Infosys Limited (INFY) Q4 2012 Earnings Report, Transcript and Summary

Sandeep Mahindroo - S. D. Shibulal - Co-Founder, Chief Executive Officer, Managing Director, Director, Chairman Of Infosys Consulting, Chairman Of Infosys Technologies (China) Ltd, Chairman Of Infosys Technologies (Sweden) Ab, Chairman Of Infosys Consulting India Limited And Chairman Of Infosys Shanghai V. Balakrishnan - Chief Financial Officer, Senior Vice President, Director, Director of Infosys Consulting Inc and Director of Infosys Technologies Australia Pty Limited Ashok Vemuri - Global Head of Financial Services & Insurance Business and Director B. G. Srinivas - Global Head of Manufacturing & Engineering Business and Director Sanjay Purohit - Head of Corporate Planning & Business Assurance and Vice President

Moshe Katri - Cowen and Company, LLC, Research Division Keith F. Bachman - BMO Capital Markets U.S. David Grossman - Stifel, Nicolaus & Co., Inc., Research Division Jeffrey Rossetti - Janney Montgomery Scott LLC, Research Division Trip Chowdhry - Global Equities Research, LLC Shashi Bhusan - Prabhudas Lilladher Pvt Ltd., Research Division Rod Bourgeois - Sanford C. Bernstein & Co., LLC., Research Division

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

Thanks, Marina. A very warm welcome to everyone on this call to discuss Infosys' financial results for the quarter and year ended March 31, 2012. I'm Sandeep from the Investor Relations team in New York. Joining us today on this earnings call is CEO and MD, Mr. S.D. Shibulal; CFO, Mr. V. Balakrishnan, along with other members of the senior management team. We'll start the proceedings with some remarks on the performance of the company for the recently concluded quarter, followed by the outlook for the quarter ending June 30, 2012, and year ending March 31, 2013. Subsequently, we'll open up the call for questions. Before I pass it on to the management team, I would like to remind you that anything that we say, which refers to our outlook for the future is a forward-looking statement, which must be read in conjunction with the 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 would now like to pass it on to Mr. Shibulal.

