Newgen Software Technologies Limited (NEWGEN) Earnings Call Transcript & Summary

Ladies and gentlemen, good day, and welcome to the Newgen Software Technologies Limited Q4 FY '20 Conference Call, hosted by ICICI Securities. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Ms. Deepti Mehra Chugh. Thank you, and over to you, ma'am.

Good evening, everyone. I am Deepti Mehra Chugh, Head IR, Newgen Software Technologies Limited, and I welcome you all to the Q4 FY '20 results of the company. I hope everyone on the call is keeping safe. Connecting with me remotely today is our management: Mr. Diwakar Nigam, Chairman and Managing Director of Newgen; Mr. Varadarajan, Whole Time Director; Mr. Virender Jeet, Senior VP Sales and Marketing and Product; and Mr. Arun Kumar Gupta, Chief Financial Officer. Before we move on to the discussion, let me highlight that this call may contain certain forward-looking statements concerning Newgen's future business prospects and profitability, which are subject to a number of risks and uncertainties, and the actual results could materially vary from the forward-looking statements. Past performance may not be indicative of future performance. The company does not undertake to make any announcements in case any of these forward-looking statements become materially incorrect or update any forward-looking statements made from time to time by or on behalf of the company. For further details, you may refer to the Investor Relations section of our website. I would like now hand over to Mr. Nigam for the presentation of the results. Mr. Nigam?

