Mastek Limited (MASTEK) Earnings Call Transcript & Summary

Ladies and gentlemen, good day, and welcome to Mastek Limited Q1 FY '21 Earnings Conference Call. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Ms. Asha Gupta from Christensen IR. Thank you, and over to you, ma'am.

Thanks, Aman. Good afternoon to all of you, and thanks for joining Q1 FY '21 earnings call of Mastek. The results and presentations have already been mailed to you, and you can view that on our website, www.mastek.com. To take us through the results today and to answer your questions, we have the top management of Mastek, represented by John Owen, Group CEO; and Abhishek Singh, Group CFO. Also, today, we have over the call, Umang Nahata, Co-Founder of Evosys. John will start the call with this overview of the quarter gone by, which will be followed by Abhishek, who will be going into detailed financials; and then Umang Nahata, who will share his experience with Mastek. We will then take the question-and-answer session. I would like to remind you that everything that is said on this call that reflects any outlook for the future or which can be construed as forward-looking statements must be viewed in conjunction with the risks and uncertainties that we face. These risks and uncertainties are included, but not limited to what we have mentioned in the prospectus filed with SEBI and subsequent annual report that you can find on our website. With that said, I now like to hand over the call to John. Over to you, sir.

Thank you, Asha. May I thank you all for joining us to review our first quarter results for fiscal '21. We appreciate your interest, your support and your analysis. I think a constructive challenge makes us a better company, and we thank you for that. The last few months have brought many new perspectives on life. So may I start by hoping you, your families and your colleagues are all staying safe and are in good health. It may only be 45 days ago since we had our Q4 call. However, despite the short window for dialogue, I would suggest that this is probably one of the most important updates in our recent history, as this quarter's results follows for 2 key reasons. Number one, Q1 represents the first full quarter of operations under the damaging effects of COVID-19, the effects of which will now unfortunately probably remain with us throughout, at least, fiscal '21 and will potentially blow some companies fatally, of course. The second reason that is an important review is -- on a positive note, this is also the first quarter where we've got the full consolidation of our exciting acquisition of Evosys and the potential benefits that will fortunately, and frankly, also remain with us for the next few years. And these are the key strategic enablers that will help accelerate Mastek's growth and continue to help our diversification objective as we scale. Despite COVID and to help provide some context to this call, I do expect Mastek to deliver good performance in fiscal '21 and smash the many bad feelings that have constrained us over the past 10 years or so, including when Majesco was part of the group. On this topic, I do want to congratulate my Majesco friend and colleague, Adam Elster, the CEO, and his team on the recent sale to their private equity firm, Thoma Bravo; and particularly thanking for helping monetize our residual investment back into $26.5 million back into the Mastek bank. I think this transaction, and consequently, the shareholder value is created, reinforces the Mastek's Board's decision to divest Majesco back in 2015. So Majesco is firmly in our past, and part -- I'm proud its part of our history, but it's now time to concentrate on Mastek's future and our potential for value creation, which started under Vision 2020 and managed to kick on to the next level, albeit in the eye of the storm of the current COVID crisis, but we are exceptionally well positioned given the assets that we have. I described Q4 as a solid performance. So I hope following it up with today's results, you will, too, now believe in our optimism that Mastek can continue on a positive trajectory in terms of revenue growth, earning's quality, balance sheet management and when we combine these all together, we can deliver sustainable value for all our stakeholders. Let me be clear. Today must not be seen as the high watermark for Mastek but a very solid and stable base camp to start our journey to become a recognized mid-cap over the next few years. As many of you know, I'm a cricketer, and as many cricketers know, form is temporary, class is permanent. So strengthening that is key, so let me share the batting lineup with you today. I'm once again joined by our Group CFO, Abhishek Singh, who will cover our financial performance, and as a solid opener, he will anchor the innings. I'm also pleased that Umang Nahata, our shotmaker, who will bat in the middle order and accelerate our scoring is joining us. Umang will provide the specific commentary on our Oracle Cloud business and also update you on how the integration of Evosys and Mastek is progressing. In our last call, we shared our belief that Mastek's business was resilient to the full impacts of COVID. This confidence was built on the quality of our customer relationships, particularly in the U.K. government, the health accounts, where we have the long-established relationships. And now with the addition of our new ERP cloud migration business, in Evosys, we're enjoying those strong full factors from the market. As we said last time, COVID has driven a significant increase in remote working, and this has brought into sharp focus the need for enterprises to operate today with a more modern, economic, secure and resilient application and supported infrastructure. And that is an infrastructure that can be easily report -- easily accessed remotely. Last call, we also shared our revised cost and growth tactical plan for the first half of fiscal '21, which was intended to ensure that the impact of COVID is shallow on Mastek and our recovery will be faster than many of our peers. Like every other company, Q1 has been a real challenge as we dealt with the headwinds of the macroeconomic level, which is why I'm very proud of our performance and our results. We were quick to re-pivot Mastek's focus away from distressed segment, like the U.K. private sector and the U.S. retail segment, and redirect those investments towards areas where we saw significant time line and traction for profitable growth, namely ERP cloud migration and the U.K. government and health sectors. Despite delays in the number of contracts, which got deferred and will now flow into Q2, we've been able to grow our revenues impressively, and our quality of earnings continues to steadily improve. So although we are far from the end of the COVID tunnel, we are confident this performance can be sustained in Q2, and then we can accelerate in the second half of fiscal '21 as the market conditions, hopefully, gradually improve. Completing the full acquisition of Evosys has obviously made a strong contribution to today's results. But it is also important to recognize that core business and the crown jewels from the U.K. government and health segments have also contributed with strong performances. Equally, we also acknowledge that our U.K. private and U.S. businesses remain in the recovery phase, and although we've made good progress rebalancing these businesses throughout the quarter, we will only really see these efforts reflected in our numbers in outer quarters. Certainly, in the short term, we stand by the element that we said would probably drive our performance, and today's results are a testament to the true potential of these assets. Importantly, we enjoy strong market fundamentals, particularly, as I said, from the U.K. government, the health and the cloud migration segments, which provides the backdrop of our results today and our short-term future growth. Our organization's speed and agility continues to help maintain the prerequisite productivity and quality metrics, even under a 100% work-from-home model. And I especially want to thank everyone of our 3,500 Mastekeer for essentially allowing us to move our company into their homes. They have operated with excellence for the past 120 days, and we will certainly continue this model for the balance of Q2. We do not anticipate any meaningful return of this environment in the short term, and I've said previously, moving forward, I do see a more hybrid work pattern for the future. Given the very real threat of the second spike in many of our geographies and additional lockdowns, we are fortunate that we have the operational flexibility to adapt to the prevailing market and customer conditions with ad productivity or quality trade-offs. Q1 also represents another solid proof point for our strong financial management attributes. Not only did we accelerate our cash receivables, which enabled us to reduce our debt levels by over $6 million and our DSOs reduced by 9 days, but last week, as I said earlier, we've received confirmation that we will complete the final divestment of Majesco's noncore assets, and certainly, the additional $26.5 million will further strengthen our balance sheet. As we said last time, we will continue to divest noncore assets and reinvest those proceeds into cash-generative assets that accelerate our core business and our value creation. So on many levels, irrespective of external factors, Q1 was an exceptionally strong quarter for Mastek, and I'm confident it sets the date for a really positive year. Quarter-on-quarter, our revenues rose 12% in constant currency terms, which equates to an impressive 46% year-on-year. As I said, the main contributors for this performance were our U.K. government, our health and our cloud migration segments. And on the company growth plan, we've repurposed more investment to drive better results, that laser focus and agility will remain for Q2. Our consistent focus on driving a better balanced, sustainable performance also resulted in a 35 basis points improvement in our EBITDA levels to 17%. Like many companies, we have benefited in the quarter from a reduced travel and living expenses due to the lockdown. However, a lot of these benefits were also offset by higher travel costs, repatriating a significant number of our people who were stranded in foreign countries when the lockdown hit. It's worth considering that some of our people have been stranded for over 100 days, and I pay tribute to their dedication, their understanding and their trust in Mastek. I am pleased that we've now repatriated most of those people with the balance all in process. Moving forward, I expect us to retain our earnings policy through the year, and this performance should further improve once we enjoy a more balanced recovery in our revenues across all our sectors. These earnings improvements will also create some financial headroom to allow us to invest further in transforming Mastek's operational infrastructure to support our goal of becoming a recognized mid-cap over the next few years, where we see a gap in the market for what we are starting to define and shape as a next-generation services partner. I'll explain more detail in our Q2 earnings of what a next-generation service partner is defined by. Margin expansion will also enable us to retain our competitiveness as the effects of COVID naturally drives more aggressive pricing in the market. As we scale Mastek to support our growth, our cost structure will naturally need to increase through the year, as we layer back some of the discretionary costs we removed at the end of Q4. However, rest assured, our cost profile will lag our revenue profile and be based on a pragmatic targeted investment profile as we continue to drive more elasticity into our cost structure. Our hard work at the end of Q4, combined with the disciplined execution of our company growth plan, has enabled us to establish a solid platform as we rebalance Mastek to the prevailing market conditions. This policy has enabled us to target additional investment capacity into our specific attractive growth segments of the U.K. government, health and the ERP cloud migration. Although we have good visibility from these segments and strong pipelines, which gives us the confidence into the future, it is also equally important to recognize that the general market recovery will neither be uniform nor immediate. The market, I see, has certainly contracted and continues to be economically fragile. The macroeconomics in our core markets of the U.K. and the U.S. continue to look challenging, and this certainly doesn't feel like a quick V-shape recovery that many predicted back in March. So in summary, I'm pleased with our performance, and I remain cautiously optimistic to the future. Abhishek will now take us through the financial breakdown to provide more context and then Umang will walk us through the Oracle business, after which, we're happy to take answers. Abhishek, over to you.