Good morning, everyone. Thank you for attending the call. I will start with some color on the previous quarter. Q4 was a difficult quarter for Infosys. It was very challenging quarter for us. We knew it going into the quarter a bit. We had adjusted our guidance in the beginning of the quarter to be flat or marginally up. During the quarter, we faced an unprecedented convergence of a number of events. Our guidance -- when we give the guidance as we have mentioned in the past, we have visibility for 95% of the revenue of the quarter, which means that we have to make up approximately $90 million during the quarter. The first 2 months progressed pretty okay. It was not exceptionally well, but it was on track -- barely on track, okay. In the third month, we faced with a number of challenges: number one was a set of contractual closure delays -- delays in closing contracts; number two was unanticipated down -- ramp-downs predominantly in the FSI segment in the U.S. This is not a single client-specific situation. It was a multi-client situation with multiple client ramp-down in a very surprising manner during the month of March predominantly. Then we had anticipated a bunch of ramp-ups in wins we had in Q3 and many of them got delayed. So in that situation and the way it happened during the quarter and the time in which it happened -- in the time frame in which it happened, we were not able to make up the entire gap of $90 million of visibility we had in the beginning of the quarter. That led to a situation where we did not meet the guidance. We -- our guidance was $1.806 to $1.810 billion. We delivered a revenue of $1.771 billion. On the EPS then, we were able to deliver the numbers. The EPS guidance was $0.81, and we did $0.81. We were able to manage the expenses. We were able to manage the costs and delivered the EPS. So that is about the quarter. For the coming year, we have given a guidance of 8% to 10%. The event, which I talked about, happened predominantly at the end of last quarter, that means the later part of last quarter and many of them in March. There is, of course, an overhang of those events entering into this quarter. For the quarter, we have given a guidance of 0% to 1% growth. And for the year, we have given a guidance of 8% to 10% growth. We have not changed the principles of giving guidance. We have always believed that there should be [indiscernible] information between the external world and the internal world. On that belief, we have given the guidance. It is definitely a much more volatile environment today than in the past. We believe that this will be a new normal and this will be the normal in which we will need to operate. And even then, we have not changed the principles of guidance. We have given the guidance. Our visibility for the coming quarter, actually the current quarter, is, as usual, 95% and for the year it is 65%. And it is a statement of fact as we see it today. We have done quite a few -- quite a number of -- we have done a lot of diligence to arrive at this guidance. And this guidance reflects all the information, all the facts we know at this point in time. At the same time, I want to point out that it is a volatile environment and we have taken the bold step of giving the guidance. There has been a number of good things, which happened in Q4 and across the year. In Q4, we added 52 new clients, 8 of them in Fortune 500 U.S. and 4 of them in Fortune 500 global. That takes our client list to 694. During the year, we got a revenue productivity increase of 4.7%. It was a difficult year. Even then, we got a revenue productivity increase of 4.67%, which is a clear reflection of our strategic direction. Our strategic direction of Building Tomorrow's Enterprise and focusing on 3 parts of client business: transformation, operation and innovation, is definitely seeing traction with our clients and that is the way we are providing higher and higher business value, client value to our clients. We had good deal wins actually in Q4. Now we had 5 large deals, 3 of them more than $100 million closed in Q4; 7 transformational programs were won in Q4. The third part of our business, products and platforms side, also has seen improvement in Q4. The revenue from products and platform was 6.2% in the quarter. We have, in the revenue from platform, which is an interesting thing to look at, was $25 million for the year, but we exited the year with a $350 million booked business. So our model is also evolving, right? Our portfolio is evolving. Our model is also evolving. The products and platforms space is predominantly about investing and actually booking revenue, which has a lot of future potential, a lot of future revenue included. Recruitment. We recruited 1,200 people in U.S. and in Europe over the last 18 months. We are recruiting another 1,200 people in the U.S. and Europe over the next 12 months. This will be new employment, new jobs created in the local countries. This is also very much in line with our strategic direction of increasing our revenue in consulting and system integration. That definitely require more local talent. So from a strategic perspective, we are definitely building a balanced portfolio, balanced from a client perspective by adding a large number of clients, predominantly in the Fortune 2000 space. From an offering perspective, by balancing -- increasing our revenues in products and platform and solutions and trying to build a balanced portfolio across transformation, operation and innovation. Our European revenues have marginally gone up. Again, it's about balancing our portfolio across the globe from U.S., Europe and rest of the world. Our long-term aspiration is to have a much balanced -- much better balanced portfolio geographically. So I clearly believe that our investment, our strategic direction, our offerings, our focus is all towards increasing client relevance, strengthening our partnership with our clients and more and more adding a higher and higher client value for our clients. And I believe that, that will definitely benefit us in the medium to short term. With that, now, let me hand over to Bala.

Good morning, everyone. We had done well under the circumstances that we are in. Sequentially, those decline in revenues, but year-on-year, we have seen revenues growing by 11% and EPS growing by around 16%. The operating margin, there was a slight decline in the fourth quarter as compared to third quarter. Our operating margin came down by around 1.1% and that is basically due to rupee because the rupee-dollar rate, which was 51.37 in Q3 has come down to 49.96 in Q4, resulting in appreciation of 2.7%, which impacted the margin by 1.1%. Except for rupee, the margin has been stable from Q3. If you look at the full year, our operating margin came down by around 70 basis points, from 29.5 to 28.8. Again, rupee had a favorable impact of around 2.3%, but the utilization came down from 73 to 69, which impacted the margin by around 2%. We had some decline in our results of around 70 basis points, so net-net, for the full year, we have seen the margin declining by around 70 basis points. If we take the full year, our revenues grew close to 16%, and EPS grew close to 15%. So we have done well under the circumstance that we are in. We had a hedging position of $80 million, $89 million. As of the end of March, the currency volatility continues to be a factor and we are not changing our hedging policy. We're going to hedge for next 2 quarters at any point of time. On the utilization front, our comfort zone is somewhere between 76% to 80%. Excluding trainees, our utilization today is around 70%, so we have enough buffers in the system to take on growth when it comes. If you look at the other financial metrics that are DSO. DSO is 63 days, which is one of the best we had seen in the industry. Our return on capital employed is around 40%, 42%. Our operating cash flows continues to be very strong. It is at 25% of revenues. So if you look at the other metrics, too, we had done well. The unbilled revenues had slightly gone up this quarter, that is because we are doing some nice transformational projects that are building milestones or elongated and this is the trend we have seen even in the fourth quarter of last year, so there's nothing unusual there. Coming to next year's guidance. We have given an 8% to 10% growth in revenues and around 4% to 6% growth in EPS. We have assumed 35,000 addition in employees for next year, which includes around 13,000 employees for our BPO operations. We're assuming the revenue productivity to remain same for rest of the year. We are not assuming any increase. And we're also assuming the rupee-dollar rate at 50.88, which is what we had seen as of closing for the March quarter. We are assuming the full year operating margin to behave within a band of 50 to 100 basis points. That is what happens in any normal year. In the first quarter, the operating margin could decline by around 200 basis points, mainly because of 2 reasons: All the visas to us gets bunched up in the first quarter because the window for our visas opens up in April and that is a month we spend more on visas. And number two, like we did in last 2 years, even this year, we are going to add some 1,200 employees in the U.S., which are local hires. That is because we want to localize our operations in all parts of the world, and most of those hiring could get bunched up in the first quarter. So for these 2 reasons, the operating margin could decline by 200 basis points in the first quarter. But over the years, we will see some improvement in operating margin and net-net for the full year, the decline could be maybe around 50 to 100 basis points. Our guidance is a statement of fact based on what we are seeing at this point of time. Of course, some conservatism is built into our guidance because we are coming out of the tough year and a tough quarter, but it's more realistic based on what we are seeing as clients' budgets and what they're saying to us about their spending. So net-net, we have done well for the year. We have given our guidance based on facts what we are seeing today. And we hope if the environment stabilizes, we'll look much, much better. With this, I open up the floor for Q&A. Thank you.

