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Earnings Transcript for TCS - Q4 Fiscal Year 2024

Operator: Ladies and gentlemen, good day and welcome to the TCS Earnings Conference Call. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Ms. Nehal Shah from the Investor Relations team at TCS. Thank you, and over to you.
Nehal Shah: Thank you, operator. Good evening, and welcome, everyone. Thank you for joining us today to discuss TCS' financial results for the fourth quarter and full year financial year 2024 that ended March 31, 2024. This call is being webcast to our website and an archive, including the transcript, will be available on the site for the duration of this quarter. The financial statements, quarterly fact sheet and press releases are also available on our website. Our leadership team is present on this call to discuss our results. We have with us today Mr. K Krithivasan, Chief Executive Officer and Managing Director.
K. Krithivasan: Hello, everyone.
Nehal Shah: Mr. N. G. Subramaniam, Chief Operating Officer and Executive Director.
N. Ganapathy Subramaniam: Good evening to you.
Nehal Shah: Mr. Samir Seksaria, Chief Financial Officer.
Samir Seksaria: Hello.
Nehal Shah: And Mr. Milind Lakkad, Chief HR Officer.
Milind Lakkad: Hi, everyone.
Nehal Shah: Our management team will give a brief overview of the company's performance, followed by a Q&A session. As you are aware, we don't provide specific revenue or earnings guidance. And anything said on this call, which reflects our outlook for the future or which could be construed as a forward-looking statement must be reviewed in conjunction with the risks that the company faces. We have outlined these risks in the second slide of the quarterly fact sheet available on our website and e-mailed out to those who have subscribed on our mailing list. With that, I would like to turn the call over to Krithi.
K. Krithivasan: Thank you, Nehal. Good day, everyone. I am pleased to share that we are wrapping up the last quarter of financial year 2024, with the strongest sequential revenue growth in many quarters and all-time high TCV, and an operating margin of 26% for the quarter, highest in the last 12 quarters. Our financial year 2024 revenue grew at 6.8% in rupee terms, 3.4% in constant currency terms and 4.1% in dollar terms. Our operating margin for the year came in at 24.6% and net margin was at 19.3%. Our ability to maximize market opportunities is evident in our record Q4 TCV of $13.2 billion. We are seeing solid deal momentum across markets, resulting in strong double-digit growth in our last 12 months TCV, which is a reflection of our deepening partnership with our clients. This is going to be NGS' last quarter with all of us. So I want to thank NGS with whom I have worked closely for more than 3 decades. I witnessed firsthand the tremendous impact he has made on TCS over a 42-year long career, working side-by-side with him and our entire leadership team on every aspect of our strategy and operations. NGS played a key role in developing and executing our growth strategy, especially our Products and Platform business, positioning us very well for continued market leadership. He has played a strategic role in several landmark projects that TCS undertook across geographies, most recently in BSNL being one. We'll miss him in his executive capacity very much. I now invite Samir, Milind and NGS to go over different aspects of our performance during the quarter. I'll step in later to provide more color on the demand trends we are seeing. Over to you, Samir.
Samir Seksaria: Thank you, Krithi. Good day, everyone. In the fourth quarter of FY '24, our revenue grew 2.2% year-on-year in constant currency terms at INR 61,237 crore. This translates to a growth of 3.5% in rupee terms. In dollar terms, the revenue was $7.36 million, a Y-o-Y growth of 2.3%. For the full year, our revenue grew 3.4% Y-o-Y in constant currency at INR 240,893 crores and that translates to a growth of 6.8% in rupee terms. And in dollar terms, revenues were at $29.1 billion, a Y-o-Y growth of 4.1%. Our operating margin stood at 26%, a sequential expansion of 100 basis points. This was in spite of 90 basis points due to higher third-party costs and travel expenses, offset by 190 basis points improvement from reduced subcontractor costs, improved productivity and better utilization. Our FY '24 operating margin was at 24.6%, an expansion of 50 basis points over the prior year. During the year, we had 250 basis points headwind on account of annual wage increases and other interventions and a further 90 basis points from higher third-party expenses and discretionary expenses. We were able to successfully mitigate those by optimizing subcontractor expenses, improving productivity, realization and support from currency. Net margins in Q4 was 20.3%, and for the full year, was 19.3%. Our annual EPS grew 10.9% during the year. Our effective tax rate for the year was 25.8%. Please note that all the full year FY '24 numbers are adjusted for the settlement of legal claims, which was accounted for in Q3. Our accounts receivable was at 67 days DSO in dollar terms, flat sequentially. Our cash conversion continues to be strong and over 100% of our net profits. Invested funds at the end of March stood at INR 46,963 crores. The Board has recommended a final dividend of INR 28 per share. The shareholders payout year till date were INR 46,223 crores, including the buyback and dividends. Over to you, Milind.
