Ladies and gentlemen, good day and welcome to the TCS earnings conference call. As a reminder, all participant lines will be in the listen-only mode, 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 telephone. Please note that this conference is being recorded. I now hand the conference over to Mr. Kedar Shirali. Thank you, over to you, sir.
Thank you, Karuna. Good evening, welcome everyone. Thank you for joining us today to discuss TCS' financial results for the first quarter of fiscal year 2020, ending June 30th, 2019. This call is being webcast through our website. An archive, including the transcript, will be available on the site for the duration of this quarter. The financial statements, quarterly fact sheet, and press releases are also available on our website. Our leadership team is present on this call to discuss our results. We have with us today Mr. Rajesh Gopinathan, Chief Executive Officer and Managing Director.
Good evening, everyone.
Mr. NG Subramaniam, Chief Operating Officer.
Good evening.
Mr. V. Ramakrishnan, Chief Financial Officer.
Hello, everyone.
Mr. Milind Lakkad, Global Head Human Resources.
Yeah. Hi, everyone.
Rajesh and Ramki will give a brief overview of the company's performance, followed by a Q&A session. As you are aware, we don't provide specific revenue or earnings guidance, anything said on this call which reflects our outlook for the future, or which could be construed as a forward-looking statement, must be reviewed in conjunction with the risks that the company faces. We have outlined these risks in the second slide of the quarterly fact sheet available on our website, and emailed out to those who have subscribed to our mailing list. With that, I would like to turn the call over to Rajesh.
Thank you, Kedar. Once again, good evening to all of you. We've had a good start to the new fiscal year, with Q1 revenues growing at 10.6% year-on-year in constant currency, 11.4% in rupee terms, which is 8.6% in dollar terms. Our operating margin of 24.2% fully reflects the salary increments we rolled out across the board with effect from 1st April, and the currency headwinds that we experienced during the quarter. Despite that, our net margin for the year was at 21.3%, which is about the same as Q1 of last year. I'll now ask Ramki to go over the headline numbers, financial and segment fee performance, and I'll step in again later to talk about the demand trends that we're seeing. Over to you, Ramki.
Thank you, Rajesh. Let me go through the headline numbers. In the first quarter of FY 2020, our revenues grew 10.6% year-on-year on a constant currency basis. Reported revenue in INR was INR 381.72 billion, which is a Y-on-Y growth of 11.4%. In USD terms, revenue was $5.485 billion, which is a year-on-year growth of 8.6%. The demand for our services continues to be driven by the large-scale deployment of digital technologies as part of our customers' growth and transformation initiatives. Revenue from digital engagements made up 32.2% of our revenues in Q1, a growth of 42% Y-on-Y. We have recast the way we report the revenue breakup by industry vertical to reflect recent changes to our organization structure, including reclassification of some customer accounts. To help you discern trends and make comparisons, we have provided the restated data for the last four quarters in our quarterly fact sheet.
Let me now go over some of the different segments, how they performed during the quarter. As a reminder, all the growth numbers are year-on-year and in constant currency terms. Growth was led by Life Sciences and Healthcare, which grew 18.1%. Most of our other major verticals reported industry-leading growth rates. Banking, Financial Services, and Insurance grew 9.2%. Retail and CPG grew 7.9%. Communications and Media grew 8.4%, Technology and Services grew 7.8%. Geography-wise, U.K. and Europe continued to outperform, growing 16% and 15% year-on-year, respectively. Other markets also continued to grow well. North America grew 7%, Asia Pacific 9.5%, and India at 15.9%. Middle East and Africa, as well as Latin America, grew 6.4%. Our portfolio of products and platforms performed well in Q1. Ignio, our cognitive automation software, continues to gain share in the market.
Last month, Ignio celebrated its fourth birthday, doubling its revenue as well as the number of customers year-on-year. In Q1, Ignio had 16 new wins, taking the total number of customers past the 100 mark. In addition to gaining scale, Ignio has also grown immensely in scope. At the time of its launch, Ignio's original focus was transformation of IT operations using artificial intelligence. It made the IT infrastructure track self-healing by preempting a lot of problems before they arose and autonomously resolving a lot of the incidents that did occur. It has since expanded in scope to cover batch jobs management and ERP application support in the IT domain. Largely driven by customer demand for deploying its cognitive capabilities in new business-centric use cases, Ignio has expanded into intelligently transforming business operations.
