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, Inda. Hello, everyone, and welcome to Infosys financial results for Q4 and FY '23. Joining us here 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 for the recently concluded quarter and year by Salil and Nilanjan, subsequent to which the call will be opened up for questions. Please note that anything that we say that refers to our outlook for the future is a forward-looking statement that must be read in conjunction with the risk that the company faces. A full statement 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, and thank you for joining us. For the full year financial year 2023, we had a good performance with growth of 15.4% in constant currency. Our digital business grew 25.6%, now being 62.9% of our overall revenue and our core services grew as well at 1.9%. We saw broad-based growth across our business segments with most in double digits. We had 26% growth in Europe and 12% in the U.S., 95 large deals with a value of $9.8 billion for the year with 40% net new. Our operating margin for the full year was at 21%. We generated free cash flow of $2.5 billion in the year. Our attrition has continued to decline in each of the quarters through the year. We are leveraging generative AI capabilities for our clients and within the company. We have active projects with clients working with generative AI platforms to address specific areas within their business. We have trained open source generative AI platforms on our internal software development libraries. We anticipate generative AI to provide more opportunities for work with our clients, and to enable us to improve our productivity. In Q4, we saw changes in the market environment. During the quarter, we saw unplanned project ramp downs in some of our clients and delays in decision-making, which resulted in lower volumes. In addition, we had some onetime revenue impact. While we saw some signs of stabilization in March, the environment remains uncertain. This led to a Q4 year-on-year growth of 8.8% in constant currency and quarter-on-quarter decline of 3.2%. Our operating margin was at 21% for the quarter, and we had $2.1 billion in large deals in the quarter. We generated $713 million of free cash flow in the quarter. Our pipeline of large deals is extremely strong. Several of these are mega deals and several of these opportunities are for cost and efficiency programs and for consolidation projects. Some industries such as financial services, in mortgages, asset management, investment banking, telecom, hi-tech and retail are more impacted, leading to uncertainty in spend and delays in decision-making. The U.S. is more impacted than Europe. Keeping in mind the current environment, we have further expanded our internal efficiency and cost program to work on our pyramid, on-site ratio, automation, travel, subcontractor, office consolidation and on pricing. We anticipate this program will build a path to higher margins in the medium term. We are committed to investing in our people in this period. We are committed to working with our clients as they deal with changes in the economic environment. Based on our sustained momentum in financial year '23, a strong pipeline of opportunities, especially focused on cost efficiency and consolidation, while also keeping in mind the uncertain environment, our revenue growth guidance for this financial year is 4% to 7% in constant currency. Our operating margin guidance for this financial year is 20% to 22%. Thank you. With that, let me hand it over to Nilanjan.

