Mphasis Limited (526299) Earnings Call Transcript & Summary

Good morning, ladies and gentlemen, and thanks for joining the Mphasis Q1 FY '27 Earnings Conference Call. I'm Nirav, your moderator of the day. We have with us today, Mr. Nitin Rakesh, CEO of Mphasis; Mr. Aravind Viswanathan, CFO; and Mr. Vinay Kalingara, Head of Investor Relations. As a reminder, there's a webcast link in the call and invite e-mail that the Mphasis management will be referring to today. The same presentation is also available on the Mphasis website, www.mphasis.com, in the Investors section under the Financial and Filings as well as both on BSE and NSE websites. I request you to have the presentation handy. [Operator Instructions] Please note that this conference is being recorded. Before we begin, I would like to state that some of the statements made in today's discussion may be forward-looking in nature and may involve risks and uncertainties. A detailed statement in this regard is available in the Q1 results release that was sent out to all of you earlier. I now hand the floor over to Mr. Nitin to begin the proceedings of this call. Thank you, and over to you, Nitin.

Thank you, Nirav, and good morning to everyone for joining us today. As we open FY '27, I will start with what we are seeing directly in client conversations because it is reshaping both the competitive landscape and our own platform trajectory. The AI narrative has matured decisively. 12 months ago, every enterprise conversation began with model access and experimentation. Today, it begins with accountability. Business leaders are asking harder questions. Where is the measurable return on our AI investment? How do we govern AI decisions in regulated environments? How do we convert AI capability into durable economic outcomes in revenue, cost and risk that hold up under scrutiny from the Boards? What we're observing across our client base is what we have come to call the agency gap, the space between what enterprises can do with AI and what they can actually deploy, govern and hold accountable at scale. Every large enterprise now has AI tools. Very few have enterprise agency, the ability to make better, faster governed decisions and convert them into measurable outcomes embedded in the operating model. That gap is the defining AI challenge and is the market problem. The fit between that problem and our platform is visible in 3 ways. First, there is a validated market gap. Enterprises own data, applications and pilots, but they have no governed system to turn these assets into accountable decisions at scale. The problem is not a lack of AI capability. It is a lack of governed execution. Second, Mphasis now has a defensible right to win. This problem sits at the intersection of brownfield enterprise complexity, integration depth, domain-specific decision intelligence and governance, precisely the territory we have built over 30 years. Not many AI-native start-ups can replicate that context. Not many hyperscalers want to own that accountability. Third, the platform economics are designed to compound. Think about landing into a one decision loop, proving measurable gain and then expanding as platform reuse multiplies across deployments. The unit of value is no longer a project or a work stream. It becomes the quality, speed and accountability of enterprise decisions. That's why Mphasis Modernize and Mphasis Optimize are not separate offerings. They are connected product motions on the same Tria platform. Modernize builds enterprise memory, extracting structured context from systems, rules, workflows and process history. Optimize uses that memory to continuously improve the decision loops that drive commercial and operational performance, revenue, pricing, demand, supply chain and risk. The platform converts a onetime transformation engagement into a repeatable expanding motion. We start with modernization, create structured enterprise knowledge and then extend into optimization use cases that improve revenue, customer experience and operating performance, compounding value with each deployment. I want to spend a moment on what Tria's early traction is telling us because it validates something larger than a platform launch. The most important signal is this. Within 7 weeks of platform launch, multiple opportunities moved from conversation to closure and are now moving to execution. That is not a normal sales cycle. That is demand compression. Clients are recognizing that Tria addresses a problem they have been unable to solve with anything else on the market. Agentic AI, as shipped by every major platform vendor, is not the answer. Clients are now increasingly understanding that agentic AI is a capability. Enterprise agency is an outcome, governed, explainable, measurable decisioning built into the operating model, not layered on as another tool. What is changing in client conversations is the attitude. Our opportunity maximization