Ladies and gentlemen, good day and welcome to the Infosys Limited Q2 FY25 earnings conference call. As a reminder, all participant lines will be in listen-only mode and there will be an opportunity for you to ask questions after the presentation concludes. Should you need assistance during this conference call, please signal an operator by pressing star then zero on your touchtone phone. Please note that this conference is being recorded. I now hand the conference over to Mr. Sandeep Mahindroo. Thank you, and over to Mr. Mahindroo.

Hello everyone and thanks for joining Infosys’ earnings call for Q2 FY25. Joining us on this call is CEO and MD, Mr. Salil Parekh, CFO Mr. Jayesh Sanghrajka, and other members of the leadership team. We’ll start the call with some remarks on the performance of the company, subsequent to which the call will be opened up for questions. Please note that anything we say with reference to our outlook for the future 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 turn the call to Salil.

Thanks Sandeep. Good evening and good morning to everyone on the call. We’ve had strong performance in Q2 with robust and broad-based growth, stable operating margins, strong cash generation, strong large deals, and increased employee headcount. Our revenue grew 3.1% quarter-on-quarter and 3.3% year-on-year in constant currency terms. Financial services grew at 2%, manufacturing double digits, energy, utilities and services at 5.8% all quarter-on-quarter. We saw growth in all geographies on a quarter-on-quarter basis. Our large deals were $2.4 billion. Our overall pipeline remains strong. We saw a double-digit quarter-on-quarter increase in our pipeline of deals below $50 million. Our operating margin for Q2 was 21.1%, free cash flow for the quarter $839 million, employee attrition was stable at 12.9%. We will launch our employee compensation increase in two phases effective January 1, 2025 and April 1, 2025. Our financial services segment in the U.S. continues to see discretionary spend increase in capital markets, mortgages, cards and payments. We have seen slowness in the automotive sector in Europe. Apart from these verticals, demand trends remain stable with clients continuing to prioritize or stake out over discretionary initiatives. Our Q2 performance reflects our sustained strength and differentiation in the industry. We are deepening our work in generative AI. We are working with clients to deploy enterprise generative AI platforms, which become the launch pad for clients’ usage of different use cases in generative AI. We are building a small language model leveraging industry and Infosys’ data sets. This will be used to build generative AI applications across different industries. We have launched multi-agent capabilities to support clients in deploying agent solutions using generative AI. Our generative AI approach is helping clients drive growth and productivity impact across their organizations. We are partnering with clients to build a strong data foundation which is critical for any of these generative AI programs. One example, we’re working with a logistics major using Topaz to power their operational efficiency improvements. Concurrently, we are supporting their digital transformation journey to help them deliver exceptional services for their customers. With our strong performance in Q2 and our current outlook, we have revised our revenue growth guidance for the financial year. The new guidance is 3.75% to 4.5% growth in constant currency. Our operating margin guidance for the financial year remains the same at 20% to 22%. With that, let me hand it over to Jayesh.

