Tata Consultancy Services Limited (TCS) Earnings Call Transcript & Summary

Ladies and gentlemen, good day and welcome to the TCS Earnings Conference Call. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Ms. Nehal Shah from the Investor Relations team at TCS. Thank you and over to you, ma'am.

Thank you, operator. Good evening and welcome, everyone. Thank you for joining us today to discuss TCS' financial results for the first quarter of FY 2025 that ended June 30, 2024. This call is being webcast through our website and an archive, including the transcript, will be available on the site for the duration of this quarter. The financial statements, quarterly fact sheet and press releases are all available on our website. Our leadership team is present on this call to discuss our results. We have with us today Mr. K Krithivasan, Chief Executive Officer and Managing Director.

Hi, good evening, good morning, everyone.

Mr. Samir Seksaria, Chief Financial Officer.

Hi. Hello, everyone.

And Mr. Milind Lakkad, Chief HR Officer.

Hi, everyone.

Our management team will give a brief overview of the company's performance followed by a Q&A session. As you are aware, we don't provide specific revenue or earnings guidance. And anything said on this call, which reflects our outlook for the future or which could be construed as a forward-looking statement must be reviewed in conjunction with the risks that the company faces. We have outlined these risks in the second slide of the quarterly fact sheet available on our website and e-mailed out to those who have subscribed on our mailing list. With that, I would like to turn the call over to Krithi.

Thank you, Nehal. Good day, everyone. I'm very pleased to report a good start to the new fiscal year. Our Q1 FY '25 revenue grew at 5.4% in rupee terms, 4.4% in constant currency terms and 3.9% in dollar terms. All our markets have returned to growth on a sequential basis, similarly, almost all our verticals also saw positive sequential growth, except for CMI. Our ability to deliver on large-scale complex engagements, projects of national importance and mission critical services for the world's leading companies have helped us in winning market share. Our operating margin for the quarter came in at 24.7% and net margin at 19.2%. I'll now invite Samir and Milind to go over different aspects of our performance during the quarter. I'll step in later to provide more color on the demand trends we are seeing in our business. Over to you Samir.

