L&T Technology Services Limited (LTTS.NS) Earnings Call Transcript & Summary

Ladies and gentlemen, good day, and welcome to the Q3 FY '26 Conference Call of L&T Technology Services Limited. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Mr. Sandesh Naik, Head of Investor Relations. Thank you, and over to you, Mr. Naik.

Thank you, Dorvin. Good evening. Wishing you and your family a happy New Year. I am Sandesh and welcome you all to the earnings call of L&T Technology Services for the third quarter of FY '26. Our financial results, investor release and press release have been filed on the stock exchanges and are also available on our website, www.ltts.com. I hope you've had a chance to go through them. This call is for 60 minutes. We will try to wrap up the management remarks in 20 minutes and then open up for Q&A. The audio recording of this call will be available on our website about an hour after the call ends. With that, let me introduce you to the leadership team present on this call. We have with us Amit Chadha, CEO and MD; Alind Saxena, Executive Director and President; and Rajeev Gupta, CFO. We will begin with Amit providing an overview of the company performance and outlook, followed by Rajeev, who will walk you through the financial performance. I now invite Amit for his opening remarks.

Perfect. I hope I'm clear.

You are clear, Amit.

Excellent. Perfect. Thank you so much, and thank you, Sundesh. Wishing everybody on this call a very, very happy and prosperous New Year, a very happy Pongal, happy Sankranti and a happy Lohri. That said, in Q3, we've had multiple conversations with clients, including hosting our fourth Advisory Council in MIT Media Labs in Boston. Based on our interactions, we believe CY '26 holds promise as macro situation improves and demand, particularly in new age technology areas continues to strengthen. This is also reflected in our large deal pipeline and closures. In preparation of our Lakshya five-year strategy starting FY '27, we have used the past quarter to reevaluate market trends, consult with clients on their spending priorities and potential high-growth profit pools. Based on these insights, we are taking decisive actions for delivering full stack engineering intelligence, EI solutions. Trying to become the first company worldwide in EI solutions, reassess our regional focus and offerings, which are not in line with our five-year Lakshya road map. In Q3, we have, therefore, deliberately improved our quality of revenue in line with this strategy. Therefore, this and other factors have reflected in a 120 bps improvement quarter-on-quarter with Q3 EBIT margins at 14.6%. Rajeev will share more details in his commentary. Now let me provide the key highlights on our Q3 performance. Revenue of $326 million grew 4.6% annually, while we degrew 3.2% sequentially as we rebalanced our portfolio towards futuristic technologies to serve our customers and tap into market potential. Sustainability continued its double-digit year-on-year growth momentum, while mobility showed early signs of improvement despite a seasonably weak and slow quarter. Our large deal wins came in at a healthy TCV of USD 180 million in the quarter. It is a fifth straight quarter where we have maintained this TCV trajectory. Now let me provide our segmental performance and outlook. Mobility. Despite being a furlough quarter, mobility showed modest uptick. 50% of our large deal wins in Q3 were in the Mobility segment. Our aero and rail subsegment has shown growth sequentially, while trucks and off-highway was slightly subdued. The auto subsegment turned the corner and is seeing positive traction. We won a large multimillion dollar engagement from a global luxury OEM covering infotainment system engineering across multiple product domains and assessment and assurance of telematic modules. We signed a multiyear agreement focused on engineering the next generation of AI-powered premium connected and intelligent marine experience. We are accelerating software-defined vehicle offerings by incorporating advanced AI capabilities in the software life cycle and product development. This is enhancing the overall product experience for end customers. In fact, happy to share that we've been rated in the top 2 in SDV in the last 2 weeks, and we'll share the report with you in a short while. From geo perspective, the U.S. market is positioned for a recovery after several quarters of slowdown in spends with increased investments, particularly in SDV technology. Europe's focus is shifting from -- towards low-cost countries and strategic partnerships. Investments for new vehicle models are deferred, while cost optimization remains a priority. We are well positioned to be the net beneficiary of these opportunities as demonstrated by the recent large deal win from the region. New model launches by OEMs in Japan indicate growth opportunities, and we are seeing steady wins. 80% of the revenue in mobility is now predominantly from OEMs as compared to 20% from them a few years ago, ensuring greater stability in our client revenue mix. And if you remember, this was one of the factors that we were a little worried about till now. The pipeline remains robust with multiple deal conversions happening in auto, T&OH, aero and rail. In summary, the mobility segment is witnessing green shoots, and we expect to see continued growth momentum in CY '26 due to better ramp-up on large deals. Coming to sustainability. The Sustainability segment grew 11.4% year-on-year and quarterly, reflecting steady demand and execution strength in the deals we have won in the last few quarters. The industrial subsegment is benefiting