Infosys Limited (INFY) Q4 2018 Earnings Report, Transcript and Summary

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. And 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, Karuna. Hello, everyone, and welcome to Infosys’ earnings call to discuss Q4 FY 2018 Earnings. I’m Sandeep from the Investor Relations team in Bangalore. Joining us today on this call is CEO and MD, Mr. Salil Parekh; COO, Mr. Pravin Rao, CFO, Mr. M. D. Ranganath; Presidents and the other members of the Infosys management team. We’ll start the call with some remarks from Mr. Salil Parekh and Mr. Ranganath, and the recently concluded quarter and the year as well as remark from the upcoming years subsequent to which we’ll open up the call for questions. Please note 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 risks that the company faces. A full statement and explanation of these risks is available in our filings with the SEC, which can be found on www.sec.gov. I’d now like to pass it on to Mr. Salil Parekh.

Thanks Sandeep and good morning and good afternoon to everyone on the call. This is Salil, with me I have Pravin, Ranga and several of our leadership team here for the call reporting as well for fiscal 2018 and for the Q4 updates. I'm delighted to share with you those results, also share with you highlights from our strategic -- for our strategic decision going forward and share with you the guidance for Fiscal'19. In Q4, we had strong revenue growth of 9.2% year-on-year and 1.8% quarter-on-quarter reported terms. Operating margin in Q4 was 74.7%. For fiscal 2018, we had revenue growth of 7.2% in reported terms, operating margin was 74.3%. Our financial services business grew 7.2% year-on-year in Q4 and [indiscernible] 16.1%, and our Europe geography to 22.5%. These highlights of our results show the investments, demonstrate the underlying trend of our dividend, the trust of our clients and the dedication of our employees. Now, let me share with you something about our strategy going forward. The main increase for our strategy is far from our interactions with our clients and leadership, our employee and a review of our business portfolio. The four key pillars of our strategy are, first, skill, agile, digital, we have been focused on the digital services business of which we already have 2.8 billion in our current portfolio, which represents 25% of our revenue for fiscal 2018 and it's growing at a very strong pace much ahead of the overall growth of the company. This is an area that we plan to invest in and expand and become more and more relevant for our client's future. The second is energize our core, apply intend automation and artificial intelligence to improve productivity in this area, here we will apply a market leader in NIA platform across all of our delivery. Third, reskill our employees, we provide any time anywhere tools for enabling our employee to be ready for the client need of the future. And fourth, we will expand localization in our market especially in the U.S., building delivery centers, training centers and hiring locals. For example what we have done in Indiana recently and in Connecticut as we plan to make up for several others that are upcoming, and also [indiscernible] the same approach for localization in [indiscernible] and in Australia. These four elements, these four pillars of strategy have been centered around what we do with our clients which is navigate your mix, we help our clients navigate their journey to their digital future. Now from our guidance. Our guidance in constant currency terms for fiscal '19, revenue could between 6% and 8% and operating margin between 22% and 24%. With that, let me hand it over to Pravin.

Thanks Salil. We had a good quarter on the operations center and our share of revenues from digital services improved to 26.8% in Q4 and for the year FY'18 percentage of revenues from digital services stood at 25.5%. During the quarter, we had seven large deal wins with TCV of $905 million, six of this were in U.S., three in Europe and one in rest of the world. Utilization excluding trainees remain stable at 84.7%. Volumes grew 1.1% while realization was flattish in constant currency aided by higher proportion of new services in our portfolio mix. Attrition has increased slightly to 16.6% as compared to 15.8% in productivity. However, our high performer attrition is significantly lower at 9.4% compared to 14.1% last quarter. We are pleased to announce compensation revisions for approximately 85% of our workforce effective April 1, both onsite and offshore, rest of the employees managers and leaders will see their revisions effective July 1, 2018. We'll continue our focus like we did last year on a sharper differentiation based on performance and contribution. Most of the people could see increases ranging from mid to high single digits. Variable pay for the quarter is 100% highest in the last 10 quarter. In addition, we have earmarked the $1 million special incentive to employees. Now let me give you some color on some of the sector. Demand in financial services is strong in new services like digital, cloud, RPA, AI and automation. Variant budgets are being diverted from the bank and regulatory spending within the bank initiatives. Banks are engaging with us strategically in digital transformation and new services, which is helping us increase our wallet share. Certain top accounts in U.S. are witnessing some toughness, however, Indian banks in U.S. and Europe continue to be strong growth driver for us. We have a strong franchisee in Investment Management, Cards & Payments and Mortgage services. We have won several large vendor consolidation deals in Europe. Our margin pipeline is healthy and pipelines for new deals is showing a steady increase. In insurance, we have seen a tremendous growth in the last year. The insurance industry continues to be impacted by changing technologies and consumer behavior and insurance companies are under pressure to innovate fast, dilute spend. However, our service combination of design technology with implementation expertise meets critical needs of the insurer to modernize their digital experience. We expect growth for us in the vertical driven by log-ins, new account openings and our offerings around McCamish and NIA. Demand in manufacturing sector remains moderate coupled with flat to go client spending budgets driven by cost cutting objectives. So sector is looking towards digitization of end-to-end processes that focus on integrating mobile, IoT and backend systems. For this higher activity in Europe which is growing through an outsourcing wave. Our deep pipeline in the sector is healthy and we have also generated new logos in this industry. Healthcare is witnessing increasing demand driven by population growth using population and increased sickness. There is a strong focus on pay for performance, best operating module and modestly linked to specific outcomes and technology led personalization upscale. Legacy modernization, digital health and analytics and care management are the key drivers. The [indiscernible] while non-discretionary spend is focused on cost optimization and consolidation. Retail sector invest continues to see a slowdown especially due to store closures and Amazon effect. However, growth momentum in Europe and the rest of the world is better as clients accelerate their digital transformation agenda. Plan for investment towards cloud adoption, infrastructure outsourcing and transformation around digital and omni-channel. Growth in source vertical was led by ramp-up in large deal wins of last few quarters coupled with fraction in TFM. Demand continues to be strong on the back of opportunities in newer areas like analytics and energy, IoT and communication, cyber security in telcos and smart meter opportunities in utilities. Overall demand for DPM is moderate driven by commoditization on one hand and automation and AI on the other. Amongst segments sources witnessing traction whereas FSHL and India business witnessed some softness. Clients are expecting increased automation led productivity gains led by RPA. The set of vertical solutions and capabilities created to provide customized solutions to the industry verticals are proving a major differentiator for us [indiscernible]. Deal size and number of deals both are witnessing an upward trend. Our strategy of [indiscernible] BPM and strong focus on analytics, RPA and digital will help counter the communization impact and grow at above industry rate. Digital transformation is one of the top agenda for all clients which increases focus on customer centricity, higher satisfaction, increased loyalty and lower cost of service. Clients are using this [indiscernible] and navigating mutual transformation to create more relevant and durable solutions in the complex world. We are making significant investments in new services scaling our digital capabilities to support extreme automation and processes, organization and infrastructure modernization, enterprise agility, cyber security and digital experience. Acquisition of design and contents is coupled with digital near shore and offshore studios will result in improved time to market, accelerated speed to volume and optimize cost for plan. Opening of Design and Innovation Hub in Rhode Island will help close the gap for design and human centered skill in technology field. Going forward, we expect to fix our budget towards modernization legacy system and increased focus on digital transformation to meet exciting customer expectation and deliver individual experiences upscale. Over to Ranga to provide some color on the financial.

