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. And there will be an opportunity for you to ask questions after the presentation concludes. Please note that this conference is being recorded. I now hand the conference over to Mr.
Kedar Shirali. Thank you and over to you, sir.
Thank you, Karna. Good evening and welcome everyone. Thank you for joining us today to discuss PCS' financial results for the Q1 of fiscal year 2020 ending June 30, 2019. This call is being webcast through our website and 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. Jainji Subramaniam, Chief Operating Officer.
Good evening.
Subhir Ramakrishnan, Chief Financial Officer. Hello, everyone. And Mr. Milan Larkar, Global Head, Human Resources.
Yes, hi, everyone.
Rajesh and Ramzi will give a brief overview of the company's performance followed by a Q and A session. As you are aware, we don't provide specific revenue or earnings guidance and 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. And once again, good evening to all of you. We've had a good start to the new fiscal year with Q1 revenues growing 10.6% year on year in constant currency and 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 Sanghi 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 are seeing. Over to you, Tarun.
Thank you, Rajesh. Let me go through the headline numbers. In the Q1 of FY 2020, our revenues grew 10.6 percent year on year on a constant currency basis. Reported revenue in INR was INR381,720,000,000 which is a YNY growth of 11.4 percent. In the USD terms, revenue was 5,485,000,000 dollars which is a year on year growth of 8.6%.
The demand for our services continue 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 4 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 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% and Technology and Services grew 7.8%. Geography wise, UK and Europe continued to outperform growing 16% 15% year on year respectively. Other markets also continued to grow well. North America grew 7.7%, 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. Igneo, our cognitive automation software continues to gain share in the market. Last month, Igneo celebrated its 4th 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 months. 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. Now largely driven by customer demand for deploying its cognitive capabilities in new business centric use cases, Igneo has expanded into intelligently transforming business operations. For a large retailer in North America, Equinio carries out the reconciliation of supplier incentives, streamlining their cash flows and freeing up their working capital.
CCS Banks, our flagship product suite in the financial services domain continues to create traction. Had 7 new wins and 5 go lives in Q1, covering core banking, insurance, anti money laundering and securities trading. The bank's 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 2 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.
Ports had 2 wins in Q1, 1 for a leading energy operator trading of renewable energy certificate and 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 the Saudi Bank. In the retail space, Optimaera, our AI powered merchandise optimization platform had 2 new wins in Q1, while Omnistore had one win. In Life Sciences, our advanced drug development platform, which is a comprehensive suite for digital transformation of drug development had 3 new wins, including 1 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 out 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 relationship, 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 4 more clients in the $100,000,000 plus band, bringing the total to 44, 3 more clients in the $50,000,000 bank, bringing the total to 100 13 clients in the $20,000,000 bank, bringing the total to 219 29 clients in the $10,000,000 bank bringing the total to 384 43 clients in the $5,000,000 bank bringing the total to 5.51 dollars 36 clients in the $1,000,000 band, taking the total to 1014. Let me now go over the financials. The annual salary increments we had affected across the board from April 1, 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 84,460,000,000 which is 103.9 percent of net income. Free cash flow was INR 75,540,000,000 and invested funds as of June 30 stood at INR489.03 billion. The Board has recommended an interim dividend of INR 5 per share. On the people front, we continue to invest in workforce transformation. As of June 30, we have trained over 300 and 15,000 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 5 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 initiative and focus on diversity and inclusiveness continue to heal good results. The proportion of women in the workforce rose further to 36.1%. The number of nationalities represented in our workforce 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, Ramkim. The
digital point
of our business is now almost $7,000,000,000 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 code auto 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. So 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 scale. 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 were 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 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 ports and instant booking and help them realize their bold vision of making the experience of booking a container as easy as booking a seat on an airline.
We'll appreciate that containers given the fact that it moves through a complex supply chain. The 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. Similarly, a GDS kind of an equivalent does not exist in the container shipping industry. So there is no common platform where this kind of transactions can be put together. So 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 you'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 adviser satisfaction rating across Private Banking. We have for this project, Deutsche Bank Spain received CellNet 2019 Model Wealth Manager Award for client experience for the new investment reporting experience designed and implemented by us. And 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 banks is an integral part and then expose that to a over 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 chain. So we're seeing 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.
And this is the space that TCS has very strongly started to occupy and in fact, 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. And in today's hypercompetitive world, these relationships cannot be taken for granted. We are helping enterprises look at their 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 in practice, the customer gets hamstrung by the complexity and the 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. And so even fairly simplistic front end design becomes complex to deploy. And we need to think about it holistically before we just turn around and design a full front end.