Thank you Salil. Good morning, good evening everyone, and thank you for joining the call. We had a strong Q2 with broad-based growth and [indiscernible] margins amidst an uncertain macro environment. Let me talk about some of the key highlights. Revenue grew sequentially at 3.1% in constant currency terms, ahead of our expectations. All geos and verticals, barring retail, grew sequentially. Europe had strong growth and is now approximately 30% of our revenue. Inorganic contribution was 0.8% Q-over-Q, which contributed to growth in Europe manufacturing. We had another quarter of volume growth. Financial services in the U.S. continues to see discretionary spend uptick in capital markets, mortgages, and cards and payments. Both [indiscernible] and manufacturing verticals reported double-digit year-on-year growth. Overall deal pipeline remains strong. Pipeline for deals less than $50 million increased double digits sequentially. Operating margin during the quarter was stable at 21.1%, driven by better operating metrics despite higher variable pay and acquisition impact. Utilization continued to improve to 85.9%, up 60 basis points sequentially. We saw headcount additions after six quarters and added [indiscernible] employees sequentially. We had a second consecutive quarter of over 100% of free cash flow conversion to net profit. Free cash flow for H1 stood at $1.9 billion, 41% higher over H1 last year. Let me delve into the details now. Revenue for Q2 was $4.9 billion, up 3.1% sequentially and 3.3% on a year-on-year basis in constant currency terms. This included benefits from acquisitions of 8.8%. Operating margin was stable at 21.1%. The major components of sequential margin--our margin walk are payments up 80 basis points of benefit from Project Maximus, 10 basis points from the currency movement offset by a 30 basis point impact from acquisitions, mainly on account of amortization of intangible assets, 60 basis points from higher variable pay and other costs. Project Maximus remains a key focus area and success as well, that is visible in improved operating metrics like utilization and realization, subcontracting costs, etc. for the quarter. [Indiscernible] growth was 2.9% in constant currency terms. Operating margins were at 21.1%, 10 basis points up on a year-on-year basis. Headcount at the end of the year stood at 317,000, returning to positive sequential growth after six quarters of declines, with net additions of approximately 2,500 employees. Utilization including payments increased by 60 basis points to 85.9%. [Indiscernible] attrition for Q2 was up by 20 basis points at 12.9%. We are on track to on-board 15,000 to 20,000 [indiscernible] in FY25. Free cash flow conversion was approximately 108% for Q1. H1 ‘25 free cash flow is 41% higher than H1 ’24. DSO for the quarter was 73 days versus 72 sequentially. Consolidated cash and cash equivalents stood at $4.6 billion after paying out $1.4 billion towards dividends. The board announced an interim dividend of Rs 21 per share, an increase of 16.7% as compared to last year. Yield on cash balance was flat at 7% in Q2. ADR was at 29.6% for Q2 and 29.5% for H1. We continue to expect ADR for FY25 to be in the range of 29% to 30%. EPS grew by 4.7% in INR and 3.4% in dollar terms on a Y-over-Y basis. We closed 21 large deals with TCV of $2.4 billion. 41% of this was net new. Vertical-wise, we signed seven deals in financial services, three each in communications, manufacturing and other, two in data, and one each in EURS and high tech and life sciences. Region-wise, we signed large deals in America, five in Europe, three in India, and one in RoW. Actual large deal wins stood at 55 deals with TCV of $6.5 billion, and 51% of that is net new. Coming to verticals, financial services saw continued growth momentum in Q2 with [indiscernible] and cost optimization through large also seen in transformation opportunities. We saw discretionary spend uptick in capital markets, mortgages, and cards and payments. Deal wins during the quarter with strong, which coupled with an expanding pipeline of small deals gives us visibility for future growth. We are doing a variety of gen-AI projects and are seeing them getting embedded in large programs. The retail sector continues to be impacted by economic and political uncertainties. Cost takeout efficiency and consolidation are key priorities for clients. Consumer spend in the upcoming holiday season will be a key indicator for future spend decisions. We are progressing well on our journey to leverage AI to deliver business value with safeguards around privacy, ethics, controls, etc. across areas such as enhanced customer and employee experiences, digital marketing, etc. Communications sector outlook is challenging with clients primarily focused on cost reductions and making their investments profitable. Discretionary spend for OEMs are expected to remain under pressure. Cost optimization and vendor consolidation are among top priorities with clients open to innovative solutions and asking for AI to amplify productivity. Political conflicts and higher interest rates continue to influence spending patterns, causing clients to focus on cost optimization on initiatives. We saw strong growth in verticals, especially in the [indiscernible] sector, especially there is significant traction in cloud programs with many companies adopting a cloud and AI strategy. Our competencies in the energy transition space, human experience, and industry clout and proactive client [indiscernible] have helped us build a strong pipeline. Growth in manufacturing was strong, partially contributed by [indiscernible] acquisitions. [Indiscernible] sector has seen recent challenges while discretionary spend remains under pressure. We have seen increased benefits of vendor consolidation. We see opportunities around supply chain optimization, cloud ERP, smart factory and connected devices across various sub-verticals. We are in discussions with multiple clients for setting up AI [indiscernible] to drive AI adoption at scale. Most high tech clients remain cautious due to geopolitical tensions. Discretionary spend and new project starts are slow due to a cash conversion focus. We are advancing multiple AI programs from ERP to implementation, focusing on customer support and sales effectiveness. Driven by our H1 performance and outlook for the rest of the year, we are revising our FY25 revenue guidance to 3.75% to 4.5% in constant currency terms. Our operating margin guidance remains at 20% to 22%. With that, we will open the call for questions.

Thank you very much. We will now begin with the question and answer session. [Operator instructions] The first question is from the line of Guarav Rateria from Morgan Stanley. Please go ahead.