approach is elevating us from CIO and CTO conversations to the business agenda, with the CFO asking about revenue cycle performance, the chief distribution officer asking about advisor productivity and the COO asking about operational efficiency. We are addressing these business problems that sit behind the technology, not just the technology problems themselves. Several dynamics from Q1 deserve specific attention from an investment thesis perspective. First, we are seeing ARR and managed services opportunities bundled together in Tria deals. That is a revenue quality signal we committed to at the Analyst Day, a shift from point-in-time project revenue towards recurring platform attached revenue that leverages and expands on the reusability within each client relationship. Second, large deal activity is being influenced by Tria at the evaluation stage. Platform acts as a proof point that converts large deal conversations by demonstrating governed measurable outcomes rather than capability alone. Third, we are also seeing new addressable penetration at existing clients, opening use cases and budget pools that were not accessible under our previous service-led model. That is the attach rate dynamic at the core of our platform revenue thesis and is beginning to show up. Overall, I'm pleased to say that Mphasis Tria is off to a stronger start than we anticipated, and the platform thesis is validating faster than the time line we had projected. Q1 establishes the foundation, and I want to be direct about what that means for Q2 and the full year. The investments we made in FY '26 in Tria in the platform operating model, in the TAP acquisition are now converting. The pipeline we have built through the investment cycle is now transacting. The deals won over the last several quarters are also ramping to revenue. FY '27 is the year that the platform first thesis begins to show up in growth trajectory, not just in pipeline metrics. Q2 is positioned to deliver the best sequential constant currency growth we have delivered in 3 years. That is a testament about the momentum building in our pipeline and deal conversion. We entered Q2 with both the highest pipeline we've ever carried and the strongest short-cycle deal activity we have seen in several quarters. We're also maintaining our FY '27 guidance, high single-digit to low double-digit growth in constant currency despite the uncertain macro environment. Margins remain targeted within the band of 14.75% to 15.75% EBIT, not because we are defending a floor because we are making deliberate investments while holding financial discipline. Operating cash flow conversion is expected to remain at 80% of net income through FY '27 as well. The pipeline data makes an investment case directly. Since the launch of Mphasis.ai, our pipeline has grown to 2.8x its original size and reached an all-time high at the end of Q1. With our sustained investments in AI, including the launch of Tria, it expands the addressable problems that we can solve for clients and the pipeline reflects that accumulation. AI-led deals have grown from 12% of the pipeline to 70%, where they're now stabilizing. This matters as much as growth. It means AI is no longer a separate deal type. It is how we compete across all verticals, all deal sizes, all solution archetypes. It's embedded in the model. Net new TCV for Q1 was $461 million, the fifth consecutive quarter above $400 million. Five consecutive quarters is not a trend. It's a signal that the AI-first strategy is not producing just point-in-time spikes, but a higher baseline for what we can close every quarter, and that baseline is the foundation for the revenue acceleration we are guiding to in Q2. The composition of the pipeline reinforces the platform thesis as much as the headline size as well. Total pipeline grew 8% sequentially and 28% year-over-year. Non-BFS pipeline grew 18% sequentially and large deals greater than $20 million pipeline grew 10% sequentially. On a Y-o-Y basis, BFS pipeline has grown 100%, which reflects in the durability of our right to win in financial services. From a solution perspective, modernization and everything as a platform are driving the strongest pipeline growth. These are 2 archetypes that map directly to our recently launched product lines as well -- and the platform as well. The alignment between what is building in pipeline and what we deliver in execution is what we want to see at this stage of platform adoption. The breadth of growth across verticals, deal sizes and solution archetypes is also revalidating our platform thesis, which is not a vertical-specific tailwind or a single large deal inflating the picture. Net new TCV for the quarter at $461 million with a trailing 12-month TCV at over $1.8 billion. We closed 3 large deals in Q1, including over $100 million deal. 63% of our TCV wins in Q1 were AI-led. The TCV to revenue conversion pace has remained steady and