Zensar Technologies Limited (504067) Earnings Call Transcript & Summary

Ladies and gentlemen, good day, and welcome to the Q3 FY '24 Earnings Conference Call of Zensar Technologies Limited hosted by IDBI Capital Limited. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Mr. Devang Bhatt from IDBI Capital. Thank you, and over to you, sir.

Thanks, Darwin. Good evening, everyone. On behalf of IDBI Capital, I welcome you all to Zensar Tech's Q3 FY '24 Earnings Call. We have with us Mr. Manish Tandon, CEO and Managing Director of Zensar Tech; Mr. Sachin Zute, Chief Financial Officer; and a few other members of the senior management team. Before I hand over call to Manish, I would like to highlight that the safe harbor statement of the second slide of the earnings presentation is assumed to be read and understood. Over to you, sir.

Thank you. Thank you, Devang. Hello, good morning, good afternoon and good evening, everyone. Thank you for taking the time to join us today to discuss Zensar's financial results for the third quarter of FY '24. Along with Sachin, I have Vijayasimha, our Chief Operating Officer; and Vivek Ranjan, our CHRO, also on this call to take your questions. It's been just over a year since I joined Zensar and exactly a year since I first spoke to all of you. In my first call, I mentioned how proud I am to be leading Zensar. Fast forward 1 year, I won't change a thing I said then. As an organization, our strong investments in our service lines and our vertical bets and, of course, our people have all come together to create a stronger and resilient organization that has client-centricity as its core tenet. Over the past year, we have made good progress on the goals we set for ourselves. Our customer conversations are positive, our deal pipeline continues to be healthy, our order booking remains stable and our profitability has been robust. Our expertise in designing digital experiences and engineering them to deliver superior engagement is showing strong traction among the clients. Though the third quarter is seasonally a soft quarter, we registered services revenue of $144.5 million, a sequential Q-o-Q decline of 3% and year-over-year growth of 1.3% in constant currency. Our margins continue to remain healthy with profit after tax growing by 700 basis points on a year-on-year basis. LTM attrition further improved to 12% from 13.1% last quarter. Coming to the quarterly performance of our verticals. This being a seasonal quarter, comparison of the year-over-year performance is perhaps more appropriate. In constant currency terms on a year-over-year basis, our services revenues in Banking and Financial Services grew by 12.6%, Manufacturing and Consumer Services grew by 5.5%, Hitech and Healthcare declined by 9.6% and 14.3%, respectively. Despite unexpected deeper and wider furloughs, from an overall revenue, margin and order book position, I am very satisfied with the performance of the company. With that, I will now invite Sachin, our Chief Financial Officer, to provide an update on critical financial data. Sachin, over to you.

