Zensar Technologies Limited (504067) Earnings Call Transcript & Summary

Ladies and gentlemen, good day, and welcome to Q4 FY '21 Results conference call of Zensar Technologies hosted by JM Financial. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Mr. Manik Taneja. Thank you, and over to you, sir.

Thank you moderator. Good morning, everyone. Thanks for joining us today. On behalf of JM Financial Institutional Securities Limited, I would like to thank the management team of Zensar Technologies for giving us this opportunity to host 4Q FY '21 earnings call. We have with us Mr. Ajay Bhutoria, Chief Executive Officer and Managing Director of Zensar Technologies; Mr. Navneet Khandelwal, CFO; along with other senior management members on the call. We'll start with a brief presentation and opening remarks from the management. Subsequently, we open up the floor for Q&A. The safe harbor statement on the second slide of the analyst presentation is assumed to be read and understood. Thanks for being with us once again, and over to you, Ajay.

Thank you, Manik. Hello, and good morning, everyone. First and foremost, I hope you and your families are keeping safe. These difficult times continue to take toll on our physical and mental health. Having said that, the fact that we have gathered today is a testament to our strength and I hope the new fiscal year brings better time for everyone. Thank you for joining us today to discuss Zensar's financial results for the fourth quarter of FY '21, which closed on March 31, 2021. On this call with me are a few others from Zensar leadership: Navneet Khandelwal, our Chief Financial Officer; Vivek Ranjan, our Chief Human Relations Officer; Prameela Kalive, our Chief Operating Officer; Harjott Atrii, Global Head of Digital Formation Services; Harish Lala, Head of Africa Region; Shirshendu Deb, Global Finance Controller; and [ Arvind ] Walti, Head of Corporate Development. The last quarter was a steep learning curve for me as I immerse myself in all things Zensar and my defining takeaway is that this company is building with energy and passion. Of course, there are areas which will need attention and nurturing over a course of time. However, being nimble and agile, we are favorably placed to grow and to serve our clients. Since I came on board, I have interacted with all of our key clients to learn more about our partnership and the expectations of Zensar. These interactions have been very positive and have helped me better understand our engagement with them and how we can deliver value going forward. I have also connected one-on-one with over 100 Zensar associates to get to know them, learn what makes them tick, their contribution to our clients. It gives me great pleasure to see the level of commitment of our people and the alignment that they show to our customers. I've been working with the leadership team to formulate and draft Zensar's strategy for the next 3 years. Here we outlining our strength, understanding where we now to grow as an organization and setting up the milestones to be tracked in order to reach those goals. We are in the advanced stages of finalizing the strategy. I've also been interacting closely with investors, analysts, partners and thought leaders to understand their perspective of the market dynamics and of Zensar's. Before I share a broad outline of Zensar's strategy that we have crystallized over the last quarter, let me give you an update of our Q4 '21 performance. We registered a revenue of $120.2 million, translating into a sequential decline of 2.1% this quarter. As we have called out previously, this is in large part due to the continuous impact at one of our clients in hi-tech space and certain declines in our consumer services vertical. Also, one of our large BFS accounts declined this quarter due to project completion. On the other side, our BFS vertical -- BFSI vertical, is experiencing traction with a new leadership team in place and multiple initiatives being taken to fuel growth. BFSI revenue saw an uptick of 2.1% quarter-on-quarter. We had a modest growth in Europe with revenue increasing by 4.7% quarter-on-quarter. South Africa saw a decline of around 6.5% quarter-on-quarter, largely due to our project completion in this quarter. Our focus on efficiency remains strong. Our margins have remained stable despite the reduction in revenue. Our gross margin has increased to 34.9% compared to 34.6% last quarter. EBITDA margin for Q4 '21 stood at 19.9%. EBITDA stood at 20. 