Hey, hi. Thanks for taking my question. First question is, you know, the reasons for changing guidance for revenue grew, is it largely because 2Q came in better than your expectations or is it because the outlook for 2H has improved versus your prior expectations because of a better pipeline of the smaller deals?

Hi Guarav, this is Jayesh here. I think there are multiple factors that led to the increase in our guidance - of course the H1 performance or the Q2 performance, as you said, and more importantly the broad-based Q2 performance was one factor. We saw continued momentum in volumes as well as the momentum in financial services. Our increase in the smaller deals, which are less than $50 million deals, as we said earlier which has had a strong double-digit growth, I think all of these factors contributed to the increase in the guidance.

Got it. A second question on the gen-AI adoption. Have you seen the gen-AI actually triggering a large transformation project and leading to multi-million dollar deals or much higher deals? Just trying to understand that - is this going to lead to a wave of larger IT spend and increased overall addressable market for us?

Hi Guarav, this is Salil. On generative AI, what we are seeing is, first, we build the capability set. Three examples that I shared of how we’re doing it, with platforms, with agents and a small language model. It’s also very much focused on productivity and growth as clients are looking at it, so any of our large deals--now, large deals today are not that much focused on transformation, more focused on cost inefficiency, so more of the gen-AI focus is productivity. Any of the large deals that we’re looking at, there’s a generative AI component to it. Now, is it driving the large deals? Not in itself, but it’s very much a part of that large deal.

All right. Last question for Jayesh, what would be the tailwinds from a margin point of view in the second half which could help us to offset the impact of the wage hike? Thank you.

Guarav, you know, just to put together all the headwinds and tailwinds, the headwinds will come from the compensation increase in Q4 that we talked about, but Q3 and Q4 will have regular seasonality in terms of [indiscernible], in terms of lower working calendar days, etc. Tailwinds would be all the things that we are doing in Project Maximus, whether pricing, whether we are talking about [indiscernible] ratios, [indiscernible] optimization, etc., so all of those would be part of the same bucket of Project Maximus.

Guarav, do you have any follow-up questions?

No, thank you.

Thank you very much. The next question is from the line of Bryan Bergin from TD Cowen. Please go ahead.

Hi, thank you. I wanted to ask, just as you think about how you’ve built the forecast forward and the discretionary view, aside from the improvement you’ve cited in U.S. BFSI, have you basically held everything else muted in your discretionary view as you go through the December and the March quarters?

Hi Bryan, this is Jayesh here. As I said earlier, I think the latest factor that has led to our margin expansion--sorry, our guidance change, starting from the Q2 performance, the increase in volumes that we saw across multiple sectors, including financial services. Our pipeline, which is strong, large deal pipeline as well as these smaller deals which are less than $50 million deals, which have grown double digits, so I think all of these have been baked in. Of course there will be seasonality in H2, as we all know about in terms of [indiscernible], in terms of lower working days, etc, so all of that at this point in time is baked into our guidance.

Okay, thank you, and then just a follow-up, just to make sure I understand the furloughs, can you just--how did you think about composing the furlough activity that you’re embedding in the year end? Any difference in what you saw from last year or historical levels?

No, so we at this point in time have baked in the regular furloughs that we have seen over the past few years.

Thank you.

Thank you very much. The next question is from the line of Jonathan Lee from Guggenheim Securities. Please go ahead.

Great, thanks for taking our questions. Can you share further detail around what you’re hearing in pricing conversations, both around new deals and any potential re-scoping of deal terms, particularly given continued focus on cost optimization for clients?

Hi Jonathan, this is Jayesh here. The pricing, overall the environment has remained stable; however, within the pricing environment, we’ve been able to make a lot of progress in terms of we’re getting benefits on the track that we are running under Project Maximus, which is value-based selling, so many of those tracks have started kicking benefits which are visible in our numbers. You know, if you look at our volume growth using a proxy of the headcount, you will see that the delta between the revenue and the volume growth, which is contributed by the pricing significantly.

Thanks for that color. How should we think about large deal TCV momentum going forward? Are we seeing any changes to client preferences around signing of large deals, perhaps maybe towards smaller deals given some of what you called out around smaller deal strength?