Thank you, Manish. Good day, everyone, and thank you for joining this call. In addition to Manish talking about business, I will take you through some key financial metrics for the quarter ending December '23. The revenue for the third quarter of financial year 2024 stood at USD 144.7 million, reflecting a decline of 3.2% sequentially in constant currency terms and 3.7% in reported terms. The service revenue for the third quarter of financial year 2024 stood at USD 144.5 million, reflecting year-on-year growth of 1.8% in reported terms. Gross margin for the quarter stood at 31.1%, a drop of 70 basis points quarter-on-quarter. Decline was primarily due to exchange impact of 10 basis points; impact due to furloughs and utilization, 200 basis points, which was partially offset with our existing operational efficiency program, higher utilization and reduced discretionary spend impacting the margins positively by 140 basis points. SG&A has increased by 70 basis points quarter-on-quarter. This includes a reversal of 160 basis points benefit we had last quarter on account of lower management bonus payout. Exchange had a negative impact of 10 basis points. PDD reversal for the quarter positively impacted the margin by 110 basis points. EBITDA for the quarter was at 11.2%, up 20 basis points against last quarter's adjusted EBITDA margins. Our adjusted EBITDA margins for YTD stood at 17.3%, well above our guided range of mid-teens. We closed the quarter with higher cash and cash balances. That stood at USD 248.3 million compared to USD 227.1 million in Q2 of FY '24, addition of $21.3 million in the quarter. DSO for the quarter stood at 75 days, 4 days lower than previous quarter. Order book remains healthy at $167.5 million for the current quarter with consistent new logo addition. As you have seen, Hitech has been a sluggish quarter for the industry, which is true for us as well. However, apart from lower revenues from some large Hitech customers, we have witnessed growth in other parts of business, despite this being a quarter with higher-than-usual furloughs. The effective tax rate for the quarter stood at 23.8%. The total amount of outstanding hedges as on December 31, 2023, was equivalent to $313.7 million against $289.1 million in the previous quarter. The Board of Directors have approved an interim dividend of INR 2 per share for the financial year 2024, which is 100% of the face value. As we have consistently mentioned, we continue our rigor on improving execution, focusing on strategic cost optimization levers and maintaining our resilient bottom line. As we push ahead, our financial strategy remains anchored with driving growth, ensuring profitability and making required investments into the focused area of business. On ESG front, we have achieved significant improvement in our ESG scores from rating agencies like EcoVadis and DJSI. We are officially committed to aligning with SBTi, which is now available on SBTi's website itself. We have deployed organic waste converter in our Pune campus, resulting in in-house treatment of 100% organic waste. With that, now I invite Vijayasimha, our Chief Operating Officer, to provide update on business operations. Vijay?

Thank you, Manish and Sachin. Greetings, everyone. I will share details about operational efficacy, service line performance and capability enrichment initiatives. First, on operational efficacy. We are continuing our journey and making good progress on key imperatives like pyramid optimization, managing utilization in an optimal range, calibrated usage of subcontractors and managing our on-site mix. Our focus on operational excellence enabled us to minimize the impact of seasonal headwinds in Q3, like the quantum of furloughs, extra holidays and leaves. Our utilization was 310 basis points higher in Q3 of FY '24 as compared to previous year's Q3. Excluding the impact of furloughs and leaves, the utilization improved even as compared to Q2 of FY '24. The rigor associated with accelerated fulfillment and capability enrichment continued in Q3. We had a gross addition of 627 employees in the quarter. Service lines. While we had good volume growth across many of our service lines, revenue was impacted by seasonal headwinds. On a quarter-on-quarter basis in reported terms, our advanced engineering service line registered a growth of 3%. Experience services remained flat. Foundation services and data engineering and analytics saw a decline of 2%. Application services and enterprise application services saw a decline of 8%, which was primarily on account of furloughs. The share of revenues from advanced engineering services, data engineering and analytics, experience services and foundation services increased from 52.2% in Q2 of FY '24 to 54.2% in Q3 of FY '24. Capability enrichment. As part of our talent transformation journey, we are proactively multi-skilling our colleagues in a structured manner via the service line academies. Our industry services groups have established domain academies in their respective vertical to enhance the ability of our colleagues to deliver superior business value. The immersive programs launched to enrich the capability of our key talent in the areas of solution architecture, product management, program management have enabled us to create a sizable pool of homegrown talent in these areas. The in-depth learning programs from our AI academy has enabled our engineers and data scientists to develop advanced skills in generative AI space. We leveraged our advanced generative AI skills to implement innovative solutions for a legal services client of ours, which enabled them to reduce processing time by 90-plus percent in some value chains. With that, I now hand it back to Manish.

Thanks, Vijay and Sachin. The last few quarters have been tough for the industry due to macroeconomic uncertainties, and the customers have seen cuts in their discretionary spend. We continue to collaborate with our customers in such times. We have strong systems in place and our capabilities are interlocked to tap into any available opportunity. Client success is our parameter and we'll keep moving in the right direction, focusing on growth and investing for the same. With that, we can open the line for questions.

[Operator Instructions] The first question is from the line of Devang Bhatt from IDBI Capital.