So we're partnering with many such organizations to carry out core transformation, holistically reimagining their operation by applying our machine first approach across the entire stack, automating business processes and IT operations and 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 Kuehne, where he spoke about how MSDN is a core part of the transformation that they themselves are going through. There are multiple instances where whether it is a machine first philosophy that we are proposing or Aegineo as a transformation platform is being used far beyond automation and productivity to really increase quality and customer experience. So it's a very integral set of tools and capabilities that we're able to bring to bear in it. Yesterday, we have put out we have shared with you the 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 the customer data from multiple systems onto our life and pension policy administration platform and 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 drumming helping the machine, 80% first contact resolution rate. So whether it is platforms, whether it is transformation or it is design, The ability to participate and 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 wanted 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 closer this quarter and our total value of contract signed this quarter in Q1 of FY 2020 is 5,700,000,000.
This compares to 4,900,000,000 in Q1 of FY 2019. And of this 2.8 1,000,000,000 was in North America. BFSI contributed to 2,000,000,000 and retail was a share over 1,000,000,000. So the deal pipeline continues to be very healthy and well distributed across verticals and geographies. And that is what is giving us the confidence that we are participating in these local 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. The first question is from the line of Vidyana 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've now tried 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.
This is a reflection of the medium term demand outlook that we see. And again, as I said, the fact that we are participating in the transformation journeys of our customers, staying relevant, gaining market share, So we are very excited about bringing onboard the talent. This 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 drink and ready as we see the demand unfolding. In fact, to put it in perspective, the entire 30,000 offers that we make, we'll have to wait and see what the joint ratios come out to be, but we expect to bring them on board in the 1st 2 quarters itself. So 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 the more the strategic nature of it that is of greater interest to us.
Got that. And my second question is a follow-up to the first part of the first question really. Typically, the Q1 tends to be sequentially the strongest quarter for you as we've seen in the last few years. And year over year comps also start getting tougher as the year progresses because we had a nice ramp up as the year progressed in fiscal 2019. So what criteria are we really looking at to maintain this double digit growth rate?
And 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 the double digit number then doesn't really materialize for this year?
We'll have to really wait and see how Q2 plan plans out. If you were to ask me from short to medium term perspective, we don't necessarily see anything new out there. But the weakness that we've spoken about in the beginning of this quarter, the last call, that has actually materialized. And whether it gains momentum or whether we're able to ride it out, we'll have to wait and see. Q2 is a big 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.
So 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, Priti, I'm saying that we are we would 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. So we'll have to wait and see how Q2 pans out.
The next question is from the line of Sandeep Shah from CGSE IMB. Please go ahead.
Yes, 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. But the areas of strength per se are similar. We were expecting Europe and UK to continue to do well, Life Sciences to do well. The weakness in the BFS 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 quarter issue and therefore we think that, that will recover next quarter. But 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. And Rajesh, I think in the television interview we said earlier we were mentioning U. S. Centric markets, but we are now also seeing Europe based banking. Is it something new headwind or this was already been expected earlier?
No, no. We said European Bank and Capital Markets. In U. S, we said Capital Markets and the Capital Markets 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. Okay. And just, Sakal, some of your global peers are now able to command the pricing power because of these scaled digital offerings. So 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 want to comment about other players. We are focused on maintaining industry leading profitability and growth. And on both those metrics, we see have a fairly decent position. I think that is the final competitive metric that you want to look at. Rest of it, we don't want to comment on.
Okay. And 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? And what could be the reason for the subcontracting costs going up and that could be a new normal going forward?
These accounting, Bhramki shared earlier in the interview that it's about INR 100 crores is the fact slightly below that. And on the subcontracting cost, it has been on that trajectory for quite some time. It's a reflection of the increasingly tight supply situation in our core market. And 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'll come and follow-up. Thanks and all the best.
Thank you. The next question is from the line of Ankur Rudra from CLSA. CLSA.
First question, Rajesh, you referred to tough comps for the Q1 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?
Amkut, demand outlook and overall competitiveness is very, very strong. So I'm as confident today as we were even 50 quarters back when we were speaking about the revival that we were talking about. So confidence from 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. But back to the first question that was asked, we are gearing ourselves for the demand that we see out there.
And we are setting up our capacity and setting our strategy on that basis, no change to that.
Okay. And 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 in the past where your interest is to expand your addressable market beyond just the IT spend as a result of greater digital pervasiveness in 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 and we're systematically reading out on that. I don't have offhand numbers to share with you, but we will start probably breaking that out for you. Let's we'll work on it and then back 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, marketing side of it is nicely building up. Marketing, our approach to it is 2 fold. On one side, we want to capture the front end design business, leveraging the investment that we've made into Bluestone and the build out that we did on which is attractive.
