R Systems International Limited (RSYSTEMS) Earnings Call Transcript & Summary

Ladies and gentlemen, good day, and welcome to R Systems Q1 FY '24 Earnings Conference Call. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Mr. Giriraj Maheshwari. Thank you, and over to you, sir.

Thank you, Ria. I welcome all participants to R Systems Q1 FY 2024 Earning Conference Call. We have today with us Mr. Nitesh Bansal, Managing Director and CEO, R Systems; and Mr. Nand Sardana, CFO, R Systems. We will start the call with opening remarks on the performance of the company by Nitesh, followed by a financial overview by Mr. Nand. Thereafter, we will have a closing statement by Mr. Nitesh. Subsequently, we will open for a Q&A session. Before I hand over, let me read out the customary disclaimer statement on behalf of the company. Investors are cautioned that this presentation contains certain forward-looking statements that involve risks and uncertainties. The company undertakes no obligation publicly to update or revise any such statements. These statements may undertake revision because of new information, future events or otherwise. Actual results, performance, achievements could differ from those expressed or implied in such forward-looking statements. With this, now I'm handing over to Mr. Nitesh for his opening comments. Thank you and over to you, sir.

Thank you, Giri. Good morning. Welcome, everyone. Thanks for joining this call. For those of you who have access to the presentation, I will keep calling out the slide numbers as I refer to them. For those who don't, I'll anyway be covering the content of the slides. I'm on the agenda slide, and I'll be covering some of the key highlights, trends and operating metrics, et cetera, as we go through. And then Nand will cover the financial details for the reported numbers for the quarter. So coming to Slide 4, which are the key highlights. We reported a revenue of INR 4,166 million, which is about USD 50.2 million, which is a year-on-year revenue growth of 3.1% and a year-on-year adjusted EBITDA growth of 10.4%. The net profit stood at INR 275 million or $3.3 million. If you look at from an adjusted EBITDA margin perspective, we have gone from 15.4% EBITDA to 14.4%, and we have provided a bridge for it, which I'll just talk about. But on a year-on-year basis, gone from 13.5% EBITDA to 14.4% EBITDA, which is the improvement of 10.4% that we talked about. It is adjusted for the share-based payment expense for RSUs that we've rolled out to all the key employees in the company, the expense for which comes to about INR 65 million, which is recorded post this adjusted EBITDA. Adjusting for which, the EBITDA will come to INR 535 million or $6.4 million or 12.8% of the revenue. The bridge between Q4 to Q1 EBITDA, we have further improved our utilization and got advantage of higher billing days resulting in INR 24 million and INR 16 million, so overall INR 40 million addition to the EBITDA in that sense. But we've also rolled out salary hike to our employees in Q1, which costed us INR 26 million. And then there is a INR 57 million impact of normal -- standard operations, which covers stuff from ramp downs or project closures coming from the customers as well as certain additional provisions for gratuity, et cetera, or provision reversals for which we had advantage in Q4. Net-net, INR 600 million of EBITDA reported for the quarter. Moving to the next slide. Looking at the trend, the 8-quarter trend for the revenue and EBITDA starting Q2 '22 to now Q1 '24, across the 8 quarters, we've gone from INR 3,750 million to INR 4,166 million, which is a quarterly compounded growth rate of about 1.5%. In the same time, we have gone from 13.1% EBITDA to 14.4% adjusted EBITDA, which is again quarterly compounded growth rate of 2.9%, bringing our EBITDA to INR 600 million. Overall, the quality of revenue has improved our focus on doing more with cloud, data and AI. With leading our value propositions with cloud data and AI has led to better quality of deals, which is what is reflected in the quality of revenue that we're reporting now. Moving to the operations metrics, which is Slide #6. There is no major change in revenue by geography, slight movement from 73.8% to 74.5% in North America, which is compensated by Southeast Asia and Europe going down from 13% to 12.2% and 10% to 9.8%, respectively. Our client concentration largely remains the same. Our top client contributes 6.2%. Overall top 10 clients contribute 22.7%, which has gone up from 22.3%. The mix has slightly changed over time, 2 or 3 clients which fell off the top 10 list and new clients have taken the place. But overall, we remain -- on one hand, we enjoy the loyalty of some of our large clients. On