Ladies and gentlemen, good day, and welcome to the Tech Mahindra Limited Q1 FY 'twenty two Earnings Conference Call. As a reminder, all participant lines will be in 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. C.
P. Gurnani, MD and CEO of Tech Mahindra, thank you and over to you, sir.
Good evening, good morning, and welcome to Tech Mahindra Q1 FY 'twenty two results. Thank you all for joining us today. Your company Continues to be focused on ESG, very focused on Employees and the families of our employees, your company also announced an appointment of wellness Sir, during the quarter, because as you know, the wave 2 in India did create a bit of a distress. And I can only say that the initiatives taken by HR, The Wellness Officer proved that we care for our customers, we care for our society, We care for our communities, but more importantly, Employee First and Employee Families First was practiced During our daily call attended by the whole leadership every morning and every evening [SPEAKER UNIDENTIFIED COMPANY REPRESENTATIVE:] To monitor the progress of our community initiatives and employee initiatives. So In a lot of ways, I can only say that we practiced And showed that we are a company with a purpose and we Practice what is not only good business, what business for good.
Sometimes During these trying moments, few awards touch you. So for our sustained efforts in putting Nature, people and planet at the heart of creating global value. We have received the HRH Prince of Wales inaugural Terracotta scene. And again, I want to compliment All our employees, leadership and people involved in the ESG framework for Continuing to demonstrate that a healthy company is A company which believes in healthy communities and CSR and ISR Are part of our RISE image. Coming back to the business, your company has done well.
We witnessed an all round performance and growth across all our key markets [SPEAKER SRINIVASAN VENKATAKRISHNAN:] And all the industry sectors. If you recall, I shared with you that The few matrices that we are monitoring is number of $50,000,000 accounts, The volume and value of the large deals, looking at revenue per account, I think that data discipline seems to be yielding results and our large deal events Continue to be robust. I promised some of you that it would be in the range of $800,000,000 to $1,000,000,000 I think we are within that range. Again, thank you for your support. Thank you.
We are clearing 4.1% quarter on quarter RMB384,000,000 for people in India, I mean, who believes in This terminology called lags and corona, I know Pravet Ananda has We've been pushing our leaders to cross INR 10,000 crores in 1 quarter. I think, Rohit, thank you for pushing us because we did drop 10,000 crores. And now this quarter, we are 10,198 crores. So yes, I'm going to 98 moments to save a little bit. And I think overall, I can say that Largest health care deal, largest BPS deal this quarter.
Health care deal is Clearly about hospital modernization or patient care modernization, VPL deal is for More digital integrated back office provisioning and fulfillment. So I can only Say that I'm happy that the investments that Tech Mahindra made over the last few quarters and let me again Remind each one of us here, 5 gs, customer experience management, Cloud, AI, data and analytics and IoT, these are the areas where we made investments. So all your capital Was deployed in acquiring companies in these spaces. And each of these acquisitions have now been well integrated. And you're seeing the results of these either acquisitions or setting up experience centers, setting up centers of excellence.
Like for example, 2 years ago, when we set up this Okam RAN Center of Excellence in Bangalore, I mean, there are a lot of people who questioned us, Will the radio network go in cloud? Will the radio network go digital? Will software defined network have taken some years to stay? And now we are seeing an increased traction because of some of those investments. I think the other highlight of This quarter is and I really consider them as highlights.
Number 1, we were High-tech verticals have been tracking for the last 5 quarters. And this time and we appointed and Invested in a management team that we had hired for the high-tech vertical. High-tech vertical for us is hyperscalers, product engineering companies And some of the unicorns, that item vertical is now shown as the highest growth. Over the last 5 quarters and this quarter particularly, They grew over 8%. So we will now be formally reporting to you every quarter on high-tech vertical.
The second part is, as I said, BPS Digital BPS customer experience side, We have continuously evolved. We have always shown you good results, but they have shown spectacular results this quarter. They are at 11% quarter on quarter. So thank you, Ritesh and Willi Keshu for your leadership. But definitely Well, pretty strong demand and a strong performance.
The third one is our platforms. Business Process as a Service and Platform is a new business unit and We do believe that it will become one of our high investment areas. One of the new platform launches that we have done is BeckOps dotai. Manish, when he speaks to all of you, will share why he is excited about NetOps dotai. But I can only say from the numbers part of the platform that registered 60 plus new wins.