Thanks Salil and Pravin. Hello everyone. Before I go to the details of Q4 performance, let me step back and look at the overall performance of the company in fiscal '18. In fiscal '18, the company delivered good performance and resilience on multiple fronts, let me talk about a few key aspects of fiscal '18. First the annual growth of 7.2% in reported currency and 5.8% in constant currency and 3% in rupee terms was in the back of good growth in digital revenues. The digital revenues exceeded 25% of the total revenues of the company. Further, increased the number of $100 million client to 20. Second, our operating margins for the year was resilient at 24.3 driven by broad based improvement in several operational parameter, productivity improvement and automation benefit. Revenue per employee increased by 6.3% during the year and crossed $54,500. This was primarily driven by the fact that the revenue growth during the year was up than the headcount growth due to the higher utilization in productivity improvements. While revenue grew by 7.2%, the headcount growth was just 1.9%. Our operating margin for the year was above midpoint of our guided during this 23 to 25 at 24.3%. Our operating margin for the quarter improved by 40 basis points to 24.7 and we will be providing more color on this shortly. Third, our cash generation for the year was robust at $1947 million a growth of 15.3% as compared to 7.2% of revenue growth. Coming to capital allocation, during the year the company successfully executed the capital allocation policy that was announced in April 2017. As part of the policy the company completed successfully share buy back of up to $2 billion. Today the Board in its meeting reviewed and approved the capital allocation policy of the company after taking into account the strategic and operational cash requirements of the company in the medium term. The key aspects of the capital allocation policy are; one, the Board has decided to retain the current policy of returning up to 70% of the free cash flow of the corresponding financial year in such a manner as may be decided by the Board from time-to-time. In addition to the above, out of the cash balance in the balance sheet, the Board has identified an amount up to $2 billion to be paid to shareholders in the following manner. A) A special dividend of Rs. 10 per share resulting in a sales of approximately $400 million, B) The Board has identified an amount of up to approximately $1.6 billion to be paid out to shareholders for the financial year 2019 in such a manner to be decided by the Board subject to applicable laws. Further announcements in this regard to be made as appropriate in due course. Now let me talk about Q4 revenues. Our revenues in the quarter was $2805 million, this is a sequential growth of 1.8% in dollar terms, 0.6% in constant currency terms. In receipt terms the revenue for the quarter was 18,083 crores this is a sequential growth of 1.6%. At competitive Q4 of last year revenues grew 9.2% in dollar terms 6.4% in constant currency terms and 5.6% in the rupee terms. Let me talk about volume growth and price realization. Speaking to volume growth for the quarter was 1.1%. At competitive Q4 of last year, the year-on-year volume growth was 6.2%. Pricing realization for Q4 improved by 3.5% and year-on-year basis. For the full year as compared to fiscal 2017 which is a better indicator of price realization. The price realization improved by 1.5% in reported terms and by 0.2% in constant currency terms. We ended the quarter with a total headcount of 204,107 employees, which is a net increase of 2,416 from last quarter. In fiscal '18, the net headcount increased by 3,743 employees as compared to the net addition of over 6,000 employees in fiscal '17. Coming to operational efficiency, our relentless focus resulted in improvement of several efficiency parameters in fiscal '18. Utilization excluding trainees for the year, it will be 84.6% from 81.7% in the previous year. Similarly, our efforts towards moderation of onsite mix resulted in onsite mix decreasing to 29.3% this year. In Q4, this further reduced to 28.7%, which is the lowest level in 12 quarters. Our focus on optimizing on onsite employee cost including sharper focus on productivity, onsite pyramid and others, localization and cost optimization measures led to a decrease in the onsite employee cost as a percentage of revenue to 38.3% in fiscal '18 as compared to 30.7% in previous year. The subcontractor expenses this quarter stood at 6.1% of revenue and compared to 5.9% of revenue last quarter. As you know the subcontractor expenses have driven primarily by utilization levels and onsite talent demand. Our operation margin in Q4 was 24.7% which increased sequentially by 40 basis points currency movements helped the margin by 20 basis points which was fully offset by a drop in utilization and price realization. Further, reduction in onsite mix and other expenses improved by the margin by 70 basis points, this was partly offset by higher variable pay and increase in compensation cost by 30 basis points. So overall this led to an improvement of 40 basis points sequentially. Cash generated from operating activities in Q4 as per IFRS consolidated was $550 million and we paid US$74 million of taxes as per the APA entered into the United States IRS. Free cash flow which is operating cash flow less CapEx for the quarter was $418 million. For the full year, fiscal '18 free cash flow was robust and increased by 15.3% as compared to the revenue growth of 17.2%. Cash and cash equivalents including investment to debt $4873 million which converts to approximately Rs. 131,765 crores. For fiscal 2018, the Board announced a final dividend of 20.5 shares after including the interim dividend of 13 per share the aggregate dividend for fiscal '18 amounts to Rs. 33.5 per share. The total pay amounts for approximately 70% of free cash flow for the financial year, which is in line with the capital allocation policy announced by the company in April 2017. Day sales outstanding for the quarter decreased by three days to 67 days compared to 70 days last quarter. After expenditure for the quarter was $97 million, which is Rs. 624 crores. Yield on cash for the quarter was 7.29% as compared to 6.9% last quarter slight improvement in the yield. Our hedge position as of March 31, was $1513 million. In fiscal '18, the EPS growth was strong at 17.8%, EPS for the year was 1.1 and this includes positive impact of $0.09 on account APA, which was calculated with the United States IRS during the year. In the quarter ended March 31, 2018, on conclusion of the strategic review offers the portfolio of businesses, the company initiated identification and evaluation of potential buyers for its subsidiary Kallidus, Skava and Panaya. On such reclassification an impairment loss of 18 million in the aspect of Panaya has been recognized in the consolidated profit and loss for the quarter and year ended March 31, 2018. The corresponding write-down in the investment value of Panaya in the standalone financial statement of Infosys Limited is $90 million. Coming to operating margin guidance for fiscal '19, we guide operating margins in the range of 22% to 24%. This is primarily an account of focused investments in digital to leverage digital opportunity in under invested areas, enhancing our investments in U.S. talent models further to foolproof our future business, revitalizing sales for swapping market opportunities and repurposing of talent. At the same time as in the last year, we continue our relentless focus on productivity, operational efficiency and cost optimization while focusing on digital growth. With that, we open the floor for questions.

