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Edited Transcript of BIRS.NS earnings conference call or presentation 6-Feb-21 2:30pm GMT

·51 min read

Q3 2021 Birlasoft Ltd Earnings Call Feb 8, 2021 (Thomson StreetEvents) -- Edited Transcript of Birlasoft Ltd earnings conference call or presentation Saturday, February 6, 2021 at 2:30:00pm GMT TEXT version of Transcript ================================================================================ Corporate Participants ================================================================================ * Chandrasekar Thyagarajan Birlasoft Limited - CFO * Dharmender Kapoor Birlasoft Limited - MD, CEO & Director * Vikas Jadhav Birlasoft Limited - Head of IR ================================================================================ Conference Call Participants ================================================================================ * Abhishek Shindadkar Elara Securities (India) Private Limited, Research Division - Research Analyst * Ashish Aggarwal Principal Mutual Funds - Senior Research Analyst * Baidik Sarkar Unifi Capital Pvt. Ltd. - Research Portfolio Manager * Dipesh Mehta * Hiten Jain Invesco Asset Management (India) Private Limited - Research Analyst * Ravi Menon * Rohit Balakrishnan * Sandip Kumar Agarwal Edelweiss Securities Ltd., Research Division - VP * Shradha Agrawal Asian Markets Securities Private Limited, Research Division - Analyst of IT and Textile * Vimal Gohil Union Asset Management Company Private Limited - Research Analyst ================================================================================ Presentation -------------------------------------------------------------------------------- Operator [1] -------------------------------------------------------------------------------- Ladies and gentlemen, good day, and welcome to Birlasoft Limited Q3 FY '21 Earnings Conference Call. (Operator Instructions) Please note that this conference is being recorded. I now hand the conference over to Mr. Vikas Jadhav. Thank you, and over to you, sir. -------------------------------------------------------------------------------- Vikas Jadhav, Birlasoft Limited - Head of IR [2] -------------------------------------------------------------------------------- So thanks, Evan. So good evening to all, and thank you for joining Birlasoft's Q3 earnings call discussion. Joining today, we have our full leadership. We have DK, Dharmender Kapoor, who is our CEO and MD; Chandrasekar Thyagarajan, Chandru Thyagarajan, our CFO; Roop Singh, our Chief Business Officer. We have SK, Shreeranganath Kulkarni, our Chief Delivery Officer; Arun Dinakar Rao, our Chief People Officer. So please note that anything that we say or refer to relating to the outlook for the future is a forward-looking statement and must be read in conjunction with the disclaimer in our investor update, which mentions the risks that the company faces. And you find this investor update on Birlasoft's website. And also, we are have filed it to the exchanges. With this, I now hand over the call to DK. Over to you, DK. -------------------------------------------------------------------------------- Dharmender Kapoor, Birlasoft Limited - MD, CEO & Director [3] -------------------------------------------------------------------------------- Thank you, Vikas. Good evening, and welcome to Birlasoft's Quarter 3 Financial Year '21 Earning Call. Thank you for joining us on this call on a late Saturday evening. Much appreciated. Hope you are staying safe and healthy, and I would like to wish a very happy, safe and rewarding new year 2021. We are glad to see achieving many milestones in our growth journey. In this quarter, we saw our EBITDA margin cross the 15% mark and stood at 16.4%. Our billed DSO continue to improve and stood at 57 days, which is the best till date. Improved margin, better collection and higher PAT has led to the improved cash generation, which has our cash and cash equivalent cross INR 1,000 crore mark. Our utilization is at highest level at 85.6% level. We are back on a growth trajectory with a 3.3% sequential dollar revenue growth and a 2.3% year-on-year growth. Quarter 3 growth was led by our top customers, with top 5, 10 and 20 registering a very good sequential growth of 6.5% to 5.3% and 5.5%, respectively. On a year-on-year basis, all the top 5, 10 and 20 customers grew by 20% each, which is very, very encouraging for us. In line with our strategy of pruning retail accounts, the active client count came down from 310 in quarter 2 to 295 and came down by 86 on year-on-year basis. The year-on-year growth in [active] top 20 customers was down 15% and was flat sequentially. Quarter 3, however, was slower than the other quarters for the wins. We secured net new deals of TCV $56 million in quarter 3, and the overall TCV win was of $109 million despite being a shorter quarter with many holidays and was a good quarter of Birlasoft overall. However, on the pipeline side, we are seeing a consistent growth despite client challenges relating to both CapEx and operating expenditure constraints. Our ability and desire to drive conversation with the clients proactively has helped both from an annuity as well as cross-selling basis. The constraints in the client expenditure has helped in generating additional pipeline, given the client's need to funnel their restrictive budget into secure and profitable revenue-generating opportunities. This has been evident in client journey relating to cost optimization, customer experience, cybersecurity and legacy modernization. Another noteworthy metric which is the peak of the revenue contribution from fixed price, fixed maturity business, while -- which stood at 57.7% in quarter 3 and is up 11% on a year-on-year basis. Mirroring this is our annuity revenue contribution, which now stand at 57%. Our aim is to take the annuity revenue to 75%, which will help us in better predictability of our revenue and of growth. We continue to be in ISG's Top 15 Sourcing Standout globally. Birlasoft had been featured in the Global ISG Index for 3x this fiscal year. Further, Birlasoft was recognized as India's Most Admired and Valuable Power Brand company for the year 2020 at the India Leadership Conclave & Awards 2020. Birlasoft also received the SABERA 2020 Award for its community-benefiting initiative called Project Shodhan, which was set up in 2017 with the aim of achieving 0 crop residual burning in the wheat bowl states, covering 61 villages and 53,000 acres of agricultural land. This is the third time in a row that Project Shodhan has been acknowledged and appreciated by the SABERA jury numbers, and we see this a small contribution from team Birlasoft towards making this world a better place to live. Let me provide some color and commentary to going forward industry outlook, keeping in mind our clients' technology spend and growth opportunities in next 1 year. The market has started showing certain improvement, and we see an unprecedented acceleration towards digital transformation led largely by cloud adoption. Birlasoft's software is made from strategic investments to strengthen our cloud and digital capabilities. For example, we have signed the strategic alliance with Microsoft in quarter 2. These investments are enabling us to provide the thought leadership and speed to help our customers in their digital journey. In the first 2 quarters itself, we have been able to close multiple transformative deals covering cloud migration, application modernization, workplace digitalization, et cetera. Likewise, we are investing with other cloud [IFEs] as well to provide our customers the best-fit solution. This year, the industry has clearly been heavily influenced by COVID-19. While in the early stages, the drive for digitalization were business resilience and continuity, however, now we see more of forward-looking and growth-oriented narratives. This has led to newer trends in the technology sector, too. For example, one of the key highlights in the cloud industry is the improving partnership caution between the ERP majors and public cloud IFEs . As you all know that we have a strong presence in the ERP, it is definitely helping us in a big way. This enables customers whose business run on large ERPs to harness the power of cloud, along with elasticity on cost base on-demand solutions. With our leadership position across ERP platforms such as JDE, Oracle, SAP and our standard capabilities and alliances on cloud platforms, Birlasoft is very well placed at helping our customers modernize their ERP. We are already executing multiple programs and deals on SAP on Azure, JDE on Azure, et cetera, and