So 58 more accounts, 60 plus new wins, highest INR PAT in Q1, Delivery excellence and overall growth working From all vectors, I think we are overall the company is in good shape. We are focused on Talent, we are focusing on talent supply chain. We are continuing to invest in M and A. Our capital allocation is doing well and Chair Vivek will share a lot more with you. Our partners ecosystem is becoming stronger Both with the traditional players and some of the new age companies and really means is that we are creating New solutions to our partner ecosystem.
Your company has also now realized that We need to be known for our thought leadership. We need to be known for our engineering excellence. We need to be known as one of the forward looking companies for this. We announced a partnership with 3 Day To launch a Global Chefs League. So your brand is now visible through The Global Test League, which is in tradition of things to come, is a digital format, digital Global Test League Played across various countries, we are advised by the 3 time grandmaster, Vishwanath Anand, And we are also blessed that we would be doing both online and offline.
So all I can say is Huge recognitions by partners, by the community, by the employees and An incredible work by the employees, company with the brokers, company doing extremely well on ESG. I would need another 20 minutes only to talk about all the recognitions we received in ESG. But Overall, very proud and grateful for an excellent quarter. Thank you all for your support. I will hand over [SPEAKER UNIDENTIFIED COMPANY REPRESENTATIVE:] So, Vincent, to take us through the breakup of the revenue and overall the quality of business that we have delivered.
Thank you, CP. Good evening to everyone. So Let me cover the company financials in little more details. Our first quarter revenue was JPY 1383,600,000, which is a sequential growth of 4.1%. And It includes tailwind currency tailwind of 20 bps.
So our constant currency revenue growth is 3.9%. What is more heartening is its broad based growth across all the verticals. Our CME Business, Communication Media Entertainment, grew by 3.2%, and that too Despite a seasonal decline in Mobility Business, I mean, as you know, this is one of the this is normally the Quarter 1 is the weakest quarter for us because of the salary increases as well as the mobility business Sealed nature. Okay. Our enterprise business has grown by about 4.7% with Key verticals like manufacturing, technology, high-tech driving the growth.
Our deal wins continue to be healthy. As CPL22, they are In the range of JPY 800,000,000 to JPY 1,000,000,000, our deal wins for the quarter were about JPY 815,000,000, And they are both in CME as well as enterprise vertical. I think 360,450 are the kind of rough numbers which are there for CME and enterprise vertical. Now and these included one of the largest deals that we have got in the Healthcare and also in the BPS segment. The EBIT for the quarter was $209,000,000 versus $219,000,000 in quarter 4.
And as I mentioned, this is one of I mean, seasonally, this is the weakest quarter for TechEm. EBIT margins have declined by about 130 basis points in Q1 versus Q4, Impacted by salary hike, impacted by Visa costs, Seasonal decline in Mobility Business and higher subcon cost, which is partially offset by operating leverage And operating efficiency, lower SG and A over the last quarter and Now this has resulted in EBIT margin of about 15.2% for the quarter. We Would look to improve the margins in the coming quarters, okay, because there are tailwinds which are expected More than offset the headwinds which will be there. The net profit after tax for the quarter was about $183,200,000 versus $147,700,000
in Q4.
It's primarily led by the higher other income of 34,400,000 Coming out of higher income on our self fund invested as well as ForEx gain, which we had in the quarter. And when we cut with Andy, one of the other reasons for the higher profit after tax was our tax rate for the quarter Was low was at about 24% and against 32% in Q4, Which had 2 one offs in terms of higher tax by our and our subsidiaries. So our tax rate, as we always said, will be in the region of about 24%, 26% in that range. In quarter While it was at least around the lower end of the rate we have indicated, So I mean just to give you more details, we had a ForEx gain of 14,500,000 In Q1, against a loss of about $8,600,000 in the quarter 4 and miscellaneous and interest income Higher by about $11,300,000 aided, as I said, by improved returns on investment of surplus fund, which improved from about 2.8% last quarter to about 4.5%. Our cash flow For the quarter was RMB172,400,000, which is 94% of the pack, quite in the Cash flow for the quarter.
Our DSOs, despite our sales growth, are just up by about one day From 92 to 93 days. We continue to follow the hedge policy, which we have. And our hedge book was about $2,200,000,000 about 10% higher than the last quarter. Based on the hedge accounting treatment, the mark to market gain that we have taken to the P and L on effective ranges is about $7,500,000 and we have carried about $23,000,000 of Market to market gain to results. I mean, just to summarize, we are back on strong growth track With strong focus on profitability and operational improvement, our endeavor will be With this remark, I will now open the floor for questions.
Thank you.