So one is that now you have stabilized your margins. So when we will see an improvement in growth? And which segments are you focusing to drive that growth? And what are we doing to reduce the higher dependence on clients?

So I think as far as this quarter is concerned, except for the Hitech segment, and there also, there were a few specific clients, where because of the furlough and so on, deeper and wider furlough, we saw declines. But if you exclude that, then all parts of our business have done better than last quarter. So I'm pretty bullish about our growth prospects, revenue growth prospects as far as non-Hitech vertical is concerned. Hitech is under stress. It is under stress for everyone. I mean, there are other verticals that are under stress for everyone, like Banking and Financial Services, which is doing well for us. But Hitech, we are also suffering. And hopefully, given that the furloughs should come down in this quarter, hopefully the worst is behind us.

And sir, as you highlighted that there are some headwinds in macro, so what are we doing to mitigate the same? I mean, are we trying to grow that -- I mean, some specific segments or some specific clients are you targeting?

I think, first of all, as I pointed out earlier last year, we are -- we have taken a lot of steps to manage and improve our client penetration and revenues. One is we have increased the addressable spend through addition of several service lines, including experience services, including eSaaS, which include Salesforce, Oracle, SAP and everything, and advanced engineering services. And we are seeing the good growth in these new service lines that we have added. Besides that, I mean, you have to stick to your core client-centricity, take care of your employees, take care of your clients in tough times, then we'll see the benefit. Also, we are trying to ride on to the newer trends that we are seeing in the market, like generative AI and so on, to see how we can piggyback on those trends and accelerate our revenues from that.

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

Manish, our deal wins have, let's say, on a trailing 12-month basis have sort of picked up. It's up 23%. Just wanted your thoughts on a couple of things. So one, have the deal wins of Q1 and Q2 completely ramped up? And do you think that the following quarter will be a growth quarter despite continuation of furloughs? So that's the first one. The second is, how are you thinking about Hitech at this point in time? When do you see this sort of the trajectory sort of at least stabilizing? It's the second one. And I have one more as well, I'll follow up post this.

Yes, Nitin, good to hear from you. I think on the first question on deal wins, as you can see, our -- compared to the same quarter last year, our deal wins have gone up by 30-odd percent -- $30 million...

$34 million.

$34 million. And if you peel the onion a little bit more, you will find that most of these deal wins are coming from existing new, which means that our farming engine, what we had invested in, is working to our satisfaction. And that's very encouraging to see. Second question was, will next quarter be a growth quarter or not? As you know, we don't give projections for the next quarter, so I cannot comment on it. And the...

$5 million-plus clients.

$5 million-plus clients have also gone up overall. And what was your third question, Nitin?

The third one was, when do you think Hitech can sort of stabilize? And are you seeing incremental deal wins at some point that will start offsetting the pain that you're seeing from declines that you're seeing?

I think, look, that's a $100 million question as to when we will see the thing. The Hitech sector for everyone is under stress. And even as we speak, Nitin, I was hearing that even Google has announced new job cuts and so on. So I mean, the jury is still out there. But as I said, except for Hitech, I see other parts of our business firing much better. So as soon as this furlough impact, et cetera, and project closure impact, et cetera, goes away, we should hopefully see growth.

Sure. And lastly, if you could give your thoughts on BFSI, Consumer Services and Healthcare as well on how are you seeing those sort of pan out?

So for us, BFSI has done pretty well. We have grown 12.6% year-over-year. And Manufacturing and Consumer Services also grew by 5.5% year-over-year. So -- and besides that, we are doing well in U.K. and Europe and also in South Africa, which are big markets for us. So as I said, I mean, things are looking up, except for the Hitech vertical.

The next question is from the line of Naveen Baid from Nuvama Asset Management.

Just wanted to confirm on what was the order backlog this quarter.

So we look at order booking and not order backlog. Our order backlog or booking was $167.5 million, which was about $34 million more than the same quarter last year.