[Operator Instructions] The first question is from Moshe Katri from Cowen and Company.

Shibu, I think it will be helpful if you get us -- maybe dig a bit deeper in terms of some of the things that you've seen towards the end of the last quarter in financial services. I'm assuming that a lot of those issues happened in the capital markets area that's based out of North America, out of the U.S. and then maybe also talk about whether that also impacted your commercial banking business or the insurance part of financial services as well. So maybe we can start with that.

Moshe, let me request Ashok to give you a very detailed rundown if he has -- and he can give you a very detailed rundown.

So Moshe, we had –- some, couple of things happened to us in the financial services space in the U.S. First and foremost, we had some large deals that we had closed in the previous quarter whose transition basically took much, much longer and actually did not start or ramp up in this quarter. And the expectation was that this would ramp up and then the transition would happen and the staffing would begin and that actually got delayed for a variety of reasons, most important one being that the transition -- the client was not prepared for the -- was not prepared for the magnitude of the transition that they had to undertake. The second was that we saw some of our programs in our capital markets space actually get terminated or not -- they actually ramped down in this particular quarter and that actually happened -- some of them were expected, but there were a lot more unexpected ones that happened to us especially for some of the larger names on the street. These programs were in the area -- mostly in the fixed income area. They were few on the regulatory compliance area. In the insurance business, again, in Europe, we had to open some large deals in the insurance space and that also the ramp-ups were very, very slow to minimal. The budgets did come on time, maybe a week or so later. They were flat to slightly negative. But the expensing or funding of the programs that we saw were happening on a month-to-month basis or actually happening in a way that some of these programs were just not getting funded. So if you have a 6-month program, they were funded for the first month [ph]. The expectation is that they will continue to get funded for the next 6 months. But they were inadvertently terminated or deferred for a couple of months or actually, as I said, terminated. The other thing that we also saw is a combination of a lot of these things happening. The other thing that we saw in some of our very large client base, there was a significant shuffle in the C-suite and we lost a couple of very prominent sponsors. And that also delayed decision making as -- for a period of time we were awaiting a new CXO, a new line -- a president to the line of business and once that person came on board, that program was not immediately renewed and was referred back for approvals again. And lastly, I think on the insurance sector in the U.S., we actually had some challenges in terms of -- that's not an area, a very large book for us, an area of strength, so on the property and casualty business some of the clients actually did see a dip. Their budgets were -- came in so low that they actually had to terminate some of the programs. Overall, I would say in the financial services space, most of the impact was in the capital markets -- in the capital markets clients and in the insurance clients. And there were about 3 of them in the capital markets and same number in the insurance space as well.

Okay, in that respect, did anything change since the end of the quarter? Are we in the same mode of a lot of these -- kind of a lot of that volatility since the end of March?

