Ladies and gentlemen, good day. And welcome to the Infosys' Earnings Conference Call. As a reminder, all participant lines will be in a listen-only mode. There will be an opportunity for you to ask questions after the presentation concludes. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Mr. Sandeep Mahindroo. Thank you, and over to you, sir.

Thanks, [Imba] [ph]. Hello, everyone. And welcome to Infosys' earnings call to discuss Q4 and FY15 financial results. I'm Sandeep from the Investor Relations team. Joining us today on this call is CEO and MD, Dr. Vishal Sikka, along with other members of the leadership team. We'll start the call with some remarks on the performance of the company for the recently concluded quarter, along some comments on the fiscal 2016. Subsequently, we'll open up the call for questions. Before I hand over to the management team, I would like to remind you that anything that we say which refers to our outlook for the future is a forward-looking statement, which must be read in conjunction with the risks that the company faces. A full statement and explanation of these risks is available in our filings with the SEC, which can be found on www.sec.gov. I would now like to pass it on to Dr. Vishal Sikka.

Thank you, Sandeep. Hello, friends. As I speak to you today, we close the rewarding year but a disappointing quarter. Rajiv and I will address the details of the financial performance during the course of this call and I want to take a few minutes first to outline my thoughts on the year behind us and our outlook for the road ahead of us. We find the external environment to be one where concerns related to currency, energy and other things as well as technological disruptions have created a sense of volatility. However, I believe that these are not structural issues and that despite these a company that is focused on innovation and efficiency can achieve great results. I believe that the traditional model of IT services is dying, but business will continue to look for partners who can help them grow and innovate, who can help them renew their operations and their businesses, and will do so in reliable and agile ways. Since I took over a CEO a little more than eight months ago, it has become clear to me that we have weaknesses in sales and other processes, and our delivery culture sometimes lack proactive innovations. However, I have also found that we have strength that more than outweighs these challenges. We have immense ability to educate and to learn, perhaps the best in the world. And we have a deep organizational desire to change and improve ourselves, as well as we have ability to recruit the best talent and to house them an exemplary client centric teams and infrastructure that is massively scalable. It is this strength that gives me the confidence in our strategy and despite the weaknesses to turn all our aspirations into commitments. It is clear that in our operations especially in sales…

Thank you, Vishal and hello everyone. We ended financial year ’15 with revenue of $8.711 billion, year-on-year growth of 5.6%. On a constant currency basis, based on FY ‘14 average rates, we grew by 7.1%. If you recollect, we had given the guidance of 7% to 9% in April, based on March 31, 2014 rates. Based on those rates, we grew by 7.7%. The revised guidance was 7% to 9% based on September 30th exchange rates and we have grown by 6.5% based on those exchange rates. We have delivered an EPS growth of 15% year-on-year on a revenue growth of 5.6%. I believe we have done exceedingly well on the margin front in FY ‘15. Our operating margin for the year improved by 190 basis points on a reported basis and 240 basis points on a constant currency basis. We offered wage hike to all employees [indiscernible] 2014, after 25,000 promotions which we did during the year. We increased our average variable payout of our employees from 64% in FY ‘14 to 86% in FY ‘15. We also did mid-year wage hike for a particular number of our employees effective October 1, 2014. We also increased our investment in training and employee engagement, all being held up to bring down the annualized attrition from 23.4% in Q1 to 13.4% in Q4. We have been able to show remarkable improvements in the operating margins because of our focus on improving operational efficiencies through onsite-offshore mix, which has come down from 30.6% last year to 28.8% in FY ‘15. Utilization excluding trainings went up from 76.4% to 80.9% during the year. Pricing though has been under pressure and has declined by 2.8% year-on-year on reported basis and 1.4% on constant currency basis. So, we’ve done exceedingly well on year-on-year operation parameters…

Thank you very much sir. [Operator Instructions] Our first question is from Joseph Foresi of Janney Montgomery Scott. Please go ahead.

Hi. I wonder if I could ask sort of -- couple of high level questions but it seems like you feel like the industry in the basic old services model is, I think, you had said dying. First, on the revenue growth side, what produces upside and are those coming from different areas than what we typically used to? Are those coming from newer initiatives as opposed to the basic application development and maintenance stuff? So I’m wondering how you are reorganizing the business to go after those newer areas and what’s driving the upside there?