For a large retailer in North America, Ignio carries out the reconciliation of supplier incentives, streamlining their cash flows and freeing up their working capital. TCS BaNCS, our flagship product suite in the financial services domain, continues to gain traction. We had seven new wins and five go lives in Q1, covering core banking, insurance, anti-money laundering, and securities trading. The BaNCS core banking software-as-a-service version is gaining popularity across the world, with smaller banks and credit unions looking to leapfrog into the digital era, gain agility, launch innovative products, and deliver a superior customer experience. Our Quartz blockchain solution was named the best blockchain breakthrough of the year at the Financial Technology Forum Innovation Awards for the pioneering work we did for two financial institutions in Africa. This pilot project lays the foundation for an innovative Pan-African financial ecosystem for cross-border information exchange and transaction settlement.
Quartz had two wins in Q1, one for a leading energy operator for trading of renewable energy certificates, another for setting up a cryptocurrency bank. We also had one go-live for a blockchain-based cross-border remittance system using the Quartz Gateway at a Saudi bank. In the retail space, TCS Optumera, our AI-powered merchandise optimization platform, had two new wins in Q1, while TCS OmniStore had one win. In LifeSciences, our Advanced Drug Development Platform, which is a comprehensive suite for digital transformation of drug development, had three new wins, including one on a new platform we launched to digitize and streamline the site selection and activation activities in the study design phase of clinical trials.
Coming on to client metrics, by focusing on transformational solutions that address our customers' growth and transformation imperatives, and by developing a full set of services catering to the needs of a broader set of stakeholders within the customer organization, we have been able to deepen our relationships, embedding our teams deep within their businesses. As an outcome, you can see strong movement of customers up the revenue buckets in our client metrics. In Q1, we added four more clients in the $100-million-plus band, bringing the total to 44. Three more clients in the $50-million band, bringing the total to 100. 13 clients in the $20-million band, bringing the total to 219. 29 clients in the $10-million band, bringing the total to 384. 43 clients in the $5-million band, bringing the total to 551, and 36 clients in the $1-million band, bringing the total to 1,014.
Let me now go over the financials. The annual salary increments we had affected across the board from April 1st and the cross-currency movements in Q1 resulted in a margin headwind of 2.3%. We were able to mitigate this to some extent through a concerted drive for rigor in operations. Our operating margin for the quarter was 24.2%. Higher other income and a lower effective tax rate this quarter helped boost the net income margin to nearly the same as a year ago at 21.3%. Effective tax rate for the year was slightly lower at 23.4%. Our accounts receivable was at 70 days DSO in dollar terms. Net cash flow from operations was INR 84.46 billion, which is 103.9% of net income. Free cash flow was INR 75.54 billion, and invested funds as of June 30th stood at INR 489.03 billion.
The board has recommended an interim dividend of INR five per share. On the people front, we continue to invest in workforce transformation. As of June 30th, we have trained over 315,000 employees on digital technologies and over 365,000 employees on agile methods. To support our growth, we continue to tap into talent pools across the world and add to our ranks. During the quarter, we added 12,356 employees on a net basis, the highest that we have added in the last five years, bringing the total headcount to 436,641. Moreover, we issued joining letters to over 30,000 fresh graduates in Q1 and completed the onboarding of almost 40% of them within the quarter. We expect to onboard the rest by Q2 itself. This is in contrast to the year-long onboarding process of the past. Our accelerated localization initiatives and focus on diversity and inclusiveness continue to yield good results.
The proportion of women in the workforce rose further to 36.1%. The number of nationalities represented in our workforce is now 149. All of this is resulting in a very vibrant and engaging workplace that attracts and retains talent. We continue to enjoy the lowest attrition rate in the sector globally. LTM attrition in IT services in Q1 was at 11.5%. I hand it over now to Rajesh for the demand drivers and trends.
Thank you, Ramki. The digital part of our business is now almost INR 7 billion and growing at over 40% year-on-year. This momentum is on account of the mainstreaming of digital technologies and the central role that they are playing in our customers' growth and transformation initiatives. Given the vast amounts of data available about each and every individual, every interaction can be heavily personalized today. I've spoken about it in the past how mass personalization is a key pillar of our Business 4.0 framework. Consequently, marketing is far more precise today, and its impact can be more accurately measured. Marketers are investing in targeted creative performance-based demand generation campaigns using the latest digital engagement technologies.
The objective is to create and deliver relevant content through the right channel at the right time to help consummate a sale, and the biggest challenge for CMOs is to do this with speed and at scale in an industry competing for talent and skill. This is where our scaled end-to-end capabilities covering creative design as well as technologies and contextual knowledge positions us well to partner our customers in their end-to-end transformation journeys. Our award-winning creative design teams at TCS Interactive are working closely with customers to design the user interfaces of the front-end systems while seamlessly integrating it with our technology teams to make them end-to-end and delivered and executed.