Milind Lakkad: Thank you, Samir. Our workforce at the end of the fourth quarter was 601,546. Our LTM attrition in IT services kept trending down throughout the year and was at 12.5% at the end of Q4, down 80 basis points sequentially and in our comfort range of 11% to 13%. TCS has been recognized as the Global Top Employer by the Top Employers Institute for the ninth consecutive year. The global certification follows a series of localized certifications with TCS being named a top employer in 32 countries and regions. Company remains the preferred employer and one of the largest job creators in IT services in several middle markets for both freshers and lateral hires. We have commenced fresher hiring from campuses and continue to recalibrate our lateral hiring, focusing more on utilizing the capacity that we have built over the prior years. TCS organic talent development initiatives continue to deliver industry-leading outcomes. Employees logged 51 million learning hours during the year and acquired 5 million competencies. In FY '24, several key initiatives were launched to inculcate a strong engineering culture among the company associates, build deeper skills in market-relevant technologies and create an AI-ready workforce. As we have done consistently every year, we have announced a salary increment for all of our employees with effect from April 1, similar in quantum to prior years, with top performers receiving double-digit hikes. Over to you, NGS, for some color on our segments and products and platforms.
N. Ganapathy Subramaniam: Thank you, Milind. Good evening to all of you. As Krithi mentioned, I'll be superannuating from TCS in a few weeks. I've thoroughly enjoyed and it's been an absolute honor interacting with all you over this forum. And I always have looked forward to your reports, all our interactions and the reports have only made me wiser. Thank you so much. Let me walk you through our segmental performance now. As a reminder, all growth numbers are on year-on-year constant currency terms. In Q4, growth was led by regional markets, which grew 26%. Manufacturing vertical grew by 9.7%. Energy, Resources and Utilities grew by 7.3%. Life Sciences & Healthcare grew by 1.1%. Our Consumer Business Group declined by 0.3%. However, it returned to positive sequential growth in Q4. Banking, Financial Services & Insurance declined by 3.2%, but saw a return of growth in the insurance business across all markets during the quarter. CMI declined by 5.5%, and Technology & Services declined by 5.6%. Among major markets, the United Kingdom led with 6.2% growth, Continental Europe declined by 2.2%, North America declined 2.3%. In emerging markets, India led with 38% growth. Middle East and Africa grew by 11%. Latin America grew by 10%. And Asia Pacific grew by 5.2%. Let me move on to our products and platform. Our industry-leading portfolio of products and platforms saw good traction during the quarter. ignio, our cognitive automation software suite, saw 32 new deal wins and 6 go-lives. TCS BaNCS, our flagship product for financial services, had 8 new wins and 7 go-lives during the quarter. Central Bank, a leading Midwest regional bank in North America, selected our core banking and payments modernization platform. The solution will come pre-integrated with core banking and payments, an ISO 20022 ready solution, enabling the bank to offer FedNow services and RTP tools by The Clearing House. TCS BaNCS insurance platform continues to see strong growth in Q4 with 2 wins and 2 go-lives during the quarter. Aviva, U.K.'s leading insurance, wealth and retirement provider, expanded on the existing relationship with TCS for a 15-year deal to transform its life business and enhance customer experience, leveraging the TCS BaNCS digital platform. As part of this, the end-to-end policy administration and servicing will expand to cover an additional 5.5 million policies to be managed by Diligenta, our FCA-regulated subsidiary in the U.K. Quartz blockchain platform had 3 wins during this quarter. In Life Sciences, Advanced Drug Development platform had 1 new win and 2 go-lives during the quarter. GenAI is a potential game changer in identifying probable drug candidates, optimizing trials, harnessing vast pools of dissimilar clinical data, capturing and processing efficacy and safety data. There are many such GenAI use cases, where pharma