Ladies and gentlemen, good day and welcome to Mastek Limited Q1 FY23 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 conference call, please signal an operator by pressing star then zero on your touchtone phone. Please note that this conference is being recorded. I now hand the conference over to Ms. Damini Jhunjhunwala, AVP IR Mastek. Thank you, and over to you, ma'am.
Thank you, Neerav. Good day to all of you. Welcome to the Q1 FY23 earnings calls of Mastek. The results and the presentations have already been mailed to you, and you can also view it on our website, www.mastek.com. To take us through the results today and answer your questions, we have the top management of Mastek represented by Mr. Hiral Chandrana, Global CEO, and Mr. Arun Agarwal, Global CFO. Hiral will start the call with the business updates, followed by Arun providing the financial updates for the quarter. As usual, I would like to remind you that anything that is said on this call that reflects any outlook for the future, or which may be construed as a forward-looking statement, must be viewed in conjunction with the risks and uncertainties that we face.
These risks and uncertainties are included, but not limited to, what we mentioned in the prospectus filed with SEBI and subsequent annual report that you can find on our website. Having said that, I now hand over the call to Mr. Hiral Chandrana. Over to you, Hiral.
Good afternoon, everyone. Thanks for joining us. I will take a few minutes and provide a business update and hand it over to Arun to give more details on the financials. We delivered 13.4% year-on-year growth on revenue on a constant currency basis, and it was flat on a quarter-on-quarter basis. It was a challenging quarter in some ways, where we had a pause in a very large program, healthcare account in the U.K. There were a few delays in some decisions on some key deals and slower than expected ramp-ups in a couple of accounts. The currency impact was almost 7% to 8% for us from a GBP to U.S. dollar. Having said that, we've got some really good leading indicators that demonstrate the confidence that we have in the business.
As you would have seen, our backlog has continued to improve. We grew that almost over 30% year-on-year. Our pipeline has been growing steadily. Even through this last quarter, we have multiple large deals that continue to be added in the pipeline. We've hired more than 550 people, including trainees. We've actually consciously reduced the number of accounts that we cater to. This is again, as communicated earlier, our focus on account mining, our focus on higher quality revenue. Almost 50 lesser clients that we're catering to, and delivering the same revenue. Our fixed price business as well as our annuity business, which is our managed services business, has gone up significantly. This is again part of our strategy to look at more predictable revenue.
We actually delivered 19.2% on the operating EBITDA, in spite of some of the strategic investments that we continue to make. The talent cost, as all of you know, is going up, but we've made some investments in specific areas as it relates to industry solutions and geographies, which we'll cover in a minute. The customer demand environment is still looking good for us. While we do see some caution when it comes to deal decision-making, most of the deals that got delayed we have not lost, except for one, which was a small deal. Those deals are taking a little bit longer to convert.
Having said that, the wins that we've had really give us confidence that we are able to now compete on a different scale when it comes to large enterprise accounts as well as more complex deals. Let me take a couple of minutes giving you some examples. We won a deal at the University of Nottingham in U.K. This is a relatively new vertical for us in the education sector, where we are combining more than 40+ disparate systems and integrating processes to deliver a digital transformation program. We also engaged with a healthcare provider in the U.S., in the Americas region, where we're transforming their entire budgeting and forecasting process using Oracle Cloud. A marquee customer called Cleveland Clinic Abu Dhabi, which is a very global brand.
We are now engaged with that hospital chain and looking at a big end-to-end transformation across their value chain, across their different business processes. For a manufacturing customer in Europe, which is in the battery manufacturing space, we actually converted our implementation business as a follow-through into what we're calling Cloud Enhancement Services, which is really our managed services business in the digital and the cloud world. These are some examples where it's a combination of business process transformation, combination of digital engineering projects, combination of where we are trying to convert some of our existing implementations into managed services. Our U.K. public sector continues to show good momentum.
While we have grown in our current accounts, which is Home Office, HMRC, there is a new DSP, which is a Digital Specialist and Programs, which we've gotten shortlisted among some very key suppliers. That should give us access to a multi-billion dollar framework set of opportunities in the next few years. This is something we communicated in the Investor Day in April as well, that we have a seat at the table on some very large frameworks, which continue to give us some predictable and annuity revenue. We are very excited to bring MST Solutions into the Mastek family. MST Solutions is the acquisition that we announced earlier this week.
They are a Salesforce consulting and integrator, which has really demonstrated unique capabilities, particularly in healthcare, state and local government, manufacturing and financial services in the Americas region. We've been looking for assets and acquisitions, as you know, in the cloud platform space, in the CX space, and in the data space. This fits very, very complementary to our digital engineering and cloud transformation that we currently have in Mastek. The cultural fit of the company is also very synergistic. They have 250 employees in India and 75 in the U.S. We believe that this combination of Salesforce and our capabilities in Mastek will give us a seat at the table on front office to back office transformation engagement, which we have been seeing demand from our customers.
As you know, we always had a digital commerce business, which was strong. This capability goes across sales, marketing, customer service, integration, and multiple other areas of what Salesforce calls the Customer 360 platform. It's a very big economy, where Salesforce is gonna go from $25 billion to $50 billion as a company, and we believe there is significant synergies in our existing accounts within Mastek, as well as cross-sell opportunities within MST Solutions accounts to take Mastek services, both Oracle Cloud services as well as our digital engineering services. A little bit about looking ahead before I turn it over to Arun. We had shared our strategy and the various pillars of our strategy. We believe our fundamentals are very strong still across those strategic pillars.
We are focused on making sure that we provide differentiated services as we grow in the Americas market, and we've launched what is something called Glide 4.0. Glide 4.0 is really a framework and platform that will help accelerate, not just modernize and move companies to the cloud, but also help with their innovation acceleration. This combines our cloud transformation capabilities that we have with Oracle and our digital engineering capabilities that we've always been good at. Also, we have looked very selectively in our top 50 accounts across the globe and putting together focused account mining and teams that can cater across different service areas in that account. In most of our accounts, we are either present in one or two pillars, so we believe there's a big opportunity to cross-sell and grow our wallet share in those accounts.
Our U.K. public sector, like I said, continues to show good momentum. We are now getting into larger framework deals and even within our own existing accounts, getting involved in lot more strategic downstream deals where we've replaced competition, in many of them. As we look at our backlog, we have an opportunity to ramp up and cater to some of the existing business that we have won. We've also got an opportunity to improve and further accelerate our recruiting engine. While we've made some good movements in that area, there's more to do. We believe that, some of the investments that we've put in place, including the fresher hiring, the talent acquisition, is gonna pay and yield results in the coming quarters. As you would have seen, our attrition actually is trending down.
Most of the other companies, I think, the attrition is going in a different direction, and we have been able to retain and put some measures to keep the attrition in check. It's still a challenging environment when it comes to talent, but we are getting confidence that our attrition going down really showcases that our brand and the career value that we provide to Mastekers is paying results. As we look at the next three to four quarters, we have some recovery to do. With the measures that we've put in place, with the investments that we have in Americas, with the continued focus on UK public sector, we believe that we can start looking at beating the industry growth quarter on quarter going forward.