We have helped international container shipping companies become an industry benchmark for customer experience by building them a new user interface that provided online quotes and instant booking, and helped them realize their bold vision of making the experience of booking a container as easy as booking a seat on an airline. You will appreciate that containers, given the fact that it moves through a complex supply chain, providing this kind of an experience in an industry of this nature is a second- or a third-order problem compared to a more point-to-point solution that airline uses. There is no common platform where these kind of transactions can be put together.
Being able to take an experience from an industry and use that as a benchmark and deploy that in a totally different industry is areas that customers see us as enablers or catalysts for their innovation, and being able to bring this cross-industry knowledge to bear with a full end-to-end customer experience to technology execution solution. Similarly, there's another example that we wanted to share, is work that we're doing for Deutsche Bank out of Spain, where they partnered with us to reimagine their portfolio performance analysis sharing that they do with their high-value customers so that their customers can understand their investment portfolios better. We applied their decision thinking concepts, design thinking concepts, and used agile methods to collaboratively come up with new designs that enable easier and more intuitive understanding of the portfolio performance.
The new reports have resulted in approximately 20% increase in advisor satisfaction ratings across private banking. For this project, Deutsche Bank Spain received Celent's 2019 Model Wealth Manager Award for client experience for the new investment reporting experience designed and implemented by us. This whole space of wealth management and customer experience in that area is significantly transforming the way banking and banks are going towards their more value-adding segments or more profitable segments. We have spoken in the past about the work that we have done for a leading wealth manager in the U.S., where we have been able to put analytics on their core platform where TCS BaNCS is an integral part, and then expose that to a robo-advisory kind of a front-end, so that we can significantly increase the personalized attention that they're able to provide, even for lower-value portfolios across their customer chains.
We've seen multiple places where customer experience goes far beyond just personalized marketing campaigns or an engaging, well-designed user interface. It is the aggregate outcome of all these organizational processes, systems, the underlying infrastructure, all of them being made to act in tandem to make the interaction frictionless and pleasant that leaves the customer feeling valued. This is the space that TCS has very strongly started to occupy, and in fact, in many industries, dominate. The customer journey begins with digital marketing, progresses to the point of sale, continues long after the sale. In some industries, such as financial services, the relationship with the customer lasts for years after the sale has been first consummated. In today's hyper-competitive world, these relationships cannot be taken for granted.
We are helping enterprises look at that customer journey in its entirety and redesign the processes and supporting systems for speed and simplicity, incorporating greater intelligence for more personalization and responsiveness. Very often, the manner in which the enterprises interact with the customers get hamstrung by the complexity and inflexibility of the systems and processes, which is the same theme that we have spoken in the past, that we need to look at it end-to-end as businesses grow. Often, by acquiring other businesses, their estate becomes more complex with multiple systems doing the same functionality. Customer data becomes siloed, so even fairly simplistic front-end design becomes complex to deploy. We need to think about it holistically before we just turn around and design a full front-end.
We're partnering with many such organizations to carry out core transformations, holistically reimagining their operations by applying our machine-first approach across the entire stack, automating business processes and IT operations, simplifying legacy application stacks, eliminating redundancies, and re-architecting with modern cloud-native structures. In our press release, we have shared a quote from the CEO of Nielsen, David Calhoun, where he spoke about how MFDM is a core part of the transformation that they themselves are going through. There are multiple instances where, whether it is the machine-first philosophy that we are proposing or Ignio as a transformation platform, is being used far beyond automation and productivity to really increase quality and customer experience. It's a very integral set of tools and capabilities that we're able to bring to bear in it.
Yesterday, we have shared with you some details of the work that we're doing for Scottish Widows, which is one of the platform deals that we had spoken about. For them, we consolidated their customer data from multiple systems onto our life and pension policy administration platform. Drastically simplified their operating environment and eliminated 80% of the operating processes. Customer service representatives are now empowered to respond to queries by readily pulling data from the terminal, helping them achieve 80% first contact resolution rate. Whether it is platforms, whether it is transformation I think, or it is design, the ability to participate across this entire chain is what we are seeing as the new competitive edge and which we are trying to bring more and more to it.
We want to talk about what we're seeing in machine-first and to contextualize that in terms of beyond automation, how it is a strategic lever that we are seeing. Let me conclude by saying that we have had fairly strong deal closure this quarter, and our total value of contracts signed this quarter in Q1 of FY 2020 is INR 5.7 billion. This compares to INR 4.9 billion in Q1 of FY 2019. Of this, INR 2.8 billion was in North America. BFSI contributed to INR 2 billion and retail was a shade over INR 1 billion. The deal pipeline continues to be very healthy and well distributed across verticals and geographies.
