Thank you very much. We will now begin the question -and-answer session. The first question is from the line of Kumar Rakesh from BNP Paribas. Please go ahead.

Hi, good evening. Thank you for taking my question. Best wishes CP. It has been a pleasure interacting with you over the years. My first question was, Mohit, you talked about the reorganization and the focus that it brings on the a gility as well as doubling down on the client accounts. From a vertical and service line perspective, what the new reorganization focus would be driving towards?

Sure. So I think from a service line perspective, we are very focused on three th ings. We are very focused on resilience, so ensuring that the service quality that we provide to our customers does not deteriorate. That is something that Tech M has been known for and I want to make sure that we retain that. It is also very focused on service line innovation. We want to make sure that each and every single service line where we have capabilities is in the leader quadrant. And finally, it is very focused on improving the economics of the business, right . So, these are the three objectives from our delivery perspective. From a sales perspective, the reorganization will help drive greater customer intimacy. It will help drive a greater focus on must -have accounts and on our largest customers. And I believe it positions us better from a large deal perspective. By bringing together our telecom and our non -telecom businesses in markets like Europe and APJ, I believe it will give us greater heft. And by moving towards a vertical model within our largest geography, which is the Americas, I feel it will give us a greater degree of domain expertise. So these are some of the objectives that we are looking to drive from the reorganization. But like I said, it will help us improve the economics of our business and drive greater revenue growth.

Thanks, Mohit, for that. A request, if you could have a session arranged in which we can go a bit detail around the re -org and your plans over the next two, three years, at a time convenient to you, would be really helpful? My second question was for Rohit. So you talked about the business rationalization, which continued in this quarter as well. Once we are done with that, and you said that we'll have some of it in the third quarter as well. Once we are done with that, how should we assess the benef it of this rationalization exercise? Will the growth for the same business should be better or the margin profile improves or our DSOs improve? So from a tangible perspective, where should we be looking at the benefit out of this exercise?

Yes, it's a mix of all of that you mentioned. I think first it clarifies from a strategy perspective where we want to spend time. That's focusing on what matters and making sure the managerial bandwidth is all aligned way give us the best suit us so that’s first benefit. Second is, when you look at the risk and reward to the portfolio we're rationalizing. It also beyond the margin benefit that we naturally see the next year based on these actions. We also see what the call we are also taking is based on the inherent risk in some of these contracts. So while the margin on the surface in some cases might look okay, but from a risk perspective that doesn't align with what we want to do as we move forward. So I think it's a mix of all of that. Benefit is going to be better risk management profile, better margins as we go to the next year, and better cash flow cycle that's on the financial side. And then from a managerial perspective, more focus on how we will unlock some value.

Thank you. The next question is from the line of Sudhir Guntupalli from Kotak Mahindra Asset Management. Please go ahead.

CP and Mohit, all the very best to most of you on your new era. Mohit, you have been with the company for almost four, five months now. When you an alyze the portfolio and conceptualize the new organization structure, what is the growth and profitability level that you are targeting over the medium term? Not asking for guidance, but if you can give a color on what your medium term aspirations are, that will be helpful?

Sure. So look, I think a couple of things. One is that we are very much still in transition mode. It is now more than halfway through the transition period, but I take over the reins from CP only on the 20th of December. Like I shared earlier in the call, we have put together a new organization structure. We are also redefining KPIs. We are changing many of the policies within the organization. And we are looking to get the team in the new organization structure to think about the numbers that we hope to deliver in the future. So to that end, I think we will be ready sometime in April to come to you with three sets of plans. There is a plan for margins that we will be sharing with you , which is what do we think is the sustainable medium to long-term margins from a TechM perspective, how we're thinking about re-shaping our pyramid, how are we thinking about the drivers from an automation perspective, from a subcon perspective, from a integration of the acquired en tities perspective. We'll be bringing a plan for revenue. How are we thinking about our geo mix, our vertical mix, account growth strategies, our account hunting strategies our, our large deal strategies, our new service line strategies. And we'll be bringing a plan for the organization, right? How are we thinking about the learning within the organization, tighter alignment with the M&M group, or we thinking about how we work with our ecosystem of partners and influencers. So, these are the plants that we'll be coming back to you with but in April. And hopefully, between January and April, we can provide you greater color. But it's way too early for me to be able to provide you with a short-term guidance on margins. But if you look at the org structure we 've announced and you look at the focus that we have on service and innovation in our margins, hopefully, it gives you a sense of the way forward.