The demand environment will have some cautionary element to it because of the macroeconomic situation that all of you are aware. We are keeping a close eye on that. Our Middle East business actually delivered their best order book in Q1, so that's an encouraging sign for us. With the MST Solutions acquisition and the combined capabilities of Mastek, we believe that there is a combination here which will help us scale in the Americas. With that, I'm gonna turn it over to Arun, and then we'll open it up for Q&A.
Thank you, Hiral. A very warm welcome to everyone on this call. I'm going to share with you the key highlights of our performance for the quarter ended 30th June 2022. The deck has been circulated ahead of this call and contains much granular details about our financial and operating performance. So I'm going to keep it quite brief so that we can spend more time in terms of Q&A. To highlight this quarter was a mixed bag as highlighted by Hiral. While we have successfully concluded acquisition of MST Solutions and signed the definitive agreement subject to certain closing requirements which team is working to close as early as possible. Our quarter was little bit muted than what we expected.
As Hiral earlier mentioned, you know, it was more driven by one of our client in U.K. healthcare, which has gone through certain reorganization between multiple departments, which led to some pause in ramp which we anticipated. Again, we expect in a quarter or two for it to streamline and we get back to same run rate with the same customer. GBP depreciation, which has been led by a macro environment, has also impacted our USD-INR revenue. It's basically because 65% plus kind of a number for Mastek comes from U.K. as a market and hence the optically in terms of USD and INR revenue, we see quarter-on-quarter a little bit more impact.
However, in terms of constant currency, we have delivered 13.4% growth year-on-year while flat quarter-on-quarter, delivering INR 570 crores for Q1, for the reasons mentioned before. EBITDA margin stood at 19.2% versus 20.7% in the previous quarter. Margin was also impacted by the currency GBP to INR as I mentioned, more than 65% of our revenue comes from U.K. as a market. Increased salary levels driven by supply-side challenges as we continue to ramp for the key wins which we had in last two quarters. Utilization also got impacted because we continue to hire the right talent as we have quite a strong order backlog and healthy pipeline.
PAT stood at INR 84.4 crores, which is 14.2% of our income versus INR 88.2 crores last quarter, which was 14.7% of our income. Gross cash stood at INR 665 crores versus INR 794 crores in the previous quarter. Cash net of debt stood at INR 490 crores versus INR 600 crores in the previous quarter. We saw some increase in DSO this quarter, which was more led by some seasonality in couple of customers and certain contract signature and money flowing to Mastek. We believe this is one time and in next 90 days it will settle down as we start reporting quarter two. On the business side, we added 33 new clients during the quarter.
Client addition continues in the range of 30 to 40 every quarter, which is again a good sign. In line with our strategy 2025, where we emphasize that we are going to focus a lot on Fortune 1000 customers as a base. Quite glad to mention we have increased that base to 21 versus 19 in the previous quarter. Moving in the right direction as we laid out in the Strategy 2025. Headcount stood at 5,553. Net addition of 576 resources during the quarter. Acquisition of MST Solutions, as alluded by Hiral Chandrana, is a strong capability addition which further strengthens our integrated offerings and US base at the same time, leading to increase in deal sizes and building growth momentum in coming quarters.
Thank you all for your continued support as we deliver strategic outcome outlined in Vision 2025. Handing back to moderator to open the floor for Q&A.
Thank you very much. We'll now begin the question and answer session. Anyone who wishes to ask a question may press star and one on their touchtone telephone. If you wish to remove yourself from the question queue, you may press star and two. Participants are requested to use handsets while asking a question. Ladies and gentlemen, we will wait for a moment while the question queue assembles. Participants, you may press star and one to ask the question. The first question is from the line of Mohit Jain from Anand Rathi. Please go ahead.
Hello, can you hear me?
Yes, sir.
Yes, Mohit.
This is first was related to U.S. Now while our commentary there is positive, but last three quarters or so we have been more or less flattish in terms of revenue bookings. What is happening there and what has changed in last one year in terms of either deal pipeline or deal won and how do we see it going forward in terms of organic growth?
Thanks, Mohit. There are three different parts to this. As we've communicated in the past, the approach that we had before in U.S. was really a project-based approach and an implementation-based approach. What that means is we used to deliver a project and move on or we deliver an implementation and move on. The change that we've made in the last six to nine months has really put some structures when it comes to account mining. There's about 20-25 accounts where we believe there is significant wallet share increase that is possible. Now some element of rationalization on the accounts has happened as well because there's no point going after an account which is never gonna grow beyond $1 million. We've taken some tough calls and made sure that we're going after the right logos and right accounts.
That account mining approach does need some level of investment and time as we start looking at the wallet share, the spend across one area. That would be one big change that we've made.
The second change that we have made is in all the places where we've done implementations as well as projects, we're converting those engagements into managed services, which we are calling the Cloud Enhancement Services. Because all the work that we do is in the digital SaaS or cloud space. This is important because our stickiness with the account goes beyond just the project or implementation. We're now there longer in that account and are able to not just deliver what we have scoped for, but start cross-selling other areas. Classic example is a company called LHC Group, which is in the healthcare provider space. They interestingly recently got acquired by UnitedHealth Group, which is obviously a very large company in the U.S.
We started providing them with Oracle Cloud implementation services, moved into the managed services through our Cloud Enhancement Services, and now starting to look at integration, data, and other surround services where our wallet share in the account has improved significantly. So that's the second element of it. The last part is in terms of new logos and the hunting approach. So our alliance-based approach in Oracle continues to, you know, be the momentum that we have. However, as we look at enterprise accounts and as we look at larger, more complex deals, the influence that Oracle would have in some of those accounts and deals reduces. So we are consciously investing in building direct relationships with these accounts and taking much more holistic offerings.
The front office to back office transformation is one example, but there are other areas where we look at not just a single pillar solution and combine our various service offerings as we start to open even new logos. There are four or five additional platforms beyond Microsoft, Salesforce, and Oracle, these are the three that we've been focused on, that we've started looking at in terms of opening up avenues. Namely UiPath, AWS, as well as Snowflake. We believe that this gives us the focus as well as a diversification of service offerings to take to the US bank. Having said all that, Mohit is right. One, we would have wanted to see a lot more growth in the Americas market by now.
I would say we are sort of behind by a quarter where we are starting to see lot more deals which are integrated, starting to build relationships in those accounts. That is not completely come to fruition in Q4 and Q1. Of course, with the addition of MST, we expect that to take it to another level because it opens up another avenue for us because Salesforce is almost present in every existing account of ours in America. So those are some of the things. Okay, I think there's some disturbance. Yeah, let me pause there. Those are some of the things, Mohit. Hopefully, that answers your question.