That is what is giving us the confidence that we are participating in these growth and transformation initiatives of our customers and staying relevant to those customers as we continue to gain market share across most of the theaters that we operate in. With that, I want to open the line to questions.
Thank you very much, sir. Ladies and gentlemen, we will now begin the question and answer session. Anyone who wishes to ask a question may press star and one on your touchtone telephone. If you wish to remove yourself from the question queue, you may please 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. Thank you. The first question is from the line of Diviya Nagarajan from UBS. Please go ahead.
Hi, thanks for taking my question. Two questions here. Firstly, I'm trying to reconcile the accelerated hiring to the slight moderation that you have in your revenue outlook that you're now trying to maintain double-digit versus expecting a slight acceleration earlier. That's my first question. Once we've done that, I'll go to my second, please.
Diviya, it's a reflection of the medium-term demand outlook that we see. Again, as I said, the fact that we are participating in the transformation journeys of our customers, staying relevant, gaining market share. We are very excited about bringing on board the talent, which is in line with our philosophy that we want to continuously emphasize homegrown talent and want to make sure that we have the capacity up and trained and ready as we see the demand unfolding. In fact, to put it in perspective, the entire 30,000 offers that we made, we'll have to wait and see what the joining ratios come out to be. We expect to bring them on board in the first two quarters itself.
That will allow us, and we are going through a fairly reimagined process both on the hiring as well as on the initial training program, significantly leveraging our digital infrastructure to reimagine as I said, both the onboarding as well as the initial training. Overall, it's a much larger strategic shift that we are doing in the way we go about acquiring talent and in the way we start to integrate that deeper inside our business units. I don't think we should read too much into the quarterly elements of it. It is more the strategic nature of it that is of greater interest to us.
Got that. My second question is a follow-up to the first part of the first question really. Typically, the first quarter tends to be sequentially the strongest quarter for you as we've seen in the last few years. Year-over-year comps also start getting tougher as the year progresses because we had a nice ramp up as the year progressed in FY 2019. What criteria are we really looking at to maintain this double-digit growth rate? Assuming that some of the softness that you've seen in the sectors that you've already called out continues, is there a risk then that double-digit number then doesn't really materialize this year?
We'll have to really wait and see how Q2 plans out. If you were to ask me from a short to medium-term perspective, we don't necessarily see anything new out there. The weakness that we had spoken about in the beginning of this quarter at the last call, that has actually materialized, and whether it gains momentum or whether we are able to ride it out, we'll have to wait and see. Q2 is going to be an important quarter to be able to answer that question. Today, we don't have anything incremental to add to what we have already shared.
Are you saying that Q2 could see a different seasonality this year than we've seen in the past? Is that how we should expect things to play out or-
No, Diviya. I'm saying that-
Should we push past it?
I'm saying that if Q2 comes in strong as typically Q2 does, then we would be well set for the double-digit trajectory. Otherwise, we are pushing it forward into H2, which is never a comfortable space. We'll have to wait and see how Q2 pans out.
Fair enough. I'll come for follow-up later if there's time. Thank you.
Thank you. The next question is from the line of Sandeep Shah from CGS-CIMB. Please go ahead.
Thanks for the opportunity. Just wanted to ask the growth which has come in this quarter, and when you were discussing at last time during Q4 result and at the start of the quarter, any change versus the growth which has panned out? Just, Rajesh, wanted to know that.
It is softer than what we had expected at the start of the quarter. The areas of strength per se are similar. We were expecting Europe and U.K. to continue to do well, life sciences to do well. The weakness in the BFSI sector has been more pronounced, though we had called it out at that time, it has been a bit more pronounced. In retail, we have seen a bit of a slowdown, which we think we should be able to recover or that it is more a quarter issue and therefore we think that will recover next quarter. It goes back to what I commented on the earlier question, that Q2 is an important quarter and we'll have to wait to see how that pans out before we make any further comments.
Okay. Rajesh, I think in the television interview, we said earlier we were mentioning U.S.-centric capital markets, we are now also saying Europe-based banking. Is it something new headwind or this was already been expected earlier?
We said European banks and capital markets. In U.S., we said capital banks in the capital market side and Europe we said generally banks. No change to what we. In fact, that is the same thing that we said in the beginning of last quarter also or at the beginning of this quarter.
Okay. Just some of your global peers are now able to command a pricing power because of these scaled digital offerings. Do you believe that time has come for all the large players like you and the other global peers, where pricing power will go more on a positive side because of the scaling up of the digital, and that could be a tailwind to the margin which is available going forward?
I don't want to comment about other players. We are focused on maintaining industry-leading profitability and growth. On both those metrics, we have a fairly decent position. I think that is the final competitive metric that you want to look at. The rest of it, we don't want to comment on.