Thanks, Salil. Good evening, everyone, and thank you for joining this call. FY '23 was a year of two halves, mirroring broader macroeconomic conditions. Growth was extremely strong in H1 with 20% year-on-year constant currency, which reduced to 11.2% in H2 due to the slowdown in verticals like telecom, hi-tech, retail and parts of financial services. Q4 came in lower than expected due to some specific client ramp-downs in discretionary spend and delayed client decision-making on new deals. In addition, we had some one-off revenue impacts, including project cancellations, et cetera. Despite the above, we closed FY '23 with a strong 15.4% growth in constant currency, leading to continued market share gains. Operating margin for Q4 and FY '23 were at 21%, in line with our guidance. Free cash conversion to net profit for FY '23 was near 85%. FY '23 EPS grew by 1.3% in dollar and 9.7% in INR terms. Client metrics were strong with the number of 50 million clients increasing to 75; 100 million client count increasing to 40; and 200 million client count increasing to 15. Long-term LTM voluntary attrition declined to 20.9%. Quarterly annualized attrition reduced by over 4% sequentially and is the lowest in the last nine quarters, which is also well below pre-pandemic levels. Coming to Q4 performance. Revenues grew by 8.8% year-on-year and declined by 3.2% sequentially in constant currency terms due to the reasons mentioned earlier. Utilization declined to 80% on the back of softness in demand. We expect the utilization to improve gradually in the coming quarters as pressures start getting deployed. We will calibrate the hiring for FY '22 -- '24 based on available pool of employees, growth expectations and attrition trends. Q4 margins were at 21%, which is a decline of 50 basis points sequentially. Major components of sequential margin movements are: We had tailwinds of 50 basis points on cost optimization, including reduction in sub-con; a [16] basis points benefit from reduction in PSCS, which is post-sales customer support, offset by a headwind of about 70 basis points from a drop in utilization and the balance 90 basis points is a combination of revenue one-timers as mentioned above, partly offset by other savings. Q4 EPS grew by 0.2% in dollar terms and 9% in rupee terms on a year-on-year basis. Our balance sheet remains strong and debt-free. Consolidated cash and equivalents stood at $3.8 billion at the end of the quarter. Free cash flow for the quarter was robust at $713 million with a conversion of 95% to net profit, yield on cash balance of 6.6% in Q4. The Board has recommended a final dividend of INR 17.50 per share, which will result in a total dividend of INR 34 per share for FY '23 versus INR 31 per share for FY '22, an increase of 9.7% per share for the year. Including the final dividend and recently concluded buyback, we have returned 86% of FCF to shareholders over the last four years under our current capital allocation policy. In Q4, we completed the open market share buyback of INR 9,300 crores, buying back 1.44% of shares at an average buyback price of INR 1,539 versus a maximum buyback price of INR 1,850. ROE increased to 31.2% in FY '23 from 29.1% in FY '22 as a result of higher payout to investors. Coming to segment performance. Large deal momentum continued, and we signed 17 large deals in Q4. TCV was $2.1 billion with 21% net new. 5 large deals were in manufacturing, 4 in FS, 3 in CRL, 2 each in life science and hi-tech and 1 in EURS. Region wise, this was split by 10 in Americas and 7 in Europe. In FY '24, we signed 95 large deals with TCV of $9.8 billion with 40% net new. Coming to the vertical segment performance. Financial Services vertical was impacted by budgeting delays at the start of the year led by macroeconomic uncertainties, coupled with softness in mortgages, asset management and investment banking. However, our strong pipeline and large deal wins in areas like Infra, production support, cybersecurity and business operations is helping in better visibility for FY '24. We have a very diverse portfolio of clients in the U.S. and hence, exposure to multiple regional banks is less than 2% of our overall revenues. We do not anticipate any material impact on our operations as a result of recent news and regional banking segment. In retail, there is heightened focus on accelerating digital transformation to enable top line growth with rigor in ensuring budgets get spent on right programs to maximize ROI while there is some pressure on discretionary tech spending, companies are prioritizing investments in key areas such as e-commerce platforms, supply chain management systems and customer engagement tools. Manufacturing segment continues to see ramp-up of large deal wins and benefits of vendor consolidation. There is increased focus on digital spend, including opportunities on ER&D, 5G and industrial IoT. Increased energy prices and interest rates coupled with continuous supply chain disruptions impacting spend on the run side of the business, especially in Europe. Communications segment is witnessing increased OpEx pressures, cost cutting ramp-downs and delayed decision-making. Demand for ideas and solutions are moving from cost takeout to revenue growth side with heavy focus on customer success. Cloud and Mobility remain top driver for 5G adoption. Overall pipeline remains strong, which gives us the confidence of growth opportunities in the coming quarters. The positive momentum in energy, utilities, resources and services for FY '23 was supported by large deal wins. Our renewed strategy to repivot our offerings and developing integrated Energy as a Service solution and the focus on journey to net zero initiative has positioned us well ahead of competition. While we are seeing delays in kicking off discretionary spend projects, the cost takeout and vendor consolidation initiatives continue to pick momentum. We expect our revenues to grow by 4% to 7% in constant currency terms in FY '24. Our pipeline of large deals remains extremely strong with increased focus on cost takeout programs. Operating margin guidance stands at 20% to 22%. The margin guidance factors and growth assumptions for FY '24 impact of utilization, employee cost increases, further normalization of costs like travel, facilities, et cetera, and we continue to focus on various cost optimization and efficiency improvement measures. As we look beyond FY '24, we believe we have various levers to generate more efficiencies like improving utilization, reducing subcons, improving pyramid apart from growth acceleration and potential pricing increases, which will enable us to aspire for higher margins over time. With that, we can open up the call for questions.

[Operator Instructions] Our first question is from the line of Yogesh Aggarwal from HSBC.

A couple of questions. Firstly, while the quarter was weak, the guidance at the upper end still looks very solid when we just mathematically look at the sequential build up from here. So is that 7% based on some macro pickup? Or is it what you see today 7% is possible? And related to that, Salil, in general, the demand and the growth picked up post-COVID. So are we back to post -- pre-COVID growth rate of 5%, 6%, 7% or FY '24 is one-off and we can see a pickup from FY '25? And then I have a follow-up, please.