My question was more related to organic growth than to the acquisition because those revenues will come through as you integrate. It was more like when should we expect organic growth to pick up? Is it like are you guys likely to take two, three quarters, one quarter? Depending on your deal pipeline, how do you see it moving?
B ased on this, I would say in the H2 time frame, right, which is really Q3 and Q4 time frame, we expect a decent jump both on order book as well as revenue growth, Mohit.
Understood. The second was on healthcare piece, healthcare life sciences. Now we have this one program, which is essentially from the government, which you mentioned in the presentation as well. How is the split between government, private, and how are the growth rates moving between the two so that we can possibly assess how that vertical is likely to move ahead?
The account that had a pause in the program impact is one single account where we actually ramped up significantly in Q4. So it was unfortunate direct hit, where we had to pause and that's reflecting from the Q4 to Q1 numbers. Our healthcare business, Mohit, as you probably know, is split between three geographies. We are working with some key providers and hospitals in Middle East. We also work with medical devices as well as healthcare customers in the U.S. Both those have actually shown some good traction in terms of pipeline and order book. The reduction that we've had is mostly in the U.K. account, as it relates to healthcare.
Like, are we done with it or should we expect something in 2Q and then we expect it to move up?
For that particular account, you know, we see some level of stability. In fact, in that same account we have now two or three new deals. Hopefully if we are able to convert that should reflect a growth path in H2 as well.
In H2. Sir, last question for Arun sir. The tax rate was little high this quarter, so what should be the recurring number for FY 2024 or 2023?
Mohit. Because this is all one-time, between cross-currency, some tax payments couldn't be realized, we expect 24%-25% as a good range as we go on a normalized basis.
2024, 2025 for FY 2023, right?
Yes.
Okay. Thank you, sir. I'll get back into the queue.
This question is from the line of Debashish Mazumdar from BNK Securities. Please go ahead.
Am I audible?
Yes, sir.
Yes, Debashish.
Yeah. Thank you very much for the opportunity. Just three questions from my side. First one is related to the healthcare clients that we are talking about. From the numbers, it seems to be the healthcare clients where we are seeing the ramp down is from the private Europe side. Is my understanding correct?
Debashish, it's the U.K. market. You know, in U.K. we're not working with any private sector. It's mostly the government that runs the U.K. healthcare. It's really in the overall public sector in U.K., not necessarily private.
Okay. Basically the why I am coming to this conclusion is if I see my government and education performance has done fairly well, whereas the UK/Europe as a market has come down. I thought that it may be a private client that is the-
Yes. You're right in terms of how we classify it. The line item that we provide as a spreadsheet does not include the healthcare account that we're referring to. That is a part of the healthcare life sciences. The account that we are referring to is the large U.K. healthcare account, which is one single account, which is basically funded by the government. We classify it under the healthcare life sciences.
Okay. Is this ramp down more to do with the current economic uncertainty or it's a client specifically?
No, this particular situation is, you know, a little bit unique and unfortunate. We won a very large deal six, seven months back, and we were able to really ramp up. This is an account that we've been working for almost 20 years, so it's a very stable account in the sense we are doing a lot of transformation projects. The particular deal that we won is really what got impacted because there was a leadership change.
That leadership change essentially combined three or four different departments in that account and really put a pause, not just on our program, but a couple of other programs as well, because they were rethinking their entire strategy for how they wanted to deliver some of that output. It's really led to not necessarily the macro environment, but a particular leadership change in that account.
Okay. Understood. The second question I have is if the U.K./Europe market macro uncertainties that you have already articulated about, and it's not only you, even your peers are also talking about it. Do we see this decision delays or deferments both in government accounts and private accounts or it is specific to private accounts?
See, the government space normally does have a delayed decision-making cycle, but that's something that we are used to because we've been working there for the last 20 years, or more. There is a longer cycle just by the nature of how that works. The delayed decisions on some of these deals I was referring to is in the private sector, both in the U.K/Europe, but also in the Americas. The part of the good news is that we're not losing those deals, right? Those deals, some of them are still active, or most of them are still active. Yeah, the environment caution makes us feel that we will see delayed decision-making cycles, at least in some programs.
You know, customers are probably gonna even prioritize which programs that they wanna fund. So, you know, eventually we might see some of that as well. Right now, we're not necessarily seeing any canceled demands. It's more in terms of deals being pushed, right shifted.
Okay. Thanks for that. One last question on MST acquisitions. If I see the revenue per employee of this target company, it's around $90,000, whereas you mentioned that around 250 employees are at offshore levels. Just wanted to understand, this, despite such high offshore presence, how can the revenue per employee is so high? If you can clarify with those numbers.
You know, the Salesforce ecosystem, as I mentioned earlier, is no longer one particular technology. It really cuts across the Customer 360-degree platform, right? There's some high-caliber architects and some very strong functional and process experts that are required to deliver these programs, right? Because we're talking about business programs across the sales division or the marketing division or even in the mid-office. MST also brings certain unique industry solutions. There's a platform that salesforce has called Vlocity. MST has been able to really build certain unique capabilities on top of Vlocity. The certifications that it takes in this environment or in this ecosystem is also not easy to get. MST has again been able to certify about 600+ resources.
The on-site rates and some of the value addition that they're doing is reasonably high and that's really the combination that we are seeing that you're probably seeing the revenue per employee.
Debashish, just to add there, when we have seen the data as part of reporting, that includes the employees data only. However, like any other IT companies, they are also in the current environment resorting to certain subcontractors specifically onshore to manage this revenue. That is also included. Maybe once we start getting into our reporting structure, we'll get much more clarity in coming quarters.
Okay. That clarifies this context. Just on this Mastek business model. Do we feel future that the margin of this business can go up because of this offshore shifting or subcontracting cost reduction? If you can help us with what is the current margin level that we are working with, I mean, the MST is working with.
Yes. Debashish, we have also assumed certain improvements definitely which has to be done in line as we get into Mastek structure and, you know. Definitely there has to be certain investment which has to get into because as they become part of Mastek, there is some lot of synergy has to be extracted. The same time, you know, the strategy to get into more of enterprise customers, it's very important considering the kind of capabilities they have built in. Balancing them out, I believe, their existing margin profile, which is in line with Mastek, will continue to maintain that.
Yeah. I think the only thing I would add is that the Salesforce engagement start with UX design blueprinting goes all the way to implementation and then of course managed services with all the different clouds that I was referring to earlier. There's a really good mix of different skills that are needed to deliver these engagements. That will be a continuous skill transformation process that MST Solutions has done well. We also have about eight or so Fortune 1000 clients. That's another interesting addition to our portfolio in the Americas, and should help us, you know, raise the game when it comes to larger deals and engagements, going forward.
Great. Thank you very much for answering my question. If you may take up the next question.
Thanks, Debashish.
Thank you. Next question is from the line of Nilesh Jethani from BOI AXA Mutual Fund. Please go ahead. Nilesh, may I request you unmute your line from your end and go ahead with the question, please.
