure, what is your thought process on margins for the full year? So Sudhir, we are definitely able to protect P and L in Q1 through tight cost control in SG and A and operational efficiency and quarter to flat to some positive bias and if situation remains normal, growth should start returning from there. And with that, we also believe some of the things which were helping us in terms of saving expenses, particularly travels, etcetera, some amount of that will start coming back. As far as your first part of question, salary increase is concerned, we deferred 1st July cycle and we are going to take only after our quarter 2 performance and some more visibility around how the market is looking like, how the growth trajectory is looking like. And that would then definitely whenever that is announced, the future quarters will slightly get impacted within that. So having said all these things, I believe we will operate for full FY 2021 in a very, very narrow band where we have delivered at quarter 1. But there are focused on each cost element which LTI incur and question everything. But at the same time, keep ourselves in a position that when growth returns, we are not regretting that we tightened our costs so much that we have to now wait to capture those opportunities. So it's a good balance being kind of implemented. The next question is from the line of Sandeep Agarwal from Edelweiss. Please go ahead. Yes. Hi, good evening gentlemen and thanks for giving me the opportunity to ask a question. First of all, I wish very good help to the whole management team and all LTI people. So to start with, I have two questions. 1, I will have from Suneet. I will want Suneet to answer, one from Sanjay. So first question, Sanjay, to you. What is your view on these three things, which most of the global players we are seeing are seeing a huge upsurge in demand. 1 is the cloud part where the capacities has been exhausted. Secondly, this transformation, what is your thought on that? I think and I believe based on data that the core has not been transformed or not been invested for quite some time in a big way. So there is a big lag, big leg up of spend, which should be there in the transformers of core. And finally, the digital transformation journey, I think it will accelerate much more with the online activity. So what is your sense on this jump in online activity assuming that some part of this activity will recede in future? So that is number 1. And to Sudhir, Sudhir, what is your sense on the future of marketing and sales? What is your sense that will the pattern how we do marketing and sales change permanently? Or you think once the lockdown opens up, probably people will get back to the open race? Or you think the new way of going through some of the internal softwares or Teams or Zoom would do wonders for marketing and sales as well? Sanjay? Sorry, I was speaking on mute, guys, sorry. Sorry. I was saying Sandeep, good questions and actually Subir is well qualified to answer both. But let me just since you have asked specifically if me, let me just try to answer the first part. As I said in my initial brief, cloud is seeing huge eruption across what the world over people have realized. Anybody who had who was totally on premise have struggled to go and operate any large corporation has struggled to go and operate and work from home models. But obviously, this usage of cloud also leads to a lot of waste going in places. So where we have COVID specific offerings for customers to rationalize and help them operate in a hybrid cloud model and rationalize their expenditure as well. With regards to transformations and core transformation, if you I think, Sameet, you attended our Analyst Day in December. We strongly believe there are 4 teams that are playing in the marketplace. Operate to transform, how do you use operations as a lever not to just do maintenance, but basically to create a backbone for transformation? 2nd is data driven 4th is experience. Digitizing the core is very important because you need to simplify things to a level whereby you can launch products platforms in a meaningful way. So yes, transformations will continue. We are seeing transformations continue even at these times. But obviously, depending on the vertical, depending on a company situation, some of the discretionary works will continue to get halted or go slow, but these journeys will continue. I'll let Sudhir answer the question on sales and marketing. Yes. Thanks, Sandeep. So as Sanjay mentioned, that it's been a busy period for us across the organization, especially from you mentioned the concept of win rooms that we have in place for deals that are underway. So if you ask me how does sales and marketing change in the environment that we are and whether it will this change will continue to be the way we work in the future, if that's your question. I think the key thing is that there are certain aspects that have improved. So for example, Sanjay, Machigetme, we are on multiple calls with clients almost every day. In fact, given today, I had 2 calls with clients in this morning before getting on to this call. So I think the first thing is we are able to stay close to our existing especially our existing clients and have multiple conversations with them. That's happening across the board. But it is harder to connect with new clients. Having said this, we had a good new logo wins this quarter. But I think