Good evening, everyone, and thank you for joining us at our Q4 FY '20 post results conference call. I hope everyone on the call and their families are keeping safe. It has been a very difficult phase for all of us, and hope that we all will come out of this situation much stronger. In this call, I'll try to run you through the steps that Newgen has taken to overcome the current situation, the new ways of our working, the impact on our business and opportunities as we see. First, we have always believed that Newgen as a family is one of our core values. Given these unprecedented times, well-being of our employees and their family is of utmost importance to us. The company's foresight, quick decision-making, business continuity, processes and robust IT infrastructure ensured seamless transition to the remote working environment. In the span of a days, we proactively set up a COVID action team, which constantly assess and responded according to the crisis. There was just-in-time requisition of laptops, enabling of VPNs, ensuring information security and coordination between teams. We are happy to say that over 90% of our workforce is now enabled to work remotely. In these difficult times, we have seen some extraordinary dedication shown by employees. I would like to take this opportunity to thank all of our employees for the same. We have about 560 active customers across 69 countries. Our solutions are of mission-critical nature for our long-term customers. This serve as the backbone of their operations. During this COVID time, we ensured we fully supported our customers so that they can ensure business continuity. We have been receiving appreciation from customers across the board for this extraordinary support extended by the company in these difficult times. Now coming to the annual results. We closed the revenue of INR 661 crore for the year, up only 6% compared to last year, which was lower than -- much lower than our expectation. We witnessed growth across most geographies, EMEA, Newgen grew by 17%; APAC at 10%; U.S. at 5%. And U.S. growth is primarily based on SaaS business and hence growth looks small but will result in long-term sustained revenue. India, however, continued to face challenges and was slow in the entire second half and also in the fourth quarter due to economic sluggishness in NBFCs and banking. We also suffered due to consolidation in banks. As you know, many banks are consolidating and many of our new propositions went out of the window. As you are aware, our business has heavy dependence on fourth quarter. The last quarter was further impacted by new business deferment due to restriction imposed globally starting in February 2020, leading to international evacuation, operations and subsequent lockdown. Government business also completely subsided. Overall, we still did 71 logo acquisitions during the year. Profit and margins were impacted during the year on account of slower growth in top line and continued investment in R&D, sales and marketing efforts. The company reported an EBITDA of INR 105 crore and profit after-tax of INR 73 crore. However, our annuity revenue continued to remain strong and comprised of 56% of the revenue and witnessed a growth of 22% Y-o-Y. Of this cloud revenue continued to grow rapidly at 60% Y-o-Y. Most geographies are increasingly showing acceptance towards cloud solution. We successfully moved clients in SaaS -- to SaaS in APAC and 1 new customer there as well. SaaS solutions are easy to deploy remotely, and this is expected to give us substantial advantage in COVID year. During the year, Newgen has been, again, positioned the Challenger in Gartner Magic Quadrant for Content Services. It has also been positioned as a strong performer in the Forrester Wave ECM Content Platform. Newgen makes plenty of investment in R&D and has strong team of 400-plus employees, which constantly focus on various research and product development initiatives. During the year, it was granted 4 patents, taking the total patents to 15 granted as of March 2020. We have recently received approval of setting up a unit in the IT/ITES SEZ in Noida, UP for development -- from Development Commissioner of Noida Special Economic Zones. We continue to extend our reach globally with our direct and indirect sales network. Now we are also focusing and strengthening SI ecosystem, SaaS sales through SI in Fortune 2000 customer in U.S. is thriving, and we are seeing good traction in this. While in short term, the environmental challenges are expected to continue to lead delays in new deal signing and lengthen the sales cycle, we believe that today the relevance and requirement of our digital transformation solutions for enterprise is more than ever. All our customers are realizing this during work-from-home situation and planning to go for more of these solutions implemented. These solutions are natural fit for our strategy of remote implementation. We are thus reinventing new ways of working by aggressively pursuing cloud deployments across the globe. Moving forward, we expect that this would yield good results. We are structuring our team in the right way. We have been successfully executing each stage of the project from requirement gathering to project planning, to implementing and production support remotely. The company has been transforming new methods of sales and marketing also, including remote engagement and increasing localization effort. Company's new version of product, iBPS, has low-code capability and includes cloud deployment that are very relevant today. Newgen has launched an enhanced version of customer communication management suite and enables user to easily create, design and manage HTML, e-mail and other messaging communications. Newgen is developing and deploying new solutions under Paycheck Protection Program of USA to help financial institution quickly process loans under the various monetary and fiscal intervention introduced by government globally to stabilize economic condition. Within a span of a couple of days of announcement of SBAs -- there is a U.S. government -- SBA PPP scheme by U.S. government, our team defined and conceptualized the solution designed and built it, deployed the same on our cloud, I mean in the cloud. We are receiving good traction of our new solution, which has now been deployed by 20-plus banks and financial institutions in U.S. till date. We are now working on the forgiveness piece for the same. The company is prioritizing SaaS-based delivery model for the solution. We are making concerted efforts towards more efficient operations and cost optimization for cash preservation to help us maintain a healthy liquidity position during this period. Our R&D expenditure during the year was 9.45% of revenue and sales and marketing efforts at 21% of revenue, keeping our long-term plans in mind. Our net cash from operating activity was up INR 90 crores during the year. Our net trade receivables as on March 31, 2020, are INR 269 crores, which resulted in a stable net DSO of 149 days. Q4 results. Our revenue at Q4 is INR 191 crore. During the quarter, EBITDA was INR 52 crores and profit after-tax was INR 42 crores. We have 21 new deals during the quarter and it includes large projects with leading pan-African financial institutions offering bank services to 20 African countries; license agreement with key government ministry in India; 4 cloud agreements in U.S., including a deal with leading provider of property casualty insurance for auto, home and business; mid-sized project with one of the largest Bahamian bank. We also required to strengthen our Board. We have appointed Ms. Padmaja Krishnan as non-Executive Independent Director of the company during the quarter. In the end, I would like to reassure that Newgen has a resilient business model in place with large annuity revenue streams, recurring business from existing customers as well as diversification across verticals, clients and geographies. We are also working on cost-optimization measures in the short term to conserve cash. We are carefully monitoring the situation and taking all necessary precautions for employees, customers, partners and vendors. We are also actively pursuing new opportunities by working around new ways of working to ensure that Newgen emerges strong from this situation. We are now open for questions and answers.

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

Congrats on an excellent set of quarters -- excellent set of results. Sir, I just had 1 question. The question was, yes, we had some deferment of business in Q4. And does this deferment mean -- I know Q4 is a heavy quarter for us. Some of this would flow in our subsequent quarters? Or how should we look at this, sir?

