Mastek Limited (MASTEK) Earnings Call Transcript & Summary

Ladies and gentlemen, good day, and welcome to Mastek Limited Q1 FY '22 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 Advisory India. Thank you, and over to you, ma'am.

[Technical Difficulty]

Ma'am your audio is breaking.

Faizan, I think I'll take it. I think there's some issue with her line. Can you hear me?

Yes, we can hear you, sir. Please go ahead.

Yes. I think -- sorry about that. I think let me do the introduction. Thanks, Faizan. Good evening, good afternoon, good morning to wherever you're logged in. Welcome to the Q1 FY '22 earnings call of Mastek. The results and presentation have already been mailed to you, and you can also view that on our website at www.mastek.com. In case anyone does not have a copy of the press release and presentation, please do write to us, and we'll be happy to send the same to you. To take us through the results today and answer your questions, we have the top management of Mastek represented by Mr. Ashank Desai, Vice Chairman and Managing Director, Mastek Limited; Mr. Hiral Chandrana, Global Chief Executive Officer of the Mastek Group; Mr. Arun Agarwal, Global Chief Financial Officer, Mastek Limited; Mr. Abhishek Singh, President Designate, U.K. Business of Mastek; and Mr. Umang Nahata, Co-Founder of Evosys. Ashank will start the call with a brief overview of the quarter, which will be then followed by Hiral, who will share his experience joining Mastek. Arun will then give us the financial update. Abhishek will talk about the business update about U.K., and then Umang will kind of round it off with the update on the Evosys business, post which we'll take the Q&A session. As usual, I would like to remind you that anything that is said on this call that reflects any outlook for the future or which can be construed as a forward-looking statement 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 mentioned in the prospectus filed with SEBI and subsequent annual report that you'll find on the website. With that said, I'd now hand over the call to Mr. Ashank Desai. Over to you, Ashank.

Thanks. Good day to all of you to be present on this conference call. We -- you already know the people who are present here. Specifically, I would like to welcome Hiral Chandrana, Global CEO, joined us on July 6. He has experience of around 14 years in Wipro, where he ultimately was managing $3 billion business, which he moved into digital in a big way. And before that, another 6 years in EDS, which became part of HP. I just was looking back to the quarter, and I must say that I'm extremely happy that it is one more step in our journey to become a major digital transformation player from India for the global market. The journey, we started, of course, 4, 5 years ago, when we were 1/3 of our size probably. And the journey is very satisfying. If I look at this quarter, of course, I will look at it only year-on-year numbers because that gives a good comparison, for first time, it is without any impact of the acquisition numbers. So year-on-year revenue growth constant currency is 27%, industry-leading number. Profits have grown more than 70%, 72%. The order backlog again grown at 54%. And our pipeline is exceeding all these numbers, in fact. So it's very satisfying to see our annual -- first quarter to move in the direction that we want to move ahead during this quarter, next 3 quarters and years ahead. So I'll spend very quickly what we are doing to make that happen. There are 3 things that we are doing to make that happen. One is build our capability to deliver this digital transformation results. One of them, of course, is to hire a number of people. We have added close to 520 people this quarter, which is almost half of our total addition last 1 year and also almost 12%, 13% addition to our existing staff. But more importantly, we are building digital capabilities of all these people by training them. We have created a training engine to make it happen. And that is really important input for our future growth. We are doing that with additional investment in delivery organization to build practice lines and so on. The second part which we are investing to build the growths of tomorrow is building the leadership. We have built new leaders in our delivery organization, building practice lines under the delivery organization, building technology capabilities under delivery organization, new innovation organization, and also CIO organization to make us digital. Of course -- and it ends with -- this quarter with Global CEO, Hiral, with his great experience in digital and his leadership, we are looking ahead. And the last point on building the organization for tomorrow is about building the marketing sales engine. We, of course, acquired Evosys business, which itself is growing fast, but what is more important is we are adding customers 40, 50 every quarter, which we were not doing before this. But what is more important is to build an engine to convert this into a much larger customer business through digital transformation offering. And that is what has happened very well this quarter. We have more than 10 customers who are already doing in that journey and many more to count. So we are fine honing his ability to what we call cross-sell and co-sell. One good example of it is this $6 million account that we got in Europe, which was jointly sold by the team, Evosys and Mastek, and we would not have got it otherwise. So these are good examples of synergy. So building capability, building leadership and building synergy. That is what we want to invest throughout this year, so that we move ahead and be ready not only for next 3 quarters but next few years. So I'll stop here. I'll pass it on to Hiral. Hiral?

Thank you, Ashank, for the welcome as well as warm introduction. Good day to all. Given it's my first time since joining Mastek, let me share a few thoughts for the short term as well as for medium term and beyond. First of all, I'd like to thank my leadership team, some of them are on the call today, and the Board of Directors for making me feel at home. In my first 2 weeks at Mastek, it's been action-packed, to say the least. Also, I want to take this opportunity to thank our customers for their trust in Mastek and the 4,300 now Mastekiers across 41 countries for executing successfully in these challenging times. As Ashank mentioned, I have significant experience in the U.S. market. I have been in the U.S. for about 26 years, 14 of them have been in Wipro. Last 10 years, I've been handling global P&Ls, global large businesses across different industries, across different service lines and digital services. I'm very, very pleased to see the depth of experiences in Mastek as well as the strong value system and the governance practices. As many of you know, Mastek has got an amazing history for delivering innovative business solutions over the years. We have strong customer satisfaction and advocacy, but many of our customers have also evolved in the last 1 year during this pandemic time. So in the next 60 days or so, I plan to interact with as many existing clients as possible, either virtually or in-person wherever appropriate. As you also know, 80% or greater than 80% now of our business is in cloud and digital. So we have a fantastic foundation to scale in this digital transformation wave. And Ashank very well summarized some of the investments that we are making. Under his leadership last couple of quarters, the leadership team has created a very solid 3-year strategy. Over the next 2 months, we'll work to refine and strengthen that a little bit, particularly as it relates to pan-Mastek, cross-Mastek global initiatives with a very rigorous plan to execute on that strategy. Shifting to H2 and beyond. Given the size of the U.S. market, all of you know the potential, so I won't speak about that much in terms of market size, but we believe there is significant untapped potential for accelerated growth in the Americas across different industries. We're seeing some very good diverse wins already. Just 2 or 3 different dimensions to that. Ashank mentioned about the cross-sell and some of these larger deals with Evosys and the broader Mastek services. One of the media companies we have recently won, where our solution included a Salesforce customer CX front-end, integrated with an Oracle back-office cloud, which is a great example of our joint strategy yielding results. The second dimension is betting on a few verticals. While in the U.S., we have strength in retail and manufacturing already, we see health care and life sciences are the key industry vertical where we've already started winning deals. So the life sciences, medical device customer, where we have a customer experience when recently as part of our D2X strategy. There's another health care group consisting of nurses, therapists, where we provide quality care to the local hospitals and health care agencies. So some really great examples of wins and momentum in the health care market. Now looking at globally, we definitely have an intent to penetrate the Fortune 1000 customer market in a big way. It's not going to be easy, but we have some elements that are already in place. And over the next few months, we'll put and strengthen that together, along with our partnership ecosystem and some of the investments that Ashank alluded to, to get more penetration in the Fortune 500 and Fortune 1000 customers. Abhishek and Umang will cover the U.K. business as well as our Oracle Cloud business, but I'm particularly excited about the private sector progress in U.K. as well as some large deals that we are closing in the Oracle Cloud Services, including what we call a Day 2 services in the implementation -- post-implementation and managed services area. As we look ahead in the medium term, we have a great opportunity to engage with our customers in different engagement models, different outcome-driven models, engaging a mobile workforce, leveraging more AI and automation in our services. So all in all, very excited about the unrealized potential at Mastek. Over the next few days and weeks, I look forward to interacting with many of you. Thank you again to our investors and analysts who have supported Mastek through these years. I'll now turn it over to Arun for financials.

