Sandeep Mahindroo - Principal of Investor Relations S. D. Shibulal - Co-Founder, Managing Director, Chief Executive Officer, Director and Chairman of Infosys Technologies (Sweden) AB Rajiv Bansal - Chief Financial Officer Prasad Thrikutam - Global Head of Energy, Utilities & Communications & Services and Senior Vice President Sanjay Jalona - Global Head of Manufacturing

Anantha Narayan - Crédit Suisse AG, Research Division Moshe Katri - Cowen and Company, LLC, Research Division Nitin Padmanabhan - Espirito Santo Investment Bank, Research Division Nitin Mohta - Macquarie Research Diviya Nagarajan - UBS Investment Bank, Research Division Pankaj Kapoor - Standard Chartered PLC, Research Division Sanjay Parekh - Reliance Capital Asset Management Limited Rahul S. Bhangare - William Blair & Company L.L.C., Research Division Sandeep Muthangi - IIFL Research Ankur Rudra - Ambit Capital Pvt. Ltd., Research Division Sandeep Shah - CIMB Research

Ladies and gentlemen, good day, and welcome to the Infosys Earnings Conference Call. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Mr. Sandeep Mahindroo of Infosys. Thank you, and over to you, sir.

Thanks, Linda. Hello, everyone, and welcome to Infosys Q2 FY '14 Earnings Call. I'm Sandeep from the Investor Relations team in New York. Joining us today on this earnings call is CEO and MD, Mr. S.D. Shibulal; CFO, Mr. Rajiv Bansal; along with other members of the senior management team. We'll start the call with some remarks on the performance of the company for the recently concluded quarter, which will be followed by outlook for the year ending March 31, 2014. Subsequently, we'll open up the call for questions. Before I hand it over to the management team, I would like to remind you that anything that we say, which refers to our outlook for the future, is a forward-looking statement, which must be read in conjunction with the risk that the accompany faces. A full statement and explanation of these risks is available in our filings with the SEC, which can be found on www.sec.gov. I would now like to pass it on to Mr. S.D. Shibulal. S. D. Shibulal: Good morning, everyone, and welcome to our earnings call. I will give -- I will begin by giving an overview of Q2. Our growth was 3.8% in reported currency term and 4.2% on constant currency terms. Our volume grew by 3.1% quarter-on-quarter and the realization -- the revenue realization increased by 0.6% in reported currency terms and 0.9% in constant currency terms. We had broad-based growth in all verticals, geos and horizontals, growing vigorously on a constant currency basis. We have added 7 -- 68 new clients, 37 net. We have added 12,000 growth employees during this quarter. Our total employee count is 160,227 as of the end of Q2. Our operating margin for the quarter was 21.9%. Let me also give you some color on business trends in various areas. In financial services, we have seen some improvement in the last 3 months both in the U.S. and in Europe. This improvement is driven by increased spending in new products and channels. Interest in areas like cloud is higher today than a year back. While compliance-related spending continues, there is positive momentum towards managed services, social media and business-facing products and platforms. However, the overall discretionary spend continues to be muted with a flat to negative outlook. In retail and CPG, there is vendor consolidation and application management and infrastructure management deals emerging as a way of demonstrating cost savings. This is the market we continue to see strong investment. Strong focus on reducing nondiscretionary spend is creating increased pipeline of legacy contracts though they are price sensitive. We see more decisions being taken than last year in the areas of business intelligence and digital consumer. Life sciences continues to see challenges due to reduced product differentiation and other cost pressures. The industry is focused on cloud-based services as a way to reduce operation -- operating cost. In manufacturing, the business momentum in high tech remains positive through client spend in relatively stagnant -- even though client spend is relatively stagnant due to sluggish PC markets and slower growth in Europe and emerging economies. However, we see spending in auto and aero industries driven by increased spending in technology in new areas like digital, connected vehicle, analytics and global expansion. The primary growth driver for manufacturing continues to be Americas, with Europe expected to see some challenges as some large transformation programs are nearing completion. We don't see any let up in challenges in energy, utilities and communication services space. The renewed challenges for clients is triggering consolidation in the industry and forcing clients to look at adjacent markets. Discretionary spend is being limited to key projects driven by the business. Our focus on proactively creating large deals has led to a significantly better pipeline. We are also focused on increasing our business in the wireless and cable space as a way to mitigate the risks in the wire line space. Competitive intensity is high in this vertical and decision cycles are long. Now moving on to service lines, business and IT operation space. Most deals are focused on vendor consolidation, end-to-end application management and application modernization. Emergence of converging client and [ph] cloud is driving asset consolidation and cost optimization by making clients asset light, with automation being a focus area. Further investment in IT are moving towards mobile devices, Big Data, social and cloud services. Pricing continues to be a challenge in large outsourcing deals. As regarding discretionary spend, which drives our consulting and system integration business, we see a tough business environment, with investments being evaluated against stringent financial criteria. Spend trends remained flat to down in various verticals. Though pipeline this year is stronger than last year, decision cycles remain elevated. Large transformation programs are broken into smaller chunks, clientele-embracing applications, which create business value while phasing out those which are not adding value. During the quarter, we had 5 large deal wins adding up to $450 million, 3 deals were in FSI, 1 each in retail and manufacturing, and 2 deals were in America, 2 in Europe and 1 in Rest of the World. Most of the large-deal pipeline is driven by clients looking at restructuring existing spend with a bias towards ADM and infrastructure management. Across industry verticals, more clients from Continental Europe are opening to outsourcing, with offshore players -- with the offshore players and 50% of the pipeline -- all verticals into the pipeline is from Europe. The pipeline across multiple verticals is robust. We have deployed a portfolio of significant investment in products and platforms, which are yielding good results. This quarter, we have 15 new clients added to our products and platforms service space. We have won 50% more TCV in this quarter than last quarter. This is also a result of adoption of SAP services by our clients. During the quarter, we have made 3 key changes in our organizational structure. We have refocused on growth markets by combining 4 countries: Australia, China, Japan, Middle East and Southeast Asia. They will operate as an independent P&L and the -- then the countries will be headed by respective country heads. Overall responsibility will be with Pete [ph], who will report to the CEO. We have created a new industry vertical business unit with integrated sales and delivery, and we will focus on utilities and resources. This will be headed by Stephen Pratt. We have also carved out life sciences and insurance and created separate P&Ls. Both BITS and CSA will report into [indiscernible] going forward. There is no change in our strategic direction and our focus on 3 offerings, CSI, BITS and PPS. The changes which we have made during this quarter is to sharpen our focus on growth markets, improve productivity and utilization and increase client -- to increase client velocity. Now let me talk about the guidance. Our guidance was 6% to 10% in the beginning of the year. End of first quarter, we had restated 6% to 10%, which meant, in constant currency terms, 7.7% to 10.7%. We have revised our -- we have changed our guidance to 9.10% (sic) [ 9% to 10% ] at the end of Q2. In constant currency terms, this will be a guidance of 9.9% to 10.9%. Yes, we have seen positive momentum, but we are entering Q3 and Q4, which are historically soft quarters for Infosys. More importantly, we have made a number of internal changes. We have made -- we are focused on cost optimization. We are focused on large outsourcing deals. We are focused on creating -- we're focused on growth markets. While these changes are in flight, it takes time to yield results. The large deals which we won this quarter will only yield results a couple of quarters later. Because of all these factors, we remain cautious, and our guidance is 9% to 10% in reported currency terms. Thank you.