Thank you, Krithi. Good day, everyone. In the first quarter of FY '25, our revenue was INR 62,613 crores, which is a year-over-year growth of 5.4%. In dollar terms, the revenue was USD 7.5 billion -- $7,505 million and that's a Y-o-Y growth of 3.9%. And in constant currency, our revenues grew 4.4%. Our Q1 operating margin was at 24.7% in spite of a 170 basis point headwind from annual wage hikes. In addition, third-party expenses also increased. These were offset by operating efficiencies, including better productivity, improved utilization and reduction in subcontractor expenses. Net income in Q1 was 19.2% and our EPS grew 10% year-over-year. Our accounts receivable DSO was at 70 days in dollar terms and up 5 days year-over-year. Net cash from operations was $1.34 billion, which is 92.8% of net income. Free cash flows were $1.23 billion and invested funds at the end of the period stood at $5.59 billion. The Board has recommended an interim dividend of INR 10 per share. I'm now going to talk about our industry leading portfolio, our production platform, which saw good traction during the quarter. ignio, our cognitive automation software suite saw 24 deal wins and 10 go-lives. Our R&I effort has led in winning 60 patents so far in this product. TCS BaNCS, our flagship product for financial services had 5 wins and 12 go-lives during the quarter. Core change drivers for our products continue to be business agility, cloud readiness, enablement for easy integration to ecosystem and partner solutions and enhance customer experience or client experience. Specific to securities industry [ T+1 ], or shortening of settlement cycle, in general, is a big growth driver for us. Custodians are looking -- also looking to see how to improve accuracy in the capture of corporate announcements and bring overall efficiency in the value chain. Globally, we see increased levels of regulatory compliance requirements and these are moving more and more real time in nature. This is another driver for transformation of core technology. A leading bank offering custody and securities lending services through its fully owned subsidiary in the U.S., U.K. and Luxembourg has selected TCS BaNCS for custody, to integrate the global operations into a single custody platform and will be implemented in a SaaS model. TCS BaNCS insurance platform continues to see strong growth in Q1 with 1 win and 6 go-lives during the quarter. A leading pan-Indian -- pan-India private insurer has gone live with over 100 products across 8 business lines, spanning the entire business scope from underwriting to policy servicing, claims processing and reinsurance. This represents the largest coverage of products and lines of business live on the latest versions of TCS BaNCS for general insurance company in India, positioning us very strongly in the growing market. Additionally, a digital portal for agents and intermediary has been rolled out to 5,000-plus agents to expand market reach and scale up business volumes. TCS BaNCS for intelligent experience, our state-of-art framework for enabling next-generation customer experience went live at a number of customers this quarter, strengthening what we can offer, leveraging digital, data and AI. Quartz's blockchain platform had 1 win and 1 go-live this quarter. In Life Sciences, the TCS ADD platform had 2 new wins and 4 go-lives this quarter. TCS OmniStore, our AI-powered universal commerce suite has 2 go-lives during this quarter. We launched GenAI-based intelligence buying guide enhancements, which is a conversational commerce system that helps agents and customers in better product discovery, personalized recommendations on products, services and offers and flexibility to tailor to the end user experience. TCS iON, our platform for digital assessment, exam administration and learning had 25 new wins and 70-plus platform capabilities went live. Our assessment platform administered exams for more than 11.8 million candidates. TCS TwinX, our digital twin solution has 2 wins and 2 go-lives and MasterCraft and Jile had 32 deal wins in Q1. Now let me go over to our client metrics. The steady increase in number of clients in every revenue bucket is an ultimate validation of our customer-centric strategy. In Q1, we added 3 more clients year-over-year in the $100 million-plus band, bringing the total to 63. 3 more clients were added in 50 million band, taking the total to 140; 4 in 20 million band, bringing the total to 300; 18 more clients in the 10 million band, taking the total to 486; 20 more clients in 5 million band, taking the total to 697; and 42 more clients in the $1 million-plus band, bringing the total to 1,310. With that, I'd like to hand it over to Milind.

Thank you, Samir. Workforce at the end of first quarter was 606,998. Net addition during the quarter was 5,452. We will continue to recalibrate our hiring for the year based on the demand outlook. We are focused on reskilling and organically developing the required competencies among the talent base. Employees logged 11 million learning hours during the quarter and acquired 1.2 million competencies. We have one of the most comprehensive talent development programs in the world, helping us stay ahead of the curve and continuously innovate and adapt to keep pace with the evolving business needs. This program has earned us the respect and admiration of our customers and employees alike. Our workforce continues to be very diverse with 151 nationalities representing and with women making 35.5% of our base. [indiscernible] Towards driving a more performance-focused work culture, we rolled out double-digit wage hikes to -- for high performers and an average 4.5% to 7% wage hike for the rest of the employees, with effect from 1st of April. All our efforts in rewarding the best talent in the industry are reflected in our retention rates, which are one of the best amongst industry peers. Our LTM attrition in IT services was at 12.1% at the end of Q1, now down 40 basis points sequentially and in our comfort range of 11% to 13%. I will now request Krithi to speak on the various demands traversing the quarter.