the other hand, we remain largely diversified, which has helped us to keep resilience during the last 4 to 5 quarters, as we have seen the market has been quite up and down. But because we are so spread out and have many clients to balance off, it has kept us very resilient. On utilization, our numbers have significantly improved and they've consistently improved over the last 3 to 4 quarters. We're now at a consolidated blended utilization of about 80%, which compared to 4 quarters ago was 75.8%. So there is almost a 4% improvement in utilization. On DSO, we have largely been in the range, quarterly up and down, not taking into account we reported a DSO of 62 days for the quarter ending March '24. Coming to some of the qualitative commentary on Slide #7, building for the future. Like I said last time, we are continuing to build our go-to-market motion. Our sales and delivery organizations have been reorganized in vertical lines, which has created a sharper focus on target industries. And these are industries where we have developed differentiated capabilities over the years. Also as we discussed last time, we have, during the quarter, rolled out focused account management for some of our key accounts, and this has been done under the leadership of our new Chief Customer Officer, Arun, who joined us in January of this year. On offerings and positioning, which is a direct result of go-to-market, our offerings and solutions -- new offerings and solutions have been rolled out on cloud platforms, which are both related to generative AI as well as smart manufacturing or AI for automation. So these are -- of course, data, cloud, AI have been our areas of focus, and we've been rolling out newer offerings and solutions in that area. We have also been rated as major contender in the Everest PEAK Matrix for Software Product Engineering Services. I've got a slide for that later. So I'll talk a little more about it, but this was the first ever Everest PEAK Matrix we participated in, and we have been put in the company of a lot of notable peers. On the partnership front, we have increased our focus on the ecosystem play on partnering with the other tech providers or tech product companies whose products we use and we implement. This is -- so we are participating in events organized by those tech companies. We are showcasing our expertise in AI-powered intelligent integration and automation. And both with the 2 large hyperscalers, Microsoft and AWS, we have increased that traction. We now have 4 solutions registered on the AWS marketplace. And we are also jointly pursuing opportunities with Microsoft in the APAC region. On the leadership front, while this is post closure of Q1, but we have had our Chief Marketing Officer, Sanjay Saha, who joined us in April. And he will be bringing in a lot of marketing focus, both to focus on and elevate our brand. And of course, that would have impact on our overall demand generation. Moving on to Slide 8, some of the key wins that maybe I would like to highlight, which also denote the nature of -- or the shift of business as it takes place. So we've been entrusted by U.S. behavioral healthcare solution provider to set up a center of excellence for their product engineering and digital transformation needs. This includes data science and analytics to augment operational efficiency and value-based care. One of the leading fire safety solution providers in Canada has engaged us to develop a mobility app using .NET and other multiple platforms app UI. It is to help digitize their operations and enhance business efficiency. A U.S.-based digital marketing solution provider has engaged us to upgrade their content management product. And this is actually not just upgrade, but also cloud enabled. So this includes cloud migration, assisting in consolidating their engineering teams for product engineering and modern data platform/AI needs. One of the largest privately owned general insurance companies have engaged us to provide product engineering services to digitize their in-house products. And one of the leading distributors of live and frozen seafood in Singapore has engaged us to implement Microsoft Dynamics-based Business Central and CRM to optimize their end-to-end business processes, yielding financial visibility and operational excellence for the enterprise. So all in all, decent set of wins and good quality of revenue, which obviously is a leading indicator for sustainable revenue base that we are building up for the future. And these are all accounts which will definitely give us opportunities to mine them further and grow with them. At this point, I'd like to hand over to Nand for financial performance and contribution analysis. Over to you.