Okay. Just last, bookkeeping. Can you share some color in terms of the lease accounting impact at the EBIT level as well as on the balance sheet? What could be the reason for the subcontracting cost going up and that could be a new normal going forward?
Lease accounting, Ramki shared earlier in the interview that it is about INR 100 crores. In fact, slightly below that. On the subcontracting cost, it has been on that trajectory for quite some time. It is a reflection of the increasingly tight supply situation in our core market. As I had mentioned in the past, our decision to participate aggressively in capturing demand and to sort out the delivery model as more and more clarity emerges around it.
Okay, got it. If I have more, we will come in follow-up. Thanks, and all the best.
Thank you. The next question is from the line of Ankur Rudra from CLSA. Please go ahead.
Thank you. First question, Rajesh, you referred to tough comps for the first quarter on a YY basis. Perhaps some of it was the large platform deals which are now anniversarying. How do you feel about that as you go further into the year, particularly in the context of, I think, relatively good, a very strong TCV that continues in this quarter, the customer conversations you've had so far and in the context of your focus on defending double-digit growth?
Ankur, demand outlook and overall competitiveness is very strong. I'm as confident today as we were even two, three quarters back when we were speaking about the revival that we were talking about. Confidence from a medium to long-term perspective is high. Short-term volatility, as I said, I would rather reserve my comments till Q2 end before making any commentary. Back to the first question that was asked, we are gearing ourselves for the demand that we see out there. We are setting up our capacity and setting our strategy on that basis. No change to that.
Okay. Maybe on a somewhat related, you highlighted a lot of examples of how you're winning more larger digital scale projects. What's been the progress on another dimension you've referred to in the past where your interest is to expand your addressable market beyond just the IT spend as a result of greater digital pervasiveness and technology? Maybe if you can comment in terms of projects, verticals, or geographies.
Absolutely. That has now become an integral part of our KPI across our entire sales team. We're systematically building out on that. I don't have offhand numbers to share with you, but we will start probably breaking that out for you. We'll work on it and then break it out. Let me anecdotally tell you that we're making very strong progress in this space. If you take areas like banking. We're moving more and more into both the CFO space as well as the CRO space, the Chief Risk Officer space. Compliance is also a big component of what we are doing. In other industries, the CMO space, the marketing side of it is nicely building up. Marketing, our approach to it is twofold.
On one side, we want to capture the front-end design business, leveraging the investment that we made in W12 and the build-out that we did on TCS Interactive. We also see a huge opportunity to bring a more engineering-oriented thinking to the entire marketing operations space, where there is significant amount of leverage that we believe the technology can play in cleaning up this space. Think about it that to densify the creative to one end of the spectrum and to more platformize and technology-enable the middle and the downstream aspects of marketing operations. That we see a huge benefit. In life sciences and pharma, we are systematically going into the R&D space. We were in the pharmacovigilance and the compliance and reporting part. Now we are going into the R&D and the discovery part of it.
Our ADD platform is acting as a door opener, pure services in that space is also opening up. We have invested in creating capabilities on wet labs and moving more and more into a space which is very heterogeneous and very inefficient. We see huge opportunities to clean up and transform those kind of businesses. Pretty much across the board, we are seeing a steady expansion away from the CIO stack and moving across different functions. We will start organizing the data and start sharing, maybe initially individual data points like we did, and then later on a more systematic way.
Thank you. Appreciate the color. Just one last quick follow-up, if I can. Obviously, as the business rotates into digital significantly quickly and these new initiatives, would there be any upward or downward bias on margins as a result of this? Thank you.
Difficult to say. Our focus is to try and maintain the margins by ensuring that our product portfolio reflects what the cutting edge of solution sets that our customers demand, and appropriately have a good mix of it. Both pricing and margin defense is our strategy rather than margin expansion. The volatility that we see coming out of the currency, that is something that we are keeping a watch on. As I said that our business model assumes a certain amount of depreciation to offset the differential inflation. That's something that we are keeping track of. We are slowly converging our cost structure to better reflect inflation in the markets that we operate in. That also kind of negates some of it over a medium term. Those are initiatives that will take time to play out.
Appreciate the call, best of luck.
Thank you. The next question is from the line of Apurva Prasad from HDFC Securities. Please go ahead.
Thanks for taking my question. My question is on the digital piece. That's been scaling pretty impressively, substantially over the past few years. Do you think that scale can be a deterrent here? Just the size of it, reaching $7 billion. Do you think these kind of growth rates may not be sustainable, despite the fact that we're getting a lot more into end-to-end transformation?
