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

Thanks, Indra. Hello, everyone and welcome to Infosys earnings call to discuss Q3 FY ‘23 financial results. Let me start by wishing everyone a very happy New Year. Joining us today on this call is CEO and MD, Mr. Salil Parekh; CFO, Mr. Nilanjan Roy; and other members of the senior management team. We’ll start the call with some remarks on the performance of the company by Salil and Nilanjan subsequent to which we will open up the call for questions. Kindly note that anything which we say that refers to our future outlook is a forward-looking statement that must be read in conjunction with the risks that the company 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’d now like to pass it on to Salil.

Thanks, Sandeep. Good evening and good morning to everyone on the call. Thank you for joining us. We are delighted to share with you that our Q3 performance was strong with year-on-year growth of 13.7% and quarter-on-quarter growth of 2.4%, this in a seasonally weak quarter for us and amid a changing global economy. We continue to gain market share. Growth in Q3 was broad based with most industries and geographies growing in double-digits in constant currency. Growth in constant currency for 9 months of FY ‘23 was 17.8% compared to the same period of FY ‘22. Our large deal value was $3.3 billion, the highest in eight quarters. With 32 large deals, this is the largest number of large deals in our history, 36% of this is net new. Our pipeline of large deals remains strong. Our digital revenue grew at 22% in the quarter at constant currency and are now close to 63% of our overall revenue. Our core services revenue grew at 2.4%. We are seeing growth in both areas of our business, digital and core services. This is a testament to our industry leading digital capabilities, including our Cobalt cloud capability and our industry-leading automation capabilities, both of which are resonating with our clients. Our large deals pipeline is seeing increased traction for automation and cost efficiency programs. Our results reflect our deep rooted client relationships, coupled with client-centric strategy, differentiated digital and cloud capabilities, strength in automation and the ability to pivot our business rapidly to changing client needs. Our cloud revenues continue to have healthy growth this quarter. Our clients are focused on accelerating the digital and cloud transformation, both to grow and to become more operationally efficient. They chose us to partner with them through the complexity of managing this change, because of our differentiated capabilities. Our industry leading cloud offering Cobalt is playing a key role in helping them navigate the digital transformation. Two examples of this, Cobalt is helping accelerate business growth and resilience for a large telco and making the decision-making more data driven. We are supporting a leading aerospace company by automation of the customer experience area leveraging a modernized technology infrastructure, driving material cost efficiency. Strong growth is accompanied by stable operating margin at 21.5%. This was driven by healthy revenue growth and cost optimization benefits. Our operating margin for the first 9 months of FY ‘23, are at 21%, in line with our margin guidance. Our voluntary quarterly annualized attrition continues to decline steadily and reduced by 6 percentage points sequentially to well below 20% for this quarter. We are encouraged by the immense confidence and trust that clients have in us. The signs around us around the slowing global economy are visible. Some areas such as mortgages and investment banking and financial services industry, telco, high-tech, and retail are more impacted and that is leading to delays in decision-making and uncertainty in spending in these areas. We are confident that the strength of our digital and cloud capabilities and our automation capability will continue to position us well in the market. We are keeping a close watch on the global economy. Driven by our growth of 17.8% in constant currency for the first 9 months of FY ‘23 and strong large deal value for Q3, we are increasing our revenue growth guidance, which was at 15% to 16% earlier to 16% to 16.5% despite the changing global economic conditions. We are retaining our operating margin guidance for FY ‘23 at 21% to 22%. We anticipate to be at the lower end of this range. Thank you. And with that, let me request Nilanjan to share other updates.