Hi, this is Salil. The large deals, the way we are seeing it is the pipeline remains quite good for us today. There is much more focus on the cost efficiency, automation and consolidation type of work. These are lumpy, so in some quarters we see a little bit more, some a little bit less, but we don’t see a change in that outlook for large deals. The point on the smaller deals that Jayesh shared was a little bit additive. We are seeing more activity there as well which we had--which is different from what we had seen before.

Thanks for the added detail.

Thank you. The next question is from the line of Vibhor Singhal from Nuvama Equities. Please go ahead.

Yes, hi. Thanks for taking my question. Salil, I just wanted to pick your brains mainly on how the BFSI vertical is looking and the size of [indiscernible] post the interest rate cut [indiscernible] changing conversation [indiscernible] approach on the clients towards [indiscernible] that might be picking up in coming quarters. Are you seeing that [indiscernible] play out, and then I have a follow-up.

Thanks. Certain financial services, we saw last quarter good improvement in discretionary spend, and we continue to see that in Q2. The discretionary spend is good. We also saw the results of some of the large U.S. banks looked quite strong. We see still the focus is much more on the discretionary and then some cost efficiency programs. We are still not seeing large transformation type of programs, but given our scale and the needs that the banks have, and some of our clients where we are seeing good traction, the overall feeling when we look at financial services, whether it’s capital markets or mortgages, cards and payments, we see good traction on the discretionary side.

[Indiscernible]. My second question was on the TCV side, TCV [indiscernible]. Would you agree with that, do anything strategic? Is the [indiscernible] pushing the deals out because of the pending U.S. elections? How would you read that, and how you see the deal flow in the coming two quarters of the rest of the year?

So there, we have not seen a change in the behavior from the Q1 to the Q2 in terms of the deal timelines and so on, on large deals. These are, at least in our experience from the past over multiple quarters, sometimes lumpy. We see some more some quarters, some less, because they are large deals. That’s where we’re looking, so we don’t see that as--at least we don’t see any change in the data about it, including in the pipeline, which looks good as well.

But you would have liked [indiscernible] quarter, do you see maybe Q3 or Q4 these [indiscernible] that or [indiscernible] will depend on how the macro factors play out?

It will be more, first, that the deal flow is decent, but sometimes because the size of these deals is quite large, sometimes they bunch up in a quarter, sometimes they spread out a bit, so we look at it a little bit more, like, over a half or over a full year when we look backwards, and that way we get--because most of them are driving revenue for the next several years, so it’s not really like they convert into a quarterly movement, so we look at it more in that sort of a time horizon.

Got it, got it. Thank you so much for that. Just one question, if I could squeeze--this one’s for Jayesh. Jayesh, what is the thinking behind the [indiscernible] through Q3 and impact Q4 and Q1 of next financial year [indiscernible] to some part of the organization? You would actually be receiving [indiscernible] in terms of a rate hike, so is this not to do with the overall demand environment or the kind of hike that we had given last year [indiscernible]? Just wanted to get your views on that.

So yes, when we look at [indiscernible], we look at various factors including what’s the demand environment, what’s the market factors, what--you know, when did we do the last compensation, etc. We have taken all of that into account. Our last comp increase was in November last year, so this is pretty much almost on an anniversary if you look at it, so that’s point number one. Point number two, if you look at within this quarter, we have increased our variable pay as well, so that’s another factor to consider as well.

Got it, got it. Thank you so much [indiscernible].

Thank you.

Thank you. The next question is from the line of Kumar Rakesh from BNP Paribas. Please go ahead.

Hi, good evening, and thank you for taking my question. My first question was to understand how is the traction on your gen-AI work. You have [indiscernible] platforms you have launched. You already had for cloud a similar platform, Cobalt, to build an accelerator to help customers set up the new technology. Relative to how it was at that time when Cobalt initiative was launched and how it was the first year of traction in terms of how many customer engagements were happening, how many customers signed up for that, relative to that, how do you see Topaz panning out?