Got it, Mohit. Thanks and all the very best.

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

Yes, thanks for the opportunity. Rohit, the first question is the rationalization of business has started way back in FY'23. And it looks like it has been restarted again starting from this quarter, which may continue in the third quarter as well. But it doesn't actually yield any results in terms of the margins. When do you expect some benefits in the margin? It may start from the fourth quarter of this financial year or next financial year as a whole. And also a question to Mohit. In terms of whatever in your plan which you have announced, I do agree the more details would be given in the month of April. But can you throw some color, what are your aspirations in terms of the growth and minimum level of margins which you are comfortable with such a big reform or reset which we are planning in the organization?

Yes. So, Sandeep, maybe I'll take the margins one first. So, if you think about what we st arted action on, we executed and communicated an action on an annualized basis of around $60 million. So, when you look at $60 million from a low margin perspective and if you assume 0% versus a portfolio average of 15, that gives you an annualized basis of $9 million benefit, right. So, it's not, I mean, from a significance perspective, quantum wise, that doesn't have doesn’t give you the plan at a portfolio level. But I think from our perspective, it all is adding up . And that's what we clearly articulated that we'll continue this exercise. So, hence, with Mohit coming in, I think we, as he rightly mentioned, that we'll be coming back to you with a strategic plan in April. It's a part of that where we're defining our core and taking action on the non -core as we identified. And the action of the non -core could be seizing that business. Some of the possibility could be that the season is not an optionality given the contract commitments. Hence, we let it run off as a separate unit, right, with a different f ocus there. And then third is the divestment area. So, I think we are continuing that with a refreshed look with Mohit coming in. And we've done some discreet measures this quarter, which will definitely help in margins next year. And as I've qualified two or three benefits on both cash flow margins and managerial bandwidth, and we'll continue to drive that towards Q3 also.

And just to add to that, right, look, I think the way that we're thinking about the reorganization and the new organizatio n, right, is first we have to define the organization structure. Then we have to have the sort of the policies, the KPIs, the KRAs that underpin this new organization structure. Then we have to have these teams come back together and think about, what we'r e going to do from a revenue acceleration perspective, what we're going to do from an organizational capability perspective and from a margin perspective. Once these plans have been built, they have to be tested internally. And only then do I want to share them with you. Otherwise, these will not be credible plans, right. So, please understand when I say that, we are using this time to build a credible plan. We already have an organization structure that we're going to live with for many, many years. To bu ild these plans, to test these plans thoroughly before we bring them to you so that it has a very high degree of credibility when you receive them.

Okay. Just a follow -up Mohit. The inherent nature of Tech Mahindra business is 40% of the revenue comes out of communication, which is more cyclical. So how do you deal with that? Because there has been a hurdle for Tech Mahindra in terms of its growth not in line with the industry because of the portfolio mix, which is more skewed towards communic ation, which is more cyclical. So how we will plan to deal with that? Mohit Joshi Sure. While telecom I agree is a cyclical vertical, but telecom has been a good vertical from a TechM perspective and many of the capabilities that we have built in telecom, we are taking to other sectors as well through our network services service line. Also, telecom is now less than 40% of our overall revenue. We also have deep inherent strengths in manufacturing because of the M&M association. And because of the very long presence we've had in the auto, aero and the discrete manufacturing space. We also have emerging strength in BFSI, healthcare. But this is the exact portfolio mix that we're thinking about and testing it to make sure that in different sort of scenarios, right, high growth, medium growth, no growth, we're still able to come back to you with a credible plan on margins. So that's what we're working on. I do want to underscore though that there is no intention for us to deprioritize our telecom or our manufacturing heritage. I absolutely want to make sure that it is the centrepiece of the new TechM as well.