Good morning, everyone. Just to give you, on the financial performance, our revenues for the current quarter grew sequentially by 15.1% in rupee terms and 3.8% in dollar terms. On a constant currency basis, this is 4.2% growth sequentially in dollar terms. EPS for the quarter is at INR 42.12. This includes a provision of INR 219 crores for visa-related matters. Without this, the EPS would have been INR 45.96. Excluding the provision for visa-related matter, the margins for the quarter is at 23.6%, which is same as that of last quarter. This quarter, we saw significant volatility in currency, with the rupee depreciating by 16% intra-quarter and on an average by 11%. We have outstanding hedges of 1.1 billion as of September end. We had given update -- or said in our July earnings call. We have given 8% commission hike to our sales folks effective 1st of May, 8% increase to our offshore folks effective 1st July and 3% to our on-site folks. This had impacted our margins by 300 basis point as well, as articulated in the July earnings call. The benefit of rupee depreciation of 11% that we saw during the quarter has been offset by the July -- by the salary hikes that I just spoke about. Our net margin is at 18.6%, 2.5% lower than the previous quarter primarily because of the provision that we took for the visa-related matter, without which the margin would have been 20.3% as against 21.1% last quarter. The reduction is due to exchange loss on the account of significant volatility that we saw in the currencies. The volume growth is at 3.1% on a sequential basis, and the realization increased by 0.6% during the quarter. Available utilization, including trainees, increased to 73.1% as compared to 70.7% last quarter. Excluding trainees, it increased to 77.5% as against 74.3% last quarter. Our cash and cash equivalents, including available-for-sale asset, is at INR 26,907 crores as against INR 24,078 crores in the previous quarter. We have done exceedingly well in terms of our receivable collections. Our DSO is at 62 days as against 66 days in the previous quarter. We have revised our rupee guidance to 21% to 22% for FY 2014. We have converted our dollar guidance of 9% to 10% into rupee guidance at an exchange rate of INR 62.61 for the next 2 quarters. With this, I'll open the floor for questions.

[Operator Instructions] Our first question is from Anantha Narayan of Crédit Suisse. Anantha Narayan - Crédit Suisse AG, Research Division: I had a couple of questions. The first one, Rajiv, was on near- and medium-term margins. I know some of your peers do give us an indication of an aspirational range that they are comfortable with. For example, one of them has a range of 26% to 27%. Another one has 19% to 20%. Now what would be that equivalent range for you? And secondly, from a utilization perspective, your utilization numbers, excluding your trainees, has gone up almost 6 percentage points in the last couple of quarters, and it's currently at around 78%. Where do think that could potentially go up to?