Hi, this is Salil. First on Cobalt, the way--as of course you know, it was launched and rolled out. We had very strong partnerships with the three big public cloud players and have today, but when it was launched as well. We had a very strong private cloud offering which we also have expanded, and we had a set of offerings on SaaS providers, the range of them, so that was an ecosystem which for enterprises was already in motion and we were already playing on that, and Cobalt brought all of it together. In generative AI for the enterprise, it’s a start in terms of how it will be adopted. There are, of course as you know, several use cases, some of them with some good traction with clients, but the method of adoption, so what we have done here in Topaz, some of the examples that I shared, you know, we have created a generative AI platform which can be rolled out across a large organization, and then the individuals in the organization start to build out their own gen-AI applications on that. We’re building a small language model. We have a multi-agent framework where the agents are doing--a set of agents are doing full solutions to certain business processes or certain functions, so these are different ways that generative AI is being rolled out. It’s difficult to compare in that sense the two. We see much deeper capability set that will be rolled out in generative AI today than what we see anywhere else. Our clients are giving us that same view. We’re also seeing generative AI a lot in productivity, and especially in the deal flow we see today in cost take-out. There, almost every large deal or significant deal, even, has some generative AI component related to productivity. [Indiscernible] not the whole deal is generative AI, a part of the deal becomes generative AI, so it’s a different way. It’s creating an impact from what we saw in the cloud space.

Any insight on the customer adoption, how many customers have signed up for that, how many transactions are happening or how many accelerators you have run on that?

There, we have not publicly shared that for the generative AI. What we have shared at this approach we are taking plus, that our projects today are not POC, or proof of concept, they’re actual projects, while they’re small in revenue, delivering impact in that space.

Got it, thanks for that, Salil. My second question was on during the press conference, you did talk about the small language model for industry-specific use cases and [indiscernible] that you are working on. My understanding is that at least the bigger models that we look around are either for consumer space or for enterprise are generally for more of general use cases, not for industry-specific use cases, so this could be a white space from the product perspective. How do you want to position this in the end market? Would it still be just an accelerator built on top of what the other tools are there, or you would want to eventually look at this as a separate product?

Here first, if you step back, our views on enterprise AI, generative AI, large language models will also play a part, but in addition, we are working on a small language model, so it’s not one or the other. The reason for the small language model, we believe we have some very good data sets within Infosys, and we are taking some, let’s call it clean data sets from outside industry and so on. These then become--these then help train the small language model. It then becomes--we are then building it for different industries, and it then becomes deployable in an industry for a specific client, where they can build or we can help them build on this small language model other business applications. The idea, it’s a new one. We feel we have some level of leadership on that, and we have launched this to see where it ends up.

Okay, so this will also work as an accelerator in deployment of AI applications, is that fair?

It will also be an accelerator. It will also be a foundation on which other business generative AI applications can be built by the client or by us for the client.

Okay, thanks a lot, Salil, for answering the questions.

Thank you. The next question is from the line of Rishi Jhunjhunwala from IIFL Equities. Please go ahead.

Yes, thanks for the opportunity. Just one question - your growth in this quarter, as well as last quarter, has been fairly broad-based across verticals. There has been--you know, the commentary that you’ve given also suggests that discretionary has seen some sort of pick-up in some verticals, but the guidance that you’ve provided for the second half effectively means that there is a considerable slow-down in the overall growth momentum. Now, I understand there is some bit of seasonality that comes through, but given the nature of broad-based growth that you’ve delivered, for two consecutive quarters at the midpoint of the guidance not having growth, seems to be a little bit counterintuitive versus what you have commented on the demand environment. Just wanted to understand how you’re thinking about that.

Hi Rishi, this is Jayesh here. If we look at what we have consistently said in the past, is that H1 is going to be stronger than H2. H2 will have seasonality, which is furloughs, lower working and calendar days in Q3, and lower working and calendar days in Q4, so all of that is baked in the guidance. Our guidance philosophy hasn’t changed. We run multiple models running up to the guidance which define the bottom, midpoint, and the top end of the guidance, and we say it as we see it, right? At this point in time, this is what we are seeing in terms of guidance.

Got it, and just very quickly, given where your utilization levels are right now, is it fair to assume that going forward, the hiding trend will largely reflect how you end up growing on revenues as well? It seems a lot of the moderation on utilization is probably behind us.

That’s right, Rishi. Again, we’ve always maintained that 84%, 85% is our comfort level utilization. We are already about that, so we don’t think at this point in time that there’s any significant headroom left on that. Most of the volume growth would come from the net hiring going forward.

Okay, thank you so much.

Thank you. The next question is from the line of Jamie Friedman from Susquehanna International Group. Please go ahead.

