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. Should you need assistance during the call, please signal an operator by pressing star then zero on your touch-tone phone. 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 2021 earnings. The financial statements, press release, and quarterly fact sheet are available in our filings with the stock exchanges and on the investor section of our website. On the call, we have with us today Mr. Sanjay Jalona, our CEO and Managing Director; Mr. Sudhir Chaturvedi, President of Sales; Mr. Nachiket Deshpande, Chief Operating Officer; and Mr. Ashok Sonthalia, our Chief Financial Officer. Sanjay and Ashok will give you a brief overview of the company's performance, which will be followed by a Q&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, Sunila. 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 LTIites 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 decline. We delivered revenues of $390.3 million, a decrease of 4.8% 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 the pandemic. As discussed during our last earning calls, we have developed a three-by-three 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 Protecting our P&L. In each of these three areas, as I had talked last quarter, we have defined Act Now, Plan Now Goals, developed 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 XFH, or Everything from Home framework. As discussed last quarter, XFH 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. LTI 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 XFH model has been very effective, and we have seen productivity improvements as we have learned and adapted to the new normal. We are 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%-50% occupancy based on individual facility design in the medium term. All locations will be prepared to shut down or reduce occupancy at 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 protecting our PNL, we have acted swiftly, as demonstrated by delivery of stable operation margins 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 deferments 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 a BFS logo in U.K.
A multi-year deal with a net new TCV of $20 million is with 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 am happy to state that we also added a new Fortune Global 500 logo to our list of clients, taking the total Fortune Global 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 the top five IT brands in India, as well as top 100 brands in the country, as per Brand Finance 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-19-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. A large deal even in the U.K. 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&C to retain customers and higher medical costs for health insurers. Manufacturing was our hardest hit vertical, excuse me, 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. 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 vertical 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-19 and commodity prices falling as well. CPG, retail, and pharma saw a marginal sequential decline and 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 Fortune Global 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 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 continue to spike in several key geographies as we speak. A further spike or a second wave of 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 first quarter of FY 2021, starting with the revenue numbers. Our revenues stood at USD 390.3 million, 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 INR 29,492 million was down 2.1% quarter-on-quarter and up 18.7% YOY. Now, coming to profitability. EBIT for the quarter was INR 5,139 million, 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 control in SG&A, currency movement, and lower product pass-through. Reported profit after tax was INR 4,164 million, 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 have offset increase in treasury income, resulting in minor drop in PAT 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 79.3% in quarter four. Our net additions to manpower in the quarter was 40. The total manpower stood at 31,477, 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 $1,098 million as at 30th June 2020 versus $1,251 million as at 31st March 2020. While the on-balance sheet hedges stood at $111 million versus $91 million 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 second consecutive robust quarter for cash collection and DSO improvement. In quarter one, the billed DSO stood at 70 days compared to 77 days last quarter. The DSO, including unbilled revenue, was at 99 days, an improvement of seven days over quarter four. The net working capital has improved by 2.5% to 13.8% of revenue as on 30th June 2020 over the last quarter. For the quarter, the net cash flow from operations was strong at INR 6,347 million, which was at 152.4% conversion of the net income. At the end of the quarter, cash and liquid investments stood at INR 34,256 million, adding INR 6,818 million to our liquidity during the quarter.
The effective tax rate for the quarter was 25.5%. Earnings per share for the quarter stood at INR 23.9 per equity share as compared to INR 24.5 in quarter four. 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 in quarter four. With that, I would like to open the floor for questions. Thank you very much.
Thank you very much. We will now begin the question and answer session. Anyone who wishes to ask questions may press star and one on their touchtone telephone. If you wish to remove yourself from the question queue, press star and two. Participants are requested to use handsets when asking questions. Ladies and gentlemen, we will wait for a moment while the question queue assembles. The first question is from the line of Sudhir Pintuvally from Motilal Oswal Financial Services. Please go ahead.
Yeah. 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. In the current context, are you seeing any early changes in the industry structure, be it consolidation in favor of large companies versus mid-size players? How do you see LTI positioned on this front versus both our larger players and even the smaller ones?
Sudhir, how are you doing? Hope everybody at home is safe and sound.
Yes.
I continue to believe in that very strongly. If you have value proposition, your story will be heard, and you would continue to grow. Obviously, in these times, logical thinking says that consolidation would happen. As I've been telling you guys for the last four, five years since we have 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. We fundamentally, strongly believe our size today allows us to bid for the largest deals, because also the deal sizes have shrunk in a meaningful way. We continue to believe in that. We have always been disrupting the market. We like to be in a position of being the underdogs, and we strongly believe that we'll continue to gain share.