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

Manish, I think the pain in Hitech and that, too, from a top line within Hitech was a well-accepted fact for Zensar, and it has been an accepted fact for the investor as well. But to surpass that, we have to accelerate the pedal in terms of driving growth in other accounts in Hitech and the other verticals. So are we geared for the same? Do you believe the time has come in terms of driving this incrementally better and that will help us to compensate the headwinds coming on the growth coming through Hitech account year-after-year and quarter-after-quarter?

As I said, except for Hitech as a vertical, we are seeing secular momentum overall in other verticals and geographies. I mean, it's -- if we continue to see significant stress in Hitech, I don't know whether the growth will be enough to offset or if the -- if Hitech remains flattish or grow slightly, then I see us growing significantly.

Okay. And sir, what do you believe -- because the growth outside Hitech in this quarter has been flat to a declining trend, except for the BFSI. So is it largely because of furloughs?

Largely because of furloughs, yes.

Okay, okay. And Sachin, is it possible...

And this time, the furloughs were much deeper and wider than what I have seen in the past few years.

Okay. Just a related question, Manish, do you expect some of these -- most of these furloughs to reverse in the fourth quarter? And Sachin, if you can quantify the impact of furloughs on this quarter's revenue.

Vijay, do you want to take that?

Yes, I'll take the first portion of the staff. I think we are seeing some sort of a mixed bag in terms of furlough reversal in Q4. Some of the sectors like Hitech are going to continue to have furloughs in the early part of the quarter. But as some of the other sectors are not going to have the impact of furloughs, so there will be some impact of furloughs in Q4 as well. Sachin, you might want to quantify.

Yes. So Sandeep, a combination of furloughs and utilization has impact of close to [ 200 basis points ] on our gross margins. And normally, the rate of the split, we don't make it public.

Okay, okay. And Sachin, if I presume you said in the opening remarks, provision for doubtful debts has been reversed in this quarter, which impacted margin by 110 basis points Q-on-Q positively. So will this be a headwind in the coming quarter? And if yes, what could be the headwind impact?

Yes. Obviously, as you know, the PDD is a one-time impact, which we registered in Q3. But broadly, other parts of our operational efficiency track continue to work. If you look at my -- let's talk about utilization. In Q3 of last year, my utilization was below 78%, it was 77.7%. This time, my utilization is over 80%. So there will be levers like this, which will be available for us going forward.

Okay, okay. And last thing on the depreciation, there has been an absolute decline. So any one-off in the EBITDA margin, EBIT margin, apart from provision for doubtful debt led through depreciation or any other items?

See, depreciation has been impacted due to multiple facilities, which we have been vacating across the globe, including India and the U.S. So the impact of that can be seen over there. Apart from that, the amortization of earlier-acquired subsidiaries is also having impact over there. But I don't foresee a significant change in that number in near future.

[Operator Instructions] The next question is from the line of Nikhil Choudhary from Nuvama.

First question is on top accounts. While, Manish, you mentioned that incremental [ TCV ] is coming from client mining, can you clarify, is it coming from top 5 clients, given we are seeing the contribution from top 5 continue to decline?

No. Actually, we are converting our -- a lot of clients we are moving up. It is not coming -- to answer your question, it's obvious that it is not coming from the top 5 clients, the data shows that. But we are trying to move up the number of clients from bracket from less than $5 million to above $5 million, from less than $10 million to above $10 million. And that is where we are seeing a lot of success.

Sure, sir. Second is regarding the margin. I think on margin, you continue to surprise. And even in this quarter, despite of reversal, we have seen margin -- EBITDA margin close to 17%. And we have seen some of the levers like offshoring utilization playing out in the last few quarters. So is it fair to assume current quarter's EBITDA margin will be -- what we can look forward to in FY '25 and maybe next coming quarters?