companies are investing. TCS ADD platform is actively working on POCs on GenAI across multiple innovative use cases, including literature insights, patient insights, safety case processing and medical writing. TCS Optumera, our AI-powered merchandising optimization suite had 1 new win in Q4. A Dutch retail client of ours has transformed its pricing strategies in their 800 Netherlands stores for the last 7 years, with TCS Optumera fulfilling their promise of providing high quality at low price. Our product will now drive their pricing initiatives in Belgium that will help them improve usability, provide flexibility in pricing and help maintain consistent pricing position. TCS iON, our platform for digital assessment, exam administration and learning, had 22 new wins and 80+ go-lives. Our assessment platform administered examinations for 13.9 million candidates. Our platform now offers GenAI-powered content creation and text translation in Indian regional languages, improved security and question creation with restrictions in editing, overwriting media, images, and creating duplicate subject codes and names, audio-based marking with noise suppression and dual recording capabilities. TCS TwinX, our digital twin solution, had 2 wins and 2 go-lives. MasterCraft and Jile won 29 new clients in Q4. Let me now go over the client metrics. As you are aware, our customer-centric business strategy enhances our ability to continually expand and deepen our client relationships. These metrics provide a measure of our progress in the journey and the validation of our strategy. In Q4, we added 2 more clients year-on-year in the $100 million-plus band, bringing the total to 62. Six more clients in the $50 million-plus band, bringing the total to 139. 10 more new clients in the $20 million-plus, bringing the total to 301. 26 more clients in $10 million band, bringing the total to 487. 28 more clients in the $5 million-plus band, bringing the total to 693. And 53 more clients in the $1 million-plus band, bringing the total to 1,294. I will now request Krithi to speak on demand drivers during the quarter.
K. Krithivasan: Thank you, NGS. As we review the last year's performance, TCS has once again proved its adaptability and relevance to customers. By working closely with them and utilizing our contextual knowledge, we proactively identified solutions to their industry-specific challenges, leading to significant deal wins and market share gains for us. Our growth remained resilient amidst macro uncertainties and geopolitical volatilities. During Q4, customers continued to reprioritize spend in projects where return on investment was high and immediate. Several key engagement themes, which are priorities for enterprises include
Operator: [Operator Instructions] We have first question from the line of Yogesh Aggarwal from HSBC.
Yogesh Aggarwal: Just a couple of questions. On the TV, you guys mentioned that there is only one large mega deal in the entire TCV which is very strong but still the near-term growth outlook is not very clear. So I was just a bit confused, if a large part of the deals are smaller in TCV shouldn't the near-term outlook improve quite a bit? That is one. And secondly, just on the India business, Krithi, in the past, companies have regretted growing India after a while, margins, cash flows, et cetera. So you think the market has matured now and it's not a risk going forward?
K. Krithivasan: Yogesh, first on the large deal, what we said is one mega deal, right, in the deal pipeline. Others are all the deals of normal size we have every quarter. So it could be large deal, it's not a mega deal, okay? And from an overall deal term perspective, there is no change otherwise. And as we -- since you mentioned the TV interview, we said that like the number of deals that we've been winning in the last few quarters give us the confidence for a period of time, the growth would return, right? So I don't see there is a reason for a confusion or conflict there. Coming to India, we do believe that we have to participate in the India growth story. And many of the large enterprises, both in the public sector and private sector, are embarking on new programs to leverage the technology that's available today. So we are selective. We want to ensure that we enter into the right deals, but we believe there are enough right deals in the market today.