Thank you very much. We will now begin the question and answer session. Ladies and gentlemen, we will wait for a moment while the question queue assembles. The first question is from the line of Sandeep Agarwal from Eagle Voice. Please go ahead.
Yes. Hi, good evening. And I have a bad throat, so please excuse me for that. Siti, congrats on a very good execution to you and your team and particularly the utmost care which you have taken of your people. I wish you best of luck for your own health as well and for the execution.
Siti, I have just one question. I am just not able to comprehend one thing that With the kind of tailwind this industry is seeing for the first time in last maybe 2, 3 decades, I would say, And probably you have a bigger exposure to 5 gs, which may not show you immediately the same thing, but the kind of use cases which are happening in the world will give you that confidence. And the kind of execution you are doing, the kind of people you are having, the best team, one of the best team you are having, Why you are not providing us any easy way of modeling your growth and your Financial for the future, I know it is against your policy, but if demand has changed in more than a decade, if Pricing environment has changed for the first time in a decade. I think you should also be a little generous with the investors and you should Guide us something so that we can build something in our model And you should provide us some kind of guidance. If not quantitative, at least qualitatively that you will be on top end of the industry quartile or something like that, Very, very helpful.
And similarly on the margins, what is your aspirational range? Because with such a huge growth coming in and if your growth is going to be in double digit also, You will start now seeing operating leverage playing out significantly. So if you can throw some light on that? And secondly, How far we are, where we will see 3 gs picking up very aggressively sorry, 5 gs picking up very aggressively. So if you can help on that.
And thanks and best of luck for me to share once again.
Yes. Hey, Sandeep, this is Rohit. Thanks for the question. So as you know, Sandeep, we don't have a policy of giving guidance. But despite that, in the last earnings calls, CPF, clearly, given our goal and aspiration to get double digit organic, right, we've articulated that and a 15% EBIT that we'll go for.
Now if you look at the quarter result, We can break it out. So we're 4.1% overall growth, 3.9% constant currency. And with that and the deal wins, which we've announced on the back of $1,000,000,000 last quarter, $815,000,000 this quarter. The momentum and the qualitative commentary is available, right? I mean, we've seen broad based growth Across the sector, it's not isolated to one particular deal.
It's multiple deals, biggest ever in BPS, biggest ever in Healthcare. So the commentary from that perspective is available, right? And we do talk about the details around it. So that's Currently, where we are and given the 1Q and the momentum, including the deal pipeline that we see, we're pretty sure this trajectory will continue to Expand further, right? So that's on the revenue side.
And similarly, on the margin, as you rightly mentioned, we've executed 15.2% in 1Q. And with the revenue growth leverage, operating leverage, that's the tailwind that William indicated, We'll continue to drive our operational productivity that we've driven last year where we invested a lot in that. Including the leverage, we will be able to manage the headwinds that we see and continue to drive that upside as we move forward. Given the policy, we don't give guidance. We will continue with that, but we give enough qualitative commentary and audits that should help you and the peers, Okay.
That's all put in. On 5 gs, I like Manish to be invited there. Manish, can you give a little bit of context with Sandeep on 5 gs and our development there?
Absolutely. So Sandeep, thank you for that question and appreciate your kind words. There are 2 things, transparency in terms of our 5 gs strategy as well as consistency in terms of What we have said over the last few years on our perspective on 5 gs and why we are, a, Very positive about it. And at the same time, what exactly is our framework? So just to remind all of us, Our framework for 5 gs is that we will continue to do transformation work for 5 gs for the telcos, Both in terms of network as well as the digitalization that is needed from 5 gs, whether it is cloud or the systems underlying.
Number 2, we will do 5 gs for ecosystem. And number 3, we will do 5 gs for enterprises, Which is what you are referring to as use cases and you are right there are plenty of use cases emerging. So as far as our CMU business is concerned, I'm happy to say 2 things right now. 1, As our strategy has been that 5 gs is and our perspective has been that 5 gs is not about just network deployment, it is our overhaul From a complete transformation agreement at Telco, I think our strategy and our investments are playing out quite well, And we will continue to see the results of that as we continue to sign and scale these projects around 5 gs. I'm also very happy to report that 5 gs is pretty much now deeply integrated in every single telecom transformation project.