from our EI solutions, which combine digital automation, AI-powered platforms across PDLC offerings for our clients. The energy and automation and industrial machinery sectors continues to see good demand with a strong pipeline in asset management and large deals. Of the $100 million deal announced last quarter, we are steadily ramping up and going as per plan, leveraging our EI portfolio to support the client across new product development and platform automation. In plant engineering, demand continues across ONG and CPG for CapEx projects and ongoing spends on digital and modernization of legacy plants. In India, we are also seeing demand from the chemical industry. We were chosen by an Australian enterprise to establish a high-value engineering center focused on engineering and digital technologies in a multiyear engagement. We further expanded our partnership with a leading global energy company to enhance information management and existing assets, including document data management for its capital projects, leveraging AI NLP solutions. Reindustrialization in the U.S. and pharma companies setting up plants domestically will create significant opportunity for Sustainability segment. We expect growth momentum in the sustainability segment to continue across industrial and plant due to ramp-up in large deals and a strong pipeline. Moving on to tech. The AI investments that we have made have been validated by recent client spending, and we are doubling down our focus on AI EI solutions that will help us scale. As I mentioned earlier, we have recalibrated our business in the segment to ensure that we put our attention to future technologies that will offer higher profitable growth. The media tech subsegment is rapidly evolving with strong focus on design-led offerings, resulting in execution of more high-end and high-margin work for our clients. We have seen steady growth in our semiconductor accounts and have also entered into a multiyear engagement with a leading global semicon platform provider to consolidate advanced lab support operations. Deals that we had won in previous quarters in the telecom subsegment have been steadily ramping up. In the MedTech subsegment, we are seeing healthy demand across all geographies. LTTS secured a new multiyear deal with a leading medical device manufacturer to deliver comprehensive product development engineering services in the cardiopulmonary segment. We expect MedTech to grow in CY '26, leveraging AI EI solutions across digital manufacturing, sustenance engineering and QARA. The Software and Platform subsegment, which includes Intelliswift, has provided us a platform to leverage our engineering intelligence framework for data-driven intelligence and automation and data science and data engineering. Intelliswift is a plan to delivering as envisaged. We have received a large empanelment from a hyperscaler and expect that to start ramping up Q1 onwards. In SWC, we have been working on Fusionworld.ai solution, an AI-based compute vision operating platform for smart spaces, which is seeing traction amongst customers internationally. We recently deployed the solution for a smart campus project in India and are also making bids in exciting areas, including data center programs across North America. Finally, let me share a few updates on our technology and innovation charter. Our suite of AI offerings are evolving with the launch of new Agentic AI platforms as we pivot from AI, artificial intelligence to delivering full stack engineering intelligence or EI solutions for our clients' product and manufacturing life cycles. We have filed 229 patents in AI and Gen AI alone, while our overall patent count is 1,655 this quarter. We have moved AI from pilots to production-grade deployments across engineering, manufacturing, mobility and MedTech with AI now embedded across PDLC, SDLC, embedded systems, IToT and manufacturing workflows. For our clients, we are doing multiple programs leveraging NVIDIA Omniverse platform to develop and accelerate AI-powered solutions focused on digital twins, medical technology and industrial digitization. We have built Agentic IQ, a scalable enterprise-ready platform, enabling rapid creation, orchestration, deployment, monitoring and governance of AI agents across engineering life cycle, positioning LTTS beyond point AI solutions into platform-led value creation. 30% of our workforce is already trained in AI with plans to reach near universal AI literacy within the next 3 quarters, ensuring delivery capability and capacity keeps pace with client demand. Overall, the macro environment has started looking positive with revival in deal-related conversations across all segments. As we pivot to a full stack engineering intelligence provider, we see more headroom for proactive deal structuring opportunities. This will give us the ability to offer an integrated suite of AI-led solutions to our customers in areas like digital manufacturing, software product engineering, engineering analytics and new product development. Talking about outlook, let me reiterate our emphasis on shareholder value creation. As I mentioned earlier, we have made a conscious decision during the quarter on discontinuing select regional and technology offerings. This is evident in our results, reflected in a 120 bps Q-on-Q improvement with Q3 EBIT margins at 14.6%. With these developments in mind, we are guiding for mid-single overall growth in FY '26. Meanwhile, our focus business areas will see a double-digit growth in the same period. I thank you for your continued guidance and support. I would now hand over the call to Rajeev for further updates. Thank you.

