Thank you. We will now begin the question -and-answer session. The first question is from the line of Ravi Menon from Macquarie. Please go ahead.

Thank you. Good evening and congratulations on a really good quarter. It looks like your top 5, top 6 to 10, top 11 to 20 clients all grew sequentially. So it seems that you are not affected at least in the top client segments by seasonality or furloughs. Is there any impact of the ASAP integration here?

There is no impact of the ASAP integration in the top 20 clients.

Why is this unusually strong? Are you still expanding wallet share? Are there any new propositions that are gaining traction in this?

Yes. Basically, we had a very, very strong booking last quarter. Outside the mega deal also it was a strong booking. And some of them were vendor consolidation opportunities in existing clients. If you recall, we had called out a large deal in financial services in the U.S. where we are significantly expanding due to vendor consolidation. We have been selected as the primary champion vendor, so that's definitely driving growth. And we are also seeing growth in some of the large tech clients who also contribute to the top 20. While in smaller clients, there are some challenges. In some of the big tech, we see some increase. There have been some clients where decline also happened. But I think overall, our top category is growing slightly better than the company services growth rate.

Great, thank you. And the Software R&D spend, that seems to be pretty much the same. It's been maintained even as your revenue is growing. So should we think about this as a medium -term margin lever overall for the firm?

ER&D continues to grow. We had a growth previous quarter. We have growth this quarter and we expect to have decent growth in the coming quarter as well. So I think the three data points generally give us some comfort that we're seeing a growth momentum in ER&D.

Sorry, I meant the software product business. The R&D expenditure that you expense out, that is pretty much the same while your revenue is expanding?

Right now, almost all the products, especially Unica and Commerce, are getting embedded with Gen-AI. And a lot of this work is getting done out of our facilities in India at this point.

Great, thank you so much. Best of luck.

Thank you.

Thank you. We have the next question from the line of Vibhor Singhal from Nuvama Equities. Please go ahead.

Hi. Thanks for taking my question. And congrats on a great performance. I had a couple of questions. In terms of the ask rate Prateek that you mentioned, I mean, it appears to be steep on the services side. So, if I were to just take it back to the strong deal wins that we've had, is it a combination of these deals getting into a situation that makes us confident that we'll be able to do this in the fourth quarter? Or is there any pickup on the ground level acti vity that you are basically seeing, which could help us achieve that number?

I think it's basically four factors contributing to the expected growth in Q4. Of course, the large deal will have one additional month of impact. That's one contributor. The second is there is going to be reversal of furloughs. We said we had very high furloughs in December quarter. So a lot of that will get reversed, even though there will be a little bit of furloughs in January as well, especially in Asia Pac. The third element is growth momentum in ER&D business. The fourth is the rest of the portfolio. These are the four components which will contribute to the growth in Q4. Ask rate, of course, as Prateek said it was, services is 1.6 % to 3.5%. And as we indicated, we expect the services growth for the full year to be at the higher end. So we should expect something in that neighbourhood from a Q4 perspective.

Got it, got it. Thanks a lot CVK that was a very detailed answer to that. So taking on that momentum, how do you see the overall demand environment and the macro playing out? I think if you're going to end up, let's say, in that guided range of the services business, and as you said, maybe towards the higher end. Does it translate into anything for FY'25? Again, not asking for guidance, but the overall environment per se that you're looking at - is it any different or incrementally more positive from where we were three months ago in terms of, clients' discussions, clients willing to start the deals, decision-making, any changes whatsoever, or is it pretty much the same as we were when we spoke last quarter?

So, okay, I'll divide this into two parts. From an IT services, the discretionary spend, I don't see any change. The situation is similar. It's a soft kind of discretionary spend in IT services. Engineering services, we are seeing green shoots of growth. As we said, we grew two quarters, and we are looking to grow third quarter. So I think a slight divergence between the two areas. From FY'25 perspective, I'm not going to make any comments on that . All that I can say is, we feel confident to exit with a strong exit momentum this year. We've had a reasonable booking, [$1.927 billion] this quarter. We have a good pipeline. We expect to do a strong booking in Q4 as well. So these are the data points that I can comfortably share. Nothing more about FY'25.

