Thank you very much, sir. We will now begin the question -and-answer session. Our first question comes from the line of Kumar Rakesh with BNP Paribas. Please go ahead.

Hi, good evening and thank you for taking my question. My first question was around growth. So in this quarter, we saw pretty strong growth delivery driven by Europe and manufacturing as a vertical. Going into the second quarter, especially when you won't have the Comviva seasonality as well impacting, do you see this growth momentum continuing into that quarter and what would be driving that?

Sure, Rakesh. Thanks for the call. Look, I think we're delighted that we've had a very strong quarter in what is seasonally a weaker quarter for us, right? If you recollect, Q1 we typically have negative Comviva seasonality. As we go into Q2, I think we wi ll see the continued ramp- up of the large deals that we have won over the past 12 months, so that should be a strong tailwind for us. We continue to see, like we were seeing in our healthcare business, a positive outlook towards that sector again driven by some of the wins that we've had. The one sort of headwind that we will have is the fact that we had a one -off in our European auto bu siness in this quarter, which will show some signs of slowdown then in Q2. On the whole, we feel we have a healthy order book for the remainder of the year, and barring any sort of unexpected and so far unforeseen macroeconomic developments, we remain confident that the growth momentum that we have set in the first quarter of the year will continue for the remainder of the year and that we will, you know, we will meet or exceed our goal of being ahead of peer average for the full financial year, as we already are in the first quarter of the financial year.

Thanks, Mohit. That's very reassuring. My second question was on the margin side. So in this quarter, we have seen the margin expansion led by SG&A. Earlier, Rohit had spoken about that we expect gross margin to drive the margin. So how much of the gross margin lever is still there in our hand and what kind of exit margin we are targeting to get to?

Yes, so I think on margin, two or three things, right? We typically have seasonality on costs on visa travel in Q1 from Q4 to Q1 perspective, so that comes negative in the gross margin predominantly. Then the Comviva seasonality also comes in there, so that's a negative. And then as I mentioned, the European auto segment where we got accelerated program deliveries, that's dilutive to the gross margin which has caused the negative. And on the SG&A side, as I'd mentioned that our portfolio company consolidation continues and we try to get the benefits there, and that progress continues this quarter as well. I think as we move forward into the next few quarters, I think it will be a mix of both. We will continue to drive gross margin on all the actions that we're delivering on Project Fortius, from fixed price productivity to more utilization from a T&M perspective, as well as continued SG&A benefit on portfolio company consolidation. So it will be a mix of both, but actions are all over to make sure that we are on track for the 15%.

Thanks, Rohit. Any target which you have in mind to exit the year at?

We've not articulated that, but I mean if you look at Q1, we're at 14.4%, and as we move forward incrementally, as I mentioned, we'll keep on improving margins, so it has to be upwards of 15% for the fourth quarter, and we'll see how each quarter progresses from here and now.

Got it. Just one clarification. We have seen strong improvement in DSO and free cash flow generation as well. So how sustainable from here on we should see -- should we expect a similar performance in the coming quarters? And thanks a lot, that's my last question.

Yes, no worries. So Yes, so DSO has been favorable. Usually, Q1 is a seasonally weak quarter from a cash and DSO perspective. This time there were two or three drivers. Operationally, we did do well, that contributed to the performance, but there were some accelerated payments also that came in which will normalize for the next quarter. And similarly, there was some FX benefit on the AR side that contributed, which was negative last time but positive this time. So it's a mix of all of that, so you'll see some normalization come through as you move forward, but as a focus area, and I'd art iculated it earlier also, you know, just the working capital strategy is very important for us and we will continue to make sure on a long-term basis we'll keep on improving, though quarterly seasonality you'll see.

Thanks, team.

Thank you. Our next question comes from the line of Sudh ir with Kotak Mahindra. Please go ahead.

Yes, hi Mohit and team, congrats on a great performance. On the Comms vertical, we have two large deals. So what percentage of the -- or what part of the ramp -up impact was already there in the current quarter, and how does the revenue ramp from these two deals stack up in terms of growth impact in the subsequent quarters?

Look, I think one of these deals will only start to ramp up, has not ramped up in Q1 at all, so we will see the impact in subsequent quarters only. I think as we had shared with you previously, for Comms we had the Comviva seasonality as a negative impact, and the second impact, as Rohit pointed out in his notes, was the case of, you know, of a client where cloud consumption was being routed through us as part of a larger deal, and as part of their takeover by a larger tech company, that cloud consumption is now being sourced directly, right? So I think these were the two headwinds for us coming into Comms for Q1, but despite that, we've delivered, you know, we've delivered a positive year -on-year growth number. I think going forward into the year, we feel positive about the possibilities and t he opportunity in Comms. There is clearly volatility in a large US telecoms client, but despite that, we remain optimistic about Comms being a growth driver for us for the remainder of the year.