Thank you, Amit. Wishing you and your families a very happy new year. I will start with the key highlights for quarter 3 FY '26. Our sustained focus on building strong pipeline and going deeper to scale strategy has helped in large deal wins, resulting in an average TCV of $200 million for 5 consecutive quarters. Sustainability, our highest margin segment grew both in revenue and margins, while Mobility saw slight growth in a seasonally weak quarter. Q3 FY '26 saw a boost of 200 bps in gross margin on a sequential basis, largely due to improved quality of revenue and operational efficiencies, discontinuation of strategic support provided in the past few quarters and rupee depreciation during the quarter. With that, moving to quarter 3 FY '26 financials, starting with the P&L. Our revenue for the quarter came in at INR 2,924 crores, a growth of 10.2% year-on-year, down 1.9% on a sequential basis. EBIT margins for the quarter came to 14.6%, an improvement of 120 bps over the previous quarter. Other income was INR 18.4 crores, sequentially lower due to USD appreciation compared to INR and asset transfers pertaining to closure of client projects. Effective tax rate for quarter 3 came in at 26%, showing an improvement from previous quarters by 50 basis points. We expect ETR to be in the range of 26.5% to 27% for the year, showing an improvement relative to previous year. Net income for the quarter came in at INR 329.1 crores at 11.3% of revenue. I would like to also highlight the impact of new Wage Code. The impact of New Labor Codes is treated as onetime exceptional item amounting to INR 35.4 crores, net of tax at 26.5 crores. Over the past few years, we've been consciously working towards improving the basic salary component in line with new wage goal, resulting in relatively lower liability. Talking about the balance sheet, let me highlight key line items. The combined DSO came in at 112 days compared to 114 days in Q2. This is within the target range of 110 to 115 days and expect to improve further. The billed DSO also improved to 91 days as compared to 94 days in quarter 2. Our free cash flows improved further over the quarter to INR 470 crores due to consistent collection efforts leading to year-to-date free cash flows at INR 886 crores, which is a healthy free cash flow ratio of 91% over net income. Cash and investments stood at INR 3,160 crores at the end of quarter 3 versus INR 2,883 crores at the end of quarter 2. With respect to revenue metrics, in dollar terms, we reported revenue of $326.3 million as compared to $337.1 million in quarter 2, a growth of 4.6% on Y-o-Y basis, while a decline of 3.2% on a sequential basis. The decline in Q3 revenue is on account of being selective on revenue portfolio of offerings and regions in line with our upcoming 5-year strategic plan. Talking about segment. Mobility segment margins for quarter 3 came in at 14.8%, flat compared to previous quarter, and this is despite furloughs. Mobility revenues will show growth in coming quarters with the environment now showing improvement in automotive sector, along with sustained growth in aero and rail subsegments. This will lead to improvement in overall mobility margins from here on. Sustainability segment further improved in margins to come in at 28.8%, higher by 70 basis points on a sequential basis. The ramp-up of deal wins in previous quarters have led to improvement in quality of revenue and also margins, and this will continue to aid revenue growth and margins as we go into FY '27. Tech segment margins for the quarter came in at 10.6%, an improvement of 160 basis points over previous quarter. This is due to improvement in Intelliswift margins, discontinuation of strategic support to customers in the last few quarters and the action taken on recalibration of portfolios and geographies to improve quality of revenue in line with our upcoming 5-year strategy plan. On operational metrics, the on-site and offshore mix has slightly moved towards onshore as compared to Q2. Offshore percentage now stands at 54.6%. We continue to work to improve this in the coming quarters. The T&M revenue mix was at 61.4% in Q3, similar range as compared to Q2. Our client profile has seen an increase in the number of clients in $20 million-plus category, and our deep relationship with clients and new age offerings will help improve this profile from here on. Client contribution to revenue, similar range compared to Q2 across categories. Headcount remained flat at 23,639 in Q3 compared to 23,678 in Q2. Attrition came in at 14.6%, slightly better compared to Q2. Our realized rupee in the quarter came in at INR 89.58 to the dollar, a depreciation of 1.4% versus Q2. As I conclude, let me provide visibility on margin trajectory going forward. We did refer to in our Q2 commentary that H2 margins will be better than H1 and are already seeing Q3 margins improve by 120 basis points. We expect margins to continue to improve from here on based on capital allocation towards high-margin segments of sustainability and mobility, selective choice of portfolio and geography, which will result in improvement in quality of revenue and thus improvement in margin and operational efficiencies, including AI-led delivery. With that, we maintain our aspiration for mid-16% EBIT margins between quarter 4 FY '27 and quarter 1 FY '28. Thank you. And now I hand it over to the moderator for questions.