Just to make it even better, I believe that this year, almost 60% to 70% of our new signings Are going to be built around either integrating or enabling the 5 gs together, mind you, with a scaled adoption of the cloud architecture as well as driving the greater Intelligent into the network systems via analytics and data and data. So that I think is You've all been asking for a while and I'm very positive that this is the year of recommending In terms of as we go along, what we have seen in quarter 1 and as we continue to keep looking at our pipeline, The story is playing out. I must also remind that we've also been very clear about Not just what we will do within 5G, what we will not do. And we have said that we are not going to go for high volume, A very low margin business in many markets. So we remain very focused on that.
You all Clearly, right, we are very clear on our game plan and strategy there and we remain focused. Our 5 gs for enterprise These cases are getting fantastic response in the marketplace. However, that story still has to play out and it is still not ready for prime time for some time, because it will start getting it's more complex and it involves Not about the architectural changes, not just in the telco, but also on the enterprises side. And I'm reasonably sure As and when that story shapes up, we will continue to our company will continue to remain at the forefront and from a leadership standpoint. I hope that helps.
And I'm sure it's necessary we can all go to an offline and give you more detail.
No, it is very, very helpful. Thanks for the detailed answer and I wish you best of luck for the future quarter. Thank you.
Thank you. The next question is from the line of Sandeep Shah from Equis Securities. Please go ahead.
Yes. Thanks for the opportunity. And it's pleasant to see that this kind of performance is ongoing, not just in sales for Marvel, it has The first question, Manish, again to you on the 5 gs. So I think last few quarters, we were saying that got a Discussion around 5 gs with the clients has started, maybe in terms of small size deals as a whole. But the way we look at believe the transcripts of the OEM on the telco side.
I think their order intake on the 5 gs equipment has also started improving. So is it fair to say, Manish, that by the year end, there could be larger deal conversions which can happen around 5 gs? And your order intake on the telecom and communications start inching up and may Pick up the page starting from FY 2023 as a whole, and this could be a growth accelerator starting from FY 2023. Some color will help as well.
So I will Sandeep again, thank you for that question and very insightful. I think it's important to recognize our role, our strategy and our positioning in the ecosystem. It's very clear. Our customers are very, very clear about that positioning. They know exactly what we stand for.
What we stand for is A more integrated holistic transformation. There really are 4 big levers there. It's guiding The telecom companies clearly recognize that for them to be able to generate a greater Momentum on both their enterprise and the consumer business, they need to continue to transform their customer experience. If you really see the acquisitions and the integrated story that we build is all directed towards The 5 gs and the domain in that space. It's not pure play network, but it is really a transformation around premium more digital in that space.
Moving leftwards, we are then talking about driving a greater product and product engineering around 5 gs. I'm happy to report that, that story has started shaping up quite well. Our engineering business, Our product development business, both for the ecosystem as well as for the telcos, is seeing Pretty good growth. There is a good solid demand. I think there are various conversations happening both on the device as well as on the software And equipment side in that area.
And number 3 is where we are talking about the new digital infra, which is Really what you are talking about, the OEM orders and the stuff. In that ecosystem, we have decided on what we will do. We will play very big on OSS orchestration, we are building IP in that space as well as we speak. We are integrating a lot of those systems. We are focusing on core.
For example, one of the very interesting case studies shaping up in the U. S. Is where we are helping a new operator Integrate their 5 gs architecture, test and certify that and that's a very scaled, very successful case study that we have For the last few years. And then of course, we continue to do integration around oral. But we are at the same time very clear that we are not going to get into the Low margin, high volume field type activity, except in some cases where it is very integrated as part of volumes.
So that is the third thing. And the 4th is a more inherent digital core, which includes Our transformation of their underlying systems as well. So all of those are absolutely at this point. I'm just giving you more detailed answer and some of this could be An expansion to the previous answer I gave Sandeep. We're clearly busy across all the four levers, all the four areas, Not just in like I said in the last two quarters in conversations, but starting to close those.
Like I said, 60% to 70 of all our new signings are already showing the trend that it will be in the transformation, in the 5 gs and transformation.
Yes. So I think, Manish, your discussion clearly implies that the deal activity on the 5 gs has started moving up. So can you believe that discussion may result into even a larger TCG wins for TUK Mahindra? Or you believe the TCG will be in a smaller in size, But maybe more consistent over next 2 to 3 years?
No, our large no, absolutely, I get it. Our larger deals We'll also be predominantly now transformed are already transformation oriented.
Okay. Okay. And you expect more to close on a consistent basis during power?
That absolutely is the intent, yes.