So the ones that got terminated are not coming back. But a few of them that got deferred, about 40% -- about 30% have actually restarted again. The ones in Europe, on the insurance side, we expect to actually kick off by the third week of April. On the insurance side –- but over both on the capital markets and in the insurance side, the programs that got ramped down or got actually terminated, we don’t actually expect them to come back in. Just another quick point is that -- so that we will have to go find programs to replace them. So the other quick point is that of the 12 accounts that Shibu talked about, the Fortune 500, 5 of them are from the financial services class. So this quarter, we were actually -- we continue to see new client additions, 5 of them, 4 in the U.S. and one in Europe from financial services sector, which are Fortune 500 clients.

Okay, and then just 2 very quick questions here going to Bala. Do -- the number, do your projections for this year, 2013, incorporate any wage comp increases for the fiscal year?

So right now, we have not factored in any wage increase for the coming year. We will leave it at this as we progress through the year and we get better visibility. We have factored in some promotions. We have factored in promotions to be done during this year.

All right. And that your hiring plans are staying intact despite some of the slowdown and the uncertainty that you're seeing out there?

Our hiring plan is 35,000 people for the year. Out of that, 13,000 people are meant for BPO and the remaining for Infosys Ltd. We believe the net addition because of this in Infosys Ltd. will be 6,000.

The next question is from Keith Bachman from Bank of Montréal.

Could you talk about your assumptions regarding pricing versus volumes as you look at your forecast, please?

So our pricing. If you look at our revenue productivity over the year, it has gone up by 4.7% year-on-year in the last financial year. It is clearly a reflection of our aspiration or strategic direction in our portfolio and the way we deliver value to our clients. We have done that in a difficult year. For the coming year, we have assumed, as usual, flat pricing and in constant currency. So that's what we have assumed.

Okay. Just to push a little bit on that, given the backdrop of what you mentioned as a challenging year, are there scenarios where you envision pricing actually declining as a consequence of weaker demand?

Actually, right now, we are not seeing major pricing renegotiation. Of course, as usual at any point in time, you have renegotiations, positive and negative, both going on. And so when we look at the overall portfolio, we don't -- at this point, we don't see any reason to change our assumption. And pricing also has a lot to do with supply and demand and various other factors and portfolio. And that is equally important factor. Our portfolio is -- our aspiration is to make it more and more balanced. And actually, if you look at the direction, it is moving towards more and more balanced, but it will take years to completely balance. That is one. So we are balancing high revenue productivity, services -- volume services as well non-effort-based offerings together. So due to all those reasons, we have assumed a flat pricing for the year at this point.

Okay, I will ask one more question then. If -- I understand you mentioned -- I think you said the net hiring is going to be 6,000 people and at the same time you're trying to change some of the workforce balance to get more consultants on-site. My question is related to that is why, if your utilization rates are down to, excluding trainees, to 73%, why not slow hiring more to reflect the weaker demand and take your utilizations and presumably your margins up?

So, if you look at what we are doing, to achieve the growth, which we have projected, 8% to 10%, we need to hire, right? Because we have attrition. Attrition has come down. Actually, the attrition now is 15% -- 14.5% or so. Even if we assume a 15% attrition in Infosys Ltd., I will lose approximately 15,000 to 20,000 people. Then, in the BPO side, the attrition is definitely higher than the Infosys Ltd. So we have to backfill the attrition as well as -- to backfill the attrition, we need so many people even if -- even with, not if, even with the utilization going up. So with this recruitment and with the attrition, to achieve our goal of 8% to 10%, our utilization have to go -- has to go up. That is number one. Number two, on the consulting, system integration trend, our focus is more to hire locally so the 1,200 people we are talking about, recruiting in U.S. and in Europe is, to a large extent, meant to increase our capability and capacity in consulting and system integration.

Okay. My final question and I will cede the floor is do you think you'll lose share in calendar year '12?

Please repeat the question. I didn't hear it.

Do you think you'll lose market share in calendar year '12? Based on your projections, you're growing call it, 8% to 10%. NASSCOM's numbers are higher than that. Do you think you'll...

I don't believe we have lost market share. We are growing 15.8% year-on-year. So given the fact that we are growing 15.8% year-on-year, right, I don't think we have lost market share.