Thank you, Milind. I'm pleased to report a strong start to the new fiscal year with all-round growth across industries and markets, led by cost optimization and business transformation. Cost optimization remains the top customer priority, including vendor consolidation and operating model transformation. Enterprises are increasingly relying on technology to help improve their competitive advantage, transforming the way they operate. Client spending under the business transformation initiatives included supply chain modernization, sustainability, enhanced customer and employee experience, technology modernization, cloud, data and analytics and AI -- GenAI initiatives. We are investing in our workforce at scale, deepening our ecosystem partnerships and strengthening our [indiscernible]. TCS with its full services capability and industry-specific contextual knowledge has always remained relevant to clients. Our strategy has resonated with clients continuing to entrust us with large and strategic deals. TCV in Q1 was at $8.3 billion. The BFSI TCV was at $2.7 billion, while the TCV for our Consumer Business Group was at $1.1 billion. The TCV of deals signed in North America stood at $4.6 billion. Having said that, during Q1, we continued to see the dichotomy that we have witnessed over the past 6 quarters. While larger and strategic transformation programs with enterprise-wide scope or benefits, example, cloud or data foundation are continuing apace, some of the smaller programs with narrower core benefits are coming under more stringent scrutiny, tending to get deprioritized. At the same time, we are seeing clients spend on initiatives oriented towards cost optimization giving them immediate ROI. Let me now walk you through our segmental performance. As a remainder, all growth numbers are in the year-on-year constant currency terms unless otherwise mentioned. BFSI, our biggest vertical returned to growth sequentially on a year-on-year basis. On a year-on-year basis, it declined 0.9%. For the BFSI industry, the wave of the next net interest rate income that was strong in 2023 has been weighing down in 2024. Clients are now balancing their transformation priorities to ensure business resilience and innovation to improve cost-to-income ratio. In the near term, we will see tech spend on enabling new partnerships in ecosystem model, stronger security practices to tackle cybercrime, data governance and democratization to address risk and regulatory scrutiny and fully integrated digital operating models. Longer term, BFSI clients are expected to increase their spending towards developing integrated models using cloud and, AI mitigating risk of legacy systems and those aimed at boosting customer experience. ING Belgium partnered with TCS to modernize its legacy application for business lending, bonus and warrants management applications and branch banking applications. With our contextual knowledge of banks' IT ecosystem, we collaborated in their simplification journey, providing ING with modernized microservices-based, cloud-hosted application. The modernization initiative will provide simplified operations, seamless customer experience, optimized and modern front end, simplified technology landscape, higher productivity and lower cost of operations for ING. This success story is a good example of the end-to-end large-scale IT modernization work we are doing for our customers. Consumer Business Group saw sequential growth for second quarter led by demand for cost optimization, increasing end customer experiences and enterprise application modernization and transformation. On a year-on-year basis, it declined 0.3%. Optimizing IT costs and realizing efficiencies in a big -- is a big priority for consumer businesses. To that end, we see good demand for operating model transformation and vendor consolidation [indiscernible]. AO World, the world's -- U.K.'s most trusted electricals retailer engaged TCS to transform the system that underpin its finance and operations functions to respond to constantly changing business dynamics and customer expectation and maintain the competitive advantage in the industry. TCS led this transformation through the design solution blueprinting and implementation of the cloud-based platform. Through this initiative, the customer could streamline its business processes, automate numerous workflows and approval processes, create robust and resilient integrated system and bring transparency in financial reconciliation. Bpost, also known as the Belgian Post Group, a leading European postal services company, partnered with TCS to digitally transform the retail front office. TCS developed a modern, scalable and portable POS solution using open source technologies and cloud-native architecture, reimagining both the customer journey and employee experience and redefining the front office environment. The new solution has improved customer and employee experience by reducing wait times and enabling many self-service options to our customers. Manufacturing continued with its positive streak and grew 9.4%, led by broad-based growth in all subsectors. Specific areas like smart