Thanks, Salil. Good evening, everyone and thank you for joining this call. Let me start by wishing everyone a very happy and safe 2023. Q3 was another quarter of resilient performance. Our revenue grew by 13.7% year-on-year and 2.4% potentially in constant currency terms despite seasonal weakness. Most of our business segments and geos grew in double-digits year-on-year in constant currency. Specifically, manufacturing grew by 36.8%, EURS by 25.9%, and Europe grew by 25.3%. Digital revenues constitute 62.9% of total revenues and grew by 21.7% year-on-year in constant currency. Core revenue saw another quarter of growth, reflecting the accelerated client focus on cost take-out. Client metrics continue to remain strong with year-on-year increases in client counts across revenue buckets. Number of $50 million clients increased by 15 to 79, number of $200 million clients increased by 5, while number of $300 million clients increased by 3 over the same quarter last year, reflecting our strong ability to mine top clients. During the quarter, we added 134 new clients. Utilization, excluding trainees, reduced to 81.7%, reflecting seasonality and employees joining the bench or position of the training. On-site asset mix remained stable at 24.5%. Quarterly annualized attrition continued to trend downwards and reduced further by another 6% during the quarter. This is the lowest quarterly annualized attrition in the past 7 quarters. Consequently, LTM attrition reduced to 24.3% as compared to 27.1% in Q2. We expect attrition to reduce further in the near-term. Revenue growth was 17.8% in constant currency terms over 9 months FY ‘23. Operating margin for the same period was 21%, in line with the lower end of our full year guidance as called out earlier. Q3 operating margin remained ready at 21.5%. The major components of Q-on-Q margin movement as follows: There were tailwinds of approximately 40 basis points due to benefits from rupee depreciation and cross currency offset by lower benefits from revenue hedging, 70 basis points from lower cost – from cost optimization, including lower subcon. This was offset by headwinds of 30 basis points from higher SG&A and the balance 80 basis points due to seasonal weakness in operating parameters, higher third-party costs, furloughs etcetera. Q3 EPS grew by 13.4% in rupee terms on a year-on-year basis. DSO increased by 3 days sequentially to 68 reflecting higher billing during the quarter. Our balance sheet continues to remain strong and debt-free. ROE increased by 2.2% year-on-year to 32.6%. Free cash flow for the quarter was $576 million, a conversion of 72% of net profit. However, YTD FCF was $1.8 billion, which is implying a conversion of 81% of net profits. Yield on cash balances increased to 6.3% in Q3. Q3 marked the 30th consecutive quarter of delivering positive ForEx income despite the volatile currency environment. Consolidated cash and investments declined from $4.79 billion last quarter to $3.91 billion, consequent to $1.32 billion we returned to investors towards interim dividend and buyback. We initiated the buyback on December 7 and till date have bought back 31.3 million shares worth INR4,790 crores or 51.5% of the total authorization of INR9,300 crores at an average price of approximately INR1,531 per share compared to the maximum buyback price of INR1,850 per share. Coming to segment performance. We signed 32 large deals in Q3, which is the highest ever. TCV was $3.3 billion, the highest in the last eight quarters, with 36% net new. 7 large deals were in retail, 6 deals in financial services and communications, 5 each in EURS and manufacturing, 2 in life sciences and 1 in high-tech. Region wise, this was split by 25 in the Americas, 5 in Europe and 2 in the rest of the world. Growth in financial services was impacted due to a higher than normal furloughs and some specific project closures. These pipelines continue to be strong and oriented towards cost takeout and take of transformation. Our competitive position in the industry as demonstrated in the past remains very strong. Retailers are seeing uncertainty on consumer spending as a result of high inflation, high interest rates and softer economy. However, at the same time, direct-to-consumer and digital commerce are opening up many new opportunities on the back of our growing presence in leading e-commerce platforms and also our very own Infosys Equinox. We have healthy deal flow in the communications segment, along with continued steady pipeline. However, cost pressures and economic concerns continue on the client side impacting discretionary budgets. Energy utility resources and services segment reported strong growth along with healthy level of large deal wins in the quarter. The deal pipeline is strong and an increasing trend versus the previous quarter given medium-term growth visibility. Manufacturing segment continues to be robust, supported by healthy pipeline of deals in both traditional and new technology areas. We are helping clients across engineering, IoT, supply chain cloud ERP and digital transformation, including helping clients accelerate their journey to the cloud. We continue to see caution around budget and spending for consumers in the high-tech segment, especially around discretionary spend areas. For digital service capabilities in quarter three, we have been ranked as leader in 7 ratings for our cloud services, digital engineering services and sales force implementation services. We have also been positioned as a major player in 7 ratings for our IoT and engineering, security and automation services. We believe our structural lever for medium to long-term growth for the industry remains intact and Infosys is well positioned to support its customers in their transformation journey. With strong revenue performance in the first 9 months of the year, the revenue guidance for FY ‘23 has changed from 16% to 16.5%. Operating margin guidance band remains at 21% to 22% for the year. And as mentioned previously, we expect to be at the lower end of the range. With that, we can open the call for questions.