Thank you, Hiral. A very warm welcome to everyone on this call. Extending from what Hiral and Ashank mentioned in terms of the business and the outlook in terms of what we want to create Mastek as an organization, let me take you through very key highlights of this quarter's financial performance. To be specific, our operating revenue for this quarter stood at INR 516.5 crores, which is up 6.9% quarter-on-quarter and 33.8% year-on-year. If you split in terms of geographical segment, you will notice our U.K. business has grown by 43.8% year-on-year and 7.3% sequentially. U.S. revenue has increased by 20.1% year-on-year and 12.2% sequentially. Middle East is lowered by 4.3% quarter-on-quarter and 19.5% year-on-year, while APAC and other segments have grown up by 7% quarter-on-quarter and 30% year-on-year. So if you notice, growth in U.K. and U.S. is driven by both digital services and also Oracle ERP cloud services, while Middle East degrowth is more driven by [indiscernible] of certain contracts due to higher sickness and travel restriction to get resources onshore, while APAC growth is driven by Australia and other South Asian countries, where Oracle ERP implementation is getting strong traction on the back of [indiscernible] which Mastek is able to deliver outcomes to our customers. In terms of operating EBITDA for the quarter, it was at 21.8% versus 21.9% in the last quarter, reflecting 419 bps improvement year-on-year. PAT stood at INR 80.2 crores, up 6% quarter-on-quarter and 72.2% year-on-year. Our gross cash stood at INR 960 crores versus INR 849 crores in the previous quarter, while cash net of debt stood at INR 703 crores versus INR 589 crores at the end of 30th June 2021. We added INR 115.4 crores in our free cash flow, which reflects 144% of our net income; strong collection and others which led to the growth in our cash and free cash flow for the quarter. During the quarter, we have added 40-plus new customers, reflecting 12 months order book at $158.4 million, which is up 54% year-on-year and 4.2% sequentially. Our headcount stood at 4,302 as on June 2021. As Ashank mentioned, it reflects 500-plus resource addition during the quarter. If I had to sum up all this mentioned number with the business, this is another quarter of consistent financial performance, which we are able to deliver on a year-on-year and quarter-on-quarter basis. One more fact to state that our year-on-year numbers are fully comparable as Evosys acquisition was completed and consummated in the quarter 1 of the last year. And hence, when we talk about year-on-year number, it's fully comparable. We are seeing growth across all the verticals and geographies where we are focused on as a company. Our U.K. government and Oracle implementation business continue to report healthy growth, both quarter-on-quarter and year-on-year. As we continue to invest in U.S. market and as Hiral mentioned about the opportunities out there and D2X and other strategy, we are seeing positive momentum and growth quarter-on-quarter and addition of new clients, both in retail and nonretail verticals. To sum up, if you find that the quarter has been positive, both from top line and bottom line perspective, our order backlog is strong, which is giving us quite a good lead indicator in terms of delivering the consistent growth. With this, I will hand over the call to Abhishek to take you through more in terms of business update, and we can pick up any specific questions which you have in Q&A. Thank you. Thank you for your support and trust in Mastek.

Thank you, Arun. Hi, everyone, on the call. A quick view of our U.K. and U.S. organic business. The organic business across these 2 geographies clocked a healthy top line growth. Our U.K. business grew by almost 31% year-on-year and right around 6% quarter-on-quarter as well in constant currency terms. Our focus on building enterprise business in U.K. has yielded its first set of results, as Hiral alluded to in his narrative. We acquired 3 new customers in the geography during the quarter and which included one very prestigious insurance client as well. Cross-sell and co-sell momentum has also gotten forward, especially with the new team there and a dedicated set of people working across the aisle to drive that forward. We were assigned a preferred supplier status by one of our large customers from which the revenue is expected in the coming quarters. If I move my attraction towards the public sector, public sector has maintained its traction with robust demand environment. The pipeline has grown at a very healthy pace in secured government business. The logos like Home Office and HMRC have added quite a few opportunities, and health care space continues to kind of drive that momentum. However, a marquee stuff there to note there -- to note is decision-making has been slow during the quarter, and we expect some major adjudications in the coming quarters. That said, we continue to solidify our sales engine, both in public and private sector. We added a few headcounts in both the sectors to increase our field sales force coverage. If I look at the U.S. business quickly, that has also come back into the growth mode with revenues growing right around 6% quarter-on-quarter. We added 6 new logos in the geography. And these are all from diverse verticals, including manufacturing, logistics and grocery retailers. We had outlined earlier as well that we want to diversify our client base out of the retail, and these wins reflect that trend. Cross-sell and co-sell continues to get traction in U.S. geography as well. Three new deals signed into the Evosys customer. [ Technical Difficulty ]

Ladies and gentlemen, the line from Mr. Abhishek Singh has got disconnected. Request you all to please stay online.

Maybe Umang can start and then take over from Abhi.

Yes, Umang, go ahead. Why don't you go ahead and continue.

Sir, the line from Mr. Abhishek Singh has got reconnected. Mr. Singh, over to you.

Okay.

I'm not sure where I got dropped, but just to quickly conclude on the point. I was talking about the U.S. business. Hopefully, we gathered some facts around the geographies performance that we have added new logos, revenues have grown and customers are coming from diversified verticals. Cross-sell and co-sell has also gotten good traction, and we continue to solidify our sales and pre-sales in the geography for increased market coverage. I'd like to conclude by sharing the fact that we have had good headcount addition as well in both the businesses, with 30% of those in the -- being graduate trainees to ensure that fulfillment continues to be seamless. And we would say that the overarching theme continues to be fulfillment and retention in the immediate term to ensure that the business and the growth remains unfettered. With that, I'll hand it over to Umang for his views from the Oracle side of the business. Over to you, Umang.

