Ladies and gentlemen good day, and welcome to the Infosys Earnings Conference Call. As a reminder, all participant lines will be in the listen-only mode. There will be an opportunity for you to ask questions after the presentation concludes. [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, Inba. Hello everyone and welcome to Infosys earnings call to discuss Q1 FY2016 financial results. I am Sandeep from the Investor Relations team. Joining us today on this call is CEO and MD, Dr. Vishal Sikka; CEO, Mr. Pravin Rao; CFO, Mr. Rajiv Bansal along with other members of the senior management team. We will start the call with some remarks on the performance of the company for the recently concluded quarter, followed by comments by Dr. Vishal Sikka and Mr. Rajiv Bansal. Subsequently, we will open up the call for questions. Before I hand it over to the management team, I would like to remind you that anything which we say which refers to our outlook for the future is a forward-looking statement, which must be read in conjunction with the risk that the company faces. A full statement and explanation of these risks is available in our filings with the SEC, which can be found on www.sec.gov. I’d now like to pass it on to Dr. Vishal Sikka.

Thank you, Sandeep and good afternoon, good evening and good morning. Ladies and gentlemen, thank you for joining us. I’m very pleased with our overall performance for the quarter that ended on the 30 June, 2015, following the below average performance that we saw in our Q4 of last year. On nearly every parameter, our results were on par or ahead of our plan. Quarter-on-quarter our revenue was US$2.256 billion, this compares to our quarter-on-quarter growth of 4.5% in U.S. dollar terms and 4.4% in constant currency. The overall demand environment continues to be encouraging baring a few select industry segments. Our volumes grew by 5.4%. This was the best quarterly growth in revenue in the last 15 quarters and in volume growth in the last 19 quarters, excluding the effect of acquisitions. I believe these results are based on creating a deeply client centric organization in our traditional service clients as well as in our new initiatives and in our business enabling functions. In large deals and in top accounts, we have re-imagined the client experience and created new processes to bring more discipline and more focus and this is enabling us to design our proposals based on those specific value drivers for our clients. In new service lines, we are seeing widespread adoption of innovation and emerging technologies, both in the grass routes of our organization as well in breakthrough innovation. And this is opening up entirely new type of conversations and new engagements with our clients. Our operating margin for the quarter was 24%, down from the 25.7% of the previous quarter, primarily on account of seasonal wage increments and visa fees. Employee utilization was at 80.2% excluding trainee and there is certainly some room for improvement that we see here. We have rolled out with many…

Thank you, Vishal. Thanks for all the kind words. Hi, everyone. We ended the quarter with revenues of $2.256 billion, a quarter-on-quarter growth of 4.5% on a reported basis. On constant-currency basis, based on Q4 average rate, we grew by 4.4%, and by 3.6% based on March 31 rates. If you recollect in April, we had given a guidance of 10% to 12%, which required a sequential growth rate of 2.8% to 3.5% at March 31st rates to meet our lower and upper end respectively. Our performance in Q1 is in line with the required rate for the upper end. I believe we have done extremely well on the margin front in this quarter. We have been able to contain the impact of wage hike and visa costs on our operating margins to 170 basis points through better operational efficiencies and cost optimization efforts. As you would recall, we rolled out wage hike for our employees effective April. We had also rolled out promotions in line with our quarterly promotion policy. During the quarter, our utilization excluding trainees went up from 78.6% to 80.2%, onsite mix, however, increased to 29.2%. Pricing continues to remain under pressure and has declined by 0.7% quarter-on-quarter on a reported basis and 0.8% on a constant currency basis. On a year-on-year basis, pricing has declined by 7.3% in reported terms and [indiscernible] on a constant currency terms. We added 11,089 employees gross during the quarter, with a net addition of 3,000, up 2,336 employees. We normally see a higher attrition in Q1 as employees leave during the quarter for pursuing higher studies, our annualized attrition on a standalone basis for the quarter was 14.2% as against 13.4% last quarter. And on a consolidated basis, it was 19.2% as against 18.3% last quarter. However, annualized attrition…

Thank you very much, sir. Ladies and gentlemen, we will now begin the question-and-answer session. [Operator Instructions] Our first question is from Edward Caso of Wells Fargo. Please go ahead.