Okay. On the margin, as I was -- as I said in my interaction with the analysts and investors, I think this year, if you look at it, the last few quarters of our performance has been kind of volatile. We have had a couple of good quarters and then a bad quarter. And this year, as Samuti [ph] had articulated, we initiated these 4 initiatives in terms of sales effectiveness, cost optimization, qualities and improving quality and productivity, and I think a lot of investment needs to be made in this initiative. What we are trying to do here is try to create an engine which will deliver high-quality revenue growth, industry-leading quality -- industry-leading growth at much superior margins. And I think a lot of investments, which are being made today, are to ensure that we have a brighter future and a better growth and better margins in the future. So I think I'm not too worried about, on a quarter-to-quarter basis, how the margins are moving right now. I think we are doing all the right things. We are making the right investments. We are -- attrition is one of the concerns that we have. We're investing back in the employees. We have given the wage hike. We have changed the salary structures for the employees. We are paying them better variable pay. We're investing in sales, investing in tools, investing in product quality and productivity, investing in products. So I think this year, we have to make all the right investments to ensure that our exit rate this year actually is on a good deal pipeline, healthy business momentum, which will deliver a high growth and a high margin. So I think I would say -- in the medium to long term, I would say that we would have better margins in the industry than the competition. But in the short term, I think you will see volatility depending on how our growth is delivering. On the utilization front, I think our utilization has increased to 77.5%, which is good. If you look at our net addition the last couple of quarters, it has been minimal. But I think we still have a lot of headroom there. I would expect our utilization to be about 82% on a steady state basis because I think that is something which many companies have shown that they can sustain, and I believe that we have about 4.5% headroom on the utilization front excluding trainees.

Our next question is from Moshe Katri of Cowen and Company. Moshe Katri - Cowen and Company, LLC, Research Division: Last quarter, can you -- looking at EBIT margins, can you talk about the pluses and minuses, the different factors that impacted and benefited margins during the quarter? The only factor -- the only thing that you kind of mentioned was comp expenses. And can you talk about some of the things, like FX, et cetera?

Sure. So if you look at -- as I said, the margins have remained flat at 23.5% operating margin. We saw rupee volatility of 11%, rupee depreciation of 11%, which have given us an uptick in the margin, about 2.5%. We had wage hike, which impacted our margin downward by about 3%. We saw revenue productivity going up by 0.6%. We saw utilization improvement of 2.4% and the on-site mix of 0.8%, which, to some extent, have been offset by cost currency impact and also by paying better our employees in terms of variable pay and bonuses. So a lot of investment and a lot of upside that you have seen on the rupee depreciation has gone into wage hike, upside that you're seeing on the improving of the official parameters had gone back -- has pulled back into business in terms of investment in sales, in terms of investment, in terms of paying employees better. Moshe Katri - Cowen and Company, LLC, Research Division: And then just a follow-up. I think you mentioned in the past that you've got to look at Q4, Q4's booking numbers and kind of the revenue number as a starting point in terms of looking at fiscal year 2015. Is that still kind of the plan at this point? And based on what you're seeing, things are kind of falling in. Where they should be falling at this point?

See, we are looking towards that. We -- as I said, we have made the right investments. We are doing all the right things, but some of these things will take time. There is not a magic wand which we'll just turn around and we'll see superior performance overnight. But I think the last 2 quarters' performances gives us a lot of encouragement. I think we ought to continue doing the right things, make the right investment. And I think definitely, the exit rate of this year would definitely be something that we would look at because that sets the flow for the next year. So I think we are very focused on improving and continuing this journey -- or the improvement that we are seeing in the last 2 quarters, and we're very focused on continuing on the journey.