the backlog strength from prior quarters continues to support in-quarter revenue. In some cases, the deployment-ready nature of our stack is also enabling shorter cycle deals to close and ramp up faster than traditional bespoke delivery. Q1 '27 revenue came in at $471 million, growing 2.1% sequentially and 8.3% Y-o-Y in constant currency terms. Direct revenues for the quarter were at $465 million, growing 2.2% sequentially and 9.9% Y-o-Y in constant currency terms as well, reflecting strong deal conversion and expanding momentum in our AI-led offerings. Americas continued to be our primary growth engine, growing 3.9% sequentially and 11.4% Y-o-Y in direct business. ROW delivered a strong sequential recovery, growing 6.1% Q-o-Q in constant currency, led by the GCC ecosystem. EMEA numbers this quarter were impacted by revenue moving to other geographies for a globally structured deal. The underlying health of the business there remains intact. Enterprise applications grew 11.9% Y-o-Y in direct, driven predominantly by AI-led modernization deals. BPO was a standout service line this quarter, growing 12.7% sequentially and 14% Y-o-Y in direct, driven by healthy pipeline conversion and new deal wins closing in quarter, again, led by AI-led propositions. BFS grew 9.4% Y-o-Y and 0.8% sequentially in direct. More meaningfully, BFS has delivered a compound quarterly growth rate of over 3.5% across the past 8 quarters, the strongest among our peers. That consistency reflects the depth of our domain context and our right to win in financial services. Insurance grew a strong 17.8% Y-o-Y, though was down 3.1% sequentially in constant currency terms, following 4 consecutive quarters of strong growth and we expect this to be a key growth driver for us in FY '27 as well. TMT returned to strong growth, up 16.4% sequentially and 13.6% Y-o-Y in constant currency terms as recent deal wins ramped up. The Others segment grew 5.2% sequentially, driven by new deal wins in retail. Logistics and Transportation reflects some first-order impact from geopolitical challenges. In summary, BFS is stable on the back of 8 quarters of structural growth. Insurance and TMT continue to be drivers of growth through the remainder of the year as well. The client pyramid tells the story of our intentional focus on driving opportunity maximization as well as wallet share and market share gains as we open new addressable spends with AI and platform-led growth model. On a trailing 12-month basis, we added 5 clients in the $20 million-plus band, reflecting wallet share expansion and successful ramp-up of large deals won over the last several quarters. We added 2 clients in the $5 million-plus band Y-o-Y and 1 new client in the $10 million-plus band Q-o-Q. The client graduation trend has been consistent over the past few quarters. Our top client metrics also deserve good attention. Our 1 to 10 accounts grew 11.1% Y-o-Y and 11 to 30 accounts grew 21%. This is a deliberate outcome of our strategy to build the next tier of $100 million and $50 million-plus accounts. On a sequential trailing 12-month basis, the 11 to 30 accounts grew 6.2%, while the top 10 grew 1.6%. The reduction of one client in the $150 million-plus band reflects normal TTM ranking dynamics as the account moved marginally below the threshold on a trailing 12-month basis while continuing to remain healthy. Moving to our financial metrics performance. Q1 FY '27 EBIT margin was down by 60 basis points, impacted by ramp-up costs of new deal wins and the TAP acquisition costs. EPS decreased 4% sequentially to INR 25.6. We will continue to operate in the stated margin band for FY '27 while making investments for growth. Operating cash flow generation was $39 million for the quarter. We will continue to invest in platform capacity ahead of demand with full visibility into the return. The deal ramp-up costs are a predictable leading indicator of the revenue growth that follows and hence, the Q2 guidance. We remain committed to operating within the target band of 14.75% to 15.75% for FY '27 while making the investments the platform requires. DSOs for the quarter was 95 days. As we have noted previously, we expect DSO trend to progressively improve through the remainder of the year. In summary, Q1 '27 delivered strong and broad-based growth momentum. Revenue of $471 million represents 2.1% sequential and 8.3% Y-o-Y constant currency growth. Our pipeline continues to be at record levels, even after a strong net new TCV signing of $461 million in quarter with 3 large deals won in excess of $100 million. Our margins were delivered within the stated band after absorbing acquisition costs. Q2 is positioned to deliver the best sequential CC growth in 3 years. We maintain FY '27 guidance for high single-digit to low double-digit growth as well as our margin guidance within the band that I stated. With that, I'll open the call for questions. Operator, over to you.