Good morning/good evening. Congratulations on your quarter. I’ve sort of focused on some of the traditional businesses, infrastructure management, ADMO and so forth, which you’re enjoying strong volume, but they’re also the more commoditizing part of the market. Is that where you’re seeing price pressure? And is that what’s weighing on margins here? And then maybe, if you could lead that into a discussion of where you are in automation, both automation of new work you’re winning and automation of existing work? Thank you.

Thanks, Edward. That’s a great question. Let me start and then Rajiv can add as necessary and Pravin can add as necessary. We do see indeed downward pricing pressure in areas, commoditizing areas like infrastructure, some parts of maintenance and verification and so forth. And that is why also we believe that automation needs to come in there probably before other areas also because they are also more amenable to automation. If you look at application development as a category, it used to be the primary category for Infosys 15-plus years ago, and that continues to be something that is much more human oriented and many of these infrastructure type services continue to be ones where – which are more amenable to automation. We have been – since I started my journey here at Infosys almost one year ago, we have been investing heavily in bringing automation to bear across the board. And in this last quarter, we saw the first tangible results of that. We rolled out our Infosys Automation Platform, which is a collection of tools, AI based technologies to help automate many of these routine, mechanizable tasks. We rolled that out an infrastructure management to 10 clients. We had a very interesting result that came up as a result of that. These 10 clients – the category of work that was done by people was about 1,080 people and we replaced the work of 1,187 out of the 1,080 people with automation. That is a saving of about 17% in terms of the number of people, and the productivity improvement of we saw up to 37% in the work as a result. So what that does is you see that in infrastructure management going forward, we will replace the work that was offered as a people-only service…

As a quick follow-up, realization continues to be negative. Is that losing important, this is a metric here as the automation kicks in? Or should we start to see a positive turn in that end, the realization metric? Thank you.

Yeah. Over a period of time that will – that will happen, Edward. Not immediately, but I mean as the – as we see the embrace of automation and the adoption of automation happen on a more widespread basis, you will see that happen.

Great. Thank you.

Thank you. Our next question is from James Freedman of Susquehanna International Group. Please go ahead.

Hi. Congratulations on these excellent numbers. So Vishal, on the afternoon call, you had described a new intensity to sales. I think you had used the word, aloof and detached, in your characterization of the sales culture previously. I was just trying to get the sense of how much you have been able to re-engineer the sales initiatives? And what – clearly you have the tangible evidence here, but what are some of the methodologies that you’re using to try and elevate the sales culture?

Well, James, so let me clarify that. I was not referring to – we have never had an aloof and detached sales structure ever in our history of our company over the last 34 years. And the thing that I was referring to as being aloof and detached is the RFP institution that exists in our – in the services industry. The very nature of an RFP and going through a proposal process is such that there is somewhat of a distance to it. There is an aloofness to it and that’s what I was referring to. It’s one of the things that our sales team is as passionate as ever and continues to be and it has always been the case. In fact, you know we have had a very distinguished history of a highly – high value, high integrity sales organization across our history, so I want to clarify that in no uncertain terms. Having said that, one of the things that we did in this last quarter was we did bring a tremendous focus to the way that we – that we sell, the way that we go after the contracts and the opportunities. And one of the most visible signs of that was the work that we did in redesigning our RFP process. This RFP process that I talked about, we have been thinking much more about how do we bring design thinking to the RFP process? How do we bring a much deeper sense of client-centricity and empathy for the client, into that RFP process, changing the narrative, deeply understanding the strategic priorities of the clients and the value that we – that we bring in our offerings and prepare that in a proposal that is much more attractive and that the clients can relate to and we already saw the first successes of that in every one of the large deals that we won in the course of the last quarter and that we have won since then. So we have had at least one sort of deep change that happened as a result of this new RFP process. So I hope this answers your question.