Thank you, John. A warm welcome to everyone on this call. I'm going to share with you the highlights of our performance for the quarter ended 30th June. You do have a deck circulated ahead of this call, which contains all the details of our financial performance. So I will be touching just on the highlights and the areas of focus. For the quarter, I think this quarter marks a big milestone for Mastek, where our quarterly revenue crossed $50 million for the first time. This is the first ever in the history of Mastek. Q1 financials represent the impact of business consolidation of Evosys business for the full quarter. So having said that, it's an all-round good performance, which is reflecting in the numbers here. As you would see in the presentation, our total income stood at INR 402.8 crore, which is up 13.7% quarter-on-quarter and almost 60% year-on-year. Operating EBITDA grew by 35 bps at 17.6% and almost 436 bps year-on-year. So that's the quality of earning reflected here. The ongoing operational efficiency measures and the abatement in variable expenses have helped us manage the impact of COVID, which was essentially around the ramp down in the projects, the revenue contraction and the bench that came up as a result of that. Total EBITDA stood at INR 84.8 crore, which is up 12% quarter-on-quarter and almost 123% year-on-year. And PAT for the quarter is at INR 46.6 crore, up 19.6% quarter-on-quarter. John alluded to the cash on the balance sheet story. I think it's been a good story all around. Our DSOs are down by 8 to 9 days, and the cash collection reflects in the healthy cash balance of INR 458 crore and change, which is compared to last quarter at around INR 414.7 crore. This is after repaying $6 million or so in the debt during the quarter, and hence, the net of debt, our cash balance stands at INR 173 crore, which was INR 81 crore last quarter. Our total debt as of 30th June stands at $37.5 million after repaying the $6 million during the quarter. And the free cash flow story continues to be very strong, stood at almost 212% of the net income for the quarter and this is driven by the focused collection across the businesses. We are focused across U.K., U.S., Middle East, emerging markets, everywhere, and try to be very cautious to avoid any potential bankruptcies that may be also staring in these geographies. Cash in the door is the business completed, as the saying goes. Moving on to the 12-month order backlog story, that stands at INR 764.5 crore for the quarter, marginally down in constant currency terms. However, I do want to reflect the fact that we have a $5.5 million framework deal with one of our health care customers that we have not included in the 12-month order backlog, because usually frameworks are statement of intent, that is a commitment to kind of spend, you still have to back it up with specific statement of work. So we'll wait for back to fructify as it gets counted in the coming quarters. Moving on to the flavors of the geographies. If you look at U.K. geography, U.K. remained flat quarter-on-quarter. There was a marginal growth of 0.3%, which I'll count as a flat quarter-on-quarter. If I break that further between public sector and private sector, the public sector business grew healthy 5% quarter-on-quarter. However, the private sector challenges continued, and it degrew by a significant percentage. Cashing on the trend in the public sector, we had shared in the June quarter that we had a seasoned professional, Steve Latchem, joining us to accelerate our public sector and health care story. And that's reflected in our order backlog and the number of new logos that we are chasing, apart from deepening the relationship with existing clientele. So this is a direct reflection of the credibility that we enjoy in the sector, and our continued investments that we have made there to materialize the opportunities that we see out there. However, private sector continues to be soft and under pressure. Existing customers are contracting back, but in very small tranches. They are being a cautious spender. Offshoring is also a bit in focus. We are looking at reducing the costs without compromising on the quality. So they are kind of recalibrating how to spend and where to spend, so that they can manage the situation and its impact on their business, but it continues to be soft. The other phenomena that very obvious is the price pressure, and that obviously brings pressure back on the margins. And our continued operating efficiency measures are coming handy to help us drive productivity and share to offset some of those price impacts that is coming our way. Apart from that, in the geography, the furlough has been extended through September that helps the employee base. Moving to the U.S. geography. COVID continues to have a bearing on the business. Revenues were down quarter-on-quarter in constant currency terms. There is a continued risk of client bankruptcies, hence, our aggressive focus is on cash collections to help mitigate that. However, on the right side, we do see some very focused spend that's coming from the clientele base, that's called BOPIS, the buy-online-pickup-in-store. These are very focused spend that customers are planning for, and that's giving us some opportunity. Having said that, our sales team is in place, and we believe that we'll be moving onwards and upwards from here. And Canada and Middle East also provides us with additional opportunities, including cross-sell. As we move on to the Evosys business, I think this is a more resilient business, and we see continued growth momentum and order closures. Offshore remote delivery has helped us to continue to service the customers where all-round good demand and customer pool has experienced newer geographies, including Canada and European countries. Revenues grew not only on account of consolidation but also organically if you were to just look at it 3 months, a full quarter of Q4 versus a full quarter of Q1. The Evosys business has grown and grown very handsomely. Order book has been very strong, almost around $25 million in business wins across the geographies and verticals in this business. We are also looking at doing some local hiring given the travel restrictions. So we have to complement our delivery with the hirings in the geography. And to fulfill the order backlog -- order book that we have won in the quarter and the business growth momentum, we are planning to hire 100-plus trainees during the quarter, kind of, train them and scale the business. The other highlights for the quarter was obviously Majesco decision to go private with a private equity. And as John alluded to it, that brings circa $26.5 million in cash, almost INR 200 crore. And very, obviously, all of you would be interested in knowing our capital allocation strategy. And we'd like to reiterate that we are focused on conserving the cash, repaying the debt and possibly putting the money back into the business to accelerate our growth. Some of the proof points are there in front of you with the public sector growth that we are experiencing on the digital transformation side, the exponential growth opportunity and the growth secured by the Evosys business. The money ploughed back into the business has far better potential, but we would want to be cautiously and conservatively managing our cash and navigating through this COVID situation. Some of the other highlights of the quarter, obviously, are all around recognition that we have had as an organization. Tech market views, "monthly Digital Marketplace dashboards" recognized Mastek at third place for its work that has been done on the DOS framework. This continues to reinforce our public sector credential and health care presence in particular. On the alliance and partnership front, UiPath gave us a lead partner ranking in U.K., which further cements our RPA credentials. Only 3 such partners -- or rather total 3 partners are there in U.K., who are called 'elite' partners with UiPath. And our exciting acquisition of Evosys and its expertise in Oracle Cloud transformation space continues to be validated by the market. There are a lot of data points that have come up from Gartner, both on Oracle as well as Evosys. And to kind of walk us through, I would -- I will hand it over to Umang to give the details. But before I do that, I do want to say -- rather reiterate what John said, this is not a high watermark, it's essentially a platform from where we are looking to build, onwards and upwards, that is for Mastek and Mastekeers. Thank you. Over to you, Umang.