Hi. Congratulations on the continued improvement. A number of the questions you’re getting are about what your assumptions are about the seasonality of the year. I know you said in your previous answers that the year is typically super-seasonal in the first half. In terms of what you’re contemplating for the second half, what--if you could share maybe what your assumptions are on, say, the cost take-out narrative versus the discretionary narrative, is that rate of change changing, and maybe some call-outs on the verticals, because I see--you know, it’s great to have the two consecutive quarters in banking, but the retail was a little bit more volatile than expected, so any comments on the typical super seasonality and why this year looks a little heavier? Thank you.

Hi, this is Salil. The way we’ve seen it, the two parts to it from what you mentioned, one, in building the outlook, we have taken a view of what we see today, so financial services discretionary, we saw positive. We didn’t see--we have not seen as of now discretionary in the other industries. We saw the continued weakness on retail, and then we saw a little bit new weakness on that automotive in Europe, so all that we took it together, then we created, so we not assumed, for example, that some new discretionary will be positive or negative in this Q3, Q4. The other part of seasonality, what Jayesh shared earlier, one is the furloughs in our Q3, then is the calendar days situation both in Q3 and we have an additional little bit in Q4. That is also adding to the way we have built this outlook for the full financial year.

Perfect. Thanks for the context, Salil. Appreciate it. I’ll drop back in the queue.

Thank you. The next question is from the line of Nitin Padmanabhan from Investec. Please go ahead.

Yes, hi. Thank you for the opportunity. Salil, you mentioned that the deal pipeline for smaller deals, which is below $50 million, has sort of improved in double digits. How has it been in terms of closures for this current quarter? While the pipeline has improved, how have the closures been in the current quarter? Have you seen that improve as well? That is the first question. The second question is around the cost of software packages - that seems to have increased on a sequential basis. How much of that [indiscernible] was internal? Is there a significant pass-through that moved this quarter [indiscernible]? Any color around that would be helpful.

Yes, so Nitin--what was the first question?

The closure rates--

The closure rates, yes. If you look at our large deal closures, I don’t think--small deals or large deal closures, we have not really seen a significant change in the decision-making process per se. As Salil said earlier, both our large deal--our pipeline still remains strong, and our smaller deal pipelines have increased double digits over the last quarter. But we haven’t really seen a change in the decision-making behavior. By nature, these deals remain lumpy, right, so you will see quarters where you do more and you will see quarters where you do less. What was your second question--

In terms of closure, there’s no increase in closures in the current quarter? When the pipeline has improved but closures on less than $50 million has not really improved in the current quarter, is that a fair way to understand?

I’m saying that closures in terms of the time taken to decision hasn’t changed, so the decision process hasn’t changed per se. There is no further delay or--you know, delayed closure is what I meant, Nitin.

Yes. What I was asking was, in terms of the absolute closures in the current quarter, have they improved sequentially or year-on-year, is what I was trying to understand in terms of the smaller deals.

Yes, so look - what we are talking about is Q3 pipeline, which has increased, so we’re going to see how the conversion of that increases. But the pipeline increase and the wins that we maintain the closure will definitely increase. Right now, we haven’t really given color on that, Nitin. What we are talking about is the pipeline, that we see a significant increase at this point in time.

Got it.

Coming to the second question on third party, Nitin, third party remains an integral part of many of our large deals, and especially the mega deals. When you take over a large project from a client, where you’re taking over people, technology, the whole solution, you will have third party costs that you’ll incur, which could be hardware, software licenses, etc., which will become costs to you and become part of the revenue for the client. This is both of that, that you know, third party, we take it from the third party vendors and whatever costs that we incur as well, so it’s all of that. We don’t really pick up that cost for this.

That’s helpful. Thank you so much, and all the best.

Thank you.

Thank you. The next question is from the line of Abhishek Kumar from JM Financial. Please go ahead.

Yes, hi. Good evening. Thanks for taking my question. I wanted to double-click on the nature of the smaller deals--

I’m sorry to interrupt you. The audio is not coming clear. Can I have the customer speak through the handset?

Yes, hi. I hope this is better.

Yes sir, thank you.

Yes, so I just wanted to double-click on the nature of smaller deals. You had mentioned in the prepared remarks that discretionary spend is restricted to certain sub-segments of financial services, so in that context, are these smaller deals mostly in those sub-sectors, or these deals are also non-discretionary potentially smaller deals that a client is releasing against a large lump sum contract? That’s my first question.