Thank you, Abhishek. Hi, everyone. Good day. Hope you're all doing fine and staying safe. So on the Oracle side of the business, it has been a phenomenal quarter, very eventful from various aspects. It's a quarter where we've had our highest value in terms of order book that we've ever had over the years of Evosys existence. And not only has those order book been in terms of volume, but also in terms of the size of these that we are seeing are significantly moving up. So the other deal sizes have been constantly going up, and this quarter is definitely a standout as far as that is concerned. We added 9 new customers who were in the million-dollar-plus kind of range, including 2 cross-sell transactions, one of which Ashank alluded to was around a $6 million-plus transaction out of Europe. Also, the general business trend in terms of focus and investment is continuing to grow. So we are seeing really good momentum. Oracle declared a really strong Q4 result. And a lot of that is also reflected in the way our business is currently shaping all around, all across in terms of the amount of new order book and the amount of execution and successful execution that we are delivering all across. We are also currently heavily planning in terms of our future and really building up the way forward. So our -- one of the most important initiatives for us right now is building up our team for the future, so building up our supply chain to execute the kind of growth that we are really delivering. We're looking at building a team of 500-plus new domain experts and graduates, who would be trained on the Oracle product and build a strong capability team from where we are today. On an overall basis, we are currently -- we continue to focus on the top 5 strategic agenda that we had shared out with you over the last few quarterly calls, and we continue to focus on those 5 agenda itself. The first, and I'll just recall and repack some -- reshare some status on those. So first was around delivering a value-based or an outcome-based delivery. We continue to invest on that particular program, and we are now targeting to move almost 15% to 20% of our installed base in this year on that kind of a program in terms of where we're delivering measurable outcome or value-based delivery to them. North America and Europe continue to be the growth initiatives and growth engines for us with significant headroom to grow. We have performed more than 100% growth in both these regions over the last 12 months, and they're looking for a similar growth over the coming 12 months in these geographies. And our investments and the whole approach and focus is aligned to that. The other big area for us that we are seeing growth in is going to be managed services or Day 2 services. We are calling it application enhancement services, which is where we are not just looking at supporting the customers that have been implemented by Evosys in terms of their transformation to cloud, but also looking at targeting customers, who have not chosen Evosys but have chosen, say, the big 4 or the big 5 consulting firms in terms of their implementation partner, but we see a good market for us to go back and win managed services business on those accounts and not just deliver lights-on kind of approach, but deliver continuous enhancement and a value-based delivery to them, too. So that's another area that we continue to focus on, and we are seeing good traction on that area. The next key strategy that we've been continuously evolving and growing on is around our verticalization. Hiral alluded to that we are looking at moving into the Fortune 1000 kind of market, and verticalization is our key approach to that -- to go to that market. Clearly, we have already organized many of our geographical teams within the geography to be vertical focused. So North America team is going to be completely vertical focused now. The U.K. team was always vertical focused. And therefore, we are not narrowing down on the top 4, 5 verticals that we are really going to invest in, and we see that we are going to move up the chain in these verticals: health care, life sciences, manufacturing, public sector, E&P, et cetera. The last and not the least is our SAP attack or SAP compete strategy, and that continues to have really great traction within the Oracle world, and we are very much renowned by Oracle as one of their top partners as far as the SAP compete business is concerned. And our pipeline on the SAP compete business continues to grow significantly, and we are hoping to see some significant wins coming out from that SAP compete market also as we move forward. So all in all, it is raining not just in India but raining in terms of orders and value all across the business. And it's a time to really invest, build up more capability and really deliver to the business growth that we are seeing here. So that's broadly where we are in terms of the Oracle business. And I'll now pass this back to Diwakar and Asha for the Q&A session.

[Operator Instructions] The first question is from the line of Baidik Sarkar from Unifi Capital.

Congrats on a great quarter. A couple of questions. Abhishek, first up, thanks for opening remarks. But how would you like us to understand with some greater degree of granularity the incremental digital spend you're seeing in the U.K. government cohort? And importantly, how do you think we're placed to increase our market share, given how tiny we might be in the scheme of things? You did cover the macros, but some granular tailwinds you're reading would be interesting to understand.

Baidik, thank you for your question. Absolutely, the U.K. public sector space is buzzing with opportunity at this point of time, the digital transformation opportunity within the government space. The government stated objective of digital by default and digitalization of the citizen services are ensuring that enough and more demand is coming in that direction. This is also coupled with the fact that certain customers like HMRC, in particular, have had a lot of 10-year GBP 1 billion deals or agreements coming to conclusion, which are now being fragmented and disaggregated and offered to niche and smaller players. So whichever way we dissect it, Baidik, the opportunity and the customers that we service are growing exponentially, and our stated strategy of deepening the customer relationship and widening the customer base. So these are the flavors on deepening the relationship. If I look at the wider customer base, there are identified departments, which are -- where we are making the pitch, and these are the ones, which are impacted by Brexit and they need to do a few things between now and 31st December to get the nation ready for post-Brexit world. So I would say that opportunity-wise, it's fairly rich and similar, I won't say it's absolutely same, but a similar trend is expected in the private sector or enterprise space as well where the competitiveness of the U.K. businesses have to go up to survive -- to provide the goods and services seamlessly to their international market, especially in the European space with tariffs coming in. So there too, there is a demand for digital services to drive in a degree of efficiency and hence, the competitiveness. So all in all, Baidik, I would say that the demand environment is robust.

Sure. Is there an indicative bid pipeline that you see materially up Y-o-Y basis? And the corollary to that question is, do you see increased competitive intensity because we see a lot -- great deal of vendors focusing on that exact cohort. So the opportunity pie might be large, but then the denominator might be increasing by the day. How would you address that?

Vendor competitiveness has not really changed. The landscape is pretty much the same. The large players and the niche players that we come across are pretty much the same. However, I would like to mention that some of the opportunities coming in, especially in the HMRC space that I mentioned about, these are -- this is one of the most sophisticated outsourcer. And it is used to being serviced by one of the most matured vendors, the likes of the absolute Tier 1s in the international market. So when those opportunities are coming up, the incumbents are trying to make it difficult. And the niche players like us will have to raise our game, both in terms of capability and capacity to address even the disaggregated chunks coming out of those contracts. That's the way we are looking at it, Baidik.

That's helpful. Umang, thanks for your remarks as well and I seem to ask this question to you every time around, which is, say, 2 years out, would you be concerned about maintaining this high-base project-related work? And the corollary to that question is, what's the services [ stroke ] annuity run rate within these space as things stand today in terms of numbers? And how do you see the nonproject revenue base evolving?