6% in Q3 '21. Our PAT margin for Q4 '21 stood at 10.3% compared to 10.9% last quarter. For the full year '21, our EBITDA margin is at 18.7% compared to 12.5% in FY '20. This is a healthy 29.9% year-on-year growth. Our net cash position continues to be strong and stands at $166 million, which is a new milestone for us. Navneet will cover this further in his commentary on the financials. Order bookings for the fourth quarter was at [ 193. ] This includes both renewals and new business. I would like to call out that a few significant deals that were expected to close in our BFSI business has been deferred by a quarter. The company's growth in meeting times has been soft for various reasons. As a global operational discipline, we have achieved the best in design levels in the last 10 years from cash position and improved profitability, which gives us the ability to invest in growth. Zensar global headcount at the end of fourth quarter stood at 9,111, which is an increase of 302 FTEs over the previous quarter. We are continuing to strengthen our teams with a mix of seasonal employees and fresh hires. Our work for anywhere model continues to be a success with over 550 associates on-boarded and fully integrated. Now let's move to the work we have done in the last quarter on company strategy. After a thorough analysis of key market trends, our understanding of client expectations and evaluating our company's strength, we are in the process of finalizing our strategy across 5 strategic growth opportunities or SGOs. These SGOs are broad areas of market opportunities that will allow us to repurpose company resources, investments and alliances to deliver maximum business impact. The first is experience services. This area is the current strength for us. Experienced services refer still the integrated delivery of research, strategy, design, prototyping and production. We provide this through Zensar studios, which operates at Green Park in the U.K. and San Jose in the U.S. Second SGO for us is advanced engineering services. This SGO provides cloud native, full stack, high velocity engineering to address the complex requirements that result from products and platforms built on cloud-native architectures. We will continue to invest in our engineering and cloud-native development capability on top of our experience -- of our strength in experience services in order to provide an integrated offering to our clients. Third SGO is data engineering and analytics. This SGO addresses the fast-growing world of data, advanced analytics, artificial intelligence and machine learning services. We already have foundational skills in this area, and this portfolio is in place to scale out. Number four is application services. Application services is the most mature of the SGOs and meets the application life cycle needs of our clients, including application development, support and engineering services. This also includes enterprise application services that come through partnership with ARCO, SOP and [indiscernible] to name a few. The fifth SGO for us is foundation services. This area is a key area of strength for us and our solutions around experience and into structure services, driven by an interconnected foundation has found strong market resonance. We will continue to drive our trust in this service line. Sixth SGO will have 2 to 5 playbooks, which are service propositions and solutions targeting specific market opportunities and customer needs. They will act as primary tools of go to market, and drive client value propositions. Also, the SGO themselves will have dedicated sales and delivery units to service our verticals and geographies. Zensar is structured to focus on both horizontal and vertical capabilities. As we concentrate on the implementation of our strategy in the coming quarters, we will equip our market and delivery teams with deep tables to enable them to build a strong pipeline and then business. We will be making additional investments to supplement the buildout of these capabilities and look to acquire some of these capabilities inorganically. To summarize, the growth strategy are as follows: one, refine and sharpen our core capabilities starting into focus SGOs; two, expand and enable sales organization to accelerate market penetration; three, invest in strong demand generation engine to drive growth in existing strategic accounts and new accounts; fourth, continue to invest in partnerships with hyperscalers and cloud, which will help boost growth; five, integrate our current experience competency with software engineering and cloud-native development skills. Our confidence in the company's fundamentals remain strong. I'm optimistic about the market potential and believe that as we operationalize our strategy, the results will be evident. Our objective is to refocus on stronger execution to drive sustainable and predictable growth. We'll implement our company strategy over the next few quarters and keep you updated on our progress. Before I conclude, I would like to spend a few minutes on our ongoing and evolving response to the pandemic. The current situation in India is particularly worrisome, with the number of cases rising as part of the COVID second wave. With a significant portion of our workforce based in India, we're monitoring the situation closely. We're continually tracking the health and wellbeing of our associates and have no immediate plans to open our India facilities. We are providing our associates support with 24/7 emergency response teams that are internally at Zensar and include senior members of the division. We're also opening up networks to connected associates with plasma donors and to facilitate donations by recovered associates and so on. With an increased focus on vaccination and breaking the chain of the variant, we hope the situation improves soon. With that, I will now invite Navneet Khandelwal, our Chief Financial Officer, to provide an update on the key financial data, after which, we will open the floor for questions. Navneet.