Thank you, Nitesh. Good morning to all. Thank you, everybody, for attending the call. I'll cover the financial performance, which -- those who are having the presentation, in the last slide. Revenue for the quarter was INR 416.6 crores or $50.2 million as against INR 416.3 crores or $50 million in last quarter and INR 404 crores, that is USD 49.2 million in same quarter last year. This is a growth of 3.1% year-on-year in dollar terms, almost flat quarter-on-quarter. Just to let you know that we are a calendar year company, and this is our first quarter. The gross margin was 33.7% compared to 34% last quarter and 33.6% same quarter last year. This is mainly due to increase in average daily due to the increments kicked in this quarter as offset by higher utilization and billing days. SG&A expenses has increased by INR 3.4 crores from INR 77.1 crores in Q4 to INR 80.4 crores in this quarter. The adjusted EBITDA was 14.4% compared to 15.4% last quarter and 13.5% in the same quarter last year. The company is able to expand sustainable operating margin through improved utilization. We have granted 53.5 lakh RSUs to the identified employees pursuant to the management incentive plan 2023 as approved by the shareholders. As per accounting standard, we have booked an expense of INR 6.5 crores on these RSUs. EBITDA post the cost of RSUs is 12.8%. We are committed for profitable growth and continued our investment in sales engine, new technologies and innovation to deliver long-term sustainable growth. Getting down to depreciation and amortization, the total expense was INR 16.6 crores compared to INR 16.9 crores last quarter. This includes INR 6.2 crores approximate for intangible capitalized on account of Velotio and ScaleWorx acquisitions. Interest expense is INR 2.8 crores compared to INR 2.9 crores last quarter. Other income was INR 2.3 crores compared to INR 1.5 crores last quarter. This quarter, we had an exchange gain of INR 99 lakhs compared to exchange loss of INR 58 lakhs last quarter. Further, the other income comprised of interest income of INR 84 lakhs this quarter compared to INR 1.46 crores last quarter. This is primarily due to reduction in corpus post dividend payment. During the quarter, the average rate for USD and euro was INR 83.04 and INR 90.14, respectively, as against last quarter average of USD and euro of INR 83.24 and INR 89.59, respectively. These are the 2 main currencies for our system. As at the year-end -- quarter end, we have a total forward cover of $35.9 million with average rate of INR 84.21 and euro cover of EUR 2.2 million with average rate of INR 93.57, which we have already mark-to-market at closing rate of March 31. We have consistently following this conservative accounting instead of parking such noncash loss in balance sheet through hedge accounting. Our tax expense was INR 8.9 crore this quarter as against tax of negative INR 1.4 crore last quarter. Tax expense was negative in last quarter due to reversal of the tax provision of INR 11.4 crores against dividend received from subsidiary company post dividend declaration by the company. Effective consolidated tax percentage is approximately 25%. Profit after tax and EPS -- net profit after tax was INR 27.5 crores or $3.3 million, compared to INR 45.9 crores or $5.5 million last quarter. Basic EPS for the quarter was INR 2.32 compared to INR 3.88 last quarter. With this, let me hand over to Nitesh for summing up.