So Baidik, I think a part of the answer is there in the question that you've asked. So long-term view, I mean, of course, the transformation business is peaking and it'll continue to peak for the next few years. But yes, over a period of time, long term, I don't know whether it's 2 years or 5 years, there will be a space where the transformation business will gradually try to [ plateaued ] on unless there's some other transformation that comes up by then. But our plan and strategy is therefore to add more and more managed services or the application enhancement services to our kitty. The amount of application enhancement services that we are currently seeing in demand, it's phenomenal, primarily because of the fact that the products that they're implementing, it's not like you once implement and you're done. These are getting updated every quarter and the kind of technology change that we are seeing is phenomenal. So the kind of work that we are getting in terms of the enhancement and the maintenance of the application is consistently growing. And we are seeing those kinds of customers not only in our installed base but beyond our installed base also. So our long-term view is to keep adding that kind of application enhancement or managed services business to our portfolio. Currently, it is at around 30%. Our vision is to bring that to around 50% over the next 2 years. And that's the future that we're trying to see because the current -- all the customers that we're adding are not just customers for now, but they are customers for long-term future for Evosys and for Mastek. And through its application enhancement to add then as well as acquiring new application enhancement customers wherever they have not chosen us as their partner for transformation today.

Sure. That's helpful. Hiral, welcome to the fold. I'm sorry, I joined the call quite late. Is Hiral on this call?

Yes, it's Hiral.

Hiral, welcome to the fold. And so very broadly, how would you summarize Mastek's right to win in the North American market? And as a part of your immediate deliverables, would you have clarity on the practice lines that you'd like to build as in package implementation versus, say, peer services? How would you like us to understand your focus areas in the short to medium term?

Yes. So there are 2 parts to that question. The right to win. Let me take a step back. There are elements of digital services around what Mastek has been delivering for customers, as you know, over the years. I think that's still a core part of the AppDev digital transformation that customers are going through. Over the last year, as you know, through this pandemic, many operating models have changed with the digital commerce initiatives that our customers are driving. And we have a very solid strategy in that area called D2X, which is direct to stakeholder, direct to customer, direct to supplier, direct to even any other stakeholder in the organization. That is starting to yield some really good results, as Abhishek also mentioned earlier. And we've seen some good large wins, and we expect to see more. The third part is what Umang alluded to with respect to broader Oracle managed services, Day 2 services and some of the cross-sell that Ashank was mentioning. So the reason I'm recapping that is we have those elements, we have those pieces, if you will, of the right to win. I think what the focus is in the next couple of quarters is to integrate that to create more large deals, integrate that to create more penetration into the Fortune 1000 customer base, as I mentioned earlier. And we have a good foundation in place. Now very quickly on your service line sort of practice capability question. Clearly, there is an element of cloud and data transformation that's going through with all our customers. So that's clearly going to be a focus area, both on the platform hyperscalers as well as, as more customers invest in data monetization and AI. That's a key capability that we plan to strengthen in the coming months, in addition to some of the digital and cloud services that we already have. Hopefully, that clarifies.

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

Hiral, just a follow-up on what you just said. I wanted to know more on your plans of scaling up in the U.S., like you spoke about verticals and all, but what could be the inorganic, organic component? Are you looking for M&A as an option to scale up quickly? Or would you first look at organic growth and then eventually go for an inorganic? That's question one. Second, if you could share -- this is for Abhishek, if you could share some outlook on the private sector in U.K. We were building up some team there over the last 2 quarters. So what are the results? And how should we expect this particular revenue stream to show up in the next year or so?

Sounds good. So Mohit, first of all, thanks for your support towards Mastek. I think inorganic is always going to be an option. As has been communicated in the past, we are continuously evaluating options. But let me first cover the organic element. As I mentioned earlier, we have the pieces, we have the elements of what it takes to be successful. We are seeing signs of diversification beyond retail and manufacturing, like I said. The reason I picked up health care and life sciences as one area is because across the businesses and across the capabilities, we've seen some good momentum, whether it's life sciences or even the core health care market. And as you know, in the U.S., the spend is significant. Another area is financial services. Clearly, that has been, in the past, a strong area with insurance in the Majesco business that we used to have. So that's something that we're evaluating as well. But the partnership ecosystem which we are starting to build on is going to be a critical part of the strategy as well. So within Mastek, we are implementing various platforms ourselves, whether it's Microsoft, whether it's ServiceNow and others. And we are seeing signs where customers are asking us to deliver those integrated cloud capabilities across applications, across platforms. So partnership ecosystem with some of the key players, the key cloud players is going to be an important part of the strategy. As I mentioned, when it comes to inorganic, we'll continue to evaluate. It's going to be a parallel strategy, Mohit, to answer your question. And data and cloud are 2 areas that we're focused on right now. But we're going to evaluate some AI companies, we're going to evaluate some vertical-specific companies as well as we go ahead. I'll turn it over to Abhishek on the private sector for U.K.

Thank you, Hiral. So Mohit, the private sector, I would say it's just as nascent as it gets. We have got -- our existing footprint is in BFS and microfinance sector and some bit of retail clientele. So the first part was about defend the state and ensure that there was no degradation. And as for the last year, due to COVID as well as some of the internalizations, the state has shrunk. But now this year, it is about defend and then build on it. And the head of private sector sales joined us in April and a couple of other sales folks have also joined. So that's one part of the strategy. The other one is obviously leveraging the Evosys clientele for cross-sell and then eventually get into the co-sell mode of doing it together. So it's in the nascent stage to put it mildly. And in coming years, we would expect it to be at the organization's growth rate at the bare minimum.

Understood. That is also largely driven by U.K. actually, so you may sort of accelerate the whole thing. Just one is for Arun. On the margin side, this attrition thing is rising for everyone in the industry, also for us. So do you think during the year, there could be a chance of wage correction, which Mastek may see and therefore, margins may come down a little bit from where you are currently?

Yes, Mohit, precisely the right question, as all of us are saying that there's a good attrition, which is going on. And as Umang also mentioned, we are building up the team for future growth, which is through the freshers and other competition, right? So yes, there will be some pressure into the margin, Mohit, but our endeavor is going to maintain, as we mentioned earlier, in the FY '21 levels, at least. So while the cost base is going to come through hike and through correction, we are planning to leverage our fixed cost as we grow and also rebalance our SG&A. So a part of those costs will also kind of -- will offset the operating levers and as I mentioned, leveraging the growth. So there could be a couple of basis points impact, but our endeavor is to maintain FY '21 kind of a level, Mohit. Unless anything changes significantly in the industry, then we will speak to you, but that's how we see at the moment.

The next question is from the line of Madhu Babu from Canara HSBC.

Congrats on a strong execution and a directional momentum. So just on the U.K. government business, we indicated some slowdown in decision making. And last quarter, I remember we indicated good deal signings in the U.K. government. So how are they ramping up? And how is the -- is there a new team in place for U.K. government also? Or how is the team there? And second is on the hiring has been very good this quarter. So do we intend to keep this kind of momentum, especially? And what are the challenges faced for a company of our size in getting freshers current because there's a lot of competition for freshers?