Yeah. Thank you. Thank you, gentlemen, for the opportunity. My first question was on the U.K. political scenario currently panning out. How confident are we with regards to growth from a next 6-12 months perspective in U.K.? Especially we have a lot of orders coming from government.
Yeah. Nilesh, good question. We have been following that closely, as you can imagine. You know, over the last year we have been able to convert many of our engagements into a bit more longer-term predictable engagements, particularly in our top four or five accounts, which constitutes, you know, almost 80% of our U.K. public sector revenue. That gives us confidence that those programs are likely to continue irrespective of the government and the political environment. These are mission-critical, critical infrastructure programs where, you know, they seem to have visibility over the next two to three years at least. Having said that, right, any sort of new government change, you know, brings some level of new initiatives, you know, or maybe rethinking of some of the existing initiatives.
The DOS framework deal that I was referring to earlier is one such opportunity where we feel that there's gonna be a lot more downstream possibilities for us. There is also a view that the civil servants that are there in U.K. is likely to you know go down through this new government change and that potentially presents us an opportunity. As of right now, we don't see the political scenario impacting us in the core secure government services business that we currently have.
How do you bifurcate the mission-critical and the other projects?
As we look at the different process areas and initiatives, the work that we do for customs, borders, immigration, biometrics, some of the work that we started doing with police protection, cyber terrorism protection, those we are considering critical or of national infrastructure importance, right, which are critical to the government. There is always gonna be some element of legacy platform moving into a new technology platform, which may or may not directly correlate to some of these processes, that would not be critical. Many of the different areas that we are touching, whether it's in Home Office or you know HMRC or Ministry of Defense, these are of national importance.
Say we would have INR 100 of order in last 12 months. What percentage would be with the mission-critical categories you just mentioned?
Yeah. It's tough to qualify or quantify that, but I would say, you know, Arun, maybe if you have a different view, but, more than 80% of the work that we do for U.K. public sector, I'm talking about the secure government services, is mission-critical.
Just adding there, you know, the kind of scale and size of U.K. public sector is quite significant, right? We are still a part of it, quite smaller. The opportunity which we see is multi-fold. As you penetrate and make your relationship much more deeper, there are more than enough projects where, you know, you have your skin in the game and you start participating and ensuring your growth. Really, I'll not be worried as a combination of, first, whether the investment will go down. That's not my worry because the size and scale itself gives more than enough opportunity for us to grow.
Some of it is like related to even core areas like safety and protection, right? Like I said, customs and borders and immigration. The workflows, the engineering work, and some of the platforms that we are supporting really kind of run the government, right? Directly, indirectly. That's really what falls under that national infrastructure that is important.
Got it. My second question was on the U.S. piece. There has been some degrowth now. Just wanted to understand what's the management bandwidth involved on the acquisition side which led to this, degrowth. Because clearly the most of the peers in the IT sector has reported strong growth in the US. What led to this some minute or slight decline in growth?
Nilesh, your first part of the question, your voice was a little bit feeble.
Nilesh, can I request you to move to the handset. Your voice is coming very feeble.
Am I audible now?
Better. All right.
Yes.
Just wanted to understand on this U.S. piece, so was the management bandwidth involved in the acquisition process which led to some decline or the decline in the revenues from the U.S. side, or the general macro which has impacted the growth over there?
Yeah. Nilesh, we realigned our structure in the Americas and actually, you know, in some other parts of the geographies as well, where there is a dedicated team which is called the growth office, which includes strategy, some of the M&A as well as the service line development and partnerships. This growth office and strategy office is really what's focused on the M&A. You know, in any acquisition process there's always gonna be some level of distraction. That's definitely there. The team that is working on the acquisition and the integration as well is a separate team from the Americas go-to-market teams.
That's a conscious call that we took and a conscious investment that we made, because we didn't wanna, you know, distract the go-to-market teams in the Americas region from the acquisition because that does take time, as you know, and it has a cycle of its own. Some of the other things that I mentioned earlier with some of the deal decision delays impacted Q1. Our in-quarter execution could have been better. In some cases, there was a dependency on Oracle for us to close the deal, so that led to some decisions or delays as well. In general, the pipeline and the momentum is picking up. We are having a lot more. One of the gauges I have is the number of CIO conversations, right?
We're having a lot more CIO conversations now, compared to three months or six months back because we've invested in that account management and client partner roles. I think, you know, give it a couple of months and like I said earlier, in H2, we expect to come back very strong on America, even organically. Because with the inorganic, we're expecting a lot more cross-selling as well. Both organic and inorganic, we have high expectations from the Americas region.
Okay. One last question from my side on the employee addition. The employee addition number is significantly higher when I see the revenue growth outlook. How to read through this, the employee addition number versus the revenue growth number?
Actually, it's definitely there are two combination. One, we have to keep hiring the right resources. Again, these are certain skills which are aligned to our pipeline, as we are seeing good healthy pipeline as we speak, in addition to the strong order backlog. Actually, so our hiring is quite aligned to that. In addition to this, we have also continued hiring freshers because unless you have those freshers inbuilt into your system, your pyramid doesn't work effectively, right? You cannot do just-in-time hiring and the hiring is completely planned for next nine months of revenue forecast, which we are working on.
I mean, we wanna make sure that we are taking a medium-term view here as well, right? The skill transformation that is needed in some of the newer technologies and some of the newer demand areas is not an overnight, you know, solution. It does take some time to get the freshers get them trained. You know, we are seeing continued demand in certain specific areas. That in some ways addresses the additional headcount that we've added. Some of them will take time to get fully productive as well, right? When we look at the demand environment, we feel that there's an opportunity to provide resources just in time.
That way we are easily able to ramp up in shorter notices versus having a gap of 1 month or 2 months from the order win to the ramp up.
Nilesh, I'll request you to come back in the question queue for a follow-up question. A request to all the participants, please restrict to two questions per participant. If time permits, please come back in the question queue. Next question is from the line of Zubeyr from Mondrian Investments. Please go ahead. The line for the participant dropped. We move on to the next participant. Next question is from the line of Mihir Manohar from Carnelian Asset Management. Please go ahead.
Thanks for giving the opportunity. I wanted to understand, I mean, you know, in your opening remarks, you mentioned about the DSP program, specifically in the U.K. public sector side, which will give you opportunity to participate in the multimillion-dollar deals. I mean, if you could throw some more light into this and what are the strategies, specifically to target this program. What is this program? In which area, and how are you strategizing that? And second question was on the cash, I mean, you know, how we are having INR 650 crores of gross cash, and we are supposed to make payment, part payment for Evosys and also for Meta Soft. How should we read this situation? Those were the two questions.
Got it. Let me answer the first, and then I'll hand it over to Arun on the second. The DSP program and the framework is really about, again, in like I said, Digital Specialists and Programs, that's what it stands for. There are multiple phases here, what they call multiple lots. The first lot will be about essentially key transformation initiatives and people and processes that we are trying to change. This is related to the mobile operations and mobile platforms, as well as the e-commerce platforms that the government is funding. It cuts across multiple departments as well as, you know, multiple phases. The Digital Specialists Program has some more end-to-end nature of demand.