Yes, so Abhishek, these are deals across various verticals and various types of deals. We don’t really give further comment on that. Considering the fact that it was a significant movement in the overall deal pipeline, we did call it out, but we are not really breaking it out into how much of that is discretionary, etc.

All right, okay. Second question is on wage hikes. Could you quantify the impact that we should bake in from wage hikes in 4Q and in 1Q of next year?

Again, I would say we have not really broken that out. What we have said is that we will do that in a phased manner, as we have done in the earlier years as well. Part of the employees will get it effective January 1, and the balance will get it effective April 1.

Okay, fair enough. Thank you.

Thank you. The next question is from the line of Keith from BMO Capital. Please go ahead.

Hi, thank you very much. I wanted to ask two questions, if I could. The first is for the annual guidance, what is the embedded expectation for the inorganic contributions for the year?

Keith, this is Jayesh here. In the last quarter when we changed our guidance, we had baked in the entire impact of the acquisitions and that, so just to clarify, this guidance change does not have any incremental change from the acquisition. This quarter, we got a benefit of 80 basis points from acquisitions, which is pretty much two and a half months of the consolidation impact of the acquisition, so you can--I mean, it would be in a similar range for Q3 and Q4.

Okay, perfect. Perfect, okay. Then my second question is, it is interesting what you said about discretionary spend coming back in the smaller deals, contributing to TCV growth. I just wanted to get your perspective on why you think there was a change in this category, and the reason I ask is, as you said, all deals can be lumpy, and so I’m trying to understand what do you think the durability is of the pipeline increasing in the small category? Do you think it’s sustainable at this point or durable as we look out over the next number of quarters? That’s it for me, thank you.

Hi Keith, this is Salil. First, I think just to make sure I understood the question, so there is a discretionary view and there’s small deals, deals smaller than $50 million, and they are, let’s say, somewhat distinct. There is an overlap, but they are two separate types of activities we referenced in our comments. On the deals smaller than $50 million, as Jayesh said, we were--we saw a good increase and thought it’s relevant in that point to share, because that gives a different type of a look into the market from what we see today. We don’t know if it’s durable. We’ll get a sense over the next few quarters how it looks - closing timeline of the deal, does it stay or does it disappear, but just now, there’s more to show us--it was one of the changes which we felt would be something of interest to share like that.

Okay, that is the category that I was interested in, the smaller deals. No comments on whether you think it’s durable or not, whether it stays in place?

Right.

Okay, okay. Was there any commonality in the type of deals in there? I know you said it was across industry verticals - I heard that, but any commonality in the type of deals within that smaller category?

Nothing that we have, you know, sort of things that we would share more color on. There is some, sort of looks we’ve had in terms of the areas and so on, where there’s--which skills or which technologies, but we’re not sharing that at this stage.

Okay. All right, that’s it for me. Many thanks.

Thank you. The next question is from the line of Prashant [indiscernible] from [indiscernible] Asset Management. Please go ahead.

Yes, hi. Thanks for the opportunity. My question is around [indiscernible]. This was a bit of a soft quarter, but that is okay, and what kind of [indiscernible] put on that, which is when I look at the sales and support employees, that’s kind of gone down by 9% Y-over-Y. Can you just explain what is happening, is it more on sales or on support side, and what [indiscernible] reduction, because I think that you need to keep engagement with your customers high so that as the [indiscernible] discretionary demand picks up, then you can actually start projects also, so how you kind of think about that versus obviously the short term kind of [indiscernible] management which might have been [indiscernible] on the employer side?

Prashant, this is Jayesh here. I think it’s just a factor of some attrition [indiscernible] we have a large pipeline of employees who are going to be joining us on the sales as well, so I don’t think there is anything to do with margins [indiscernible]. We will continue investing into sales as required in the business.

So this is more for temporary [indiscernible], like the number of sales people will actually increase in the coming quarters?

Yes, and you know, our sales cost has remained in terms of the dollar value of the costs, it’s remained in the range of 4.5% over the many years. I think this is just a small blip.

Okay, okay. All right, thank you much.

Thank you. The next question is from the line of Manik Taneja from Axis Capital. Please go ahead.

Thank you. A question with regards to segment and margin performance, if you can help us understand the factors that have driven the sharp decline in margins in verticals like energy, utilities as well as other segments, and the improvement that you’ve seen on the manufacturing side.