So I'll take the first question. Madhu Babu, the market -- or the sales team for the U.K. public sector is the same. All we have done is enhanced it for better coverage and newer areas or newer customers that we want to get access to. There's no change in the sales leadership, so to speak.

So as far as the talent goes, as you know, we have continuously investing into the new talent. And to that extent, we had added 500 people. Idea is to see that we take care of attrition and growth together and also focus on training the people to the new skills because that is going to be really crucial in terms of what we do and how do we leverage what we have. In terms of numbers, I think we'll calibrate them as we grow. And as we look at the second half, you would, of course, staff for our next year's growth.

Abhishek sir, so the U.K. momentum will be intact in the public sector because we indicated some slowdown in decision making in the opening remarks. So U.K. public sector momentum will be intact?

Yes. So demand environment is robust. We are executing on it. All I wanted to give an indication was that there are macro environmental issues, which will do impact the speed at which we expect the businesses coming our way. But that said, there is an order booking, and there is a backlog apart from all the stuff that's out there for adjudication. This was just a heads-up from what's happening in the NHS space vis-à-vis U.K. government.

The next question is from the line of Ashish Agarwal from Principal India.

Sir, just 2 things from my side. First is, Mr. Hiral, sir, just wanted to understand, given the fact that we need to expand in U.S. and grow our nongovernment business significantly from here on, what kind of an incremental investment need -- do you think need to be made? And will that impact the margins over a 3- to 5-year period? That is one. And secondly, just on one data point. It seemed like that in this quarter, the margins in the Middle East business dropped significantly. Any specific reason around that?

Middle East question, I think I'll let Arun answer. I'll come back to U.S. answer along with Hiral.

So Ashish...

Yes. You carry on and I'll pick the second question.

Correct. So Ashish, the U.S. expansion in the private sector, U.K. expansion has got some similarities, like you rightly pointed out. The capabilities that we have, like I mentioned earlier, whether it is cloud native development, app transformation, digital transformation services, UI/UX, digital commerce, D2X as well as some of the cloud implementations with Oracle that Umang alluded to, which is application enhancements, the various elements are there in place, right? So from a capability enhancement perspective, that's why I called data and AI and a little bit more of a cloud platform play. Those are the areas that we will strengthen from the capability aspect, but the synergies across Mastek, across different regions, across different business units, I think can be strengthened. And that's where we're going to look at a very rigorous service line strategy as well as an integrated solutioning strategy because we are starting to see much more integrated deals, much more larger deals, as was discussed earlier. And in some cases, it's a matter of having an operating model in place that can cater to that kind of demand. Ashank alluded to one of the large $6 million deals, that's a great example where it was multiple tower. Even some of the deals that Evosys and the Oracle business is one, there are multiple oracle elements, not just on ERP or 1 HCM tower, multiple aspects of Oracle, surround services around that with integration of data coming to play. Same thing with the private sector, as Abhishek already covered, we see some good momentum. It's early days, but we have those elements in place, which we plan to cross-leverage across the globe. So I don't think there's going to be impact on margin per se because of that. And as Arun kind of alluded to earlier, we have an operating rhythm in place to manage that at an overall level. I'll turn it over to Ashank, if you want to add anything on the overall strategy and then to Arun on Middle East.

Yes. Only one addition, Hiral, you have covered well what at operating an organic level we are going to do. The only investment that we would do, obviously, in the growth strategy of U.S. is the inorganic growth. And as Hiral also said, we are looking at multiple companies. And if the fit is right and it fits into our strategy of, a, building capabilities; b, synergizing our digital transformation story. If these 2 things are there, we would be happy to invest in U.S. market for making that happen. So that obviously will have -- in terms of the cash that we have today.

Ashish, very quickly on the Middle East margin side. The lower margin is driven by the stickiness, which caused both onshore and offshore, which led to delay in project execution accepting to the right, that led to margin [ lows ] in the current quarter. Additionally, due to travel restrictions, as you'd be knowing Saudi and other countries, they were travel embargo, which restricted our ability to transfer people from India. Typically, that's the model. However, some of the contracts we need to provide people onshore, so we had to get into subcontractors model, they come expensive. Again, that's also impacted the margin. Third, again, since travel embargo continues and it's kind of relaxed again, depending upon how the COVID cases are going up, we are investing further -- we have to invest into local hires as well to take care of the on-site presence requirement from the customer perspective. All this led to erosion in the margin. The margin should come back gradually normally in a couple of quarters because some of them are temporary and some of them will take a little longer to recover.

Got it. And lastly, sorry, I'm repeating a question, I think, which Mohit asked. So right now, there is no plan for a second round of salary hike, but you may decide it if the attrition keeps on going up. Am I right in there?

So Ashish, we had salary hike last year, which was delayed and is given effective December. This year salary hike typically comes in quarter 2. So we are still evaluating. And we are considering the option of giving the salary hike in quarter 2, more will we conclude between now and next 3 months, maybe 30 days, but there will be salary hike definitely. And what I said to Mohit, again I'm repeating the same thing, there will be hike in collections. But in fact of those we are planning to mitigate with the help of the growth -- basically, as the growth comes, we are able to leverage our fixed cost. And at the same time, we are able to rebalance our SG&A investment. So a greater portion of those impacts we'll try to manage through the business and also through the operating levers improvement, which we are doing anyway from last 4 years.

[Operator Instructions] The next question is from the line of NGN Puranik from Enam Securities.

I have a question for Hiral. This is about the service lines and capabilities. How do you look at expanding the deal sizes going forward, coming from your background as a large enterprise? What do you think is missing in terms of adding new service lines to the portfolio? And especially when you look at digital strategy, so where are you today? So in terms of cloud migration, where are you and customer experience? Cloud migration, I think you're significantly ahead. With Oracle around, you are very significantly ahead from a customer experience, big data and cybersecurity. These are the key elements, which will in aggregate give you larger deals. So where are you? And how will you fill up those space?

Hiral, you would like to answer.