Yes, Sandeep, that's the intent. I mean, but some of these actions you would appreciate are dependent on customer interactions and other dependencies. So while the intent is in that direction, but we'll keep you posted, how we pace on that so that you're reliant on anything that changes there versus the current assumption.

Okay. Thanks, and all the best.

Thank you.

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

Yes. Hi. Good evening. Thanks for the opportunity. Rohit, I had a question on the absolute employee costs. I think over the last four quarters on an absolute basis, this is up almost at a 3.5% CQGR. Well, revenues have d eclined. Even the absolute employee count has also gone down. So if you could give some context there, that would be very helpful. The second is your thoughts on telecom. Do you think it's sort of is bottoming out? And how you're looking at it? How should we think about it as we look into the second half and going further? Those are the two questions.

As of our employee cost perspective, I think we did wage hike a little bit later last year. So more towards Q2-Q3 cycle. And this year we've done the wage hike Q1-Q2 cycle with most of it in Q1. I think from an inherent increase perspective between the last three -odd quarters, that's showing as two wage cycle impact. So that's causing an increase there. We are in the current quarter where the impact is minimal. We've also started as a part of a long-term strategy, investing in freshers from a long-term view of pyramid correction. So that while not a big cost item, will continue as a long -term measure for us, which will be an investment for a few quarters before we start seeing the return there. So that's kind of the drivers there in terms of employee cost increase. From a telecom perspective, I don't know, Mohit, if you want to add based on the discussions you've had with the customers, I think maybe a quick view is, when we look at our customer discussions and the geographies we are operating in, we don't see a dramatic uptick into the second half versus the first. If you look at the global results of majors and telecom players also are not that favourable. And what we try to work on is what Mohit mentioned, making sure that we use this opportunity to get the organization structure in the right direction from a long -term perspective so that we leverage that domain expertise which we truly believe in from a telecom perspective. Mohit, if you want to add anything?

I think, we do have deep and exceptional capabilities from a telecom perspective. So as and when the sector bounces back, I think we will have the ability to grow with the sector. At the same time, I'm also quite keen that we are all quite keen that we don't do any suboptimal deals that we don’t -- this is not the time for us to be doing crazy deals and I want us to avoid that temptation.

Sure. Just one last question for Mohit, if I may. Is that over the years we have done a lot of acquisitions and do you see that a lot of these acquisitions that have been done, that the cross - sell opportunities to multiple customers across TechM, has that sort of been embedded or that's something which is sort of a low-hanging fruit that can be sort of executed on as we go forward?

I don't think, its low-hanging fruit. I do think that some of the sort of opportunities of cross-sell have been utilized, but certainl y, there is the possibility of doing more. For instance, we have made acquisitions of a digital engineering services company with strong capabilities in Eastern Europe. Now, digital engineering clearly is a skill in great demand the world over and across industries. So, Atul and I will be working very closely to see how we are able to grow our engineering business on the back of this and other acquisitions. There is also some acquisitions that we have in the design space where there is the opportunity to take that capability across various verticals and across various geos. So, there is certainly the possibility to optimize the acquired entities from a margin perspective and from a cross-sell perspective, but I don't think that there is any particularly low-hanging fruit there.

Thank you. The next question is from the line of Ravi Menon from Macquarie.

Hi, thank you. CP, it's great seeing you and your team at transform Tech Mahindra. Best of luck for your next adventure. You spoke of how 5G-related spending has been a little slow, but given how 5G has failed to uplift consumer output in all markets, and we've also not seen any killer enterprise use case come up, can we even expect 5G-related spend to pick-up in the near future?