Thank you very much. [Operator Instructions] The first question is from the line of Moshe Katri from Wedbush Securities. Please go ahead. It looks like Mr. Katri’s line is dropped. In the meanwhile, we will move to our next question, that’s from the line of Nitin Padmanabhan from Investec. Please go ahead.

Yes. Hi, good evening and thank you for the opportunity. My question was around the increase in cost of software packages that’s up by almost $69 million sequentially. How should we think of this cost? Do you think this incremental $69 million will be a sticky number out there or do you think it’s sort of representing the headwind instead of come off going forward? And is this sort of a pass-through nature that’s the second sort of clarification on the same thing? Thank you.

Yes, Nitin. So I think these – the $69 million is a combination of software and other deals which we do which have DAS services, etcetera. It could be infrastructure. So these are part of our integrated services offering, right. So these come with manpower component and sometimes they also come with an attachment of these services. So that’s the way we do it. It’s an integral part of our service offering. And I think looking at we have to see where we end up for the quarter four, but I think this is part of our overall offering and it’s actually giving us traction in the market in many of our service lines.

Sure. Is this sort of – so it is a pass-through in nature in a way, is that correct? And basically, at least earlier in the past, you had suggested that the new level would sort of sustain. So in the new operating model, this is sort of sticky thing that continues, is that correct?

An integrated offering, like I said, this is integrated with our services offering. So they are not just standalone deals we do, they come with the service element as well, right. So that’s the way you have to look at these deals.

Sure. Fair enough. Thank you so much and all the best.

Thank you. Our next question is from the line of Bryan Bergin from Cowen. Please go ahead.

Hi, good evening. Thank you. Why don’t you just clarify some comments around demand? I am curious if you would say there is a material change in the way that clients are behaving now versus 3 months ago in your reported 2Q, because the areas you are citing weakness I think were the same ones, the pockets of weakness that you talked about. I am really just trying to understand if you think there has been a real change to spending and contracting there or more broadly the same?

Hi, thanks for the question. This is Salil. What we have seen today in addition to what we said last quarter, for example, in financial services beyond mortgages, we see the investment banking side of our clients as well showing an impact of the economic environment and they are in telco, high-tech and retail in some clients. So, we don’t see a material change, but within financial services, one more area that we see some of the impact coming in. Having said that, we have for example clients in energy or utilities or manufacturing, those industries are still looking quite strong in terms of the outlook.

Okay. Okay, that’s helpful. And then on the large deals, the renewals were a big component of that TCV and you have also cited benefits from consolidation in the commentary, are you taking any different approach as it relates to proactive renewals to try to drive more vendor consolidation opportunities?

So on large deals, as you pointed out, we have had a very strong result, $3.3 billion and 32 deals. We see the focus which we had on transformation continue, but outside of the industries that we discussed before, where there is some impact, we see huge cost automation, cost efficiency plays across all industry segments. And there, we have, we believe, very strong capability, which is helping us. And within all of those discussions, we see areas where there is vendor consolidation. The approach we put in place is similar to what we had in the past. However, we see – given our market share gain over the last several quarters many clients are looking at us when we start to narrow the list in the vendor consolidation.

Okay, thank you very much.

Thank you. The next question is from the line of Apurva Prasad from HDFC Securities. Please go ahead.

Good evening. Thank you for taking my question. Salil, I’m not asking for any guidance for ‘24 or ahead, but would appreciate your comments. And then the visibility that you have for the year ahead, so how different would it be versus typically this time of the year. So, perhaps any comments on pipeline or pipeline to TCV conversion?