Yes. Sure, sure. No, great question, actually. So let me kick it off and Ashank, Abhishek, Umang feel free to add. So when I look at the service line capabilities and transformation, there are 3 big buckets. And then I'll spend maybe a minute here because I think it's an important part of our overall strategy. So there is the business transformation, which is essentially driven by digital demand and the application services as well as the enterprise applications business that we have. That does include cloud, that does include ERP and various elements of enterprise apps. It also includes the application development, cloud native development of application transformation. That's, again, very closely connected to business processes of the customer. So I'll put that in the application transformation/business transformation bucket. The second category is what we are calling intelligent transformation. Now here, the elements of data and elements of analytics and AI come into play. There is an automation continuum, which we plan to embed into every part of our delivery and customer engagement. So this is a definite focus area back to our earlier comments as well, where we plan to strengthen either through organic as well as inorganic elements. The last part is the experience transformation. Now in experience transformation, we have certain elements that are already in place. Like I said earlier, the D2X strategy, which is particularly working well in the U.S., has some interesting elements beyond just front office because the whole idea is to connect from the customer front office all the way to the middle office and the back office, which could drive integration, API, microservices as well as ERP cloud back office integration. And there are some interesting examples of cross-experience platforms, for example, Adobe Magento, Salesforce as well as the Oracle CX, which is a business unit within Oracle, where we're seeing some really good demand. So all in all, if you look at it, any application sort of transformation bucket, we want to strengthen the cloud platform play; in the intelligent transformation bucket, we want to strengthen the AI and data play; and in the experience, we just need to kind of bring it together and connect the dots from front office to back office. One very important element of the strategy, which I alluded to on the partnership, we at least, for this year, do not plan to build organic capabilities on cybersecurity or infrastructure. However, we are starting to see deals, particularly in U.K. and even certain parts of U.S. verticals where that is needed. So we have a partnership strategy in place. We'll share this maybe in the next quarter discussion. But for cybersecurity and infrastructure, we have a holistic play, so that we can cater to some of these large deals that they are [ restricting ]. Ashank or anybody else if you'd like to add anything.

No, I think I'm fine with your answer.

And what will this make to your deal sizes once you build these capabilities? And one important missing piece is the analytics, big data or would you like to focus on a few capabilities or you would say that I'm not going to focus on everything? I'll say -- I'll not invest too much on cybersecurity, I'll get into big data in a big way because that's a future and customer experience because that's very vital.

Big data and analytics and AI is definitely an investment and focus area, as we mentioned. Within that also, we are dissecting in terms of data monetization, we are looking at -- actually, we're already delivering certain pilots and Abhishek can talk about it. We're also doing some pilots in the U.S. with machine learning models as customers are looking to move from this pilot stage to much more production and larger implementations of AI. So clearly, that's a big focus area. I think the transformation that customers are going through is also very interesting because some of the business models that are currently in place, there is an opportunity to look at outcome-based delivery. So that's why we are very excited about some of these capabilities and integrating them together because now we can start delivering more based on customer outcomes and business process outcomes. And Umang mentioned about his 5-point strategy. Evosys business has really done well when it comes to value-based delivery, which is really looking at the business processes and the customer outcomes. So we plan to look at that as a synergistic area across Mastek globally, and that will be a key element when we look at multiple towers and multiple practices as part of large deals. Right now, we are starting to see $5 million deals even in the private sector. We would like to elevate that to even $10 million and plus deals and hopefully even higher in the future.

Mr. Puranik, may we request that you return to the question for follow-up questions. Next question is from the line of V.P. Rajesh from Banyan Capital.

Congrats on a good set of numbers. Just a question on the way we are thinking about the number of active user base we have more than [indiscernible] accounting for, let's say, 50%. So...

Sorry to interrupt Mr. Rajesh, your audio is breaking from your side, sir. Please check.

Is it better now?

Yes, sir, please go ahead.

Okay. So I was asking about the typical deal size that our top 10 customers are around 48%, and we have more than 650 clients. So are we getting to a point where to service the clients, we are hiring contractors and therefore, that will impact the margin, whereas some of the other competitors what we have noticed is that they are cutting their pay. So I'm just curious how are we thinking about our business?

I'm not clear of your question, Ashank here. You are saying that large customers account for our percentage. So what is the question?

So the question is that do we have too many clients which are giving us very low revenue and to service that revenue, we have to essentially go and hire contractors -- subcontractors and therefore, that will eventually impact our margin. So that's what I'm trying to understand. Especially when we listen to some other mid-tier IT companies, they are trying to reduce the number of clients they are servicing. So that's what I was trying to understand.

Okay. Let me answer it, and maybe Umang can also add because most of these clients are at our Oracle practice. So see, it is like this that any customer acquisition has certain cost. And that cost obviously is accounted for when we have built the results that we are delivering. So we are presently acquiring 40, 50 customers and preserving the bottom line because model allows us to invest in sales and marketing and deliver the results at a gross margin, which can service the EBIT that we are talking. Now that is unlikely to change even if we grow large number of customers. I think as subcontractor goes, you see it is always the mix of subcontractors with hires. So one example is what we have done this quarter, we have hired 500 people. That is exactly to serve this coming up market and depend less on subcontractors. However, subcontractors, we do employ. And Umang can add maybe the kind of subcontracts that we had in specific areas.

Yes. So there are 2 aspects to this. One is as far as our customer qualification and quality concerns, we are definitely getting more zero down in terms of our focus. So we spoke about the vertical focus that we are moving into. And therefore, looking at the customers from a particular area of specialization is going to become a part of our strategy as we move forward. There is, of course, a clear evaluation in terms of every deal on what kind of margin are we delivering or not and so on and so forth. There is, I would say, a healthy percentage of contracting or subcontracting in a part of our mix, not necessarily -- not high at all. And clearly, we are not looking at a business wherein we are just being the trading partner in between the delivery is done by subcontractors, and we are just getting -- transferring or handling the deal -- passing it through us. So that's not the business that we are really into. So like I said, there is some portion of contracting, but it is healthy. And there is also portions of focus in terms of going forward business where we are trying to look at some verticals as a key focus and trying to look at the kind of customer acquisitions that we're going to have.

Right. Okay. And my next question is just given the momentum we are seeing in the deal flow, and as somebody said, it's raining lot of deals. Can we expect that we can potentially do a 20% kind of growth this year?

I think Arun can answer that question.

Very quickly, Rajesh, if you notice, our current quarter growth is 33 -- 34% year-on-year, right? So if we continue to deliver and you can go by our order backlog, which looks very healthy 12 months, which is $158 million, as we speak, which is -- if you again compare it last year to this year, you can find this good lead indicator, which makes us believe that, that will continue to grow. Now it depends upon how we are able to continue getting more and more orders that we have done in the past quarters and converting them into revenue with the help of our hire and retention strategy. I'm sure we can deliver to those kind of numbers.

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

Sir, first question is for Hiral. So Hiral, as you are coming from an extremely large IT organization to a much smaller one, and Mastek does have this aspiration to grow from a small to mid-player to a mid to large player. So what are some of the gaps that you have witnessed, not just in terms of the capabilities but if the organization has to move to a higher orbit, you might have found some gaps in terms of culture, people, training or the capabilities of the current people, salaries, higher level hiring, et cetera. So what are some of these gaps, which would be your area of focus in this financial year, which you have identified? And how do you plan to fulfill it? So that's the first question.