It’s a great question, Joseph. So there are two parts to that. There is a renew part to that which is basically where we want to -- where we are endeavoring to make our existing services for the existing businesses that they cater to, more comparative and more productive by bringing in automation, by bringing in new technology into those businesses. An example of that is the worst that for example, happens in upgrading packet systems or implementing packets. We recently did a large deal there. We brought some IR into our traditional SAP practice and we won a large deal where we will do the upgrade and implementation in management projects of this SAP landscape. This is an example where you take a traditional people in terms of kind of a project offer and replace that with lesser number of people, perhaps to a higher price but augment that with a software which is much higher margin. And yes you have two things, the revenue -- the cost to the customer goes down but the margin goes up. And you save people to put on additional projects. So this is the kind of transformation that we see on the existing business. And in parallel, the new areas have fundamentally higher value, higher margin kind of areas. This is where we build complex applications for complex problem using new platform like the work with IIP, the Infrastructure Information Platform or the design thinking engagement. There we basically work with clients on identifying their next generation problem and then working on rapid solutions for that. These are the kinds of things that are higher value. They are typically served to new lines of businesses whether it is marketing of sales or strategy. And so they are high value, high margin projects. However, as I mentioned earlier, we have approximately 250 of these types of engagement goings but this compares to more than 30,000 projects that we have in the traditional business. So this will take some time to become a material revenue driver. So in the meantime, the revenue has to come from a significant improvement in the productivity and in the differentiation of the existing stuff that we do. Does that make sense?

Okay. It does make sense. I guess, the second question and this has, sort of, been one that some of your predecessors have gotten before. Given your high level of profitability and the fact that there seems like there is significant headwinds including pricing pressure, over a longer period of time. Why not adjust the margin profile lower in the short term until those new projects that you’re working on can kick in and provide productivity? Why try to maintain that level of profitability when clearly it seems like people are resetting the bar at a lower price point?

We have done our analysis and it is not that the margins are impacting our growth. If we recollect about a year back, our margins dropped about 23.5% but that didn’t deserve higher growth for us. We continue to make investments if it is required. We have a very flexible investment policy. The priority is to accelerate the growth of the business. And whatever the investment needs are, they are being fulfilled proactively and on a case-to-case basis. So these things -- and the reason why we give them margin band and we’ve started giving margin band for last three, four quarters, precisely for that reasons so that we wanted the flexibility to be able to make investments as and when the opportunity arises. So I think we are absolutely aligned. But we need to make investments to accelerate our growth. But it’s not that the margin is impacting our ability to do -- make the investments.

Okay. And then the last one from me, just specifically on pricing, we’ve heard a lot of different commentary on pricing. Some look at it as stable, some look at it as declining. I like to get to a sort of your view on what pricing is doing but not just in the short term but over the long term. And if it’s impacting those 30,000 projects that you described, maybe you could address that versus a long-term margin profile?

So maybe Joseph I can start and Pravin, if you can add something. In the short term, we see a tremendous pricing pressure coming. And I don’t think this is something that is temporary. I think this is a flexible thing that is going to impact the way the services have been done. It creates what I have in the past referred to as a downward spiral where cost continually come down and we become increasingly competitive in yesterday’s model, not realizing that we are, in fact, could use that analogy, bunch of horse-carts trying to compete with an automobile. And in this case, automation is taking over major parts of the business. It has to. It is a natural order of things. We have to embrace that. We have to embrace the situation that people become the managers of exception than operators of the automation rather than operator of the system. We have to evolve towards that. And on profitability, I think longer term and you think about this, you realize that as they evolve towards that kind of a model, the people become much more productive and able to deal with these kinds of processes and automation. Then our, in fact, margins don’t need to suffer because we can continually bring a combination of people and software to the services world and augment and amplify people’s ability with software. So I see this very clearly and I see that this is a irrevocable trend and we have to embrace that because if we don’t, then we will get this update and you had already see that happening in the industry and in the results that you have seen recently.

Thank you.

Thank you. Our next question is from Keith Bachman of BMO Capital. Please go ahead.

Yes. I had a few if I could. The first one relates to the previous question, but you are anticipating constant currency growth in this current fiscal year of 10% to 12%, which is meaningfully above what you’ve consistently generated during the past fiscal year, including this quarter. What’s the bridge that enables you to get to constant currency growth of 10% to 12% this year, because many of those activities you just described in the previous question I think are longer-term objectives, but I am curious how you bridge this year?

They are, but, I mean, as I mentioned in this example, and we saw several examples, some of those I outlined during my preamble, where the complement -- where the addition of automation has resulted in results already where we can monetize the software and the reason of our people working on project and thereby make the overall offer more competitive. We see that happening in bids already. We see that happening in projects already. And my sense is that in the early part of the year, it is all -- based on the pipeline and the outlook that we see, it is all about execution, efficiency, and getting our job done. And as we evolve towards the second half of the year, more and more effects of this automation, more and more effects of the new -- as well as the some of the new kinds of project will start to contribute to the revenue. So we see the 10% constant currency achievement as being not that far off from what we have already done if you look at over the last few quarters.