As they look at research, you know, design, all the way to testing and implementation, the Crown Commercial Service, this is information that is publicly available as well, but they are looking for certain capabilities, certain specific capabilities, right? Which they're calling Digital Specialists. Which could be involved in one of those areas, or it could be involved as a full stack in multiple areas. These are the two components. You know, the central government and the health teams, as well as the defense teams, will all kind of benefit from this. It's a more larger kind of vehicle that cuts across multiple divisions in the U.K. government. Mihir, hopefully that addresses the first question. Arun, if you wanna answer the second.
On the gross cash, yes, it's $85 million plus we have as of June end. But Mihir again, we need to be mindful, as I mentioned, you know, there's some timing difference because of which DSO was impacted, and we believe to come back to our quarterly run rate to keep generating the healthy cash. That will continue. However, this particular Amnesty acquisition is funded by internal cash and plus a portion has been through borrowing. Just to give you a quick split, $80 million is the upfront consideration. We are planning to borrow $30 million as a loan, which we'll be using to part-fund this particular acquisition, and $50 million will be internal cash, which will be used.
Sure. It's understood. Just on the first question, I mean, on the DSP side, if you could quantify the opportunity. I understand it is difficult, but if that could be done.
Sorry, Mihir. Quantify the?
DSP opportunity.
I mean, the overall, you know, it's tough to quantify the overall value of the framework as shared by the Crown Commercial Service, $ 4 billion, across, you know, three to four years. It does include roughly about 50 suppliers. You know, you probably might know the various frameworks that were earlier, the DOS Framework, which had, you know, a lot more suppliers. This has 50 suppliers. The two lots that I was referring to, the Digital Programs and Digital Specialists, there's only 20 suppliers that got selected in both lots, and so we are in that 20 list. Now obviously it's tough to quantify which ones that we would win, but this is an overall pie and overall timeframe of the programs.
Sure. Understood. Thanks. That's it from my side.
Thank you. Next question is from the line of Sachin Kasera from Svan Investments. Please go ahead.
Hi, good afternoon. My first question is regarding the comment, the impacted area, the U.K. performance. You mentioned it was because of a large contract in the government which could not be ramped up due to leadership change. Is it that we need to be going for re-bidding, or is it that there's a temporary pause and maybe after a quarter or two this will start getting executed?
Sachin, just a small clarification. This particular account, we had already ramped up, you know, in Q4, for this particular program. It was not like we could not ramp up. We actually did a decent job in ramping up in Q4. That particular program was paused and that's what led to, I mean, like I mentioned, the leadership changes and the consolidation of various departments. As of right now, it's a pause, which they have said is of six to eight weeks, which sort of ends in the July timeframe. Having said that particular program will come back in a different avatar, if you will, right?
It's not gonna be in the same form as how we had won it. It will come back in a slightly different set of components with some of the decisions that they've made. In that same account, we are seeing two or three different areas which we have developed pipeline in. This is still a large account for us and, you know, runs the entire healthcare in the U.K.. That particular program will come back in a smaller fashion. The efforts are on in building or converting some of the pipeline so that we can get back, like Arun mentioned earlier, to the previous run rate.
I think it'll take at least a quarter or two for us to get back in that particular account, the run rate that we had in Q4.
Sure. When you say different avatar, does it mean that there is going to be some impact on what you were looking earlier in terms of peak revenue from this contract or overall size of the contract? I mean, if you could just give us more details when you say becoming a different avatar now than it was.
Both. Exactly, the two things you said. One is actually it had come specifically there was a particular solution direction that this program was conceived by or conceived in when we had won it. When I say different avatar, it's now going to be a little bit more standardized platform versus developing a custom solution, right? That's the one piece. The size of the program will be reduced a little bit, and it'll actually be spread into multiple phases. Because given the change in direction, you know, they. We have to actually go through a little bit more design and blueprinting before we can actually develop the full functionality.
Both ways in terms of spreading and the timeframe as well as on the size, as it relates to this particular program. What I was referring to also was there are a couple of other initiatives that are going on in that same account, which, we're also engaged in. That is independent of this particular program.
Sure. On the currency, you mentioned that we have been impacted because of the cross currency and the weakening of the pound. From what I can see, we have around $10 million hedge. How are we approaching this? Are we looking at seeing the currency scenario increasing the hedging significantly or we play as the time goes by?
Sachin, we always take hedging, and we continue to maintain our internal policy and guidance for that. However, as you'd be aware of, in our UK business, specifically digital services business, significant portion is onshore, right? There the hedging is not possible because how we are structured, only the services which is rendered from India can be hedged. That portion of hedging continues. And we ensure our pricing as well reflects going forward the revised currency model. That's how it's going to pan out, Sachin, in medium to long term.
Sure. The second question was on the acquisition of MST. From what I can see, in the media, Hiral mentioned that, you know, in our vision of $1 billion, this entity should contribute between $180 million-$200 million. Two parts to that. One is that's from a little longer term. How long will the integration take, and can we start seeing? Because if we're talking of $180 million-$200 million from this entity, we are talking of a significant scale up from the existing run rate of $30 million. One, when is the integration expected to happen, and when can we start seeing this ramp up in the MST numbers?
Participants, please stay connected. The line for the management on. Participants, stay connected while we return the management back to the call. Ladies and gentlemen, thank you for your patience. We have the line for the management reconnected. Sir, you may go ahead.
Okay. Sachin, sorry about that. Looks like we got disconnected. You're able to hear us now?
Yes. Should I repeat my question or you were able to get it?
No, I got the question. When we were starting to respond, we got cut off. You know, your question was about the Salesforce growth or the MST growth as part of the $1 billion. Yeah, I mean, there's some short-term things that we are doing. The integration plan, we have got some good learnings from the past. We took a lot of efforts to prepare well, when it came to synergy, account planning, synergy planning, or integration planning. Over the next three to six months, we should start seeing that, and we expect most of the integration to be complete, before the end of this fiscal year. The key thing though is that we're not gonna wait for that, right? The account planning and cross-sell synergy is starting right away.
For example, I'm headed, you know, to Chennai later today. Our account teams are meeting, you know, in August second week. We're starting to share. We're actually working already on one deal together. There are about 25 accounts that have been identified, some in U.K., but most of them in Americas. These accounts are a combination of existing Mastek accounts and a few MST Solutions accounts. A lot of planning has already gone in, even before the acquisition and, of course, we have to execute that now with the account teams and the field teams.
The reason we are bullish about the medium to longer term as well, just because of the sheer spend that Salesforce ecosystem has and the talent gap that we see in the market with our customers in this specific area, right? Across the different Customer 360-degree clouds. Even if we have a fairly you know organic growth on the Salesforce ecosystem side, that revenue should increase you know maybe in 10%-15% ahead of industry growth rates. Having said that, the areas that we would like to amplify that is with some of these integrated deals and offerings. That's really where we see this overall business becoming $ 150 billion to $ 200 billion over the next few years.