Yes. Thank you and then just one follow-up. Rajiv, could you revisit your SEZ conversation? I didn’t quite follow what’s going on there. But what that implies for the tax rate going forward?

No, if you would – no. In India, we have a tax exemption for all the software services export that we do from special economic zones. So the tax regulation in India says for the first five years, we get 100% tax exemption and from the sixth year onwards, we will get 50% tax exemptions. Some of these SEZ units were set up five years back and they are moving to 50% tax exemption during the year. As a result of that, the effective tax rate is actually to go up because of this profits moving from 100% tax exemption to 50% tax exemptions. In addition, there has been an increase in the statutory tax rates in India, and that is another reason why the effective tax rate is actually to go up this year.

Got it. Thank you.

Thank you. Our next question is from Joseph Foresi of Janney Montgomery Scott. Please go ahead.

Hi. I guess my first question here was could you give us some idea of what portion of your business is in some of the newer offerings like digital versus some of what you’re seeing on the commoditization side?

That is a good question, Joseph. There is a tremendous sense of ambiguity in the industry around what digital exactly means. When you look at it philosophically, when Nicholas Negroponte wrote the great book, Being Digital, when look at it in that sense, everything that we do is digital. So I would say that 100% of our revenue is in digital. But when we look at in the sense of digital and what it is doing to the industries that we serve, for example, to retail, and how digital is enabling a completely new set of experiences for consumers in the retail environment, or how digital is about bringing mobile devices and transforming the experience of the consumer, or how digital changes the manufacturing industries towards becoming much more, where software becomes embedded. I mean, if you look at the dashboard of an S-class Mercedes today, the entire dashboard is a digital one, there are no knobs and switches and needles that used to be there. So in that sense, there are tremendous opportunities that we see in how the physical world of our clients is becoming transformed by the – by digital technology and we see a great sort of opportunities there. My – I mean so we do a lot of business in these new areas. Almost all the work that we are doing in the digital technology space is in these kinds of opportunities. Almost all our design thinking work that we do, almost all the analytics work that we do, is in these kinds of engagements in these kinds of areas. So once the industry settles down on a better, more precise and a more realistic definition of what they mean by digital, I mean there are massively varied distributions in how companies characterize their digital revenue, and I think it is – frankly, in my view, it is nonsense. And so once they have that then we’ll be able to more precisely articulate the parts of our business that are those areas. But let me just, for now, say that as the world around us becomes increasingly digital and increasingly driven by this transformation of the physical experiences into virtual ones, we are seeing almost all our growth coming in – in almost all of those areas we see tremendous growth in our business.

Well, I mean I agree that there needs to be some – I’m sorry, go ahead. Did I cut somebody off there?

No, no, go ahead, Joseph.

Okay. Yeah, I agree there needs to be a standard definition on the digital side. But I guess my question is, as you see these projects develop in digital, are they new incremental business? Does it impact your visibility at all? And how should we think about them from a margin perspective? I’m just trying to get an idea of sort of how you compete versus some of the other players who are obviously claiming fairly good growth rates and larger – large percentages of their revenue from digital?