Our next question is from Nitin Padmanabhan of Espirito Santo. Nitin Padmanabhan - Espirito Santo Investment Bank, Research Division: So what is it that worries you in the medium term in terms of growth because if I look at your guidance, it looks pretty weak because the first half itself has a 14% growth. Like last year, where you did highlight that there were specific client situations, are you seeing anything of those that worry you at this point? Or is it project closures, ramp-downs? And what is that -- what do you do in terms of lack of near-term ramp-up? I just wanted some color. S. D. Shibulal: So there are 2 factors. Number one, there is some seasonality to our business. Q3 and Q4 are generally soft quarters for us if you look at it historically. And we also have less number of working days in Q3. So those do have impact, but more importantly, we are also going through some internal changes. And as Rajiv said, we are actually trying to put the foundation down for a sustainable growth over a long period of time at superior margins. They do make and they do require investments, but more importantly, they require changes. And those changes will yield results only in the long term. They are not going to yield results overnight. And these 2 factors are the drivers of caution, and we remain cautious. We have looked at our current visibility. We have looked at our current deal pipeline. We have looked at our current client behavior. We have looked at how the different industry verticals are behaving and faced with challenges. So for example, the U.S. shutdown will have some impact on the defense industry, which will flow into the manufacturing industry sooner or later. It is too early. And in the retail segment, we have seen -- these are industry phenomena, but we also do get impacted by them. We have seen concerns about holiday spend and other things. So there are external -- but more importantly, internal changes which we have made, which we believe will only yield results in the long term. These factors are considered into our guidance, and that's why we have kept our guidance at 9% to 10%, 9% to 10% in reported currency, 9.9% to 10.9% in constant currency. Nitin Padmanabhan - Espirito Santo Investment Bank, Research Division: Sure. I was just trying to understand because historically, at least a year ago, you had highlighted specific -- client-specific issues that you had at some point. There is nothing of that sort that you would worry about in terms of criticality at this point? S. D. Shibulal: There are no specific client issues I'm worried about. There are -- I talked about the internal changes which we are making, which will yield results only in the long term, and I talked about industry, the later [ph] aspects, and more importantly, the -- equally importantly, the seasonality of our business. Nitin Padmanabhan - Espirito Santo Investment Bank, Research Division: Sure. And just one last question, if I may. You highlighted that attrition was a worry for you. I just want to understand, in terms of attrition, how much of that would have been involuntary this quarter? S. D. Shibulal: So attrition is a matter of concern for us even though, in absolute numbers, attrition has come down. In absolute numbers, attrition has come down, but in personnel terms, it has not really come down materially. We have done a number of things. We have given compensation increase. We have given promotions. We have given -- we have reviewed the variability of compensation. We have provision for higher variable compensation in the system. We have done a number of things. And communication also has been a very important part of this process. We have -- we're in constant touch with our employees. We will continue to do it. Now the involuntary attrition, the difference between voluntary and involuntary attrition will be about 1.5%. So the involuntary attrition will be 1.5%.

Our next question is from Nitin Mohta of Macquarie. Nitin Mohta - Macquarie Research: Shibu, I just wanted to understand the demand environment a little better. Is it that you're seeing a pickup across the board? Or is it more a function of your market share and deal win ratios improving? S. D. Shibulal: There is improvement in the demand environment in U.S. Europe is starting to show some signs of demand improvement. It do vary, industry vertical to vertical. We have seen demand improvement in financial services, which is a very large portion of our business. Traditionally, we will spend on cost management and regulatory and compliance areas. We are seeing some early signs spending in new products and new channels. So that's good for us. We are also starting to spend on digital transformation. That also helps us. In retail, continuing to see pickup in the digital space, but more importantly, retailers are looking for optimization of their operations, which is leading to either vendor consolidation or large outsourcing opportunities, which we have not traditionally seen in retail. Manufacturing, high tech, is showing positive momentum. And in the areas that where we're not seeing any change in the momentum is -- or even -- I wouldn't say degradation, but lack of momentum, would be in wire line. We are quite focused on increasing our business in wireless and cable to mitigate this lack of momentum in the wire line, which is then a substantial portion of our energy, utilities and communication services space. So overall, we are seeing some improvement in momentum more in the U.S. and less in Europe. Europe is starting to show early signs. The momentum is different in different verticals. Now at the same time, there are, of course, some concerns in the environment. See, the environment continues to be volatile. So while this has all happened, the government shutdown happened, then you had -- you have this overhang of the debt ceiling. So there are -- there is volatility in this situation, but if I look at generally, there is positive momentum. Nitin Mohta - Macquarie Research: Shibu, if you can just give some color on how you're seeing your market shares changing probably now versus a year ago, any comment on vendor issue.

So I will look at it in 3 different dimensions. So if you look at the large opportunity, large outsourcing deals, remember these are price-sensitive deals. These are -- and the competition is quite heavy. If you look at our track record, it has improved. If you look at the second half of last year, we won about $1 billion in large outsourcing deals and those deals have now converted to revenue, and that is what is showing up in Q1 and Q2 as revenues. If you look at last -- this half, that is the first half of this year, so far, I think we improved similar number of deals and similar value. More importantly, we are focused on new revenue rather than rebate. So I believe that they will start showing up in revenue a couple of quarters later. So our ability to win large outsourcing deals have improved. And some of them, we have won even against some of our traditional competition and sometimes -- in majority of times, we have succeeded in vendor consolidation environment. That is on large outsourcing deals. On the transformation space, our capabilities have gone up. Especially with the Lodestone acquisition, now our capabilities have gone up in the U.S. -- Europe. The integration has to complete and the people have to come together to win deals and see in [ph] pipeline, which is being attacked by joint Infosys-Lodestone team. I expect that will yield results as time goes by. The third offering that we have in products and platform is very, very small. It cannot make a difference to Infosys' growth. It is in its early stages, other than Finacle, but this quarter, we have added 15 new clients. And the TCV win this quarter was much higher than last quarter. So our ability to create solutions, which are allowed [ph] into our clients, our ability to show business value, our ability to win has improved. We still have a long way to go. Remember that. That is where all the internal changes we are making are important. We are doing cost optimization. We are driving productivity and quality. We are improving -- we are trying to improve the quality of our sales force. We are looking at mitigating immigration-related issues. So these initiatives have just started. They have started about 3 months back and way too early for us to say that the results will be there immediately. So that is why it will take time for these things to yield results, and that is why we remain cautious. Nitin Mohta - Macquarie Research: Sir, if I could just tie in the last a bit. So if I look at the second half of fiscal '14 and compare it with a $1 billion kind of contractments that you had last year and similar level in the first half, you feel more optimistic about the deal pipeline in the second half or it's going to be roughly the same level? S. D. Shibulal: The pipeline is somewhat similar actually. I am entering -- I think, if I look at the current pipeline, which is about a year back, pipeline is somewhat similar. But if I look at the velocity of wins, velocity of wins in Q3 and Q4 will be lower than Q1 and Q2 because of the 2 simple reasons. Number one is that people have been on holiday, and that does impact the velocity of the -- I'm not talking about general velocity, I'm talking about large outsourcing deal velocity. We did see, last year, a little bit in Q4. So the pipeline is similar.