manufacturing, renewable energy, battery energy storage systems, grid modernization with digital solutions, supply chain transformation and vendor consolidation are showing a positive trend. Jaguar Land Rover, U.K.'s largest luxury automotive manufacturer has partnered with TCS to implement SAP Service Parts Management. This streamlined JLR's aftermarket parts supply chain, unifying multiple legacy systems across their 2 iconic brands into a single system. JLR benefited from optimized inventory worldwide, improved stock turnover, enhanced supply chain visibility and improved collaboration and communication with suppliers. This also established common processes to support standardized operation across both brands, Jaguar and Land Rover. This success story showcases how the client embarked on a supply chain transformation, wherein the key objective of global inventory optimization and system consolidation was achieved. And how TCS with its large project expertise, with such large project expertise and contextual knowledge was able to deliver substantial savings to the client. Life Sciences and Healthcare continued to do well and grew 4%. The pharmaceutical companies continue to invest heavily in R&D, supply chain transformation, smart manufacturing, clinical unified platform, cognitive-based case intake automation and customer experience transformation for patients, health care -- for patients, health care personnel and others as part of business transformation. In the health care customers, we see vertical integration, significant increase in home care and virtual care and adoption of value-based care at scale. All these initiatives are leading to increased IT services spend for us. Energy Resources and Utilities also grew at 5.7%. ERU companies are investing in transforming businesses and asset portfolios towards a more sustainable future, including renewable generation capacity, transmission and distribution to bring the energy to where it is needed, energy storage and new way of running a grid, like distributed energy resource management and virtual power plants. TCS is engaged in pioneering work in such initiatives for its clients. CMI continued to face business challenges and declined 7.4%. Given the uncertain macroeconomic outlook, clients are focused on realizing the benefits from the investments in 5G made during the pandemic period before investing in any large-scale projects. As these challenges abate, we expect spending on tech stack modernization to grow as telcos leverage automation, network intelligence and virtualization to align with shifting industry trends. Investments will be oriented towards enhancing business and operational performance by leveraging real-time intelligence, scalable and modular network and partner ecosystems. Current spend in this sector is led by initiatives in cost optimization, vendor consolidation and integrated operations. Technology & Services returned to sequential growth after 5 quarters. On a year-on-year basis, it declined 3.9%. Customers in this vertical remain cautious about new spending until business growth momentum picks up. However, we are very excited about a marquee deal we secured with a leading tech company where we will be -- where we will showcase the depth and breadth of all our service offerings. We expanded our 2-decade-long partnership with Xerox, developed a new agile cloud-first operating model in an end-to-end transformation program designed to fast-track the evaluation of the company to simplify services-led, software-enabled organization. We will consolidate Xerox Technology Services to improve business outcomes, migrate complex legacy data centers to a public cloud, deploy cloud-based additional ERP platform to transform business processes and incorporate Generative AI into operations to help drive sustainable growth. We will be leveraging the deep capabilities of our service practices, such as AI.Cloud, enterprise solutions, including Crystallus and cognitive business operations, including Cognix,. We will also build an AI first enterprise platform for Xerox. Coming to our service practices, AI.Cloud, cybersecurity and enterprise solutions led the growth this quarter. We launched renewal of Centers of Excellence and delivery centers focused on AI, IoT and digital engineering. We have also further expanded our partnerships and alliances with ecosystems by onboarding new partners in the areas of [indiscernible] which is utilities process industry -- consumer process industry segment. Cybersecurity, cloud workload and endpoint security, threat intelligence and cyberattack responsive services, GenAI, e-commerce platforms, business consulting for public sector and enterprise integration services are also continuing to grow. We continue to see global recognition across for our service offerings. AI.Cloud organizations are seeing cloud, data and GenAI adoption as essential for delivering superior customer experience, remaining cost competitive as well as be able to roll out differentiated products and services rapidly. There is a renewed focus on data strategy, data governance and use of analysts driven by the desire to