Just one last question for Arun. When we see the geographical reporting, both in North America and the other segment, there is significant correction in the EBITDA margins. Is it mainly because of investments or are there certain one-offs? When do we see the profitability improving these two geographies going, right?
Particularly if you are speaking about North America, they are a combination of both. One is in one-timers, which we expected to normalize in quarter two. Second, yes, there's the investment which continues, Sachin, as we have focused and we believe there's a significant opportunity in the market to grow, those investment also has some impact, but predominantly driven by one-timers.
Sachin, sorry to interrupt you. I'll request you to come back in the question queue. I request to all the participants, please restrict to two questions per participant. The next question is from the line of Amit Chandra from HDFC Securities. Please go ahead.
Yes, sir. You know, thanks for the opportunity. My question is on the U.K. government digital spend. Seeing the data, the government spend on a digital side has come down significantly over the last two quarters. Is it only because of the political uncertainty or turmoil that is going there? Or is it because of the uncertainty in the various departments? Also, our growth over the last two years has been largely driven by the traction that we're seeing in the U.K. government side. You know, with the spending coming down at an aggregate level, don't you see that the organic growth that we earlier thought of is at risk?
Yeah, Amit, maybe just to clarify a couple of things. Our U.K. public sector, I'm talking again about secure government services, the non-healthcare account, the rest of the secure government business. That has actually continued to show some good momentum. Now, if you remove the currency impact, you know, from that, the business actually has grown. You can see that reflected both in the government and education industry slicing as well as in the digital engineering slice that we provide. Both ways, you know, the digital engineering business that we do for the U.K. public sector has shown growth. Again, you know, if you remove the currency impact, I'm talking about constant currency.
Yeah, from that perspective, we don't think that the political environment has impacted us in any way. The decisions and the delays in some of those decisions could still be in place, right? Because these cycles do take longer. In some cases, some of these larger framework deals have longer cycles just by the nature of it. At an organic level, particularly in the U.K. public sector, we don't see that dramatic a change, you know, at least from the current lens that we have, both in terms of our existing accounts as well as the growth that we see in those accounts.
Sir, in the U.K. government accounts, what is the average tenure of a deal? What is the annuity component? If you don't see refilling of deals because the spending is coming down because of uncertainty and delays in decision-making, don't you see that second half can get impacted more?
No, some of these engagements that, like, I was referring to earlier, Amit, we've been able to convert them into reasonably long-term predictable engagements. While some of the contracting used to happen three months, six months, you know, before, we've been able to take and convert them into one to two-year engagements, which gives us a little bit more predictability. Also, like I was mentioning earlier, you would have seen our fixed price, you know, go up, our annuity business go up. We're consciously making sure that some of the places where we've developed the Platform as an example, right? Or done some engineering work or implementation work, we're converting that into managed services as well.
There is definitely a macro environment which is so unpredictable with inflation, with some of the uncertainty, with the war that continues as well as the political environment. For the engagements and the accounts that we are running, we still see stable growth from that sector. The impact that we saw in Q1 was really from the healthcare account in U.K., like I said.
Okay. Sir, my second question is on the MST acquisition. Obviously, you know, it's a good acquisition and good add-on to our portfolio. If I see the three-year figure, it's around 11%. I know, you know, it also includes the COVID year.
You know, in terms of the earn outs that we have, you know, set for the company around 35 million, and, you know, last year growth rate is around 20%. What kind of targets are we actually looking out in terms of the earn outs, you know, to actually get paid?
It's quite initial stage as we speak. The targets have been staggered and the payout is also staggered accordingly. As it has been mentioned, a lot could be in the range of $0 of $35 million, right? And it has multiple both top line and bottom line which is attached to it. While we want them to achieve the maximum number, to be honest, because if they meet their numbers, it means our acquisition is successful. Again, we are still evaluating, you know, in next six months how it is going to develop.
Also, Amit, like you rightly pointed out, there was a COVID timeframe in between, and the company consciously pivoted towards some large enterprise accounts. We kind of like the rhythm of the company because they go deep in some of these accounts, and actually are expanding into different divisions, different Salesforce clouds. We've done about six customer reference calls prior to the acquisition. All those six customer calls indicated more opportunity just within the Salesforce ecosystem itself, plus potential other areas as well. The mining and the deep relationships that the company has was a pivot that they made in 2020 during the COVID year versus going into, you know, mid-size accounts or smaller size engagements. From a future outlook perspective, the pipeline looks strong.
The deal momentum that they have looks strong. The other thing that we've not talked about very explicitly is that they have a high focus on state and local government in the Americas. This is an interesting market which we were evaluating in the past, but it was not very easy to get into. Mastek has been able to develop relationships, you know, at the governor and agency level in certain states where they're actually digitizing multiple process areas. You know, fire and forestry, economic development, even land and water resources, which is challenging in some states like California. The spend of the state and local government still continues to be very high. Even with a recession type of environment, we like the healthcare and state and local government focus.
That's another thing we found attractive in addition to the Fortune 1000 clients.
Thank you. Amit, sorry to interrupt you. I'll request you to come back in the question queue. Participants are requested to ask two questions at a time. The next question is from the line of Zubeyr from Mondrian Investment. Please go ahead.
Can you hear me?
Yes, Zubair, go ahead with the question, please.
Yeah. Sorry, got disconnected there. There's a couple of questions from me. First of them will be a clarification, what Hiral mentioned in the introduction. Hiral, did you mention quarter-on-quarter, you're expecting industry-beating growth? Is that from next quarter? Or you mentioned sort of its normalization in next three to four quarters?
The latter, Zubeyr. Next three to four quarters.
Post three to four quarters, you're expecting industry-beating growth, quarter-on-quarter growth?
That's it.
In the near term, if you know not pinpointing the exact number, but just trying to understand, you know, what you're expecting in terms of. Because obviously if you look at the past two-year numbers, this is probably one of the, you know, weakest quarter-on-quarter for you and possibly year-on-year as well. Just kind of your input in the next sort of 12-month timeframe, if you were thinking that.
Z ubeyr, we will be back to quarter-on-quarter growth. As we mentioned, you know, this quarter had certain one-timers which were not anticipated. Our backlog, our pipeline looks strong enough. We believe, you know, our quarter-on-quarter and year-on-year growth will continue to be there, from coming quarters onward.
Second, I think one of the participants earlier asked this question, but just wanna ask this differently. If you could help me break down the revenue, I don't know if you quantify it this way, but discretionary versus non-discretionary. I think you explained that, for example, mission-critical is about 80% of the U.K. business. But overall, do you quantify the discretionary versus non-discretionary? And also if you could help me understand, you know, what would you say is discretionary versus non-discretionary when you think about the services that you provide to your customer base?
Participants, please stay connected. The line for the management dropped. Ladies and gentlemen, thank you for your patience. We have the line for the management reconnected. Sir, you may go ahead.