Thanks, Ravi. This is Jeet from Newgen. So we have -- we had almost a set of at least 10 to 15 deals, which were almost confirmed deals, which really got pushed out. Now what has happened after this push out, surely some of these deals are going to fall through in Q1 and Q2, and we are assessing that. But there's also an element of some of these deals, which may not fall, so in the near-term visibility because as the customers also rearrange their priority. So for the larger institutions, we are thinking for the banks, where we will go from a strategic delay still requires most of these deals over, say, in next 1 year's time. But whether they fall in Q1 or Q2, that's the time. We think that 60% of these will still get closed in the next 2 quarters. But others, it may just get delayed for a slightly longer time.

Okay. I think -- sorry, go ahead.

No, no, I just wanted to know, does that answer your question?

Okay. Yes, that does. And I think you had also mentioned in our previous calls that though we have a heavy Q4 historically, we are slowly trying to move towards balancing it out by bringing some of the business in other quarters as well. Are we progressing towards that? And do we have some visibility in terms of 2, 3 years of time line or something like that, sir?

No. So I think there are 2, 3 ways of happening this. So as 1 of this is on very organic or what we are pushing through cloud. So as an annuity business starts becoming a larger part of the business share -- new share, the seasonality subside. And in fact, over the last couple of years, that has happened. We have now reached an annuity business from roughly around 40% to 56% over the last 3, 4 years. And this is growing substantially year-on-year. So with more cloud push and -- in larger business side, we do think that over a period of time, the seasonality will decrease. So far, we were not pushing cloud across all territories very aggressively because we are timing it with the market acceptance of that solution. But now with this COVID, I think there is a complete new way where customers are being more receptive about cloud as well as it becomes a more viable way of conducting business, doing business as well as implementing solutions. So we do think it as well. But it will take still some more time, still we have a large amount of our revenue coming at license deal revenue, which introduces the loss target there. So it's a work in progress. So it may take 3, 4 more years to really see them out completely on quarter-to-quarter.

The next question is from the line of [ Vikas Himani from Natwarlal Research. ]

Congratulations for the good quarter. So my question is related to the billing rates. Do we have any impact on the billing rate due to this COVID-19 situation? First. Or are we trying to do this to give the more transition from the volume side?

Yes. So Vikas, if I understand your question, your question is about, does it have impact on billing rates? Is that your question?

Yes.

So our billing rates predominantly are determined in different lines of our revenue streams. So we have revenue streams predominantly, which is license, which is always negotiated and in difficult times, you can have customers benefiting harder. We have ATS and AMCs and cloud, which are precontracted, where there's very little negotiation because that's a regular business, but customers can still talk about, but out there, the negotiation sounds were very minor. And then there are resource-based contracts. In our resource-based contracts, still -- see we are not a company which really provides very large teams and has got very large horizon contracts. We still have short teams, tactical teams on tactical contracts. So we are able to retain our -- our push is to able to retain our billing rates and in terms of optimizing, in terms of getting more efficiency to the customer for the same billing rates. So we are not -- our business is not really getting such that the rate at we can able to build our resources. Vikas, does that answer your question?

Sir, the line for the current participant dropped.

Okay.

The next question is from the line of [ Ritesh Chandini (sic) [ Ritesh Gandhi ] from Discovery Capital. ]

Just a couple of questions. In terms of -- is there any kind of guidance -- I know it's difficult right now, is there any guidance that you're providing with regards to this current year FY '21?

No, we don't provide guidance. The issue is we have difficult unprecedented situation in terms of looking at exactly how the business scenario will unfold is very difficult. But broadly, as Mr. Nigam had addressed, we have a large part of our business, it's completely diversified. We have completely diversified across geos, across segments of businesses and across customers with very little client concentration. And our contract deal sizes with clients are not of really huge magnitudes. They are still more tactical. And we do very, very critical things for customers. Our customers run their [ respective ] bank, the bank is running its core businesses. It's lending on its platforms. It's opening accounts on this platform. Similarly, if it's an insurance company, it's the same. So we don't see any big challenge in our continued business, which is the annuity businesses or renewal of ATS and everything in the order books, all the support contracts or cloud contracts. We do see, however, the impact on the new deal wins, which is whether it's new deals in existing clients or new deals in new clients. So our ability to determine the next year's growth will be determined on how much the market opens faster and how fast customers are able to pursue the new orders. So we do see that there is still an upside for us because this environment has also shown up slightly accelerated the pace of sorting that's been making in certain customers. As the next quarter unfolds and market opens, we should be able to have more better estimates about how our top line will unfold and our cost rate.