Thank you, Abhishek. Hello friends. I've got 3 very simple and important messages for you, which I believe are going to shape the future of Mastek as we move forward. The first message that I have is the Oracle Cloud business. So if you look at the Oracle Cloud business, I think there is tremendous headroom for growing in this business. And I say this because in spite of the COVID challenges and a tough Q4 for Oracle, their ERP cloud business still grew more than 30% in the last quarter. And if you look at -- under this growth, what is largely fueling this growth is the transformation of their on-premise installed base to the cloud. And this is where I -- we are just getting started. I mean Oracle has not even moved 20% of their installed base to the cloud yet. So there is still more than 80%, 85% market, which is yet to be migrated to the cloud. And to add, on top of this, I think, in the first time in Oracle's history, we clearly are a market leader in the enterprise applications business. And especially as compared to SAP, all the market rankings place Oracle at a much higher space, if you look at Gartner, Forrester, all the other reports. And I'm sure we all understand that SAP had the largest market share in the Oracle on-premise or in the on-premise ERP business. So while I'm really excited about the Oracle on-premise to cloud business, I'm much more ecstatic about the SAP to Oracle Cloud kind of potential that the market has. And I say this not just by [ whim ], but we've already had a headroom start in this, and we have invested large specializations in trying to build IP asset called Evosys Live for SAP, which has already helped us winning some key logos of large and long-established SAP customers to migrate to Oracle Cloud. We continue to aggressively invest in this opportunity, and I'm sure we will be recognized as the market leader in this space. As we stand today, we clearly are one of the leading partners for Oracle Cloud business, cloud application business. And I say this not just because we have been awarded by Oracle as their global partner of the year for multiple years in a row; not just because Gartner is in their Oracle Cloud and queued for 2 years in a row now; not just because we have the largest installed base of Oracle in the cloud customers -- one of the largest installed base of Oracle Cloud customers. But I'd say this because our approach to cloud transformation is far more advanced than anybody else in the market. What we currently follow, what we are really ambitioned to follow towards, is an approach called VBD or value-based delivery as we internally call it at Evosys. What VBD means? It is more like an outcome-based approach to transformation, wherein we look at the customer's business today, we look at what is the business ROI that they can get, and they try to do an outcome-based contracting wherein we will do a risk-reward-based contract to help them deliver the business benefit that they look at. And this is phenomenally different than anybody else doing this kind of business. To deliver an effective VBD program, we've also invested significantly in developing various IP assets that allow us to do benchmarking, differentiating, automating our solutions and highly focused on key focus industries that we have, wherein we want to grow and expand, industries like health care, like public sector, like engineering and construction and manufacturing. And the beauty of this value-based delivery model is that, as we deliver more and more value-based delivery stuff, our potential of predicting the return on investment continues to increase. I'm sure who better than all of you guys to value the potential of predicting ROI accurately means. So that's the Oracle side of the business in terms of why the headroom and what we see. My second point today that I wanted to explain to you was the cross-sell of Mastek services into the Oracle -- or the -- versus installed base. Now if you look at Mastek from my eyes, I would see Mastek as especially the Mastek digital services business was significantly driven by the -- by servicing their existing customers, who are a very loyal installed base that Mastek had. And this is primarily because once the customer gets a touch and feel of what the Mastek quality is, what the commitment and agility that they receive from Mastek, I think it is literally impossible for them to not to become a Mastek customer for life. On the other hand, where I think we were weak was in acquiring new customers or new logos, and that engine is where we were a little shallow. But this is where the combination of Evosys and Mastek, I think, will really fly. What Evosys brings to Mastek is a much larger installed base. We now, together, have a 4x bigger installed base of customers to take care of, customers to whom we can take on this journey of Mastek customer for life, and the journey has already begun. They have already won our first customer, and we are actively pursuing this business in all the geographies, in U.K., Middle East and North America and in APAC. Not only are we seeing opportunities in the current installed base of Evosys but we are also jointly building a much more comprehensive digital cloud transformation program, which is not just looking at SaaS, but looking at an overall transformation in terms of platform, in terms of app dev, data, security, all of it. And that, I think, is a very strong proposition and will clearly elevate us in terms of winning much more net new logos for the Mastek core services also. The third point that I wanted to talk to you guys about was building a stronger integrated Mastek. In my few months that I've spent being a Mastekeer, I clearly see that we are growing into a meeting of hearts and not just a meeting of minds. It is an environment where we are really focused on not trying to adopt each other's -- or overpower each other but rather work with each other in terms of building the best of the best practices that we could, challenging each other, debating with each other trying to come back with the right answers in terms of how would we build the gen-next organization? How will we build the team that really looks at the future and is delivering to the future? There have been lots of various healthy discussion sessions. And what I can tell you truly from the experience that I've had so far, that we are clearly integrating at the highest common denominator, and we are looking at things in a much more open, transparent and dynamic format. The work culture that we are clearly building here will not only harness some of the best talents of the industry but will also look at grooming some of most world-class leaders that the industry will have. And I'm sure they will help us fulfill our high ambitions, but with a very humble and human touch. So to sum up, the Oracle Cloud business clearly and definitely continues to grow. And we, within that business, are now moving towards the next league of customers. The installed base market opportunity is definitely growing, and we have a 4x bigger installed base to service to go after. And as a joint company, we are clearly building a next-gen culture and next-gen integrated Mastek. So that's all from my side. Thank you, everyone. Back to you, John.