This is Salil. I didn't catch the second one. I'll go with the first question, then you can just repeat the second one. On the guidance, what we have built it with today is what we see with the deals we have sold and the ongoing work that we have and then put the range between 4% and 7%. There are different scenarios in which different things happen. We've widened the band to 3 points given the uncertainty in the environment. We also have a very strong large deal pipeline with some mega deals in the pipeline. Of course, these are always binary. But given the strength of the pipeline, we believe that there is ways that we can achieve the high end of the guidance. Yogesh Aggarwal : Got it. So I was asking the second question was 4% to 7% is almost going back to pre-COVID growth rate. So is it like the new normal again? Or we can expect some pick-up again from FY '25? That is one. And also, Salil, I wanted to ask you on the recent management exits. Just recently, you had two Presidents and a COO. Now, all three are not there for whatever reasons. So has it impacted the business by any chance? And is it -- what's the new structure? Are you going to replace them? Or is it -- the new structure doesn't need President and COO? Salil Parekh : So on the first one, of course, you know we don't provide a view or a guidance beyond this financial year. Underlying the way we see the business, we see two growth drivers, and we are well positioned on both in terms of capabilities and track record. One is on digital transformation, comprising of cloud and other elements and one is on cost efficiency, automation and an additional element, which is on consolidation that comes in through that. We see both of those drivers working. We've seen a reduction in the digital transformation work today. We see more in the cost and efficiency and consolidation play today, but going through depending on where the client is, what the environment is, we feel comfortable for both of those drivers to work over time. In terms of the structure, we have put in place a structure for the delivery organization, which is already rolled out. And in the next few weeks, we'll roll out the new structure for our FS team. So we feel good with the leadership cool that we have within the company who are moving up to take a broader role and a larger role that they will step up and deliver what we are driving to.

Our next question is from the line of Bryan Bergin from TD Cowen. Bryan Bergin : I wanted to ask on the growth outlook first. At the midpoint of your 4% to 7% range, can you give us a sense on how much of the backlog is already in hand versus having to go out and convert upon the pipeline to achieve that growth target? And does the amount that you have to sign in that pipeline to hit the target differ relative to prior years at this time? Salil Parekh : This is Salil. Thanks for that. We don't have a specific sort of number there that we share externally. What I can sort of share is, we see -- through this past financial year, we've had a good large deals booking, $9.8 billion with 40% net new and we see a set of very strong active relationships, some of them are expanding through the year through other work. And then we saw in Q4 during the quarter, some ramp downs. So keeping those factors in mind, we have built the guidance of 4% to 7%. And we see that we have the ability to deliver on that guidance. Bryan Bergin : Okay. And my follow-up is kind of on margins here. So you've cited internal efficiency programs that you're going to progress upon, I think, permitting office consolidation and other items. Is there a stated target of cost reduction that you're expecting to achieve? So a run rate of op margin expansion? Just trying to get a sense of how you think about the structural margins of the business, assuming the efficiency initiatives you cited. Salil Parekh : So there, we put together an internal plan with targets and, let's say, a roadmap for each of the subcategories that we outlined and a few others. And we have a view to drive that through the next sort of period here in the coming quarters. We have not shared that target externally, but our view is to make sure that we put in place -- execute on that programs in place and deliver to that in the medium term.

Our next question is from the line of Ankur Rudra from JPMorgan. Ankur Rudra : First question is on -- I just wanted to get a bit more color, if you can, on the reasons for the very sharpness on revenues and margins versus the guidance. What -- why did this surprise you? And how much of the demand environment has existed through the quarter or versus what probably came in the last 30 days? That's the first one. Salil Parekh : This is Salil. So what we saw there was during the quarter as the quarter progressed, we saw on some clients, ramp downs on programs. And this was across different sectors, telecom, retail, hi-tech and parts of financial services, mortgages, investment banking, asset management, and that was something which were unplanned as we went through. And then additionally, we had some onetime impact, which we saw in the quarter as well. Ankur Rudra : Would you be able to elaborate on the onetime impact, Salil? Salil Parekh : Yes. So I think, firstly, the majority of the decline is volume-led. The balance of the revenue is one-timers, which is a combination of specific client issues, including the impact of cancellations as well, which is just a top line impact more over and above the volume impact. So that's the state of play really for the quarter. Ankur Rudra : Okay. On the guidance, I just wanted to get a sense. Looking at what happened in the quarter and the uncertainty in the environment, are you turning more conservative for the guidance setting process for FY '24, both on the revenues and the margins versus what you may have done before? And also, along with that, if you can share what's the visibility that you have at the moment for the full year versus what you may have had at the beginning of last year. Salil Parekh : So there on the guidance, we took into account what we see typically as we closed the year in March, on what we've had in new large deals and overall new deals and the ongoing work that we have across our client base. And that basically becomes the foundation of our guidance. Typically, again, as you know well, we don't have a detailed view of Q3 and Q4. So we have more typically estimates from other years that we use. And that's the same approach we've used the year from what we see as we look out. And the same on margin, we finished the year at 21%. Our utilization in Q4 is low compared to what we want to target. We have a very strong efficiency and cost program. But within that program, we are very clear that from an employee perspective, we will continue with our commitment with employees. And so the utilization will go up through the quarter. But in the medium term, we will get that impact back into the margin. And that's how we built the '20 to '22 margin guidance. Ankur Rudra : Understood. Just a last question on the leadership, I think this was attempted before. But my stand at it would be -- I mean, clearly, there's been departures, as you acknowledge, and some of them have gone to competition, probably will drive hungrier peers going forward. Do you think you're losing muscle and increasing the roles and responsibilities at a more concentrated leadership team at least as seen from the outside at the time of the industry is facing a tougher period this year? Salil Parekh : Sorry, Ankur, I didn't follow, you said, will we have concentrated leadership or…? Ankur Rudra : Yes, concentrated leadership is basically more roles and responsibilities as an example, on your door or Nilanjan's door versus having three other very senior leaders helping you with a wider leadership team. Salil Parekh : Okay. What we have seen and what we know is within the company, there's a very strong set of leaders across different roles. Many -- on delivery, many of them have now stepped up and clearly, any role as you start to step up to deliver leadership within a large company like Infosys becomes more concentrated, and that has been announced and rolled out and the same will happen with FS where we are rolling that out in the coming weeks. The FS segment, of course, is a large segment for us. So those will be concentrated in that sense. So we will have a leadership structure with a very strong responsibility for several of the senior leaders.