leverage AI and GenAI. Generative AI continues to hold major mind share and this is increasing by the day with newer models and techniques coming to the market almost on a daily or weekly basis. Customers are looking at scaling out their POCs and pilots by implementing necessary guardrails. Mature customers with a solid cloud and data foundation that were able to experiment with multiple Generative AI use cases, are now looking to reimagine parts of their value chain to make them AI native. This AI first business strategy is increasingly seen as a eventual long-term aspirational goal. While the interest is strong, organizations are taking calibrated approach to measure the risk potential and organizational impact, while charting out their road map for Generative AI adoption. TCS has been batting on the front foot with all the required investments made to participate in this space and opportunity. In this quarter, over 278 GenAI engagements have been deployed, all in various stages of progress. Engagements that have successfully gone live include those engagements' dynamic pricing strategy, improved product quality, hands on customer experience and significant productivity uplift in business operations, software development and IT operations. Our AI and GenAI pipeline has also doubled in the quarter to $1.5 billion. During the quarter, we launched TCS AI WisdomNext, a platform that aggregates multiple Generative AI services into a single interface and enables organizations to rapidly adopt next-gen technology at scale efficiently and within regulatory frameworks. The platform offers a comprehensive suite of modular, reusable components and industry-specific prefabricated solution blueprints that are easy to use and enable faster business value realization. It can evaluate the accuracy of the AI model used and offer fine-tuning as a service. IoT and DE, we continue to see demand for the IoT platforms and digital engineering capabilities across different application areas. Few examples include, life sciences and health care customers continue to invest in remote patient monitoring, diagnosis through connected devices leading to more software platform solutions and services. High-tech and technology solutions -- software and services customers are looking at new-age skill sets, which include chip design and optimization of manufacturing operations through automation. In the manufacturing space, key areas are factory transformation, PLM services and smart product engineering. Energy management solutions like TCS Clever Energy are seeing good demand from customers across retail and manufacturing. Cybersecurity services continued to grow this quarter. The focus areas of our customers have been network security, identity and access management modernization, risk and compliance and cloud security. Our interactive services saw good growth this quarter across multiple offerings. The effective integration of technology and creativity is a key theme for all marketers. Our narrative around the need to improve CMO/CIO collaboration has been received well. CMOs understand that it is of paramount importance to connect the dots of complex technology systems, AI and data and that -- this connecting of the dots, along with creativity as the multiplier is a key to help brands in their responsible growth journey. Our Cognitive Business Operations services also saw good bookings and revenue growth in both ITIS and BPS. As businesses are looking to get a heads up on the long-term view, investments are made in current operations to make it leaner and more efficient. Our approach-led, modern tech-led transformation and assets such as ignio, Cognix, MFDM, is gaining traction. Lastly, in the Enterprise Solutions unit, clients continue to invest in clean and sustainable digital core by modernizing their ERP. We'll continue to invest and strengthen our joint go-to-market approach with our partners. Moving on to geographies, emerging markets continued showing superior and diversified growth. India led with 61.8% growth. Middle East and Africa grew 8.5%, Asia Pacific grew 7.6%, while Latin America grew 6.3%. Among major markets, the United Kingdom led with 6% growth. IT services spend continues to be more resilient in the U.K. and is expected to remain on the growth path. Europe grew 0.9%. IT services spend remains flat. In addition to other growth areas, sustainability initiatives and compliance of regulatory requirements is a key focus area amongst European clients. The biggest positive was North America returning to a sequential growth after 5 quarters. On a year-on-year basis, it declined 1.1%. Overall, IT services spending is stable in the geography. However, clients are neither going for large scale CapEx initiatives nor ramping down with deep spending cuts. There are tailwinds in the form of consumer demand, employment rates and technology innovation and headwinds coming from rising government and consumer debt, inflation and interest. We remain focused on delivering to the best of our capabilities and improve market share across industries, services and geographies. We can now open the line for questions.