Sure. 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 two months and not the entire 90 days. How comfortable are you with the large deal win numbers this quarter and the current deal pipeline?
Deal pipeline, Sudhir, 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 large deals in Q2 as well. Lots of activities. Obviously, as you can expect, some amount of hold activity has also happened, but by and large, what we see is there is continued activity on large deals, and customers are continuing to go on that path.
Sure, Sanjay. One last question to Ashok. You managed margins quite well in a quarter which is heavily disrupted. Does that leave you with a good headroom to roll out salary revisions and bonuses in the near future? 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?
Sudhir, we are definitely able to protect P&L in Q1 through tight cost control in G&A and operational efficiency and of course, INR depreciation also helped. Where we stand today, and as Sanjay spoke about quarter two, flat to some positive bias, and if situation remains normal, growth should start returning from there. With that, we also believe some of the things which were helping us, in terms of saving expenses, particularly travels, et cetera, some amount of that will start coming back. As far as your first part of question, salary increase is concerned, we deferred first July cycle, and we are going to take only after our quarter two performance and some more visibility around how the market is looking like, how the growth trajectory is looking like.
That would then definitely, whenever that is announced, the future quarters will slightly get impacted with that. Having said all these things, I believe we will operate for full FY 2021 in a very narrow band where we have delivered quarter one. There are many uncertainties, many unknowns, and we will have to watch very carefully. We continue to be very 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 tighten our cost so much that we have to now wait to capture those opportunities. It's a good balance being kind of implemented.
Thanks, Ashok. Thanks, Sanjay. All the best and stay safe.
Thank you. The next question is from the line of Sandip Agarwal from Edelweiss. Please go ahead.
Hi, good evening, gentlemen, and thanks for giving me the opportunity to ask a question. First of all, I wish very good health to the whole management team and all LTI people. To start with, I have two questions. One, I will want Sudhir to answer and one from Sanjay. First question, Sanjay, to you. What is your view on these three things which most of the global players we are seeing a huge upsurge in demand. One 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.
There is a big leg up of spend which should be there in the transform in the core. Finally, the digital transformation journey, I think it will accelerate much more with the online activity. What is your sense on this jump in online activity, assuming that some part of this activity will recede in future? That is number one. 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 old ways? 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?
Oops, sorry, I was speaking on mute, guys. Sorry. I was saying, Sandip, good questions. Actually Sudhir is well qualified to answer both. Let me just, since you have asked specifically with me, let me just try to answer the first part. As I said in my initial brief, cloud is seeing huge adoption across what the world over people have realized. Anybody 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. Obviously, this usage of cloud also leads to a lot of waste going in places. 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, I think, Sandip, you attended our analyst day in December.
We strongly believe there are four themes 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? Second is data-driven organization. How do you use data to actually do meaningful decision-making? Thirdly, digitizing the core, and fourth is experience. Digitizing the core is very important because you need to simplify things to a level whereby you can launch product platforms in a meaningful way. Yes, transformations will continue. We are seeing transformations continue even at these times. Obviously, depending on the vertical, depending on a company's situation, some of the discretionary works will continue to get halted or go slow. These journeys will continue. Let Sudhir answer the question on sales and marketing.
Yeah. Thanks, Sandip. As Sanjay mentioned, that it's been a busy period for us across the organization, especially from, he mentioned the concept of win rooms that we have in place for deals that are underway. If you ask me how does sales and marketing change in the environment that we are and whether 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. For example, Sanjay and Nachiket and me, we are on multiple calls with clients almost every day. In fact, even today, I had two calls with clients this morning before getting onto this call. 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. It is harder to connect with new clients. Having said this, we had a good new logo win this quarter. 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, what we'll see is that big decisions and large deals do require some level of interaction. I think there are some natural limitations with this way of working. 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. I think we are moving towards the hybrid model.
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 under more channels. Having said this, 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. I'm sure when you ask about how we are executing, I believe Sanjay and Nachiket will answer. LTI Canvas has been a fantastic way of us delivering to clients. 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.
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 a transition we carried out remotely. As well as we're able to do implementations. We actually talked about an SAP warehouse management implementation that we did with a client. There is a change in what we sell and how we convince clients that we'll continue to be able to deliver even in the new normal that we see. 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 completely. There are many good things. 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. 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 one has ever had. 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 our oral.
You can bring the best of the company to bear in these times. I just hope we will continue. You also need a social fabric when you do business development or even actually software development. We take those good things, bring back those good things, but also 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 footprint also by traveling less. Thanks a lot.
Absolutely.
Thank you. The next question is from the line of Sandeep Shah from CGS-CIMB. Please go ahead.