Hi, can you hear me?
W e can hear you now.
Do you want me to repeat the question, Arun?
I f you can.
I was just trying to understand, you know, I think one of the participants earlier asked this question about mission-critical versus non-critical. If I wanted to understand in a whole, you know, consolidated level, if you were to quantify the revenue where there's discretionary versus non-discretionary business. Also according to you, how would you characterize discretionary versus non-discretionary spend in terms of the services that you provide to your customer base?
I think Hiral was alluding to it when line got disconnected. Discretionary spend has to be seen from the eyes of the customer. As we engage and again, lot of the work which we are doing is not in the legacy space. Either these are digital transformation space or in the cloud. Most of these projects drive ROI, significant ROI to the customer, whether in terms of helping them to acquire their end customer or in terms of cost reduction.
In terms of process improvement, which goes a long way in terms of customer satisfaction. To keep it simple, right? There are multiple other ways which can be driven depending upon the project which we do. Most of this project has significant ROI for the customer. But again, when you get into, you know, discretionary and non-discretionary, it depends on the priority of the customer, right? If they're on the growth mindset, any projects which can help them to get their customers will not be discretionary. But if they're in the tough times where they can't spend money, then definitely they have to balance out which one they want to go for. It will be difficult really to quantify.
In the space of public sector, Zubeyr, as we answered in the previous question , most of the projects which we do for public sector are in the space of immigration, borders, customs, which are important, very critical, because as different countries are, you know, restricting their borders or making it much more pruned to avoid different kind of issues. And with Brexit coming together, those clearance becomes much more critical and important. So that by distinction is-
You know, very quick sort of back-of-the-envelope calculation, 65% of business is U.K., 80% is critical. Can I say largely if I was to do a consolidated calculation that 55/45 would be a good split in terms of the essential work you're doing and the 45 where the customer has more discretion that in a tough time they would possibly try to cut that expense. Or like 60/40, would that be a fair number?
No, I don't think, Zubeyr, because as I said, you know, most of the work which we are doing is more digital transformation and cloudification for the customer. You know, calling 40% discretionary will not be correct.
Zubeyr, maybe just to clarify this, the reason it's tough. If you think about it, right, a good majority of the work that we do, you know, almost 95% of the work that we do is in the SaaS digital or cloud migration and cloud transformation space. When you look at how we engage with our customers, it's also like Arun was referring to, right? It's either to improve their top line, you know, help them get more customers, move their business from brick and mortar to online, increase their customer loyalty, you know, completely transform their value chain processes across different industries. We tie it to business process KPIs, right?
Across even when we do back office or mid-office transformations, it is related to business process KPIs in terms of improvement or cost reduction, or in some cases top line. I mean, it's a little bit tricky to classify that as non-discretionary or discretionary because those are all critical for them to run their business.
No, that does make sense, fair. Thank you very much. Appreciate the help.
Okay. Thanks, Zubeyr.
Thank you. Next question is from the line of Amit from Care PMS. Please go ahead.
Yeah. Thank you. Just one couple of points. One on the MST transaction, did I hear it right that the margin profile of the company is similar to Mastek, which is 18%-20%?
Yes.
Okay. This earn-out, which is the zero to $ 35 million, is all going to be in cash only, right?
I t is in cash.
Okay. This delayed larger probability deals which we are mentioning, is it because of the pricing? Is it because of the competition or just a global recessionary fear, macro issues?
It's not the first or the second minute really, deals that, you know, we had high probability as it relates to Q1 closure in early Q1 closure, for example, in the April timeframe. Many of them either got deprioritized in terms of decision making or some of them, you know, just moved and shifted right. Now we have one couple of them in July, but there are still deals which are ongoing. The decision-making cycle that we saw in some of our cloud implementation has taken slightly longer than we expected. That's what we are referring to. I mean, it could be due to the, you know, the macro environment.
It could be due to particular customer prioritization. We have not canceled those programs. You know, the deals are not canceled, right? That's really what's giving us confidence that you know we still have. In some cases, we were actually shortlisted to be the final and there were some you know contractual negotiations that had already started as well, right? Which is why we're calling it high probability. Yeah, I mean, some of those delays in decisions impacted the in-quarter execution, which we call as book and ship, where you would book the deal and still close revenue in the same quarter, particularly if it's early in the quarter.
This MST transition, the leaders of their company will be continuing or now Mastek leadership will take over, I mean, in terms of the operations in the business, so to say?
I mean, all of the leaders will continue. In fact, there is a good strong retention program that is built into the value of the deal. There is some good talent that they have that goes beyond Salesforce actually. Many of them have grown through the architect ranks and program management ranks and delivery ranks. You know, their delivery leaders or their CTOs, the sales leaders and the account managers will all continue, Amit.
Okay. Thank you and all the very best.
Thank you.
Thank you. The next question is from the line of Mayank from Dalal & Broacha. Please go ahead.
Thank you for taking my question. My first question is regarding the annuity business or managed services. In the earlier remarks you had mentioned that you want to focus more on expanding this annuity business. What is the current contribution to our revenue and what do we aspire it to be, you know, in the future?
You know, it's a good question, Mayank. Our annuity business, relatively speaking, to many of our competitors is very low. We've moved the needle on that in the last six to nine months. Now we're hovering in the 30% to 35% range. Our, you know, ambition is to move that more closer to 50%. What we've done is we've gone to each engagement and each program that we've done implementation. It could be an e-commerce implementation, it could be a cloud implementation, it could be a digital engineering program where we've developed a platform and, you know, converted them, you know, or most of them into managed services engagement. That's one strategy.
We're calling it Cloud Enhancement Services because we believe that in the new world of digital landscape and SaaS landscape, the on-premise type of managed services does not hold good. Where we see DevOps programs or continuous improvement or continuous delivery programs, it's a very different type of managed services. We think that there is an opportunity to usurp and beat some of the incumbents who are doing managed services the old way. That's another kind of, you know, track where we may not have done the implementation, but we can still get the managed services. As an example, maybe an Accenture or a Deloitte might have done the implementation, but we could still get the day two services or the managed services, in that, right?
Third is when we go after new engagement, we're actually baking in some of that Cloud Enhancement Services as part of the implementation. In the past, we used to just focus on the phase one, which is the implementation. Now our deals include this element, you know, as part of the package. Of course, you can't do that with every customer, but that's our conscious effort. Sort of approaching it from multiple angles, so we can move this from a 30%-35% type of mix to at least 50%.
Got it, sir. Thank you. My second question is regarding the funding for MST acquisition. You said around $30 million will be through loans. What do you expect the annual interest outgo to be on this loan?
Yeah. Mayank, it's loan taken in the US. It's approximately, you know, 190 basis points plus, so forth. We expect 350-360 basis points on average will be the cost of capital.
All right. Thank you. Sir, and my last question is regarding attrition. We are seeing the attrition trending downwards. I just wanted to understand from you that what are we doing differently from our peers that we are able to retain our employees in a better way?