The next question is from David Grossman from Stifel, Nicolaus. David Grossman - Stifel, Nicolaus & Co., Inc., Research Division: I guess either for Bala or Shibu, it sounds like you're not raising wages. Utilization hopefully goes up during the course of the year. You got a bit of rupee tailwind as well. Yet it sounds like, overall, that it's possible that margins could be down year-over-year. Can you help us understand where that excess margin is going and where you're investing over the course of the year?

David, we couldn't hear it clearly, but if your question that when the utilization rate goes up, what will happen to the margin or -- is that the question? David Grossman - Stifel, Nicolaus & Co., Inc., Research Division: No. What I was, I guess, pointing out that if you're not raising wages and utilization, theoretically it should be improving over the course of the year and you also have a rupee tailwind to margin. If you bundle all that up, your margins, according to your guidance, could be down year-over-year in fiscal '13. So with that said, where are you investing that -- all those tailwinds that would result in a margin overall being down for the year?

So I think I got the question. I will answer and then ask Bala to add to it. I think for the quarter-on-quarter, I think Q1 is when we will apply for our results, so that has an impact on our -- that has an impact. And I think Bala is going to give you a lot more color on this. Actually, I'm going to ask Bala to explain this clearly.

David, this year, that is fiscal 2012, our utilization is 69%. Next year, we're adding 35,000 people more. So utilization could fall to maybe 67% because we are talking about 8% to 10% growth. So the impact of that on the margin could be around 70, 80 basis points. That is what we are talking about for the full year. Operating margins could decline within a band of 50 to 100 basis points. Of course, rupee will give a benefit, but we do make investment in terms of hiring people in all the global markets. We are making investment in our platform, product solution business. We are increasing the spending -- we are increasing some of the hirings in sales and marketing. So we are making those investments so the rupee benefits gets reinvested in some of this and the impact we see on the margin is basically the utilization impact. David Grossman - Stifel, Nicolaus & Co., Inc., Research Division: So Bala, could you help us understand better. I think this came out, one of the other questions is with revenue decelerating across-the-board in the business, why would you continue to hire at that rate to drive utilization down again year-over-year in fiscal '13?

So David, there are 2 answers to it. One, I said, if we want to grow 8% to 10%, see Bala's numbers reflected including trainees. So without trainees, our utilization is about 70%, 71%. Our comfort level is about 78% to 80%. So if you look at that and then if you are planning to go at 8% to 10%, you still need an additional number. So the net addition in IL, that is Infosys Ltd., due to all this, is 6,000 people. For the entire year, the net addition is 6,000 people. And so on one side, it is required. There is a second factor also. [indiscernible] Many of these people have been given offers in campuses last year, itself. But it can be clearly seen that the net addition is only 6,000 people. And when you move the utilization from 72% to 78%, all you are getting is about 10,000 people extra, so 16,000 people is what it is. And you are looking at about 10% growth. David Grossman - Stifel, Nicolaus & Co., Inc., Research Division: Okay, and perhaps we can follow it up offline. Just one other question is in terms of the client-specific stuff that you talked about, I think you mentioned that some of them were just being terminated outright. But do you think that the programs or the clients where you're seeing duress [ph], do you think you've seen the bottom more or less in terms of the client-specific fundamentals that you're seeing this year or do you think that those clients are otherwise go on a period of transition that you could see incremental deceleration as the year progresses?

David, again due to some reason, your line is not clear. I got bits and pieces of that question. So I think one question you were asking was that do you believe we're seeing the bottom. Please remember what we said about access, that many of the events actually came together only during the very later part of last quarter. So in that sense, there is a bit of overhang, which is continuing. We have looked at -- we have done a lot of analysis before giving the guidance to make sure that our principles are not violated. We have evaluated the situation of all of our clients. We have talked to all of our client partners and master client owners who actually look after our clients. We have looked at our book of business. We have looked at our clients. We have looked at the budget, why the budgets have closed. We are not seeing a spending velocity. We have considered all these before giving the guidance. And so given all the facts, which we know at this point in time, this is the number. And we believe that unless something totally surprising happens, this is the number we see at this point in time. David Grossman - Stifel, Nicolaus & Co., Inc., Research Division: Okay, Shibu. If I could just sneak in one more, just on the wages. Is your sense that wages are going to be relatively flat throughout the industry for the year? Or do you just feel that you're that much above the industry that you really don’t feel that you would be competitively compromised by holding them relatively flat?