[Operator Instructions] First question is from the line of Nitin Padmanabhan from Investec India.

Congratulations, Nitin, on the reappointment. First, I had a couple of questions from a demand environment perspective. Of late, we have seen quite a few companies report client-specific issues. And even in the context of Mphasis, I think we have seen insurance and logistics sort of drag for the quarter. Just trying to understand how much of those were something that you didn't really anticipate? And second, in terms of client conversations, are you sort of sensing incremental caution in any form because we have also sort of of late in terms of commentaries picked up some caution even from banks spending and discretionary and so on and so forth. So just would be great to sort of have your context around what you're seeing within your client base.

Sure, Nitin. Thank you again for the congratulations. I think the environment at a macro level is obviously complex, I think, to say the least. What that does is creates uncertainty. And of course, that leads to a certain degree of caution with clients in committing to programs, not knowing where the cycles are heading. Just look at it from 3 months ago to today, the interest rate cycle seems to be reversing. The upcoming Fed meeting seems to be the most uncertain outcome meeting, so to speak, just to give you a data point. So from that perspective, I don't think the environment is any different for us than it is for our peers, right? We are dealing with the same set of macro challenges, same set of uncertainties, both interest rates, geopolitics. We're also dealing with the same set of AI disruption fears. I think the way to think about the environment and the demand is that, as I mentioned in my script, there's a fair amount of debate in enterprise customers, especially in the U.S. as to what should be the strategy for the second innings of an AI game that is being played like baseball. This is really early innings. Inning 1 was all about which model to use, what tools to deploy, how to find some efficiency productivity. It was really all about efficiency and savings. But I think as we transition away from tool deployment, experimentation, use case factory, pilots, POCs, the real questions that are being asked are, are we really gaining ROI from these investments? And if the answer is, it's not measurable economic outcomes, then what should be the pivot that enterprise needs to make in how they think about deployment at scale and how to impact business outcomes. So I think the bigger enterprise confusion on deals that Firstly, all of them must have an AI-led solution. But the biggest question mark is, how do we know that this will stand the test of the next new development that will come out of one of these frontier model companies in 3 months or 6 months because the density of launches is obviously increasing. So I think the short answer is that the old school way of thinking about discretionary spend has to change. I don't think we will see discretionary spend come back in a way that it used to be 3 or 4 or 5 years ago. I think today, there are additional pockets of spend that sit outside of tech because a business -- if you see -- show them a business case that we can expand revenue conversion by 1% or improve an underwriting decision or to some extent, give them a better forecast of inventory and demand, that business case gets funded, whether there is tech budget or no. So I think that's what we are trying to call through opportunity maximization that it isn't just about playing in the CIO's budget. It's actually about looking at what an enterprise needs to transform and how do you help them get to a point where they can genuinely be an AI-first enterprise. And that mode is just about starting. And the ability to shape those conversations to lead those clients is probably falling a little bit short from traditional consulting environments as well, primarily because this is a whole new world and everyone is looking for the right answer. So most of our opportunities are really coming out of those conversations. And of course, we continue to maximize our existing strongholds, whether it's SDLC transformation, legacy modernization and all of those as well. So I think a little bit more nuanced answer, Nitin, but the traditional way of thinking about long-term annuity run deals, I think those are highly susceptible to disruption because that's where you will have the narrative of productivity and what the client is asking for a pass-back. But the new way of thinking about it really is how do we impact certain strategic initiatives and programs where AI needs to get embedded. And I think most CIOs are now transitioning away from having an AI strategy to actually having a strategy that supports the business while embedding AI at the heart of those strategies.