Okay, okay, okay. And just in terms of the Question about the guidance, Rohit. What we have said is the double digit organic growth as a whole. So now with the good start Where we are at closely lifting kind of a growth for the Q1 on our Y o Y. It looks like for the full year also achieving It seems kind of a growth may not be a big task including the inorganic as a whole.
So is it the right way of looking at it as a whole? And second, the question in terms of margins. So I think, yes, the delivery execution is good, but the attrition is a big challenge as a whole. There, For us, it's not only attrition is higher, but the utilization is at an all time figure, which could be counterproductive to each other as a way. So in that scenario, you believe Lifting the margin may not be an easy task going forward and there could be a possibility of second round of lease hikes You believe no attrition can be well managed and utilization can also be well managed going forward, I believe?
Yes. So, Sandeep. On the growth side first, so if you look at what we said earlier, we said organic double digit With 1Q results and the deal win momentum continue and the view we have in the pipeline, definitely From an aim and from a visibility perspective, we see an upside to that case, right? And that's where we're kind of looking at. And in the good part, as Manish mentioned, the results that you see on the Communication and Media and Entertainment Space is also rallying a similar growth trend, right, which is helping overall.
So we will continue to see an uptick there. And as we keep on Progressing in that journey. We'll keep on updating where we stand on that path, right? So that's kind of on the growth side. 2nd, on the margins.
While we've done 15.2% in the current quarter, We definitely see headwinds to the point you're trying to make, which will continue given the demand environment we're in. But we've very well articulated and discussed our action items to have tailwinds to offset that and Manage it efficiently. So we have incremental levers that will help us position ourselves in that journey as we move forward. And In our discussions and previous conversations also, it's a long term journey for us. It's not current quarter.
It's not next quarter. We will sequentially continue to work towards the productivity levers. Even if utilization is high, We have other measures that we have significant headroom to work with, and we will continue to deploy it. And example we've given is on our strategy change on M and A side where we're centralizing most of the back offices. So projects like those have been identified and well defined with ownership and outcomes that we're confident to deliver that tailwind as we move Including the operating leverage that we see with the volume growth.
So hence, that gives us the comfort on incremental Progress that we'll continue to make in this journey on margins, I think.
Yes. And just the last question on the other intake. With the demand picking up, Also, the telecom communication growth may be better because of 5 gs and the other transformation which Manish has spoken about. One can fairly say that our new business PCV business can be now approaching a new normal of mostly around maybe anywhere between $700,000,000 to $1,000,000,000 most of the quarters going forward? Or do you still believe it is too early to call out this trend as a whole?
Thanks and all the best.
So I think obviously, I won't again give a guidance, but what I can say is pipeline is good. The momentum is strong, as you heard from Manish, and you probably hear from other leaders as well, and you heard from CP. So that's reflective of how we look at the future. But the deal closure time lines are not vary from a time to time perspective. But Given the pipeline and reflection of that convertibility, we are confident that we will continue to be below the normal average that we had earlier.
So we see that trend playing out as we move forward.
Okay. Thanks and all the best.
Thanks, Sandeep.
Thank you. Next question is from the line of Pankaj Kapoor from CLSA. Please go ahead.
Yes. Hi. Thanks for the opportunity. Manish, Again, on 5 gs, sorry to persist. But just a clarification.
The way you describe 5 gs is now getting integrated in all the deals that you are seeing in Okay. Does this mean that the spend is not really as much incremental, but there's more replacement of existing dollars? And if
I just take that logic further, does it
mean that the reported growth in telecom obviously will accelerate, but may continue to lag the overall profit growth? You can clarify that, please.
Well, I think as far as the latter part of your question is concerned, I'm not sure I can Comment on that, I don't think that's how we look at anything. But John, primary question is The 5 gs is indeed an integral. 5 gs is one of 5 gs integrated 5 gs story is one of the transformation program that we have. And that continues to scale, that continues to be new set of capital expenditure projects That we are deriving the value from as far as the telcos are concerned. But I think you all know and we have been saying it very clearly that the telcos have not I've always been allocating their total CapEx as a percentage of their revenues.
It's not that they are spending 30% more than the previous years. Most of them predominantly have kept that line flat. And hence, there is a repurpose of that coming from what they were doing earlier to a few or 2 or 3 things, whether it Cloud, whether it is 5 gs network or for that matter, data transformation. And all of that is stitched together To direct a more intelligent network, which is built on a 5 gs port. That exactly is The strategy that we are mimicking, because that has been your company's key strength of aligning with how the telco strategies evolve.