Okay. Thanks, guys. Appreciate the coverage in the call. Asha, we will then open for questions, if we may.

[Operator Instructions] The first question is from the line of Amit Doshi from Care PMS.

I just wanted to understand on the cloud migration business, which has really done well and which is expected to do well. In the current quarter, in the June quarter, what portion of it would be -- do you believe would be attributable to a spurt in demand owing to this work-from-home culture that has been built up suddenly, which probably many organizations may not have thought before? If something can be shared on that?

Yes. I'll let Umang give you more commentary. But I think what is driven is because COVID happened so quickly and lockdown happened so quickly, where you traditionally think there was going to be a cut on discretionary spending, it actually highlighted the gap in people's infrastructure, security, remote working. So I think that's where there's been a very quick adjustment, and people have seen the economic benefit, the operational benefit and the strategic benefit of moving to cloud. But I'll let Umang give you more detail about how much of that drove the pipeline, and therefore, the order bookings, if that's okay. Umang?

Yes. Thank you, John. So definitely, if you look at the last 4 months, the initial reaction was of shock and surprise, and it started with many people postponing their decision-making time. But as things have started to stabilize, as people realized, this will be new norm and as the work-from-home becomes mandate and as the requirement for a much more secure and remote and digital application goes up. The pipe definitely has moved up. We haven't had any closure already of such kind of rapid in-quarter kind of transaction because of this. Although most of the closures that we had in our last quarter was largely pipe that we already have -- had before that. So we were closing those businesses. And a good portion of those transactions, the customers did take their decision because of which we had a good order book in the quarter. However, as we move forward now, we are seeing many new opportunities, which would have been at a later part of the client's agenda, but are moving up in their agenda constantly. I don't have a quantifiable value in terms of how much this would be. But there are many opportunities that I can definitely assure you of which were not going to come up so soon but have started coming up much faster in the client's agenda in terms of transforming from on-premise looking at a digital cloud platform.

Umang, I'll complement your answers with a data point that will help folks on the call. On the Evosys business, roughly 70% -- 72% of the revenue is through cloud, whether it's cloud migration work or cloud support work. So that gives you an idea of the cloud focus or the recognition that this entity enjoys in the market. And it's very natural that every other opportunity that's coming our way is predominantly in the cloud space. What has happened over the last 3 to 4 months is going to accelerate that demand, and that's what fuels our excitement in this space.

Yes. Okay. Okay. Okay. In the press release, there is a mention that you're planning to hire trainees in triple digit. So just wanted to understand, so was this opportunity there earlier? And probably the Evosys, pre-Mastek, was probably waiting for this acquisition to get over and invest in there? Or it's because of the COVID that -- and that's why such a large skilled force is being planned to hire? So if you can just share your thoughts on that.

Actually, it's the business model at Evosys, where we hire trainees, train them and then deployed them on the project. It's predominantly, if you recollect, it's got a significant offshore component. It's had the repeatable and scalable model. And hence, trainees become a very integral part of fulfillment. So this is not the first that we are doing at Evosys. It was done earlier as well, and it is in same line, but it reflects the confidence in the business and the growth opportunities for which we need to create the fulfillment.

Okay. So it's part of routine. There is nothing special because it was a special -- specific mention in the press release, so I just thought I'll check. Okay. Okay. Okay. And vis-à-vis the cash conservation policy or selling more noncore assets to fund the growth, so where that capital would be required to probably, kind of, spread on more geographies or spend on -- or invest on more people, acquiring more skill set or something else, if you can throw some light on that?

Yes. I'll try and help you. All the above. I mean, if you want to grow your business in simple terms, you've got to increase your coverage, you've got to improve your order value that has got to go up, you've got to improve your win rate and you've got to expand your scope. And we need to put a lot more working capital into the business on all those aspects because the average order value for Mastek is going up. I think, as Umang quite rightly said, we've got a fantastic customer acquisition engine in Evosys with the cloud, but we need to take those customers on a journey for a customer for life, which is cross-selling, up-selling and account management. So it's skills, it's capacity and it is new markets. But the markets are big enough for us to deliver our plans. We don't need to find new markets. We just need to execute in the markets we've got, and that's going to need investment.

[Operator Instructions] The next question is from the line of [ Ravi Sundaram from Sundaram Mutual -- Sundaram Family Investment. ]

I just have 2 questions. Congratulations on a very good set of numbers. Sir, on Slide 13, my question was, it looks like you have added 48 clients in Q1. It was 436 last year -- sorry, last quarter, now it appears 504. So what exactly contributed to this addition? And how should we, as investors, look at this addition in terms of translation to revenue?

Okay. So 48 -- you're right, that 48 new customers were added during the quarter, and that's a healthy split across the geographies. 23 of those were out of U.S., 8 in U.K. and Europe, 6 in Middle East and 11 in the rest of the world, that is Australia, New Zealand, Singapore and India market, put together. And these are the customers who have -- who we have signed up, which we will be delivering over the next 12 to 18 months. So that represents the revenue potential or the revenue opportunity that's coming from these customers. And it's also a very healthy spread across the sectors or verticals, as we may want to call it, which also gives you the fact that the very basic reason why we acquired Evosys or we wanted to do this transaction was the customer acquisition engine and geography access to newer verticals and sectors. All of that is reflected in the account of 48 that you're looking across here. So this is good news for us as an organization, and it represents the revenue potential on a cross-sell basis apart from the first path being delivering the Evosys services and Mastek services in their respective customers.

Okay. My second question was on the cash balance. I think it has gone up from INR 81 crore last quarter to INR 173 crore this quarter. Did we have any one-offs that contributed to a significant jump? Because I'm looking at annualized, how much can the cash generation improve? That was the line of thought.

So first thing is that this is the net cash. The gross cash is much higher. And this is on account of the collection effort and a very synchronized effort made in all the geographies that has resulted in the collections. There are no major one-offs to call out here.