Thank you, Nand. So summing up and looking ahead, Slide #10, I'm referring to -- rather Slide #9, I'm referring to. Our own focused account management approach, as I talked about, we are beginning to see some results from it in form of increased client traction and there is a proactive deal pipeline that is getting generated through that. This is obviously leading to more meaningful relationships with those clients. We've also signed a strategic partnership with IIT Delhi. This is something we did in January or rather, February this year to create a joint COE for research towards applied AI and sustainable solutions. IIT Delhi, as we all know, is a premier institute in India, and they have a dedicated artificial intelligence department. And being close to us from Noida, it makes a lot of sense for us to collaborate with them. And this is a joint center of excellence, where we get access to their latest research as well as most of the PhD students as well as their faculty members to work together with us on joint projects of interest. Trends that are shaping 2024. And as we know, '23 has been quite an interesting year, a lots of things happening around the world, both on geopolitical as well as on business front. As we see -- as we've gone into 2024, we are seeing that there's still an increased focus on India as an offshoring destination, where clients are choosing options like setting up captives or partnering with service providers and quite often both, because lot of clients do not want to have a complete fixed cost base even if it is in a low-cost geography. So while it creates some competition, but it opens up new opportunities -- new avenues of opportunities for us as well. Generative AI, from being obviously the fascination and talk of the town, it's also getting embedded into the software life cycle, changing the ways that we develop software. We ourselves at R systems, we have rolled out co-pilot trainings and licenses to our workforce to stay both in touch and ahead of the trend to the extent possible. While there are sectoral nuances with some evergreen sectors like tech, media, telecom, health, et cetera, or BFS sometimes being slow, but we have a very balanced portfolio across multiple verticals, and that has helped us keep resilient through those times when some sectors have slowed down, other sectors have picked up. And hence, we stay resilient. And we are optimistic on the market sentiment improving in the second half of this calendar year. In fact, from the deal activity as we see, we've seen green shoots of things picking up both in terms of the deal sizes as well as the duration that customers are taking for the decision-making. And I'll come to the last slide on the Everest PEAK Matrix. As we talked about, this is the Everest Group's PEAK Matrix Software Product Engineering Services Assessment of 2024, where we have been placed amongst the major contenders, which is, if you are referring to the slide, we have put a green box over there to show where R Systems is. The assessment, obviously, is a fairly rigorous assessment done by Everest Group. And according to them, they have highlighted some of the key strengths that we need to obviously hone in and continue to stay focused on. So what Everest has also highlighted is we have a balanced portfolio across buyer sizes and geographies, that we have a strong partner ecosystem comprising hyperscalers, data engineering partners and enterprise technology providers, that we are amongst a few firms who have a dedicated service for private equity firms, and we have the willingness to engage in emerging deal constructs. And in their own research and talking to our customers, they have heard client appreciation and feedback for our technical expertise, effective project management practices and proactiveness and pitching innovative solutions. So I think it's a good reaffirmation of what we believe our core strengths are, what we stand on, and we stay committed to building on these and deepening our relationship with the client for the future. That's really what I had in form of presentation. We would definitely be open for questions now.

[Operator Instructions] The first question is from the line of Harsh Chaurasia from Vallum Capital Advisors.

So I have two questions. From last 5 quarters, we have seen decline in on-site employees. But in the current quarter, there was on-site employee addition. And at the same time, the North American region grew both on a Q-on-Q and a Y-on-Y basis. So are we seeing some green shoots in the region from both direct channel as well as the private equity channel? And my second question would be, in the last quarter, in the call, you mentioned we have built up a strong sales funnel. And even in this quarter press release, you have mentioned like the sales funnel is quite strong. So where are we in terms of the stages, like the early stage, mid stage or the later stage where our sales funnel getting converted into the dealings. So these are my 2 questions.

Thank you, Harsh. Thanks for those questions. So I think your observation is right. Last 5 quarters, we've seen decline in the North America onshore, which is also very directly, I think, a reflection of the tech landscape in North America with significant layoffs across tech companies, et cetera, who happened to be our customers in many cases because we serve the tech ecosystem. The increase in North America this quarter largely is from the direct sales channel because we did win a significant deal with the California state government. We have also won a few more deals where the projects are being done on an on-site and offshore mix mode, which required some more onshore presence. So those are good green shoots. Like you said, yes, they are green shoots of both emergence in terms of new demand as well as a little bit of opening of spending in the North American tech sector or largely in the North American region. I would wait another quarter before calling it a secular trend, but the green shoots are definitely positive, and we are excited about it. On your second question on strong sales funnel, I still stand by that Q4, when we presented, we talked about our strong sales funnel. We have executed on that. Our result may look like flat from Q4 to Q1, but that's a net flat, which contains some effect of whatever ramp-downs were already known, et cetera, versus all the stuff -- all the business that we have won. From a decision-making cycle perspective, I think we were expecting a much faster decision-making cycle in Q1. We did not exactly get that. So the funnel has stayed strong. It is a mid- to late-stage funnel, but the decisions have taken longer. So we have not lost deals, just that the deals which could have started off in January, maybe started off in March or maybe starting off in April. So we are seeing some delay, but that funnel is building up. It is both in terms of average deal size, I'm positively enthused by it, and also from the perspective that these are good quality revenue type of deals that we are looking at.