Thank you very much sir. Ladies and gentlemen, we can now begin the question-and-answer session. [Operator Instructions] Thank you. The first question is from the line of Joseph Foresi from Cantor Fitzgerald. Please go ahead.

Hi. I wanted ask about margin's first. I think why the revision lower, and I think there been a couple of revisions lower over the last couple of years. Do you feel like it's taking them down far enough?

Hi. This is Ranga here. I think if you look at last year, we gave guided 23 to 25, we ended up at 24.3 higher than the midpoint. I think one of the -- I want to emphasize that we'll continue our relentless focus on all the parameters that I talked about as well as the productivity and the cost optimizations. What we have done really is, as part of our business review that we did. We looked at areas -- digital areas especially where we need to invest more to leverage the opportunities point one. Second, on the U.S. talent model, we have planned for additional investments so that the growth is not compromised in the United States. Third, we've also looked at revitalization of sales to see especially in respect of -- pursuit of large [sales] [ph] and conversation of the [sale] [ph] and also repurposing couple of our talent -- some of our talent in the digital area. While I think what we will do is, as the year progresses there is a range they have given, but as the year progresses, we'll certainly -- we will be able to provide more color on how we are progressing on those four investments. But nevertheless, our relentless focus on the optimization and productivity will continue.

So let me ask kind of a different way. Do you feel like you're at your natural long-term level of margins giving next year. And if not what utilization obviously have gone up, so I'm wondering what leverage you have to continue to maintain the margin level that you have.

I think we are confident of retaining the guidance range to the current 22% before we're confident about it because we also believe that some of these investments are required for leveraging the digital growth in the near term. So we're confident of that range in the medium term.

Okay. And then, the last one for me, can you give us some color on how fast Brazil grew for you and what your expectations for the growth rate in that business are going forward? Thanks.

Hi. This is Salil. In terms of digital, we started to really track and look at it very carefully for this fiscal '18 process the disclosure for us. In Q4, digital has grown 3.6% over Q3, with that sort of a trend, it's something that we would push for. We see the market certainly growing at a large level. Overall, digital number of 2.8 billion we have attracted and look for this carefully in fiscal '18, we start to see comps in fiscal '19 as quotas roll in. We also see the overall addressable market for this business is somewhere in the range of 180 billion to 200 billion and that market is growing quite strongly. So we expect this to be -- one of the growth drivers for us in the future.

Thank you.

Thank you. The next question is from the line of Anantha Narayan from Credit Suisse. Please go ahead.

Thank you and good evening everyone. I have a couple of questions as well and the first one is to Ranga, on the margin issue. So Ranga, the new -- you spoke about those investments being the reason for ratcheting down your margin range. Are there any one-off elements in those investments or should we sort of expect such investments to continue just given your size and growth. And if the latter than what sort of top-line growth would be required to get your margins back to the 23% to 25% range.

This is Ranga here. I think, sorry, you were saying something.

Yes. Sorry, just to clarify this question was related to more from a three, four year perspective rather than just for FY'19?

Yes. I was saying earlier we ended the year at 24.3 and a Q4 was robust at 24.7. And the guidance that we have given 22 to 24 finally takes into account, so the investment but one-off big ticket single investment that we need to do. It is not like that it is not really a chunky investment. We're looking at all the prop accounts and also the service lines where we have more potential to grow primarily investing in the capabilities, primary investing in certain IP that were required to drive the digital growth. It's not really a large term investment that they're looking at. And of course, this will be very gradual and progressive during the year depending upon how those investments pan out during the year. Certainly will have -- it will have necessary impact on the margin. But at this point in time what they have assumed is really all these investments that we're going to make throughout the year. But, of course, we are conscious of the fact that for the overall EPS and earnings growth the margin date has to be more than be compensated by the revenue growth to retain the EPS growth, I think that in the medium term. So I think we are very conscious of that fact. I think this is a balance between how we need to really look at focusing invest in digital areas where we feel that there is a large opportunity that we need to leverage.

And on the second part of that question Ranga, over the next three or four years, would single-digit growth suffice for you to manage your margins at the existing levels?

Well, I think one of the factors that I would like to emphasize the market levers that we're looking at here is not necessarily the cost optimization lever alone. One of the things is, the digital revenue that we've talked about 25.5% for the year is coming at higher price points and not only higher price points it is also delivering us better gross margin than the core IT services. So, our emphasis or endeavor would be to drive that price point and gross margins in digital better during the year. And that is something that we're also working on. So our overall objective is that a combination of faster growth in digital services, which will be at -- which could be at higher price point and gross margin need to offset the other impact of the margin growth on the EPS. To answer your question, I think we're comfortable with this range and we will watch during the year. This is the range that we have made certain investment assumptions to drive growth and we're comfortable that even with this kind of brand broadly the earnings in the medium term need to be protected through multiple levers including digital profitability.

Thanks Ranga. And then, just one more question, just to Salil. Salil on this, I just look at it on paper both Panaya and Skava seem to fulfill some of the criteria among those four elements of your strategy that you laid out. So maybe you could just detail for us the reasons why you decided to get rid of that.

Hi, Ananth. This is Salil. I think the approach we laid out in the four elements with agile, digital and then the core. And we have still have people in localization. Those are the go forward strategic elements we can drive to building out a digital services revenue stream. The two-prong building that I talked about before. And within that we emphasize what we have in our platform basis, for example NIA, on McCamish, what we have in insurance are certainly products such as Finacle and Edge. Panaya and Skava, the approach we have taken is, we initiated the process evaluating identification of a potential buyer for it. There are certain criteria internally that we looked at that we would need for all of our businesses to fit for them scale. And there were some of those criteria that Panaya and Skava did not meet in this time. The commitment we have with our clients is to ensure that there is two product we have here, something that the current clients you are working in and clients in the future leaving this, we remain committed to this. And off the approach we are taking in terms of a strategic review increased.

Thank you, Salil and good luck for the new fiscal year.