Our next question is from Diviya Nagarajan of UBS. Diviya Nagarajan - UBS Investment Bank, Research Division: A couple of questions. This one-time provision that we've had this quarter, can we assume that, that won't trigger for the rest of the year? S. D. Shibulal: So this is in relation to our discussion with the U.S. Attorney's Office and other government departments, regarding a civil resolution of the government investigation into our compliance of I-9 requirements and past B1 usage. Based on the status of these discussions, we have set aside a reserve of $35 million. Now because the discussions are ongoing, we are not able to provide additional details at this point in time. Diviya Nagarajan - UBS Investment Bank, Research Division: Got that. In terms of your segmental breakup, some of your sectors like telecom, telecom seems to have recovered this quarter after a couple of quarters of decline. Are you willing to call this a secular trend for the rest of the year? S. D. Shibulal: Let me ask Prasad to respond to that.

This is Prasad. I think the -- as Shibu mentioned in his opening remarks, the pressure on wireline business continues. We are trying to offset the mix of our business by moving more and more work, on a relative basis, to the cable and the wireless business. But on the wireline side, we will see -- we will continue to see challenges. And at an overall level, that will drag the telecom growth overall downwards, although cable and media are still going fairly strong for us. Diviya Nagarajan - UBS Investment Bank, Research Division: Just one last question on your volumes. Firstly, the volumes for the second quarter, which is typically strong, seem to be little on the lighter side. And in particular, on-site volumes seem to have declined. Is this a function of projects having started last quarter and this is a normalization effect or do you think that this is an indication of what should we expect for the next couple of quarters? S. D. Shibulal: So the volume grew by 3.1% in Q2, on-site is 0.7% and offshore is 4.3%. Actually, if you look at the last couple of quarters, you can see the on-site growth was higher. And in a way, the on-site growth signals new project starts, which will eventually lead to offshore growth. But more importantly, this is also an internal change which we are making. We are very focused on making sure that we do more and more work from offshore. That is one way for us to provide higher and higher value to our clients. So one of the internal changes we are making is to drive more and more work from offshore. Again, I want to say that these changes, while you have seen some improvement, I -- it's too early to say that they are going to make overnight differences. We expect that to yield results in the long term. This is also a way for us to address a potential immigration bill if it becomes a reality.

Our next question is from Pankaj Kapoor of Standard Chartered Securities. Pankaj Kapoor - Standard Chartered PLC, Research Division: Shibu, just want to check on the next couple of quarters when we are guiding for almost a sequential decline of about 1%. Is that largely because of the internal changes that you are referring to. So basically, the on-site to offshore shift, which is having this decline in the top line? S. D. Shibulal: We have seen growth over the last 4, 5 quarters but, at the same time, we have seen this volatility. That's one factor. Second factor is that historically, if you look at our performance, there is seasonality to some of the quarters and Q3 and Q4 are generally soft. Then number 3 is more important, that we are making a bunch of internal changes, which is meant to create an environment of sustainable growth and sustainable profit. And those changes will take time to yield results. These are not silver bullets, it will take time to yield results. And finally, our guidance is always a statement of fact. We have looked at our pipeline. We have looked at our clients. We have looked at our other revenue mix. We have looked to our -- the number of working days in Q3. We have looked at all of those things. And we felt that we need to remain cautious because the internal changes will take time to yield results and there are external -- as I said, the seasonality to our business. So we have given a guidance of 9% to 10%. In constant currency terms, it is 9.9% to 10.9%. Given all the facts we know at this point in time, we believe this is the right guidance. Pankaj Kapoor - Standard Chartered PLC, Research Division: Okay, sir. And just, Rajiv, on the margin front, can you quantify what was the benefit that you got from currency in this quarter?

This quarter, on an average basis, currency depreciated by 11%, which give a benefit of 250 basis points on the currency, which is offset by a 300-basis-point impact because of wage hike. Pankaj Kapoor - Standard Chartered PLC, Research Division: Okay. So is it like fair to assume that outside of the currency, the margins would have bottomed out at year end from year on. Obviously, FX currency, we should see margins of rupee on a up-trending trajectory or you think there are further changes ahead on the margin side?