on an ongoing basis that is something face to face meetings, in person discussions are important when you're forging new relationships and building on those. The second thing is that, though we've got a very healthy large deal pipeline, I think going forward, right, what we'll see is that big decisions and large deals do require some level of interaction. So there are so I think there are some natural limitations with this way of working. So we will work I don't think we'll go back to the way we used to work. I'm sure that all of us will have an opportunity to travel a little less and still connect with clients as effectively. But I think we are moving towards the hybrid model. But I still believe that in our business that face to face interaction, especially to build and sustain relationships is something that cannot be underestimated and cannot be done as effectively in remote channels. Having said this, right, what we have also done and this is to your previous question on has COVID accelerated cloud and digital, which it definitely has, we've used the opportunity for a significant amount of training and enablement of the entire sales force, sales organization in cloud and digital. And I'm sure when you ask about how we are executing and belief trends, I'm not sure if you could answer that LTI Canvas has been a fantastic way of us delivering to clients. So how we do work is also a key part of the sale. It's not only what we do, it's about how we do it. And we are able to demonstrate to clients that we are able to do transitions remotely. For example, the large deal that we spoke about was the transition we carry out remotely As well as we're able to do implementations, we actually talked about an SAP warehouse management implementation that we did with our clients. So significant amount of there is a change in what we sell and how we convince clients that we will continue to be able to deliver even in the near normal that we see. So let me pause here and see if there's any follow on questions. If I may add one small thing, I think we need to keep good habits from COVID and not go back to old ways of doing things in a completely. And there are many good things. As Sudhir said, we are talking I think I'm having more customer discussions than I normally did. I used to also travel 140 days on the road, right? Today in the discussions, there are no status quo, there is no holy cow. You can question the customer on any and every decision, every past theory that they have one has ever had. So if you have a story to tell, I think they will listen. This situation also allows us to bring the best of the company to bear. In the past, you will typically have a few people traveling to our customer orals. Now we have had situations where we have 60, 70, 80 people being on an oral. So you can bend the best of the company to bear in these times. So I just hope you will continue to but you also need a social fabric when you do business development or even actually software development. So we take those good things, bring back those good things, but also not use the opportunity of higher productivity in these times and not go back to some of the old habits that we have had. Extremely helpful. And I'm sure that you save lot of carbon print also by traveling less. Thanks a lot. Absolutely. Thank you. The next question is from the line of Sandeep Shah from CJS CIMB. Please go ahead. Yes. Can you hear me? Yes, Sandeep. Yes. Thanks for the opportunity. Sandeep, just wanted to understand that we really appreciate your industry leading growth even continuing in this bad year of FY 'twenty one. But the way I think we are premise of better growth versus industry is also dependent on a consistent large deal wins. And we do understand pandemic is leading to some amount of delay in the decision making as you are saying in the pipeline. So with large deals may not be very healthy in this year, are you worried about the growth entering into FY 'twenty two? This is slightly longer term question, but is it gives you a bit of a discomfort if you think beyond FY 'twenty one? Suneet, I hope your family is doing well. Yes, sir. Obviously, we announced one deal, albeit a little small size. But as I said, we will hopefully announce a few deals in Q2. Deal pipeline looks healthy. But we have to see how the next few quarters, next 3 to 6 months hold up. In our business, what we are doing today, right, the pipeline and discussions we do today help us in 2 or 3 quarters down the line when the deals close and the ramp up happens. Today, where we are, we are very, very busy. I don't think it will impact anything significantly in FY 2022. This year, obviously, is going to be tough because customers are spending in a very measured way. But we will see. There are so many unknowns and it's very difficult to quantify. I think next 3 to 6 months will define what happens in FY 'twenty two. But irrespective of what happens, we want to continue focus on capabilities. We want to continue focus on building our A plus team, so we can continue to partner with customers and create opportunities for our businesses. Okay. Hello? Yes. Yes. And second, Sanjay, last time, you were the first one to call out that there could be some demand headwinds in the banking financial service insurance in the second half of this financial year. Can you update in terms of a demand outlook in that segment as a whole? Because some of the