Thank you, Ajay. Good day, everyone. Welcome to this call. At the outset trust, you and your love bonds are safe and in good health. In addition to Ajay, talking about the business, I will take you through some of the details on our financials of our core business. In the fourth quarter of financial year 2021, we have reported revenue at INR 8,767 million, which reflects a sequential decline by 3.3% in rupee terms. Our gross margin for this quarter improved to 34.9% as against 34.6% in the previous quarter. For the year FY '21, our revenue in rupee terms stood at INR 3,682 million, representing a Y-o-Y decline of 8.5%. Gross margin for the full year stood at 33.4% as compared to 28.3% in the previous financial year. In U.S. dollar terms, for the fourth quarter, the reported revenue is $120.2 million, reflecting a decline of 2.1% sequentially. In constant currency terms, revenue for the quarter declined by 3.4% sequentially. For the year FY '21, our revenues in U.S. dollar terms stood at $494 million, representing a Y-o-Y decline of 12.7%. The effective tax rate for the fourth quarter is 25.3% as against 26.5% in the previous quarter. Full year effective tax rate for FY '21 was at 26.1% as against 27.8% in the previous financial year. The U.S. dollar realization during the quarter has been INR 72.9 per dollar against INR 73.8 in the previous quarter. The year before in the same quarter, it was INR 72.4. The total amount of outstanding hedges as of March 31, 2021 was equivalent to $122.3 million against $120.6 million in Q3 of this fiscal. As of end of this quarter, our cash and cash equivalent balance was $166.3 million against our $160.2 million in Q3 of FY '21. For full year, net cash and cash equivalents grew by 178.4% on a year-on-year basis. During FY '21, we have put focused efforts on improving our cash flows. Our operating cash flows grew by 25% to [ INR 8,580 ] million against -- sorry, INR 6,862 million for FY '20. Free cash flow grew by 34.6% and to that INR 8,185 million in FY '21 as against INR 8,080 million -- INR 6,080 million for FY '20. Our operating cash flow as a percentage of EBITDA stood at 125.3% against 135.3% in FY '20 and free cash flow as a percentage of EBITDA was 119.5% as against 119.9% in FY '20. Our return on capital employed before exceptional items improved to 33.8% as against 19.9% in the previous financial year. For the quarter ended March 31, 2021, our billed DSO increased by 3 days and stood at 51 days against 48 days in the previous quarter, while DSO, including unbilled increased by 3 days to 77 days as against 72 days in the previous quarter. On a year-on-year basis, DSO has declined by 9 days. During the quarter ended March 31, 2021, the Board of Directors have recommended a final dividend of INR 2.4 per share, subject to the approval of shareholders. With this total dividend payout, including the interim dividend for this year, will be a 180%. With that, I come to the end of my presentation and open the house for questions.

[Operator Instructions] The first question is from the line of Mukul Garg from Motilal Oswal Financial Services.

Ajay, I just wanted to start with the -- your assessment of how things are in Zensar, you had some time to look at and analyze the weakness, which the business has seen in over a year now. While it is good to see the strategy refresh, can you offer some perspective on how this should impact growth and by when should we expect this to translate into additional growth?

Right. So Mukul, to begin with, I'd like to reiterate that full faith in our capabilities of the organization. We have a strong company, with a very strong client base, very committed set of individuals, very resilient processes and foundation, right? We are resilient and as we are agile and nimble. Now the strategy has been carefully handcrafted in consultation with leading experts, clearly identified sort of what we have seen from experts, what we have heard from our clients, what we are seeing happening in the market, what we have heard from analysts, including folks such as yourself, right, and we've come up with this strategy. Our objective has been to crystallize our focus, to provide clarity on our GTM and our offerings and to reorient the organization to serve our clients better, right? I am confident that as we go about executing on this, we will, over a period of time, see the results and the benefits accrue to the firm.

Sure. So any -- again, just a question related to this is, given that we've had trouble such as [ offline ] over the last 2 quarters and your consumer space is also weak, is that something which is kind of eased up now? Any growth visibility, you can offer, I know you guys don't provide guidance, but do you expect things to get relative growth going forward?