Operator: We have our next question from the line of Sudheer Guntupalli from Kotak Mahindra AMC.
Sudheer Guntupalli: Congratulations on a good set of numbers. Krithi, you reported solid deal wins and you're indicating that the demand visibility has improved over the previous 3 months, I think on the press meet. On the contrary, one of our consulting-heavy peers has indicated that demand situation further deteriorated over the previous 3 months. So is it fair to assume that the problem of incremental deterioration over last 3 months is more pertinent to the discretionary strategy consulting kind of engagements and the rest of the portfolio remained largely resilient?
K. Krithivasan: So definitely, in a way, so Sudheer, if you look at what we have been saying discretionary programs with not so exiting ROI, come under pressure. So if the ROI is not immediate or ROI is not meeting the threshold the customers have set for themselves, they tend to pause those programs or delay these programs. So to that extent, there could be the lack of visibility on near term. But as I said, like since the TCV has been quite high, on the medium to long term, we are more optimistic.
Sudheer Guntupalli: Sure sir, second question is for Samir. If you adjust for BSNL deal ramp-up led margin dilution over the previous 2 quarters, your EBIT margin should have already been somewhere midway of your aspirational band of 26% to 28%. So my question is, have we peaked out in terms of margins or you see further scope for a margin upside?
Samir Seksaria: Sure, Sudheer. So first, we'll not -- we'll look at our margins on a portfolio basis and will not split customer or geography out of it. Coming to your question on whether the margins have peaked out. In the -- as you know, first quarter, we take the impact of increments. So we would have a headwind coming up. But I think overall, during the year, we have -- in spite of strong headwinds coming through and in a challenging macro, we have been able to deliver consistent good margin improvement in the last 3 quarters, almost 100 basis points in each of the quarters. We believe some of the levers, like the subcontractor cost, was one of the levers which helped significantly in FY '24, might have bottomed out. But with our focus on disciplined execution, we believe still levers like pyramid, pricing and utilization can help us. And if the macro risk recedes and growth reverts back higher to its normal trajectory, then that can only help us accelerate this journey.
Sudheer Guntupalli: Got it. And lastly, NGS sir, congratulations on a glorious career. It's a privileged listening to you and all the best for your future endeavors.
N. Ganapathy Subramaniam: Thank you.
Operator: The next question is from the line of Ankur Rudra from JPMorgan.
Ankur Rudra: Just the first question is on the strong signings momentum you mentioned. How are you thinking about the conversion of this into revenues over the next year or so? And how does it set you up for fiscal '25, given perhaps much easier comparables this time?
K. Krithivasan: I didn't get your second question, Ankur, can you repeat?
Ankur Rudra: My question was given the signings momentum has been very strong towards the end of the year...
K. Krithivasan: I got that question. You have a second question.
Ankur Rudra: Second question is on how do you think about the comparables given fiscal '24 growth was not very high. Is it easier comparables this year? Does it help you significantly?
K. Krithivasan: TCV, definitely like we've been also looking at where is the revenue coming from, Ankur. Like, we are quite comfortable on the revenue conversion of the deals that we signed in the last 3, 4 quarters. And they've been at a similar rate that we used to convert in the past as well. So -- and like we always say, we've been saying in the last few quarters, the headwind has always been in those projects that we signed quite some time ago and which are of discretionary nature or where the clients can slow it down or pause for some time, those are the ones providing the headwind. What was the second question?
Samir Seksaria: Will FY '25 -- given how FY '24 was, will FY '25 pan out better?
K. Krithivasan: We -- yes, Ankur, we've been -- or last quarter also we mentioned this. Seeing the TCV of whatever we signed this quarter, we believe the FY '25 would be better than FY '24.