see this as a strong theme for Birlasoft for the next few quarters. Our growth strategy. We continue to focus on key objectives such as platform-based digital initiatives, cloud adoption and aggressive automation. Our growing relationship and partnership with platform providers is helping us structure transformational, multi-services and long-term deals. Our digital as well as emerging technologies continue to show uptick in growth and share of revenue. We continue deeper penetration in our top accounts to cross-sell and shift to increase annuity business. We continue to see positive traction in building and growing our pipeline by leveraging outcome-based deals and capabilities across verticals, new wins in our chosen area of focus both in defined micro verticals and select technology offerings. With this, I'll hand it over to Chandru, our CFO, for providing more color to our financials. Over to you, Chandru. -------------------------------------------------------------------------------- Chandrasekar Thyagarajan, Birlasoft Limited - CFO [4] -------------------------------------------------------------------------------- Thank you, DK. Good evening, good morning, everybody. I hope you're well. Let me give you some more detail on the numbers to relate to what DK just said. Our third quarter revenue was at $119.5 million. This is up 3.3% quarter-on-quarter and 2.3% year-over-year. We did have some cross-currency tailwind of about 30 basis points. And therefore, the revenue in constant currency was lower to that extent. Our Q3 EBITDA was at $19.6 million. This, again, is an improvement from the $16.1 million that we had in the previous quarter. That's -- and it's up 21.6% quarter-on-quarter and 30% year-on-year. Our EBITDA margins stood at 16.4%, like DK said, and that is a significant improvement both quarter-on-quarter and year-to-year. So we had a 247 basis point improvement quarter-on-quarter and 350 basis point improvement year-on-year. We have achieved the EBITDA margin of 16.4% 2 quarters ahead of what we have been saying. So that's good news for us. The improvement came from a few specific, targeted initiatives that we've taken. One, utilization, that went up from sub-84% in the second quarter to 85.6% in third quarter, and that was a growth of close to 200 basis points. Our subcontractor expenses has come down quarter-on-quarter, and we see this as a constant effort as the mobility internationally improves. We realized revenue from deals that were in transition in Q2, and you'll recall that we did talk about those deals in transition. Our ongoing G&A cost optimization initiatives have also borne fruit. Margin improvement has happened in spite of rupee depreciation of about 1.5% in Q3 versus the previous quarter. We also took the decision this past quarter to move to the new tax regime in India, and this has helped improve our effective tax rate from 32% as it was in the previous quarter to 29.5%. And that has helped in a small part to improve our PAT for the quarter as well. The profitable growth that we've seen, the cost optimization initiatives that we've made and the lower tax, have all helped in the PAT, which is at $13.1 million versus $9.3 million last quarter. And that's up 40.3% quarter-on-quarter and 28.3% year-to-year. We just spoke about our cash and cash equivalents crossing the INR 1,000 crore mark. We -- again, this has been a constant effort for us, ensuring that we are good on collections. Our improved profitability helped as well, and that has seen a INR 94 crore or a $14 million improvement on a quarter-on-quarter basis. It's up INR 325 crore or $402 million on a year-to-year basis. Or 60% -- about 60% of the cash is in -- invested in India, and that's helping us get some from other income as well. Our operating cash flow stood at about $27.5 million in this past quarter with a small CapEx spend in the quarter. And our net cash -- net free cash flow was about $26 million, which is 278% of our PAT. That explains the improved collection and DSO, which stood at 57 days, better 1 day quarter-on-quarter and 8 days on a year-on-year basis. Overall, I'm satisfied that we are progressing well on our key metrics, and we will continue to monitor them closely on an ongoing basis. With this, let me throw the floor open for questions. Thank you all. ================================================================================ Questions and Answers -------------------------------------------------------------------------------- Operator [1] -------------------------------------------------------------------------------- (Operator Instructions) The first question is from Baidik Sarkar from Unifi Capital. -------------------------------------------------------------------------------- Baidik Sarkar, Unifi Capital Pvt. Ltd. - Research Portfolio Manager [2] -------------------------------------------------------------------------------- DK, congrats on a great quarter. Much appreciated. My question is the cloud practices of your key SBUs across SAP, Oracle, Microsoft and other ERP majors have reported growth in excess of 20% Y-o-Y. And the guidance for multiple years ahead is in that range. But when do you think we will be in a position to mirror these growth rates now that you have directional lever of annuity that's beginning to fire as well? And an extension to that question, you've mentioned that your top 20 accounts grew 20%. So it looks like there's a tail that's falling off. How should we see this going forward? -------------------------------------------------------------------------------- Dharmender Kapoor, Birlasoft Limited - MD, CEO & Director [3] -------------------------------------------------------------------------------- Yes. Thank you, Baidik. No, absolutely, I think we are also seeing a good uptick in the cloud revenue. And more importantly, that there is a revenue of the deals that are moving ERP on the cloud. I think that combination has really started working well for us. Our partnership with the cloud platform providers, such as Microsoft, has started giving us a good leverage and good traction in the market. In fact, today, Microsoft, SAP and Birlasoft have a common GTM, in which we go to market together so that we can help our clients migrate their ERP, their SAP S/4 or the legacy ERP also onto the cloud. Similarly, we are looking at how do we have JDE platform ERP moving onto the cloud platform also. Then there are other opportunities where there are custom applications and legacy applications that need to be migrated to the cloud, and we have started working very well on that side also. So we also have started seeing a very good traction in the cloud already, and that definitely will be one clear goal for us to go and achieve significant growth in that. That was answer to your first question. Your second question, if you can repeat, please? -------------------------------------------------------------------------------- Baidik Sarkar, Unifi Capital Pvt. Ltd. - Research Portfolio Manager [4] -------------------------------------------------------------------------------- Sir, my second question was, you mentioned that your top 20 accounts -- I mean, your top accounts grew 20%. So it looks like there was a large scale that fell off. I'm just looking at your Y-o-Y growth rates. So how should we interpret that? And obviously, as an addendum to my first question, yes, so you gave an answer that the environment is looking good. But when do you think will you be in a position to mirror those growth rates? -------------------------------------------------------------------------------- Dharmender Kapoor, Birlasoft Limited - MD, CEO & Director [5] -------------------------------------------------------------------------------- So actually, with the top accounts growing very well for us, it's definitely a good news. That means our annuity revenue is growing. That means our cross-selling is working well, and our relationships are becoming much stronger with our strategic customers. On the other hand, we look at our tail, as I have mentioned that in a couple of calls before also, that we have had some amount of revenue coming from the commercial transactions with some of the customers where the revenue was very small, and the margin was either negative or close to 0, okay? And we have taken this call that we do not need to continue to focus on the accounts that are not having our strategic offering, at the same time, where we do not see growth coming in. So we took this call so that we are able to cut the tail so that we are completely focused on our strategic customers. And I think I'm absolutely very pleased with that progress