Right. so if you look at -- so let me address this in 2 ways, Mukul. So if you look at this quarter, the pressure came from 2 segments, hi-tech and consumer services. Now within consumer services, consumer services, U.S. actually has done quite well. It has grown. We had project completion, very significant project completion and closure in both U.K. and South Africa, and that caused that decline. So we are watching that space very carefully, right? So I think over a period of time, that should stabilize, number one. Number two is, in the hi-tech space as well, the client base that we service was disproportionately impacted by the pandemic. What we do see now is that going forward, again, we see a lot of resilience in that client segment and we see that segment also stabilized, which I think is going to provide a trajectory for us in the right direction. So we see that going -- looking into the future that both these segments will stabilize. We'll continue to see some consumer services pressure in the U.K. because we've got projects lined up. But outside of that, we see good resilience in our customers and therefore, a good trajectory set up for us.

The next question is from the line of Sandeep Shah from Equirus Securities.

And Ajay, in terms of your postmortem about where Zensar stands and where you want to take it, any prospect in terms of the observation where we claim that digital revenues have been at 65% of the revenues while our growth has been lagging year after year, one of the lowest. So these 2 are a major discovery. So where is Zensar going wrong? And how do you want to rectify going forward?

Yes. So Sandeep, yes, I'll give you a slightly long answer to that question. So first of all, what we've seen, especially in the last several quarters, is that our traditional client base, it's just which side of the pond you're on. Our traditional client base, especially in hi-tech and consumer services, to a great extent and to insurance in a slightly lesser extent, have been in areas that has been disproportionately impacted by the pandemic. So this has resulted in reduced spend budgets, et cetera, right? And further, what has happened is, that our own response to the pandemic, which also pretty much was month-on-month and influenced by what we saw happening in our traditional client base, was to tighten our operational levers, right? So the results, Sandeep, is that the result was that, while we tightened our ourselves in the first, second quarter of the pandemic, right, as the demand opened in certain sectors, right, we continued -- because, again, what we saw in our traditional client base, right, to move certain areas of investment, which at the right time, may have immediate results. So we have now recognized this as key focus areas of our go-forward strategy. That's the first thing. Second thing is, we are now, as we speak, coming out of the strategy exercise and coming out of how we are going to operationalize and execute on the strategy that we have put a very sharp structure around that, right? We are significantly strengthening our sales our marketing, our client acquisition and our account management engine, in addition to the sharp focus we now have into our capabilities through our SGOs and our services into our playbook. And I think this will, over a period of time, bear results.

Okay. Okay. Any estimate where you believe that FY '22 could be a year of execution and this exit rate providing just 3% decline in the revenue on a quarterly annualized basis, if you look at the Q4 annualized revenue. Then FY '22, we again may have soft or muted growth versus industry and not strategy may start playing out from FY '23? Any -- if you can share in terms of when do you expect the strategy to start playing out in terms of turning around growth?

So Sandeep, what I can share with you is the fact that a big part of the growth strategy exercise has been completed. As we speak, we are now looking to operationalize it and to launch it. Typically, what happens is that when we do this kind of a strategy refresh, now if you see the way we have gone about it is, that we have restructured ourselves, we have refocused our energy through these SGOs and through these playbooks. We already have core capabilities in all these SGOs and the playbooks that we going to go after, none of this is brand new. But typically what happens is, as we do this kind of a re-muscle, refresh our growth strategy, the results accrue over a period of time and I see that happening with us as well.

Okay. Okay. And just last 2 questions. In terms of entering FY '22, any large client specific issue, especially in the hi-tech top client as well as any other clients. And second, in terms of wage hikes and acquisition, what are the plans for [ FY '23 ] and what could be the margin range? One can predict for FY '22, looking at future exit versus what -- where we were a year back has been very strong?

Right. Sandeep the first part of the question, I'll answer, and then I'll pass it on to Vivek and Navneet. Is that what we see, especially in the course of last quarter is some of our top-tier clients, especially the ones in hi-tech and a couple in consumer services, have demonstrated strong resiliency, right? And we see that resiliency translate into a stabilized business and stabilize budgets for them. And that bodes well for folks like ourselves in terms of our own business trajectory in our own project pipeline with some of these clients. So we think and we will -- we think that as their business has stabilized, as their business have shown resilience, it will translate into a better trajectory for us going forward. So that's the first thing. Now in terms of your other 2 questions, if I could first request Vivek to chime in, and then Navneet to give you a sense of the margins. Vivek, please?