Got it. And the entire of product, which is helping and assisting in the PPP in America, which we're seeing, has been adopted by about 20 clients order. So is that a reasonable amount of actually increase in the revenue? Or...

So I think what that is, typically, that is more about our ability to be relevant in the market in the most difficult time. So what we did is out there, we're rapidly using our product, deployed a new solution in a matter of days, made sure that we have around a series of new customers who could come to the solutions. Our initial pricing was determined to basically make sure that they don't have any barriers of entry because it was supporting the customers. But we see with each of those customers, we are assuming that we can build up $1 million -- multimillion-dollar pipeline of business over the next few years because some of them are very substantial customers. So it may not have direct revenue relevance in 1 or 2 quarters, but surely adds up to the whole price over more quarters.

Got it. And just on the expenses side of things, you had indicated some kind of cost-cutting initiatives. Is there anything you can highlight with regards to the actual steps being taken and how large we expect that to be in terms of impact on our expenses, sir?

So I think the expenses are in work in progress. We have already taken some measures and some measures are organic because of -- I think there's a substantial part of our expenses in international travel. I think we see -- I see a very strong reduction this year because of -- because it's not a good reduction, but we have no choice. We can't travel. And the second part is about rationalization of certain -- in terms of performance, pays and other things, which we have taken up for some quarters. So I think we are -- since this year, we are not aggressively reinvesting in sales and marketing and growth. So we are looking at more conservative numbers. And thus, I think we should be able to plan our expenses much better this year and get much better margins.

Got it. And the last question is on the India revenue piece of thing. So obviously, with the kind of consolidation of financial institutions, et cetera, you had indicated, things are going slightly slow. Do you see that being an area, which remains slightly flattish? Or you expecting actually degrowth to happen in that? Or I mean, how should we be thinking about the India expect -- financial services?

Yes. I mean we always look at India market very positively. I think at the beginning of the year, we have enough cases. I think the only thing is over because there is so much uncertainty and sudden jerks in this market, which really disappoints during the middle of the year. I think the last year I think if you look at, there are 3 major damages to Indian markets from our perspective: the NBFC issue, which was typically a growth driver because we used to sell to almost anywhere in new NBFC and existing NBFCs were big customers; banking consolidation, which not only spoiled over cases in the banks, which got consolidated, but also deferred our cases in the banks, which became the principal bank; as well as government -- slow movement in government cases, where decision making completely got pushed out. I think, again, as I said last year also in the last quarter, we have created phenomenally good cases in -- big trade finance cases in our Tier 2 banks as well as in private banks. We have extremely good cases in governments and different ministry is going on. The issue is about if the government is going to be slightly more aggressive in spending, we should be able to still grow in India. So we're not ruled out in India. But as you are saying, the other areas of the market in terms of international is growing. So India as a percentage of revenue may not be able to keep pace with the international area.

Got it. Got it. And sir, last question is with regards to your hedging book policy. How much of your revenues and for how long are hedged? And are there some kind of currency benefits we expect to creep through in terms of your offshore business?

We -- since we don't hedge, generally, we have a packing credit, which is against the export receivables. We rotate that against that, and that provides a natural hedge because we also having our expenses on that. Beyond that, we don't do any hedging. So it's roughly around -- if I'm right that number, really Arun can confirm around INR 70 crores, INR 80 crores, which we rotate.

Yes, yes, yes, INR 70 crores, INR 80 crores.

That's provides the natural hedging, yes.

Got it. Got it. Understood. So we are seeing a small amount of impact of kind of currency in the Q4, and we can potentially see a larger amount Q1 onward?