Got it. Okay, that's good enough for us. Thanks a lot, CVK. I wish you all the best.

Thank you.

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

Thanks for the opportunity. Most of my questions have been answered. Just one question in terms of margins. Prateek, I think in one of the conversations earlier, you have shown that the medium-term aspiration is being 19% to 20%. Can you throw more light in terms of timelines and how we can reach to that kind of an aspiration and which segment of margin will pull that trigger?

Thanks for reminding me, Sandeep. Yes, that absolutely remains our aspiration and hopefully sooner than later, but medium-term is what we have been saying and I will continue to say that. The environment is not the most conducive to increasing margins at t his point in time. Obviously, when we have a blowout quarter like what software delivered this quarter, it helps because most of that revenue percolates down to the profit line as is the nature of that business. But we continue to go through the tunnel. There is probably some light at the end of the tunnel, but it's a long tunnel.

Okay. And the second question in terms of ARR scale in the products and platform business is going up. Is it fair to say the growth pickup could be better entering into FY'25 versus earlier years or still it's some time away and we can continue to grow at a low single digit on a Y oY basis?

So, Sandeep, we will reserve our commentary on the future prospects of the software business. We are very happy that our strategy is playing out exactly as we planned. Our objective was to convert perpetual licenses to subscription and support model, which makes the need for the product much stronger and the clients much stickier. And that strategy is working out very well. Obviously, the strategy can also have some dynamics from a revenue perspective, but it is absolutely the right strategy from the long-term perspective. So it's a little early days to call out a strong trend in the software, but our strategy is working. Both price realization and the whole renewal subscription model are working well. A couple of products, Unica and Commerce, we've kind of implemented an ascent program where customers can deploy these products in a cloud of any choice, which pretty much gives them SaaS functionality with Gen -AI capabilities. So we're seeing strong tractio n for some of these products, and these were all the work that we did in the past, which is definitely showing some optimism here.

I don't remember the number, but it's about 20 basis points - 25 basis points.

Okay. Thanks and congratulations on a good execution again. Thanks. All the best.

Thank you. The next question is from the line of Manik Taneja from Axis Capital. Please go ahead.

Thank you for the opportunity and once again, congratulations for the great performance. First of all, the bookkeeping question, if you could help us understand what was the headcount due to the Verizon deal for the people takeover transaction over there? And the second bit, just wanted to understand your hiring strategy. Some of your peers have continued to cut headcount over the course of last 12 months, while even we have done some corrections, but we are fa ring much better. If you could help us understand what's different between them and us in terms of the delivery model on that front?

Yes, thanks Manik. First of all, we would not like to talk about client specific data points. So I'll kind of pass that one. I'll just draw your attention that the number of freshers that we hired is a little ahead of that 3,617 that you see. It was around 3,818 or thereabouts. So that gives you some color, but obviously we don't want to talk about client specific data. In terms of hiring, we did have two quarters of 2,500 - 2,300 kind of decline. But like we had mentioned in the last quarter con call as well, we do expect, and we did have hiring in this quarter. That is in line with the growth that we are experiencing. We are transparently giving out the ask rate for the next quarter as well. Headcount at best is a leading indicator and we are guided towards it. I'll leave it there. On a year -on-year basis also, we are positive headcount 224,756 compared to 222,270.

Sure. Thank you and all the best for the future.

Thank you.

Thank you. We have the next question from the line of Girish Pai from Nirmal Bang Equities Private Limited. Please go ahead.

Thanks for the opportunity. I had one question on Gen-AI and a couple of questions on ER&D. CVK, you mentioned about surround services with respect to Gen-AI. So for $1 spent on Gen- AI, how much would be the downstream work on surround services like data modernization?