Ankur Rudra: Understood. Maybe if you can comment a bit more in terms of how do you think or where do you think clients are and where do you think the environment is in terms of spending cycle? It's been almost, I think, 2 years now, it's now slightly longer until we've seen revenue sort of decline, decline, decline, perhaps bottom out and begin to recover. How do you feel about the spend cycle right now, especially the mix of discretionary and nondiscretionary? And also if you can touch upon financial services and TMT verticals.
K. Krithivasan: I won't want to -- look at this way, Ankur. Like clients want to do transformative work, they want to embrace new technology. We talked about cloud adoption. We talked about enterprise cloud modernization. We talked about Generative AI. Clients want to do all of them. Understand also, clients want -- they want to conserve cost. So these 2 are the drivers that work -- that make them choose the appropriate projects. Wherever they're trying to do on client -- cost and optimization, you would see programs around vendor consolidation, operating model transformation or sometimes application rationalization, those kind of engagements are started. And using the savings. The saving is used to fund the programs that I talked about. So I don't think that it's a -- if you look at purely the TCV and look at the kind of project, you cannot say there's only 1 kind of project. You would see a fair mix. I would say maybe 55% in terms of cost and optimization, or 60%. The remaining in terms of transformative engagement. That's how probably put where it the -- at upper gross level.
N. Ganapathy Subramaniam: If I can add, Ankur, to what Krithi has said, every organization wants -- yes, every organization wants to become an AI organization. So there is a huge amount of upskilling, transition, that internally they are going through, to train their own people on the impact that AI can have in terms of every one of their internal processes and their planning process, and what are the parameters that are important for their growth. All of it. So they are going through the AI transition themselves, right? And in addition to that, given the number of new technologies that are coming in this space, the possibilities are opening up. As I alluded to in the press conference, the first phase of defining the architecture in which they would like to develop these programs, which LLMs will be relevant for them, which one they want to keep it in-house, which one they want to keep it in the public domain, what data that they have internally, what data they need to get it externally and measure, there a lot of these -- strategic decisions are also at play. So I think as far as the cost and optimization efficiency, using AI for internal purposes, they're all -- there is no dearth of opportunities. They're all happening in some way. But on the strategic transformation programs, the kind of work that they want to do, they are calibrating it. They want to solve all this internal issues, strategic issues first, assess the regulatory impacts before they want to progress further.
Operator: The next question is from the line of Kawaljeet Saluja from Kotak.
Kawaljeet Saluja: I have a couple of questions. First is on TCV and the relative lack of, what I would say, excitement about the near-term growth acceleration. Is there anything in the composition of TCV, which is leading to this relative lack of enthusiasm? Anything which you can throw some color on, the renewal component or the ACV, anything that can help us understand the dynamics of growth and TCV a little bit better?
K. Krithivasan: Thanks. Kawaljeet, I won't call it a lack of excitement. We are quite happy with the TCV we signed. Our caution comes from also the headwinds that we face, right? Like there are -- like, there is a demand or the short-term demand still remains, not very clear or volatile. So that's a cautionary stand. Like once we go through the quarter, probably we'll get a better understanding of how the gross -- let me say overall demand, net demand. So we are quite happy with the TCV. The TCV is -- we've been able to convert the TCV into revenue very well. But what we have not been able to predict is the headwinds that come out because customers want to conserve cash and then stop some of those ongoing large programs. So that's the reason you see the amount of caution in terms of predicting the revenue.
Kawaljeet Saluja: And Krithi, anything in terms of renewals versus new TCV? Because I saw a stream of announcements, but plenty of them were renewals. So how does that compare with the historical average? And if you can throw any -- if you can add any insights on the ACV number, that would be useful as well.
K. Krithivasan: We don't publish ACV number, Kawaljeet. But from a renewal to new revenue, actually, there is no change. Actually, if at all, I would say that our new revenue has been stronger.
Kawaljeet Saluja: Okay. That's heartening to hear. Now the second question is for Samir. Samir, any other levers through which you can juice up the margins? I understand there are some near-term headwind from comp provision but just to understand the perspective of profitability and how it can improve. Any levers that you can highlight, because at least from the face of it, to us, it looks that the engine is running nice, in a very optimized way today.