Our next question is from the line of Kawaljeet Saluja from Kotak. Kawaljeet Saluja : I have a couple of questions. The first question is on guidance once again. Is it back-ended or guidance assumes even growth through the course of the year? And a related question to the guidance is that given the deterioration in the macro environment, along with a huge miss in the 4Q along with me signings. Do you think you have been more, what I would say, watchful in your guidance for FY '24. Has the process been tightened? Any thoughts on that would be welcome. Salil Parekh : This is Salil. On the revenue growth guidance there. The thinking is really spread over the 4 quarters. I'm not sure, I would say, it's front or back. But it's based on what we see in the large deals today, and also in the pipeline that we have, where we do have some mega deals in the pipeline. So that gives some weightage to the guidance, given where those deals will come, it will be later on in the year itself. The second one, sorry, what was that. Are we more conservative? Is that the point? Kawaljeet Saluja : No, no. Has the process of guidance have been tightened or rather the forecasting process, has it been tightened given the magnitude of miss in your revenues in the quarter, which obviously would have chunked to you as well. Have you basically, I mean, built in better cushion, greater cushion in your guidance for FY '24? Or is the process and the underlying assumptions the way it used to be historically? Salil Parekh : So we have tried to put in place what is a changing and uncertain economic environment, which -- where we saw some of these impacts. So those factors have been taken in as we build this guidance. Kawaljeet Saluja : Okay. And the second question that I had is on profitability. Every company would, I mean, want to operate at a certain base of profitability. Now in Infosys case, this profitability has been drifting down and the profitability guidance is down to 20% to 22%, which is a kind of a new low. How should one think about the underlying operating assumptions behind these deal wins and the process of bidding for large deals? And how does that tail in now with the underlying base of profitability aspirations and rather assumption that you have? And is this -- so how should one think about structural profitability, if you may? Nilanjan Roy : Hi, Kawal. Yes, so I think if you step back a bit into, say, the last 1.5 years, I mean, basically the whole chasing of this demand side, three compensation hikes in 15 months, stretched salaries. All that, in a way, has made our structure a bit inefficient, right? And in a way, a part of that today is the reverse that you're sitting at 80% utilization, whereas you want to be at much higher levels and your pyramid is not as efficient because you had to get talent from anywhere when the market was hot. So we've seen a lot of these sort of things during this period where we can identify these pocket, sub-con, rising to 11.5%. So I mean, we were clear that we had to go behind this -- the -- getting the volumes in, right? And we knew we had time to correct the margin structure, right? And therefore, that's fundamentally what we still believe in. Our guidance is just today at a midpoint that we ended the year at 21%, and we have enough flexibility in this guidance between 20% to 22%. And in a way, 21% is just the midpoint of that. To take care of -- firstly, of course, there may be some headwinds coming because of compensation, there could be something on travel, but at the same time, you have levers of improving our utilization at 80%, really, which is probably one of the lowest I've seen. We have other opportunities of improving the pyramid because the higher bench comes with a double value of cost. One is you have the ideal cost of the bench. And at the same time, you have a very rich pyramid. So the moment you start moving freshers into the pyramid, you get a double benefit of cost that the ID cost goes away from the bench and your quality of the pyramid improves on the production side, right? So you're sitting on two inefficiencies now. These are the levers we start using, pricing, et cetera, still going on in conversations, how we build in pool also. So aspiration continues to be that we continue to look at improving margins from where we are. The guidance is just a reflection of it gives us the flexibility in this uncertain year. And we've ended at 21% as you saw consistently during this last year as well. Kawaljeet Saluja : FY '22, Nilanjan was there, uncertainty might be there in revenue. But on costs, right, there are only tailwinds, and there are a number of tailwinds that you listed out, and I presume that the labor market is cooled off. So why bring down the lower end of the buying, actually. Nilanjan Roy : Yes. So I think also some is that many -- some of these levers will take time to put in because it's a different situation of how much sort of room you have to deploy levers when you're growing at 10% versus what we are growing at 4% to 7%, right? So for instance, your pressure, how fast can you deploy them when you're growing at 4%, it's a different pace versus what you are deploying at 7% versus what you're deploying at 10%, right? So all that will still weigh into the structure. It's not that you can immediately say to overnight change my utilization from 80 to 85 or shift beyond site offshore because in a way, a slower volume regime has that overhang on how fast can be deployed. But like I said, when we started that we are sitting on these inefficiencies, which are very visible to us, and we know we can deploy many of these sort of levers which we have to continue to aspire for a higher margin profile.