[Operator Instructions] Our first question comes from the line of Vibhor Singhal from Nuvama Equities.

Amit, I have a few questions with a few more sub questions, so I'll try to squeeze in as many as I can. So just wanted to understand the nature of this restructuring exercise that we have taken. Is it like there are some of the clients for which we have stopped doing the projects? Is it some of the divisions that we have basically kind of shut down and we will not be taking any more projects in that domain? And also, if I look at the basically breakup of this, I think it appears to me that the major restructuring has happened in the tech segment and in the India business. So would it be fair to say that the large part of it predominantly this is the SWC business that we had acquired that we are kind of closing down because that is also leading to an improvement in margins.

Sure. So first of all, thank you so much, and wish you a happy new year as well. So let me step back and talk a little about what's happening. See, we -- what's happening is there are huge spends, CapEx spends that are happening on the -- in the data center buildup and the energy buildup area in the U.S. And that is creating follow-up opportunities in the hyperscalers. It is creating opportunity in the tech infra business, in our area, in the Semcon area as well as in IP because there's -- for data center build-out, you need all those things. And then finally, our clean plant. So it's a cross-vertical tailwind, if I may. Second, we are seeing reindustrialization of the U.S. Third, people are moving from AI from enterprise to actually physical digital plus industrial, which we are calling engineering intelligence, right? So when we looked at all that and we looked at our bets, we said that we need to narrow our focus into specific areas that will give us extraordinary growth and leap forward as opposed to areas that may be lukewarm in growth and lower in margins. I mean so we balanced all of that. And we said we don't want to play in a commoditized business tomorrow where you can do copy paste and cut paste. We want to be people that are known for technology, and we want to look ahead, so we don't get into a problem, so -- in the future. So with all that -- and then we knew that with our business that we were at, we were comfortable with this double-digit guidance that we had given you, and we were at that trajectory. So we spoke to our Board as well and the guidance was that if there is stuff that doesn't make sense and is getting commoditized, start looking at seeing if you want to rationalize it. So with that said, what we have done is there is parts in -- of business that we were doing in the tech segment in Israel that we have taken, and we have now closed that down. There was business in parts of Europe in very small area of mobility, a little bit in tech, again, which was old technology, and we knew that the next step would be deep discounts, et cetera. So we shut that down as well. And third, then we looked at our U.S. -- the couple of U.S. clients that were operating at projects that were operating on older technology, where we were counting the revenue actually from India because the PO was from India. So we took that also, and we have taken that out as well, including shutting down the lab, providing the equipment back to the customer. And then there was a little bit of revenue that was coming from Indian customers, that was not adding value. So we did not accept new orders in that area. So all put all that together is what we have done, Vibhor, as we stand today. Now -- yes, so that was the question, right?

Yes. So I mean, is it fair to say given that we have seen a very sharp decline in the India business and in the tech vertical that a major part of this restructuring exercise would be in the SWC business?