I think let me answer it before he steps in. Ashank here, Hiral is just 15 days now. I think some of your questions will be best answered by him as he moves along probably next quarter, but Hiral, if you address those what are your first few days of the service.

Sure. So Sarvesh thanks, I think it's an important question. As I look at -- I think I mentioned in my opening comments as well, one of the strength areas in terms of culture and value system of Mastek, as you know, the organization has sustained and also innovated continuously across multiple decades. And I had a great opportunity over the last week or so to go through some of the Board meeting, some of the discussions with the various team members. Also, we had an all-employee hands-on meeting, I also made a trip to Dallas to meet the talented team out there. So all this has happened in the last 1 week. And I can tell you very passionately that the value system, the governance, the cultural fit is very similar to the likes of Wipro. And that's one of the biggest reasons that excited me to join as well. Now in terms of gaps, like Ashank said, we're still in the process of looking at which areas need to be strengthened, which areas need to be transformed. I do remember one of the Board member conversations a couple of months back where they said, hey, you don't work in Mastek, you fall in love. And in the 2 weeks that I've seen, I think -- now I understand why he said that. This is an important element of our cultural transformation, which is a continuation of Mastek 4.0. There are elements of transparency. There are elements of empowerment, which are already in place. So I think there's no gaps really in terms of cultural and foundational elements. One area that we do plan to strengthen in the short term is marketing. Now I do not want to keep Mastek the best kept secret. I think there is way too much depth of experiences. There's some very, very interesting and complex work that we're delivering. Umang and Abhishek talked about some of those. And it's very important for us to articulate that value to our customers and the external ecosystem and to all of you, frankly. So we do plan to share our 3-year strategy and our go-to-market in the coming months in more detail. But we do want to elevate the one Mastek brand. We do want to elevate our overall marketing strategy. And when I say marketing, not just communications, but account-based marketing, content marketing, working with customers in terms of case studies, sharing some of the business value that has been added. And there are some great lessons again from the Evosys experiences that Umang and team have built over the years. So if I were to call out one area outside of the service line capabilities that we talked about in some segments, the overall marketing strengthening is a key focus for this quarter. So let me stop at that and more to come in the coming months.

Sure. We'll look forward to that. Second is on margins. So I think a few quarters back -- till a few quarters back, our commentary was that there might be a margin compression by, let's say, 150 basis points or so because of the gains that we had in terms of saving during the COVID times, they are likely to run off. But now I think this quarter, the commentary is that the margin which we saw in FY '21 and in this quarter, which is around 21%, 22%, that is going to be going forward, the new normal and sustainable sort of a margin. So hence, the impact of one-off cost saving, et cetera, which we had attained in the previous financial years, maybe blunted by the operating leverage in the business because of the growth. So is that the right way of understanding your margin trajectory for the future?

Arun, can you answer that?

Yes, let me comment. So a very nice question. And I think, again, we had spoken about that. So at the moment, those savings which were driven by COVID and then you get into more details, it's that typically your travel-related savings, right? And all of us know that the COVID is not gone, it's going to stay. The travels are not going to be the same as it used to be pre-COVID days, right? So costs will come back, but the cost will not come back at one go, it'll come very gradually to be precise. And hence, we don't know at this point of time, how the world is going to open up, what kind of cost is going to come back to business. If our business growth continues as we are seeing, a lot of those cost months [indiscernible] maybe partially offset it with the improvements which we are driving, right? But at this point of time, when we state that our endeavor is to maintain the margin, our endeavor to maintain the margin is also subject to that the travel will not come back to the same magnitude as it was pre-COVID as the things normalize. And it's a little longer term to be precise to see those kind of travel to come back.

Mr. Gupta, may we request that you return to question queue for follow-up questions. The next question is from the line of Ravi Naredi from Naredi Investments.

Sir, my question is this, how we use the cash to -- how we use the cash?

Okay. That's the question? Ashank here. Thanks, Ravi, for that question. So as you know, we have been building this war chest for last many years in terms of free cash flows out of our productivity improvements in IT services business. So first, usage of that happened to us when we acquired Evosys and then we also have payments as we acquire the remaining 30% stake. So some of that cash obviously is going to be utilize towards that. But more importantly, Ravi, as I said earlier, our growth ambitions require us, particularly in U.S., to acquire companies, a, to build capabilities, just capabilities apart from this revenue; and b, of course, the revenue and synergy aspects of digital transformation. So we have [indiscernible] the war chest so that at no point of time, we have a situation where we are not comfortable with the strong position in cash that we have always kept in spite of revenues and so on. So this is a balance between a comfortable cash position and the payments and the acquisitions. And to that extent, we do feel that we need to keep the war chest as we go along what we have. I hope that answers your question, Ravi.

Yes. Yes. And second, sir, Mr. Hiral, will base to Europe or U.S.? What is your planning?

So Hiral is based in Chicago. He is operating as a person from U.S., of course. But being a global, like all of us, he's going to operate from all the places that we win, but Hiral can answer it also, if he wants to.

Yes. No, I mean, I think you've covered it, Ashank. So I am based in Chicago area. I have spent significant time in U.K. I used to travel there once in 2 months, significant time in Europe. We are seeing some early signs there in the broader Europe market as well. So I have experience in those countries across France, Netherlands, Nordics, Switzerland, Germany. And Middle East is an important part of our business as well. So we've done some great work, particularly in the Oracle Cloud business. So definitely, between those countries and continents and India as well as U.S. In the near term, definitely, we have an opportunity to scale up in the U.S. given our capabilities and depth that we already have. So it might be more focused or at least 50% of my time will be focused on the U.S., but I do plan to spend an equal amount of time in Europe.

The next question is from the line of from [ Satish Saraf ] from Tusk Investments.

Welcome, Hiral and, congratulations to the team for very good results. I have a question on the Oracle plan going forward. So with Evosys and Mastek about the cross-sell and the co-sell, how do you plan to bring in synergies? Or rather, how do you see Mastek plus Evosys, let's say, by the year 2025, what's the broad vision like?

Let me answer it, and then Umang can add basically and Abhishek, too. So it's difficult to talk about 2025 in terms of what would that unfold at. But as I said that the opportunity that is opening up to us in terms of number of customer entries that we have is something that we very seriously want to leverage. And as we speak, there is a constant effort to make that happen. And maybe Abhishek and Umang can add how we are leveraging that on cross-sell and co-sell.

Abhishek, please go on.