Yes. Sorry, I couldn't get the question.

No, I was asking is that given the actual depreciation of the rupee, we've seen some impact of that happening in Q4, but we'll see the larger impact happening at Q1 onwards in terms of benefits of the rupee depreciation?

I don't think. With the Q4, I think the currency movement towards the end of the month -- towards March, it was slightly higher, maybe on -- towards the end, it was higher than what was projected in the Q1. So it depends on entirely how the currency moves at the end. But I think you should also understand, for us, it does not matter much because it balances from the interest cost on the packing credit. So eventually, we try to maintain neutral currency there.

[Operator Instructions] The next question is from the line of [ Shiv Agarwal ] from -- an Individual Investor.

I am just trying to understand if the quality of delivery to customers has been hurt due to remote working? I mean what has been the feedback from your customers so far?

I think this is one thing we have done, in fact, extremely good. So far, I think our quality of delivery to any customer has not hurt because we are managing very critical installations for them. I think also we are already, as a company, who is servicing customers of more than 60 countries around 600 -- 560 major critical installations. Of course, we are not present at every place. Our people are not at the customer site. So there is a kind of a remote working prebuilt in the model. Only what has happened right now, that has been completely fully unleashed in terms of that remote working. So we have made sure all our customers, their systems are up and running, all their critical milestones, releases that have gone. In fact, for one of our global shared service manufacturing client, we have gone with a global rollout of process during the month of April. At the end of the peak COVID, we had a global rollout of process for more than 60 countries being used. I don't think our delivery affected. What is hurt is ability to get into new deals because the decision-making out there is more critical, it's more collaborative as well as people have to feel comfortable about investing in this area. That is the impact we see.

Okay. And sir, one more thing. Given that your platform is very neutral, and it's possible to build a lot of solutions on top of this, so have you received a lot of inquiries on your existing customers from the -- in the sense of whether have you been able to cross sell? So some banking clients comes and says that you're already handling this sub process. Now why don't you do another adjacent process or maybe even the legal department, can you automate, maybe digitize the document and so on? So have you been receiving those kind of inquiries?

I think always, that's been one of our growth drivers to keep on cross selling, up selling to the customer. And I think if you look at it this time, Mr. Nigam also will give you an idea. In the last 3 months now -- not like in this, just 2 months, we have done work for SBA which is PPP lending. We have done work for forgiveness. We have done work for enrollment of students for a county. We have worked on [ CPLS, ] which is a U.K. lending. We are working on the Australian scheme. For India SME in agri, we have come up with actuator, which are being pushed in the market which are -- and all these are for both existing and new customers. So right now, financial service industry is showing more -- they are becoming more active. Rest, they are still recovering from shock. So -- and wherever the industry is moving, we are able to find more and more relevance out there. I'm sure, as the market opens up, we'll find more traction in business because of these initiatives.

So the way you have built products for the banking industry on using your platform, are you looking at building similar kind of products for other industries like U.K., for example, I mean, they are relatively recession resistant so that might help.

So it's very difficult to understand the new industry in the time of crisis. I think we have already 5 different industries. We do government, which is another big area for us. Insurance is another area for us. We work on manufacturing and global shared services as one important area. Similarly, pharma insurances, health insurances we were submitting, where we have expertise. So the initial subsidy around working more on those areas. And then as better times, we can invest into newer areas and newer verticals.

And just one more thing, sir. Regarding the PPP and the one in U.K. and also Australia, you mentioned that you have signed up some 20-odd customers. So how many of them are new and how many of them are your existing? I mean to whom you have deployed it...

So far, the customer wins are only in the U.S. We have not got any customer wins so far in Australia or U.K. I mean these are very small subsidiaries yet. And if I'm right, out of the U.S. out of 20 more than 50% or 60% are new customers.

Okay. So then it gives you a lot of growth opportunities with that?

That you can check with Deepti, right. Deepti, she can give you an exact number. Yes, because these -- that...

Yes. I think substantial is new customers.

Our strategy was to acquire them to cloud through this opportunity and then show them the power of platform and then do the regular digital account opening, loans and many of more processes with that.