Yes, this is Mohit here. I think, look, from a 5G perspective, I don't think that there is any near- term expectation that there will be a significant pickup in demand. I think while the telcos have invested quite aggressively in 5G historicall y, there is a little bit of a pullback now, and there are use cases that we have built with telcos that are labs that we have established, and we are very hopeful that in the medium to long run, whether it's manufacturing or it's travel, we will start to see more 5G use cases, but there isn't a near-term bounce that is visible.

Thank you, Mohit. And while it's great to see the 99% pay-out to shareholders of stuff, I mean, with 37% of the revenue coming from communications that I just spoke, we are not likely to see an immediate or near -term uptick. Wouldn't the turnaround be aided by some inorganic initiatives in verticals like BFSI, where we are sub-scaling with the peers?

Yes, so again, like I said, this is the plan for revenue tha t we are building out, and we hope to come back to you with that in April. You will be mindful of the fact that I still haven't taken over as the CEO, so it's too early to be sharing concrete plans, and these plans also have to be, built and tested, right, before they are shared. But we will certainly come back to you, and it is very much on our mind. Like I said, our plan for revenue will include things like how we're thinking about the vertical mix, how we're thinking about the geo mix, how we're thinking about our service lines. All of these will be in our plan.

Right. So we shouldn't take the current capital allocation as kind of, what is, as the norm, right?

Yes. No, certainly. I mean, we are looking at reshaping from a margin p erspective, from a revenue perspective, and from an organization perspective.

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

Hi. Thanks for taking my question. Firstly, all the best to CP for future. Two questions. On the margin profile, I understand that you will be sharing your plan in April, but just trying to understand based on your experience so far, what are the key levers that will help you to bridge that gap and attain the steady state margins?

Well, I think the levers are pretty much the same that you would have for any player in our space, right? So there is the pyramid that we're looking at, and therefore, for the pyramid specifically, what is our average resource cost both offshore and in all the geographies in which we operate. We are looking at a service line mix because certain service lines like digital product engineering, for instance, have a higher realization than service assurance, for instance. We are looking at the acquired entities and the profitability of these acquired entities. We are looking at the productivity that we can drive in our fixed price portfolio using automation. We are looking at our head to tail ratio or the span of control that we have within the organization. We are looking at the level of subcontracting that we have. These are the broad areas we are looking at. To be candid, I don't think that there is very much from an SG&A perspective, but these are the broad lines we ar e looking at when we talk about the margin expansion program. We will be sharing the details with you as we build and test our plan.

All right. Last question. On the large deals, can you specify what initiatives are you taking and what would be the sweet spot for Tech Mahindra? Thank you.

Yes, look, so from a large deal perspective, first of all, I just want to underscore that TechM actually has been extremely successful in large deals historically, right? It was one of the firs t companies in the space to actually do $1 billion deals well ahead of many of our larger peers. So there is a lot of expertise within TechM in commercially structuring, but also in delivering successfully on large deals, right? We have created a large deals capability within each of the SBUs. Because the SBUs at the end of the day manage the accounts. We are also looking at creating a large deal capacity centrally, and the central large deal capacity will essentially be deal directors and deal advisors, bu ilding relationships with the various deal advisors, but also identifying patterns, right? Are these digital transformation deals? Are these cost takeout deals? Are these Gen AI-led deals? Are these cloud and infrastructure deals? So that we can then take these patterns across multiple deals to multiple clients. So that is how we are thinking about large deals. I want to make sure that while obviously we do our best to win large deals that we do not go that at the end of the day we have a certain margin aspiration that we want to build, and so therefore we will be guided by that as we shape our large deals structure.

Thank you.

Thank you. We have the next question from the line of Rishi Jhunjhunwala from IIFL Institutional Equities. Please go ahead.

Yes, thanks for the opportunity. Just a couple of questions. Firstly, if you look at our top five clients' revenues, right, in the last six quarters they are down almost 30%. So just wanted to understand, what is the nature of ram p down given that these were being the top five clients would be large and fairly long relationships that we would have had. And I'm assuming, the budgets wouldn't be down by that amount. So have we lost wallet share there?