because it is a harder decision for any management team when they have to cut the tail and shift their resources on to more strategic engagements. We have been able to do it in a consistent way without hurting our revenue, at the same time, while improving our profitability because there is no point working on nonstrategic engagements where you are bleeding for your profits. -------------------------------------------------------------------------------- Baidik Sarkar, Unifi Capital Pvt. Ltd. - Research Portfolio Manager [6] -------------------------------------------------------------------------------- That's helpful. On margins, the margin upgrade journey has been very sharp, especially given that the offshoring needle hasn't moved much for us. Is it fair to assume that we'll hit the 17% threshold sooner than expected? And how should we look at margins for the fiscal ahead? -------------------------------------------------------------------------------- Dharmender Kapoor, Birlasoft Limited - MD, CEO & Director [7] -------------------------------------------------------------------------------- So I think a larger portion of the margins that we are showing is very sustainable. I always maintain that we have to keep our margins 15% and above. I wanted to keep it more closer to 15% as we start planning the next financial year for the investments that we had to make going forward so that we can see higher growth in the market. So we will look at that. We continue to sustain our margins about 15%. And any additional margin that we get, we would also plan for investing with that for the higher growth. -------------------------------------------------------------------------------- Operator [8] -------------------------------------------------------------------------------- The next question is from the line of Sandip Agarwal from Edelweiss. -------------------------------------------------------------------------------- Sandip Kumar Agarwal, Edelweiss Securities Ltd., Research Division - VP [9] -------------------------------------------------------------------------------- DK, congrats on a good execution. So DK, I have a couple of questions. And I think Baidik already asked a lot of detail. But just wanted to know in this quarter numbers, let's say, we are not -- if we were not hitting the tail account cleanup, which is happening, what -- how superior would the growth have been? And second, how far we have come in that journey where we are basically cleaning up the very noncontributing type of accounts? And when do you think it will get over so that the next hit stops the overall growth? So that is number one. And number two, driven -- going by the order book which you have as of today, similar to your order book, and you obviously have a very good idea of, I mean, how much time it is executable, how much of it is executable in next year and next, next year, so what is your sense how -- where we can see our growth rate? I'm not asking for any quantitative data, but I'm asking for a direction. -------------------------------------------------------------------------------- Dharmender Kapoor, Birlasoft Limited - MD, CEO & Director [10] -------------------------------------------------------------------------------- Yes. Absolutely, I think, good questions, Sandip. On the tail sides, if I look at -- it is going to be very insignificant, maybe 100k, 200k. That's all. It's not significant that would have shifted the needle from the growth perspective. So they're not going to make too much of difference. At the same time, the way we have done is not cutting the tail by taking the impact. What we are doing is that we are cutting the tail after shifting our resources to more strategic engagements. Because at the end of it, every company has limited resources, okay? So we do not have to cut the tail and suffer in the process. What we look at is that all these strategic resources that are locked in those engagements that are our tail accounts, we shift them into strategic engagements so that we do not take too much of impact on the revenue side also. So I don't think that it will be anything worth mentioning as to how much we would have taken an impact by cutting the tail. In fact, it would have improved our profit definitely because we do not have to continue to bleed. At the same time, it will also hit us going forward to have a better pyramid and better span of control because once you have your resources in fewer engagements, that would mean that we can have far more effective pyramid in the organization. On -- coming to the order book, the second question, as I said that our annuity revenue now is at 67%, and this is what used to be 51% in the previous financial year when we began. And this financial year, when we started, we were at 60%. Today, if you look at, we are at 67%, I am expecting that we should be either 69% or 70% by the end of the financial year. And if that is the case, that would mean that we will have much better annuity revenue and order book for the next financial year. And that should be able to give us double-digit growth in the next financial year. -------------------------------------------------------------------------------- Operator [11] -------------------------------------------------------------------------------- The next question is from the line of Shradha from Asian Market Securities. -------------------------------------------------------------------------------- Shradha Agrawal, Asian Markets Securities Private Limited, Research Division - Analyst of IT and Textile [12] -------------------------------------------------------------------------------- Congratulations, DK, on a very strong quarter. Firstly, on the margins that -- you said that you're looking at sustainable margin above 15%. But when some costs come back when the work-from-home environment normalizes, do you expect we can still be able to sustain margins at the current level? -------------------------------------------------------------------------------- Dharmender Kapoor, Birlasoft Limited - MD, CEO & Director [13] -------------------------------------------------------------------------------- So Shradha, as we had given 16.4%, now I'm absolutely confident that we will continue to give more than 15% because we have factored in the increments as well as any travel coming back in the future. So we have already factored that in. We know that there is some more window and opportunity possible to grow the margin. At the same time, I know that some margin, we will have to sacrifice where we give the increments. But span of control in pyramid is one such opportunity on which we are already working on, and I definitely see that we will continue to deliver more than 15% going forward. -------------------------------------------------------------------------------- Shradha Agrawal, Asian Markets Securities Private Limited, Research Division - Analyst of IT and Textile [14] -------------------------------------------------------------------------------- Sure. That's helpful. And another question, sir, is of our deal wins have been a bit softer. I mean, I agree that we are coming off a very high base. But when we look at the pipeline, how do you see the pipeline emerging relative to last year? And how should we then look at the conversions going into next quarter as well as first half of next year? -------------------------------------------------------------------------------- Dharmender Kapoor, Birlasoft Limited - MD, CEO & Director [15] -------------------------------------------------------------------------------- Correct. I think -- while I know that $109 million wins in this quarter will look pale in front of what we did in quarter 2, that's the irony of doing 1 quarter very, very well and getting a lot of wins. But that's how life is. So I always said that even in the previous quarter, I said that while we have done $273 million wins, but if we continue to sustain our number of wins between $100 million to $150 million, I think we should be very happy. Also, we should note down that the quarter 3 is a very tricky quarter because most of our customers are creating their budgets. Therefore, budgets are already lower in the quarter 3 of us, and that is quarter 4 for them. So most of the budget, they have already consumed. At the same time, it is a shorter quarter because number of days are lesser. Third, it is also where clients would take up some furloughs. In this quarter, some of our customers took furloughs, okay. At the same time, the number of days were lesser. That definitely had some impact on our growth. But if you look at, it also has an impact from the