Yeah. Can you hear me?
Yes, Sandeep.
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 2021. The way I think your premise of better growth versus industry is also dependent on a consistent large deal wins. We do understand pandemic is leading to some amount of delay in the decision-making, as you are saying, in the pipeline. With large deals may not be very healthy in this year, are you worried about the growth entering into FY 2022? This is slightly longer-term question, but is it gives you a bit of a discomfort if you think beyond FY 2021?
Sandeep, 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. We have to see how the next few quarters, next three to six months hold up. In our business, what we are doing today, the pipeline and discussions we do today help us in two or three quarters down the line when the deals close and the ramp-up happens. Today, where we are, we are 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. We will see. There are so many unknowns, and it's very difficult to quantify. I think next three to six months will define what happens in FY 2022.
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 business.
Okay. Hello?
Yeah.
Yeah. Second, Sandeep, 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? Some of the large peers are showing deal wins in that segment, and incrementally, they are not sounding that much cautious.
It's a good question again. Frankly, where we are, we are also not seeing anything so far. What I did say, not to get misinterpreted in any way, we were thinking that there could be some pressures coming in from defaults, et cetera. We have not seen any of it. Our top line continues to grow. It grew in Q1. We seem to have a healthy pipeline. Again, things are changing on a daily basis, Sandeep. We are yet to see how things pan up. We will see. Today, where we stand, I also don't see any problem right now.
Okay. Just bookkeeping question to Mr. Ashok. Treasury income has gone up significantly. Is it more to do with the notional gain fair valuation of some of your debt securities? Do you expect that may lead to some amount of Q-on-Q dip in the coming quarters? This is actually an increase in the yield because of the cash increase which is happening?
Ashok got dropped off. Let's see if he's back yet. Sunila? Okay.
Yeah. We're just trying to get him reconnect.
Sunila, Sandeep, he'll come back to this.
Yeah. 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 line of Nitin Padmadabhan from Investec. Please go ahead.
Nitin, how are you doing?
We're still trying to connect Mr. Sonthalia.
Right. Anyways, I'll just complete my question then. There were two questions. I just wanted to understand the cost saving. You've had a good amount of cost saving this particular quarter. Just wanted to understand how much of your Because I do believe that there will be some costs, like travel costs, et cetera, that could come back once things normalize. How much of your cost savings 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've also shown improvement on your working capital. Should we continue to assume this level of working capital as a % of sales going forward as well? These are my two questions. Thank you.
Sorry, I was dropped and the first question partly I heard. I will tell you that if we allow all the costs to come back, then it means we would have wasted this crisis. All of us are thinking that how do we ensure that whatever pain got created because of crisis, at least we create some of the 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 four. Whatever we billed, we collected that in this quarter.
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 accommodations for a temporary period, and those may play out going forward for the next one or two quarters. Our whole focus is that how do we, in spite of giving certain concessions, we can maintain at this level.
Right.
There was a question from Sandeep Shah before.
His question was, would the treasury gains and investment income likely to reverse in future quarter? No. Treasury income gain mostly are very much realized gains also, and there is a small amount of MTM, quite a bit is realized. We don't expect them to reverse until unless you are saying that interest cycle is going to reverse in a hurry. We don't see interest cycle is going to reverse in a hurry. I think they are realized, and they are going to stay.
Right. Just continuing on that.
Nitin, I have a question?
A follow-up. Yeah. Just on the cost front, sir, which are these costs that you see that you could be able to defend and may not increase in line with revenue? If you could just highlight some bit, maybe even qualitative comments will do.
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 capacities, the hybrid model of work from home and work in a distributed manner will also play some part on the CapEx and then consequently on depreciation, amortization, et cetera. I believe that some of the things which has happened, certain negotiations, which are temporary of course, around the rent, et cetera, and some of the conveyance and cab thing also are going to partly stay with us. 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.
Yeah. Thanks.
Thank you. The next question is from the line of Nitin Padmanabhan from Investec. Please go ahead.
Nitin Padmanabhan, how are you doing? Are you there?
Nitin, if you can hear us, we can't hear you. If you've muted your device, please unmute it. As we're still waiting on a response from the line of Nitin, we'll move to the next question. The next question is from Manik Taneja from Emkay Global Financial Services. Please go ahead.
Hi, thank you for the opportunity. The first question was for Sanjay. Sanjay, you talked about your commentary with regards to verticals. You could also throw some light as to how you are seeing your demand across geographies, especially given the commentary that we heard from one of the largest peers around Europe, essentially holding up much better. Also, should we expect the usual seasonality of second half being stronger than Q1 hold for us this year as well?