Our next question is from the line of Pankaj Kapoor from CLSA. Pankaj Kapoor : Nilanjan just continuing on Kawaljeet's question around margins, two things. One, what kind of a timeframe are you looking at for this year's wage hike? Are you sticking to first quarter? And what kind of quantum are you expecting? What kind of margin impact do you foresee of that? Will it be similar to last year? Or do you think this could be lower this year? Nilanjan Roy : Yes. So this will be continuously evaluated. We have built in, like I mentioned into our guidance compensation, and we will take a decision during the year as well, looking at the market context, the competitive context, so no decision has been taken as yet. Pankaj Kapoor : So the hike may not happen in the first quarter. Is that what you're saying? Nilanjan Roy : At this moment, no decision has been taken for the hike. Pankaj Kapoor : Understood. And in the -- at the lower end of the guidance, are you keeping a buffer for some kind of potential pricing pressure that might come in during the course of the year? Is that the headwind, which you see as the major one when you are guiding for a 20% floor? Nilanjan Roy : I don't think -- I mean, specifically in on pricing. I think it's just that we are at 21% and the midpoint between 20% to 24% just happens to be 21%. And like I said, there may be some headwinds, there may be some tailwinds. And of course, the aspiration is continuing to do better than our margins as well. So nothing specific like that in terms of pricing continuing or something. Pankaj Kapoor : Okay. And Salil, if I look at the net new deal wins, probably this was the lowest since we had from the start of the pandemic. I mean, was this mainly due to clients delaying decisions on deal awards towards the last, say, 30 days? Or -- and are you building any kind of a conversion of this to get to that 7% at the upper end of the guidance? Salil Parekh : So there, one of the things we have seen in the pipeline is a slowing in decision-making. So large deals are staying in the pipeline longer. Having said that, the net new or even the quantum of large deals, as we've discussed in the past, there is always volatility because these are only deals over $50 million and not everything, it's not a full, let's say, bookings value. And so we've always seen that volatility in the past. We think with the large deal pipeline that we have today, which happens to be a very large pipeline, and some mega deals in it, we have the ability to drive to a margin -- sorry, our growth guidance as we run through the year. Pankaj Kapoor : So just to clarify, at the upper end of the guidance, we are expecting some of those mega deals to convert during the course of the year. Salil Parekh : We -- I would not be so specific in that to say what it's based on. We do have a large pipeline with mega deals, and we anticipate that some of those will allow us to get to the higher band of the guidance.

Our next question is from the line of Abhishek Bhandari from Nomura. Abhishek Bhandari : Salil and Nilanjan, this quarter, we had certain unanticipated external events that led us to miss our guidance of 16% to 16.5%, especially after we had waited at the end of Q3. Do you think you could have considered issuing a profit warning citing results are beyond your control because this time the miss seems to be fairly sure and shocking in the fourth quarter. Nilanjan Roy : No, I think we see the full year, we said 16% and we are at 15.4%. And we said 21% margin, and we were at 21% as well. So I'm not sure what questions referenced to. Abhishek Bhandari : Whether it was coming from, we had raised the band at the end of Q3. We signaled we possibly had better execution under control. Of course, things have changed there a macro situation beyond our control and there were some cancellations. So as a good action. Nilanjan Roy : This evolved during the quarter, right? So the situation also has evolved during the quarter. It's not as if suddenly on one day, we wake up and certainly see that the volumes are down. This is a situation during the quarter as well. Abhishek Bhandari : Okay. The second question is, Salil, I think in the press conference, you mentioned M&A could be an opportunity where some of the global companies could consider selling the captives. Do you foresee a meaningful deployment of capital for that particular purpose this year? Are there enough number of such captive conversations in your pipeline? Salil Parekh : So on M&A, I think we have, with a strong balance sheet, the ability to do something small or medium or large, today, we are in, let's say, we look at many opportunities. We will see how those fit in. There are various sort of components to it, a strategic fit, of course, valuations, which are much more reasonable today, cultural fit of those companies and the ability for us to integrate that in and so all of those we will keep in mind. And if it sort of meets those points for us, we will look at those opportunities.