Got it. Just one quick follow-up there. So in your conversations with clients, well, from an Mphasis perspective, obviously, we do see that the pipeline is sort of picking up very strongly and Tria is also finding a lot of acceptance. Do you think that even from our portfolio perspective and our clients in the context of macro when the deal wins and visibility are out there? And do you think that the certain level of visibility that you would have otherwise thought of, you would sort of be a little cautious from that perspective is one. And second is that do you think that you would want to sort of -- it makes sense to sort of sacrifice margins in the near term to really just focus on growth. Those are the 2 things I just wanted your thoughts on.

Sorry, the second question is clear. I'm still not clear what the question on the first part is. You talked about adoption of Tria...

The first one was about -- yes. The first one was around anything that you picked up across client conversations to suggest that the environment could be far more volatile despite the fact that we are finding a lot of acceptance with our services that despite that, you could still have unforeseen volatility within the portfolio.

Yes. So I think at this point, Nitin, again, we can only go by our own pipeline and our own client conversations. And hence, we are showing a certain degree of confidence in our next quarter performance. There is always a chance that macro will get really harsh, much harsher. And if we get an interest rate shock on top of the oil shock, then that will create disruption in the economy. But again, we can't predict that and trying to predict the macro environment is anyways hard enough. But the focus is on micro, client by client, deal by deal, account by account. I think there's a fair amount of opportunity because every time there is this new tech adoption cycle, there is an opportunity to lead the customer if we have the right propositions and the right points of view. And clients are actually looking for partners who are not just willing to execute what they want, but actually willing to argue, debate, discuss, ideate and co-create. And that's the positioning that is very clearly visible to us, at least in our existing verticals and in our existing geographies. And given that U.S. is the frontier market when it comes to adoption of these new tech, I think we seem to have found a good sweet spot with early adopters. The second question that you asked me around growth margin trade-off. At some level, yes, I mean, it's not that we took a trade-off for margin to deliver growth. I think we had a utilization drop because we had to ramp up for expected growth in Q2. And of course, we have some impact from the acquisition announced in third week of April. Those were all conscious decisions, but the idea wasn't to go grab market share by actually playing the price game. That's a very different ball game. We do expect that as the platform adoption expands and the attach rate starts to show up over the next 2 to 3 quarters, we definitely have an opportunity to expand the gross margin. How much of that we reinvest, how much of that we keep in the P&L is a call we will continue to make. But we feel fairly good about the fact that we are able to not just sell ARR deals, but we are able to sell deals that have a component of ARR and managed services because that gives us a lot more operating leverage besides just looking at the traditional pricing model. And I think just a minute on that model, it is very clear even to our largest clients that their current mode of purchasing services will evolve and change, and it won't just be based on input or capacity, but some form of an outcome in certain areas where it's amenable. And outcome-based pricing is not the same as output-based pricing. So there's a fairly interesting evolution that, again, we are trying to lead with some of these engagements. And some of those are actually in quarter -- already showed up in Q1 in terms of the way we were able to price and construct those deals. And that's really something that's going to continue to evolve as we go forward. You had also asked me a question around insurance and logistics in the previous question. So let me quickly address that, and then we'll take the next question. I think insurance grew about 35% in FY '26. This is coming off of a fairly strong growth year. We had certain project milestone completions. This is not a reflection on the pipeline and the growth potential of the business, and we'll continue to see further expansion. It is not related to any one client impact. We have no client impact to call out as we stand. We are continuously working fairly aggressively to drive that motion so we can not just protect what we run, but we actually expand using the approach I just explained to you on where clients want to go. On logistics, it's a little bit more headwinded given the macro and the geopolitical environment. It's become a smaller unit for us and small number changes drive high percentage variations. More work to be done, both in logistics as well as in airlines and railroads, and we'll continue to report on that as we go forward.