I think different people will react in different ways. So because of the volatility we have seen in Q4 and because of the volatility we are seeing coming into Q1 and the overhang, which I talked about, we felt that the right decision for us to do is to delay the compensation increase at this point in time, look at it again in Q2 or Q3. That is what we shall see. If you look at the history, whenever we have done this in the past, as in when the situation got more -- got better and more clearer, we have quickly gone ahead and done compensation changes. That is what we have done in the past. Eventually, actually, there are years in which we did extremely -- actually high compensation increases actually after delaying. So we always believe that we have to be fair to all the stakeholders and we believe given where we are, it is the right decision to make. At the same time, as I said, we are rolling out promotions. We are rolling out promotions effective July 1 for a large number of people. And we also rolled out -- actually in October, we did 7,700 promotions. So we just did one cycle of promotion, about 4 to 6 months back. And we'll be doing a pretty large number of promotions beginning of second quarter. So I believe we have taken the right decision.

The next question is from Joseph Foresi from Janney Montgomery Scott.

This is Jeffrey Rossetti in for Joe. I was just wondering if you could provide an update on your growth assumptions for financial services for the year and how you expect some of the Q3 ramp-ups that were delayed to progress?

So let me request B.G., B.G. Srinivas to give you that information.

Yes, so given the fact that we are exiting the quarter with shrinkage in the quarter-on-quarter revenues and the fact that even the Q1 number is looking muted, for the full year, the outlook for financial services will be marginally below the Infosys' overall growth rate at this point in time. At the same time, as we see opportunities during the quarter, there are a couple of these in the pipeline, depending on both deal conversions as well as decisions on these decisions for deal closures. We could be revising this, but at this point in time, it is still muted.

Okay, and any detail on the change in leadership in the financial services and manufacturing verticals? And if there's any, could you talk about any impact that you're seeing from accelerated visa rejections in the U.S. essentially impacting any of your business in the U.S. at all?

No, the transitioning between me and Ashok, between the manufacturing sector and financial services has started a couple of months ago and that transition is going relatively smooth. There are no issues with respect to any of this, to the business as usual because the respective teams continue to run the business and then this is not something unusual. So there's no impact on the business because of the leadership change. We will continue to build on the respective unit strategies and focus on furthering the growth. The second part of the question was related to delays in visas. Again, this year, we have planned for visas ahead of time. We have already started to process the visas. We applied first visa applications and we should see a number of visas coming in, in time though there have been some queries on some of the visa applications across the industry. But by and large, we have sufficient numbers filed to take care of the eventuality.

The next question is from Trip Chowdhry from Global Equities Research.

I had a question on your intellectual property portfolio. Happening in the last quarter, you did -- I'm sorry, in your Analyst Day you mentioned about 2,000 patents in work. And if you look at the companies like IBM, they had run their IP as a profit center, not as an insurance policy or as a cost center. They run it as a profit center. And we have done some patent analysis on your applications as well as the granted patents and I think they are extremely, extremely strong both in cloud as well as in social media. I was wondering have you been approached or are you approaching companies like Facebook or other companies to exclusively license those patents? Or enforce you patents on violators so that probably you just look at there are $1 billion being spent for 800 patents that AOL sold to Microsoft. So I'm just thinking, other than just granting insurance to the customers' ventures on user's proposition, have you thought about enforcing your patents and any thoughts about how do you intend to monetize that?

So thank you for the question. I will request Sanjay Purohit who heads our Products, Platforms and Solutions Group to respond.

When we're looking at our intellectual property-based strategy, we essentially are looking at it from 2 perspectives: one is how do we develop intellectual property that we can use to improve quality and productivity of these services across our suite of services in the consulting systems integration as well as IT services; and second is how do we use our intellectual assets and intellectual property to actually create new products and platforms that we can take to market as outcome-based offerings to our clients. Obviously, in all of these spaces, we have identified specific areas that we want to make investments, and whenever you do a landscape analysis of such an area, you formulate an IP strategy, which includes what will we develop, where will we partner, where will you build, what do we do with our patents. And we are pursuing in line with that -- with that line of thinking. In that context, when we look at individual spaces, the offerings we have in the space, in the products and platforms, we take decisions as to how you do you want to leverage our intellectual property for either internal or commercial use or look for partnering with other people who have intellectual property that we can actually leverage together to take new offerings to the market.