Okay. Annualized, can we look at about INR 60 crore cash per quarter, cash addition -- net cash, I'm talking about? Or is it...

Yes, our business has got different -- different areas have got different cyclicality and seasonality. So kind of hard to just multiply it here. But this gives you a good base. You can do your discounting on these numbers.

The next question is from the line of Baidik Sarkar from Unifi Capital.

Abhishek and John, a very, very strong quarter execution, congrats to you and the team. A couple of questions, and if I can request, Umang to take this one, please. We understand the market for Oracle Cloud and ERP is doing rather well. And to that extent, as a service provider, we are a proxy, strategically. But how would you articulate Evosys is right together in this space? And what is it really in our proposition that adds to that? I understand you touched upon the transfusion IPs you've built in your opening commentary, but that apart, how exactly is your right to win?

So like I said, there are a few critical things that a customer looks at whenever they are choosing a partner. There are a few basic ones, which would be, have we done it before, are they really referenceable, can they bring us more right references to them, and we have one of the largest installed base of our cloud customers or references, 1,000-plus customers that we've already done it for. The IPs that you already touched upon, so do we have the tools and the resources that can deliver this? Again, with this experience, we've got people who've had more cloud experience and most of the competitors in the market out there. And they have also developed and invested and continuously invested in tools. But last and the most important one that I mentioned, which is our ability to look at the ROI that we can deliver to the customer, clearly and explicitly explain to them what is the value benefit that we are going to deliver and go to an extent of signing a contract which has a certain portion, say, 5% to 10% to 20% linked to that kind of an ROI and commit to that kind of an outcome that they will get by migrating to cloud. So once you put all of these together, it makes an extremely powerful proposition, and that's been one of our secret sauce of success so far.

Sure. That's helpful, Umang. I recollect the momentum phase successfully connected in May last year was significantly high, Y-o-Y, after the Q4 call. But then if I look at the order book, now it seems kind of flattish, maybe with a 3%, 4% uptick. So do you have a sense of the near term, is that still uncertain? Just wanted your sense of the very near term.

Well, on the -- sorry, was that on the order book?

That's right, John, on the order book.

Okay. Sorry. No, I think, what I will say is COVID -- people are working from home and some of our biggest customers, including the government, are working from home. So if you think, the simple answer is, we've had deferral and some of the deals have moved to the right. So I do expect this to make up the order position in Q2 and we balance out with a good strong first half order position and then we pick up momentum in the second half. So it's not a deferral -- it's more a deferral than a cancellation or losing projects.

John, it's helpful. Abhishek, the beat on your other income has been quite significant. If you could help us split the INR 17 crore between your rental and other income?

So 3 components here, Baidik: treasury income, rental income and you've got an R&D credit for the work that we do in U.K. So possibly 60% of this total number is on account of R&D credit, and the remaining 40% is on account of redeemed treasury and clientele income every quarter.

The next question is from the line of Madhu Babu from Centrum Broking.

On the U.K. government, could you talk us about what is happening on the NHS and home office? How the ramp-ups are going to happen in these accounts?

Yes, with pleasure. I think, first of all, I go back to the government decision-making process or their ability to make decisions has absolutely been impacted by COVID. Insofar, they are working from home and the infrastructure doesn't support it. So I'll start with -- if you think about being a government customer and the process they went through 6 months ago, a government employee would go to a government building, switch on a government computer and go on to a government secure network and application. So -- and they have all their sign-offs and their approvals always within that private cloud or government cloud. Now they are all working from home. So it naturally puts the delay in the system and the process. So that's where delay in just velocity getting deals out is impacted. Regarding the home office, we bridged some of the -- so what they have done is, they have just bridged some of the contracts for the rest of the calendar year while they go through bigger procurements for the next 3 to 5 years. So we do expect deal flow to be a bit like a hockey stick in the Q4, Q1 next year, because what they have done is given us some bridging contracts just to keep the teams in place while we're at work-from-home. The key for our government business and our health business here in the NHS is broadening our customer base and deepening those customer relationships. So I think we've always said NHS, we've been there for a long time, we've built credibility, and we are continuing to grow that business because we are seen as reputable, trusted, easy-to-do business with. In the home office, we went in with our IPT project that we then expanded to the biometrics project. Those have all scaled up. We've inserted in the MOD, I think it was probably 18 months ago, 2 years ago, that is starting to be a material contributor to the business. So the key is winning new departments and basically replenishing that conveyor belt. And also the mining of those accounts of the NHS, the home office, the MOD and some other accounts that will come in line or come on stream in the next few quarters, that is the bedrock of the growth. But again, although it's our crown jewel, we're still a rounding error in how much addressable spend the U.K. government does on digital. So there's a plenty of headroom to grow. And the nice thing about the U.K. government, they have very strict payment terms. So it's not a -- we're not tying up working capital. This is -- they are paying within 30 to 45 days. So it's a solid customer, good growth potential. We've got a good reputation. It's now about just executing that, which is why, as Abhishek said, the acquisition of Steve Latchem coming into the organization, gives us a little bit more scale. We are also working with a gentleman called Rob Shore, who used to be the NHS Chief -- Deputy Chief Executive. So he is being retained by Mastek to give us some more health attributes as we scale the business. So the bedrock of our growth from the old Mastek will be around the U.K. government and the U.K. health, and they are solid, but there's plenty of headroom to grow.

Yes. I guess one more on the cross-sell. I mean, let us assume -- I mean how many of the Evosys clients would be -- where we can potentially do multiservice? Because there will be a lot of tail accounts when you say 1,000 customers. And how is the incentivization happening for the Evosys sales team to pitch in Mastek as well? So how the sales will be incentivized for the whole process?

Yes. And I think that is what I call the -- I think we used, when we did the acquisition, 1 on 1 is got to equal 3. And I think a lots of acquisitions, 1 on 1 become 1.5. So we've had a very clear pillar 1, pillar 3, and pillar 2 is the cross-sell. So I think there's a -- you've got -- if you think about it -- excuse me, whenever you put in a new infrastructure or application, it creates opportunity because you've got to integrate it with your legacy applications, and it creates opportunity for analytics, for BI, for automation. So I think where Evosys used to be very good at doing implementations of cloud, they can now stay in that customer and help that customer go on this digital transformation journey and become a more valued customer. So in simple terms, we increased the scope of services we can provide to that customer, which means our revenue goes from a transactional more to an annuity-based as we move with that customer for years, not just for 2 to 3 quarters as we implement. So that's the strategy. And as I think Umang said, the logic is very sad. It comes down to people. So the Evosys salespeople are basically incentivized, and there is a financial incentive to drive that behavior. But it's also, they are -- as Umang said, they are skilled at selling cloud migration around ERP, HCM, supply chain management, whatever the application, and we need skills of how do you sell Mastek digital services. So it is a different experience base. But we are -- at the moment, we're running 2 sales, but both are incentivized. But it's about combining skills and combining reach, not about sort of turf war and fighting, but there is a financial incentive to drive the right behavior. I don't know if that helps to answer the question, Madhu?