So that's the strategic part of the answer. As far as the upsides are concerned, I think we've been very clearly saying that our Non-five gs revenues will continue to grow as well. Our legacy will continue to remain under challenge and We continue to replace that with new business. We'll be in a single digit growth area, but as the 5 gs revenue kicks in, we will start scaling Our revenues in 2 or double digit kind of a tragic trend. And we remain very positive on that.
So more than money or more down, I think we are very happy with the execution of our overall strategy at this point.
Understood. That's helpful. And my next question is on the technology vertical. If you can give some sense of how is the client concentration there? I mean, is it dominated by a few large accounts, very large accounts?
And in a sense, in terms of how sustainable is the growth? Thank
you. Yes. So maybe I'll start off and maybe hand over to Jagdish to add on, Pankaj. Just from a concentration Actually, first, I mean, simple answer is not highly concentrated. It's quite spread out.
So there's no concentration risk there. I think the biggest customer as a percentage of the total vertical would be probably 15% odd broadly, right? So I don't see that as an issue. And that engagement Journey with all those customers are gaining traction quarter over quarter, as CP mentioned, and we're seeing a lot of positive Progress there, which will continue to reap benefits, including all the pillar penetration. As you know that we have defined 5 core pillars from an offering perspective, We see that growth across these customers across those type pillars, not isolated to IT transformation.
It's across The pillars that we have. So that's a good story given its broad based book from an offering perspective, and it's highly Kind of broad in terms of customer orientation perspective as well. Jagdish, would you like to add anything on that?
Yes, sure Rohit. So I think the as Rohit said, it's not definitely client concentration is Not a challenge. We are quite broad based on that. As far as the growth is concerned, it's been driven by 3 areas, primarily, obviously, a lot of engagement with hyperscalers, an area of work with product engineering and the 3rd area being primarily Our investments and build in the areas of semiconductor and the way it's starting to play out, we see that as a critical driver. Others, I think We expect this growth momentum to continue because we think that the growth is going to be driven by revival across the globe and also know the pandemic and geopolitical impact of it, which is primarily focusing a lot of offshoring and also supply Related opportunities that are coming across in the high-tech area.
So we see all of that, but also the 5 pillars that Rohit talked about, Including our New Age EPS and Cloud and DNA and Digital Engineering driving the growth. Got it. Thank you and wish you all the best.
Thank you.
Thank you. The next question is from the line of Manik Taneja from GM Financial. Please go ahead.
Hi, thank you for the opportunity. While it is good to see the improvement in terms of order intake over the last The order book to bill ratio essentially seems to be much in a clear one time, while Matthew is at same time and below one time. Same thoughts, Jeff?
Yes. So I think we're going to look at what we report. So when we report the deal wins, We talk about greater than 5,000,000 deal wins, and we talk about incremental growth deal wins. We don't Talk about renewals here, right? So these are all incremental to the business perspective.
So the definition might vary, and hence, the correlation is not As easy to look, but maybe I'll give you a couple of more data points. So if you look at our reported wins In the 2 quarters, obviously, when we don't report less than $5,000,000 there again, we're seeing significant growth Broad based across the geos, which has significantly gone up versus what we've seen in the past. So hence, That's another interesting data piece that is coming out, which demonstrates the growth that we're seeing. But broadly, It's a comparison that you can't do given the definition difference across the board.
I also had a follow-up question related to margin. So if you could call out the bridge for the margin for the factors I'll just start in margins in the coming quarter and also help us understand the lower that you think will help us
Sure. So let's look at Maybe the headwinds first. So if you look at the challenges on what we see from a margin perspective, I would say We will have a supply side talent Situation that will continue in the industry, which we have a focused strategy, as articulated before, to kind of manage And we're ahead of the curve there. So that's kind of first area that we look at. 2nd, from a Challenge perspective is, as we move forward, continues to be travel coming back.
So if you look at this quarter as well, the travel is not yet back. Some of the regions are getting vaccination drives True, people have started moving around. If you look at the data from an aviation perspective, the takeoffs are almost At a 60% to 70% level of 2019. So hence, it's getting back to normalcy. So that will Get to customer travel, etcetera.
So that's another headwind that potentially will come as we move forward. And from a tailwind perspective, obviously, growth is positive for us. We're strong with all that we're seeing from a pipeline deal win perspective. So that gives us the operating leverage. That's a strong one.