Thanks for the question. I think – as you rightly said, we are not in a position to provide the guidance for the year, which starts in April. Pipeline – we have a very strong large deal pipeline. So we are feeling good that the pipeline is at a level which is in good shape. We see good traction on large deals and we’ve seen more in the sort of relevance connect with our clients on the cost efficiency and automation gains and in the areas, in the industries where there is economic support a good traction of Cobalt and the digital transformation phase. So the pipeline is looking quite good today based on what we see in the digital.

Got it. And Salil, you called out IB mortgage in parts of telecom, high-tech and Retail, but is there any vertical trend for these between transformation – the ones that are transformational nature and deals that are more on the cost optimization across verticals. And the second part to that is, do you see any moderation in new client acquisition channel with more vendor consolidation deals happening. This was something which we had very strong traction more recently.

On the first part, we see some of the growth transformation plays impacted in those industries that we talked about, for example, mortgage investment banking, retail, high-tech, etcetera. The cost efficiency plays everywhere. So we see that even in programs there and let’s say in the energy sector or manufacturing. There – in many places, we see essentially clients looking to use the cost efficiency to fund the transformation because in many cases, they still need to drive digital or cloud transformation to keep their market growth, so that clients connect, customer connect are going. So that’s how we see that play right now.

And Salil on the other part on the new client acquisition, with more vendor consolidation rates.

Yes, there on usual, our new client, we’ve seen – while we don’t disclose the number, we’ve seen a very good new client acquisition in Q3. And then the consolidation of discussions where – so there is no contradiction in there to at least – both are carrying on within our sales expansion, new client acquisition continues to be important as well. Then the consolidation, what we are seeing is on several discussions, clients are looking, especially if they have six or seven vendors they want to narrow down to one or two or three, and we are appearing to the beneficiaries in quite a few of those discussions.

Got it. Thank you, and all the best.

Thanks.

Thank you. Our next question is from the line of Mukul Garg from Motilal Oswal Financial Services. Please go ahead.

Thank you. I hope – to start with on the…

Sorry to interrupt, your audio is a bit muffled. If you are on a hand speaker phone, please switch it to handset or something on your phone.

I hope this is better.

Yes, sir. Thank you.

Sure. So Salil, I have two questions. First, on the strong TCV wins this quarter. Can you at least let me qualify how much of the strength was on account of share gains, which you guys have made versus the resilience, which is there on the technology spend because if you look at the broader market commentary, and you have also highlighted retail as one of the weaker areas whereas you got seven large deals in retail. So if you can just help us break out these to get a sense of the deals in momentum?

So there – I’ll start with that. This is Salil. I think the large deal momentum for us is really a function of what we’ve seen that we’ve put in place, we still within this mix of $3.3 billion have digital transformation deal, and we have cost efficiency automation deals. What we mean by some of the industry callouts, for example, retail or telco is, there are some clients, not everyone in that industry, but there are some clients which are getting impacted by the economic environment. We’ve been quite focused. We have a broader portfolio. So for example, we showed up in retail, we have those large deals and the it’s a mix between transformation and cost efficiency automation. And so many times when clients feel an impact of the economic environment, and there might be a greater need the cost efficiency play as well. So we are ensuring that both of those engines continue to work well with our clients.

Right. And my other question was on the margin side. You guided for margins ‘21 to ‘22 bands with margins towards the lower end. Can you just help us maybe what the pools which you are seeing on the profitability given that the supply scenario is in rapidly. Is there some portion of the pressure which is on account of the higher share of cost efficiency deals, which you guys are winning with initial ramp-up cost, because if you look at Q4, obviously, Q3 also had the pass-through business, which got impacted. I’m assuming, as Nilanjan mentioned, there was some seasonality into that.