Yes. Thanks a lot, Ajay, and thanks for the question. So you have 2 questions. One is on attrition and the second is on wage hike. So on attrition, we have seen that there is an increase in the industry and a similar trend is also in Zensar. However, we always do better than industry, and we have a robust strategy and plan to retain our key people. As all of you know, Zensar is recognized for best-in-class people practices. And through our employee engagement framework, we ensure extensive connectivity with our employees, which is focused towards their career development progression and learning. We have learning as a key differentiator, and we also use extensive digital platforms to engage, enhance connect and get [ lots ] of people and ensure that we provide effective experience on all touch points. So we have a robust plan to ensure that attrition is minimized, and we have seen a net headcount growth of 302, and we plan to ramp up accordingly through this plan. In terms of wage hikes, we have been witnessing an industry-wide demand and supply mismatch, and there is an overall wage growth. So we will be giving a hike aligned to what is the market strength. Having said that, we will also continuously be working towards optimizing our pyramid, and we strive to minimize the impact on the margin. So our endeavor is always to reward performance and skills which are more valuable in the market. Over to you, Navneet and Vijay.

So when will be the rate hike would be given?

Yes, this is effective first of July. Yes, sorry, Navneet.

So I mean the last sundry actually gave was [ 50 ] 1st of January already, and that has reflected already in our Q4 performance. Coming back to the question on margins broadly, we will continue to focus on driving operational efficiencies and in our efforts in automation and digitization to enhance productivity, which has helped us in driving the overall operational performance reflected in our results so far. On-site offshore mix, which has been a good lever for us during this period, will continue to remain more offshore centric. And we will drive further improvements in the way we are actually managing our people pyramid, which should give us enough levers to be able to fuel the further investments that are required for growth. We will make investment in specific areas to have a sustainable and predictable growth. And as a result, we expect that there will be some moderation, which would happen in the margins in the medium term and the S&M investments will definitely go up. And we believe that one can expect the margins to be in the range of high teens from a go-forward perspective.

The next question is from the line of Nitin Padmanabhan from Investec.

Wanted your thoughts from an assessment perspective of the business. When you look at the predictability overall, is it a function of higher short-cycle projects for us? Or how would you sort of look at it in terms of whatever you have seen so far?

Nitin, so let me let me take a shot at your question. I'd like to actually give an expanded answer, right? So the goal, Nitin, is to have sustainable, predictable growth, right? Right. And as we worked on our strategy, right, as we worked on our strategy, as we looked at what were the areas we wanted to overinvest in, focus on, what kind of playbooks we wanted to drive, what services we wanted to double down on, right, I have worked with the leadership team out here to be very careful of the fact that we -- in the ensuing period, meet that goal of sustainable, predictable gain. Now since I joined in January, I was very careful, right? First thing is to avoid any short-term reactions, to take time to identify the root causes of performance, to put forward a strategy that is fit for purpose, which, in our case, is something that enables us to drive selective sustainable, profitable growth. So with that, I made the point to deep dive into each portfolio, evaluate all our key engagements, deals in pipeline, to identify gaps and pressure points that stand in the way of growth, right? I've personally spoken with a few project clients to make sure our relationships are highly defined, to better understanding where we -- where you expect us to deliver value. And the result of which is we created the strategy which will -- we created this scaffolding, which will help us drive that sustainability that we are looking for, that predictability we are looking for and it will come with the right mix of experience-related projects, engineering projects, development projects, what we do around data, the application support work we do, the infrastructure support work we do, will come as a mix. And we constantly focus on the mix in the right way to make sure that we are responding to the evolving market demand and thereby using that as a means to drive sustainability and productivity.

Sure. That's helpful. So if you think about it, the way you see it today and the mix that you're sort of visualizing, do you think that the road to predictability would be a 1-year kind of [ sampling ] or do you think it takes slightly longer? Navneet, I just wanted your thoughts in terms of how quick do you think this fix for you?