Samir Seksaria: Yes, Kawaljeet. So the ones I called out, pyramid pricing and utilization -- pyramid, productivity and utilization, definitely have further scope. And we also believe that incremental margins will have to be contributed by pricing improvements.
Kawaljeet Saluja: Right. The final question that I have is on the BSNL deal, right? So there's $1 billion of revenues that come in, let's say, over a period of 12 to 18 months. Is there subsequent work packets that will flow in? Or does this create, let's say, revenue vacuum as you move into FY 2026?
N. Ganapathy Subramaniam: This is NGS here. I think -- see, we have currently -- we are focusing on installing the network across 100,000 towers. We have achieved about 10,000 towers as of date, and there are further opportunities. For example, beyond rolling out this 100,000 towers, we also have to upgrade a good number of them to 5G. That's another revenue stream that will come. And then subsequently, the maintenance, support and aspects for the next foreseeable future. That's another thing that is expected. In addition, there are also opportunities to increase the number of towers that BSNL will deploy. Because clearly, they are focused on what they call as saturation sites, which essentially means rolling out new towers in rural areas where, hitherto, even a mobile network doesn't exist. So there are clearly some more opportunities that will come from the BSNL. But clearly, this is a mission-critical project, very complex, highly integrated and indigenously developed. The opportunities to take it to market with other operators and other things is an opportunity that we are calibrating.
Operator: We have our next question from the line of Surendra Goyal from Citigroup.
Surendra Goyal: Krithi, I'm just trying to understand your commentary better. You had sequential growth in Q4, you are saying that visibility has gotten better. Do you think TCV trends are good and mostly regular-sized deals? And June and September are seasonally strong as well based on what we have seen over the years, so why are you not willing to call out growth in the coming quarters? Is the leakage in the existing big business a concern enough to hold you back despite so many positives? Any clarity would really be helpful.
K. Krithivasan: Surendra, 2 things. One, we have never given guidance. Two, as I -- whatever answer I gave to Kawaljeet, like there is certain amount of unpredictability in terms of our customers' willingness to, or readiness to cut the discretionary work that we are doing based on the return on investment, they are seeing. And it is also a factor of how they see the economy panning out or how -- what they should be ready for. So if there is a greater confidence on their overall business growth, you will see them, now at least, embarking upon more discretionary projects or not pausing the projects. So it's a question of the overall economic sentiments our customers are in. That's the reason that we are not sounding very optimistic.
Surendra Goyal: And are there...
K. Krithivasan: We are, I think, let me put it -- we're not -- we're being cautious here. It's not -- I'm not -- we are being cautious here because of these reasons, Surendra. Go ahead, sorry.
Surendra Goyal: And are there particular verticals where you see the reprioritization happening more commonly compared to, say rest of the business?
K. Krithivasan: No, it comes from like their individual perception. See, there are some programs that we have seen, a number of incremental enhancements are supposed to be done. But when they see the new enhancements not going to yield greater value, they don't do those enhancements, they stop at wherever, whatever -- after the initial set of modernization. So are -- we have seen programs where they have signed up to initially a very high SLA. But they realize that given the current environment, that kind of SLA is not required. So then you have a lesser number of associates handling the same program with a reduced SLA. So you will see a mix of -- and there was one instance where the customer sold off their business to somebody else or they got out of the business, so they ramped down the people in that program. So -- and some of these decisions happen on a very short notice. So this is broadly the spectrum we are seeing.
Surendra Goyal: And just a housekeeping question. Are any deals which get canceled, either because of customers selling of a business or any other reason, what you report is that a net number or just a gross number?
K. Krithivasan: No, like what is it? Net number or what is the question...
Surendra Goyal: No, what I'm saying -- see, if you had signed a deal 6 months back and then the deal got canceled, would this quarter be net of that cancellation or the cancellations are not accounted for?