Next question is from the line of Vibhor Singhal from Nuvama.

Congrats on a solid performance in this quarter. And Nitin, congrats on your reappointment again. Two questions from my side. In terms of the outlook that you have shared for next quarter, just wanted to break it down into a couple of things. There is this consolidation of Red Oak also, which is probably coming up in the next quarter. So how much would that be contributing to the kind of growth in that? And just -- if I remove that also, do you expect the organic -- I'm just calling that a separate part. The remaining part of the business, the core business that we already have, is that also expected to be as strong as you'd expected? Because, of course, we had a very strong deal wins right up till -- leading up to this quarter. So I'll just wait for your answer for the question and then probably I have another follow-up.

Sure. Thank you for the kind comments. Aravind, why don't you take the question on Red Oak as well as organic versus...

Yes. So the Red Oak is baked into our outlook. The timing of that in terms of when it would start, if you look at our notes, the consummation has not happened. The work has not started yet. We expect that maybe it would start sometime towards end of August. So to that extent, it is baked in, but it will not have possibly the full quarter impact for the current -- for Q2. So obviously, given that, the commentary around growth is a little more broad-based than just one transaction, right? So we do see momentum. We've seen kind of buildup to that in terms of how our TCVs have been and how we have kind of propped up even from a headcount standpoint, the kind of increase and the utilization investment that we have made in Q1, which will play out in the subsequent quarter.

Got it. Got it. So Aravind, basically, our guidance before this consolidation was also -- for the full year, the guidance was also high single digit to low double digit. Now that we have incremental contribution from Red Oak. So let's say, if I were assuming X percentage growth earlier, can I assume X plus something more coming from Red Oak for the full year?

Very difficult to kind of peel it like that because it is not that large number, given the range that we give, right? If I had given a specific number, this question is relevant. We have talked about high single digit to low double digit. If you look at the size of the payout and typically, we've talked about these are customer consolidation initiatives. The typical payout that we do is between 1 and 1.2x revenue is the consideration that we pay. If you kind of normalize it for half the year, it may not be as meaningful to kind of look at and it is well within the range that is already kind of baked in, in our guidance commentary.

Got it. Got it. And since I have you, can I just ask you about the margins? So in this quarter, basically, if you could just give us the margin walk, how much was probably the impact of the earn-out for the acquisition, the currency impact? And given that we are almost at the bottom of our guidance, how can we build the margin trajectory for the remaining part of the year? And then I'll have just one more question for Nitin, which I probably should have asked in the beginning, but I just probably wanted to get this out of the way.

Sure. Sure, Vibhor. So from a margin walk perspective, obviously, like in any quarter, there are lots of puts and takes. But if I were to look at just the 2, 3 big items that contributed, we had TAP acquisition that kind of had a margin impact of about 0.35%. Point to kind of consider here is that this was an acquisition which we structured where a large portion of the consideration, I would say 2/3 of the potential consideration was in earn-out and the entire earn-out is flowing through the P&L and not through the purchase accounting, right? So it is something which is going to play out over the next couple of years. The other big thing, Vibhor, that contributed was a steep drop in utilization, which is kind of more in anticipation of the growth trajectory that we've been talking about. So I think the first one will kind of continue. The second one should reverse, right? The -- from a broader direction, Nitin kind of talked about it as a response to the question of the previous caller. But in a way, we think there will be a normalization over the course of the year as some of these investments start to pay off.

Got it. Got it. Nitin, just one last question from my side on the AI adoption that we are seeing in the industry. I think some of our peers have been calling out and we've been reading a lot about how the enterprise adoption, AI adoption is happening and how large enterprises are kind of reluctant to basically take an off-the-shelf large language model and implement it. And rather, they are actually asking service vendors to customize SLMs, the small language models, as per their requirement, in many cases, looking for token cost optimization as well in other cases. So what are our conversations with the clients on this? I'm sorry if you touched part of it in your opening remarks, but any color on that, that do you think this could actually open up a bigger opportunity for us on the AI side?