This is a question that we have addressed multiple times in the past. It's a question of how do we design solutions that actually leverage the scale as a strategic asset, rather than organize ourselves in a dysfunctional manner where scale becomes a liability. We have been very focused on this dimension. What you said about end-to-end, that is a classic way of how the scale across and the scope of capabilities becomes significantly a differentiator for us and a great value add for our customers.
More and more our customers are looking to us as innovation catalysts, there the scale becomes a huge strategic benefit because what they see in us is a full spectrum of capabilities that they are interested in today and things that they might not be interested in, but they want to get early visibility on, so that they can think about it and maybe make small point experimentation on it. We are in fact further doubling down on it by significantly integrating this with our co-innovation partner ecosystem so that we act as a gateway for our customers, that once they're onboarded onto the TCS ecosystem, they have seamless access to both the innovation that's happening inside TCS in our CTO labs, in our industry labs, and also the innovation that is happening in our partner ecosystem.
We see this as a network effect and an ecosystem effect where incremental scale and incremental participation becomes exponentially more valuable for all participants inside the network.
Right. Thanks. Just to follow up on the margins where you talked about, how should we look at it more on a constant currency basis? There obviously will be currency headwinds there with the tech supply crunch on-site and subcontracting actually going up. How should that aspect be seen?
A good challenge from an analytical perspective, because when you think about constant currency, the currency should be held constant both on the revenue side as well as on the cost side. The cost bakes in the inflation impact, and if you were to remove that inflation and look at it, yes, that would be a good way, but I don't think anybody has that kind of level of data, neither are we hairsplitting to figure that out. When we give salary hikes, a salary hike is a reflection of inflation in different markets, and that differential inflation is reflected in the currency movements or the expected currency movements in the various economic models that we look at. I think constant currency margins is a artificial construct and something that we should have abandoned long back, but high time that we move away from it.
Sure. Thanks and all the best, Rajesh.
Thank you. The next question is from the line of Ravi Menon from Elara Securities. Please go ahead. Ravi Menon, your line is unmuted. You may go ahead with your question, please.
Hello. Hi. Thank you for . One of the things that you mentioned is that the hiring of freshers has pulled in a little bit due to, one, your ability to train them in a different-
Oh, excuse me. This is the operator. We unable to hear you clearly and its voice is breaking up a bit. Can you please check?
Hello. Any better?
Yes, better, sir. Thank you.
Yeah. One small thing. You mentioned that the fresher hiring has pulled in a little bit. One, you mentioned is due to the ability to hire these trainees differently using the digital inquiry for training. Second, you said that it's also due to change in the demand pattern or being prepared for that. Could you just elaborate a little bit on this?
Ravi, let me make a guess on what you were asking, because it was not very clear. You were asking us as to elaborate the training strategy because of which we are accelerating our hiring. Is that what it was?
That's right. Thank you.
It's really not about where we're coming from, is that we believe that our ability to absorb a much larger trainee inflow is significantly enhanced because of our shift from physical training facilities to digitized training facilities, and being able to provide this training as a series of nano courses so that it can be integrated with people through their work cycle itself. We have significantly invested in reimagining our training infrastructure, and we've completely digitized it. Now that we can absorb a larger capacity, we are actually stressing the system and seeing what we can do. Once it is done, in combination with the TMQT infrastructure that we have set up, we will be able to move even fresher hiring into an on-demand basis, and we'll be able to seamlessly integrate it.
It is part of a larger transformation that we are going through, and we are really putting it to test by accelerating the trainee onboarding.
Great. Does this also give you, I'd say, greater capacity, say, in the medium term? Is that what you're building towards? Is this because of better visibility in the medium term that you're pulling in the training hiring?
Absolutely. As I've said that our participation and deal flow and our medium-term outlook is very positive, and therefore, we believe that this talent we will definitely be able to consume. A few quarters here or there were timing impact. We think that we have the cushion in our profitability to be able to strategically invest in creating this capacity as well as in the transformation that we are attempting.
Great. One last question, if I may. You said that there was some headway Is there any other-
Excuse me. This is the operator. Mr. Menon, your line is again unclear. Can you please check?
Sorry. My phone seems to be having an issue. I'll try to speak up a little bit and hopefully that's audible. Just checking if anything on the deals that you won. Is there anything that ran a little slower or got pushed out compared to what you were expecting at the beginning of the quarter?
No, Ravi. There's nothing that in terms of existing deals that I would say that has been pushed out or slower. Nothing specific to comment on.
All right. Great. Thank you. Best luck.
Thanks.
Thank you. The next question is from the line of Pankaj Kapoor from JM Financial. Please go ahead.