large peers are showing deal wins in that segment. And incrementally, they are not sounding that much cautious. So it's a good question again. And frankly, where we are, we are also not seeing anything so far. But what I did say, not to get misinterpreted in any way, we were thinking that there could be some pressures coming in from defaults, etcetera. We have not seen any of it. Our top line continues to grow. It grew in Q1. We seem to have a healthy pipeline. But again, things are changing on a daily basis, Sandeep, right? So we are yet to see how things pan up. We will see. But today, where do we stand? I also don't see any problem right now. Okay, okay. Just bookkeeping question to Mr. Rusho. Treasury income has gone up significantly. Is it more to do with the notional gain fair valuation of some of your debt securities? And do you expect that may lead to some amount of Q on Q dip in the coming quarters? Or this is actually an increase in the yield because of the cash increase which is happening? I showed it was got dropped off. Let's see if he's back yet. Sunilah? Okay. Yes, we're just trying to get him reconnected. Sunilah, can we feel we'll come back to this? No issue. No issue. Thanks and all the best to management and stay safe. Thank you. Thank you. We move to the next question. The next question is from the line of Nikhil Prasmanayuk from Investec. Please go ahead. Nikhil, how are you doing? We're still trying to connect Mr. Antalya. Right. But anyway, I'll just complete my question there. There were 2 questions. I just wanted to understand the cost savings. You've had good amount of cost savings this particular quarter. Just wanted to understand how much of your debt because I do also I do believe that there will be some costs like travel costs, etcetera, that could come back once things normalize. So how much of your cost savings are probably will return when growth returns? And how much of your savings would you be able to hold on as and when things normalize is what I wanted to understand. The second thing is you have also shown improvement on your working capital. Should we continue to assume this level of working capital as a percentage of sales going forward as well? Yes, these are my 2 questions. Thank you. So sorry, I was dropped and the first question partly I heard, but I will tell you that if we allow all the costs to come back, then it means we would have wasted this crisis. So all of us are thinking that how do we ensure that whatever pain got created because of crisis, at least we create some of these structural changes, so that we can retain some of the things. Of course, some of the situational savings, which have happened, they will get back and we will see how does it work out in future. As far as your working capital is concerned, this quarter has been very good because largely we collected for the quarter 4. Whatever we did, we collected that in this quarter. And so going forward, our focus would be to maintain this level because I see some pressure when we talk about commercial concessions. In some of the cases, there are payment term accommodation for a temporary period and those may play out going forward for the next 1 or 2 quarters. But our whole focus is that how do we in spite of giving certain concession, we can maintain at this level. Right. If you have a question from Sandeep Shah before and his question was, would the treasury gains in investment income likely to reverse in future quarter? No. So treasury income gain mostly are very much realized gains also. And there is hardly there is a small amount of MTM, quite a bit is realized. So we don't expect them to reverse until unless you are saying that interest cycle is going to reverse in a hurry. And we don't see interest cycle is going to reverse scenario. So I think they are realized and they are going to stay. Just continuing on that costing follow-up, yes. Yes. So just on the cost front, sir, what which are these costs that you see that you could be able to defend at and may not increase in client revenue. If you can just highlight some bit, maybe even qualitative comments will do? Yes. So, like this, I don't think the way our thought process has gone, travel costs are going to come back to the same level. There will be some saving around that. I'm also sure that when we plan our capacity future, future capacities, the hybrid model of work from home and work distributed in a distributed manner will also play some part on the CapEx and then consequently on the depreciation and amortization etcetera, etcetera. Also, I believe that some of the things which has happened, certain negotiations, which are temporary, of course, around the rent, etcetera, and some of the conveyance and cab thing also are going to partly stay with us. So some of these things are there, which are going to partly stay with us, partly as the growth comes back are going to return. Thank you so much, gentlemen. Stay safe. Thank you. Thank you. The next question is from the line of Nikhil Patwanaruk from Investec. Please go ahead. Nitin, how are you doing? Are you there? Nikhil, if you can hear us, we can't hear you. If you've muted the device, please unmute it. I see you see the response on the random nickel. We'll move to the next question. The next question is from Manik Panija from MK Global Financial Services. Please go ahead. Hi. Thank you for the opportunity. The first question was for