Hi, this is Jayesh here. There will be multiple factors that will play out across segments in terms of utilization, in terms of [indiscernible] mix, in terms of the kind of business mix, etc. - you know, the deals that will ramp up intra-quarter, so there will be multiple factors that will play out. We don’t see a significant change if we look at it on a trend basis for a few quarters, but on a short-term quarter basis, you will see some of these factors playing out in terms of margins.

Sure, and the last one was with regards to wage hikes, whether you think that there will be [indiscernible] starting January 1, it would be great to [indiscernible] on the quantum of these hikes to likely impact in Q4 and how is that split up across the workforce between January and April.

Yes, so we haven’t really spelled out the quantum of the wage hike percent at this point in time. All we stated is it’s going to be in two phases. Obviously our junior employees will get it in January and the rest will get it in April. The majority of employees should get it in January.

Thank you, and all the best in the future.

Thank you. The next question is from the line of Sandeep Shah from Equirus Securities. Please go ahead.

Yes, thanks for the opportunity, and congrats on a good execution. Most of my questions have been answered. Just wanted to understand how to read this double-digit increase in smaller deals below $50 million. Is it first broad-based across verticals, and can it--if it continues as a trend, can it be a precursor of better demand in calendar year 2025? Why I’m asking this is one of the reasons for Infosys’ better performance in FY22 and FY23 became not many conversions of deals which were below $50 million in terms of path to conversion revenue.

Sandeep, the purpose of sharing this, as I said earlier, is we do share what we see, and that is what--you know, this was one of the interesting ones, one of the important things we thought is important for the investors to understand, that we are seeing a change in the smaller deal pipeline which directly and indirectly in some ways represents the discretionary spend, etc. That’s point number one. Point number two, of course if we--if the win rate remains the same and we are able to convert, that should--that would reflect in terms of revenue in the near term. At this point in time, it’s just one data point, very difficult to say whether it is going to become a trend, become sustainable, etc., so I think we should--at this point, we read it as one data point.

Okay, okay. Is it broad-based across verticals and markets?

Yes, it is.

Okay. Thanks, and all the best.

Thank you. The next question is from the line of Girish Pai from BOB Capital Markets. Please go ahead.

Yes, thanks for the opportunity. My first question is regarding mega deals. Across the industry, even when I look into peers, you’re not seeing any mega deals being signed, so are there a similar number of mega deals in the pipeline compared to 2023, or have the mega deal numbers kind of come down? That’s my first question.

On mega deals, we don’t share specific data on what is in the pipeline or not. We only talk about the overall large deal approach.

Okay. My second and third questions--second question, TCV to revenue conversion, has that changed versus what it was in the previous quarter or six months back? That’s question number two. Question number three, you talked about value-based pricing being one of the key levers in this Project Maximus. Can you just give us some examples as to how this is being practiced right now?

Yes, so Girish, coming to your first question on conversion, we haven’t really seen any significant change in terms of signing or in terms of conversion at this point in time. We continue to gain market share, consistent even when we look at it on a quarter-on-quarter basis. Coming to Project Maximus and the value-based selling, I think there are multiple tracks within that, right from the new age pricing, the tracks on getting a change request where we are eligible for getting the right rates, etc., so there are multiple of those tracks within that. We haven’t really shared data beyond this for obvious reasons, but as you can see, we have--I mean, the track has contributed significantly in terms of the realization and price realization.

Okay, thank you very much.

Thank you very much. Ladies and gentlemen, we will take that as the last question. I’ll now hand the conference over to management for closing comments.

Hi, thank you everyone. First I want to share in summary, we had a strong quarter on revenue growth, margins, cash collections, large deals, so we feel good about that. That resulted in an increase in our revenue growth guidance for the full year, which also gives us good confidence as we look into the future. Clearly, financial services is showing continued strength in discretionary spend, and [indiscernible] our segments remaining about the same, with the small comment--with a comment on automotive in Europe becoming a bit slower. We have deep, deep capabilities in generative AI, and these are things where we’re building platforms, agent solutions, small language models that we believe will be of huge impact with our clients, and we continue to see a strong focus on execution across our business, and that remains key for us as we go ahead, so we remain optimistic as to how the year will play out. Thank you everyone for joining, and look forward to catching up in the next quarterly discussion.

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