Our next question is from the line of Ashwin Mehta from AMBIT Capital. Ashwin Mehta : So Salil, what is the nature of this one-off client issue? And when this reverse out like we saw last year in the same quarter, where we took a client contract provision. Secondly, is it a single client or multiple client issue that we are talking about? And in which segment have you seen this client issue? And I have a follow-up. Nilanjan Roy : Yes. So like I said earlier, this is a one-off client revenue issues, and there are a number of clients -- it's a mixture of clients, and some of it is a provision against them. Some may come back, some may not come back. And some of it is also due to cancellations, right, because the revenue impact also beyond the volume impact of cancellations. Yes, I mean, it is -- there is a mixture of clients there. Ashwin Mehta : And the 10% decline that we've seen in U.S. telecom, is it related to this -- these client issues because that appears to be a pretty steep decline? Nilanjan Roy : 10% decline in? Ashwin Mehta : In the U.S. telecom business of yours. Nilanjan Roy : Yes. No, I don't think anything specific in coming out of these issues really. Ashwin Mehta : Okay. And the last one is, if I look at your guidance it implies a 2.9% sequential growth over the next four quarters. The last we saw this ex of the COVID surge was in FY '16, so what drives such a high growth comfort for us in an uncertain environment? Salil Parekh : Sorry, just say that again, please. I didn't follow that. Ashwin Mehta : So the CQGR requirement for your top end of guidance is around 2.9% sequential every quarter. This is something that as of FY '22, we've seen last in FY '16. So in an uncertain demand environment, what drives such a high-growth comfort? Salil Parekh : So there, what we've seen with our guidance is we have some good large deals that we closed in the previous financial year. And we have a pipeline, which gives us a large pipeline, several of them megadeals the opportunity to have those come into our mix and give us a flow through the year. Ashwin Mehta : So would you say the sub-$50 million deal flow is where the traction is much stronger than what appears in the greater than $50 million deal flow that we announced typically? Salil Parekh : We don't have a view that we share typically on the non-large deals but our large deals is one of the components that we use to build out the guidance.

Our next question is from the line of Gaurav Rateria from Morgan Stanley. Gaurav Rateria : So first is conversion of the order book to revenue. If I look at your fiscal '23, you entered the year with a net new deal win of roughly $3.8 billion, which generated incremental revenues of $1.9 billion. You're entering fiscal '24 with a net new deal wins of $3.9 billion, which is pretty similar to last year, but the guidance implies incremental revenues of $1 billion at the midpoint. Just trying to understand that what has changed that is driving significant downtick in the incremental revenue with a very similar net new tailwinds in your book. Nilanjan Roy : Yes. So I think also part of it is the net new wins and the phasing of that, right? And I think in FY '22, you would have seen them more throughout the year. And if you're seeing in FY '23, I think the last quarter, for instance, somebody has also mentioned has been a weaker quarter because there's usually a four to six-month gap between that deal win right before it comes into revenue. So I think partly is the phasing, but the underlying -- I think we've had strong deal wins on both sides as a percentage of net new. I think part of the answer is the way the net new have flowed in during the year. Gaurav Rateria : So it's to do with the ACV growth being weaker than the TCV growth. Is that like a fair understanding? Nilanjan Roy : Could be, could not be, also a timing of it, right? So I'm just saying that in the net new, like, for instance, in quarter four, as somebody has mentioned, is about 22%. So that will reflect in FY '24 going forward initially. And then, of course, as new deals ramp up, that's a separate volume impact. But the phasing of the wins within that is also to be seen of where the net news come. Gaurav Rateria : All right. The second question is around the comment that you made around the stabilization that you have seen in March. So is it fair to say that your guidance is assuming things are likely to improved sequentially from here on? And this is the worst? Or it's difficult to say that the worse is behind us. Salil Parekh : Yes. At this stage, we are not seeing any of those things. What we are saying is we saw some sizing, but the environment is uncertain. So we are watchful and agile. And one of the reasons we've expanded the margin -- sorry, the growth guidance band to 3 points is to take that into account. Gaurav Rateria : Got it. Last question from me on the margins. So how much of the margin downtick is primarily a cost-led issue, which will rectify over a period of time? And how much it is kind of flexibility you have given to yourself to go after the deals, which may have a fundamental different contract profitability? Nilanjan Roy : Oh, that's a fantastic. So like I said, I mean, we explained how we've done the margin guidance. We ended at 21%. That is the midpoint of 20% to 22%. We have some headwinds. We have some tailwinds. And this margin allows us that flexibility as well. Of course, we continue to aspire to improve that.