Sandeep. Sandeep, you talked about your commentary with regards to verticals. Could also show some light as to how you're seeing your demand across velocities, especially given the commentary that we've heard from one of the largest peers around Europe essentially holding up much better? And also should we expect the usual seasonality of second half being stronger than Q1, hold for our fiscal year as well? I couldn't hear the question. So you're saying we gave vertical commentary. What did you want us to comment on? If you could also help us with your commentary from our general I'm sorry to interrupt, but I request you to speak closer to the mic. We can't really hear you very well. Yes. Is this better? Yes, much better. Please go ahead. Yes. So I just wanted to understand your demand commentary with regards to geographies. And also should the regular pattern of H2 being stronger than H1, should that hold true for FY 2021 as well? Well? I'll like Sudhir to comment on he can comment on the demand overall. But guys, I've given you as much on where we stand today that we see the trough behind us. Q2 will be flat to a positive bias. We don't typically give a revenue guidance that I've given you more. But there are many things which are changing on a day everyday basis. We're dealing with really an unprecedented problem. But things keep changing. But let's Sudhir articulate clearly on the demand creation for you. Sure. Thank you. Sudhir, are you there? Yes. Yes, sorry, I was on mute. Yes, thanks, Sanjay. So let me cover the pipeline and associated large deal questions. So pipeline for us, if I compare it with the same time last year, is up 19% Y o Y. But also, I think the good thing about the pipeline is that we except for manufacturing oil and gas and automotive, where I think the pipeline will start to return in the coming months. The other verticals, the pipeline is holding up pretty well. We see a reasonable pipeline of growth in U. S, Europe. And in case of us emerging markets, which is our India, Middle East and Asia Pacific business is showing some good resilience in terms of pipeline in this market. As Sanjay mentioned, we've been very busy win rooms, which essentially are for the large deal activity that we have seen. So there is a healthy amount of activity that's underway. And we hope, as he's mentioned, to see if we can get some closures within the next couple of months. But what is happening is that deals are getting they do take a little bit longer to close. There are some deals that are going on hold where some clients are looking for more time to make their decisions going forward, because it's a dynamic business environment not just for us, but obviously for our clients. I think what one of the concerns that was there was whether new logos would be possible. Announced 15 new logos including Fortune Para onion logos. But I think the key thing here is the move to cloud and digital. That acceleration is what we want to capitalize on. So this is where our partnerships with the large cloud players and the major product players in this segment has been very helpful in terms of driving that pipeline. So a multifaceted pipeline is currently what we see. Though there are certain deferrals and deals on hold, but overall we think there is a demand environment. But I won't make any bold projections because as Sandeep said, things are changed tend to change quite rapidly. And I think we will see that kind of scenario for a few months coming forward. Sure. Thank you, Sudhir. So I have one more follow on question. This was regards to what we've been hearing from the industry is that customers may also be asking for a differential pricing around work from home delivery. Just wanted to pick your brains as well on this subject. Sorry, say that again. So we've been some of what we've been hearing from the industry is that some customers have been asking for differential pricing for work from home delivery. Are you seeing that play out in the market as well? Okay. Not that no, not at all. No, no. So you're saying essential rates for people working from home? No, certainly not. I think what we are seeing is the client asks are there around more around discounts that they are having, obviously, demand pressures that they are facing or project deferrals or certain projects being sort of the timeline being extended. But no, nothing of the no rate reductions because of where people are located. Sure. Thank you. All the best for the future. Thank you. The next question is from the line of Vinit Manik from Karma Capital Advisors. Please go ahead. Hello, gentlemen. I had two questions to you. So first one is with respect to the CPT Retail and Pharma. So within the Pharma and Life Sciences, we have seen a large surge in the spend within the IT and the transformation that is happening. So for us, where do we stand for that segment? And my second question is in terms of our strategy with regards to the new client acquisition. So we had largely a strategy of mining the existing clients with more deals and more traction. And so with all this COVID happening around are we seeing even the midsized companies coming to you guys for a cloud transformation or other digital platforms to be connected for the better working of their businesses? Okay. Vineet, let me answer CPG Retail Pharma. Yes, we have minimal footprint on retail, but yes, CPG and Pharma are 2 important sectors. They have grown