So it's very difficult for me to talk for FY '25 and going forward. I think our guided band has been 14% to 16% because we think that, that is a more sustainable range which we can work on going forward. Because we still want to create -- as we have been saying, we are working on a few of the large deals, which will have impact on the margins in short run. Then obviously, the enabling of the re-skilling of my delivery team is partially happening. At the same time, if you see my investments in S&M is also going up. So this is the room which we have created to ensure that in long run, it helps us to grow faster.

[Operator Instructions] The next question is from the line of Nitin Padmanabhan from Investec.

Just to clarify, you mentioned 14% to 16% basically allows for large deals that could ramp up. So have we won anything that is likely to execute and thereby have an immediate impact on margin?

No, I don't think we can state anything which -- any large deal which will have impact on the margin just now. But you have to be...

So it's more forward-looking.

Yes, I mean, this is -- you have to build in the capability to do large deals, right? And as we all know well that the large deals typically are not very margin-accretive in the initial stages. So we have created that cushion. We also want to create some cushion to invest in sales and marketing and so on. So that is what we are trying to do.

We have the next question from the line of Vikas Ahuja from Antique Stock Broking.

So if I look at some of your peers, their commentary has incrementally started turning positive. And if I remember correctly, in one of your interviews, you have talked about demand continues to remain tough and mega deals are a thing, but you are also seeing an equal number of that being canceled. So anything changed for us in last 1, 1.5 months? Are things incrementally turning positive for us?

As far as the macros are concerned, I don't think there has been a material change in the macros that we have been seeing over the last couple of quarters. And I don't think it is materially going to change for the next 2 quarters also, the overall macros.

Okay. And also, the other part regarding that mega deals you talked about that you have been seeing some cancellations on that side overall, anything has improved on that front as well?

No, actually, what I had -- what I was quoting was that for every 2 large deals getting signed, 1 existing deal is getting canceled or something like that. So that is what I had said. But we are at a stage where we have to first win some good amount of large deals. And then hopefully, we can comment on cancellations. But what I was commenting on was what I had heard in the industry discussions.

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

Manish, you might have answered this. But for a consistent growth for Zensar over the next 3 to 5 years, the 3 things might have to be addressed. One is the large deal team formation, which caters to the pipeline and converge the pipeline faster; second being the farming of the existing top clients or target clients; and third being the hunting of must-have clients on an ongoing basis; and the fourth being having a required door openers or service capability in the portfolio across verticals. So can you throw a light whether Zensar has addressed all these 4 in terms of restructuring and reorganization or still some of this is work in progress? And when do you expect these to get addressed and we can actually grow in line with the industry?

All these things have been addressed. Are they perfect? The answer is no. There's always room for improvement, right? So from a strategy perspective, all these 4 items have been addressed. And we are seeing -- as I said, we are seeing some green shoots already. Our farming, as I mentioned, EN is the highest, existing new deals is highest over the last few quarters, which is a very encouraging sign and shows that farming is working. Do we disclose net new logos? No?

Net new logos, yes, 9.

Okay. We have opened 9 net new logos. Some of them are -- a few -- quite a few of them are Fortune 500 companies overall. So all those things are happening. It is not that they are not happening. But you cannot be binary that either they are happening, not happening or happening perfectly. It is always a journey.

[Operator Instructions] The next question is from the line of Ganesh Shetty, an individual investor.

Sir, are you looking for any acquisition because we have got considerably cash and cash reserves? And especially, in health care sector, we are having less exposure, so whether this sector can be scalable through acquisition.

Yes, we are looking at all avenues, including acquisitions. Almost every week, we look at a possible acquisition target. And the team is actively working on, but we will not buy something just for the heck of it. So where we see a strategic fit and the right price, I have a fiduciary responsibility to the shareholders to conserve cash. And we continue to look, but we are not going to throw money at doing an acquisition if it's not worth it.

Sir, my second question is regarding that Hitech performance for last so many quarters. So as you will see, no ray of hope in near future. Are we also planning to reduce some exposure, like reducing our investment and deploying the resources in ever-growing sector like BFSI and Consumer? Can you throw some light on this, sir?