So if I may ask, have we addressed -- like made the addressable market for Blackstone private equity channel? Like what are we looking at the -- like where we can provide our capabilities? What are the number of clients we are looking to pitch? And what would be the addressable market for Blackstone channel?

So Harsh, Blackstone has been in a fairly good channel or active hunting ground for us. We have been part of that portfolio now for 3 quarters or 9 months. And during this time, we have already started working with or getting revenues from over basically a double-digit number of clients, I would say. From a prospecting or reaching out perspective, I think there is 40 to 50 clients within Blackstone portfolio that we have access to. But again, individual Blackstone companies will make their own decisions based on their own spend cycles, et cetera. So we remain -- we are definitely getting that traction. We are taking advantage of that access, and it is a very active channel for hunting for us and it has been quite positive for us so far.

Just last question, if I squeeze in. So basically, it's a data regarding question. Earlier, we used to provide the repeat business. Now we have stopped providing the data points. So what would be the repeat business for this quarter? Same data point for last quarter and the year before?

So at least in the last 2, 3 investor calls that I've been part of, we haven't focused on repeat business. But having said that, and right now, I don't have the number -- direct numbers or exact numbers in front of me. But given my sense of the business, on a rough order of magnitude basis, we still get close to between 85% to 87% of our business from repeat customers. Because we are dependent on or because we do a lot of discretionary work, we open quite a good number of new clients each year. So about 10% to 12% of our revenue does come from new customers, but 85% to 88% would definitely be repeat business consistently.

Next question is from the line of Yash from Avagrah Capital Advisors.

You have been adding team members in the top and upper middle management level. Where are you in that journey? Are these investments or gaps in this space filled? Or there is more to go?

So yes. So far, we've added basically 2 team members in the upper management level, the Chief Customer Officer and Chief Marketing Officer, which basically have been a Q1 and a Q2 addition for this year. We did not make any major addition or change to the senior team. Actually, there, we have not made any changes. These are only additions, but we did not do anything last year of that kind. These are gaps that we have identified as a result of our strategy exercise that we did in Q4 last year, where we identified certain gaps. Not having a Chief Marketing Officer was a clear gap. Not having anybody running the account management or farming function was a clear gap. So we filled those. We will continue to invest in bringing some focused talent around sales and marketing because we had promised we will continue to invest in sales and marketing as we develop our go-to-market motion. So those would be more middle tier talent, not at leadership level. So it will continue. You will see some additions happen as we go across during this year because clearly, it takes time to identify talent, bring them on board and by the time they join. But I do not see -- it is an ongoing exercise. I think your question was, are we going to see more during the coming quarters? The answer is, yes. We will see a few more coming during the quarter.

So as you are in the investment phase currently and with the demand remaining subdued for the next 6 months, so how do you see the movement in the margin for the medium and long term?

So I think last quarter also, I'd addressed this question. We are phasing out this investment in a manner that we can keep pace with the growth of the business, so that we continue to deliver margins. Pretty much in that, we have been managing. So whatever margin expansion we are able to do may get offset by some of the investments we make. There might be again, seasonality across quarters which may be a few basis points here or there, but we are not indicating any massive margin dilution because of the investment, because we are phasing out the investment along with the business growth.