Right. Right. So Nitin, yes, yes, good point. And as I was saying just a little bit earlier, look, I note that when you do a strategy refresh, and then you operationalize strategy like this, like even though we are not doing -- bringing in any new kind of services here, we are basically reoriented, refocusing ourselves at crystallizing, right, our capability around very specific growth opportunities and playbooks, right? It takes a period of time for this to play out. And yes, I mean, it is going to take that time to play out. Typically, it will take 4 to 8 quarters, right, sometimes a little bit sooner. But yes, we'll be watching this space very carefully. We have -- we're able to report our progress on, how we are driving this strategy every quarter that we meet here.

The last question I had was around -- after sort of 7 quarters of sort of the impact that we have seen so far on revenue. And obviously, because of the pandemic, a lot of clients would have pulled that spending and even the top line. Do you think that the Haitong market has sort of bottomed out and at least the decline, per se, is sort of will be additive from here on and at least it should be a sort of growth perspective, considering that each of these are on a recovery path?

The way, Nitin, I would answer that question is, that as we drive up our investments, right, so as we refocus around these strategic areas, as we crystallize and drive and operationalize these playbooks and solutions, right, as we increase our investments in the business, both in terms of our Haitong market and our capability buildout and our partnerships, increasingly, over a period of time, this will create that sustainability, the predictability that we are looking for, right? It will get executed over a period of time as we operationalize it. That is what I firmly believe right now.

So one last question, if I may. The new leadership that we [ find focus on the BFSI ] side, what's newly changing so far? And how sort of have we evolved from that vertically standpoint so far under the new leadership for that [ period ]?

Sure, sure. So Nitin, we doubled down on BFSI, about 3 quarters back, we brought in new leadership, right, in addition to the existing talent that we had, right? And we put very sharp focus on that vertical. The result has been that insurance piece of the BFS business has stabilized, right? And the BFS business is showing green shoots, right? And with the kind of team we have in place, with the kind of effort that is being put forth, the kind of pipeline that is being generated. I feel confident of the work we are doing in that vertical.

[Operator Instructions] The next question is from the line of my name is Manik Taneja.

The first question was for Navneet. In the current quarter, we have seen a significant decline in our S&M expenses and an associated increase in our G&A expenses. So for most account, it appears that there is some one-off G&A expenses in terms of the payout to the outgoing expenses field. If you could help us understand, clarify that and also give us some sense of how should we be thinking about our S&M expenses going forward, given the fact that you speak about increase in spending here in terms of account management as well as new things to quit?

Yes, sure. This is Navneet here. So in our S&M expenses, there has been also a provision write-back on account of excess provision that we've got, which is a onetime reduction that you are seeing. And also in the G&A, it has been on account of a onetime increase in certain costs and on account of -- and you have seen the note towards that in the financials. But largely, if you see on an operating margin level, both of this will be typically knocking off each other. So of -- while in the -- on a go-forward basis, our S&M expenses will increase, you will see a decline in the G&A expenses.

Okay. Okay. And just a clarification with regards to wage increments for the next year, so you plan to increase wage increments from July -- 1st July actually. Is that correct?

Yes, yes, that's right. We will be resuming our normal wage increase cycle, which is typically in the July of every year.

And one question for -- so why the situation of we see is still developing, I just wanted to understand, given the outbreak of the COVID outlook in the second wave actually has been very severe, are you seeing any near-term impact from a delivery standpoint on your operation and how do you intend to essentially address that, that's question number one? And second question was for Ajay. Given the fact that customers have got much more used to offshore delivery over the last 12 months and Zensar, including the industry, which we have seen significant progress on that front, just wanted to understand if the customers are much -- frequenting much more accustomed to scale-based pricing versus location-based pricing as such?

So yes, Manik, thank you for the question. I'll actually request Prameela to answer the first question and a part of the second question. She's the right person. Prameela, please, go ahead.

Manik, and regarding the next question, if you look at the offshore mix trend for us for the last couple of quarters, I believe we will see the same trend continuing to go by the current pipeline and order book that we have as we look at where the customers are expanding and the conversations we're having with our customers. We see this shore mix to be in line with what we have seen in the last 2 quarters.

And Manik, can I request you to repeat your second question again, please. Your line wasn't on.