Sure, Mohit. And so your earlier guidance of doing better than industry growth, obviously that statement will not have much of a predictive power right now because you are already way ahead of the industry getting into this year. So if you can help us unde rstand that on a year -on-year basis, do you expect the growth to accelerate further from here on, maybe into high single digit for the full year? High single digit or how to think about the full year growth, that would be very helpful.

Sure. So look, like I said, as of now, we see a strong order book, we see strong continued execution on large deals, we see very high NPS scores, we see an expansion of service lines into existing clients, we see strong opportunities, especially in continued strong opportunities in areas like ServiceNow, building out a strong set of AI capabilities. So on the whole, we're very optimistic about our business and what we see, but clearly we're operating in an environment with enormous volatility, so it would be foolhardy of me to give you any specific numbers. But standing where we are, we continue to ha ve confidence that we will have strong execution through the year and like I said we will more than achieve the targets that we've set for ourselves in terms of beating peer average. By how much percentage, that is harder to say at this time.

Fair enough, Mohit. And the European auto account where you have seen accelerated delivery, this is just a normal project which got accelerated or is there any particular one -off in it and if possible, can you quantify the impact?

No, it's not a one -off. It is accelerated delivery within a program. I would ask Rohit to answer the second part of the question.

Yes, it is a normal project which got accelerated, which will have a next quarter pressure for us because it will not be repeated. I would say around a 1 % to 1.3% range would be the impact coming into the next quarter. And as we have the large deal ramp -up which we'd mentioned, Mohit mentioned has not started yet, that will offset that and above and over and above that, the rest of the business needs to continuou sly perform to offset that and grow further for us for the next quarter.

Thanks, Mohit and Rohit. All the very best.

Thank you.

Thank you. The next question co mes from the line of Ankur Rudra with JP Morgan. Please go ahead.

Thank you. So clearly the 1Q performance was very impressive. A few parts in my question, it's a single question only. Were you surprised by any segment or was this a plan and as you look at the performance, can you maybe separate out the demand environment, was it -- has it improved at all or were you just taking more successful at taking share and the same comment if you can make for the rest of the year, your confidence of sustaining this comes from your own execution or you think demand is also improving? Thanks.

Sure. So look, I think the first part of your question was about the – sorry Ankur I completed blank out in the first part of your question was that about the European auto.

Were you surprised by the performance or was this a plan all along?

No, I think look clearly the quarter turned out to be stronger than we were originally expecting and I think part of it is the acceleration of the delivery for the European auto piece that we spoke about, so that was a positive surprise coming into the quarter. This is a seasonally weak quarter for us, but we were expecting a strong performance, but yes it did come out to be higher than what we expected. For the remainder of the year, like I said now we're getting into seasonally stronger quarters for us and we're also going to be delivering on the order book that we have closed in the previous year, so we feel pretty good about the opportunities in front of us. Now, as you talk about the total demand environment and we did a significant amount of analysis over the past 12 months. So what we're seeing is we are seeing a little bit of a shift. I believe that the core which is relatively stable, but the demands are changing in the sense that the demands from an application development perspective are more from a modernization perspective. From a platform enterprise applications perspective where there is a growing fear of a SaaS eclipse, we're not really seeing that. We are seeing the platform or the enterprise application demand actually strengthening, specifically seeing strong demand in areas like ServiceNow and SAP, but also in Salesforce. Seeing a very strong demand as you would ex pect in the data and AI family. S o whether it's cloud AI services or it's data engineering, Databricks, Snowflake or on the GenAI frameworks. Also seeing, given the fact that we are building out capabilities strongly in that sector on the sector-specific or the vertical packages like a Guidewire or a Temenos or a LabWare LIMS. Areas where we are seeing challenges to demand are sort of as you would expect in the manual testing area in your traditional big data area, in standalone e -commerce, in legacy CRM and legacy infra admin. So I would feel that the demand situation is not ca tastrophic. Clearly, there is a ton of competition out and our competition at times is doing irrational things, but aside from that we remain as they would say cautiously optimistic about the demand environment for the rest of the year and our ability to execute.

Awesome. Thank you so much. Best of luck.

Thank you, Ankur.

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

Yes, thank you. Hey, so given your growth acceleration and the positive growth that you have in each of your verticals, I'd like to ask if you could if you could just pinpoint what are the main enablers that have allowed you to achieve that improved growth and the breadth of growth across the verticals? And now that has improved relative growth in the sector has been enabled, do you have a key next step in your strategy to try to extend and add to that? Thank you.