Yeah. Hi. Thanks for the opportunity. I had a couple of questions on the platform business of yours, which appears to be doing very well. First, if you can give me some sense of the scale of the business currently and maybe how this would have grown in the last year. Second, any color if you can give in terms of how much of our order booking or the deal pipeline would be constituted by such platform-led deals?
Let me answer the second part . The order booking in the last four quarters from platforms has not been there. Actually, we didn't declare our order booking in Q4, but it was Q4 of last year that the large platform deals came in. The TCV that we have reported through this quarter is pretty much more BAU business rather than one-off deals. What was the first question that you had?
Yes. My first question was in terms of the current scale of the business, since it's part of the regional market, I guess. If you can give some sense in terms of what could be the revenue contribution from the platform business currently is, and how this would have probably scaled up in the last year or couple of years.
We are not breaking that out.
Okay. Obviously, it seems to be concentrated largely on the insurance vertical as of now. Any thoughts or any investment that you are making in terms of expanding it to other verticals, maybe retail or any other parts of the banking?
No, in fact, in banking. Yes.
Hi, Pankaj. This is NGS here. In addition to the insurance platform, our foray into the banking cloud, covering the retail and wealth management part is doing well, and we are on track to have launched it in the U.S. The first customer has already been onboarded and has gone live with it, and we see a good pipeline to expand that U.S. banking cloud. We've already launched, about 18 months ago, the same platform in the banking cloud in the U.K. We are looking at other opportunities in the banking space. The third platform that we are actively promoting to set it up as an utility is the capital market side. Securities back office is an area of focus for us, and that includes asset servicing.
That's something that, look, while we have a very huge customer base, all of them have implemented the platform on the on-premise model. We are actively working with them to see how we can move them into a platform model as they come up for the next phase of renewal, next phase of innovation.
It's also important to note that platforms doesn't automatically mean very large-scale projects only. Platform is a much broader strategy for us and the work that we're doing in life sciences and the work that is going on in telecom, each of these are platform offerings which are steadily gaining traction. There, the ticket size of individual transactions is much smaller. We are also seeing similar opportunities in security and in other spaces. The platform strategy for TCS is not concentrated only on large-ticket transactions, but it's a much wider strategy.
Got it. Thank you and all the best.
Thank you. The next question is from the line of Manik Taneja from Emkay Global. Please go ahead.
Hi. Thank you for the opportunity. I had a couple of questions around our performance in Europe. You've been quite positive on the business from the traction that you're seeing in that geography for quite some time. There have been a couple of acquisitions amongst the local European players, some consolidation in that geography in the last month or so. Just wanted to get your sense as to how you're reading that. The second question was around the possibility of pricing increases. About a quarter or two back, there was an expectation in the industry that there is a possibility of getting price increments from the customers. How do you see that going forward?
European market, we don't want to comment about competitor moves. We continue to see traction, and I think our market position is strengthening, and we continue to increase market share in almost all the countries that we are operating in in this theater. On pricing increase, like-to-like pricing increase in line with general inflation. Slowly in some select pockets we are seeing it, and we are focused on trying to achieve it. In our industry, productivity is a significant component of the value proposition. Our focus is to defend the portfolio realization level rather than a like-to-like realization level. It's a complex scenario. Our ability to cycle into newer service lines, which have a good price defense and to ensure portfolio-level realizations remain strong. We are quite happy with the progress that we're making in that space.
Sure. Thank you. Just to prod you a little bit further on the pricing increase. Is this a geography-related phenomena wherein certain you're seeing some pockets of improvements, or is it more broad-based improvement that you're seeing?
It's very client-specific and relationship-specific.
Sure. Thank you and all the best.
Thank you. The next question is from the line of Sudheer Guntupalli from Ambit Capital. Please go ahead.
Good evening, gentlemen. Thanks for the opportunity. Among the top U.S. banks, there seem to be an increasing talk about insourcing trends now. Almost all of them now want to position themselves as technology companies like, let's say, banks, which do most of the technology work in-house. Even some of the retail companies like The Home Depot, et cetera, have recently ramped up their technology headcount by almost as high as 40% or so in some cases. We understand that insourcing trends also move in cycles. What is your take on this risk playing out at this point in time?
We addressed this multiple times in the past. Our stance on insourcing does not change. We believe that there is a role for location strategy for technology capabilities of clients, as well as there is a space for partnership strategy for technology supply chains for customers. These are two independent elements. Sometimes when certain shifts happen, there might be a short-term optimization, but this is a cycle that we've seen multiple times in the past. The optimal cycle is that these are two independent decisions and will work in parallel. I wouldn't say independent, but parallel decisions. As a competitive threat, we don't think this is a competitive threat.