We'll take a next question from the line of Sudheer Guntupalli from Kotak Mahindra Asset Management.

A couple of clarifications. Due to unplanned ramp-downs and cancellations, you said we have seen a sharp 3.2% fall in the revenue. However, margins fell just 50 basis points. And even based on the positioning of margins you gave, utilization and cancellation led impact isn't so much in proportion to 3.2% fall in revenue. Logically, this decline of this magnitude should have entailed a much bigger margin impact given the cost recalibration is difficult in the near term. So just curious, is there any sizable pass-through element which would have gotten rolled off, which would have also led to the revenue decline? or is there any deferred cost component which will come and hit us in the subsequent quarters? Nilanjan Roy : No. So as we went through the margin walk earlier, if you go back to script, we explained the four key elements. I think they're quite clear of how the margin has moved from 21.5% to 21%.

Sure. And the second part, the reason why I'm also asking about this pass-through component is the [SVB] share and the sentiment overhang sort of unfolded from 10th March post which there were 12 to 15 working days and the revenue was almost 3.5% to 4% short of guidance or expectations, which means there is a $180 million revenue swing. It looks quite a bit for 12 to 15 working days of invoicing, so again, would it conversely, is there a deferred revenue component which can come in the subsequent quarters since you also mentioned somewhere about the provision reversal of one off. Nilanjan Roy : No, I'm not clear on your question really.

No. What I was asking was in general, the macro sentiment overhang unfolded in the last.... Nilanjan Roy : No, I think if you say that whether all the shortfall of 3.5% has happened in the last, like month or something like that?

Yes. So you are saying the 3.5% shortfall is evenly spread from the beginning of the quarter itself and not necessarily... Nilanjan Roy : Yes, of course, the onetimer is a different issue, but yet the majority of the drop in revenue is because of volume. And like Salil said, this was pretty much after 15th, and we've actually seen March stabilizing. So it was in the initial half of the quarter.

Our next question is from the line of Surendra Goyal from Citigroup. Surendra Goyal : So my first question was on the revenue guidance. Just wanted to confirm that the guidance is all organic in nature. Salil Parekh : Yes, the guidance is all organic.

Yes. Surendra Goyal : And second question is on margins for Nilanjan. So while I understand that your guidance is always annual. But how do you really think about medium-term margins, right? So the common question we have been getting from investors, given the direction of margins is can it be 18% a couple of years down the line. So I know you can't quantify it, but just wanted to understand how you guys think about medium-term margins. Nilanjan Roy : Yes. I think I've explained it earlier in the question to Kawal as well. if you have to step back and you see during this period of COVID for us to go after in a very talent constrained environment, the impact on the cost structure of the company all across per capita cost went up, pyramids got -- with a combination of compensation, stretches, pyramids got skewed basically, fundamentally, you are going behind these large deals. We even have time to really optimize on all these levers, sub-cons at a record 11.3%. All these inefficiencies we saw, but like we have continuously said during that period that we knew that we had to go and grab that volume, and we would have enough time to subsequently as we start unwinding those inefficiencies and this is a cost optimization program we run throughout. And that's where we still think these inefficiencies still exists across -- utilization is a classic one. I mean we're sitting today at 80%, as we mentioned, and it's got a double whammy on cost, like I mentioned earlier. So these are things we will continue to target on and aspire to improve our margins, and 20% to 22% really gives us that flexibility and 21% just happens to be the midpoint where we ended the year.

Sure, Nilanjan. I get the annual guidance. My question was more medium term because in good demand scenario, margins go down because of supply side issues. And in bad demand scenario, possibly, they go down because of either pricing or whatever other reasons. So maybe, I'll just take it offline.