Mayank, I mean, we spoke about it, I think about six to nine months back late in 2021, where we essentially started a series of measures to engage our employees in a very different way. You know, as you can imagine, there's a lot of Gen Z's and, you know, Gen Y's which are there in the workforce, and they have a very different expectation of how to, you know, how to be engaged. Second is in terms of careers and opportunities. The work that we are doing, you know, clearly has cutting-edge technologies, new sort of emerging areas. We're starting to see some work in the data AI space as well, you know, Web 3.0, Web 4.0.
As we look at newer programs, making sure that we are engaging our employees in some of these newer technologies, also giving them opportunities to scale in different areas or even transform their own skills. That's the second part. The third is just purely engagement with many of the employees, right? I mean, our leadership team, you know, my direct executive leadership team is spending a lot of time with employees and Masteke ers directly so that we understand, you know, their ambitions, their aspirations. In some cases, you know, challenging them to take on more responsibilities. We have a program called Aspire, which has identified top talent in the company, and we are engaging them into strategic initiatives as an example, right? These are some examples of things.
I mean, you know, nothing earth-shattering, but making sure that we are continuously engaging employees so that they can deliver better for us as well as, you know, grow themselves in their careers as well.
Got it. Thank you and best of luck for the future.
Thanks, Mayank.
Thank you. The next question is from the line of Sunil Kothari from Unique Investments. Please go ahead.
T hanks for the opportunity. My question is to achieve your objective or vision of $1 billion in second half of this decade, this particular acquisition which you feel or you said in some interview that we can reach with integration maybe $150 million-$200 million. No need of any adding or any new acquisition further or how to understand this?
No. Sunil, you know, as part of our, you know, three to four-year strategy, we had created a roadmap for anywhere between three-five acquisitions, right? Of course.
A lot of that depends on the size of the acquisition, the timing, et cetera, et cetera. This was very, very consciously done in areas where we felt we needed to bridge certain gaps, right? The two other areas that we have identified is the cloud platform, so this is in the Azure and AWS space, and then in the data and automation space, right?
The CX space that we have identified, we believe in that space, this is the right acquisition and we were very consciously going after Salesforce as an area, right? On the three pillars, we've taken or addressed one of them, right? Which is the customer experience, the digital experience, the front office. The two other pillars, we are still very interested. Over the next couple of years, we would be making some more acquisitions. Data moving to the cloud, AI and automation, some of the innovation that is happening with Azure and AWS, those are still interesting areas that we feel could be acquisition candidates.
Okay. Sir, my second question is this, in one of today's interview you said that this PaaS project it has some 60-70 online consultant or engineers. Are we utilizing those somewhere else currently or yet we have to wait for some time?
Can you repeat your question? Sorry, I didn't get it, Sunil.
Basically I think, Hiral, today's ET Now interview mentioned that we had 60-70 people on this, the project which has been paused, this healthcare project. What is status of those manpower, those skills? Are we utilizing somewhere else now or we have to wait for some time?
There's a combination. Some of those skill set has already gone into different projects. A combination of those were also served through subcontractors and as you don't have those requirements, you let go the subcontractors, a combination. I don't see significant talent sitting on bench from that particular ramp issues out there. Yes, as we need, we can always onboard those talent back into the company.
Great. My last question is this event which has given major concern to investors' minds about this healthcare project which has been paused, do you feel it should have been announced little early whenever that happened? How do you react to this situation?
Sunil, as we mentioned, you know, nothing has been concluded yet. The client has got into little pause mode. They are recalculating as they got merged between multiple departments. They are recalculating their overall strategy. We are also as days goes by, we are also in a watch mode. We are having multiple interaction with them. How can we salvage the project back maybe in different avatar, as Hiral mentioned in the earlier point. There are multiple new projects which is coming, you know, which can offset some of this impact at the same time.
It's a combination, Sunil, and you know, sometimes informing on a real time basis become difficult because some of the decision-making is always, you know, as a part of more discussion and you know, to make things happen in a positive way from both sides.
True. Just one suggestion that will help us to impress.
Sir, sorry to interrupt you. We are not able to hear your audio.
Create more confidence.
No. It's point taken, Sunil. We'll take care of it going forward. Thank you.
Thanks a lot. Thank you.
Thank you. The next question is from the line of Ashish Das from Sharekhan. Please go ahead.
Hi. Thanks for the opportunity. Arun, just a question on EBITDA margin. See, the Q1 EBITDA margin is below the company's aspiration level. Earlier you used to say that it would be around 20%. Now you will take the wage revision in Q2. What is the outlook for the EBITDA margin for FY 2023?
You are right, but as we mentioned, you know, our endeavor is always to maintain in high teens, close to 20% was always the direction. However, the currency has impacted something which was not envisaged, Ashish. I'll mention in my commentary, you know, because since we have significant exposure to GBP and significant portion of our revenue comes from GBP, negative movement in that section led to some of the, you know, depletion in our margin profile. Still we are, our endeavor is to maintain in high teens and, depending upon currency to be closer to 20% if we can.
Okay. The wage revision would be higher than the last year? The impact of the wage revision.
Again, as I mentioned, we are still working on quarter two. Quarter two is a cycle when we do the wage revision. Still, we are under discussion. Ashish, we should be able to give more information, maybe in the coming months.
Okay. My next question is on your $ 800 million framework deal that is also related to NHS. That's the healthcare. What is the status? Do we think that we'll get any new deals under this framework in near future or it has also
A ctually that framework still continues. The two deals which Hiral mentioned about that we are quite positive if we are able to convert into Mastek's favor, we'll again be able to offset the impact which we have got from the other pause. It's part of this framework. Not only these two deals, we expect couple of more high value deals between $30 million-$50 million coming up in near term in the pipeline. As I say, near term is between 3 to 6 months.
Got it. Thank you so much.
All right.
Thank you very much. I now end the conference. Sorry.
I know we are out of time, so maybe I'll just take a minute to wrap up. You know, first of all, thank you to everybody, all the investors, analysts, and for your support, your questions, very thoughtful questions and feedback. You know, like I said, it was a challenging and a mixed quarter, but we are seeing you know, some good lead indicators, which give us confidence for the future. I wanna reemphasize on a couple of things. Our fundamentals of our strategy we believe are still in the right direction. Our Oracle Cloud business is still strong in terms of the market opportunity that we have in front of us.
The differentiation that we see in our engagements because of the specialist nature of some of the business outcome-focused engagements is still very strong. We're truly excited about the unlocking of value through the MST acquisition. It's in a space which is high growth and combined with our engineering and cloud transformation opportunities, the Salesforce ecosystem presents a great opportunity for us to grow in the Americas. With that, I'd like to kind of again hand it over to the line, but thanks. Thanks, everyone.
Thank you very much. On behalf of Mastek Limited, that concludes this conference. Thank you for joining us. You may now disconnect your lines. Thank you.