I couldn't hear the question. 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 a geography-
Sorry to interrupt, but I request you to speak closer to the mic. We can't hear you very well.
Yeah. Is this better?
Yes, much better. Please go ahead.
I just wanted to understand your demand commentary with regards to geographies. Also, should the regular pattern of H2 being stronger than H1, should that hold true for FY 2021 as well?
I think I'll like Sudhir to comment on, if he can comment on the demand overall. 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, I've given you more. There are many things which are changing on an everyday basis. We're dealing with really an unprecedented problem. Things keep changing. Let Sudhir articulate clearly on the demand question for you.
Sure.
Thank you.
Sudhir, are you there?
Sorry, I was on mute. Thanks, Sanjay. Let me cover the pipeline and associated large deal questions. Pipeline for us, if I compare it with the same time last year, it is up 19% YOY. Also, I think the good thing about the pipeline is that, 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 have very busy win rooms, which essentially are for the large deal activity that we have seen.
There is a healthy amount of activity that's underway. We hope, as he's mentioned, to see if we can get some closures within the next couple of months. What is happening is that deals they do take a little 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. It's a dynamic business environment, not just for us, but obviously for our clients. I think one of the concerns that was there was whether new logos would be possible. As you know, we announced 16 new logos, including Fortune 1000 logos. I think the key thing here is the move to cloud and digital. That acceleration is what we want to capitalize on.
This is where our partnerships with the large cloud players and the major product players in this segment is being very helpful in terms of driving that pipeline. A multifaceted pipeline is currently what we see. Though there are certain deferrals and deals on hold, overall, we think there is a demand environment. I wouldn't make any bold projections because as Sanjay keeps saying, things 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. I have one more follow-on question. This was in regards to what we've been hearing from the industry, is that customers may also be asking for differential pricing around work from home delivery. Just wanted to pick your brains as well on this subject.
Sorry, say that again.
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?
Oh, okay. Not at all.
No. No. Are you saying differential rates for people working from home? No, certainly not. I think what we are seeing is the client asks are there more around discounts that they're having, obviously demand pressures that they're facing or project deferrals or certain projects, the timeline being extended. No rate reductions because of where people are located.
Sure. Thank you. All the best for the future.
Thanks.
Thank you. The next question is from the line of Vinit Manek from Karma Capital Advisors. Please go ahead.
Hello, gentlemen. I had two questions to you. First one is with respect to the CPG retail and pharma. Within the pharma and life sciences, we have seen a large surge in the spend within the IT and the transformation that is happening. For us, where do we stand for that segment? My second question is in terms of our strategy with regards to the new client acquisition. We had largely a strategy of mining the existing clients with more deals and more traction. With all this COVID happening around, are we seeing even the mid-size companies coming to you guys for a cloud transformation or other digital platforms to be connected for the better working of their businesses?
Okay. Vinit, let me answer CPG, retail, pharma. Yes, we have minimal footprint on retail. Yes, CPG and pharma are two important sectors. They have grown really well for us. 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 is actually going in actual drug discovery on COVID right now. We still feel very positive compared to a lot of other verticals on CPG, retail, pharma. That could be driving the growth for the company as well, above the company's average. Our key strategy, I think, again, I want to say, every call I speak and say this: there are four pillars to our strategy. Growth accounts, these are large accounts. We need to continue mining. Invest accounts, which could become growth accounts for the future.
We need to continue to throw that kitchen sink at them. New account openings, which could become invest accounts and growth accounts in the future, and large deals to change their trajectory. It will not be right for you to think that our strategy is built only on one part. We continue to drive new account openings very similarly. We opened, as we said, 16 new logos, including one Fortune 500. As we pointed out, a little more difficult in these times when you're not meeting customers face-to-face. Again, as I say, it will be difficult, but it's not as if it can't be done. Which we have shown with one logo. We'll hopefully close a few more in the subsequent quarters on Fortune 500 as well.
Okay. Thank you, Sanjay. Thank you very much.
Thank you. The next question is from the line of Madhu Babu from Centrum. Please go ahead.
Yeah. Hi, sir. I think because of this work from home and lower travel, overall, the savings for the industry has been huge. I think at least for the short term, most of the companies have shown strong margin performance this quarter. Gradually, do you expect the pricing to fall because of this? Being a competitive industry, once the clients return back to normalcy, do we expect a pricing erosion because of this whole change in the cost structure and obviously lower CapEx? That is the first question. Second, can the onsite-offshore mix structurally change? After executing so much from work from home, other clients might be more comfortable with much higher offshore.