really well for us. And I think they will grow above company average this year as well. Even if you look at pharma companies and CPG companies, lots of investment dollars from them and they're actually going in actual discovery on COVID right right? So but we still feel very positive compared to a lot of other verticals on CP and Retail Pharma that will be driving the growth for the company as well above the company's average. Our key strategy, I think, again, I want to say I've always at the call I speak and say this, there are 4 pillars to our strategy. Growth accounts, these are large accounts, right? We need to continue mining. Invest accounts, which could become growth accounts for the future. So we need to continue to throw the kitchen sink at them. New account openings, which could become invest accounts and growth accounts in the future and large deals to change the trajectory. So it will not be right for you to think that our strategy is to do it only on one part. We continue to drive new account openings very similarly. We opened, as we said, 16 year old logos, including 1 Fortune 500. As Sreed pointed out, a little more difficult in these times when you're not meeting customers face to face. But again, as I say, it will be difficult, but it's not as if it can't be done and which we have shown with 1 logo, we'll hopefully close a few more in the subsequent quarters on Fortune 500 as well. Okay. Thank you, Sandy. Thank you very much. Thank you. The next question is from the line of Madhu Babu from Centrum. Please go ahead. Yes. Hi, sir. So I think because of this work from home and lower travel, so overall, the savings for the industry has been huge. I think at least for short term, most of the companies have shown strong margin performance this quarter. But gradually, do you expect the pricing to fall because of this? Because being a competitive industry, I mean, once the clients return back to normalcy, I mean, do we expect the pricing erosion because of this whole change in the cost structure and obviously lower CapEx? Okay, that is the first question. And second, can the on-site offshore mix stress really change? Because after executing so much from work from home, other clients might be more comfortable with much higher offshores. Both very good questions. But we don't believe it will be, as I said in my initial commentary, you need a social fabric that binds people. I think we've capitalized a lot of social fabric because people knew each other for a long time. So you can easily work from home. But and we are social animals, right? And we are in a team sport rather than an individual sport. So it's not say that it will be 100% or 75 percent offshore work from home or it will not be 100% get back to work either. It will be a hybrid model. And these hybrid models take time, energy, effort, cost to make them work, right? So I think that is there to play out. We will see how it goes. With regards to on-site offshore ratios, you can clearly see we are at around, what, 21% on-site. We are one of the lowest ones globally. And we have continued to keep pushing work offshore, and we'll continue to do so. This is one good habit that can come from the pandemic, right? How can you push even more? You can reduce your dependence on immigration. You can actually work and execute things a lot better in this model and we have proved it that everyone can do that. So yes, we will continue to see that and hopefully we will start to put efforts towards that. But also depends on the kind of work we are doing, right? So it will be it will not be immediate. It will be gradual. It just cannot be done overnight, but it will happen by think. Thank you. The next question is from the line of Vibhor Singhal from Philip Capital. Please go ahead. Yes. Hi. Thanks for taking my question. So just two questions from one from my side. One is, Sundar, if you could just briefly throw some light on the energy verticals, you mentioned that this was impacted in a twin manner from the COVID as well as low crude prices. So have we seen any kind of, let's say, revival in at least talks about basically clients coming to us in terms of maybe deals or some kind of expenditure maybe happening, if not immediately or maybe 1 or 2 quarters down the line. So is there some recovery inside or will that be weak for a good near to medium term future? And my second question is to Subhir, this is again basically just wanted to get a perspective on the way we are approaching the deals right now. So if I were to basically understand, as Sanjay mentioned in his opening comments that we are having one time commercial discounts that we have given to clients. So is the pricing for new deals also a bit lower than hypothetically it would have been, had it not been the current environment? So is there a feeling that we would have got a better pricing on new deal had it been won maybe 3 months before or 6 months down the line? Or there isn't much of a size erosion that you are seeing in that sense? I'll let Sudhir answer both of them and Sudhir go ahead. Okay. So Sanjay, I was focusing on the second part. Okay. I can answer the first part. Okay. Go ahead. Okay. No, no, go ahead. No, no. So I think please add to the oil and gas part because we're closely involved with so in front of the discussion of conversation. So on oil and gas, saw obviously a steep decline and sort of immediate reduction from a client spend