Sure. I think the frontier model adoption and the token cost issue is a fairly complicated but yet topical question that comes up in almost every client conversation that sits at the heart of that whole ROI from AI investment. I think a couple of things that are panning out. Firstly, no large enterprise will go native with any frontier model. They will not go first party, which means that they want to have the ability to plug in and plug out any different kind of models that become available. Two reasons for that. One is cost, as you mentioned. And the second more important reason is the risk of obsolescency. What seemed to be a great strategy 2 years ago suddenly seemed obsolete when the next model came out. And then the explosion that happened, for example, just in coding assistants gave our customers a lot of pause in worrying about what to do next. And this is what I referred to earlier when I said in the first innings, it was all about model adoption, tool adoption. Now the conversation is how do I build a stack that gives me the ability to do enterprise adoption at scale without creating dependence on a model or a tool. I think there will be a lot of push and pull in this. We've already seen last week's announcements on new models that came out of China. Many of our large clients are now experimenting with open source and open weight models. That will put definitely a pressure on token costs because the cost of tokens is dramatically different depending on which model you choose to use. So the real revolution is not going to be in what model you're using. It's going to get commoditized fairly quickly. Now what that means for model company economics is a whole different discussion, subject for another time. But it definitely means that there's a tremendous opportunity in not just helping them build SLMs, but actually helping them build the stack that enables them to ingest all new developments that will come over the next 2 to 3 years. And that could include SLMs, that could include governance layers, that could include a whole host of other capabilities, which, by the way, are very neatly fulfilled by Tria as well. So that's truly the game that's going to play out is the bet we are making.

Next question is from the line of Sandeep Shah from Equirus Securities.

Congrats on good execution and congratulations, Nitin. The first question I wanted to ask in this customer contract acquisition, which is...

Sandeep, sorry to interrupt you. Your audio is not clear. Can you speak through the handset, please?

Yes. Is it clear?

Yes, thank you.

Yes. The first question I wanted to ask is in the acquisition of customer contracts in the vendor consolidation-led deals. Aravind, you articulated the price to sales is 1 to 1.25x. So the TCV which we get, is it that TCV which we won in the vendor consolidation or this is one of the part of the larger TCV which we won in the vendor consolidation? And which event precedes is the larger deal TCV win, which precedes as an event or the -- acquiring a smaller vendor through all vendor consolidation precedes when winning a large deal?

So I would say, Sandeep, look at each of those as more discrete transactions. The vendor consolidation is a larger strategy that the client undertakes, but each of these are discrete transactions. So it is not a multi deal with different components, it actually happens in phases.

Okay. Okay. Because we disclosed this, but if I'm not wrong, peers also does that. So it is not mandatory to disclose, but we disclose on our discretion.

I didn't understand. Sorry, can you repeat?

So in the notes to accounts, each time we disclose such kind of deals, but my sense is even some of the peers and competitors are also doing some kind of a structured deals, but those announcements are not found in their notes to accounts. So is it mandatory to announce? Or how is it?

It is mandatory, Sandeep. It also depends on how the accounting construct happens. In these cases, while we don't take over an entity, in none of these, we have taken over an entity, the accounting follows an acquisition accounting. But if you look at and you will see the disclosures on PPA, it is almost entirely customer relationship and customer intangibles. So the cost gets amortized.

Okay. Okay. Good. And second question, Aravind, in terms of the hedge losses, how do you see if the current spot rate continues? The hedge losses may further increase or with the new hedges and the higher strike price, it can reduce on a going forward basis? And second, on the OCF for this quarter, if we adjust for the delayed collection of the fourth quarter debtors, it seems it has been slightly tapered in this quarter. So that means heavy lifting has to be done from 2Q to 4Q. So are we confident about the same?