So, there are a couple of factors which will impact the margin. One of is the benefit growth, because I think we need to have a minimum growth to sustain the margin because -- well, most of the expenses in the current quarter would be fixed, because, as you know, most of our expenses are salary cost. Having said that, I think on the margin front, we have a couple of levers in terms of utilization on set up issue. All the initiatives that we took on the cost optimization in the last quarter will start yielding results on this quarter. So I think we have some upside in the margin but I think the important part, which I was saying in the earlier -- also was that, we have to make the investment to ensure that we exit this year with a good growth momentum, with a good margin, so that the next year looks better. I think we are on that path. We are making the right investments. And I think, if we continue on that path, I think we would see the margins -- these margins will have bottomed out. But I think a lot in the near future will depend on the growth that we did. Pankaj Kapoor - Standard Chartered PLC, Research Division: So is it like fair to assume that you will be reinvesting only the currency gains into the business side? Or does it mean that irrespective of the currency, you will continue to invest, which means that the margins can fall further from here?

If the investments are going to give us long-term returns, which are for the better of the organization, then I think we would make the investments with respect to currency movements. I think currency movements happen. We took the decision to give a wage hike without knowing that the currency would move the way it had moved. So I think we are making the investments, which are the right investments, which have -- which we know will give us return in the future, and I think the currency depreciation just happened within the quarter, which we couldn't predict at the beginning of the quarter. So I think we are making the investment with respect to the currency movements.

Our next question is from Sanjay Parekh of Reliance Mutual Fund. Sanjay Parekh - Reliance Capital Asset Management Limited: Mr. Murthy had mentioned that one of the agenda would reduction in on-site cost, and the on-site cost was -- had steeply gone up from 36% to 46%. And you did allude in your call that we are on towards the reduction. But if you can give us some flavor of over what period do we see this cost coming down? And particularly within that, also, could we control the -- expat utilization, which is lower than the overall on-site. On that piece also, do we see some cost? So if you can give some flavor over the next 3, 4 quarters that will help. S. D. Shibulal: Sure. Yes, Mr. Murthy has said that, and there is a lot of work happening on reducing on-site cost. It can be done by multiple levers. Number one is reduction in on-site percentage itself. And number two is rationalizing costs, changing role ratios. And all of these are long term. We can't go in and say we are going to reduce the on-site by 5% with clients starting tomorrow morning, because the client also has to be prepared. Changing the role ratios is a gradual process. Utilization on-site is quite substantially high. We are at about 94% also utilization. Now our deputy utilization is even higher. We will continue to push, but the point is that none of this is overnight and it will take time. We have seen improvement this quarter, on-site, offshore ratio. It has improved by 0.8%, but it will take time. And it will take few quarters and we will continue to focus and -- but results will show up over a period of time.

Our next question is from Rahul Bhangare of William Blair. Rahul S. Bhangare - William Blair & Company L.L.C., Research Division: Manufacturing had a quite a good quarter. Can you help reconcile some of the actual performance with some of your cautious commentary from last quarter? S. D. Shibulal: We have given a guidance. If you remember last quarter, we have stepped our guidance of 6% to 10%, which is approximately 7.7% to 10.7% for the year. The quarter-on-quarter is not the important issue. One needs to look at secular trends. We have seen growth for the last 4, 5 quarters sequentially. But there are assets -- there are multiple internal transformations we are doing to create the sustainable growth and sustainable margins. And they do take time to yield results. The environment has also been volatile. We have seen positiveness in the U.S. and some positiveness is starting to happen in Europe, but it continues to be volatile. And there are some unforeseen events, which also happened in the environment. So our statements are actually statements of fact as we see it. When we enter the quarter, our visibility over the quarter is about 95%. Now 95%, 5% of the $2 billion revenue is $100 million. That is what we need to make up, and we have approximately 60 days to make this up. So it's important to note that the guidance is based on what we see and it's a statement the fact, and that's what we talk about. This quarter too, it is very similar. We are making a statement of fact that's based on all the factors we know. We'd include that deal pipeline, the customer velocity, the potential holidays, furloughs, there are challenges of internal transformation, all of those we consider. And that is where the caution comes from. It is also important to remember that you have seen -- we have seen volatility in our performance. If you look at the last 8 quarters, you will see volatility in our performance. Rahul S. Bhangare - William Blair & Company L.L.C., Research Division: Okay. But in the manufacturing vertical, in particular last quarter during your call, you had some pretty cautious commentary but it ended up -- the quarter ended up ending -- ended up quite nicely. Did something happen during the quarter to where I think you had some cautious commentary about discretionary spending, specifically in the manufacturing vertical? Did that change? S. D. Shibulal: So let me ask Sanjay Jalona to answer that.

So overall, we had a good growth in this quarter. We have seen all sectors, especially high-tech and automotive, starting to spend a little bit more than normal. We did see some investments, and going into miniscule [ph] business transformation, a lot of customers spending on digital and analytics, so that is what has propelled the growth. We see good growth pipeline and momentum going in and all the service lines have also grown-in this quarter. Rahul S. Bhangare - William Blair & Company L.L.C., Research Division: Okay. And one more quick one, Rajiv, sales and marketing is now nearly 6% of revenue. Should we expect this to be the new normal or should we expect further increases?