No. Vibhor, I would not land that case. I would say it is -- Vibhor, it is a lot -- in fact, a lot of it is POs that were being routed to India on tech labs, et cetera, that we have taken out and look at the other part that I talked about, Middle East, Europe. And there is these orders that we would have otherwise taken -- but we said there's no point taking in empty calories. I'd rather take something that is value add to the company, and that is why we decided to let it go. So it's a mixed portfolio, if I may. In fact, if you remember, we had purchased SWC, there was this telco infra part, cyber part. So I'm happy to share the cyber part, we've actually won 3 new contracts, less than $10 million, but cyber contracts in the U.S., in fact, we were hoping to sign a bigger deal and announce it to you guys, but Christmas came and everybody went merry. So we'll do it in this quarter. But -- so cyber is growing there. And tech infra as well in the U.S., there are newer areas coming up on connectivity, which we are actively engaged in and growing. In fact, the one operator that we signed has been signed because of the tech business domain experience that we got from SWC. So those continue to be the bright spots. In fact, Middle East also, we are there. In fact, I was there in Middle East for 3 days and again going back in Feb appears to be a promising area for us. I would not come to that conclusion just yet, but this is in play. We expect to finish all of this by March. See, on grounds of prudence because we could have actually kept quiet and said we'll tell you in March and all that, right? We decided we are a very clear, honest, transparent management team. So we wanted to in prudence tell you that by the time you end quarter 4, March end, the floor is you will end up somewhere in the middle digits. And if we are able to win some of this and grow, maybe it will be bigger than that. But this is the right time we thought consciously to make this pivot on margins, get it to that, like Rajeev said, get to the 16.5% EBIT range where we also are comfortable and you are also comfortable.

No, Amit, I really appreciate that, sir. And I think we've discussed it many times. It's good to take a decision which are in the benefit of the long term of the company rather than focusing on the short-term goals. So congrats to the entire team for taking this step. Just last couple of questions. So is the restructuring exercise done or we could see some more steps being taken and some more accounts being closed in Q4 or in the coming quarters?

See, Vibhor, like I'm saying, so if I see, if I would have only assumed Q3, I would have maybe given higher single or whatever. I've taken everything into account and telling you the floor is mid-single and you will be done. So maybe a little bit here or there, we'll play.

Got it. Got it. And just one last question for Rajeev and then I'll leave the floor from the other participant as well. Rajeev, I know this business definitely boosts the margins also. So going forward, do you expect more margin expansion vis-a-vis because of this restructuring side that continues to go? Or do you think we've kind of plucked most of the fruits of this restructuring side? And secondly, does this also benefit our DSO days in coming future? And will it also help getting them down as well?

Vibhor, let me respond to both of your questions. So of course, we've been taking guidance from many of you, so I appreciate that part. The margin improvement will continue, right? And that's the reason we provided a guidance of mid-16% levels between a range of quarter 4 FY '27 and quarter 1 FY '28, right? And there were 3 factors. Of course, one was because of the Intelliswift acquisition, the integration plan would continue to show margin improvement sequentially as we move forward, right? That was one. Second was, of course, this recalibration exercise that Amit largely explained, I think lands in Q3. He's given a view for FY '26, but that largely solidifies our ability to grow in portfolios that we think are more futuristic and our profit pools, right? So that will also contribute. Third, if you really see, and that's what we talked about earlier, our Sustainability segment and all the large deal wins continue to translate, right? So you see growth double digit year-on-year. You also see improvement in profitability. Of course, that part will continue. But alongside, we are now seeing green shoots in mobility, right? So mobility, if you look at year-on-year margins, it's come down EBITDA of about 19% to 20% is down to about 15%. We also believe that mobility will continue to turn around from quarter 4 onwards. Work to be done, but you'll see over the course of next 4 quarters that the profitability will move and we aspire for that mid-16% range. Second, on the DSO, yes, we will continue to improve DSO. Our aspiration is much like on our free cash flow, and I remember some of you posing that question that we will be deliver 95% -- 90% plus of free cash flows in the year. Indeed, we are delivering in the first 9 months. Much like that, we will continue to improve DSO. At the moment, I've given a range of between 110 to 115 days. Our aspiration is to improve even beyond that. But at least I've given a view for the year.

Our next question comes from the line of Sandeep Shah from Equirus Securities.