The way I would characterize that is the new engagements from our consulting team, the way we are reorganizing and setting up our consulting is in two distinct categories, towards the renewal of the existing businesses, we have created the theme of, what we call, knowledge-based IT, which is a overarching program to help transcend and renew the existing landscapes, the IT landscapes of customers. And the new area, which is all about, I think, all about what you have been referring to as digital, which is around, how do we transform, help transform our clients’ businesses in strategic new areas. So in retail, that means really finding the experience of the consumer, creating more omni-channel, as well as rethinking the physical spaces that can consumers are going to. I mean if you notice in the retail world, many chains have been closing down their stores and things like that, but many others are actually rethinking the physical store as a great new kind of a digital experience and we are helping many of our retail clients with these kinds of changes. Or even in banks or telecos and people who have retail presence and in hospitals, physical spaces are becoming increasingly digital and we are seeing a great growth happening in these areas. Or if you look at some of the other industries around CPG where you optimize the supply chain using the completely digital technologies where in the past there was a lot of physical presence and so forth or in energy with digital oil fields. Everywhere we see that the new of the equation of renew and new almost inevitably ends up being all about digital. So the way I would put it is the product and platforms business, all the IP-led services business, the design thinking business, almost all of the new and parts of the renew will all be about this so-called digital transformation of businesses. And the rest will be about the renewal of the existing landscapes to move it to the cloud and things like that. So the key ends up being is which part of the customers’ business which used to the physical or analog is now becoming digital or virtual and how do we put a bracket around that? And I think that is a good way to measure what this means and in our case that would be again the good way to measure that.

Got it. And then last question for me sort of a quick one. On the profitability side, I understand the margin profile for this year and sort of what you’ve given for the guidance for the bracket there. But as digital becomes a larger piece of your business and you balance it versus commoditization, where do you see or how do you feel about the profitability of the business and present margin levels over a longer period of time? And you don’t have to give us a number, but I’m just sort of trying to get an idea of sort of what you think is sort of a realistic level?

I think that so far the visibility that we have operationally over the rest of this year we feel comfortable with the 25 plus or minus one guidance that we have given. If you look at beyond that, the – earlier – in response to one of the earlier questions I mentioned that the formula that we are following is of taking a people-oriented proposal, which was 100% driven by people, and transforming that into a lesser number of people plus software. And we charge for the software as we do for Panaya, or IAP, or IIP or the other platforms. So that equation changes in a way that instead of 100% people at a certain rate and so forth, towards lesser number of people plus software it does three things. It – first of all, it lowers the cost to the client and it helps our service become more differentiated and more attractive because we can lower the price of the software, you have a lesser number of people, so you have more room to maneuver. Second, it actually helps us to improve our margin because the software is at a much larger margin and we have lowered the number of people who are in the part of the proposal. And third, it frees up the people to do more, to do more of the new kinds of things like the digital things that you were talking about and to do more projects of the same nature. So this cycle we want to repeat over and over again, and my expectation is that if we are successful at scaling up this cycle, as we have done the early work of that in this last quarter with Panaya and with IAP and so forth, then we will see the margin profile actually not come under pressure, and in fact increase. And that is why I have laid out our aspiration of getting the 30% margin by 2020. If we are successful at replicating and scaling up this virtuous cycle of going from a people only model to people per software model, then we will be able to increase our margin profile without compromise and that is our assumption.

All right, thank you.

Thank you. Our next question is from Ravi Menon of Elara Securities. Please go ahead.

Hi gentlemen, congratulations on a great quarter. First question is on the high number of laterals that we’ve seen as a proportion of gross hiring over the last three quarters. I mean do you think that this is investment in your new areas, maybe in the Infosys Information Platform, or trying to extend Panaya into – are you making it useful for other ERP packages as well, like Oracle, you know, getting Finacle ready for the U.S. launch, things like that, or is this also kind of a retake of the employee pyramid with new capabilities, new skill sets that you require in your traditional areas of business?

This is Pravin here. Let me respond to that question. So what you’re seeing is a short-term phenomenon, so we are seeing many transformations, the need for investing in newer areas, so why do we try to ramp-up on the capabilities and cross skill people internally. So there is some dependence on external highs. And some of these areas are also on some of the newer technologies, where you may not have too many people. But over a period of time once we are able to cross skill our people, we will see a reduced dependence on – we’ll see those lateral numbers coming down. We will continue to be reliant on our people, training them, re-skilling them and they’ll be able to scale up and take on some of the new technology roles.