I think this is -- this one -- this will stabilize at this level plus-minus 0.5% here and there. I think if you look at -- compare our season, marketing expenses, the competition, I think we are the most efficient sales force, a very effective sales force. And I think we have made those investments in the last 2 quarters on our sales. We gave an 8% wage hike during May, and we've also increased the performance bonus for them. So I think is to control all that, I think we have made a lot of investments in the last 2 quarters on the sales and I think it will stabilize around this level in the near future.

Our next question is from Sandeep Muthangi of IIFL. Sandeep Muthangi - IIFL Research: I have a question on margins. Rajiv, I'm trying to reconcile the margin breakup that you said. You said 300 bps negative because of the wage hike and then 250 bps positive because of the currency depreciation. So I'm just trying to see the net impact of these things, should that have been 50 bps, but the salary cost as a percentage of revenue have increased by about 160 bps quarter-on-quarter. Is this because of this performance bonus for the sales guys and perhaps any other metrics, any other salary-related event that are not included as a part of this 300 bps?

I told you, we have -- so what I had said was that we give a wage hike which had an impact of 300 basis points, set off by a rupee depreciation, which give an offset of 2.5%. These are operational parameters being much better in terms RPP utilization on-site mix and that set off against higher provision for bonuses and they will pay for our employees. Sandeep Muthangi - IIFL Research: Can we quantify the bonus and the variable pay part, Rajiv?

No. I think what we are saying is we have to pay our employees better. We have to make sure that they get -- people who are performing, they will get paid high variable pay. And all operational benefits that we have seeing in terms of improving the parameters have been drawn back. But I think it will be too much to break it up between how much of it has gone to variable pay, how much is going to this. But I think, overall, what we are saying is, if we perform well, if you do well on our operational parameters, some part of it will go back in the business, whether it's sales, whether it's employees, whether it's quality and productivity of the tools. Sandeep Muthangi - IIFL Research: Okay. Just please help me with one thing then. Should we look at these performance bonuses and variable pay as a recurring event, that every quarter -- is this what is going to happen or is this kind of seasonal or the nonrecurring thing that has happened in 2Q?

No, I think what we have done is now we have come to a level where we are very comfortable and we believe that this will drive a high-performance culture in the organization. So I think what we have done in the current quarter and quarter 2, up to current quarter, is I think going to be the right thing to do in terms of measuring the performance of people and driving a high-performance management in the company. Sandeep Muthangi - IIFL Research: Okay, great. If I can have one question on the slight reorg that has been happening. Should we be going back from a purely vertical-based structure, which has happened during the last reorg, to a part-vertical-based structure and a part focused on the [indiscernible], so the emerging growth markets kind of structure. So what should we read into this? Is this because you want a higher focus on this or is it because you face some challenges with a vertical-based structure that this kind of reorg had happened? S. D. Shibulal: So we have actually created in this a virtually country P&Ls of 4 countries, Australia, China, Japan, Middle East and Southeast Asia. And these are being headed by the country heads and reporting [indiscernible], who will report them to me. The purpose of this is to bring in more focus in these areas. But the operation will continue to be somewhat joint. We want to make sure that the knowledge and benefits of the global industry verticals to flow into these countries and that will be taken care of at the ground level. We've also created a couple of new industry verticals. That is to drive growth. New people are taking up leader positions. And Steve Pratt is looking after Utilities and Resources, Ravi will look after the Life Sciences and Manish will look after Insurance. These are all new leaders who are coming up and who will look after new industry verticals and drive growth. So overall, it is all meant for increasing our focus and -- increasing our focus and creating velocity. Sharpen our focus on growth and also increasing client velocity.

Our next question is from Ankur Rudra of Ambit Capital. Ankur Rudra - Ambit Capital Pvt. Ltd., Research Division: Can you maybe help me with some of the margin benefits outside of currency you called this time? I can see utilization improvement, offshore shift and realization increase? Is it possible to enumerate the consolidated gains from these benefits?

Utilization improved by 2.4%. As I said, on-site mix of 0.8% and RPP of 0.6%. Put together, they would give us a benefit of about 150 basis points for the quarter. Ankur Rudra - Ambit Capital Pvt. Ltd., Research Division: So given that the currency tailwind was counterbalanced by wage hike, are these incremental 150 basis points was basically taken up by the bonuses, which is what you spoke about? S. D. Shibulal: The rupee depreciation gave us 250 basis points. The wage hike was a negative 300 basis points, so there's about 50 basis points drop offset by 150 basis points increase in the operational parameters. The balance of 100 basis points goes to additional bonuses and other expenses, other investments that we talked about. Ankur Rudra - Ambit Capital Pvt. Ltd., Research Division: Just to clarify this, additional 150 -- sorry, the 100 basis points is gone. Will this stay at this level every quarter or this is a one-off only in this quarter? I just want to clarify that point.