[Operator Instructions] We have our first question from the line of Ankur Rudra from JPMorgan.

So just maybe the first question, we've seen an element of pickup in overall growth momentum this quarter. However, if I peel out the growth from India, growth in the international business is about 1.5%, both sequentially and year-over-year on constant currency terms. So in this context and also the fact that deal wins are sort of weaker than the last 4-quarter average, the question is, what gives you the confidence that fiscal '25 will truly be better than fiscal '24?

Thanks, Ankur. So we, see, like, we said fiscal '25 will be better than '24, overall. And even what we see like compared to Q4, we see the sequential growth, even leave India out, even India -- leaving India, almost all our verticals and all our geographies have grown. So the growth -- while India growth has been substantial but compared to previous quarter, the other sectors have also really done well. So the -- the fact that it's being broad-based is what is giving us the confidence that this year will be better than last year. As we -- I was explaining before, on the TCV side, we find it's more a timing issue because the pipeline is quite strong. We are not too worried about that TCV being lower than last quarter.

Okay. Appreciate it. The follow-on question for me would be on Generative AI. You did highlight that your overall AI pipeline has strengthened. But if you just stay with Generative AI, how is that impacting your business? If you can give us some color in terms of how it's impacting specific projects and customer perception? Related question is, do you feel that Generative AI in client conversations and client thinking is potentially creating a headwind for spending on IT services?

At this time, first question, like there is always a discussion almost on any new program we do or even it's a AMS program or ADD program we do. There is a discussion on, can we leverage Generative AI, can we bring in more productivity, that discussion always happens. We also look for opportunities to bring in those productivities or other values through Generative AI. In terms of, is there a headwind? We are not -- we have not seen a headwind so far. Clients do want us to look at Generative AI as one of the lever, to better deliver in terms of cycle time or in terms of cost, in terms of quality. That discussion always happens but we have not seen as a headwind so far, Ankur.

Appreciate it. Just last question, if I can squeeze in. Any comments on pricing given the nature of the business.

Yes, Samir will take this question.

Yes. Ankur, pricing overall in general is stable, while there could be aberrations at an individual customer level or the phase in which -- deals which we are facing. But at a portfolio level, there's nothing material to call out. As you would have seen, realizations also have been improving sequentially.

We have our next question from the line of Sudheer Guntupalli from Kotak Mahindra AMC.

Congrats on a good set of numbers. In March, you indicated that the demand visibility has certainly improved over December quarter. Now you delivered growth better than expectations. In that backdrop, just trying to get a context of your comments in the press that you don't want to yet call out the sustainability of the current growth number given the volatile environment. Is it just a philosophical stance you are taking not to indulge in near-term guess work or quarterly guidance given the uncertainty? Or is this by any chance, led by a relative weakening of demand visibility versus March quarter for whatsoever reasons? What I'm trying to understand is that directionally, are we seeing a steady improvement or stability in demand over time? Or is demand moving like a sinusoidal curve over quarters?

Sudheer, in the annual -- last quarter, I don't know whether we said that there is a improving demand environment. What we said is, we believe, we are confident that FY '25 will be better than FY '24. And that is based on how FY '24 panned out and how we started seeing the early quarters of FY '21. But it doesn't mean that the uncertainty has gone away. We still see situations where clients are ramping down programs or reevaluating programs at very short notice. And that's the reason we believe that it's too early to call a sustained growth momentum or a demand stability. It depends a lot on the economic outlook of our customers. It's certainly not philosophical but it's quite practical, Sudheer.

Sure sir. And the second question is on your other statement that clients are neither going for large-scale technology initiatives nor going for deep spending cuts. So if we were to quantify this qualitative statement, is it fair to say that since the deep spend cuts are already in the denominator, incrementally not having them should still be a mathematical tailwind for us in terms of growth?

See, the way I would characterize is, there are long-standing programs. As long as they are delivering incremental value to our customers, they are continuing. And they -- if there is a budget -- a limited budget available or customers are reevaluating, should they be starting a new program, which gives a better ROI, it could be a discretionary program or it could also be a cost optimization program as against the next phase of a long-standing program. So whichever is giving them a better ROI is being adopted and lesser ROI programs are paused. So that's the way I characterize it. And it was the situation last quarter also and there has not been a material change in that situation, Sudheer.

Next question is from the line of Kumar Rakesh from BNP Paribas.