Sure. So my second question was that, given the fact that customers have got much more accustomed to offshore delivery over the last 12 to 18 months' timeframe, do you see a scenario wherein customers become much more open to scale-based pricing and less agnostic to and less prone to location-based pricing and, thereby, some benefit for the industry as a whole, given the demand supply mismatch?

Yes, yes. So Manik, so first of all, you're spot on, right? I mean what pandemic has done is it's created an increasing borderless world when it comes to talent, right? The comfort level, if anything, it was already decent. If anything has gone up in course of the pandemic in terms of which shore you get the work done, right? And the results, we think, we believe, is that this is increased offshoring of work is a trend that will continue and that -- there are certain implications in terms of pricing, et cetera. And I think that will remain consistent with what we have seen in the last couple of quarters. I don't see any significant moves in either direction. We're still going to remain consistent with we have seen in the last 2 quarters.

[Operator Instructions] The next question is from the line of Sandeep Shah from Equirus Securities.

Just a question on strategy. So Ajay, in terms of our strategic areas where we want to refocus, those are not materially different in terms of what the strategy of other peers are also adopting. So in that scenario, so just wanted to understand what would be the key recipe of Zensar in terms of door openers or entry drivers into the clients, which we a year also and an alternative, which will drive our predictability and sustainability in terms of this growth?

Yes. So Sandeep -- So first of all, Sandeep, that you would agree that none of the identified SGOs would come as a surprise, right? So now the most important premise is that all of these are well defined, high-growth market segments, right, which either are very high-growth, like advanced engineering or sometimes what we call it, high-velocity engineering, data engineering and experience services. These are acknowledged high-growth market segments, right? And all there are markets which are currently very large and will continue to draw a significant portion of our time spend, such as the work we do around foundation services and the work we do around application services. Now the way we see this play out is that in the latter category, which is foundation and application services, we will draw on our current strength and momentum to build on the strong base that we already have, right? In the first category, which is experience, high-velocity engineering and data negating, as we redirect our investments and as we drive our talent pipeline to bring this to market with relevant service offerings, I think this is going to create a resonance with our clients, right? We already are doing significant work in each one of these areas, between 10% and 15% of our revenue already comes from this. And as we refocus our execution muscle in this, right, as we refocus our investments and with the kind of clarity that we bring out through our SGOs and playbooks in terms of driving customer value propositions, right, and given the agile, nimble and strong execution muscle that we have as a firm, I think this will play out. It is -- all of these 3 are high market demand areas. You will agree that these are areas where there's going to be enormous investment that will happen from our customers and I think we are well positioned to capture.

Okay. And just in terms of strategy execution, have you defined 2 or 3 KPIs which you, as a leader, would like to track on an ongoing basis before the execution starts leading result. So any performance measurement KPIs, which you would like to observe, and we would also like to observe to see whether the strategy is moving in a right direction?

So Sandeep, again, good question, and we are working on that right now. I mean there are standard metrics like revenue margin, et cetera. But we are working on what are the key indicators that we would like to track as we operationalize the strategy. So we'll come back to you.

The next question is from the line of Akshay Ramnani from Axis Capital.

I had a question on your comment on strategic clients. So you mentioned about putting a focus on strategic clients for growth acceleration for us. So do you think that our current set of clients are optimum for driving that growth journey or do you think we will have to double down our efforts on having new set of strategic clients for a sustainable growth ahead?

Yes. So the answer is both. And that is how we are doing our operationalization plan. That is how we are setting up our sales and marketing team. That is how we are creating this solution and prepaid backbone to support, intend to address both these segments. We cannot not address either 1 of these 2. So as we look forward, we continue to double down on our strategic clients to make sure we deliver value and reap our benefits coming out of that as we stand shoulder to shoulder with them to drive their agenda and at the same time, continue to drive our trust around acquiring new clients in the segments that we want to play. So the answer is both. .

Sure. Sure. And another one was on acquisition. So if you can just provide some color on what areas you will be focusing on and the tentative size that you would be looking for?