Our next question is from the line of Keith Bachman from BMO Capital. Keith Bachman : Yes. I had two questions also. Could you talk about what the growth rate of the backlog in the pipeline was during the March quarter and how that differed during the December quarter. I'm just trying to understand the magnitude you called out volume was the major driver. But how did it impact the overall backdrop? And within that context, could you give us a sense of -- you called out there are several onetime events for customers. Could you give a quantification about what that was in the quarter? Nilanjan Roy : Yes. So we don't quantify that. But like I said, the majority has been because of volumes and the balance has been because of the one-timer across clients, some of them related to cancellation and other provisions. Keith Bachman : Okay. But you don't want to give a characterization of what that -- those cancellations were a quantification of it? Nilanjan Roy : No, I don't think anything else we have to add on this, Keith. Keith Bachman : Okay. Okay. I wanted to -- my second question then relates to pricing. And the previous question, I think, was trying to get at this. I'm not sure I understood the answer. But if you think about the guidance that you provided, on the one side, perhaps I would think that you give COVID benefits associated with your contracts, but a lot of your customers, frankly, are experiencing the same economic weakness you are and therefore, could negotiate candidly tougher pricing as we look out over the next 12 months. In other words, want price reductions because they're experiencing economic pain as well. So maybe just talk how are you thinking about like-for-like pricing as you look out over the next 12 months in terms of the forecast that you provided regarding -- excuse me, that you provided. Nilanjan Roy : Yes. So I think if you see pricing in generic, and I won't say how much of the pricing element has been built in. So this is a program we started about 1.5 years back. And it is a combination of two or three things. One is the renewal discounts, which clients come back when programs are ending. And basically, after productivity increases at the renewal stage, which we are just loosely calling discounts. Now that is something which we have really curbed over the last few years, basically pushing back on the renewal because there are other ways we can get productivity as well. So that's something which has actually stemmed quite a lot. In fact, clients understand that we have to also provide for our own talent in this hot talent market to compensate their teams. So that's something which we've learned appreciate as well. So that's one part of it. Second, to the program, which we run on basically digital pricing where we're going after new digital deals, and this is a combination of how we've changed our pricing model into linking it, for instance, the new early acquired subsidiaries, which have higher pricing. It could be more broad-based pricing, outcome-based pricing. There are new innovative pricing construct for that second. Third is simple hygiene work of having color clauses into our MSAs. And of course, how much you can execute and implement a different question, but at least with that and deals going in, at least you have a starting point to negotiate with the client as well. So it's all three we look at in terms of existing deals, new deals and renewals, and of course, you have clients where we are able to push this through great levels, some clients ask for that to be plowed back into the employee sets. Some clients, it depends on markets, of course, who are going through their own sort of concerns on their environment, it may be more difficult. And therefore, it's literally horses for courses in which we go literally client by client to see where we can get an improvement in the underlying ARPU realization. Keith Bachman : And so what is the underlying assumption associated with the guidance for FY '24? And how is that different on what you've experienced in FY '23…? Nilanjan Roy : Yes. So we don't -- yes, so absolutely, we don’t break down our guidance into volume and price, if you want to call it that way, that contracted into the overall guidance. Keith Bachman : Yes, more just directional. Is it the same, better or worse, just kind of directional barometer? Nilanjan Roy : Yes. We would expect pricing to improve, right? Now I can't give you a sense of versus last year, how much will this improve, but yes, we have pricing improvements built into our overall plan.

Our next question is from the line of Abhishek Kumar from JM Financial. Abhishek Kumar : You've seen some divergence in the client behavior that we have talked about versus what some of our larger peers have spoken about. One, we have seen March stabilizing while what we heard yesterday out of March actually decelerated. And second, the discretionary spend for peers have actually got deferred and not canceled, while we have seen certain cancellation in the projects. So in that context, just wanted to understand the nature of these projects, which are being canceled. Are these discretionary or there are vendor consolidation deals where you made a loss…? Salil Parekh : So the -- what we shared with some of the projects or programs were stopped in an unplanned way during the course of the quarter. These are not resulting from tender consolidation. These are resulting from decisions that the clients have typically made on their spend given the environment that they are faced.

Thank you. Ladies and gentlemen, that was the last question for today. I now hand the conference over to the management for closing comments. Over to you, sir. Salil Parekh : So thanks, everyone, for joining us. As we shared through the call, first, for the full year, we had good growth, good margin, good cash collection, we saw during the quarter some situations which were new situations during the quarter with the changing environment. We have a strong guidance for next year of 4% to 7% of growth. We have a good guidance on margin. We've put in place even more emphasis on a cost and efficiency plan, which has many components at a detailed level, and we look to see that benefit come through over multi-year period and aspire to higher margins. And we have an extremely strong pipeline with large deals and some mega deals, especially on cost efficiency automation. With that, we feel the business remains in a good position and we have the ability to work through different environments on digital transformation and/or on cost efficiency consolidation as the course of the year develops. So we look forward to executing on that and connecting with you at the end of this Q1. 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.