The next question is from Shashi Bhusan from Prabhudas Lilladher.

During the call, you attributed the weakness to challenging macro and then changing leadership for clients and project ramp-up business. Are these the only issues or we are also seeing weakness because of protectionism by the Western world and competitive bidding by peers or our stickiness to quality rather than quantity?

So I think it's predominantly the factors which we mentioned, that is the lack of confidence in the global economy, some leadership change in our clients and regulatory things being pushed out, in the financial business, the regulatory requirements, the regulatory and compliance requirements being pushed out. That removes the urgency in some of the programs. So those kind of factors. We are not seeing our client base responding to protectionism or things like that. And now, our philosophy always has been to create quality growth and that is superior financial performance, which is a balance of above industry average growth and superior profitability. And of course, there is no doubt that, that is the aspiration. So our aspiration is not to be the largest volume, right? That's not our aspiration. So our aspiration actually drives those strategic direction, the investment which we make, the choices which we make and the performance which we get. I firmly believe that dropping price -- I firmly believe that dropping price is not going to actually drive growth in the long term. It may have a blip. If you look at the different service lines, which we have, consulting and system integration, we are not the pricing umbrella. There are -- the global size we're operating who are the pricing umbrella for us. If you look at business and IT operations space [ph] for the entire Indian [ph] industry, probably we are the pricing umbrella. I don't believe that we can drop price and get higher volume because of the simple reason that it is a closed loop system and the industry, itself, will be forced to readjust. And again, the last point I want to make is that the value, which we deliver -- it's an important point to remember, the value, which we deliver is what allows us to actually get that premium. It is not that we just hold on to the price. It is all about the appropriate client value. So as long as we are delivering value, as long as we are continuously improving our performance, our productivity, our investments and investing in the right place and being innovative in terms of the clients, I believe that we will continue to get the premium. So I don't think one should think of giving up the premium to get volume, and I don't think it will work either.

So did it happen in the past that either trying to walk out of -- from -- away from us or we walked out of contract just because there was a pricing issue even though the client was premium or if, say, Fortune 500 clients?

There is no doubt that we have lost deals and clients. That happens to anybody in the world. That is part of the business. Like in any business, you lose some opportunities because of price. See, the important thing is that when it is a strategic customer, when it is a strategic client, when it is a large relationship, so these are choices you make not at the corporate level. These are choices, which you make at the individual client level or into individual deal level. When it is a strategic client and if they are going through a tough time, it is our responsibility to respond to it, our responsibility to make sure that their total spend, total cost of ownership comes down. And there are various mechanisms of doing it. It cannot be price at all. It can be more offshoring. It can be more -- moving to managed services. It can be converted into a fixed price. It can be moving to a platform. There are many ways of doing this. So when a strategic client is going through a tough time, we have a responsibility towards it and we try and deliver that through various mechanisms. So to answer the question, it's the losing a deal or a price is something, which is part of every business. I'm sure it has happened to us also. But winning the deal is actually not on price. Winning the deal is based on the solution, based on the client value, which we'll provide and that is where we focus the highest.

If we look at our client wins over the past 4 quarters, strongest among all the Indian Tier 1 peers, moreover, the net client position has been also the strongest we have ever witnessed and that, too, across the buckets. But when we are seeing quarter-on-quarter growth, it is only turning out to be more anemic in nature. So where are things going wrong? Are these clients, which we are winning are not ramping up, or it's just a ramp-down from some of our existing client is creating the problem?

Actually, our client wins are predominantly in the right place. They are mostly Fortune 500. If you look at the 52 wins we had, 52 additions we had this quarter, 8 of them are U.S. 500 and 4 of them are Global 500. We have a must-have client list, which is predominantly the Global 2000. And that is where we spend most of our energy adding clients. See, during the -- because of the environment, in many situations, we are actually starting very slow. And that is leading to the observations, which you are making. But these are strategic clients. These are the clients we really want to have. And we really want to have -- the one way to actually manage the bumps and manage the volatile environment, we should actually expand the portfolio in all dimensions. One dimension is clients. During the last downturn, one of the interesting things, which we noticed was that some of our global competitions have client base of 2,000. And so it is very important that we have a large client base that will allow us to mine the client base, that will allow us to manage some of the volatility as we go along. We are applying the same principles to other parts of our business, so we are actually expanding in Europe. It is about -- again about having a balanced portfolio across the globe. Our offerings are also meant to create a balanced portfolio across different kinds of strengths, which the client has.