Sure. So look, Rod, I think there was a very meaningful strategy that we'd laid out at the start of the transformation journey itself. And it was predicated on the need to build deep domain vertical depth across the sectors and it was not just a sectoral question. Look in sectors like telecom, we have depth in your traditional IT which is OSS, BSS, but also in networks and we have our own software packages. So we pretty much cover the entire ground there. In areas like financial services where we are smaller than our peers, we clearly identified sub -verticals like payments, like wealth, like insurance and like core systems where we wanted to build that very deep vertical expertise, hire a ton of industry experts and then start building AI agentic AI frameworks across processes that we feel were amenable to automation. We did the same thing in healthcare where we identified areas of strength in life sciences and in the provider space. In manufacturing, we opened up aerospace in a very significant way and it's been a huge growth driver for us, which has compensated for th e somewhat slower movement that we've seen on the auto side. So through Sham Arora our CTO, we've been building very strong horizontal capabilities, very strong tooling for our teams, supplemented by the work in our Makers Lab. But I feel it is the vertical piece that is really bringing the sort of the spe cial sauce to our capabilities and I'll give you an example. For one of our telco clients , we're building out a small language model, but then the client also wanted us to fit a harness onto the small language model so that it could drive agent-based action. Our ability to understand the process flows within telecom, our capabilities to build a small language model from scratch have really allowed us to marry the two in a very seamless way, which we believe is a great differentiator. All of this combined with the architecture that we've created for the organization that allows us to really act with agility, I feel is giving us the lift as is shown in our significantly differentiated growth in this quarter. I think the future pivot will be to dig deeper into marrying the AI capabilities onto the domain capabilities because I feel that the real value for clients will not come from model -specific changes, the real value for clients will come from deep process k nowledge and deep industry knowledge and that's what we look to do is to combine our core technical and engineering skills with deep vertical expertise. And we will continue driving deeper and deeper. For instance, our BFSI teams have created a remarkable set of agentic solutions for wealth management that can give a very quantifiable degree of savings and growth to our clients and that's the direction we'r e going to be headed towards in all of our vertical businesses.

That's helpful. I'll go back in the queue. Thanks.

Thank you. The next question is from the line of Kawaljeet Saluja with Kotak Securities. Please go ahead.

Hey, hi, fantastic performance team, congratulations. Just a couple of questions. First, actually both questions are for Mohit. Mohit, the first question is that when you joined TechM, you mentioned that the pricing of Tech Mahindra is comparable to peers, implying potential of high teens margins. Does that assessment hold true even today, and if yes, you know, have you thought through as to how you would use the surplus margin in case you're able to execute well over the coming quarters? That's the first question.

Okay, super. So you want to ask all your questions now or should I go through one by one?

Okay, the second question is that I think on one of the questions of Ankur's question, you did mention that the competition is irrational. Now without naming any competitor, can you give flavors of irrationality so that we can understand and appreciate the industry perspective a little bit better?

Sure. So look, first on the pricing piece, right? Hopefully, Kawal, you consider 15% also as high teens because then I can reassure you we will hit that number for the year. As you know, we have been consistently growing our margin over the past 11 quarters now. We continue to have a number of operating and pricing levers that will allow us to hit that number and we have been incredibly disciplined in terms of our deals. And so we absolutely make sure that all of the deals are at least in the long term accretive to our margins and we will continue that discipline. As you know, we have also been investing. We've been investing in talent, we've been investing in IP, we've been investing in software licenses and we will continue to do that and we will calibrate that based on where we see the growth opportunities. For instance, in my opening remarks, I'd spoken about the Comm Center of Excellence, but when you have a chance to visit Hyderabad next, you will also see our learning center of experience, you will see our engineering center of excellence and you will get to see our retail CPG center of excellence. So we're investing very heavily in these showcases that showcase our technology, our use cases and our partner technologies. So we will calibrate the level of investments according to where we see the most opportunity. For the year, I think 15 is a number we're comfortable wi th, and obviously for beyond FY27, we will have to spell out a path. I feel that we continue to remain disciplined in terms of our pricing, and so that gives us the optionality in the future about whether we want to -- how much we want to focus on expanding margins and how much we want to focus on further deepening capabilities. On your second question about competitor irrationality, I'll give you a couple of examples, right? I think one example is obviously the level of productivity baked into, 5 to 7 year deals. Now, obviously, we want to make sure that we are aggressive, but getting into a 70%, 80% productivity benefit over a 5-year deal, I feel is getting into productivity benefits that are not visible today without very significant process or system changes by the client, so that is where we would hold back. I think a second area is on the infrastructure side. As you know, memory prices and chip prices are increasing significantly, and we are not willing to guarantee those for the customer, right? If you're seeing a pricing inflation of 20% year-on-year, to tell clients that you will hold the price for a 3 or 5-year deal, we think is a forward call which doesn't really make sense. So I think these are two examples of irrationality where we have stepped back.