We always keep looking at our portfolio. And we don't look -- do it at a sector level, but we actually do it at an account level. And we go and see where we want to invest, where we want to maintain and where we want to divest. So we continue to do all 3, and we do it at an account level instead of trying to do it at a sector level.

[Operator Instructions] We have the next question from the line of Jalaj from Svan Investments.

First of all, could you talk of 2 segments, Hitech and...

Your line was breaking in between. I request you to please repeat your question.

Sure. Am I audible?

Yes, a little better.

Yes. Could you touch upon the sudden de-growth -- or rather in both Life Sciences and Hitech, is it all -- the complete impact is because of the furloughs? Or are there some client-specific issues or some project-related issues there?

No, a lot of impact is because of furloughs and there are some project cancellations also. So project completions and -- completions, project completions, not cancellation overall. So both those issues are there.

Okay, okay. And could you touch upon the nature of the PDD, which you talked about 110 bps impact, which vertical was it and some nature -- color to it?

So I won't be able to disclose in which vertical it was and all. But what I can tell you is that according to the accounting norms, beyond certain days if the collection is not happening, so we need to create a provision of the same in the books. According to our accounting policy, we have created that provision in earlier quarters. In Q3, that collection actually happened. So with the correction, we had to reverse the PDD. And that's where you are seeing this impact.

And besides, this is an ongoing thing. There is nothing one time that we have done something or anything. This is -- we are just following our accounting policies and showing you the impact. That's all.

That's helpful. Fair point. And Manish, this would be for you, maybe a little long-term question, 2, 3 years or 5 years down the line, what -- as per you -- or what are you seeing as a growth driver for the organization? And where are we moving? Maybe you could talk about some IG, industry group level or a service line. How do you see the growth coming more from a driver's perspective?

See, one of the repositioning that we have done is along the lines of experience, engineering, engagement. We are perhaps the only company of our size which can do these all 3 things together and in sync with each other. As more and more digital projects are getting done, it is not about just experience or just engineering or just engagement, but a combination of 3. And that is a unique value proposition that is resonating really, really well in our client base. It is helping us differentiate in the market. So I'm hoping and I'm seeing some green shoots there also that this overall strategy will get us to the growth and the top quartile performance that I'm looking at in the next 3 years.

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

Manish, one of the lead indicators for us to judge whether the strategy is running or not running could be tracking the deal pipeline. So can you throw some light in terms of how the deal pipeline at the end of December looks like both on a Q-on-Q and Y-o-Y basis? Is it growing higher than your expectation or it's not meeting your expectations?

Yes, the deal pipeline is stable to better than the same time last year. So that's about all I can say because we do not disclose the numbers per se. But I can tell you that it's same or better as compared to last year.

The next question is from the line of Jalaj from Svan Investments.

Manish, with regards to the offering or the repositioning you talked about, could you specifically touch upon the health care vertical because I believe that in your previous role, you've been managing the same. So could you talk a little about the repositioning of us as Zensar as a company and the industry trends there?

So this is -- this quarter is the first time that we have split out the health care as a vertical. Actually, we were doing close to 9% to 10% of our revenues was coming from health care. And the obvious thing was that if without focus, this kind of revenue can be generated, then with focus, a lot more can be generated. And that you would have seen in the results of the other players in the industry. Most of them have shown significant growth in health care and life sciences. So we have spun it off or we have created a new vertical. And we will continue to invest in getting exceptional growth in this particular vertical. And yes, I will use my experience in the industry from the past.

So from a service line offering or the offerings we have right now in health care, do you feel like we are there or some more investments need to be made there or an M&A would be required in this vertical further?

Both M&A and investments, they are not there. As I said, we have just started the vertical. It's barely 2 months old, 3 months old. So we will -- we are hiring some excellent people. We are looking at M&A. So both -- I mean, whatever it takes, we want to do it because this is a pretty good vertical to be in.

Okay. And some industry trends, if you were to talk about maybe some micro payer segment, payee segment, whatever you see like there?