So just I will squeeze in one more. If you look at our G&A in the quarter, it has gone down materially over the previous quarter. Any specific reasons for the same [ph]?

That is quarter-on-quarter fluctuation. One cannot look at it as a secular trend.

[Operator Instructions] The next question is from Rod Bourgeois from Bernstein. Rod Bourgeois - Sanford C. Bernstein & Co., LLC., Research Division: Yes, do you think the month of March in terms of demand was weak across the entire industry? And also do you see a reason that demand trend would improve later in the year to support a back end-loaded growth outlook for Infosys?

So our demand trends in later part of last quarter was more weaker in FSI segment than any other segment and a little bit in manufacturing, but down in the FSI and that is where we saw the weakest situation. And now we have looked at our client base over the -- looking at this from the next one-year perspective. We have taken into account any kind of fluctuations they could go through as far as we know, to best of our knowledge. And most of that has been factored into our guidance process. Now, if things improve, we will definitely be ready to take advantage of it. If things don't improve, we will continue to do our best, take advantage of the situation even if it doesn't improve. But if it improves, we will -- we are the ones -- we will be the ones who will benefit because we will be prepared. We will have the capacity. We will have the relationship. We will have the clients and I believe that will help us. Rod Bourgeois - Sanford C. Bernstein & Co., LLC., Research Division: Okay, great. And then the weakness that you saw in the financial services vertical, you've given some good color on the specific things that happened. But you believe those things are due to financial services industry-wide trends? Or could it have possibly been just due to some specific issues you happen to encounter in your particular client base?

So I think across-the-board in financial services, there is a structural change that we are noticing. But the speed and rapidity with which it impacted us this quarter is specific to a few clients in the capital markets space and in the insurance space. But Shibu was also mentioning that the amount of investment -- dollar investment and time that was being diverted to ensure meeting regulatory and compliance [indiscernible] issues, that pressure seems to be a little off from a technology and process perspective. But we do -- we are seeing the fact that there is -- some of this has an impact on our competitors as well in some of the accounts where we have been impacted and they are also present. Rod Bourgeois - Sanford C. Bernstein & Co., LLC., Research Division: Okay, and then, Ashok, on the -- you mentioned earlier today as well that there was some particular weakness in the area of risk management and compliance. Is that a market-wide issue or is that due to some client-specific factors where leadership changes occurred and some important work was essentially delayed or pushed out?

So this is specific to a couple -- actually 3 capital market clients where were we had a significantly large programs in risk management and compliance. We have not seen that to be a secular situation across, but this is specifically in the area of -- these are capital market clients in the U.S. Rod Bourgeois - Sanford C. Bernstein & Co., LLC., Research Division: Okay, great. And then one final thing, I mean you talked a little bit earlier about the wage inflation and the decision to not give wage hikes this year. If you see some issues with employee attrition or particularly an issue in losing some of the higher potential talent in the organization because of the absence of a wage hike, particularly if competitors decide to go through and actually give wage hikes, is that a decision that you would reconsider very quickly? Or is this something that is probably going to be in place for the next several months regardless of what happens?

So I think it is important to note that we are not taking a decision not to give wage hike this year. We have taken a decision to delay the wage hike. We will revisit it in the beginning of Q2 and beginning of Q3 again to see what is the right thing to do based on where we are. So it is not about delay -- not having the wage hike this year. It is about delaying the wage hike given the volatility we are in. We are explaining this to our employees. Our employees do understand the challenges, which we are going through. And also, please remember, our value to our employees are multifaceted. We do not base only on compensation. It is based on capability building, it is based on the kind of work which they do and various other factors. So our -- and our attrition has actually come down over the last 2, 3 quarters. Now I cannot rule out the fact there could be a small hike -- a small spike in attrition because of this. But that's part of life. We believe that is the right decision to take at this point in time.

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

Thanks, everyone, for joining us on this call. We look forward to talking to you again. Over to Shibu for some closing remarks.

So once again, thank you very much for joining the call. We look forward to seeing you again next quarter. Thank you. Bye.

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