Yes. So I think like we mentioned, the reason for Q3 margins, we’ve already given the breakdown. So as we look ahead to the levers which we have on is of course, utilization, right? And we’ve seen about 1.7. This is probably I think at least in the last 3 to 4 years have been worse in the lowest. So that’s one which we will have. And as we start putting these pressures on to the production floor that you will get a automatically if there any benefits, right. So that will be a double value impact for us. We also have subcons. Today, we dramatically reduced our subcons literally in three quarters. We were 11% plus. We are 8.7%. Historically, we’ve been at 7%. If you look at our pricing has been quite stable and historically, this was one lever which we always bind down repeatedly, which is a discounts and renewals etcetera. And as of now, we haven’t seen that at all. We continue to push with clients and where all we can get price increases. So we are seeing the information in terms of our own workforce continuing to upgrade that and that we ever which we have. So we are continuing to see these are in our era to speak as we look at, and we will continue to deploy them.

Is it fair to assume that we should see at least better profitability in the next quarter, given that we have a number of levers in the business?

So there is been a guidance for the year. You’ve seen in the first 9 months, and that should give a good indication of Q4.

Fair enough. Thanks for taking my question. I will get back into the queue.

Thank you. Our next question is from the line of Sudheer Guntupalli from Kotak Mahindra Asset Management. Please go ahead.

Yes. Good evening, gentlemen. Thanks for the opportunity, and congrats on a good quarter. Salil during some of the previous macro uncertainties like Brexit, with in a few weeks of the vote, we had seen some of our large clients canceling the ramping down projects. This time, even on the tough comps, the pace of growth in moderation is much lower than what many people have been anticipating. And many forward-looking indicators like deal wins, pipeline and CIO surveys still continue to be very strong. even 11, 12 months into this macro concerns. So are you seeing the previous three to four macro downturns? How do you move on to the current cycle, especially on the available of the resilience of IT service spend?

So thanks for the question. It’s always difficult to sort of compare across cycles. From the perspective of Infosys, my sense is what you mentioned earlier, which is we are still seeing the pace of change when there is change within an industry or client to be not rapid. And we are also seeing that the opportunities for cost optimization and efficiency are expanding within the work that we are doing. So in many ways, we are in a good position to be able to work on both sides. And so – while it’s difficult to predict what the the situation in the economy will evolve, we feel quite balanced. Our sales team is quite agile we’ve pivoted quite quickly and develop various sort of points of view on different efficiency scenarios in different industry that we feel comfortable that the pipeline will be is looking good at this pace, and we will continue to work on that.

Sure. Thanks, Salil. So is it a right understanding to say that we are now in a much better position to navigate this macro weakness probably through more than compensation from the cost efficiency deal and vendor consolidation deal. Is that the correct interpretation?

The word we see it is we have both components of at least the two large components of our clients are looking for we have good industry-leading capability. So it’s really a function of a specific industry, if industry or a client will evolve, the position ourselves to make sure that we can support our clients in that area.

Sure. Thanks, Salil. All the best for the future.

Thank you. Our next question is from the line of Moshe Katri from Wedbush Securities. Please go ahead.

Hey, thank you. And happy new year, and congrats on strong execution in a pretty tough environment. I have a three-part question first, March guidance upgrades is pretty unusual from a seasonality perspective and given the macro concerns. So it seems like you have better visibility now. Can you share any views on the budget cycle itself, your kind of concern over slippages, maybe a month or 2, budget delays. Are you seeing any of that? Or you think the budgets will be awarded or finalized as on time this time?

Thanks, Moshe. This is Salil. On the budget, so far, we’ve seen in some clients and especially in the industries we’ve called out some areas where there has been slowness in deciding or some sort of changes, especially on some discretionary work. So we mentioned high-tech, for example, mortgages, a bank – investment banking. So all of those ones that we mentioned before. But we don’t see a broad base change. Equally, we do see good, let’s say, the area with the budgets moving ahead as in the past, with energy, utilities, manufacturing. So we’ve got like one answer that it’s a little bit by industry or sub industry somewhat different.

Understood. And then you – in the press conference, you mentioned that about third of your new – third of TCV came in from new logos. Can you remind us, is this within the range of what you’ve seen in the past in terms of mix of new logos versus renewals?

Sorry, referring the last deal, $3.3 billion that was 36% net new. That in the range where we do some quarters its lower, some quarters higher, but not – these numbers are not unusual.