Right, right. So Akshay, the one -- so let me give you 2 quick points on that. The first one is that the way we have managed our business, we've created a fairly significant war chest that is available to us for making acquisitions, basically doing some M&A activity. And we are constantly in the lookout for tuck-in acquisition that enhances our capability in certain areas of focus. So that is one. The second is that what we are very clear, and this is also a part of the whole strategy exercise that we have done, in any acquisition we do, will be in 1 of the 5 strategic growth areas. We will not do any acquisitions outside. It will fit 1 of the 5 acquisitions in our strategic growth areas, mostly the ones we are looking at very seriously. We are very strong in experience because the full proof negotiating. We'll continue to bring more and more of that into the mainstream of how we drive our experience and engineering. As we look forward, we will look at tuck-in acquisitions in the space of engineering, data platforms, what we do with the hyperscalers. So yes. So those will be -- all the acquisition conversations will revolve around 1 of these -- 1 or more of these 5 strategic growth areas, Akshay.

And this -- is this a matured-based pipeline of inorganic investments? Or is it a mid- to early stage, if you can put some sort of time line to that? And also the size, what would be the sweet spots for us? Yes.

Yes. So we are constantly evaluating, Akshay, right? We're constantly, they are with our team, we have a very vibrant corporate development team. So we are constantly evaluating. And as and when some of these mature, we will come back, and we'll let you know, right? And these are typically tuck-in acquisitions. We are going to acquire for capability, right? They're going to require largely to make sure that we get lead pro in capability -- areas of capability, which are focused areas of investment for us. And the nature of tuck-in acquisitions didn't give you a view in terms of what kind of acquisitions we are looking at, what is an upsize of the firms we are looking at, given where we stand, given our size, given the fact that we are able to do tuck-in acquisitions. So I can give you a sense of -- it may be consistent with -- as we see, right, with what we have done in the recent past, et cetera, right? Having said that, we continue to watch that space very carefully. So while it's going to be tuck in, while it is going to be consistent with what we have done in the recent past, given the magnitude of the projects that are available to us, we are looking at this space constantly.

The next question is from the line of Devang Bhatt from ICICIdirect.

Just -- all my questions are answered, just one clarification as to, sir, normally you give order book number, what is the order book number? And you said that hi-tech has bottomed out. So am I correct in that? And what deal closure that has been deferred by in financial services?

Yes. Devang, I will take a shot at your question, and then I'll ask Navneet to chime in as well, right? So hi-tech, some of our key strategic clients in hi-tech have stabilized, resilient, they're showing stable business going forward. They've done -- they're past the period of challenge, the way we see it and they've shown very, very good business metrics, right? So -- and we hope that, that is going to also enable us to get on the right trajectory. There is a section of hi-tech clients that continue to see that a little of weakness. There are not very large clients for us, but we are watching that space carefully, right, because hi-tech clearly is that tale of 2 cities. There are certain segments that have done extremely well doing the pandemic and there are certain segments that have been disproportionately impacted. So we are watching that space very carefully, right? Now in terms of order book stands at about $100 million right now. In terms of certain deferrals, so there a few significant deals in our foundation services, [ built up ] foundation services business that has been deferred to the next quarter. We are in very advanced stage of those deal closures, and we are hoping that deferral will get consummated in the next quarter. Navneet, would you like to add?

Yes. So Ajay, you have actually covered it completely from the perspective what Devang wanted. But just to add, from a demand environment perspective, the demand environment looks good. And yes, the order booking number that you are seeing, which is about $100 million this quarter, it includes both the renewals and the new order bookings that we have done. And it's a slightly lower number because we have a couple of deals that we are working, especially in the sales side, have got delayed because of client specific issues and that's what's getting intercepted there, Devang.

Great. Just one last question. In terms of strategy, is there any particular focus on geography? Is there any particular geography that you're going to focus or it is going to be across?

Yes. So good -- again, Devang. So our 3 focus geographies are U.S., U.K. and Europe and South Africa. And we will retain focus on all these geographies. We have very strong footprint in all of these 3, and we will continue to retain our focus in these 3 geographies.

That was the last question. I would now like to hand the conference over to Mr. Manik Taneja for closing remarks.

Thank you, moderator. We thank you all once again for joining us today and also express our sincere thanks to the management team of Zensar Technologies for giving us the opportunity to give this report. I hope you and your loved ones are keeping pace with the second wave of pandemic. Take care and stay safe. Thank you once again.

Thank you.

Thank you.

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