But 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 that technology can play in cleaning up this space. So think about it that to densify the creative to one end of the spectrum and to more platformized and technology enabled 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 and D space. So we were in the pharmacovigilance and the compliance and reporting part.
Now we are going into the R and D and the discovery part of it. Our ADD platform is acting as a door opener and then 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, very heterogeneous and very inefficient. So we see huge opportunities to clean up and transform those kind of businesses. So pretty much across the board, we are seeing steady expansion away from the CIO stack and moving across different functions.
But we'll have to 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 solutions that set our customers demand and appropriately have a good mix of it. So both pricing and margin difference is our strategy rather than margin expansion. The volatility that you see coming out of the currency, that is something that we are keeping a watch on. But as I said that our business model assumes a certain amount of depreciation to offset the differential inflation, but 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. So that also kind of negates some of it over a medium term. But those are initiatives that will take time to play out.
The next question is from the line of Apoorva Prasad from HDFC Securities. Please go ahead.
Thanks for taking my question. My question is on the digital piece. I mean, that's been scaling pretty impressively substantially over the past few years. So I mean, do you think that scale can be a deterrent here? I mean, just the size of it reaching 7,000,000,000.
Do you think this 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. So it's we have been very, very focused on this dimension. And 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 catalyst.
And there the scale becomes a huge strategic benefit because what they see in us is a full spectrum of capabilities that they're 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 point partners ecosystem so that we act as a gateway for our customers that once they are on boarded on to 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. So we see this as a network effect and an ecosystem effect where incremental scale and incremental participation becomes actually more valuable for all participants inside the network.
Thanks. And just a follow-up on the margins where you talked about, I mean, how should we look at it more on a constant currency basis? I mean, there obviously will be currency
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 hair splitting to figure that out. So when we give salary hikes, the 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. So I think constant currency margins is artificial construct and something that we should have abandoned long back, but high time that we move away from it.
Thank you. The next question is from the line of Ravi Manon from Elara Securities. Please go ahead. Ravi Menon, your line is unmuted. You may go ahead with your question, please.
Hello. Hi. Thank you, Suraj.
Raj, 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
Excuse me, this is the operator. So we are unable to hear you clearly and his voice is breaking up a bit. Can you please check?
Hello, Eddie better?
He is better, sir. Thank you.
So, you just mentioned that the
pressure hiring has pulled in
a little bit. 1, you mentioned is due to the ability to
hire new strategies differently using
the distillate inquiry for training? And secondly, you said that it's also the demand pattern of you to prepare for that. Could you just elaborate a little bit on this?
Let me kind of 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?
Right. Thank
you. It's really not about where we are coming from is that we believe that our ability to absorb a much larger training 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. So we have significantly invested in reimagining our training infrastructure and we have completely digitized it. So now that we can pay we can absorb a larger capacity, we are actually stressing the system and seeing what we can do. Once it is done, we'll be able to in combination with the TNQT infrastructure that we have set up, we will be able to move even pressure hiring into an on demand basis and we'll be able to seamlessly integrate it.
So it is part of a larger transformation that we are going through And we are really putting it to test by accelerating the 3 d onboarding.
Great. And 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. So as I've said, our participation and deal flow and our medium term outlook is very positive. And therefore, we believe that this talent we will be definitely be able to consume a few quarters here or there, we're kind of in fact. 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 Is there any other
Excuse me, this is the operator. Mr. Miller, 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 ramped a little slower or got pushed out that compared to what you were expecting at the beginning of the quarter?
No, Ravi. There's nothing that in terms of existing deals that we need to that I would say that has been pushed out or slower. So nothing specific to comment on. All right, great.
Thank you. Best of
luck. Thanks.
Thank you. The next question is from the line of Pankaj Kapoor from GM Financial. Please go ahead.
Yes, hi. Thanks for the opportunity. I had a couple of questions on the platform business of yours, which appears to be doing very well. So 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? And 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 4 quarters home platforms has not been there. So the you would actually, we didn't declare our order booking in Q4, but it was Q4 of last year that the large platform deals came in. So 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. So my first question was in terms of the current scale of
the business since it's part of
the regional market, I guess. So 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. Okay. And I mean, obviously, it seems to be concerned largely on the insurance vertical as of now. So any thoughts or any investment that you're making in terms of expanding it to other verticals, maybe retail or any other parts of the banking?
Pankaj, this is NGS here. So 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 United States. The first customer has already been on boarded and has gone live with it. And we see a good pipeline to expand
that U. S. Banking Cloud.