So just building on the ambition that you outlined, Ashank, it's very, very simple that the whole rationale of Evosys acquisition was around the fact that Evosys has a great customer acquisition engine and their sell with Oracle provides us with continuous supply of new customers across all the geographies. Now any customer doing the back-office modernization or moving from on-prem solution to cloud, they are starting their digital journey, and this is the first place where Umang and team actually gets engaged. But that's not the only piece that they want, and there are a lot more that comes along with that initiative. The ability to bring in larger Mastek capability and complement that and tap the customer's digital transformation journey, we are the start point that Umang and team delivers. That's what is -- will be driving our future. And we want to reach a stage where every opportunity is eventually a co-sell, which means things in the pipeline are looked upon from all the offerings, not just Evosys, Oracle implementation capability or Mastek's digital transformation capability. But you look at it from all the service offerings, and it becomes, as Umang also alluded earlier in his presentation, a customer for life. That's the way we are looking at it. And obviously, the customers coming in from the engine provides us with that opportunity. Umang, you want to add your comments to that, please?

Yes. No, nothing -- no additional to that. I think you've put it out very well, Abhishek.

And Satesh, just to round it of like Ashank and Abhishek said and Umang covered that in some of his comments as well, the examples of that co-sell and examples of those integrated deals they're already [ there ], right? I mentioned the media company earlier. That's a classic way where the back office is Oracle Cloud, the front office is sales force. There are multiple middle office elements as well as integration and API-based services that are part of the deal. And that's also an example where we've landed with a particular scope, and we're now expanding into different areas. So we'll see more of that. I think your question on vision for 2025, give us some more time. We'll come back, as we evolve, I think there's a lot more larger deals, a lot more larger customers that we'll be catering to. And we're seeing some really good foundational elements of these integrated deals, which will continue to grow in the coming quarters.

The next question is from the line of [ Vivek Gautam ] from GS Investments.

Congratulations on a good set of numbers, sir. But any word on the slowest quarter-on-quarter growth we have seen over the last few quarters, sir?

Sorry. I didn't get the question.

The quarter-on-quarter growth has been slowest for the last few quarters. So is it a blip or sort of reasons behind the same, sir?

Arun, do we have any?

I will share with you, Vivek. So very quickly, as we mentioned last quarter, our order book and backlog was healthy. And some of the numbers which you're seeing is after the impact of the right shifting of the execution of the contract. Because as all of us know, digital skill set, there is a gap between demand and supply in the market, right? And it is also reflected into our attrition numbers. So there's a twin strategy, which is going on in terms of having the natural talent, at the same time investing into freshers, training them and bringing them up to the learning curve, where we can service our customers much faster, right? So some of the gap is -- from the earlier quarter is driven by right shifting of the execution plan because the lack of resources which we have. But as we speak, we are not seeing any shortage in terms of our pipeline and the order book to give you the comfort there.

Very nice, sir. And just a few words on the opportunity side and the expected growth rate for the different verticals for us and time to come, especially in North America.

Arun?

Yes. So North America, as Hiral mentioned, again, if I just broader label vertical split, our U.K. public sector is growing good again, this quarter and also if you compare year-on-year, including previous quarters, the growth is good there. NHS is also growing healthy. A lot of contracts is managing on a renewal basis and lots and lots of contract is coming up in our pipeline for adjudication, which will more happen in quarter 3. So U.K. public sector looks good. U.S., as again mentioned earlier, it's more D2X strategy, which is helping us to penetrate into not only to the retail customers, but we are getting into non-retail customers as well. And it's complete umbrella of services, which is helping customers to resolve their multiple issues at the same time. And to combine what TAISTech was doing earlier after the acquisition, we combined them together with Mastek, we spoke at this capability and it becomes completely D2X for the customer, right? So we are seeing those kind of growth to continue in those markets. And again, as a vertical, health care is going to be important. Retail continues to be important in the U.S. market. And from the Oracle side, as Umang mentioned, manufacturing also becomes the key market for us to penetrate as we go on.

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

Congrats on a good set of numbers. Sir, my first question would be, the Evosys acquisition has changed our trajectory completely. So any -- and we have decent cash on the books right now. So any plans to go for another acquisition, especially on the U.S. side? When can we expect another acquisition?

So thanks, Jatin. Yes, important question. But as I said earlier, Ashank here, that as we speak, we are evaluating obviously multiple candidates for a few regions. We have sufficient resources, as you all know. However, we have to be extremely careful before getting into new acquisitions. As I said, it has to add value to Mastek and Mastek's future growth and digital area. Either it has to build our capability that we lack or service lines that we do not have or to bring a substantial customer base and revenues along with it. Of the kind that we need, we have to be very choosy as we speak, we have a team which is evaluating many customers -- many acquisition candidates. But as always is the case, it is extremely difficult to predict when it will happen. But as you rightly said, we are focused right now in a bigger way in U.S. because that is where the growth went in last and present focus is looking at U.S.-based companies. But we are open otherwise to other opportunities if they fit into what we do.

Jatin, maybe just to quickly add on this. See acquisition strategy is important, like Ashank mentioned. But we are also looking at a broader framework as part of our strategy, which includes organic capability building, it includes partnerships, like I mentioned earlier, as well as M&A, right? So there are certain areas where we would want to strengthen the capabilities in-house because we feel those are differentiated offerings that add on and align well with our digital and cloud services. There are certain elements where we will partner, like I mentioned, infrastructure and security. And there are certain elements, we would want to do an M&A. And the framework is there in terms of how we've evaluated those potential options and, actively, like Ashank mentioned, looking at various possibilities in the U.S.

The next question is from the line of [ Mukesh Prajapati ], individual investor.

Yes. Congratulations for a good set of numbers, sir. I think my question all have been answered. So wish you all the best for next quarter, sir.

Thank you, Mukesh. Thanks.

Ladies and gentlemen, that was the last question. I now hand the conference over to the management for closing comments.

So thanks. It is, as usual, always energizing to meet our investors and our well-wishers. So it is your energy that drives us through to perform, as we said, as we are building capability, as we are building leadership, as we are building marketing engine. However, I want to add and with, of course, a little bit on somber note in terms of great work that our Mastekiers have done in spite of very difficult times that we went through the second wave. It is very unfortunate that some of our Mastekiers lost their loved ones during this period. But we are all here and we are with all of them. And we have our vaccination program and other things that we have initiated to see that we are most comfortable in terms of what they do and where they work. It has been a hard time for them to work from home. And looking forward to post-COVID era where we are back in business as usual. Hiral, you want to add anything, otherwise, we can close.

No, I'll echo your comments, Ashank. I mean it's been a tough journey for many individuals and families. And I think our talent and HR team has done a phenomenal job keeping the engagement. Our leadership team has done -- gone out of the way to make sure that they are closely connected with our employees and their families, in many cases. So we expect some of those pandemic challenges to remain over the next couple of months, but hopefully seeing some of the trends, it looks like we'll be back in business soon. But very excited to be part of the Mastek family again. And like I've shared in some of the comments earlier, we'll be sharing more details in the coming weeks and months and look forward to your continued support. Thanks, Ashank.

Thanks. We can end this.

Ladies and gentlemen, on behalf of Mastek Limited, that concludes this conference. Thank you for joining us, and you may now disconnect your lines.