perspective. But what we are seeing there is, again, it's been it's the nature of apps are changing. So it's becoming, again, this is a vertical from a for example, from a cloud perspective, from a digital perspective, there is more to do. But especially from a data perspective, which is something that we think we can exploit a lot more going forward. So I think we're still in the wait and watch phase from an uptick in demand perspective in this vertical, but it will come in these new areas going forward. We'll also see some core modernization happening here, which will also be something that will be in one of our suites further, I guess. Andy, anything you want to add on oil and gas? No, I think it will take some time, Vibhor, but it's not to say that you're not conversing. You need to keep conversing and keep having a dialogue, whether it's related to how you can save money, how you can help them operate better in the new normal, how can you run oil fields the way they have to be, how you actually monetize the large drop of oil from the existing oil fields, etcetera? All those have to continue, Dohar. Sure. And your second question, I think, was on new deal pricing. So on new deal pricing, the clients, I mean, this and obviously, it's a competitive environment out there. But I'm not seeing specific asks for these new deals to be priced differently. There have been asked, as I mentioned, in between the March especially between March June regarding investing in clients in very difficult times, which we have done as true partners. But clients as I said, most of the projects that are happening right now are based on clients looking at a combination of their consolidation efforts for cost reduction as well as transformation efforts from a digital and a cloud and data perspective. So that pricing is I don't see a big shift in terms of where it was, but it's similar type of pricing. But I guess I'm repeating my son right now, but the discounts were both in the March to June period. That's where we had majority of last. Sure. That's it. Thanks a lot for taking my questions and wish you all the Thank you. We'll be able to take one last question. We take the last question from the line of Ruchi Valde from BOB Capital. Please go ahead. Thank you for the opportunity. My question is to Sudhir. June quarter was a very unusual quarter because of the COVID-nineteen. So now it would be helpful if you could characterize due to the COVID, how the deal pipeline has changed in terms of, I mean, deal sizes, mix of new client and the existing conversations or the repurposing or the change in the scope of block that you were dealing with? Okay. So I did talk about the pipeline earlier. I'll just cover some of that again. So as I said, we are so the pipeline is up on a year on year basis. There is from a pipeline from a vertical perspective, manufacturing, oil and gas and refining in the second half of the year. Other verticals continue to be pipeline growth that we are seeing continues to be healthy. From a geography perspective, U. S. And emerging markets are doing well for us. In terms of the nature of this, we are seeing a combination of deals, as I said, as clients are looking for cash generation or cash savings, right? So we are seeing 3rd large deals which have which include vendor consolidation and consolidation. We currently think that most of those deals are in this in our sweet spot areas without much risk to our portfolio. So we see net gain possibilities in many of these large deal consolidation deals. On the transformation deal side, this is continuing. In fact, if I referred to the conversations that we've had just this week, we are having the ASP closure conversations. Because I think as Sanjay mentioned earlier, whatever was digital, whatever was in the cloud and whatever was from a processing perspective did not rely on manual processing actually got done and got done very efficiently from a client perspective. So So if anything, there is an acceleration in those transformation programs and that's where that's the other area of growth that we are seeing from a pipeline perspective. So it's a combination of the 2. I still think that some decisions may not happen in the sciences that normally see. So we are seeing certain deals on hold and certain disorders. So it's a dynamic decision making environment, but there are I would say from a if I just measure the team on how busy it is, it is there is a lot of activity going on right now. Just a small follow-up to that, Suneet, you mentioned some deals or some conversations are deferred or put on hold. Now if you're characteristic to those conversations, are those large size deals or you see a combination of both? It's a combination. It's a client specific thing. As clients are looking at their own demand environment or their business environment is changing, It's there isn't a clear pattern, but the combination of both deals being held or being deferred to later decision. Issue. That's helpful. Thank you and all the best to the LGID. Thank you. Thank you very much. We'll take that as the last question. I would now like to hand the conference back to the management team for closing comments. Folks, this is Sanjay again. Thank you all for joining us on this call and wish you, your families and loved ones good health and safe passage through these trying times. We'll see you on the other side. Take care, guys. Thank you very much.