perspective of how many deals can be closed. So I personally am very happy with $109 million worth of deals, and I continue to see that the pipeline is growing very well for us. As the new budget has started kicking in, in the quarter 4 for us, which is quarter 1 for most of our customers, that means they have a new budget, and the new opportunities are coming on the table. So we should see better quarters coming -- in the quarter 4 and thereafter. -------------------------------------------------------------------------------- Operator [16] -------------------------------------------------------------------------------- The next question is from the line of Abhishek Shindadkar from Elara Capital. -------------------------------------------------------------------------------- Abhishek Shindadkar, Elara Securities (India) Private Limited, Research Division - Research Analyst [17] -------------------------------------------------------------------------------- Congrats on the good execution. My first question is again regarding the -- you mentioned about furloughs. So did Q3 growth was as anticipated at the start of the quarter? Or given our manufacturing exposure, significant manufacturing exposure, were there any incremental furloughs that we had to go through? -------------------------------------------------------------------------------- Dharmender Kapoor, Birlasoft Limited - MD, CEO & Director [18] -------------------------------------------------------------------------------- Yes. Absolutely. I think you have absolutely asked the right question because manufacturing is the largest vertical for us, and they are the one who will generally take a furlough in the last 1 or 2 weeks. So we did anticipate. But in this quarter and in this financial year, due to COVID, the decision taken by the clients was much later in the quarter. Until the second week of December, we did not know if anybody is going to take a furlough. It was only in the third week they decided that the last week, they will take furlough. So some impact definitely was there on us for furlough, but I think that is something that we always factor in. In this quarter, it came a little later, but we always anticipate that some amount of furlough will always be there in the quarter 3. -------------------------------------------------------------------------------- Abhishek Shindadkar, Elara Securities (India) Private Limited, Research Division - Research Analyst [19] -------------------------------------------------------------------------------- That's helpful. Sir, what I'm also trying to get an answer is the growth rates across service lines and verticals in the context that we have almost dropped 86 accounts on a Y-o-Y basis and 15 accounts on a quarter-on-quarter basis. So it seems that, at least optically, it appears that growth is driven by other horizontal. But if you can give us a color as to what could have been the growth in the other service lines and verticals had we not dropped these number of accounts? So that could be useful. -------------------------------------------------------------------------------- Dharmender Kapoor, Birlasoft Limited - MD, CEO & Director [20] -------------------------------------------------------------------------------- So Abhishek, I don't think -- as I said that I don't think it will be significant if we will have to look at our tail and the revenue that would go away when we drop the tail. So it is insignificant in the last 3 quarters when we -- or in the last 4 quarters, if that has dropped by 86. It could have had impact of maybe $1 million or $2 million, maybe $2 million, okay? But we saved our sources and shifted those resources into the strategic engagements. We would have also secured a similar revenue in the other accounts also. So we are doing very careful analysis before we are taking that decision. Where we interact with the customer, we look at whether that service offering is -- should be for us or not. We also look at if there is an incremental project that we are going to win from the client or not. When we see that each of the answer is pointing us towards that there is not going to be any growth with that client, at that time, we take the decision. So we have a very strong analysis process in place, through which only we determine that. And that's the reason you would have not seen that while we started doing the analysis 3, 4 quarters back, we did not take a drastic decision. Every quarter, we have been taking 10 or 12 clients away from us, and we have been shifting those resources onto our strategic engagements. So I would say that it is insignificant. I don't think that we would have had any different growth percentage even if we were counting new wins with those accounts. However, when it comes to the profitability, I'm sure it would have impacted us if we would have continued working with those clients. -------------------------------------------------------------------------------- Abhishek Shindadkar, Elara Securities (India) Private Limited, Research Division - Research Analyst [21] -------------------------------------------------------------------------------- That is helpful. The reason I am trying to understand this is the increase in technical head count was not necessarily to replenish the employees lost because of dropping these accounts. So what you're trying to -- what you're saying is we have repurposed those employees and still, we have hired on a quarter-on-quarter basis. Is that a fair understanding? -------------------------------------------------------------------------------- Dharmender Kapoor, Birlasoft Limited - MD, CEO & Director [22] -------------------------------------------------------------------------------- Absolutely. Absolutely. We moved all the resources to our strategic engagements. And of course, we continue to hire from outside our group. -------------------------------------------------------------------------------- Abhishek Shindadkar, Elara Securities (India) Private Limited, Research Division - Research Analyst [23] -------------------------------------------------------------------------------- Okay. If I can ask maybe 1 or 2 data point questions? I think there is a mention of reclassification of revenue mix in the press release. I may have missed it. Can you just highlight what that reclassification was all about? -------------------------------------------------------------------------------- Dharmender Kapoor, Birlasoft Limited - MD, CEO & Director [24] -------------------------------------------------------------------------------- Yes. If you remember, I think this question came up in the last quarter as well, that our on-site revenue have suddenly increased, okay? We thought that it was because of one transition that was going on, but it baffled me actually that why it should be that case. We went back and looked at the data, and we found that there was a mistake in computing the way we calculate our on-site and offshore revenue. We counted in that quarter some of the revenue that is with the captive in India as on-site revenue, whereas that should have been an offshore revenue. It is not an on-site revenue because that work was being delivered in India in rupee terms. So we corrected that data for the previous quarter. Since that data item will be different from what we have already reported, we mentioned here that this has been reclassified. -------------------------------------------------------------------------------- Abhishek Shindadkar, Elara Securities (India) Private Limited, Research Division - Research Analyst [25] -------------------------------------------------------------------------------- That's helpful. And second, on the data point side is, what could we assume now for the tax rates for FY '22? -------------------------------------------------------------------------------- Dharmender Kapoor, Birlasoft Limited - MD, CEO & Director [26] -------------------------------------------------------------------------------- Now we will go with the next 2 tax regime, and I would ask and request Chandru if he can provide more color to the tax rates that will follow in the coming financial year. -------------------------------------------------------------------------------- Chandrasekar Thyagarajan, Birlasoft Limited - CFO [27] -------------------------------------------------------------------------------- Sure. The effective tax rate for FY '22 could range between 26% and 29% on a steady-state basis. I say 26% to 29% because it depends on the mix of margins coming from the various geographies outside of India. While we know if you have tax rates of 25.17%, there will