Sure, sir. Regional markets witnessed a very strong growth during the quarter. This part of the portfolio may be more volatile than the rest. When we're talking about double-digit growth for the full year, what are our base case expectations on this piece?
The reason we broke that line item out separately was because of its nature of being much more volatile than the rest of the business. 85% of our business has a certain revenue characteristic. This 15% has a different characteristic. Beyond that, we are not going to give color in terms of giving you a line item-based forecast of what the growth looks like.
Sure, sir. That's it from my side. All the best for the rest of the year.
Thank you. The next question is from the line of Shashi Bushan from Axis Capital. Please go ahead.
Yeah. Thanks for taking my question. Did the quarter play out much weaker than we expected, both in terms of revenue growth and deal win?
As I said in the beginning, it definitely was softer than we expected on the revenue growth. On the deal wins, it has not been. Our actual deal wins have continued at pace.
Do you think we need to accelerate on deal win in order to achieve a double-digit growth?
We'll need to wait to see end of the year so that we see a couple of years of that data before we can comment on what would be ideal. It is unlikely that we would actually provide an answer to that question even in the future.
Okay. Thanks a lot, sir, and all the best.
Thank you. The next question is from the line of Dipesh Mehta from SBI CAP Securities. Please go ahead.
Thanks for the opportunity. Just on two vertical communication and manufacturing. We are seeing some revival in terms of growth trajectory. Can you provide some more detail about what you see outlook and what is driving it? Second question is about macroeconomic factor, whether any weakness or some kind of blurring in terms of visibility about near-term projection because client indecisiveness or some kind of delay, which you are seeing or you don't think any macro factors so far impacted your visibility about near-term future. Thank you.
On the communication side, we see strong growth in the media and information services space. Also this is actually one industry where Europe and U.K. are doing relatively stronger for us than North America. It's pretty much driven by strength coming out of the media and information services space and the participation that we're seeing there. On manufacturing, it is the other way around. U.S. manufacturing has been strong for some time, and it continues to be strong for us. Whereas Europe and U.K. are relatively softer. From a macro perspective, beyond what I shared earlier about banking, we don't have anything further to add to that.
Sir, just on manufacturing, if you can provide some more detail about which area is doing or showing more traction and where you are seeing some weakness.
Manufacturing, especially in the U.S., is strong across the board, both auto, non-auto, process, resources, all of it is doing very well. Really there's not much to call out between it. Whereas European auto obviously is much weaker, it is more a regional split rather than some vertical split.
Understood. Thank you.
Thank you. The next question is from the line of Sumit Jain from Goldman Sachs. Please go ahead.
Yeah, hi. Thanks for the opportunity. Firstly, wanted to understand about your platform business growth. I think you called out a pretty strong growth for each of your major platforms. When I look at your regional market and others' performance this quarter, it has been a bit soft. Wanted to understand which geographies within that is leading to that softness.
The reason again, as I said, we define that as a separate line so that we don't get into a Q-on-Q commentary on growth trajectory in that. That line is volatile, and we will only talk about it from a longer-term trend lines rather than short-term ups and downs. It is composite both platforms as well as more regional markets. All of them have characteristics of volatility in there.
Okay. Got it. Secondly, I think in your order book details you called out within 5.7 around $2 billion in BFSI. Do you include the platform-related orders getting to BFSI within this order book?
No. This order book is like the revenue line that we report as BFSI. It is coming from that same segment.
Which implies that your book-to-bill ratio is pretty strong in BFSI. Am I correct in reading that?
Yes, but trend lines on that are yet to be in. Yes, we can say that.
Okay. Got it. Thanks for the opportunity. Bye.
Thank you. Ladies and gentlemen, that was the last question of today. I now hand the conference over to the management for their closing comments. Over to you, sir.
Thank you, operator. To sum up, we had a good start to FY 2020, growing at 10.6% in constant currency and on all major industry verticals showing good growth. Digital is nearly a third of revenues now and continues to grow strongly at 42% year-on-year. The strong momentum is on account of the heavy focus on transforming the customer experience and our participation in these spends on account of our end-to-end capabilities here. On the margins, despite the impact of salary increments and currency volatility, our net margin stayed stable at 21.3% and we had an EPS growth of 13%. Our net hiring in Q1 was the highest in the last five years, and our employee retention continues to be the best in the industry. Demand for our services has been strong, driven by increasing investments in transforming customer experience.
We signed contracts totaling INR 5.7 billion in Q1, and that deal pipeline continues to be healthy. Thank you all for joining us on this call today, and have a great evening ahead.
Thank you, members of the management. On behalf of TCS, that concludes this conference call. Thank you for joining us and you may now disconnect your lines.