Happy New Year to all the management team. Sir, the first question is Project Lakshya was in place for more than 2, 3 years at a group level. So why suddenly this exercise versus last 3 months before we were not thinking about the same? I do agree this will create a value-added portfolio with a higher margin. But what has led to this? Why I'm asking is there has been more than 2 or 3 restructuring exercise, which we have carried out in terms of growth strategy in the last 3, 4 years, but somehow organic growth is not picking up. So now with the new restructuring exercise, what will change in terms of changing that organic growth part?

Sure. So thank you so much. So if I may provide a little bit color. So Lakshya is not a 2-, 3-year program. It's a 5-year program. It happens every 5 years. We are -- in fact, our first Lakshya was 2010-'11 right up to '15-'16, then it was there to '21 and then '21 to '26, and now we'll do '26 to '31. So it's a 5-year program. These are not 2-, 3-year programs. So that is point number one. Point number two is that we did mention, and I think we had talked about it during our investor call or we had talked about it in one of those processes that we do 5-year programs. So the new 5-year -- next 5-year program will start on April 1, 2026, and go until March 31, 2031, right? So this is part of the process that we follow. Point number two is that we are -- if I look at it, we've restructured or simplified our organization in segments. And we today have 6 sales teams in North America. We've got 4 regional teams outside of North America, total 10 teams that allows us the ability to continue to look at deals globally rather than in specific areas. This has actually given us the ability to sign about $200 million -- around $200 million of TCV for 5 straight quarters, right? And the wins that we have had in Sustainability, you can see that playing out. You can see Mobility turning around. And in Tech, if I was to include the stuff that we dropped, we've actually grown double digit, right? So we do have organic growth coming along. Now if we are a tech company, we have 2 choices. I could go back and stay in a business that tomorrow will become dilutive -- continue to dilute -- be dilutive in margins and continue to drain away some of the good stuff that is happening in other areas or the choice is that before I get commoditized, I turn around and then do it in advance. Lastly -- and we have talked to you in advance, and you will notice that in our calls, we give you some forward views. We normally have views that are between 9 to 12 months ahead of the market. So we do believe that the market is pivoting on EI. They are pivoting to physical, digital, industrial combined AI. And that's why if we don't pivot now, we will be in a problem in 9 months' time or 12 months' time. So this is our first restructuring exercise in this space, in this area. And I would like to acknowledge actually that our teams have done very well in terms of being able to identify in the last quarter itself, take action and decisive action, which has helped us improve the margins within the quarter. I would have rather done that than come back, lowered the revenue, not improve the margins and done it 2 quarters down. We have been able to provide decisive action in the same quarter. And from here on, you will continue to see margin improvement as you've seen. And like I said, we will shut everything off. Whatever we have to do, should happen hopefully by or will happen by March 31 per our current plan. And your company, therefore, April 1 onwards, continues to focus on EI. Look, our ambition is to become the world's first and biggest EI company in services and solutions, and we will continue to march towards that.

Yes. Just a follow-up. In this rationalization exercise once it's over, one can assume SWC seasonality, which leads to volatile growth, will now no longer be valid starting next year. And a question to CFO, sir. Sir, just we are cutting down on a low-profit portfolios, but our margin milestone has not been changed. It should have changed, right? With the restructuring exercise, it could have been better than 16.5%. So any reason for the same?

So can you repeat your first question?

Yes. Just with the restructuring exercise, SWC seasonality will now won't be there starting next year?

I heard you. So we seem to be in love with Mobility on some calls, and we seem to be in love with SWC on some calls. We just don't like Sustainability, which is the highest profit margin in the company, is it? Okay. So now, right? So let's go to this. So I -- all I can say at this stage is that we are looking at our portfolio very seriously. There are actions that we have taken. There are actions that we are taking. So please allow us till April when we come back when we provide you that kind of clarity. At this stage, please give us some more time in play right now. And on margins, I think, Rajeev, you can please answer.

Sandeep, Rajeev here. I think on the second question that you have, right, that we should have seen probably an acceleration in terms of EBIT improvement. Rightly acknowledge. At this point, there is a little bit of prudence that is baked in. I probably will come back in quarter 4 to clarify. Our intent is definitely to deliver earlier than what I'm guiding for. But at this point, it's more prudence that I've maintained that time period.

Our next question is from the line of Nitin Padmanabhan from Investec.