be different tax rates coming from the other geographies. Between 26% to 29% is the range I can give you. -------------------------------------------------------------------------------- Abhishek Shindadkar, Elara Securities (India) Private Limited, Research Division - Research Analyst [28] -------------------------------------------------------------------------------- That's helpful. And just last before I go back to the queue, sir, you mentioned about moving workloads to the Azure platform. I -- given our strong SAP exposure, and we have been talking about Microsoft, and you mentioned in this call as well, can you just elaborate what conversations in terms of where we are playing mid-market, which market are you playing on? And what is the quantum of deals that are there in the pipeline? Any color on that could be helpful. -------------------------------------------------------------------------------- Dharmender Kapoor, Birlasoft Limited - MD, CEO & Director [29] -------------------------------------------------------------------------------- Thank you, Abhishek. The -- if you look at -- there is -- was a partnership already between SAP and Microsoft, where they have joined hands as to how can they migrate their clients, the SAP clients onto the Azure platform, and we joined that partnership. And now we're collectively working on securing these opportunities. So the deals are of varied size. Whenever there is a legacy modernization, the deals are coming, it is ranging from -- anywhere from $3 million, $4 million to $20 million deals. And it also depends on the clients that -- at what speed are they going to take it up. Because sometimes, the first and second deal is generally a smaller deal, followed by the larger deal because by that time, the client has got the confidence that they can actually move larger workloads onto the cloud because they started getting the confidence in doing that. During the COVID period, I believe the deal size are not as big as they can be. But as we come out of COVID, I think the deal sizes will increase because a lot of experimentation and smaller deals have been done by the client during this time because they do not want to take a much larger initiative. But as we are getting success in those smaller initiatives for a mid-initiative, I think the larger initiative will start coming up in the next year. -------------------------------------------------------------------------------- Operator [30] -------------------------------------------------------------------------------- The next question is from the line of Hiten Jain from Invesco AMC. -------------------------------------------------------------------------------- Hiten Jain, Invesco Asset Management (India) Private Limited - Research Analyst [31] -------------------------------------------------------------------------------- Yes. Can you give me your 9 months subcontracting expense for this year and last year? -------------------------------------------------------------------------------- Dharmender Kapoor, Birlasoft Limited - MD, CEO & Director [32] -------------------------------------------------------------------------------- 9 months subcontracting expense. Chandru, do we have that information in hand with us right now? -------------------------------------------------------------------------------- Chandrasekar Thyagarajan, Birlasoft Limited - CFO [33] -------------------------------------------------------------------------------- I do not have that information off hand. But I can tell you that in the current -- in the past quarter, we have reduced that significantly, as I had said earlier. I don't have that information on year-to-date basis right away. I think I can get you that information off-line. -------------------------------------------------------------------------------- Dharmender Kapoor, Birlasoft Limited - MD, CEO & Director [34] -------------------------------------------------------------------------------- But Hitesh (sic) [Hiten], you can always get in touch with Chandru off-line or with Vikas, and we can get you that data. -------------------------------------------------------------------------------- Operator [35] -------------------------------------------------------------------------------- The next question is from the line of Rohit Balakrishnan from VRDDHI Capital. -------------------------------------------------------------------------------- Rohit Balakrishnan, [36] -------------------------------------------------------------------------------- Yes. DK, many congratulations on a great quarter to you and the team. So DK, most of the questions have started with an earnings question. And also, good to see that we've moved to a lower tax rate. Just one question of cash now more than INR 1,000 crores and has a great asset. So just wanted to know, and I've been asking this question consistently, so just wanted to know your thoughts -- I mean, what -- how are you guys thinking about it? Are you guys thinking about building or what your overall process is? -------------------------------------------------------------------------------- Dharmender Kapoor, Birlasoft Limited - MD, CEO & Director [37] -------------------------------------------------------------------------------- Well, yes, I think, Rohit, dividend, definitely, we will continue to deliver a dividend as we have delivered in the previous financial year also and the other quarters also. So we'll continue to do that. I don't think there is any change of thoughts from that perspective. However, we have started thinking that what are the newer investments that we need to make in order for us to grow faster? Should it be looking at or going after certain type of deals? Or should it be going after or looking at if it is the right time for doing any merger and acquisition, okay? So we have started thinking in that direction. And as soon as we have a clear answer and strategy, we are going to come back and publish as to what is going to be the approach and strategy for Birlasoft. -------------------------------------------------------------------------------- Rohit Balakrishnan, [38] -------------------------------------------------------------------------------- Right. And I mean, maybe this is just a repeat of the questions, so sorry if I did. I mean, in terms of -- so we've been around $120-odd million, $126 million was perhaps the highest. So when you see -- I mean, the subsequent -- what you had mentioned in the last quarter that we probably regained the scale that we achieved in Q3 of last year to around $125 million. So I just want to understand. I mean, can we sort of look at 4%, 5% quarter-on-quarter dollar revenue growth from here on? DK, we had obviously a couple of disruptions in between, due to COVID, et cetera. And now we are sort of looking at curtailing the tail. But I mean, from there on, let's say, at '22 onwards, can we sort of look at 4%, 5% quarter-on-quarter dollar revenue growth? And is that what we are working towards? -------------------------------------------------------------------------------- Dharmender Kapoor, Birlasoft Limited - MD, CEO & Director [39] -------------------------------------------------------------------------------- No. Absolutely. Absolutely, Rohit, I think that is absolutely the goal that we had to continue to grow quarter-on-quarter. This is something that is so essential for us to have in our plans, and I'm very hopeful also that we will continue to show that. So we have -- during this time, we have made our revenue and growth very predictable. And I'm absolutely certain that we will continue to show good results going forward. And I would also like to say once again that we do not have any concerns about the tail. It actually is a good strategy to remain focused on fewer accounts. I know this question has come multiple times. And Rohit, you also asked that. So I would say that remain confident that there are not going to be any impact on our growth due to cutting the tail. -------------------------------------------------------------------------------- Operator [40] -------------------------------------------------------------------------------- The next question is from the line of Ashish Aggarwal from Principal Mutual Funds. -------------------------------------------------------------------------------- Ashish Aggarwal, Principal Mutual Funds - Senior Research Analyst [41] -------------------------------------------------------------------------------- Sir, my question was also similar to what the previous participant asked on the growth side. Because if we look at the second half of last year, a lot of that growth was