So you cannot give a number, right?

Well, like I'm saying, I mean, we are not -- we'll continue to report or continue to maintain our margins at current levels. We will expand on margins through operational efficiencies. We'll invest them into the investments that we are making. So we are currently at the [indiscernible] levels. Our endeavor is that we continue at those levels.

Okay. And can you speak about the organic growth for CY '23 and Q1? That's all.

CY '24 or sorry, did you mean CY '23?

CY '23, and yes, this current quarter.

Okay. So CY '23, we saw our numbers largely remain flat, okay? And this was a combination of we did acquire Velotio Technologies middle of the year. And then at the same time, the market has also kind of taken a turn. But overall, we combined the Velotio Technologies with our business. And as a result, as a whole, we have continued to stay moving in the positive territory. There has been some churn in the business. There has been some impact to our traditional business, which went down. So organically, in CY '23, we did see a slight amount of degrowth, which was offset through our acquisition of Velotio. CY '24 or Q1, that trend has sort of flattened out, and we are seeing a positive impact coming towards the future. We are seeing positive organic growth. Hopefully in the next 2 quarters, we will start seeing both quarter-on-quarter year-on-year positive organic growth impact as well. It will be difficult to make out because Velotio has been fully integrated. So the numbers won't be available separately. But I'm sure you guys, since you do a lot of analysis, you will have a sense of how it is coming through in the numbers.

Next question is from the line of Abdulkadir Raja from Ratnabali Investments Private Limited.

Just a couple of questions. In the last few calls, you had mentioned that the Velotio has a quarterly run rate of roughly $2.3 million. So just wanted to understand like is this run rate being maintained with a 30% EBITDA margin?

So Abdul, I don't think we have given a quarterly run rate for Velotio in any of the calls. And so I wouldn't go into the exact number of what is Velotio's quarterly run rate. But having said that, what I have definitely said and I'll repeat and reiterate now is that Velotio has been both growth and margin accretive for us. So they have -- now that, that business is integrated with ours, we have seen that bring positive growth momentum to our overall business and to the portion of business which we execute out of Pune, we have actually managed to extract better margins. So it has been margin accretive as well, right? So since we are not reporting separately, it will be very difficult to put a finger at saying exactly how much is Velotio. But from a people utilization and growth of the center and growth of the services perspective, I have absolutely no doubt in saying it has positively grown and been both growth and margin accretive for us.

Okay, sir. Sir, the next would be like we have a sales target of roughly $1 billion to achieve in, say, the next 4, 5, 6 years. So I just wanted to know like if you have narrowed down any acquisition target, so I don't want any details, but like are we on track? Or like have we found out the target company, which you can acquire? Just any thoughts on that?

Abdul, we are very active players in the market from an acquisition perspective. Every month, we probably do at least a couple, if not 4 or 5, due diligences or -- due diligence is probably much later, but at least the initial discussions with potential targets. And being part of a Blackstone portfolio company, we have the advantage of having an extremely large ecosystem of acquisition that kind of acts on our behalf to have access to a lot of bankers and other players in the industry. So our funnel for potential acquisition targets is extremely rich. We are, of course, being conscious and cautious in terms of where we spend our bandwidth, how many we are able to kind of look at in detail and what suits our kind of growth thesis. So that way, yes, we're constantly looking. They are in various stages. And as soon as we find where -- it's both the meeting of the objectives, the growth thesis, the value it offers and the right price to acquire, then we will be in a position to probably make an announcement whenever it happens.

Next question is from the line of Praveen from LIC.

Sir, I would like to know how is the telecom sector helping the company's growth in this -- especially after the Vodafone public issue?