Yes, so a few impacts, Rishi. One, the rationalization that we did was within the top customers where we had a particular area that was non -strategic, non-core, agreed with the c ustomer and we kind of took it out. So that was kind of non -value-added for them and for us. So it's kind of a pass through, if you will. So that caused a 15 million a quarter impact, right . So that was part of the top list. Second, we see, as you know, a lot of our top customers are also from Com ms space. So there we mentioned in our narrative over the last three quarters, four quarters that one of our top customers is going through a downward spend pattern and that has impacted us negatively. So that's the second driver that's caused a reduction in the top account. And then, between, if you just kind of normalize these two and where we can share specific walk with you, outside of that is going to be all in average with the discretionary spend that we've seen going on.

Understood. And just secondly on the margin side, right? So the last two quarters have seen about 650 bps of margin decline. Just if you can quantify, how much of that was purely led by all the restructuring efforts that you would have done either on the customer or on the employee side? Any kind of visibility in terms of reversal of those in the time period in which you can. And I'm just talking about these one-off expenses, right? So I'm assuming there should be some visibility around that. That will help. Thank you.

Yes, sure. So I think from a last quarter perspective, we reported a number of 6.8%. In that, we had broadly 2% one -time impact due to mainly due to a customer bankruptcy, right . And that we had to take a charge. So that gives you a normalized view closer to, 8.7% -8.8% where we were last quarter. And from there, based on the operational dropping scene and utilization revenue decline versus not equivalent cost out in the time frame we had and some pa rtial VP reinstatement which we had in the previous quarter, we've seen a normalized margin dip down to 7.34%, right? And then this quarter, if you add back the exceptional items, so then we've had the exceptional items, right? So you take that out, the re ported margin is 4.7%. The exceptional items in the quarter is around 260 basis points. So take, 260 basis points for this quarter and close to 200 basis points last quarter. So those have been the exceptional items that we've seen in the last two quarters.

So I'm assuming these two should ideally be reversed in the next two quarters, right?

So these are, look at the, say for example, customer, when you say reverse, it will get normalized. Yes, it won't repeat. But when we look at Q3, as I mentioned, our portfolio identification of the core and exiting non-core will continue towards Q3. That's the current plan. And since there are a lot of dependencies on multiple stakeholders on executing those actions, there could be some one month up and down. That I mentioned, we'll keep you posted on how that goes. But right now, the intention is to close all our portfolio clarity actions by Q3.

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

Sir, thank you for the opportunity. Just while some of my questions have already been answered, I'm just trying to understand, what are you seeing from your customer portfolio in terms of verticals like financial services and manufacturing?

Sure. So look, manufacturing is a very significant vertical for us. And I do feel that, we have an incredible right to win. It's also a sector that is being transformed quite dramatically by everything from 5G to IoT to automatio n in the plant to everything that is happening from a digital perspective on the sales front. So it is a sector that has historically been underinvested in technology. But there's an enormous amount of technology going in, whether it's from the IT perspective or from an engineering perspective or from a design perspective. And I do feel given the heritage of the Mahindra Group, we have a unique right to win over here. This is also a sector where despite the slowdown and despite the downturn, we have seen growth across Europe and across the US. So I'm very bullish about our long -term opportunities in this sector, especially as we're tying more closely with the Mahindra Group as well. On the BFSI side, our presence is a little bit more scattered. We have a dee p presence in insurance in the US and in Europe, and that is something that we will look to build. We've also had an incredible amount of success in insurance across the Americas and Europe. On the banking side, our presence is more limited. But again, I d o feel that, we have a right to win in this sector, given the fact that, we have expertise across multiple areas like digital engineering for financial products, like design through the BORN acquisition, like a couple of very targeted vertical BPS capabili ties we have, for instance, in mortgages in Europe, but also the relationships that we have built up with financial institutions through the Group. So I do feel that while it will be a longer climb in financial services, because we are not the entrenched leader in this segment. I do feel that there will be significant opportunities, because banks and insurers and asset managers are constantly looking to refresh their partners. And I do feel that, we have the opportunity to dig in deeper into our existing clients and to get new clients.