Okay. And then the final question is for Nilanjan, when we met in Bangalore back in December, you pointed to pivot in the nature of the new deal flow towards, as we said, cost optimizations and your consolidation. Obviously, this is what you’re seeing. Are these deals typically less dependent on clients’ budgets given the fact that you’re kind of taking over a specific function with the objective of kind of reducing delivery costs? And is there any difference in profitability levels here in terms of these projects versus some of these projects that you’ve been doing in the past few years? Thank you.

So in that, I think the way you described it, these are not fully correlated with the budget of a client in many instances these are areas where given the evolving economic situation, clients are looking to reduce that tech spend across the enterprise, in many cases, use some of that savings to fund transformation programs. It sometimes was coupled with vendor consolidation. So let’s – there are clients you may have five or six vendors and when we benefit from the consolidation we see tremendous efficiency that can be created. Our automation tools become quite useful. We typically add automation on our ongoing programs, which gives an annual benefit. But when we see something of scale where we have not been involved earlier, we have an ability to provide a much greater benefit. In aggregate, the profitability of these deals is within the range of the rest of our company and especially has been more and more over time, leverage the automation tools and our capabilities, we see these becoming stable high profit deals.

It’s very helpful. Thank you.

Thank you. Our next question is from the line of Pankaj Kapoor from CLSA. Please go ahead.

Yes. Hi. Thanks for the opportunity. So, my first question is on the smaller deals, which are less than, say, 50 million TCV. If you can give some qualitative color on how your win and pipeline in that basket has been moving? Is it higher, lower versus, say, what it was six months back?

So, on that – thanks for the question. We don’t typically disclose much about those deals. Overall, we have a good healthy pipeline where we publicly disclose more about the larger deals.

Understood. And Salil my second question is on these cost takeout deals. Can you give some sense on how the pricing in such deals behaving? Are you seeing the pressure there more than normal, either because clients are pushing for more discounts or because of competitive intensity?

So, there the pricing in Q3, we have seen quite stable within the mix, we have not seen a change. Typically, it’s really a function of what type of focus that clients have, which industry they are in, as we have not seen at least in Q3 in the deals that we have closed in the discussion. We have a big change on that it looks stable at this stage.

Understood. Thank you and wish all the best for ‘24.

Thank you.

Thank you. Our next question is from the line of Ankur Rudra from JPMorgan. Please go ahead.

Hey. Thank you and congrats on the strong numbers there. Just a couple of questions to understand some little bit better. I think one of the comments that you made earlier on the Pankaj’s question, you mentioned on previous calls over the last year, the listed deals what were [ph] smaller deals and that is showing up and so despite headline deeply declining.

Ankur, we can’t – we couldn’t hear. Ankur, we would have to go on a handset or something. We couldn’t hear your voice is very muffled.

Is it better?

Yes.

Okay. Thank you. So, I was saying that I am going to try and counter this question in a different way. You had mentioned in previous calls that the mix of deals was changing in favor of smaller deals. And that’s why the headline, TCV was declining, the growth is still quite healthy [indiscernible], do you think the mix of deals is still the same as it was in the last year before this quarter?

Hi Ankur. Thanks. This is Salil. I am not clear on the mix of deals on the previous discussions. But just looking macro, we see the mix of deals remaining in good shape across the board. There are some quarters in which – those were number of larger size deals. But in general, we don’t have a pattern in that, at least that we did in Q3.

Okay. Alright. The next question I wanted to check, Salil, again, was on the U.S. business. The headline growth seems to sort of slipped down to close to low-double digits, whereas the growth has been led by very strong performance in Europe and manufacturing. Do you worry about the U.S. business, it’s sort of slower than Europe, which is not the case in the rest of the industry when you look at deals?

So, there, Ankur, we have had very strong growth in the U.S. at over 10% in Q3 in constant currency. Europe, of course, has been a standout in the growth that we have had. We see the traction, the pipeline, the work remains pretty strong, as we have described earlier, across the two dimensions transformation and cost across the geographies. If you look at the economic situation, we do see developing side a little more impacted, but we see good traction on the pipeline in both. We had a very successful Europe program in the last 18 months, 24 months, and that’s also helping us with the growth in this quarter.