I think, as I'm saying, we have to pay our employees well. People -- people do perform. There are people who are actually performing very well. So I think this is a right level of payout that we have to give to our employees. And I believe that going forward also, we'll continue to provide at these levels. Ankur Rudra - Ambit Capital Pvt. Ltd., Research Division: Just on the -- these -- on x currency tailwinds you called this time, do you feel that the low hanging fruits on these levers have already achieved and it will be tougher to gain further gains on utilization in offshore shift?

Not really. We started on the cost optimization thing last quarter. We have incurred expenses for that, but the benefits will come on the subsequent quarter. Utilization is at 77.5%. I would expect utilization had a -- we can position to take it up to 82%, so we have a 4.5% lever there. Our on-site mix is still at 30.2%, shows potential to bring it down. So there are enough levers that are there. But I think a lot of this will depend on the growth. If we see good momentum, I think it goes to the flexibility to make changes much faster. So I think all these factors will play out in terms of how the margins will look like in the future. Ankur Rudra - Ambit Capital Pvt. Ltd., Research Division: Just finally on -- last question on margins, like you had historically quantified the result impact in 2Q, you are articulating the investments you'll be making towards other areas to make yourself more competitive in the long term. Is it possible to quantify the extent of that investment for the rest of the year?

No, it is difficult, because a lot depends on your eligibility to make the investment. If you do well, you have good quarter growth, you see the upside in margin. A lot of that will flow back into the investment. So I think it's dependent on how growth is looking, and that's the reason that growth becomes very critical. If we see good growth, then we'll see how much of that can be invested, how much of the upside in the margin can be invested back in the business. But having said that, I think some of the variable pay that we are talking about are investments that we have to make going forward. So those have already been done this quarter. So I will not see an incremental impact of that coming in the subsequent quarters, but I think a lot of other investment you're talking about in terms of sales, quality productivity, delivery efficiency would depend on how we perform in terms of our growth. Ankur Rudra - Ambit Capital Pvt. Ltd., Research Division: Just lastly on the guidance...

Excuse me, Mr. Rudra, sorry to interrupt. May we request you to return to the queue, please, as there are several participants waiting for their turn. Thank you so much. We'll take our next question from Sandeep Shah of CIMB. Sandeep Shah - CIMB Research: Just 2 questions in terms of the guidance. Is it -- are you assuming more furloughs in a higher seasonality versus what you used to assume in the last year? And secondly, in terms of -- and the second question is, Shibu, you made one of the comment that the volatility in terms of the growth to some extent is coming down? So is it fair to say that this may sustain going forward because of 2 reasons? One is the stop-and-start approach in your discretionary project has actually been improving? And the second our win ratio in the outsourcing and the order book is now improving to give us a less volatile growth going forward? S. D. Shibulal: The first question was about furloughs. We are not assuming anything out of ordinary at this point in time. Sanjay has expressed the concern about more furloughs because of the government shutdown, which can lead to different spending cut, which can lead to manufacturing sites taking more furloughs. But that has ended, we are not assuming that at this point in time into our prediction. We will assume normal. Media[ph] has also said something about furlough decisions after the Q3 closures in the financial industry. That also were not considered. We have considered somewhat similar to what we considered in the past, number one. Number two, regarding the volatility, what I said was that over the last 8 to 10 quarters, we have seen volatility. While we have seen growth over the last 4 quarters, most of the initiatives have started are very, very nascent. And it's too early for them to yield result and they will only yield result in the long term. I wouldn't -- in the last quarter, I was very clear that wouldn't consider this as a secular trend. I remain cautious even today. I remain cautious even today because of the reason, as I said, that most of the internal transformational stages which we are making to achieve all the stability is way too early. Because of that, I remain cautious. I wouldn't declare this as a secular trend. Sandeep Shah - CIMB Research: Just a follow-up on the discretionary project side, do you believe the stop-and-start approach is getting behind and there is more predictability on the ramp up of the leads? S. D. Shibulal: So on the large outsourcing deals, we have won, but -- so you asked that also, so I'll answer both. On the large outsourcing deals, we have won, but we have not won enough, because a stock has to get built. A $1 billion win this year will only give us about 4%, or 4% to 6% this year and about 20% this year, which is not much in the scale at which we operate. We need to win more and create a stock, and that's what we are trying to do. On the discretionary spend, there is a bit more velocity, but again, the environment can be very volatile, right? We're starting to get a little bit more velocity, especially in the financial services space, but we started seeing volatility in the retail space. So financial space is getting better but retail space has become more volatile, and the government shutdown also, that didn't help. So we have considered that also into our guidance. It has improved. The overall environment has marginally improved, there is no doubt, but the discretionary spend also has improved by there are areas where we have seen bigger ratio.

Ladies and gentlemen, due to time constraint, that was the last question. I now hand the conference back to Mr. Sandeep Mahindroo for closing comments.

Thanks, everyone, for spending time with us on this call. We look forward to talking to you again. Thank you, and have a good day.

Thank you, members of the management team. Ladies and gentlemen, with that, we conclude this conference call. Thank you for joining us, and you may now disconnect your lines.