Thank you. The next question is from the line of Keith Bachman from Bank of Montreal. Please go ahead.

Hi. Thank you. I had two questions if I could. The first is, is also on margin, but I wanted to just understand the strategy as it relates to onsite and offshore. In the March quarter. your offshore effort and revenues actually went up a little bit, but I would assume pursuant to some of the strategy elements you laid out that in fact what are the implications the margins as you pursue more digital activities given the waiting of onsite and offshore and then I'm a follow up please.

Hi, Keith. I will take that question. I think one way to look at it is really segregate our onsite revenue into two components. One is the digital and non-digital. And even if you look at the overall company, they're looking at 25.5%. And when we looked at the gross margin of these 25.5% of the business, it is higher than the quarter IT services. And it is higher than the -- of course higher than the company's gross margin. So, we -- the area of course, digital is not a homogeneous business makes sense because it has got a very wide range of services there. But, with the pricing discipline that we have we are confident of achieving better price point in the digital revenue. Even if it is higher onsite component, at this stage based on what we see, we do believe that the gross margin things will be higher than the core IT services. So, to answer the question, the emphasis on digital, revenue growth not necessarily mean that those revenues because of higher onset component are coming at gross margin. As today that is not the case. So I think the primary focus of the margin is really to drive further digital without diluting the gross margins that we are getting in digital to better price point. And at the same time make sure that we are leveraging the opportunities across our top accounts. And in [Technical Difficulty].

Capital allocation versus M&A and you've laid out a strategy where you're paying out 70% of your free cash flow and then also going to pay a special dividend. With that said, emphasis like a lot of the Indian based IT providers -- service providers rather is facing structural challenges. And if you look at Accenture over the last five to seven years has put a heavy emphasis on M&A to rebalance or remix the portfolio. And it just seems to me the risk you're running is weighted towards the capital allocation is not being able to remix your portfolio at a rate that allow you to either maintain or accelerate your revenue growth. So while this is a tricky balance admittedly it just wood on the surface seem to suggest that perhaps you should be weighing more to the M&A side. So if you could just speak to the capital allocation strategy that you laid out today and what emphasis that you're going to place over on M&A over the next 12 to 18 months to try to help rebalance your portfolio.

Hi. This is Salil. I think in terms of the capital allocation policy, there are two components to it. First is up to 70% of our free cash flow from our ongoing cash generation. And then, second one being 2 billion on what we have on the balance sheet today. [indiscernible] quite a significant amount on the balance sheet in addition to the ongoing cash generation that we will continue to drive into. We developed today at least a view -- a first view of what are the opportunities in the M&A space. And we are proactively looking to see what are those we could leverage into those digital service architecture around the definitions that we've built internally for our future scale up. You also saw the announcement today of the acquisition that we did what we call the experience space of digital related to the digital creative agency. We want to continue to do those types of acquisitions and indeed across that digital landscape that can help us position us in this transformation. Our revenue also conscious that we have a significant amount of cash on the balance sheet and that even toward the capital allocation policy which relates go through the ongoing cash generation and what it's been today on the balance sheet.

Okay. Thank you and best of luck too.

Thank you. The next question is from the line of Moshe Katri from Wedbush Securities. Please go ahead.

Thanks. Can you talk a bit more about some of those investment buckets as you mentioned 3 or 4 some of your earlier interviews? And then, in that respect, maybe you can talk through a big picture perspective about strategy for the next three to four years. Are we going to see any deviation from what we've seen in the past maybe a couple of pointers here could be helpful. Thanks a lot.

On the investment buckets we purchased dividend planning for our fiscal '19 relate to investments in finance. First, building out digital capabilities, so turning in an investment in scaling up creating, recruiting and in general giving utilization benefits to building the digital capability. Second is to expanding same capability and allowing that to become more focused in the growth area. Growth in sectors, geographies and also in the service offers. The third related to our localization approach in the first instance in fiscal '19 investments in localization in the U.S. went for talent, those were that building up delivery centre capabilities and training capabilities within the U.S. And the fourth related to refactoring and reskilling of our employees and that cost as it relates to aligning to our future direction namely on the digital and cloud platforms that they are working towards. Turning to the second question on direction for the next three or four years as you described. It centered around [indiscernible], the first is the scale up of our digital business, which is today 2.8 billion and growing rapidly. The second is to energize of course with AI and automation. And third relates to giving our employees for the future discipline roadmap. And then, fourth relates to expanding localization in the U.S. and in other geography that we operate that direction is there. That is the actual we expect now for the go forward period and we expect to sit with it in the coming years.

Great. And then, just final question, this is a big picture question. There's a lot of optimism, I guess among the sell side, the buy side that we may see that up tick in demand this year. Based on conversations that you're having out here with clients, are we kind of getting there or at this point this is still kind of up in the air just given the fragility of the environment and given the geopolitical uncertainty out there. Thanks a lot.

If I understand then, within those client demand and optimism, what we see today, there are segments where there's significant optimism in group, for example and energy utility in a geography, for example, the European geography for us are even more [indiscernible] than rest of the world. Overall, in the areas you defined basically service architecture. There's significant optimism and quite a lot of opportunity for growth and those areas become skewed for us and then starts to see the return that is the area where we see the most dynamic growth and opportunity in the market and hopefully we leverage that as we execute on it.

Thank you.

Thank you. The next question is from the line of Diviya Nagarajan from UBS. Please go ahead.

Hi. Thanks for taking my question. Actually two questions. One is from the direction of M&A, your latest acquisition seems to be taking your M&A in a different direction especially when coupled with the exits that we are looking for with Panaya and Skava. Could you run us through your outlook for how you're looking at M&A going forward? And my second question, again, coming back to the margin arguments, Ranga, if you could just run us through at the lower end of your margin guidance, higher is the margin guide. What are the key elements that really contribute to the margins? I understand that you probably reached a certain limit on utilization expansion, we've already seen headcount additions pick up. So if you could just break it down into utilization pricing and then the investment in fact on your margins for the next 10 months that must be very handful?

Hi. This is Ranga. Here on the margin front, I think in the last year we guided 23% to 25%, we reduced by 1% and we said primarily on account of rupee and to some extent the U.S. talent model. However, we delivered 24.3%. Now, this time, the primary reason for guiding in 22% to 24% is to tap the opportunities in digital and some of the investments that we need to make to tap those opportunities as well as in reproposing the sales engine for -- some of the last two pursuits. Third of course is the additional investment that we need to make in the United States. These are three principal pieces. Now, the way we are -- we do not want to kind of totally exclude these things I know from our planning standpoint. We will see how these investments pan out during the year and maybe after Q1 to Q2, we'll get a better perspective, but we want to make sure that we keep the range at 20% to 24%, so that no necessary investments, if you have to make and as we made during the year, we will address demanding aspect.