Wishing you a very Happy New Year. I just wanted some context around the margins. So one, obviously, the support that we were giving for the customer has come off, and we have also had some currency benefit as well. And it looks like while we have cut down these businesses, the headcount is still pretty flattish. So just wanted some context around how should we understand this? Is the margin benefit from the cut down of businesses likely to accrue more in the next quarter and beyond? Or that is largely already factored in, in the current quarter? So yes, that was the first question. The second one was around when are we expecting to sort of give out salary increases? And finally, while our deal wins have been consistently strong, I think, for the past couple of quarters. And I think if you look at it year-on-year, it's a very strong growth. When should we start to expect that to really start showing up from an overall portfolio perspective in terms of higher growth?

So Nitin, let me take the first couple of questions, and I will have Amit to respond to the deal wins part. So first one on the margin trajectory, I think what you need to understand is that in the quarter, we've seen the margin improvement come through from 3 areas. I called out during my commentary. It has indeed been on the improved quality of revenue and operational efficiencies. Of course, Sustainability has grown. We've also talked about some of the selective choice of portfolio of revenues and geographies. That's one. The second is on discontinuation of the strategic support that we provided in the past few quarters and rupee depreciation, right? So it's a mix across. But what I'd like to leave you with is that, look, going forward, the margin improvement will come from 3 to 4 areas, right? One is that we want to become more, I would say, sharper in terms of capital allocation towards higher-margin segments and technologies. Amit talked about EI, which is really the Engineered Intelligence. And you will see margins improving across Mobility, Sustainability and Tech, right? So it's going to be a combination. I already talked about selective choice of portfolio and geography. Last but not the least is the operational efficiency. We've recently had Munjay, who has joined us as a Chief Operating Officer. He is championing the [ AI cost ] for the company. And there is a lot of work at this point in time going around AI-led delivery. And we will call out more specifics as we come into quarter 4. But these are the areas that likely will continue to improve. And last is around the Intelliswift acquisition. Like I said earlier, we've got about 6 to 8 quarters of integration plan, and that business has continued to grow and improve in profitability. So those are the 3, 4 areas that I'll clarify in terms of the margin trajectory going forward.

Second question was on wages.

On the wages, let me respond.

Yes. Wages, we will provide wage hikes to all our employees worldwide in quarter 4, and we have baked that into our estimates as we have provided you our margin trajectory. right? So that is your second question. Third was on deal wins. So Nitin, we've had deal wins in Sustainability. Look, so I was very honest and open in sharing what did not ramp up. So the Mobility win that we had in quarter 4 has not ramped up for us, right, and still going small as opposed to what we were expecting. The other wins that we have had in Sustainability and Plant subsegment as well as in industrial products have ramped up. And therefore, you can see that growth. Mobility, there were some smaller wins, sub-$10 million wins that have helped us in terms of -- see, the biggest hit we take on the furlough quarter, which is October, November, December, is in Mobility and largely Mobility U.S. and Europe where we take them -- Mobility where we take the hit. So in spite of that, Mobility sequentially grew for us, and we believe Mobility has bottomed out. You will see growth from here. And a little bit of ramp-up, whatever we have won in quarter 3, the entire ramp-up of that, I'm confirming to you has already taken place. In Tech, the deals that we had won, they did, like I mentioned to one of the earlier colleagues on the call that when you look at Tech, had we -- if I keep the business that I walked away from, I would have actually shown you double-digit growth as well as sequential growth in Tech as well. So the deals are ramping up other than that one deal that I called out, the others have ramped up as we speak.

Perfect. That's helpful. Just one clarification. So as we get into the next quarter with the wage increases in place, are there any -- could you give us some sense in terms of puts and takes on how to think about margins there? Or should we expect margins to be lower? We'll not be able to offset the wage increase, I presume?

So Nitin, let me take this question. So you should see the wage increases in quarter 4 that Amit talked about could likely have an impact of about 1%, but we will continue to see improvement in margin because we factored this wage increase. Like you saw in quarter 3, we saw an improvement of 200 basis points in gross margins. And that also will somewhat pan out, not to that extent, but will pan out in quarter 4 between both gross margin or SG&A. So about 1% of increment impact will get absorbed on account of all the aspects that I talked about on margin improvement.

Our next question is from the line of Ravi Menon from Macquarie.