From a Productivity standpoint, the journey we did on automation, the journey we've created digital assets helps us on that journey strongly On all the space, including IT and BPS, we will continue to digitize a lot of our operations that gives us the upside. And then if you look at our offshoring also, we've seen substantial growth there from year on year and even quarter over quarter perspective. And as compared to the industry, we still have headroom there, right? So that's another journey we continue. And I mentioned earlier on the G and A Centralization initiative for all the portfolio companies that we have, that's another one.
So I think we have significant actions there that we'll continue to work on and drive execution on, which gives us the view and the confidence that we as we Mentioned earlier, it's a long term journey, and we will continue to work on it and get better incrementally as we move forward. Thank you.
Next question is from the line of Gaurav Ratharian from Morgan Stanley. Please go ahead.
Hi. Congratulations on good performance. Two questions. Firstly, on margins, are you also Making any incremental interventions in the coming quarters, which is probably leading to margin outlook remaining unchanged despite a very strong performance in 1Q?
So again, from an outlook perspective, I'll reiterate that we're not giving an outlook. We had mentioned we will deliver 15% earlier, and I'm saying that we will have plus plus to that. We're looking at Continuing to drive better results as we move forward, but I'm not calling out a guidance there, right? So in that perspective, as I mentioned, the headwinds and the tailwinds, that gives us enough confidence on the progress that we'll make in that journey.
Okay. 2nd question is on the pipeline. You have had very, very significant deal wins in the last 2, 3 quarters. So after the deal means typically the pipeline sees a dip. So just trying to understand better how your pipeline looks versus last Few quarters.
And what really needs to change within the pipeline for you to be able to get to a double digit growth in the communication business? Is it because your win rates are already very strong, right? So I believe that things have to change on the pipeline side. So I'm just trying to get a better figure, Better color around your pipeline, especially in the communications business?
Sure. Maybe, Manish, your answer given it's more directed to comps, why don't you take it on the pipeline comp side?
No, no, absolutely. It's my pleasure. I think the thank you for that comment on the deal wins and we are very happy about the way the deals are Perfectly fine for the last few quarters. I'm happy to report that the pipeline continues to look very robust because both the Programs were running in parallel, the task of continuing to create proactive proposals and pipelines around our transformation At the same time, whatever yields that we're in the comment to continue to engage and ensure that the clients focus. So with the efforts and the investments that we have made, particularly in the last 2 or 3 quarters, In our client engagement, the programs that we've put together and categorizing our account relationships into Medias where we have a greater potential to get a tailwind, we continue to build the pipelines across all our theaters, Whether it is APJI, EMEA or Americas, Amel continues to evolve into a pretty healthy trend.
Okay. Any quantification around the pipeline versus last year or last couple of quarters that will be helpful? Thank you.
Yes. I think I would even give you better than that. I think overall, our absolute pipeline is Maybe at a long time high in comparison to last year or even before. But what is more important is, And I'm emphasizing on this word. I'm sure you'd appreciate it that our qualifications of that pipeline Has even further improved income companies become a little bit more smarter about What are the areas that we say 12% we don't.
Even that qualified thing which we are very clear that is aligned to the client strategy and our strategy, Even that overall trend is even better than the absolute number. So The percentage was I don't have the numbers off my of your hand, but you can provide to me.
Thank
you.
Thank you. The next question is from the line of Rishi from Nomura. Please go ahead.
Hi, thank you for taking my question and congratulations on a decent quarter. Just two questions, Just reiterating a little bit on the guidance, right? Given the quality of the deal pipeline or deal wins over the last few quarters, right, Stronger pipeline and stronger 2Q, 3Q eventually. What stops you from giving a more definitive guidance? And I think you also talked about 5 gs, which could be a year of reckoning, right?
So anything that is more like a caveat, which sort of stops us from giving a more detrimental guidance versus think last time you used to talk about double digit, more or less.
Yes, Harish. So it's more
of a policy that we don't Give guidance. And despite that, I think we've given an indication for this year when we started 1Q that we'll be Double digit organic. Now based on 1Q and what we see moving ahead, what I've indicated is we're seeing almost All verticals
being in
the double digit zone, right? So qualms, as Manish mentioned, That's moved from high single digit to double. And similarly, we see similar traction in all other verticals in the enterprise side. So hence, that's looking favorable. And we've also mentioned BPS, which had a stellar quarter, the visibility looks very positive, and we're looking at industry leading growth there.
So I think from a narrative standpoint, we are giving a Visibility of what we see in the future, given our policy of not giving hard guidance, we don't want to
do that. That's where we stand.
Okay. Fair enough. And just if you could provide us any color on the hiring plans here, both on-site offshore, that will be helpful. Sure,
Arunish. I'll invite Harish to take that question. Harish, who is our Chief People Officer.