On the M&A question, I think with the approach we want to take with and title announcement of the acquisition today. It's clearly centered on the digital services space. One of the components of that is the experience area which is where this acquisition squarely fits in. Our view started to look at what the landscape is for acquisitions in services across the varied digital components whether it is data, analytics, IoT and cloud. Those are the areas which have detailed components of a digital service architecture. We really examine acquisition opportunities and moving the services claim as we will start to look after.

Salil, I'll come back for follow-up, if you have time and all the best for the year.

Thank you. The next question is from the line of Parag Gupta from Morgan Stanley. Please go ahead.

Hi. Good evening everyone. So just two questions out here. Firstly, if you look at the deal trajectories that you announced today they seem to be pretty strong. Now you're looking at the numbers itself, we still probably haven't seen any significant pickup in growth rates across U.S. or BS V or retail for that matter. So just want to get a sense that, is the deal trajectory signaling an improvement in the demand environment going forward. Is it more forward-looking rather than the numbers which are possibly backward looking, or do you think there are some parts of the business that are actually dragging down overall growth. So that's my first question. And just the second question on the margins. But again, what I'm just trying to understand is you made one point that there is going to be a lot more investments in digital especially in areas that have seen under investments in the past. What I'm just trying to understand here is that it's being driven by what you're seeing in the market and what clients are demanding for or some of these investments, something that you're making in advance given the way the market is beginning to shape up. So, just trying to get some clarity on that. Thank you.

Hello. This is Pravin here. I will respond to the first part of the question. From this year we have seen tremendous growth in insurance services. We're seeing tremendous growth in energy and utilities and in the telecom space. We are also seeing good growth in the life services and healthcare space. On the -- whereas growth on the manufacturing side and on the DFS -- side of the DFS as well as on the retail side growth has been moderate. In the coming year we expect to see continued growth in energy, utilities, we expect to see the momentum continue in telecom as well. Any comments they run through expect to perform better in DFS than what we did this year. This year, if you ignore the impact of -- one of the large product cancellations last year at DFS, if you're normalizing the growth of DFS would have been on similar lines to company growth rate. And in DFS, our -- we have a much diversified portfolio, we have our strong presence in Europe, we have a strong presence in Indian banks as well. So, while we have seen some softness in large banks in North America, not in terms of spending up more in terms of diverting more spend to internally rather than through outsourcing. Other than that I think there is definitely continued spending in this bucket. So we remain optimistic about this, but it remains to be seen particularly in the North America where we have seen good growth in both Europe as well as rest of the world. I mean not been perfect as I said earlier, we had one [indiscernible] $905 million in revenue. Four of these states where in financial services and three in Seattle space. And this $905 million is the highest TCV in this quarter from this particular year. And total TCV was about $3 billion from that deal. The pipeline continues to be healthy and it's across different sectors as well as service lines. So net-net, like you see, they have seen good growth in few verticals. We have seen good growth in among geographies like Europe. We have seen some softness in North America but that's not related to any macro environment issues. So we are hopeful that spend will start coming back to North America this year. Now, coming back to where we are seeing some drags, from the sector perspective, we expect continued dullness in the retail space from our perspective. Apart from that some of our businesses like consulting, in the last year or two, we have had some challenges in consulting. We are still working on stabilizing then growth back in this area. It remains center to our strategy we have seen -- I have seen that still work on the progress and we expect few more quarters of challenges before its stabilizing. I will pass on to Salil to respond to the other question.

Hi. This is Salil. In terms of where we are investing in digital, I mean, in fact that was outlined before. Within the space of digital, we have internally detail digital service architecture that we have built which comprises of five elements. And from that we're investing in some cases for example investing in the area of cloud, investing in the area of modernization of application landscapes, investing in the area of IoT, investing in the area of experience. So we've pick a few select areas within the digital landscape where we look to invest and clean up our capability to start to service the need that we see with our clients going forward.

Great. Thank you very much.

Thank you. The next question is from the line of Edward Caso from Wells Fargo. Please go ahead.

Hi. Good evening. I have a question around some of the accounting with the acquisitions for Panaya and Skava going to be treated as discontinued operations and therefore taken out of the historical numbers or have they been taken out?

Hi. This is Ranga here. As far as the IFRS standards, once identifying assets held for sale, which is driven by the management's intentions to sell. To reclassify all the assets and liabilities the assets held-for-sale and liabilities associated with that. After that we have to do a fair value assessment and we undertook fair value assessment from an independent valuer and $18 million of impairment loss has been recognized in the consolidated financial statement. And to answer your question, these are not discontinued operations. I mean these assets will continue to be generating because they have revenues and they have no cash flow associated with these assets. But we are classifying them as per IFRS as assets held-for-sale. And so accordingly what has happened is in the consolidated balance sheet we have called it out both the assets and liabilities and we have taken the impairment loss.

So, the next related question is, how important were Panaya and Skava to someone of your existing revenue such that now you've indicated that it's for sale. Could it impact some of your existing revenue run rate?

Ed, this is Pravin here. We will continue to partner with them based on the irrespective of whatever outcome or shape it takes. We will continue to support to our existing clients and in future happen for new prospect out of plan if there is a need applicability of Skava and Panaya, we will continue to perform that.

And my last question related again as the, the WongDoody, if I said that correct acquisition. If you got about one -- if you paid about one times revenue call it 75 million. That's about 2.5% growth within the 6% to 8% in guidance. Are you assuming 2% to 3% from this acquisition?

We are talking about the recent acquisition. Now, this is -- what they have given, 6% to 8% is organic growth.

Is organic growth.

That's right.

Thank you.

Thank you. The next question is from the line of Ashish Chopra from Motilal Oswal Securities Limited. Please go ahead.

Hi. Thanks for the opportunity. Just one clarification on the previous question as well, Ranga. So while 6% to 8% is the organic growth, does it also bake in the course of revenue from Panaya and Skava as when and they get sold or currently that is not embedded in the guidance.

Well, I think they have taken into account that possibility. Clearly, this is the organic growth.

Okay. And the second question was to Pravin, so Pravin you mentioned that overall spending in BFS remains healthy, but there is this trend on in certain primes in North America where they are taking the work back in-house. So if you could just elaborate on how secular or sporadic this is still whether it is really this fits to a very small set of clients. Do you see it happening across a wider set?