The next question is from the line of Sachin Kasera from Svan Investment.

Congrats for a good set of numbers. Just one question on the other income. So Abhishek, you mentioned that almost 60% is from R&D incentives that you got. So is that our sustainable number? Or is it like a lumpy number, which comes once in a quarter or once -- one quarter in a year?

Yes. It has 2 components to it, Sachin. The first one is that it's equated through the year. And the second part of it when it gets adjudicated. The Differential comes in whenever it gets decided. So this kind of number would be once a quarter -- I stand corrected, once a year.

So for us, in terms of -- for the full year, what is the type of this R&D incentive we should build in? It's like INR 15 crores, INR 20 crores for the full year?

No, it won't be of that order of magnitude. Usually around INR 12 crore to INR 13 crore. It's a function of -- it's not a function of -- it's not an assured number, Sachin. It's based on the type of work you do, and you have to go through a very clear accreditation process. It could very well be that in a flat year, you could have done more of those works which qualifies for it vis-à-vis a growth year where a lot of work would not qualify for it. So there is no clear arithmetic to it. Having said that, over the years, we have definitely had a good traction on this one.

Sure, sure. Second question was on the cash that you're expecting from this Majesco transition. So one is that the number that have you mentioned, we will have to pay some taxes on that or the -- we have some tax benefits because of which we will be able to monetize the entire gain?

This is the way it is structured. This is the net number. We don't incur any taxes on it.

Okay. And now that the cash balance will go up significantly post this money coming in, are we looking at any sort of further acquisitions? Or are we looking at increasing the dividend payout ratios going ahead?

I think we have a healthy dividend payout ratio, Sachin, but the first target obviously is around $36.5 million worth of debt that's there on the balance sheet. That is the first port of call, followed by the fact that acquisitions, though not on the horizon, we are looking to consolidate and build on what we have right now. But it's never say never because if there is an exciting asset out there, that's something that we need to invest in, then we would absolutely look at it. Having said that, there's nothing on the horizon. It's about navigating the COVID, repaying the debt and maintaining consistency in these environments.

Just one -- last one question on DSO. So where we stand as on June you think it can sustain, it will go up or you think there is further room for improvement as far as DSO is concerned?

DSOs are at a very healthy level of 71 days. My sense is that it will flex between that 70 to 80 range, barring any unforeseen event.

Okay. So we are almost at the lower end of the range already?

Yes.

The next question is from the line of Vaibhav Badjatya from H&I Investments.

Sir, on the broader theme of acquiring Evosys, which is cross-sell potential, this ERP cloud implementations or on-premise implementation business, we have seen in a couple of other cases as well, for example, KPIT, they built this ERP business for a long, long time, hoping that they will acquire customers through this method, but ultimately, it didn't work. So just wondering whether it is -- whether we should focus on customer acquisitions or selling our capabilities? And I mean, what do you -- why do you think that if other company is not able to do it, we will be able to cross -- to client's based on just customer acquisition philosophy?

Yes. I think it's a fair point about acquisitions, and I think we've been very clear with our M&A strategy. You cannot buy your way to success. You've got to operate and integrate, but acquisitions can accelerate that. So why did we look at Evosys, because if I look at Mastek's history, we came from a very indirect sales model. And over the last 4 years, we've built a more direct go-to-market. But it's -- you've got to go with a compelling proposition, as Umang said, and you've also got to sell in a market that's already buying. And I think that's where the cloud migration is of its time. So if we are too conservative and we don't fuel that growth, as the market expands the cloud, we will be very narrow, very deep, but very narrow. And I think if we want to meet our aspirations of being a true midcap, I think we need to broaden our base, which we've set strategically for a number of quarters or a number of years, and we need to deepen those relationships, and basically take more customers on what we've done with the U.K. government. You have an insertion, you stay with them, you implement, you build your reputation, you expand. And that means, as we go forward, we have a real solid base for any economic eventuality of growth market, declining market. And I think that's where we're at the moment is we've got a robust business because we've got some very nice client segments in U.K. public that are well, they are growing and they are paying. But I think as we go forward, we need to broaden that base. Why will we be successful when every other company hasn't? I think that's -- it comes down execution, as I said, because we brought the companies together it doesn't mean we will be successful. But integrating them, working as a team, going back to some of the questions about incentivizing the right behavior between the 2 organizations, and both organizations looking at the bigger price, not the short term price, I'm confident we've made a good start. But I think the only success we'll have is when we've driven the value add of 1 and 1 making 3. But of that I am confident because I think we know why we're doing it. This is complementary and it gives me more coverage. It allows me -- both companies to increase their order value. I think it increases our value and our win rate. And I think to a customer -- through a customer's lens, we're seeing as providing more scope, and therefore, we've got more value to them. So that's why I'm confident this is working.

[Operator Instructions] The next question is from the line of Mohit Jain from Anand Rathi.

Sir, first is for Umang. Like what was our revenue rate last quarter for Evosys?

Mohit, Umang has had another call to attend to.

But do you have this figure?

We are right at the top of the hour. I can help you with that. We were circa $16 million, give or take, for the last quarter for Evosys -- on a consolidated basis services, like-to-like.

$15 million has become $18 million, is it?

$17.5 million. So roughly 8% -- 9% -- 9-odd percent quarter-on-quarter growth is what we are looking at.

Perfect. And second, sir, when you say cash balance, this is received -- money to be received from Majesco stake sale?

Yes, yes, this is as of date. This is not -- this is 30th June number.

Next question is from the line of Nirmal Bari from Sameeksha Capital.

My question is on the EBIT margins or the segmental margins in the Middle East business. So last quarter, we reported around 26%, and that has dropped significantly this time to around 11%. So what has led to this?

Nirmal, I assume your question was on the segmental profit of Middle East? Because I couldn't get that question completed. Okay. So on that simple one, last quarter was a very truncated view of the numbers. And as a result, a lot of factors were not reflected there. What you see here is a better reflection, though it is a little bit muted but our sense is that it is closer to early teens on a stable basis.

The next question is from the line of Sarvesh Gupta from Maximal Capital.

Congratulations on a good set of numbers. Just one broad question. From your commentary, I think I gathered 2 things. One is you are saying that $50 million should not be considered as a high watermark, but should be considered as a base from which we can build in. And secondly, you have also written that there are some pricing pressures that we are seeing. So broadly on these 2 points, what would be the broad guidance in terms of revenues and the margins going forward for the business in totality?