K. Krithivasan: Our TCV is only the what we sign new in a given quarter.
Surendra Goyal: Understood. NGS, thank you for all your insights over the years and all the best.
N. Ganapathy Subramaniam: Thank you so much.
Operator: We have our next question from the line of Gaurav Rateria from Morgan Stanley.
Gaurav Rateria: Just wanted to get little bit better trends on BFSI. You did you talk about insurance vertical growing during the quarter across geographies. If you could lay out in terms of outlook within BFSI of subsectors, what's going to grow and where the visibility is higher, where visibility is still not there, that will be very helpful.
N. Ganapathy Subramaniam: Gaurav, this is NGS here. I think, see, overall, our engagement with our customers in the BFSI segment has been terrific and very good partnership that led to about $4.5 billion worth of TCV during the quarter. Insurance is doing well. Capital markets is just -- almost every stock market is doing well. So they are increasing opportunities that are coming. But largely in putting controls, risk and safety measures, as opposed to trading systems -- or trading and settlement systems because they're all working, they're all scaling, and they don't want to touch it and they have invested a lot in algo trading, everything. On the retail banking side. Clearly, payments and wealth management are 2 significant areas where we have customers wanting to try out new technologies and especially portfolio management, portfolio amortization and using GenAI to rebalance and then reducing in a way that increasing their own productivity and giving that ability to their customers is something that we are seeing and identifying arbitrage opportunities on the fly. These are all cases that people are trying it out. And there are opportunities in payments specifically and wealth management on the retail segment. Market infrastructure side. Yes, there are a good number of programs are in that pipeline. As you know, we signed up the deal with the ASX, Australian Stock Exchange, and we implemented one of the most complex commodity systems for MCX. And we continue to engage with customers of ours, like London Clearinghouse and other firms. Large market infrastructure programs in payments, payments modernizations, and almost every market, they are considering to implement something like a UPI, faster payments, instant payments. They are all discussions that are going on, but these are all long-term projects. So deal cycles are expected to be longer. I hope that gives you a perspective.
Gaurav Rateria: Just a follow-up on this, where are you seeing the unexpected ramp downs or behavior of client decision-making within these segments? And any likelihood of that kind of continuing? I mean are you expecting this to continue in the current quarter as well?
N. Ganapathy Subramaniam: I think I can't really pinpoint something that, look, if you take our BFSI segment, for example, most of our customers, they are all long-term, strategic customers for us. We have enjoyed a phenomenal relationship and partnership with all of them. So we sign deals and they commit deals to work with us. But then at the same time, they come back and then say that, look, yes, I signed this deal and then I want to defer this for about a quarter. Even though contractually, they may not have that option, we remain flexible with them. And then we have to accommodate them in the interest of a long-term relationship. And culturally, we are like that, right? So from that perspective, we see some volatility in decisions because, for example, if they face a headwind, they come back and then talk to us and then say that, "Look, can you execute this program, in terms of 12 months -- instead of 12 months, can you do it over 18 months or 24 months?" And such things happen, then it's an unplanned, let's say, distribution of work that we need to manage. And customers love us for that, so I think we will continue to operate in that fashion. And it is that volatility, which we are not able to predict. And at the same time today, there are so many start-ups coming in AI. Some of them, they say that, look, maybe I want to invest in that startup rather than building it myself. Why I wanted to build it? But today, I want to see what the -- conceptually what they are coming up with is interesting, maybe I will invest in them and then accelerate their journey and adopt that technology. So these are all the volatility that we see in the marketplace, for which we will like to be respectful of their thoughts and decisions, and accordingly, align ourselves to this. And that's the volatility which I'm not able to predict, and I'm not able to communicate it. We only echo what we see and what we hear from our customers to all of you.
Gaurav Rateria: Last question for Samir. On the comfort band of 26% to 28%. You did talk about pricing to be one of the levers that will be required to sustain the margin in that. In the current environment, do you expect this to play out in the coming quarters based on the kind of deals that you have signed? Or is it more of a factor that could be at play only when the discretionary spend were to return back?