This is -- interesting is normally effective content that we have seen in the past -- if you look back over the last 10, 15 years has been -- we are seeing signs and we have seen acceleration of enforcing and over a period of time it has stabilized and we are seeing periods like [indiscernible] crore divested from those captives. But, today we are seeing is primarily in -- to some extent in -- give us space and also to some extent and probably the unseen state. It's something we have been seeing in the last couple of years, I would say. There are two primary reasons from our perspective, one obviously given on the technology disruptions and then sort of looking at building that capability and find these skills and capabilities of other level in India, they want to tap on to that instant capability. Second one is, as part of the usual confirmation, one part -- one element of transformation is modernizing their legacy and there is plan for embarking on that destiny there. And some of the plans have realized that they have outsourced that too aggressively. They don't have resident model in the legacy systems so we have seen clients increase and hoping for the purpose as well. It's a combination difficult to predict how long this trend will continue. But it's there. I mean we work, I mean for us it's in some sense it's interesting, in fact that grow to some extent. We also worked very closely with captives. We also help in many cases in terms of implementing that captives providing training assistance, recruit assistance and so on. And in many of the cases we have seen our book of business has also improved with duties and captives.

Got it. And just lastly from my side, on one of the investment areas, you articulated for the margin guidance on revitalizing the sales. If you could just maybe throw some more light on that with respect to -- are we talking about having more feet on the ground or are we looking at changing the kind of mix with enough sales team or what exactly was entailed around that? Do we do we think we are probably sub-staff or is it a quality issue?

On the same, what would you like to do to expand what we have in terms of our sales capability. Our sales capability are very strong. However, there are areas and pockets we can go out to more subsectors -- in some areas -- in few European geographies. We could also plan to do something where we want to introduce more digital specialists into our sales mix and also to look at how we can work on account expansion programs. We really are expecting this. The primary focus is to expand the sales capacity into newer areas, some we just never climbed in and some intersecting geographic base.

Got, of course. Thanks Salil. That's it from my side. Wish you all the best.

Thank you. The next question is from the line of Rod Bourgeois from a DeepDive Equity Research. Please go ahead.

Hi, there. Hey. During Vishal time as CEO, he set a vision for emphasis that was more product focused and I guess my question at this stage is, is Infosys now planning to move back to more of a service orientation or will Infosys maintain the general vision that was set by Vishal on the product and software front?

Approach we laid out really talks to scale out digital services state today. We have a huge strengthen in services growth in agile, digital and of course services. That's the primary focus there -- they were driving the business. In addition to that we have what I call a scale platform like -- scale products and platforms. Like Finacle, like NIA which is a strong platform everyone will spend, like McCamish into the space like Edge those continue to be part of our future approach. We absolutely want to be driven to build out our digital services business, which is the primary focus for where our clients are going in the future.

Got it. And I hope to learn more about that. The follow up question is related to the margin guidance, your guidance implies some potential force some margin contraction based on the investment plans that you've outlined here. I guess I also wonder is the margin contraction outlook is partly accounting for risk that could stem from contract profitability issues given that your pricing has been somewhat more aggressive over the past couple years. I'm wondering if the guidance is accounting for potential contract profitability issues that could stem from that?

This is Ranga here. No, that's not the reason. In fact if you look at two aspects, right, you look at the pricing this year in the constant currency basis, year-on-year price realization has improved by 0.2%. I mean it's broadly stable unlike the mid years. We're pleased to see pricing decline in constant currency between 1% and 1.5%. Second, this is not due to any contract contraction either in the sales or in the margin. This is not account of any of those. It's primarily our duty off investing in certain areas to drive the Silk Road and the sales revitalization and the U.S. timing model which is not to do with any specific contract contraction either in sales or margin.

So. This maybe the follow-up to that just real quick is, the price realization being up year-to-year. How much of that is due to mix and how much of that is due to the price improvement on apples-to-apples deal?

I think it's very difficult to put number on both the buckets. Price realization is a combination of two factors. One is, of course, the rate cut in the T&M. T&M is straightforward, it is rate card. In case of a fixed price project is also a factor of the productivity that we achieve in a fixed price project after the commencement of the project which is either through onsite exchanges and the total headcount in a particular FTE, due to a better productivity management in a fixed price project. So as you know roughly 50% for revenues, little over 50% of revenues come from fixed price and they have the onsite part as well. The second reason for up tick in price or maybe not as much of a downward pressure that we saw in two years ago. Also we are seeing that is still, which is about 25.5% of revenues coming at better price points. So it's a combination of both.

Thank you. I'll yield the line and follow up on some other topics. Thank you.

Thank you. The next question is from the line of Ankur Rudra from CLSA. Please go ahead.

Hey thanks. Suddenly the high level Infosys has been espousing a strategy focusing on new services, artificial intelligence, automation and also reskilling employees. So from your strategic reappraisal, are you sort of endorsing that direction or are you making any kind of reprioritization areas. Any clarification there would be helpful?

Hi, Ankur. This is Salil. The approach we have laid really is focused on building our agile, digital services portfolio. That portfolio today which is approximately 2.8 billion in revenue and where we see quite a strong demand from our client and a large market opportunity. This then combined with revitalizing or energizing our core with automation and AI and reskilling. That focus and the localization in the U.S., our focus is really -- very centered on the services aspects plus key platforms and products like Finacle, McCamish, NIA and Edge. With the objective there is to be building relevance for our clients' digital journey is taking them and making sure that we are investing in and building up the capability sets and do with that, but again very much in the service group.

Okay. And this is a follow-up on your guidance. I understand over the course of last year the commentary on banking perhaps changed a bit, we were all hoping for a bit of a recovery which was delayed several times. Are you seeing the new guidance you're still baking in a recovery in BFS spending or is that actually an upside to the guidance you stated?

Ankur, its Pravin here. We have factored on the estimates that are assumption clear are down each of the sector. And that's affecting quarter three, in the coming year, our expectation is yielding much better. It remains to be seen, how much it is based on whatever visibility we have that factored that into guidance.

So, just to understand your commentary on banking, spending should improve in FY'19 is that the comment?

We do I mean -- today, when we look at banking there is some process in Americas, there is spending, but as I explained earlier some of the pending is being diverted to internally to captives. So that's from the Americas side. On the Europe side, we continue to be good traction. We are also seeing lot of spend in super regional and Indian banks in North America where we have good presence there. Hope it's a mixed bag. We believe that our portfolio mix -- our diverse portfolio mix will help us in capturing whatever spend that found there to one's hoping. So, from our perspective, while we are clear, I have explained, while we have a muted growth, but if you normalize for the impact of RBS, then our growth would be in line with the company growth. We do expect next year growth to be better and spend to come back to North America but it remains to be seen. But, based on our estimates what I have said is, our guidance factors into all this uncertainties and mix on estimates and that factored in the guidance

And just for the margin guidance for next year, Ranga, if you could clarify, I know obviously you baked in a lot of things here, I think you are baking in stronger wage hike bonuses variable components as well. But how much of the -- lowering of the guidance is because of the step increase in local mix, new skills and investments versus the lack of operating leverage from existing levers that we had in prior years like utilization, onsite [indiscernible]?