Yes. I'll let Abhishek give you some, not guidance, but what are we endeavored to hold. But I think it is -- as an organization, there's absolutely no point celebrating $50 million. It's a milestone on somewhere. And if I look at the market potential for us, particularly in the U.K., government of the U.K., health and the cloud migration, these markets are starting to really move. So we've got to capitalize on that. And I think if we're too conservative or too complacent, that's a real worry. We have to compete for every dollar, and we will. But I think our mindset is, we want to build something, we don't want to celebrate where we are. Pricing pressure is -- that's the natural consequence of a recession, it is everybody gets tighter and it flows through the supply chain, and we're seeing it in all our accounts. However, I think in both Evosys and the Mastek, there is a great opportunity to leverage our operating model. So we can do -- a lot of our revenue comes on onshore. We can take a lot of that business offshore because we're now seen as a trusted partner. And customers are starting to look at things they never used to look at, are now relevant. They didn't use to work from home, but now companies are putting 100% of their people working for home. They didn't use to like offshore delivery. Look at the economic reality. That's a really viable option if you've already got the confidence that you can get the same quality, productivity and velocity from your digital services partner. So I think we can manage the margin pressure that we will come under from a pricing perspective because we've got a more dynamic operating structure. But yes, I expect us to hold our revenue. Now what's the trajectory we're going from $50 million? I'll let Abhishek give you more commentary on that. But I'm confident we have pipeline, we have market access to support growth. And the margins, there's no point -- it's taken us a long time to get predictable margin control and revenue control in the organization, put the systems in. We are not going to let that go. So I think we will endeavor to maintain our margin quality as we grow the business. But I'll let Abhishek give you a more sort of detailed point.

Thanks, John. I guess you covered it all. We don't delve in the forecasting or guidance realm, but yes, this is the base. And as the audience on the call have seen and heard, the order backlog is robust. The 12-month order backlog and the last quarter order booking both have been fairly robust. So that gives us the confidence that we will be able to build on that. Having said that, in the Q4 narrative, we did share that we expect this year to be flattish for the organic business and a healthy growth for the inorganic business. So put together, that should give our audience an idea of net-net, it is going to be a growth with better quality of earnings. That's reflected in the Q1 performance.

And Abhishek, on this INR 134 crore Evosys number for Q1 FY '21, what part of Evosys business, which will come through demerger, is not included in these numbers? Can you just quantify that number? And if possible, the EBITDA margin for Evosys business?

It's 100% India. It was last quarter where we had a truncated part of the business in our numbers. In this quarter, 100% of the Evosys business is consolidated.

The next question is from the line of Ashish Kacholia from Lucky Investments.

Congratulations to the team on a good set of numbers this quarter. I heard that Evosys had added 40 clients in this quarter. So I must imagine that the size of these transactions would be very small individually, maybe $100,000, $200,000 kind of number. So I just wanted to understand what has been your initial track record of converting these into more mineable client accounts?

Yes. And you're right. Your analysis is right. An Evosys typical sale starts in the $150,000, $200,000, $300,000 region, and it's a point solution. Either it's a human capital management system or a supply chain management or an EBM. Whatever it is, it's a point solution. But it's an enabler for other things. And that's where we've got to make sure that the cross-sell, we stay in that customer and we grow. So I think it is about how we use that insertion and build on it.

So any track record that we've been able to kind of convince ourselves that these clients are mineable for further business? Because I would assume that clients have already given out most of the work to the larger Tier 1, Tire 2 kind of players. So it would be very difficult for us to win incremental business.

It is, but -- you are right. But it comes -- so if I look at the evidence, we've been in a -- typical sale will be, say, $200,000. If we don't talk about how we then take them on a managed service, we do our analytics, on BI. We are -- they are going to do that work with somebody. Why not do it with the same trusted partner that did the implementation? Who knows more about cloud than anybody else? So there is a logic. What we've not been doing historically before we got together was having that conversation. So it wasn't an option for the Evosys old customers, it is today. To give you an idea, just on -- Ashish, to give you the idea, okay, well, if these customers -- the average order value is, say, $200,000, how do you scale it up? If I look at some of the cross-selling, the deal that we closed was about $4 million. So because you're increasing the scope, the insertion may still be $200,000, $300,000, but the opportunity built on that platform is in the millions. If you look at the color -- and Abhishek has the absolute number, but I think of those, something like 20 of them were multibillion-dollar companies. So they do have the budgets and the disposable income to invest in digital. Now ours -- that's the logic. Ours is making sure that we -- the positive experience they have with the cloud migration, they then stay with Mastek and they do the analytics. And so it's all about execution. Pipeline looks good. First order, $4 million. But you're right, the key success is how many of those $200,000 deals can we take on the journey of a Mastek customer for life.

This $4 million deal is some kind of a -- I mean, have you disclosed the name or the sector or kind of...

The sector is, it's a multinational engineering company. I'm not too sure if we've got permission yet to share the name, but it will become public domain in the next few weeks. So it's just timing, Ashish, is why I'm not telling who it is. But it's -- on the back of that, we also can see sort of 2 or 3 other in the pipeline of that region, $4 million to $5 million.

But that's a significant number for a company of our size. I mean $4 million, $5 million deals, if we start winning on a regular basis, that can be huge.

Three years ago, we would -- it was beyond our dreams. Now it's only $3 million or $4 million, why can't we get to $10 million. So that's where we are on our journey.

Yes. I think -- and this is the only 1 deal that we've been able to convert from the $200,000 to a $4 million to $5 million kind of a situation?

No, no, that's the biggest. We've probably done around $5 million or $6 million. We're still in the infancy. Again, we have quite a disciplined integration of column 1; Mastek core services, who got to continue to grow; column 3, Evosys implementation has got a -- this is in Column 2, which is a discrete segment. But it's getting traction. It's about how we build on.

The next question is from the line of Kaushal Dedhia from Standard Chartered Bank.

I just wanted to understand on your backlog. Out of $101 million, how much would be from the Evosys business? And how has that grown from Q4?

Yes. So I think the ratio is a little bit improved in favor of Evosys given the win that they have experienced in this quarter. So I would say roughly around -- it's in the 55%, 45%, is the breakup of that number we can look at.

So 55% is Evosys, if I'm right?

No, 55% is on the Mastek side, 45% is on the Evosys side.

The next question is from the line of [ Ashish Das ] from Sharekhan by BNP Paribas.

Thanks for the opportunity. Abhishek, I just wanted to know the...

Ashish, can you be a bit loud, please? You're not audible clearly?

Is it better now?

Yes, please. Go ahead.

Abhishek, I just wanted to know the profitability side. See, if I see the segmental breakup, I can see that U.K. has reached 20% margin, which is kind of highest in the last few quarters. And you are saying that [ local hires ] would be there and that Evosys margin would be around mid-teens. So what kind of -- is there any scope for the improvement or in margin or moderate than expected from these sites?