I mean out of our large deals this quarter, 25 were actually medical. So, I think this will show that we have a very strong pipeline there.

Understood. Maybe a last question over here was on pricing and contract profitability in the projects you are winning right now, especially the large number of big deals this time you signed. How is that trending? Is that improving, staying the same or maybe becoming a bit lower than before?

These are for the new deals signing?

Yes. The new deal signings this quarter, how is that trending versus before?

I don’t think there is an unusual. Yes, absolutely new deals, and in fact many clients want the productivity efficiencies upfront. So, we always see that the – initially, part of these new deals will be lower than portfolio margins. But like we have shown in the past, at the same time, our existing deals and large deals are reaching higher profitability, and that offset some of this pressure which is coming from the newly signed deals and margins will typically be lower. So, that is unusual on the trend.

Okay. Appreciate it. Thank you for the color and best of luck.

Thank you. Our next question is from the line of Vibhor Singhal from Nuvama Equities [ph]. Please go ahead.

Hello. Yes. Hi. Thanks for taking my question and congrats on a solid quarter. So, Salil my question – I have just two questions. One, I wanted to basically get an idea on, I mean you have seen attrition coming down in this quarter quite sharply. And as you mentioned in your opening remarks as well, so I mean how do you see the trend of this attrition going forward of course downward? And how do you believe the benefit of this could actually percolate to our margins? Again, I am not asking for objective guidance of a number. But in terms of the direction, do you think it is going to aid our margins, or do you think most of the impact of this is already built into the numbers that we have currently? And my second question was usually on the geography of Europe. So, just wanted to pick a win on how the conversations with the clients are happening in that part of geography, specifically if you could maybe break up between Continental Europe, Eastern Europe and in the UK. And which pockets of those geographies do you think are looking more softer, or is there more of believe looking in that part of the geography?

So, I will take the first one on the lower attrition. Absolutely, we are seeing this coming down. And like we have said, even in the future in the next quarter, at least until, what was an issue, because we are seeing is coming down. Absolutely, this should have a positive impact on margins. I mean during the year, whether it was stretching on laterals, whether it was the compensation hikes we did, that really impacted our year-on-year margins. So, I was looking ahead and attrition as an impact both of the macroeconomic and also the internal policies we are doing in terms of promoting within, etcetera, should benefit us looking ahead.

On Europe, I think the way we see some color for 25% of our business in Europe, and we have a few countries in the country, we operate in we see some slowing – some economic impact in Germany. There is some in the UK, less so in the moderate countries at this stage. But overall, the coloring is a little bit more by the industries that we mentioned earlier in the call, which are across sort of on a global perspective. But relatively, Europe seems a little bit more impacted today than U.S.

Got it. If I can just maybe drill down just a little bit more. Any specific color that you can provide on European retail and European manufacturing segments?

So, there – we don’t necessarily provide that much sort of granularity, but sort of same comments on a global level on manufacturing that we mentioned earlier and for energy, which is looking stronger and sort of let’s say, attention to the economy on retail in this case.

Got it. And the softness in retail, do you believe it is as of now confined to the retail stores and what maybe circulate and you could, in your discussion with clients, do you see percolating down to the CPG companies and probably other ones as well. But as of now, if you look at the more of the retail stores that we are talking about?

So, within retail, we have not called out any specific sub-segment at least in our commentary. We are not gone down to that rightly in our public statements.

Alright. Got it. Thanks for taking my questions and wish you all the best.

Thank you.

Thank you. Our next question is from the line of Sameer Dosani from ICICI Prudential Asset Management. Please go ahead.

Thanks. Just one question around outlook, if you look at your commentary around readings in North America and Europe, you don’t look more cautious overall, but if I look at performance for the last few quarters, I think Europe has been performing better than North America. So, do you think this impact of the cautiousness and your tools it looks like [indiscernible] and you see more growth trajectory will be a little more affected going forward, your thoughts around that? Thanks.

I think in Europe, there is two different things. We have had a very strong Europe program, both in transformation and cost over the last 18 months, 24 months. So, some of that comes through in the benefits we see even in this quarter. The commentary or the view is more to share what we are seeing just in the economic activity. And again, we see the coloring more by industry, which is a little bit global as opposed to just specifically across the board in the geography.