And we have already launched about 18 months ago the same platform, the banking cloud in the U. K. And we are looking at other opportunities in the banking space. The 3rd platform that we are actively promoting to set it up as a utility is the capital market side. Securities back office is an area of focus for us.
And that includes asset servicing. And 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. They're 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. So platform is more 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. But there, the ticket size of individual transactions is much smaller. And we are also seeing similar opportunities in security and in other spaces.
So 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 MK Global. Please go ahead.
Hi, thank you for the opportunity. I had a couple of questions around our performance in Europe. So 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 consolidation in that geography in the last month or so. So just wanted to get your sense as to how you're reading that?
And the second question was around the possibility of price increases about 3 to about a quarter or 2 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 know the comment about competitor moves. So 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 this theater. On pricing increase, like to like pricing increase were in line with general inflation. Slowly in some select pockets we are seeing it and we are focused on trying to achieve it. But in our industry, productivity is a significant component of the value proposition.
So our focus is to defend portfolio realization level rather than a like to like realization level. Whereas so it's a complex scenario. Our ability to cycle into newer service lines, which have a good price difference 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 broaden a little bit further on the pricing increase. Are there is this a geography related phenomena, wherein certain you're seeing some pockets of improvement or is it more broad based improvement that you're seeing?
It's very client specific and relationship specific.
Thank you and all the best.
Thank you. The next question is from the line of Sudhir Guntopalli from Ambit Capital. Please go ahead.
Good evening, gentlemen. Thanks for the opportunity. So among the top U. S. Banks, there seem to be an increasing talk about in sourcing trends now.
Almost all of them now want to position themselves as technology companies like, let's say, FAANGs, which do most of the technology work in house. Even some of the retail companies like Home Depot, etcetera, have recently ramped up their technology headcount by almost as high as 40% or so in some cases. So we understand that in sourcing trends also move in cycles. What is your take on this risk playing out at this point in time?
I 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 2 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. So the optimal cycle is that these are 2 independent decisions and will work in parallel. I wouldn't say independent, but parallel decisions. And as a competitive threat, we don't think this is a competitive threat.
Sure, sir. And regional markets witnessed a very strong growth during the quarter. So this part of the portfolio may be more volatile than the rest. When we are talking about double digit growth for the full year, what are our base case expectations on this piece?
So, Ufma, 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. So 85% of our business has a certain revenue characteristics, this 15% has a different characteristic. Beyond that, we are not going to give color in terms of giving you line item based forecast of what the growth looks like.
Sure. 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 Bhushan from AXIS Capital. Please go ahead.
Yes. 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 we 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.
And do you think we need to accelerate on deal win in order to achieve double digit growth?
We'll need to wait to see end of the year so that we see couple of years of that data before we can comment on what would be ideal. But 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 GAAP Securities.
Just on 2 vertical, communication and manufacturing, we are revival in terms of growth trajectory. So 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 projects and 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. And also, this is actually one industry where Europe and UK are doing relatively stronger for us than North America. But 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 is strong for some time and it continues to be strong for us, whereas Europe and UK are relatively softer. From a macro perspective, beyond what I shared earlier about banking, we don't have anything further to add to that.
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 U. S. Is strong across the board, both auto, non auto process resources. All of it is doing very well. So really there's not much to call out between it, whereas European auto obviously is much weaker.
And so it is more a regional split rather than subvertical split.
The next question is from the line of Sumit Jain from Goldman Sachs.
So firstly, I wanted to understand about your platform business growth. I think you called out a pretty strong growth for each of your major platforms. But when I look at your regional market and others performance this quarter, it has been a bit soft. So I wanted to understand like which geographies within that is leading to that softness?
The reason, again, as I said, we defined that as a separate line is 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. And it's a composition it's composite both platforms as well as the more regional markets. All of them have characteristics of volatility in there.
Okay, got it. And secondly, I think in your order book details you called out within $5,700,000,000 around $2,000,000,000 is in BFSI. So do you include the platform related orders getting to BFSI within this order book?
No. This order book is like to like revenue line that we report as BFSI. It is coming from that same sentiment.
So which implies that your book to bill ratio is pretty strong in BFSI. Am I correct in that reading that?
Yes. But trend lines on that are yet to be here, but our yes, you can say that.
Okay, got it. Thanks for the opportunity.
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 for 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 review focus on transforming the customer experience and our participation in these spend 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 5 years, and our employee retention continues to be the best in the Demand for our services has been strong, driven by increasing investments in transforming customer experience. We signed contracts totaling 5,700,000,000 in Q1, and that field pipeline continues to be healthy. Thank you all for joining us in 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.