Okay, noted. Looks like deal values are getting an Ozempic treatment. Fantastic. Thank you so much.

Thank you, Kawal.

Thank you. The next question is from the line of Nitin Padmanabhan with Investec. Please go ahead.

Yes, hi, good evening. Congrats on a very solid quarter. Had a couple. So one is there are a couple of puts and takes both on comms and manufacturing as we get into the following quarter. Just wanted your thoughts on do you believe that both these verticals can actually grow, or do you think we could see declines? That's the first one. The second is when are we sort of planning wage increases? And finally, Mohit, are you seeing any instances of delays on ramp-ups due to the macro that you would worry about incrementally, or is it just business as usual at the moment?

Okay. So let me answer your first question. We fully expect to see growth in comms and manufacturing to continue. In manufacturing, like we said, a portion of the year-on-year growth came from the fact that we were able to deliver early for our client project in Europe, but even if you take that out, we remain optimistic about our ability to drive growth in manufacturing on a year-on-year basis. Obviously, the quarter-on-quarter piece is attributable to an increase and that will pull back. For comms, it's the other way around. We had growth, but we had a relatively softer quarter because of one is the Comviva seasonality and the second, like I said, is a cloud pass -through within a complex project that got pulled back by a client, which will go away in Q2. So I remain optimistic about both comms and manufacturing growing through the remainder of the year, barring obviously any unforeseen surprises. As far as the wage piece is concerned, we expect to be able to announce it effective Q2, obviously in a phased fashion which we will be announcing, to our employees in the days to come, so that will be effective, it'll start becoming effective Q2 in a phased fashion. On signs of delays in contract signing, candidly, I've seen one or two examples where clients have been, if it's a multi -year contract, there have been questions about should we do this in - house, is this really very strategic and should we outsource it, what will we do with the AI piece, are we getting enough benefits? But candidly, it's not very different from what I used to see, in my 25-plus years in this industry. So I would say I'm not seeing an outsized or a very large level of client delays or cancellations, and hopefully this is proven by our own large deal track record over the past three quarters.

Anything on ramp-ups of deals that you've already won that's getting pushed out that you would worry you?

No, nothing out of the ordinary, Nitin.

Perfect. That's very helpful. Thank you so much and all the very best.

Thank you, Nitin.

Thank you. Our next question comes from the line of Surendra Goyal with Citi. Please go ahead.

Yes, good evening and thank you for the opportunity. Couple of questions. Firstly, on the IT services headcount, it's down 7% year -over-year. So based on the plans, do you see it kind of continuing to decline further or are you at a point where this may kind of need to start going up?

Sure. So look, I think look, IT services revenues has continued to go up year -on-year. As you know, as we have shared in the past as well, our productivity for our fixed price engagements was below our expectations, and so we've driven with the help of the new AI tooling a higher level of productivity, which has meant lower headcount. At times, that headcount has therefore been repurposed to other engagements, either FP or T&M, and that has meant that we have not had the need to be able to backfill as much as we traditionally would have. I believe we're running a healthy utilization, bu t we also see a good, trajectory for revenue growth for the remainder of the year, and I assume that that will mean hiring in the remainder of the year absolutely, which will be a mix of fresh talent and experienced talent, so that should -- that should absolutely happen, Surendra. The decline so far, which is not a revenue decline, just headcount decline, has been driven by our ability to drive greater efficiencies in our very large fixed price portfolio.

Thanks. And just one clarification for Rohit. Rohit, on the SG&A, is there any one-off provision reversal, bad debt related provision reversal, anything to call out which could impact going forward?

No, nothing as a one-timer in this quarter that will impact next time.

Sure. Thank you so much.

Thank you.

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

Yes, thanks for the chance and thank you, congratulations on a very strong performance. Just first question, Mohit, in terms of this is a consistently third quarter in a row where the deal TCV is above 1 billion and which is in line with what you have been indicating earlier. But now we are near to the aspirational margin of 15%, is it fair to assume the TCV has an upwards scope in the coming quarters because discipline approach on the margin, t hat challenge is reducing quarter-on-quarter?