So, the outlook, I mean do you think the outlook that you are giving will reflect in the numbers in the last two quarters I mean because [indiscernible] has been an unforeseen portfolio. Thanks.

So, there we have given a view on our outlook only up until March this year, so we will come up with guidance for the next financial year at the end of this quarter.

Okay. And that’s it. Thanks.

Thank you. Our next question is from the line of Girish Pai from Nirmal Bang Equities. Please go ahead. Mr. Girish Pai, could you please un-mute and go ahead with your question. As there is no response from this connection, we will move to our next question, that’s from the line of Rahul Jain from Dolat Capital. Please go ahead.

Yes. Hi. Thanks for the opportunity. Firstly, we commented that manufacturing is doing well for us, but actually the vertical is doing exceedingly well in the European region, that is up 60% YoY, but is much weaker in the U.S. where it’s up 7% YoY. So, what is that we are doing so well in Europe, is it a lot about few very crucial deal, or it’s more holistic and why it’s different in the U.S.?

So, thanks for the question. Within the industry, we don’t typically comment on a client, multi-client level activity. But we do have good traction, as you pointed out, within our European business in manufacture.

Okay. And another thing was on digital revenue. For the quarter, it’s up 17% YoY or let’s say, CC would be 20% or 21%. This is like our slowest ever since we have been giving this time savings on digital revenue. So, is this a bit worrying, or is it more because of the furlough and any other factor?

So, it’s partially due to some of the changes that we were discussing earlier on in certain industries and sub-industries, we see much more attention to the economic environment. And the – we see some of the digital transformation work being slower where we see much more focus across the board on the cost and automation.

Got it. And lastly, if I can, is margin impact furlough was too high in the quarter. How has this shaped up in the current month? Are these clients resume to normal scenario or that will remain extended in Q4 as well?

So, we will have to see how it goes, it’s a bit too early to say what’s going to be the Q4 outlook on that.

Okay. That’s it from my side. Thank you so much.

Thank you. Our next question is from the line of Girish Pai from Nirmal Bang Equities. Please go ahead.

Yes. Thank you. I just wanted to understand with cost optimization deals more in the pipeline and in the TCV, has the average deal tenure gone up in the last couple of quarters?

So, thanks for the question. We don’t typically comment on the deal tenure in terms of public statements.

Okay. Can you say that the third-party, I think have given you a lot of traction in terms of getting deals. Now, the number has gone up from about less than 2% of revenue to almost like – I think this quarter it’s – in this quarter, it comes to almost like 6.5% of revenue. Do you see this number going up in the coming quarters and years?

Like I have said, we are offering it quite holistic. In some cases, like I said, many of the cloud-based deals come with services, there could be licenses, there could be DAS services. So, more and more integrated deals and then you go to IT-as-a-service, which is really sort of very holistic. We could see this. But I mean it may vary from quarter-to-quarter, you could have some quarters with that. But there is nothing to say that in the long run where this is going a bit early to say that.

Okay. And lastly, from a competitive landscape perspective in the vendor consolidation deal, who are the ones moving out? Are these the global MNCs or these are typically Tier 2 vendors?

Again, on those, we don’t specifically comment on where we are getting the benefit of the consolidation. We are seeing some benefits coming through with large clients.

Thank you.

Thank you. Ladies and gentlemen, that was the last question. I will now hand the conference back to the management for closing comments.

Thank you. So, thank you everyone for joining us. This is really fantastic to have our Q3 close out, 13.7% growth, 21.5% operating margin, 3.3 billion in large deals, very happy with that outcome. We can see guidance increase on our growth for that. And we can see both sides of our business on transformation, digital work and core services, cost automation working well. And so we feel good with the current environment and how we can play and support our clients on both sides. Thank you all for joining us and we look forward to catching up during the quarter. Thank you.

Thank you. Ladies and gentlemen, on behalf of Infosys Limited, that concludes this conference. Thank you for joining us and you may now disconnect your lines.