Yes. Thanks. Thank you for asking that question. Clearly, we've stepped up our hiring engine In this quarter, not only by making sure that we have enough and more recruiters on our roles, but also We are very confident that We will hire significantly both of our lateral and As we would have heard earlier, CP said that our pressure intake is going to go up significantly. And You've seen what we've done in quarter 1, but we are going to significantly take it up in this year.
Is there a number that you're alluding to or?
Well, I would rather say that we would Follow the trend that we've done this quarter and if anything enhance it significantly.
Thank you. The next question is from the line of Surinder Goel from Citigroup. Please go ahead.
Yes. Hi, thanks and good evening
to everyone. So just wanted to understand There are
no one offs on margins that we should be aware of, right? And I was just looking at the margin for standalone and console and the margins come up a bit different And more return in nature.
Yes. Suren. So when we look at the P and L across the line, we do have plus and minus, Which kind of nets off. So at a net off level, we don't see significant one off that will give us Tailwind or headwind? So from a margin perspective, it's quite operational, right?
That's the way to look at it. But From certain line aspects we do have, but that doesn't drive the loan, is that?
Yes, yes. We have certain write offs of investment in subsidiaries. And obviously, that means There is a corresponding credit in the on the other side. So with the net, at a consolidated level, there are no write off. At a standalone level, there are certain write Okay.
So that's the difference you see in the margins of the year in standalone and console.
That's very clear. Thank you both. Thank you.
Thanks, Rohini.
Thank you. The next question is from the line of Rishi Jhunjhunwala from IIFL. Please go ahead.
Yes. Thanks for the opportunity. Just one question So, Just wanted to understand, has the denials of The weekly deals of those deals also gone up accordingly? Or is it more that the quarter has remained the same?
Sorry, there's a little bit of disturbance, but
let me articulate it what I got. Your question on deal wins value, which has gone up Significantly over the last few quarters to last two quarters. And is there any change in the tenure of these deals? Is that the question?
Correct.
No. From a deal tenure perspective and the way we're reporting, we don't see any meaningful or significant change here, And the average tenure continues to be the same.
Understood. And just a follow-up on the previous question, right, on the So, Greeti, profitability. So, you've talked about improving profitability in the portfolio I could also see apart from the difference between console and standalone, which We talked about this probably because of write offs, but also see that your minority interest for the first time in many years have actually gone into negative. So is it something which we can assume to be more sustainable going forward as well in terms of improvement
and profitability of the
portfolio companies or something which is both
So maybe subsidiary and console, the way to look at it is maybe not the right reflection of Portfolio company performance because a lot of the business that we drive through The portfolio company is through synergy and the value that we get on revenues they add The other entity. So if you look at entity to entity there, you won't get the right comparison. So hence, you have to look at the integrated portfolio company, which will be across the multiple entity stream, right? So Which will be across multiple entity stream, right? So hence, that's probably an indication, but that can drive wrong Answers also sometimes, right?
So while you're linking it this time and you're getting that answer, but generally, that might not flow through based on Actual operating results of portfolio companies.
So you're saying that it will not reflect a minority interest as well. I can understand Standard and consistent, so all that,
have we understood in minority?
Yes. So those are only legal entity performances, but there's a lot of businesses that those Entities will drive and enable sales across other Tech M entities, right, because that's the synergy case that you get Through that capability building, for example, I'll give you a couple of them. The acquisition we did on digital on us Stand alone, that entity might perform a particular financial, but the deal that helps win TechM on customer engagement that we already own, That really is part of the synergy case that we try to drive through that, and that's not going to be built in the legal entity, right? So it's not the complete picture that you get.
All right. Thank you.
Thank you. Ladies and gentlemen, due to time constraint, that was the last question. I now hand the conference over to Mr. Rohit Anand for closing comments. Over to you, sir.
Yes. Thank you. So again, I wanted to just Reiterate, thank you, all of you, for your support to the company. Your company has delivered Great quarter. 4.5 percent revenue, the highest we've seen in any quarter.
Highest INR PAT. EPS is highest as well at 15.3 And our deal wins are quite spread out between the verticals we have, including the geos, where we're seeing growth, which is broad based. So thanks to all of you for all the support and thanks for joining and for the questions. Look forward to the engagement. Thank you.
Thank you. Ladies and gentlemen, on behalf of Tech Mahindra Limited, that concludes this conference. Thank you all for joining us, and you may now disconnect your lines.