also driven by one large deal which we won, if I'm not wrong. And our growth in the first 3 quarters -- or our revenues in the first 3 quarters have been significantly lower than our peers in terms of growth rates, et cetera. So how should we look at this number changing materially in FY '22? That is one. And secondly, just one data point. When are you looking to do salary hike further in place? Maybe I would have missed if you would have already told, sorry for that. -------------------------------------------------------------------------------- Dharmender Kapoor, Birlasoft Limited - MD, CEO & Director [42] -------------------------------------------------------------------------------- So let me answer the salary question first. The increments are being done from January, okay? So that has already been factored in our plans. So the salary increments are going to happen from this quarter, the quarter 4. Coming to the growth side, there are some significant wins that we made even in this financial year. Also, I did talk about those wins in the earlier 2 quarters at what kind of wins that we have made. For example, there was a deal I talked about, about $72 million. There are 3 or 4 deals about $30 million that we have done, okay? There was another deal that we had done with a European company, which was $20 million. Then there was a medical devices company with which we closed a $28 million deal. So I think there are a significant number of deals that we have done in the financial year also. So I don't see now overdependence on one large deal. Now we have started having more number of deals that are going to bring growth for us, and that's the reason, as I mentioned earlier, our top 5, top 10 and top 20 customers all have grown very well in these 3 quarters. And I think that is going to bring a lot of growth in the future as well. And that comes because of our significant focus on improving our annuity revenue and also improving our cross-selling. -------------------------------------------------------------------------------- Operator [43] -------------------------------------------------------------------------------- The next question is from the line of Vimal Gohil from Union AMC. -------------------------------------------------------------------------------- Vimal Gohil, Union Asset Management Company Private Limited - Research Analyst [44] -------------------------------------------------------------------------------- Sir, just wanted to get some more color on your margins. How should we look at margins? Because if you look at our offshore ratio, the restated offshore number that you have given, we've improved by about 40 basis points. So my sense is that a lot of the margin improvements would have come from the subcontracting costs coming down. Now my question is going forward, is the reduction in subcontracting costs a conscious decision? Or is it that probably, when things normalize, the subcontracting cost would sort of come back? That's my question on margins. My second question is on -- your confidence on double-digit growth in FY '22 is well appreciated. How much of that would be driven by the fact that your newly created Microsoft Azure partnership? How much would that contribute in that double-digit growth ambition in F '22? -------------------------------------------------------------------------------- Dharmender Kapoor, Birlasoft Limited - MD, CEO & Director [45] -------------------------------------------------------------------------------- Well, definitely -- so yes, part of the growth definitely comes from the subcontract cost rationalization. And as we look at continuing improving our mix of revenue between on-site, offshore, between time and material and fixed price, we are slowly moving towards having higher margin coming from our engagements. So that's definitely one thing. The second benefit comes from cutting the tail where we have been bleeding for the profits. So that also has given us some advantage. We improved significantly on our SG&A also because we have to continue to look at how do we become a more efficient company. So we looked at every single aspect of SG&A, and we improved upon that. There are a lot of automation that we did. We completed our integration because a lot of costs were going on the integration side also because we were running the 2 IT organizations in parallel, and now we are fully integrated after the month of June, July. So that has started giving us the benefit also. So all these benefits are sustainable benefits, and we will continue to see that we start playing at par with most of our peers. So that's on to the profitability side. Coming to the growth side, yes, we are confident that, I think, double-digit growth will come in the future. When it comes to the type of growth, so Microsoft definitely is going to help us in a big way. It is very hard to say that just based on one particular point -- one particular technology, how much growth will come. But as I gave the macro view after the partnership, we definitely want to achieve $100 million practice from Microsoft. And that goal remains, and we continue to work in that direction. -------------------------------------------------------------------------------- Chandrasekar Thyagarajan, Birlasoft Limited - CFO [46] -------------------------------------------------------------------------------- DK, if I may add to the question on subcon costs. Hiten Jain had this question as well. The full year subcon costs in financial year -- FY '20 was about 13.7% of revenue. And in the first 3 quarters, which is year-to-date Q3 FY '21, we have sub-12%, 11.9% to be precise. So just to corroborate DK 's point that optimization is a continuing activity, and we will further improve this, as I said, as mobility improves globally. -------------------------------------------------------------------------------- Vimal Gohil, Union Asset Management Company Private Limited - Research Analyst [47] -------------------------------------------------------------------------------- That is great to hear. Sir, again, on subcon costs, if I were to look at the average subcon costs for some of the larger peers, it is closer to maybe 10%. And probably for the largest peer, it's about 7%. And also, talking about margins, when you talk about delivering margins in line with peers, if I were to look at some of the midsized peers, they have margins -- EBITDA margins closer to 20%. I mean, how should we think about this commentary, sir? -------------------------------------------------------------------------------- Dharmender Kapoor, Birlasoft Limited - MD, CEO & Director [48] -------------------------------------------------------------------------------- So -- no, absolutely. I think if you look at the 20% margin, we have to look at that in a more sustainable basis. I think we should look at the numbers pre-COVID, and we should also look at the number post-COVID. So we definitely are going to play in a way that we continue to give the margins closer to our peers. We are the smallest company actually among our peers. So that definitely -- economy of scale that they have, we may not have that. But despite that, we are confident that we will continue to give. However, I also mentioned that we need to look at what are the newer capabilities where we go and invest. So should there be a possibility of sacrificing a little bit of margin so that we grow faster? And I think that is another part of our strategy that we will execute going forward. And that's the reason I have always maintained that we will continue to grow more -- continue to give EBITDA more than 15%, and we will also ensure that we invest back so that we start growing much faster. -------------------------------------------------------------------------------- Vimal Gohil, Union Asset Management Company Private Limited - Research Analyst [49] -------------------------------------------------------------------------------- Sir, when you talk about investments, this would be on maybe the technical head count? Or what exactly do we mean when you say that you want to invest? What is happening for investments? -------------------------------------------------------------------------------- Dharmender Kapoor, Birlasoft Limited - MD, CEO & Director [50] -------------------------------------------------------------------------------- Correct. It is about looking at the capability enhancement and the talent enhancement. We have gone by the micro vertical strategy. I have talked about that in the last 2, 3 quarters. When we go after the micro verticals, that means that we want to get behind those micro vertical and say that we are