Thank you, Sam. And I have a follow-up for that. Do you – can you give us a rough timeframe of when you think Finacle could be launched in the U.S. and similarly Panaya’s extension for Oracle and other platforms?

We have already achieved, from a functionality point of view, a lot of the capabilities that we need for the U.S. market. We already have successful clients and of course, we have talked about Discover Financial as a great success story that we have had with Finacle recently. And we have done additional deals in the U.S. as well, and we are scaling up our presence there, primarily from an implementation services perspective. So we are very confident that Finacle will be able to address the – certainly the Tier 3, Tier 4 banks in the U.S. market, which is a huge opportunity for us. We believe that Finacle is a great core banking platform. We believe that it is the best core banking platform on the planet and we are continuing to invest heavily in this in Michael’s leadership. And we are very confident about its capabilities in the U.S. market. I mean as you may have seen recently many analysts voted Finacle as the best banking platform in the world. We have recently ported it to the Azure platform, Azure Cloud platform with Microsoft and we are also working with Oracle to move Finacle to the Oracle cloud. And we expect to see growth in the U.S. in the coming quarters.

Thank you, sir.

Thank you. Our next question is from Keith Bachman…

One more thing before we get to the next question. The Panaya, Sanjay what were you saying, Panaya 30% is already in the Oracle space.

Thank you very much. Our next question is from Keith Bachman of Bank of Montreal. Please go ahead.

Yeah. Thank you. Rajiv, for you if I could, if you could talk a little bit about – you mentioned operating margins are expected to be – continue to expect to be 25% plus or minus. If you could talk about some of the puts and takes relative to the quarter you just reported and particularly address how does the pricing and commoditization that you’re seeing in the business impact that? But if you could deal with some of the puts and takes as you rollout here over the next couple of quarters to the operating margins?

That’s a good question because we are seeing pricing pressures and we are seeing very, very competitive pricing environment in almost all our large deals that we are bidding for. But you also have to understand that as we embrace automation and we talk about more effort productivity, some of that would contain the impact of pricing pressure that you are seeing in the market. Second is the training and re-training and re-skilling of people. Our subcontracting expenses as a percent of revenues have actually steadily gone up from 2.5%, 3% a couple of quarters back to 5%. As you know subcontractors are a multiple of the employee cost per capita. And that is another lever which we are focusing on in terms of training and re-skilling our people so that we are able to replace high cost subcontractors on the projects, which will give us some margin lever. We have spoken about utilization and as you know that we would like our utilization to be 83%, 84% and today we are operating at about 80%. So that’s another 4% lever that we have.

Right.

Roll ratios are very important. In the last couple of years, when our growth was muted, it did not give us enough opportunities to correct our roll ratios because employees do expect promotions even if there’s non-growth that’s an issue in the industry. The industry, the competition was doing well and to retain the best talent that we had. We rollout promotions, roughly about 25,000 promotions last year. So you know, as we see an acceleration in our growth, we believe that we’ll be able to achieve a much leaner and better roll ratios. So enough levers that we have on the margin front in the medium to long-term. In the short term, yes, it creates a problem because when you are in the middle of the quarter when you’re looking at your investment needs to extrude the growth, look at the needs of the projects in terms of staffing and the technology assets that they need. At the same time, you have to work within a very narrow margin band. There is a fine balance that we have to strike on a day-to-day basis, and I think over the last five quarters, we have struck a good balance. Honestly, I would not want to improve the margins at the cost of investments, which will lead to better growth. So every single investment is looked at from a return perspective, from an ROI perspective. And if it makes sense in the medium to long term, we’ll go ahead and make the investment, even if that means that in the short term or the near quarter, you would see a dip in the margin. So I think our philosophy on the margin is very clear. We would want, as Vishal had articulated by 2020, we would want our margins to be about 30% of operating margin. It’s a long journey. And in the near term, we have to balance the needs very, very carefully.