Samir Seksaria: No. So we believe that incremental margins will have to be contributed by pricing improvement. That need not be through an immediate pricing increase, but will need to be structured -- we will need to work out structurally. And towards that, it would be a combination of various factors. Overall, portfolio-based pricing increasing, renewals getting priced in at a higher price, or when the renewals happen, asking for a price increase. Or the overall new deals which come in get factored at a higher price. So I wouldn't expect it in 1 quarter or we go and ask for a price increase to a customer and we would get it.
Operator: We have our next question from the line of Kumar Rakesh from BNP Paribas.
Kumar Rakesh: My first question was for Samir. So we are exiting this year closer to 26% on the margin side. So through the next year, FY '25 through the quarters, should we expect the quarterly movement of margins similar to what we saw this year? Or there was some difference in the trajectory, which we saw and we should build accordingly?
Samir Seksaria: I think one thing for sure is, like it happens in every year, we will take the impact of increments or the headwinds, largest headwinds coming in then in Q1 and then we claw back on the margins as we go through the year, and we would expect a similar trajectory to happen.
Kumar Rakesh: Got it. And there has already been a lot of question around the deal TCV, ACV and the revenue conversion. Additionally, Krithi, you also spoke about in the last quarter about the pent-up demand in the retail segment this quarter. You have spoken about pent-up demand to be there in BFS. How do you see that panning out in the context where you have caution in the near term while you were also talking about there is a pent-up demand? Or do you think that would be the catalyst that you would be looking at where these pent-up demand eventually starts translating into revenue and gives you more better visibility on demand and comfort as well?
K. Krithivasan: Kumar, like, to me, once the customers are comfortable about their demand environment, about their market, or for instance, like see insurance today, they look at their long-term growth to be, or say, for manufacturing, we find there is a lot of activity. So those sectors we find there is a investment happening. So it is a factor of those individual businesses. Like capital markets has done reasonably well this quarter. Like we found that spend happening in the regulatory sector, the risk and compliance. So it depends on the individual customer. And whenever they see that there is a greater confidence of their business, you would see the pent-up demand also being satisfied. And as long -- again, it's also -- it's a factor of what is the return on investment or that particular investment will give them. So it's more a factor of the individual business and the clients' outlook, Kumar.
Kumar Rakesh: Got it. So in any of the verticals or pockets, have you already started seeing this pent-up demand starting to translate?
K. Krithivasan: I wouldn't call it pent-up demand, but as I spoke in my original commentary, consumer business, for now we started seeing green shoots in pockets. Like even this quarter, we found airlines, transportation, doing very well. So you would see pockets in each of these verticals. I won't say -- any given vertical, you may not have all subverticals return to growth. But there will be some subverticals that would return to growth. But as I said, this quarter, insurance grew well. Airlines and transportation grew well. Manufacturing, by and large, most of the segments in manufacturing grew well. So this is what we are seeing now.
Operator: 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.
K. Krithivasan: Okay. Thank you, operator. We are very pleased with our financial year 2024 performance, growing at 3.4% in constant currency amidst the macro uncertainty prevailing in the major markets. Our Q4 revenue grew 3.5% in rupee terms and 2.2% in constant currency terms. Deal momentum continued to be very strong in Q4, with our order book at $13.2 billion for the quarter and $42.7 billion for the full year. Our Q4 operating margins improved to 26%, an expansion of 100 bps sequentially. Our net margin in Q4 stood at 20.3%. Our LTM attrition in IT services fell further to 12.5%. We continue to deliver resilient results, winning market share and balancing growth with profitability. We have an exceptional leadership team and an extremely dedicated workforce. It has been every TCSer's hard work during the year, which fueled our collective achievements, and I would like to thank each one of them for their contribution to the company's success. With that, we wrap up our call for today. Thank you all for joining us.
Operator: Thank you, members of the management. On behalf of TCS, that concludes this conference call. Thank you for joining us, and you may now disconnect your lines.