Hi. This is Ranga here. I think two aspects one of course is really the priority areas of investment that I talked about that is the primary one. And we do believe that the digital revenue which is 25.5% is that it's coming at higher price point and also had higher gross margin as well. We do believe that the rate of growth in digital should kind of minimize the impact of the core IT services pieces that you mentioned. Giving us an effect in the core IT services, the three things that we have been able to successfully do of course is utilization, which is we already said that at the current we are comfortable. Coming to onsite mix, which has come down below 29% this quarter and we do believe that we will continue to focus there. The third piece is really in the core IT services looking at the onsite part of the FTEs and we do believe that they have a play in terms of bringing more productivity and get some margin benefits there. So I think while we're focusing on the core aspects on the -- dimensions that I talked about, digital revenue growth, the higher gross margin is also important factor for us. And this time, we have also advanced all the salary hikes to April as you have seen and we've also kind of trying for higher variable pay in terms -- if you achieve the targets that we have set ourselves. So all these elements are part of our guidance.

Okay. Thank you so much. And best of luck.

Thank you. The next question is from the line of Yogesh Agarwal from HSBC. Please go ahead.

Yes. I just have one clarification, Ranga, in FY'17, Panaya and Skava were around $100 million, so as you mean they were down let's say 20% in FY'18. So, around $80 million, are you assuming any revenues in FY'19 in your 6% to 8% guidance or are you maybe for six months, are you not assuming any numbers?

Now. Let me clarify. I think both Panaya and Skava posted, their revenues are not material for us.

Okay. Okay. So it doesn't matter that if you include….

Very, yes, not material for us. And that did not impact the guidance that we have given and in fact the fixed rate that they have given bakes into account the -- it's purely organic. Panaya and Skava revenue are not material for us.

Got it. Thank you, Ranga. Thanks.

Thank you. The next question is from the line of Bryan Bergin from Cowen and Company. Please go ahead.

Yes. Hi. My first question. Can you talk about your expectations for the slower revenue growth throughout the year as it relates to 6% to 8%? How do you expect that progress throughout the year?

Hi. And if you look at the Q4 revenue growth just concluded quarter, the year-on-year has been 9.2%. And if you compare to -- and during the course of fiscal '18, we have seen improvement in the year-on-year growth quarter-on-quarter. So for example Q2 and Q3 was 8% and now we have Q4 is more than 9%. I think that is and also we have got a decent exit rate that we have seen unlike some of the previous years of Q4, we have had decent exit rate. And typically as you know we are looking at -- given the -- given our earlier profile, Q1 and Q2 typically our first half typically happens to be stronger than the second half that has been the pattern. But, without even -- I didn't want to give a sense that look that is going to continue. But having said that, the good exit rate that we have gives us confidence saying that look Q1 and Q2 are the first half, would be broadly in line with the pattern we have seen in the earlier years. So, to answer your question, it is not back ended, the question is which is primarily Q3 and Q4 growth is where it is that's not how we have planned for the street.

And my next question, discuss your plans as it relates to augmenting the strategic consolidated capabilities?

Hi. This is Salil. In terms of consulting with the approach we want to progress is, we expect the significant amount of growth coming from consulting given that's the area that worked closer with the business user. We are working on our consulting business that Pravin shared with you had calculated in fiscal '17, which was typical of the instrument. We have now put in place a turnaround plan to get that consulting, really focused on where is growing in terms of some of three elements and quite a lot of the business linkages that we need to scale up with the normalcy have your buyer on the business side. That is the level of consulting activity that we have which is what we need to enhance in fiscal '19 and we hope to do that over the next 12 to 18 months.

Thank you very much.

Thank you. The next question is from the line of Girish Pai from Nirmal Bang. Please go ahead.

Yes. Thanks for the opportunity. A couple of questions, one was regarding a capital return, is there any regulatory issue that could prevent you from making a buyback of this 1.6 billion in FY'19?

If you look at the April 2017 policy based on that we did the buyback right. We did the buyback of up to $2 billion, we just concluded. There are no restrictions, of course, that could go by the guidelines in India, it's a big guidelines with very specific on [indiscernible] et cetera. But, there is no restriction. What the board has stated which has identified $1.6 billion and the mode of disbursement, you can decide later. So that's the thing it's not about any restriction.

[indiscernible] part, would that prevent you from making a buy like in FY'18 or would be a 4Q FY'19 event?

In India of course there is a time gap which is there between two successive buybacks as per the setting guideline. Typically runs about 12 months that has been the broad timeline. So, that's one aspect. But, beyond that there are no restriction but as the Board as clearly said in our capital allocation policy we have earmarked and the mode of disbursement, we have kept it as flexible and that will be decided by the Board in sometime.

Okay. My second question is regard to the mix between you and [indiscernible] $3 billion last deal DCV number. If you can like, you mentioned, Pravin you mentioned a certain number for 4Q, but can you tell for the full year how much the number is?

This year the number is what $3 million, so for Rs. 3 crore it was $905 million. So on an average it has been about $872 million to $800 million in the other three quarter.

No, no. The mix between you and net new?

Q3, yeah. It increased about 32% net new out of the $905 million, for the year, it's about 30%.

Okay. Thank you. Thank you.

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

Yes. Hi. Thanks for the opportunity. So, on the digital it seems that there is some kind of a realignment in your priorities and the portfolio which you are not going to target. That appears to be more closer towards UPS have been focusing on for some time. So, my question is that, do you think that you could be at a disadvantage here as others have already moved much ahead of this?

First, what was interesting to see is, the existence of our digital capabilities today. Today we already have 2.8 billion of digital work in the deep line digital services architecture that we've developed. And it's now growing as I said earlier quarter-on-quarter at quite a rapid space in fiscal '18 and we see that's continued ahead. That's very much focused on the future is this becomes the growth engine for us given our client's future relevance to this sort of work. We want to make sure that the invests build this out when we have all the full lifecycle of digital capability is available where our clients go.

Okay. And Pravin in the $3 billion of this year, were there any digital deal was so part of that?

Sorry.