[Operator Instructions] The next question is from the line of Rahul Bahri from Xponentia Capital.

Sir, I just wanted to understand the EBITDA or the PAT this year has obviously gone down significantly. And I believe one of the key reasons is the impact of COVID in the last quarter. But as you look back, even quarter-on-quarter, with the last 3, 4 quarters, our numbers have been lagging the previous financial year. So is it the NBFC and banking, so to say, challenges that, that sector is facing, is that the single biggest reason? How do you look at the bridge of the -- let's say, the EBITDA from last year which is about INR 20 crores, INR 25-odd crores? How do you look at that bridge? And second question is more related to the DSO days, which is roughly about 149 days. Is that something which is unique to our business given the large dependence on the BFSI segment? And do you think that, that can improve going forward?

So Rahul, thanks for your question. On the -- so I think if you have been tracking this business, this business has been always positioned around the 20% growth rate. And we have been doing that for X number of years now, at least last 8, 9 years. So what has happened in the first 3 quarters, because of the weakness in India, we were already running in a slower rate or rather than 20%, we are running at a growth rate of around 13%, 14% in the first 9 months. And at that level also, there was some amount of difference. And our cost at the beginning of the year when we are planning the cost for achieving 20% growth, both in investments in R&D, sales marketing as well as manpower for servicing that growth, we are already at a cost of between 15% to 17% earlier. So anything which is below -- above that adds to our margins and anything below company [ reduces ] our margins because we can't do cost planning based on exactly on the business, which we do in that year. So there is some element of slowdown in the first 3 quarters of the year because of the India impact. But the biggest crisis, if you look at our Q4 business also, the majority of that Q4, also it lopsided towards the last month and the last 15 days of March because that's what most of the licenses have closed for us. And if you look at also the impact of that, this year our license revenue has gone even lower than the last year's license revenue. So any revenue addition would have directly added to our margin because that's how the numbers unfold. Anything beyond 15%, 16% of our cost, that's completely added to the margin. So all this roughly around INR 20 crores, INR 30 crores, INR 40 crores of -- if you look at clip, we are looking at actually the clip, which was bigger than INR 20 crores because we are comparing it with the last year's number. Our projected numbers for this year is slightly higher than that, so some more. So I'm assuming that last INR 30 crores, INR 35 crores of clip was all because of Q4. But beyond that, another INR 20 crores, INR 25 crores was a slowdown in the whole year of India. And on the second question of DSOs, I think if you've been tracking this, I think our DSO has been a part of our business culture and it's also to do with license company sales globally, if you look track international companies who sell a lot of licenses, especially the new customer. So we were in the -- around 2, 2.5 years, we are at a DSO of more than 270 days or something like that. So we have taken a target to get the average DSO to 120 days. I think we are already doing that, only the March numbers -- till March quarter, it's slightly larger. So the DSO number is slightly larger at the end of the March. But during -- if you look at an average during the year, it has gone around 120 days, which was our target. It will keep on reducing because as the annuity and subscription businesses keep on increasing and become larger part of the revenue, this will further optimize. And I think over next maybe 2, 3 years, we can take our next year of target to bring it to less than 100 days.

The next question is from the line of [ Amit Agarwal from Bindi Investment. ]

The first question is regarding revenue from top clients. So as I can see, the revenue from top 5 clients and top 10 clients has decreased on year on basis with around 4% to 5%. Is this because we lost a big client amongst top 5 clients during FY '20?

Okay. Sorry, I think our presentation did not make it. So basically, what we are saying, this is not the revenue from the same pipeline. So last year, we had got substantially 3 large deals from some clients, which created the concentration higher. So every year, these top 5 clients or top 10 clients also change for us, depending on who comes. So typically, our clients are -- the larger clients are in the range of around $2 million of revenue, and they'll keep on switching. So we have not lost any clients in those cases. But last year, we have got some major deals in U.S. as well as in India, some 3 large deals, which really made it slightly more lopsided towards the top 5 clients.