So it's a very big number, Girish. I don't know exactly, but to streamline the data estate , and to create, I think there are also clients who are looking at private Open AI stack, right? Based on NVIDIA's Tesla processor. If they go for that approach, then it's a big investment. Security and others are also there. I think it's like in 25x or something in that range if I want to estimate a very high-level guess. The surround services are where the real opportunity is. Of course, we have to lead with the right propositions from a Gen-AI perspective. I would really encourage all of you to read the TBR report. The way we are driving this is we have our first Gen-AI lab in London where we bring customers, we bring the business stakeholders from our client organization. They come in the morning, they can go back in the evening with five or six practical use cases. That creates a lot of excitement in the business on what is possible. That's how the programs are starting. And we've also launched a new proposition called Co - Force, which is bringing all the support and software development lifecycle optimization. I think that's also seeing traction. These are the two broad areas where we see this growing. The most important thing is you need to bring the Gen-AI capabilities at the tip of the iceberg, and then you can probably get a lot of surround work. What was your question on ER&D?

I had two questions. One, what is your right to win in the auto ER&D side? You've done the ASAP acquisition, but why should a customer come to you compared to going to a pure play auto ER&D player like a KPIT or a Tata Tech? And the second question on ER&D is, HCL Tech probably started off its life as a ER&D player 40 - 45 years back. But that's still just a $2.2 billion business, even after doing multiple acquisitions. So it's not come to the size of, say, the business IT services business. So what is ailing the ER&D business to why it has not grown the level of the Business IT Services side? Just those two questions.

Yes, I have Vijay Guntur, President of ER&D. I would request him to response.

Thank you, Girish. So your first question is on auto segment. Our acquisition strategy of ASAP is twofold. One is to get into the e -mobility space, which is a space that most automotive and even off-highway equipment companies are investing into. So that' s our first rationale, to fill that gap and get access into this market. Second is, most of this business today we have is based out of Germany in ASAP, and the similar capabilities are required by our customers in US, Japan, and other markets. So to expand into other markets, the services that ASAP has. And of course, to our e xisting customers, cross-sell our other services into the business, which is going to take us some time beyond engineering services as well. So that's your first question on automotive and ASAP rationality. The reason we are a full service provider beyond certain specific automotive capabilities is to help transform into the case services that customers require, which is around connected, autonomous, and shared capabilities. The e-mobility space is already there. So that is what is our full service capability that we are building on and that is what is attractive to customers in this space. Your second question. I think we entered this market when it was a very nascent market, and we see significant potential in this space. ER&D spend is expected to grow in the digital space at about 10%, whereas the traditional is expected to grow at about 2% year-on-year. Those are the numbers for growth in this market space. Overall, we see that is an attractive opportunity for us to grow. This market is maturing, so we are there early in this space and very diversified. So we will grow certainly in this space.

Just one more dynamic from a sourcing perspective. ER&D sourcing is not a structured sourcing as in IT services. In IT services, you have a lot of advising firms trying to help clients with a structured sourcing process. In ER&D, it is still nascent. That also kind of mandates that it is more of a land -and-expand strategy rather than a large -scale strategy. So I think that also possibly contributed to slightly lower growth in some periods of time.

Just to add, our long-term growth in ER&D has been at about 10.5%.

Thank you. Ladies and gentlemen, that was our last question. I would now like to hand the conference over to Mr. C. Vijayakumar for closing comments. Over to you, sir.

Thank you. In summary, we had a remarkable quarter. Great growth - 6% sequential growth. Our operating margin performance has been stellar. Our attrition has been the lowest. We've grown well in North America organically, which is the biggest market. We continue to add headcount to fuel the growth in the coming quarters. So we remain optimistic. Even though there is an uncertain demand environment, I think our balanced mix of services, our talent, and our strong industry positioning has reflected in a lot of analyst ranking, including our leading position that we are being positioned in Gen-AI. I do feel confident we will capture some reasonable spend, and we'll continue to maintain our growth momentum. Thank you, everyone, and wishing you a good holiday season and Happy New Year again. Thank you.

Thank you. On behalf of HCL Technologies Limited, that concludes this conference. Thank you all for joining us. You may now disconnect your lines.