Yes, fair enough, fair enough. Okay, I did want to come back to the 30% margin aspiration in 2020. If you think about the next five years, roughly a point a year, so to speak, but how do you get there, because you’ve talked about adding IP is one of the key variables in machine learning and automation. I would assume as you acquire more RP though – IP excuse me that you’ll start to bump into some of the software vendors, who are also your partners would then become I would think some level of competition. But maybe if you could just – how you anticipate getting to the 30% in some of the bigger pockets?

I think that from a software vendor perspective, if you look at the platform layers, more and more of the platform technologies that are relevant in the modern world continue to be open source. So maintenance and delivery offerings around open source software, maybe add value to existing open source software and any contribution that we make is also – goes back into open source, and our IP is on solutions built on top of it. I think is a model whereby we can prevent ourselves from getting into the trap of on the one hand competing with legacy or incumbent vendors and on the other hand continuing to monetize our IP. From the perspective of application development and custom solution development, one of the benefits of being at Infosys is that we have the tremendous scale to bring these kinds of custom or highly micro-vertical solutions – industry-oriented solutions to life in a way that a pure package system vendors cannot. And I think – when I came here that was one of the most attractive things I found about Infosys, is that, that opportunity exists and being able to at a very massive scale, bring unique IP-based differentiator solutions for narrow parts of industries. For example, one of the amazing solutions that we have built using AI technology is a solution to balance an aircraft. And we have been working on this and it is amazing. And we can – in airplanes, weight – when engines are mounted on it, it can be balanced. And we have built AI systems to do this in a much more accelerated way than was possible using previous techniques. Now, this has probably 10, 12 customers that use that, but it has an extremely high value to those 10, 12 customers. And we can afford to do point solutions, highly niche industry-specific solutions for these types of things. And usually the new kinds of problems where software is making it way for the first time don’t have package system vendors anyway. So we believe that that strategy of being open to whatever exists in our clients’ landscape, being a partner to everybody, being open to everybody and yet being able to carve a niche for ourselves by building differentiated IP-based solutions is the right strategy which manages to get around these existing pitfalls that we see in the world today.

All right, thank you gentlemen.

Thank you. Our next question is from Rishi Jhunjhunwala of Goldman Sachs. Please go ahead.

Yes thanks for the opportunity, a couple of questions. First on – in the sharp rebound in the growth in this quarter, just wanted to understand a bit more on how much of that would you attribute to on-ground demand actually picking up versus re-executing much better in this quarter? And just trying to keep to seasonality aside, we understand that typically June is a better quarter?

Rishi, my sense of it, and perhaps Pravin and Rajiv and any of our leaders who are sitting here can add their perspective on it. My sense of it is that obviously, better execution and much more focus that we brought, along with the changes that we put into the organization to – again, to focus ourselves in a very deeply client-centric way is primarily the reason for the result that you have seen. And some of it, I would also attribute to the strategic initiatives that we have put in place over the last three, four quarters, which are now starting to bear fruit. But that is not – but a much larger percentage of the change that I would attribute to is to the better execution and to the initiatives that we put into place. I see lots of people nodding their heads around the room, so, and I don’t think anybody wants to add anything to that.

Great and second question is over the past four to five years, we have seen that consistently we’ve been starting the year well, however, in Q3 and Q4 the growth seems to be tapering off. And I’m not talking about, again, the sequential seasonality, but even in year-on-year growth terms it tapers off in the past few years. You mentioned in the morning that you’d hope and you’d worked towards rectifying that growth trajectory or the trend, just trying to understand first of all what is the issue that even year-on-year growth actually tapers off? And secondly, what steps you can potentially take to make sure that second half is – the deterioration doesn’t happen as it has happened in the past years?