Thanks, Sandeep. Look, I think, as far as TCV is concerned, TCV is also feeding through to growth, and we're very happy about that. We will continue to be very competitive in the deals where we think it makes long -term economic sense for us. But as you kno w, for large deals specifically, right, it's quite a binary outcome, it's a zero or one, and our ability to forecast beyond let's say a quarter or two, is quite limited. We're very confident that our capabilities on the large deals front have built up quite significantly. Our pipeline looks quite strong as of now, but I candidly don't know what it would look like 2 or 3 quarters down the line, so it's hard for me to forecast. We wi ll continue to stay aggressive. And on the margin point, all I'll say is while we're very happy with the margin growth that we've been able to deliver, I'm also mindful of the fact that we have the wage bill coming up in this quarter, we will certainly have, some productivity pressures from an AI perspective, and we still have to deliver the 15% margin, right? So we're not taking that for granted and losing our discipline on large deals and on profitable growth.

Okay. And just the last question, Rohit, I think we have done a post -mortem of many of the acquired entities and wherever required, we have taken a control or started liquidating. But if I look at the IT headcount mix on the offshore, it has been going dow n on a Y-o-Y basis. So this is still a lever which we have not fully utilized and can be a big margin driver ahead?

Yes, so I think you're talking about the pyramid, is that right?

Yes, IT headcount mix, onsite-offshore. Yes.

Onsite-offshore. So look, I think as you know, we've signed up a lot of large new deals, and some of these new deals have a rebadge component as well. So I think that will limit very significant changes because obviously for the large deals, initially the headcount ramp-up is much higher onsite and then over time you're able to transition some of that work offshore. So I feel our ability to pull this lever will be limited also, in response to a question that was asked earlier by Ankur, I'd shared the fact that we are seeing, strong momentum and opportunities on the enterprise application side, an SAP, a ServiceNow, or even a Salesforce, and as you know, these are more onsite-heavy programs of work, right? So that is the other aspect there.

The strength , Sandeep, will continue, right, as we ramp up on the large deals that we've announced, that will have more onsite portion as well. I think the trend will continue as we build in more maturity stage of execution of these deals, we'll see a reduction, but not in this year.

Thank you. Ladies and gentlemen, we will now take one last question which will be from the line of Vibhor Singhal with Nuvama Equities. Please go ahead.

Yes, hi, thanks for taking my question and congrats team for a solid quarter. Mohit, just one question from my side. In the manufacturing vertical, I think a large part of our manufacturing vertical still pertains to the auto segment. We are hearing a lot of commentary by peers about weakness in the auto segment, especially in US and Europe, especially on their EV pr ograms and other parts as well. How is that playing out for us? Are we also seeing that kind of a weakness, and despite that, there is just strength that we have seen in the manufacturing vertical? Are we not really present in those parts where the typical cut down in spend or weakness i s happening, and how do you see vertical playing this vertical playing out given the auto segment itself? Any colo r on that would be very helpful?

Sure. So I think it's a little bit nuanced. So first of all, we look at industrial manufacturing, so we look at auto and aerospace sort of -- together from a manufacturing perspective. Now, obviously in aerospace, there has been an uptick in demand. We're especially seeing an uptick in the IT function but also in the engineering business function. In auto, customers are looking for AI for cost reduction, they're looking for faster turnaround of system changes, which is a little bit of a downer. But on the whole, I think, some of our auto customers actually we had a significant hits last year, which we had called out if you remember our manufacturing growth last year had stalled because of auto cutbacks. Some of those we see coming back, so it's a little bit of a nuanced picture, right? We are not certainly seeing the same level of stress that some of our other competitors have called out. There is some pressure certainly, there is a huge ask of productivi ty, but in some cases, this has also meant consolidation opportunities. In some other cases, we have seen growth, for instance, while the auto sector is a little bit challenged, auto finance has actually shown reasonable resilience, right? So because we have a reasonably diversified portfolio, we've been able to manage through , and if I look at the combination of aerospace and auto together, then certainly feel positive about it.

Got it, got it. Great. Thanks for taking my question and wish you all the best.

Thank you, Vibhor.

Thank you. I would now like to hand the conference over to the management for closing comments. Over to you, gentlemen.

Well, thank you so much. Thank you all for making time for us today. Again, just to reiterate, very pleased about the very strong start that we've had to financial year '27 with really strong growth, strong large deal performance, strong addition of large clients, strong margin performance that has been aided by a strong team, strong, customer sa tisfaction and NPS performance. And we're very confident that in the last year of our transformation, these trends will continue and that we will continue to deliver on all the promises that we had made to all our investors and stakeholders. And thank you all for your support again.

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