My first question is more of a request, Krithi. If you could consider starting to give guidance on a full year basis that would be really helpful because I really don't understand why a large company and successful one like TCS should not have a guidance and almost every other peer of yours have. And the challenge, which at least I face is, the operating matrices which you share are not enough to give us a full picture of how the trends are panning out. The deal TCV has a very poor correlation with the revenue trend and the other operating metrics is -- also are relatively lesser than what the peers have been giving. Now demand appears to have started stabilizing. You have settled in your office for a few quarters now. So now may be a good time to relook at this strategy, whether you want to start giving a guidance. I understand TCS hasn't in the past but maybe a good start to give. And if you take a feedback and if you still conclude that, you should not give a guidance, then at least maybe start giving some more operating matrices such order backlog or ACV numbers, that we can do our own numbers and come to a sense that what direction the growth potentially could be.

Sure, Kumar. We will definitely consider that. See, it's been a -- it's considered stand for a long time because we believe that if there is a certain amount of prudence in not giving guidance because it helps us in driving growth, beyond maximizing growth based on what we see in the market space. But we will consider your request and we'll have a internal discussion and come back to you.

That would be great. My second question specifically was on the GenAI side. So you did talk about $1.5 billion of deal pipeline on AI and GenAI side. Can you give some sense how the booking and revenue conversion could possibly be? You have spoken about 270 projects you are working on. So is it fair to expect that about triple digit million dollars of total revenue TCV you may have been working on, on the GenAI side?

At this stage -- see, at this time, we don't want to give the number, Kumar, because these projects also tend to be not very large, like we also -- in the past also we mentioned, many of them tend to be smaller projects, small duration projects. But this quarter, we did win a large project as well, like where we are establishing a AI office for one of our customers, which is fairly large. But otherwise these projects tend to be small. So when we are -- maybe we will consider this request as well, Kumar, like when we are ready to provide a number in terms of the revenue or order book in AI, we will do it. It has to stabilize before we are able to give it to you, Kumar.

Sure, sure, makes sense. Yes. One question on the BFSI side. So it was encouraging to see that BFSI has now returned to growth. So is that a reflection of absence of last 2 quarters of furlough? Or you are seeing some recovery on the ground in terms of client engagement as well?

I would say there is some positive movement because as I was telling somebody else, like -- our BFSI North America has done relatively well, which is not really impacted by furlough. So this is -- BFSI performance to a great extent is, I would say, North America performance as well.

We have our next question from the line of Abhishek Pathak from Motilal Oswal.

My first question was on the communications vertical. Sir, what near-term catalysts do you see in this vertical, which could meaningfully alter client behavior and it could bring it back to growth? We've seen almost 5 quarters of decline now. So when do you expect the historic CapEx that the operators have done to trickle down to services? That's one. And secondly, the Life Sciences vertical, it has been quite strong for FY '24, another strong quarter. So do you think client behavior here is any different to, let's say BFSI, where cost takeout is the main theme? Do you see more adventurous projects here? Or is the theme pretty much similar?

Abhishek, first on CMI, okay. There are a couple of factors playing out here. Like many of the telcos invested heavily for 5G rollout. And they have not seen the expected return so far. So for them to invest more, they'll be looking for -- they are -- we believe, okay, they are looking for a lower interest rate environment before they can embark on new transformative programs. So from that perspective, lowering interest rate would be a good trigger for us to see. It is our expectation, for us to see projects, more investment and hence, more IT projects to be kicked off. Life Sciences, like we said, has been bucking the trend, okay. That is also more to do with the noncyclical nature of the industry, like people think to consume more of those services in good times and bad times. And which also because of that creates more opportunity for drug discovery, drug research. So to some -- to that extent, it's behaving in a very secular way.

We have our next question from the line of Ravi Menon from Macquarie.

Krithi ji, you spoke about how we finally see America and North America come back to sequential growth. I don't think even during the financial crisis, we've had a situation where we had 5 quarters of sequential decline. So this was an unusual time but do you think that we've finally bottomed out here? And should we see sequential growth from here in North America?