Both very good questions, but we don't believe it'll 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. We are social animals. We are in a team sport rather than an individual sport. It's not to say that it will be 100% or 75% offshore work from home, or it will not be 100% get back to work either. It will be a hybrid model. These hybrid models take time, energy, effort, cost to make them work. I think that is there to play out. We will see how it goes. With regards to onsite-offshore ratios, you can clearly see we are at around, what, 21% onsite.
We are one of the lowest ones globally. 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. 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, and everyone can do that. Yes, we will continue to see that, and hopefully, we will start to put efforts towards that. Also depends on the kind of work we are doing. It will not be immediate. It'll be gradual. It just cannot be done overnight, but it will happen, I think.
Okay, sir. Thanks.
Thank you. The next question is from the line of Vibhor Singhal from PhillipCapital. Please go ahead.
Yeah, hi. Thanks for taking my question. Just two questions from my side. One is, Sanjay, if you could just briefly throw some light on the energy vertical. You mentioned that this got impacted in a twin manner from the COVID as well as low crude prices. 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 one or two quarters down the line? Is there some recovery in sight, or will that be weak for a good year to medium-term future? My second question is to Sudhir. If we can basically just wanted to get a perspective on the way we are approaching the deals right now.
If I were to basically understand, as Sanjay mentioned in his opening comments, we are having one-time commercial discounts that we have given to clients. Is the pricing for new deals also a bit lower than hypothetically it would have been, had it not been the current environment? Is there a feeling that we would have got a better pricing on new deal, had it been won maybe three months before or six months down the line, or there isn't much of a price erosion that you are seeing in that sense?
I'll let Sudhir answer both of them. Sudhir, go ahead.
Sorry. Okay, Sanjay, I was focusing on the second part. Okay. I can answer the first part.
Okay, go ahead.
Okay.
No, go ahead.
I think please add to the oil and gas part because we're closely involved with some of the discussion conversation. On oil and gas, we saw obviously a steep decline and sort of immediate reduction from a client spend perspective. What we are seeing there is, again, it's the nature of asks are changing. It's becoming, again, this is a vertical from a cloud perspective, from a digital perspective, there is more to do. Especially from a data perspective, which is something that we think we can exploit a lot more going forward. I think we're still in the wait and watch phase from an uptake and demand perspective in this vertical. 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 sweet spot areas. Sanjay, anything you want to add on oil and gas?
No, I think it'll take some time, Vibhor. 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 do you actually monetize the last drop of oil from the existing oil fields, et cetera. Dialogues have to continue to happen.
Sure. That's helpful.
Your second question, I think, was on new deal pricing. On new deal pricing, the clients, I mean, obviously it's a competitive environment out there. I'm not seeing specific asks for these new deals to be priced differently. There have been asks, as I mentioned, in between the March, especially between March and June, regarding investing in clients in very difficult times, which we have done as true partners. 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. That pricing, I don't see a big shift in terms of where it was, but it's similar type of pricing.
I guess I'm repeating myself right now, but the discounts were up in the March to June period. That's where we had a majority of the asks.
Sure. That's great. Thanks a lot for taking my questions, and wish you all the best.
Thank you. We'll be able to take one last question. We take the last question from the line of Ruchi Burde 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-19. Now it would be helpful if you could characterize now, 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 work that you were dealing with.
Okay. I did talk about the pipeline earlier. I'll just cover some of that again. As I said, the pipeline is up on a year-on-year basis. From a vertical perspective, manufacturing, oil and gas, and automotive pipeline has been a bit soft, but we expect that to start recovering in the second half of the year. Other verticals 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 deals, we are seeing a combination of deals, as I said. As clients are looking for cash generation or cash savings, right? We are seeing large deals which include vendor consolidation and consolidation. We currently think that most of those deals are in our sweet spot areas without much risk to our portfolio.
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 refer to the conversations that we've had just this week, we are having ERP closure conversations. Because I think, as Sanjay mentioned earlier, whatever was digital, whatever was in 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. If anything, there is an acceleration in those transformation programs, and that's the other area of growth that we are seeing from a pipeline perspective. It's a combination of the two. I still think that some decisions may not happen in the time frames that we normally see. We are seeing certain deals on hold, certain deferrals.
It's a dynamic decision-making environment, but I would say, if I just measure the team on how busy it is, there is a lot of activity going on right now.
That's helpful.
No, that is okay.
Just a small follow-up to that. Sudhir, you mentioned some deals or some conversations are deferred or put on hold. Is there a 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 changing. There isn't a clear pattern, but it's a combination of both deals being held or being deferred to a later decision.
That's helpful. Thank you, and all the best to the LTI team.
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.