not bigger than the larger players, but we can definitely be better than them in those micro verticals. But that would require that we build significant skills, domain skills as well as the technology skills in that. And that is where the investment would be required. We are also working on certain solutions that are required for that market so that the repeatability is higher, and we are able to work on the patterns for which we get an easier discussion to follow the common problems that the industry has. And there is an investment that will be required in that direction as well. -------------------------------------------------------------------------------- Vimal Gohil, Union Asset Management Company Private Limited - Research Analyst [51] -------------------------------------------------------------------------------- Right. Sir, last question, just a follow-up on what Ashish asked. I mean, our growth rate in the past 3 quarters has been slightly lower than some of the peers, and we do expect something like pillars of that growth to be top quartile. Given the fact that some of your client -- the bottom client exit process has been complete, some of the deals will probably get into execution stage. Do we expect the growth to reverse that to top quartile in Q4? -------------------------------------------------------------------------------- Dharmender Kapoor, Birlasoft Limited - MD, CEO & Director [52] -------------------------------------------------------------------------------- So I believe that we are working towards that, but I don't think that I'll give any guidance in that direction because one of the major focus for us has been to change the mix of our revenue. As I mentioned earlier that if your annuity revenue is lower, that means that you need to work much, much harder to get the growth that you want. That has improved considerably for us, but it is still lower than most of our peers. And I think that revenue mix is very necessary to change for us to get into that. Now because it is changing, and it is changing much, much better way than what we initially thought, I am getting more and more confident by every quarter that we will start delivering the result which will be in the top quartile. But when it happened in quarter 4 or not, I would not answer that as yet because we are still working in that direction. -------------------------------------------------------------------------------- Operator [53] -------------------------------------------------------------------------------- The next question is from the line of Ravi Menon from Motilal Oswal. -------------------------------------------------------------------------------- Ravi Menon, [54] -------------------------------------------------------------------------------- DK, congrats on a really good execution. Wanted to understand the hiring trends. So this quarter, if I look at the technical head count hiring, this is the strongest hiring that we've ever had, yet utilization is at an all-time high. And probably, this might be as high as you'll be comfortable operating. But even when we won the Invacare deal, we didn't actually see this kind of hiring. So should we look at the deals that we've planned in FY '21 like being slightly sharper than what we've signed with Invacare for most of FY '20? So should we also think about the deal durations being very different? Is that right given there is such strong hiring? -------------------------------------------------------------------------------- Dharmender Kapoor, Birlasoft Limited - MD, CEO & Director [55] -------------------------------------------------------------------------------- So Ravi, absolutely, we should definitely look for that. But we have to continue to look at that, how do we optimally utilize the talent that we have, okay? That is going to be my first focus. Because if we do that, that would mean that we would still be able to extract better profitability with the talent and the capacity that we have today. At the same time, we have to continue to hire the talent from outside. If I look at 1 year back, the growth came without hiring too much from outside because we did have that capacity with us. It was only that we had to utilize it in a better way. And hence, without hiring too much from outside, we were still able to deliver even that large deal. So it worked very well. But I would say that the low-hanging fruits are already done. What we have to look at is now, as I clearly stated that, one clear focus would be that how do we improve our pyramid and how do we improve our span of control. So I think there is still some optimization possible on that front, but further revenue will get delivered by hiring from outside. So yes, you will see more hiring from outside than what we have seen in the last 4 quarters. But at the same time, we will continue to look at how do we optimize our current capacity as well. -------------------------------------------------------------------------------- Ravi Menon, [56] -------------------------------------------------------------------------------- I think considering the strong demand environment, do you think that we would want to really operate at much lower utilization, probably 80%, 81% in stock, 83% to 85%? What would be your preference? -------------------------------------------------------------------------------- Dharmender Kapoor, Birlasoft Limited - MD, CEO & Director [57] -------------------------------------------------------------------------------- I don't think there'll be too much difference. I believe that if we remain at 83% utilization, we are very comfortable. -------------------------------------------------------------------------------- Ravi Menon, [58] -------------------------------------------------------------------------------- Okay. Yes. And when you spoke about the investments, you set up -- you had the micro verticals that you're looking at. Could you give us an example of 1 or 2 of them? -------------------------------------------------------------------------------- Dharmender Kapoor, Birlasoft Limited - MD, CEO & Director [59] -------------------------------------------------------------------------------- So absolutely, I think we are definitely looking at the investments on certain strategic deals. That is one offset of investment that we are looking for. Second, we are looking at, if there is any possibility of acquiring any talent or any tuck-in acquisition, we are yet evaluating. But if I look at from the readiness perspective, I think we are ready today. If you would have asked me 2 quarters back, we were not ready, and I actually was very open in mentioning that we will come back when we are ready. But after the integration of our IT and many other aspects, I believe that our structure is stable. I believe our IT systems are stable. Our processes are in place. Our policies are already stabilized. So we are absolutely having the right management team that can go and absorb any tuck-in acquisition that we may have to do. So we have started evaluating in that direction and started preparing our strategy. -------------------------------------------------------------------------------- Operator [60] -------------------------------------------------------------------------------- The next question is from the line of Dipesh Mehta from Emkay Global. -------------------------------------------------------------------------------- Dipesh Mehta, [61] -------------------------------------------------------------------------------- I have 3 questions. First, about -- DK, when do you expect -- so maybe broadly, if you can provide qualitative comment about S and IES recovery, how do you expect it to play out? Second question is about, if I look $1-plus million client, we have seen weakness and limited success. So whether limited success is hurting because of virtual selling or how one should read that thing? And third question is if I look margin expansion over last 2, 3 quarters, your stand-alone margin remained largely stable. But subsidiary performance has improved. So if you can provide some color what is playing out there? And what is further scope to expand margin in subsidiary? -------------------------------------------------------------------------------- Dharmender Kapoor, Birlasoft Limited - MD, CEO & Director [62] -------------------------------------------------------------------------------- Yes. On the net new, I think your guess is absolutely right that due to the virtual selling and no travel, the net new has taken a hit for every company. And I believe that, that should come back as we move forward. So that is where I believe that there