Understood. Understood. And the second question is regarding the expenses. So as I can see in Q4 itself, there was some improvement around 5% in employee cost and around 10% in other expenses. Is this because of the COVID? And also, what is the magnitude of improvement that we can see from this number here?

Yes. So we have done some, I think some of -- because of the withdrawal of travel and other things because there's a travel cost which gets cut because of that automatically. And some was because already the year after Q3 also was slightly slower on an implementation manpower, so we optimize something around that number. There's also amount of manpower cost gets reduced because of the variable pay, because since we didn't meet our targets, so the variable pay probably kicked in, which reduced the manpower cost. So that's where the impact has come in the last quarter, but it has been minor. Going further, during the year, depending on how the business and the conditions unfold, we have already defined a series of things, both on the manpower cost as well as traveling cost and other costs in SG&A and marketing. So we have put them on the radar. We are optimizing them. And depending on -- as the market unfolds, we should be able to really project them well. But as we've said, I think it's even with the similar lines of revenue, as we did this year, we should have better operating margins. We hope to do better than that. But I think we will generate better, surely we have some expansion of operating margins this year.

Would it be possible for you to at least quantify Q1, Q2 from here?

I think it's difficult because we don't really give forward projections. And our business is also still very small and jerky, dependent on still licensing and new deal wins. So -- but any more color that's where you can talk to Deepti, she can provide you as much information.

[Operator Instructions] The next question is from the line of [ Rahul Agarwal from Infinity Capital. ]

My question was more along the line of what the previous 2 participants were asking. So on the cost structure side, how much of your costs would be fixed costs and how much would be variable costs? In the sense that much of your revenue would also be going through implementation and as new deal wins go down, that part of the revenue may disappear and you may also be forced to cut costs there. So how -- when you look at your P&L, how do you break each of these down? And how would it impact -- how would you think the margin would shake up with the revenue being impacted?

Yes. So you are right. We have an element of cost, which is roughly around still 40%, 45%, which is manpower driven in terms of support and deal. That is where depending on the size of business and size of our implementation, we have the variabilization of cost. But a large portion of our costs, which are to do with our sales and marketing and R&D investments are predetermined. So every year, we do plan about both these heads very aggressively. This year, as Mr. Nigam had communicated, we are looking at really working on also conserving cash and not going very aggressive on that. So this year, for the first time, we are now planning for almost 20% growth upfront in Q1. We will see how it unfolds and then plan. So there's going to be optimization in our sales and marketing costs in terms of our travel and expansion. There's going to be optimization of the manpower cost in terms of depending what degree of business we get, which is to be implemented. Those will be the major heads. And then there will be some amount of optimization, which is induced with the manpower into SG&A and other costs. We do think that between -- like on travel, there's a chance of optimizing the travel cost by around 30%, 40% depending on, if the travel opens up only in Q3, Q4. So similarly on manpower front, it depends on -- there's an element of optimization we can achieve by not hiring aggressively because we have -- we do more than 15% attrition. This year attrition is going to be less. We also do hire more aggressively than that. So this year, on the hiring side, if we go slow, then it is going to be around 5%, 10% the impact on the manpower cost just because of that.

Understand. And your overall employee costs are about 40%, 45% of revenues. I'm assuming your sales and marketing costs and R&D costs are also in the nature of manpower costs because it largely be people. And if you can correct me if I'm wrong. So other than that, the variable employee costs, how much is really variable per se? Was my question.

I think variable employee cost is only in the implementation manpower, which is very small. So variable costs, if you're talking about employee costs, then beyond these heads, there is not much. But on the other variable costs, which are in terms of our -- which we call marketing, travel and other things, those I already explained where they stand. In case you want some more details, I think Deepti can -- you can just write down your set of questions, and she can provide you better numbers to better understand.

As there are no further questions, I would now like to hand the conference over to the management for closing comments.

Thank you so much for attending the call. For any further queries you can connect with us, either you can mail me or can go through the website. Thank you. Stay safe.

Thank you.

Thank you. On behalf of ICICI Securities, that concludes this conference. Thank you for joining us, and you may now disconnect your lines.