I'm sorry, I was hearing a ring tone. But Praveen, thank you for the question. See, telecom has been a core sector for us, and it has been something that differentiates us in the market because product engineering for telecom requires both specialized skills and deep programming knowledge, which thankfully we are able to demonstrate and do. The customers that we work for, Praveen, are mostly the technology providers for telecom companies and the core OEMs who the telecom companies use to build their tech stack, right? So we are not so much exposed to the service providers themselves, the likes of Vodafone, T-Mobile or AT&T, et cetera. But we are working with the technology providers, who actually provide the core stack on which their telecom works. So we're working with the likes of Nokia or we're working with other such core providers. So for us, the telecom market is less impacted by what happens to or how the -- again, there are merger situations happening between telco operators around the world. We are less impacted by that. But we are more impacted by the general spend by those operators on technology, right? And which, if you look at in the last 4, 5 quarters after the 5G spectrum, a lot of operators have spent a lot of money on 5G spectrum. They are struggling to monetize. And that has resulted in some amount of expense squeeze of what these operators spend on technology or refreshing their technology, et cetera, which has some impact on us. But because we are working on core products, it's also a fairly resilient spend. So we have not grown significantly in telecom space, because that's how the market is. But our business is very sticky, and we are continuing to kind of stay with our customers because we are core to them. And telecom is not a stand-alone market. We work with telecom and media and entertainment companies. Some amount of media and entertainment spend is something that we have taken advantage of, and that's also something that was one of the reasons for acquiring Velotio because they also have a strong media offering. So that has helped us in overall keeping the market rounded up and taking advantage of it.

Sir, 1 more question. You have been giving good dividends for the past 2 years. Can we expect a bonus issue?

Praveen, this is something that is obviously a Board decision on how we appropriate and this is part of our capital appropriation policy. We stay committed to returning back our reserves and the shareholders' profit back to the shareholders in one form or the other. Whether it goes in form of dividend, bonus issue or anything of that sort is a decision that's probably taken at that point of time. I do not know if the precedent, if there has been any, Nand, you want to maybe comment on that?

So these are -- as of -- we have never issued bonus in the past. But I think as of now, there is no such plan. Whenever there is any such thing, we will inform.

Next question is from the line of Nikhil from [ SMP Family Office ].

So my first question is like we are trying to grab the larger clients. So are you planning to underbid to grab them? And my second set of question is like what is the growth rate in ACV and TCV? And what is the contribution of Blackstone portfolio companies in ACV and TCV?

I heard your question. I was just making my notes so that I don't miss out on any part of the question. So on -- bidding for larger value clients, are we underbidding? Or are we taking margin impact to win those customers? The current answer is no. But again, this will -- just to be completely honest, Nikhil, depending on nature of the business, we might take those calls from time to time. So far we haven't, because the nature of work that we are still winning either in premium, digital, skills and services, cloud, data, AI, et cetera, and customers who are investing in those areas are at least -- our experience so far has been there not [indiscernible] . They are building something which is strategic to them. So we are able to get the rates we normally command and we deserve. But tomorrow, if we do get larger, long-term sustainable revenue, we will obviously try to stay competitive to the market to win such business, but that's for future to tell. On growth rate on ACV and TCV wins, I don't think we track it in terms of growth rate of TCV wins on a quarter-over-quarter basis. But having said that, since we did put a new go-to-market motion in place, we are tracking the number of deals over a certain size that we win. And there, like I said, we've seen very positive movement, where our deals which are above $1 million in ACV or above $2 million or $3 million in ACV or beyond, have continued to grow consistently quarter-on-quarter. Contribution of Blackstone portfolio, again, we don't -- again, that's a split we don't report as a percentage. But like I mentioned to another question, I think Harsh had asked earlier was we are already working with double-digit number of Blackstone clients. And we are -- we have made significant headway with those customers -- with some of those customers actually crossing $1 million revenue with us already. And we have significant runway in terms of where we have in the pipeline over 30 to 40 other Blackstone portfolio companies that we are prospecting with.

So my next question is like margins in the IT services business has improved drastically, like it's a good improvement in the margin. So are these sustainable margins? And what are the margins there going to be sustainable margins going ahead?