We are acutely aware of this. We have looked into this our management team has been thinking about this over the last few weeks and the last quarter or so. For whatever set of reasons this has been the case in the last several years, and we are aware of this and we are working hard to make sure that this year is not a repeat of that. Again by pipeline building, and client centric focus, looking at getting better visibility into the future of projects and the opportunities of the clients, and so forth. But the other reason that I’m cautiously optimistic that the second half of this year will not have the same fate as the second half of the previous years, certainly relative to the previous years, is that the initiatives that we have put in are consistently picking up steam. And while these are still small, I mean on our IIP, as proud as we are that we have 127 projects, on Panaya we have 137 engagements, on design thinking we have more than 100 engagements. But together all these add up to like 400 projects out of a baseline of 8,500 projects. And so as important as these are, they are still small; but there is a consistent rise in the adoption of these. And therefore, we believe that as we get into the second half of the year, more of the growth will come from these kinds of initiatives. And the zero-distance will have picked up more momentum by then and so forth, so that will also help in addition to the operational excellence and the deep scrutiny on this particular scourge that we have had in the past that that will be okay. So I feel – as I sit here today, I feel cautiously optimistic. I feel aware of this problem that we have had in the past years and cautiously optimistic that we’ll be able to do better this year.

And do you think that by nature these revenues are less seasonal than the traditional services that we do?

I don’t think so. I mean maybe Rajiv and Pravin can add their insights into that. My – I come from the point of view that great solutions and great innovation is of a timeless nature. And when times are bad, you need innovation, and when times are good, you need innovation. There are some furloughs and things like that that happen in our Q3 in the manufacturing industry and other kinds of things, but we know them in advance and we know that and we should be able to, with appropriate forecasts and better planning, we should be able to mitigate those. So that sort of how I, at a high level, I look at it. But obviously, an organization of 180,000 people continually goes through the same exercise every year, so there must of some sort of reasons for that and we are working hard to make sure that this year, we don’t have the same fate as the previous year.

Great. Thank you very much.

Thank you. Our next question is from Dave Koning of Baird. Please go ahead.

Yes. Hey, guys. Great job and I just have a couple of short ones. But the acquisition contribution from Panaya and Kallidus or Kallidus or whatever, how big were those in the quarter? Maybe how much sequential growth did that drives to?

Well the incremental from the two acquisitions that we have done is only about $7 million during the quarter. Skava and Kallidus were closed, these were closed on only the 3 of June, so it’s only a one-month revenue. And Panaya and Kallidus are small acquisitions. They’re very strategic acquisitions, but they don’t really add much to the top line in the initial stage, but they have a huge multi-player effect on the entire business of the company. So in terms of your question, it’s only about $7 million incremental revenue that is factored in the revenue.

Okay, great. And somebody else asked about the tax rate, the 29% to 30% this year. Is that sort of what we should expect going forward now? Has that all normalized?

It seems though because the increase in tax rate is primarily because of statutory – increase in statutory tax rate in India, which I don’t see coming down unless the Government of India in the next budget decides to bring it down. And also the fact that some of the units would move from 100% tax exemption to 50% exemption, I would believe that this is here to stay.

Okay. And then lastly just the subcontractor portion of expense, that ramp, I think it was the highest it’s been, maybe ever, is a little over 5% of the rev. What’s driving that? And maybe is that something we should expect to stay elevated?

Yes, this is Pravin here. There are times when there is need to ramp up quickly on a particular skills. If we don’t have internally, we may need to deploy subcontractors. And sometimes, particularly in quarter one and quarter two, our quarter one and quarter two, we also at times have a very high percentage of visa utilization, so we don’t have too many people with visas. So that means that either way we have to recruit or we have to use subcontractors in the short period of time till we are able to back fill. So what you are seeing is something that because of mix of mismatching skills, as well as pressure on the visa. But over a period of time, we should be able to bring it down.

Got you, cool thank you.

Thank you. Ladies and gentlemen, that was the last question. I now hand the floor back to Mr. Sandeep Mahindroo for closing comments.

We would like to thank everyone for joining us on this call and spending time with us. We look forward to talking to you again during the course of the quarter. Thank you.

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