Sure. And one strategy question, like this year we've had the restructuring cost, the transition that's happening in the organization, but should some of these efforts continue into next year as well, or next year should be a year of margin expansion, especially given the fact that we've had much higher margin aspirations in the past, but we've always disappointed on that front. Just trying to understand if FY '25 should be a year of margin improvement or not?

Yes, absolutely. For sure.

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

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

Yes. Hi. Thanks for taking my question. So, Rohit, my question is on the margins again. Two parts to the margin breakup that you gave. You mentioned there was a 200 basis point excess item last quarter. This was related to a client bankruptcy and around 260 basis point in thi s quarter. So what was this 260 basis point in this quarter related to? Is it that we are shutting down some subsidiaries? Is it some severance packages that we are giving or some penalty that we are paying for some contract termination? It will be very helpful if we could just broadly classify, if not with the numbers, just with the help us to what exactly does this 260 basis point compose of? And then I'll have a follow-up question.

Yes, sure. So it's just some of that that you mentioned. It is broadly, we decided not to take any more business in certain category of geographies, type of customers slash business line. So that's one where we've said no, to that business or said strategically doesn't fit in. We've closed contracts based on the similar outline where they don't fit us from a long-term perspective, taking one-time closure impacts. And similar to that where we could terminate, we've taken those terminations as well. So that's where it is. And in some cases, we've also isolated those as separate runoff portfolio. So those are the impacts we've taken in the quarter.

And would it also have some severance pay of maybe people who have left or have been asked to leave?

Not right now in the current action s et. As we continue to outline our focus areas moving forward, there are areas where we think we don't have a viable divestment case. And we stop those businesses and have some restructuring or severance impact. That could be a part of the next step of action.

Next couple of quarters maybe?

No, I mean trying to get it towards the next quarter. But as I mentioned, given the dependencies, regulatory, other aspects, if there's an overflow, we let that communication flow through the event.

Got it. And my second question is that, this takes care of the one -time impact in Q1 and Q2. Now, adjusting for that, our margins in this quarter is 7.3%, which is almost 400 basis points down in the last couple of quarters. So what is the reason for this core margins, excluding the exceptional items, to be down by 400 basis points?

Yes, revenue is definitely under pressure, right? So that continues to be a big driver, which is the number one. Second, we've had, while we' ve taken a call from a long -term perspective to continue our regular wage cycle, so that's also added to a cost from a Q1-Q2 perspective. And when we look at actions from an operational perspective, while some of them have been executed well, you can see t hat in the sub -con item, over the last three quarters, four quarters, we've continued to play that out. The headwind that we've seen on some of these items have over kind of led to a gap versus the improvement that's visible, right? So that's kind of broad ly where it is. As we look into the future, into the second half, our view is the revenue will continue to be under pressure while the deal wins have come into momentum. So hence our cost and relevant actions have to be in line with that. And also, as we t hink about the next year and the baseline around the core business that we continue to maintain, what's going to be the right set of growth numbers, and in accordance with that, our cost alignment to make those actions happen. And that's the plan that we will share with you as we move forward.

Got it. Great. Thank you so much for taking my questions and wish you all the best.

Thank you. Ladies and gentlemen, we will take that as the last question for today. I would now like to ha nd the conference over to Mr. Mohit Joshi, CEO Designate, for closing comments. Over to you, sir.

Well, thank you all again. I just wanted to end by, first of all, thanking CP because this is his last investor call, thanking him for his leadership through the past many years in guiding TechM to its sort of relevance today. So, thank you, CP. Also from a TechM perspective, while there are obviously near -term challenges, I am very enthused about the medium to long -term prospects of our business, given the depth of client relationships, given the outstanding talent that we have, and given the incredible support that we have from a very successful group, the Mahindra Group. I am very optimistic about the long -term potential of the business and look forward to sharing the plans that we have mentioned, a plan for revenue, a plan for the organization, and a plan for margins with you over the next few months. So thank you and speak to you soon.

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