So payer segment is pretty saturated as far as I see it. I mean, there is not too much scope for new players. I would say on the innovation segment, which is medical, medtech and life sciences, et cetera, there, we will see much more innovation is happening. And if innovation happens, agile companies like ours, who have a complete suite of offerings from experience to engagement, we tend to do better. Provider space is very large. But again, provider space is pretty focused on on-site only kind of deals. So we will have to pick and choose what we will take and what we will not take.

[Operator Instructions] The next question is from the line of Devang Bhatt from IDBI Capital.

So apart from health care, any specific areas that you plan to do M&A or you have identified any particular segments to do M&A?

Yes, we have a complete M&A strategy in place. And there is a corporate development team focused exclusively on M&A. And we have a fairly detailed strategy in place.

Okay. And in terms of the generative AI, are you seeing some traction? Or in which segments are you seeing generative AI traction?

We are seeing a lot of traction but primarily in proof of concepts. Last time I -- in one of the calls, I had mentioned that we are doing close to 100 proof of concepts overall in the gen AI space. But a lot of them are either revenue is small or we are doing it pro bono to get into larger -- win larger deals using gen AI space. But we are doing a lot in that area.

Great. And sir, in terms of, say, your segment-wise, maybe in medium term, where -- which segments are you seeing green shoots and which segments are you seeing headwinds, I mean, vertical-wise? If you can...

Headwind is obvious, Hitech. And the rest of the things I said have been doing pretty okay. So that is pretty much the answer. And basically, we are in just 4 verticals. We don't want to spread ourselves very thin. So that is where those headwinds and tailwinds are. And as I said, even BFSI, knock on wood, we have seen growth. There, our other competitors and other industry colleagues have seen negative growth.

[Operator Instructions] The next question is from the line of Jalaj from Svan Investments.

So picking off your brain a little more on health care, so do you guys expect that health care would contribute to somewhere mid-teens or a higher level of the top line in the next 2 to 3 years?

Yes. Obviously, the hope is there that it will contribute disproportionately. I mean, without creating a vertical, it was contributing 9%, 10%. So if we are creating a vertical, hopefully it will give us that growth.

Got it. And then one thing which you alluded upon and which your peers have been saying, majority of them have had a good quarter-on-quarter and Y-o-Y in health care. So some specific issues for us since we have -- or rather, Y-o-Y, we had a huge de-growth there on a small base also.

In particular, completion of a few projects and also some amount of furlough. And companies who are seeing growth, they are working primarily in the payer segment, where this is the open enrollment season this quarter. So they see an uptick in revenue.

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

Could you give us some color on the deal wins that we have won in the quarter? Maybe by vertical, where are you seeing the more strength? Or even if you could give a trend over the last few quarters, where have you seen the biggest strength from a deal win perspective when you look at verticals?

So Nitin, we don't give the split of deal wins by verticals. But what I can tell you...

Yes, just qualitatively.

Yes. So qualitatively, if you look at -- obviously, my order book is reflecting a consistent improvement on a year-on-year basis. Last quarter, we reported $194 million. This quarter, we reported $167 million, which is on a Y-o-Y basis, there's a significant improvement, if you see, starting from Q1 itself. So for the last 3 quarters, we had a pretty healthy deal order book, which represents the deals. And as Manish said, especially in this quarter, our existing new portion of the deal wins has been one of the highest in last maybe 8 to 10 quarters. So I think that is the reflection of the farming, which is happening across the verticals, except the Hitech, where we are seeing some headwinds.

Ladies and gentlemen, that was the last question. I would now like to hand the conference over to Mr. Manish Tandon for closing comments. Over to you, sir.

Thank you. Thank you all for joining this call, which turned out to be a very important day in the history of this country and also a holiday. So I'm very grateful that you could join even on a holiday. Thank you very much.

On behalf of IDBI Capital, that concludes this conference. Thank you all for joining us. You may now disconnect your lines.