Of the $3 billion dealings that you announced --

For the year.

Yes.

See, which of this large deals happen, element of digital, we have millions of deals that were elements of cloud migration and legacy transformation and so on. We have not segregated or computed how much of percentage our digital is, whatever the extent of digital, that is counted towards the 25.5% of only $2.8 billion that Salil talked about. We have not tracked that deal level to say what percentage of this $3 billion is digital.

Sure. Understand. And lastly just, Ranga clarification, the investment in digital and reskilling that you are talking about for the margins outlook, is it building in any impact of any acquisitions also in those areas as part of this?

No. We are not looking at the acquisitions impact on this. This is primarily on the investment that we need to make either by day of servicing and either through the employee base investments or some of the IP based investments. It doesn't take into account any acquisition cost attributable to this areas.

Sure. Got it. Thank you and all the best.

Thank you. The next question is from the line of Ashwin Mehta from Nomura. Please go head.

Yes. Hi. I had one question, you seem to be indicating higher wage hike this year. Do you think this could be an industry phenomena or this is more Infosys specific?

No, no. The real hike is in same range what we did last year. So I don't see any difference. So, like last year, we will continue to differentiate and majority will be [indiscernible] when we see wage increase particularly in India between mid single-digit to high single-digit understanding with what we are seeing in the last year and it's line with what we are seeing in the market.

Okay. And the second question, though the subcontractor expense has -- they depressed your margin by almost 50 basis in FY'18, do you think this will go up further given the inflation based restrictions that are coming up on the leaders?

See. One of the things, as you know, the need for subcontractors comes essentially when -- it's primarily of course, it's more than 95% onsite. And it comes primarily when we do not have the required skill set manpower to start a particular project on time due to non-availability of visa or that is also not being available or searching some other products and so on. I think awarded course of year, we have taken actions in terms of making sure that subcontractor seeing this, something is a last option after exhausting all the option. And at the same time there are several projects, where lack of availability of couple of resources especially in digital kind of project will decrease the ability of the company to go after those projects. And what we are also do, we have done during the course of the year is also that the price point at which these subcontractor deployed in our projects are higher to make sure that there is a fair amount of diligence and discipline on the margin for the subcontractors. So this is something that we're addressing at one front. In the second front, the U.S. talent model is really the core vehicle that we are looking at to make sure that the supply chain aspects that I talked about, ability to staff engagements on time. It's all clearly getting impacted by the visa issues in the second lever. I think both are important for us, but in the short-term I think, we're comfortable with the current level. And as we move much more towards the established.

Okay. Just one small one, in terms of digital you talked about what's your q-o-q growth, can you share what the y-o-y growth in digital was this quarter?

At this point in time, we are able to share q-o-q and from Q1 will be providing more color on the digital revenues. So that is a trajectory that you could depict for all the investors and having let you track

Okay. Thanks a lot and all the best.

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

Yes. Thanks for the opportunity. Salil just want to understand what all three, four parameters you will look for to measure the achievement of the strategy which you are putting forward starting from FY'19?

It is for us to believe the measure that we will start to, very focused on and this $2.8 billion revenue that I have referred in fiscal 2018 and how that trajectory expands strategically in fiscal 2019 and the years to go at. Internally, we still start to look at, how, yes, I call it that, this digital index works across all sectors, across our accounts, when the percentage of rescaling is between [indiscernible]. Are we looking at our account expansion parameters internally and what percentage of what is focused in financial digital. What is good margin and pricing that we see in a digital business. So, in total we design 6 or so parameters that surely we want to drive this business. Actually we are now focused on the growth of this absolute revenue on the $2.8 billion.

Okay. And second, on the large deal [indiscernible] traditional IT, you guys are achieving this mark of close to $1 billion is achievable or it could be still a work in process?

Our ambition is to reach that -- we are almost there on an average we have been doing about 750 to 800 [indiscernible]. But sometimes the challenge is, from the cycle times are longer than we anticipate, some of the deals we have pushed to the subsequent quarter. But looking at the pipeline, it's achievable and that's where we are focusing on.

Just last question on the margin guidance of 20% to 24% based on you replied to the earlier question, it does not relate to a contractual profitability. So it looks like, it's an investment to write the growth. So, is it fair to say that because your growth as to be up 6% to 8% is not materially different than the 5.8% in FY'2018, so that shows the margin compromise as not lead into kind of a growth in FY'2019. But, is it fair to say that once this investment is their forum, next two to three years, the growth comes back to high single digit to a low double digit and your margin can be leveraged because of the growth?

I think as clearly said earlier this is non-account of any particular contractual contraction either on volume or on slides or anything of that sort. It's not due to any of those factors. It is purely based on our intention to invest in digital areas to accelerate growth in those areas and revitalize our sales to make sure that we are better placed to capture the growth in the coming years. So I think that's the whole intention. At this point in time we have guided for 6% to 8% in FY'19. At this point in time, we do not want to comment beyond FY'19. But, our endeavor would be that these investments are for growth and they are not one-off chunky investments or simply cost to address any particular contractual contraction.

And just one clarification, this guidance is on a constant currency or will the rupee depreciate [indiscernible] that the pressure in terms of this guidance would be slightly lower?

Well, I think the 6% to 8% is certainly constant currency, if you are referring to the margin, when we give margin guidance, we always assume certain currency momentum vis-à-vis rupee that has been baked into the mark.

Okay. Thank you and all the best.

Thank you. Ladies and gentlemen, this was the last question for today. I now hand the conference over to the management for their closing comments. Over to you sir.

Thank you. Thank you everyone for joining in for this call. In terms of our closing, I'm really delighted we have had a strong Q4, the strong closing of the year. Q4 starting to see growth at 9.2% and its strong operating margin performance. In terms of looking ahead, we're pretty focused on our four pillars of our strategy. First, scale out agile digital business, which is 2.8% today, which grew Q4 on Q3 by 3.6%. Second, energize our core apply automation and artificial intelligence and really drive productivity improvement into that and on the business. Third, reskill our employees and fourth, localize and our marketing starting especially in the U.S. with the talent and capability. We believe this is a strategic direction that is going to give us more and more relevance to [indiscernible] future and we are looking forward to execute that with the investments that have been outlined for those growth areas. With that, our guidance for fiscal '19 reconfirms what we have discussed today, 6% to 8% in constant currency terms revenue growth 22% to 24% operating margin. Thank you, everyone again and looking forward to catching up on our Analyst Day Investor Day and the future calls.

Thank you very much, sir. Ladies and gentlemen on behalf of Infosys that's concludes this conference call. Thank you for joining us. And now you can now disconnect your lines.