is a growth possible by bringing in more net new. But the good part also is that in that process, the cross-selling has started working very well. And our efforts paid off because we proactively planned that we had to go after the cross-selling and annuity revenue. And that started working very well and has given us the advantage. So that's the way I look at going forward that net new will increase. Looking at the margin side, I would request maybe Chandru to provide the breakup between the stand-alone and consolidated, as to how is the margin looking on both the sides and if he can provide the answer to you. -------------------------------------------------------------------------------- Chandrasekar Thyagarajan, Birlasoft Limited - CFO [63] -------------------------------------------------------------------------------- Yes. Sure. On the margin breakdown between the stand-alone and the subsidiaries, we look at it at a consolidated level because that's -- it's a business model that we look at in terms of how we deliver, where we deliver. So then you have costs coming mostly on-site, they sit in the subsidiaries. And that's where the greater pruning has been possible for us. We continue to run an optimized shop offshore. Like we said, we're also replacing some of our on-site subcons with the regulars, both offshore and on-site. So this is a continuing process. So you will see the mix improving as we continue to look for cost takeout opportunities. So what you're seeing right now is based on how we manage to prune down cost while growing our revenues in both of -- in offshore and on-site. And that's why you'll see revenue growth kind of consistent while the better margins coming from -- the margin improvement coming from our subsidiaries versus the details of stand-alone entity. -------------------------------------------------------------------------------- Dipesh Mehta, [64] -------------------------------------------------------------------------------- So one question, I think, you might not answer, what about SAP and IES? How do you expect that horizontal to recover? Because that is where the weakness and roughly 40% of our whole revenue coming from this 2, for example. So if you can provide some perspective. I think to some extent, our overall revenue also gets impacted because of weakness there. -------------------------------------------------------------------------------- Dharmender Kapoor, Birlasoft Limited - MD, CEO & Director [65] -------------------------------------------------------------------------------- Sure. See, I think there are 2 things that we need to look at in that. One, the COVID situation forced many companies to slow down on the larger transformation program, where there was an ERP adoption, ERP migration. In case of, for example, Oracle migration to cloud went slow because if the ERP was already running on-premise, there was no incentive of migrating to cloud during this time for them. However, the newer customer who wanted to adopt, they definitely have started going to the cloud. Similarly, on the SAP S/4HANA side, the migration to S/4 slowed down during this process and because there is incremental business benefit that everybody will look for. And that would happen probably once the business stabilizes post-COVID for most of our customers in U.S. and in Europe. So I think that slowdown is primarily because of that. But at the same time, this is one area which is changing the shape significantly. Sometimes it looks at -- we look at ERP revenue in the stand-alone form in a traditional way, but a lot of such a revenue is now getting divided between the ERP and digital. Some of the things that used to happen in a monolithic application in a traditional way, now that revenue gets distributed between a digital opportunity and in a traditional ERP. For example, if somebody was implementing SAP with SAP CRM earlier or same with Oracle with Oracle CRM or CBL CRM earlier, today, the CRM revenue comes in the form of Salesforce or Microsoft Dynamics, okay? But that revenue is there, but it may be now counted as part of digital or emerging technology rather than being counted as part of IES or SAP. So I think that's the way we have to continue to look at as to how the shape of the revenue will change. Going forward also, you will see that sometimes, the deal size may look smaller when it is being done on the cloud, but that will be one deal that will be smaller. But there will be many smaller deals together that will form the whole transformation program. So earlier, it was one large expense that used to happen on one ERP. But today, that gets broken between the ERP on the cloud integration and some of the best-of-the-breed applications that get integrated with the core ERP. So the spend is same, but it gets distributed in different buckets. -------------------------------------------------------------------------------- Dipesh Mehta, [66] -------------------------------------------------------------------------------- I understand. Last question, can you quantify impact of salary hike in Q4? And what kind of quantum hike we are giving to increment? -------------------------------------------------------------------------------- Dharmender Kapoor, Birlasoft Limited - MD, CEO & Director [67] -------------------------------------------------------------------------------- So we are going as per the industry norm, which is, most of the industry players are going with about anything from 6% to 6.5%. So we are also at about 6.4%. That is going to be the cost that we will -- the increment that we will give. That should have an impact of about 2.2% to 2.3% of revenue. That should be the impact. And then we, of course, continue to look at working on fixed-price contracts and the span of control and the pyramid improvement so that we can claw back what we lose on the increments. We claw that back by improving our margins. -------------------------------------------------------------------------------- Dipesh Mehta, [68] -------------------------------------------------------------------------------- Understood. And is there any data which you can share about our pyramid, how it is currently? And what optimal range you might have in plan? -------------------------------------------------------------------------------- Dharmender Kapoor, Birlasoft Limited - MD, CEO & Director [69] -------------------------------------------------------------------------------- So I do not have the ratio handy with me, but I believe that there is definitely about 1% that we can further improve from here in our gross margin by improving the span of control. -------------------------------------------------------------------------------- Operator [70] -------------------------------------------------------------------------------- Ladies and gentlemen, due to limitation of time, that was the last question. I now hand the conference over to Mr. Dharmender Kapoor for closing comments. -------------------------------------------------------------------------------- Dharmender Kapoor, Birlasoft Limited - MD, CEO & Director [71] -------------------------------------------------------------------------------- Yes. Thank you very much, everyone, for joining the call. Quarter 3, I'm absolutely delighted that we have been able to deliver the EBITDA margin 2 quarters in advance. I have always committed that we will be achieving 15% in the quarter 1, but there are a lot of hard work that was put in by the team in order for us to get the optimization in a much faster way. So I'm absolutely very pleased that the results that we have given in the quarter 3 on the profitability side. The growth could have been a shade better. But of course, we all know that it was quarter 3. And generally, quarter 3 is a tricky quarter for everybody. But we are back getting the quarter-on-quarter growth. So that is a good news for us. At the same time, as we go and move to have higher MAT revenue, we will have much better predictability going forward also. So thank you very much for your confidence in Birlasoft, and thank you very much for participating. If you have any question that remained unanswered or you could not ask any questions, please feel free to reach out to Vikas, and we would love to provide all the answers that you may need. Thank you very much. -------------------------------------------------------------------------------- Operator [72] -------------------------------------------------------------------------------- Thank you. Ladies and gentlemen, on behalf of Birlasoft Limited, that concludes this conference. Thank you for joining us, and you may now disconnect your lines.