Thanks, Ashish. I think the biggest point, we want -- I want to draw our attention of everyone is that the margins have got the pushes and pulls of the macroeconomic environment. And as I mentioned in my brief, the first one is that you've got projects ramping down, you've got people on the bench, you've got revenue pressure. And on the other side, the cushion is coming from the variable expenses coming down significantly, especially around travel, hospitality and stuff around that. So the margins have to be looked upon from multiple directions. I would say that the consolidated view that we are looking at right now or an indicated number of Mastek inching towards the 15% operating EBITDA and Evosys around 20%, 22% mark this quarter. If I use this as a reference, both sides of the businesses have had a good 50, 75 bps favorability coming from the macroeconomic environment. Having said that, the numbers that we are looking at right now on an aggregate basis, that's the range that we feel comfortable with, Ashish.

The next question is from the line of [ Ram Bhatt ] from ICICI Direct.

Most of my questions are answered. Just wanted to know 2 things. One is, what is the time line for your -- do you have any time line for debt repayment? Secondly, is the Evosys organic growth sustainable? And Evosys stand-alone margin, I just wanted a clarity, is it 20% -- 22% or 20%?

So margins are always in the range. One quarter or one swallow doesn't make a summer here. So obviously, I can give you a number, but that will get impacted over the period of time. So it's a range, and we stick by the range. I missed your first question. Was it around the debt repayment schedule?

Yes, any time line on the debt repayment?

Okay. So the standard term loan schedule is 1-year moratorium, 4-year repayment. And as we feel comfortable, we'll keep paying off as we did last quarter with $6 million.

It's cool. And what's the Evosys organic growth? Is that sustainable? That you have said it's 9% this quarter on Q-o-Q basis. Do you think it is sustainable on a quarterly basis?

If you look at our business from a very, very myopic lens of only growth, so growth is the only direction, either 6%, 9%, 7%, 20% overall. Can't comment on that. But yes, it is growth, and there is tremendous market opportunity in which Evosys enjoys very good reputation.

The next question is from the line of [ Jatin from Alpha Capital. ]

Congrats for a good set of numbers. Sir, my first question would be on, again, dwelling on the margins because Evosys is growing faster than our Mastek-based business, and you see there is higher margin. So can we expect this 17.6% this quarter to even improve from here?

I think I answered that question. It's a classic case of "Dil Mange More." Doesn't matter what we deliver, there's always a desire for more. What I've -- what we have outlined is a sustainable EBITDA margin after which -- beyond which we will invest back in the business. This is not about maxing out on the EBITDA. This is about sustainable business and accelerated growth. So after anything beyond our threshold, as we generate, we'll invest back in the business.

Sure. Okay. And sir, my last question would be on this -- dwelling on other income. So you're saying some part is one-off a kind of thing. So can we -- even in this quarter as well as last quarter, both quarter, other income was close to INR 17 crores. So how much can we expect going forward?

Barring one-off, I think we are in a healthy zone of INR 7 crores to INR 10 crores of other income.

We'll take the last question from the line of Sachin Kasera from Svan Investments.

So basically regarding the acquisitions that you mentioned, you may still look at those acquisitions. So they would now more be a small type of acquisitions, which we will be more building some capability around specific needs? Or are we still going to be looking -- if we still get -- you mentioned that you will be looking at something very attractive. But if something attractive and big is available, are you still have hunger for a big acquisition?

So I think as Abhishek said, how we -- our capital allocation will be looked at, but I think -- let's be pragmatic. We acquired a company 2 quarters ago, and we're in the integration of that. And that was a big acquisition for a company. And it's the capacity to digest and to integrate and to extract the value. My philosophy is very simple. You don't grow because you buy a company, you grow because you buy capacity, capability and you've got to operate it. So we're still in the early days of that integration. And I will say it is going well, and we are cautiously optimistic, but let's not celebrate too much. So that being said, 2 quarters ago, nobody knew about COVID. And I think COVID will have a profound impact on the market. So there is a logic that maybe certain companies need the stability of something like a Mastek, and that -- we'll look at that through that more of an opportunistic lens than a key strategic lens. But at the moment, a big acquisition is not on my radar. It infills to give me complementary skills, services and capacity will because if it accelerates in our core business, it's a good use of capital. If it diversifies me into markets, I'm not -- I've not got critical mass, we won't do it. So it's -- I think while we're in the impacts of COVID, we are not going to M&A our way to the midcap. We're going to operate our way to the midcap. But we may -- to your point, we may have some infill acquisitions, just to complement out what we do.

Superb, that's very happening. Just 2 small data questions for Abhishek. One, what was constant currency growth for Mastek? And secondly, on the tax rate, how do we see this year and the next year?

Constant currency, we were flat quarter-on-quarter, around 0.5% degrowth. So I would say, it's practically flat, 1% in INR terms. Tax rate would be in the same zone of 22% to 23% ETR.

Okay. So this quarter, I think the tax rate is quite high?

Yes, that's for the one-off event that we have made provisions of.

For the full year, we can look at 22%, 23%?

That's right.

Ladies and gentlemen, that was the last question for today. I now hand the conference over to the management for their closing remarks. Thank you, and over to you.

Okay. Thank you very much. I hope you get as much confidence ahead of these results as we do. But I think it's confidence, not complacency is the word I'll leave you with. And we have a philosophy in Mastek that every quarter we reset back to 0, and that's where we've got to be. To the point, $50 million is not the high watermark, it's the baseline that we've got to build from. Our earnings quality is the baseline we've got to build from. I think the other thing is, let's not get too carried away. COVID is still having and will continue to have a profound impact on our business, on our economy and on our people. And there is massive economic fragility in the world, and we have to operate with that. But I think we do have a very good plan in our cuts and growth. And I described this as it's a bit like antibiotics. You take a treatment, as soon as the symptoms die off, you don't carry on -- you don't stop taking the treatment or else the symptoms come back. And that's where we are with COVID. We said it's a first-half phenomenon. That's our hypothesis. We will cut and we will grow and repurpose, and that's what we're doing. We are not through the woods. I think we've had a good quarter, and I have confidence in Q2, and I have confidence in the second half. But let's not forget, COVID is having a profound impact. So we will grow. We have certain recovery in the U.S. and the U.K. private that we've got to execute. We're trying to build elasticity into our cost structure. But that planning for growth is not going to come at the expense of margin dilution. And let me -- although we've just had cash in the bank, we are going to continue to be overhead averse because we -- the market is going to get a lot more competitive. So we've made a good start. I think we're managing COVID probably better than many companies because we're a lot smart, a lot sort of more agile and we can navigate, and we are not as exposed to some of those segments as other companies. Acquisitions. Yes, if it can complement the core business and mean we grow quicker, that's the right way to allocate our capital. But we're not buying -- we're not going to buy a company to get us into new markets if it's not got synergy with where we are. So good start. And as Abhishek says, one swallow does not make a summer, but it comes down to execution and everything. And we're confident we have the plan and we have some momentum for Q2 and the rest of the year. So with that, we thank you for your questions, and I wish you stay safe. And we look forward to engaging with you in the coming weeks.

Thank you very much.

Thank you.

Thank you. Ladies and gentlemen, on behalf of Mastek Limited, that concludes today's call. Thank you all for joining us, and you may now disconnect your lines.