Okay. Then Rajiv if I could transition to you. You mentioned perhaps the 250 basis points impact to margins in Q1. I wasn’t sure what the source of, is it just the volume variance, or is that investment? And should we still be thinking even with 250 basis points, you have been talking about 25 basis points plus or minus, is that still the right average for the year, which means you end significantly higher than that?

No. This is true [indiscernible]. Every year, the first quarter, every IT company with drop in margin because of employee wage hike, promotion, and including visas, and typically the impact is about 250 basis points. And as these impacts and the growth starts coming into second quarter when we start hiring people from the colleges, the average per capita costs started dropping again during the year and the margins are going up. And these are investments typically in the first quarter and not there in the subsequent quarters. So that’s the reason of first quarter margins typically lower and we end up -- exit rates are pretty high.

Okay. But it still is the right thought process to equal 25 basis -- excuse me 25% operating margins plus or minus for the year?

Yes. So as we said, we had given about 25% plus minus 1% earlier. We have seen a cross currency impact of about 100 basis points. But considering what we are seeing after the very impact of pricing and other things, we still believe that 25% plus minus 1 is achievable next year.

Okay. And the last one for me just the consulting, I think you said it’s the tip of the spear and yet many of the consulting areas seemed to be a bit slow. How do you plan on differentiating INFY’s consulting activities as you look at the next 1 to 2 years with a bit of a challenging economic environment still have at least to the growth objective that you’ve identified?

Keith, our history with consulting has been checkered one and it has primarily been based around package systems and providing services, more tactical services around package systems. My sense is that consulting has to evolve towards a tip of the spear where we can have a strategic dialogue with customers and where their business is going and use that as the basis to create a more overarching and more holistic engagement with the client. We see that happening already. I mentioned that we have a tangible pipeline of more than 100 of these design thinking projects. As we speak right now, we have two clients in our Palo Alto office, one a large logistics company and one a very large CPG company. Both American companies sitting with our team in Palo Alto and Stanford, working on identifying important strategic problem for them with our consulting team as well as with our design team. And so that kind of a transcended of the traditional known business towards one where you can have a strategic dialogue, it will create a high value even if it is a small project that is a high margin project, but it creates a strategic engagement at the very top of the client and then that provides the ability to get downstream revenue from the more traditional projects, because you are engaged at the very top. So that is one part of it. And on the traditional package system part of it what we are working on is a few very crisply defined packages or templates where we can renew the existing system landscape of our customers around ERP system, around this knowledge-based engineering type work where our teams can start to transcend the packages and instead start to engage on solving the business problems no matter what package is used. So we are carrying out this transformation. Sanjay Purohit is our new head of consulting and he is carrying out this transformation as we speak. And it is driven primarily by evolving into a strategic consulting organization where we work on the next generation projects as a basis to drive also the projects hearing now. Does that make sense?

Yes, it does. Okay. All right. Thanks very much, gentlemen. And best of luck to you.

Thank you. Our next question is from Moshe Katri of Cowen & Company. Please go ahead.

Thanks. Congratulations on the significant contraction and attrition rates. I think that was pretty impressive. There is definitely lot of skepticism Vishal over the guidance for fiscal year 2016. So if it’s possible, I just want to ask a couple of questions in that regard and maybe it’s going to clarify some questions. First of all, is there any M&A contribution factored into that 10% to 12% constant currency growth guidance?

Hey, Moshe, no, there is not, only the ones that we have already acquired so that would be the Panaya acquisition as well as what we announced today, the Skava acquisition which is a small. So if we were to do any bigger acquisition that would make a change to this and we would then modify the guidance to include that. So this 10% to 12% does not include the guidance.

So would Panaya be adding about 100 basis points or so of growth?

No, I see -- you see when we acquired Panaya, we acquired multiples of about six times and now we have some aggressive plans with Panaya in terms of the revenue growth this year, but we would not want to share the numbers separately for Panaya this year and going forward.

But it is not a lot of amount, it’s a small amount, below right.

Okay. And then -- please go ahead, sir.

Moshe, if I might -- if I might add the -- if you look at 10% as the baseline there, it is not that difficult to see how we could get there given the areas of focus that I have talked about. It basically averages out to, what if you do a quarter-on-quarter model of the growth on the quarter-on-quarter basis, the uniform rate that will be 2.8% quarter-on-quarter growth over four quarters. So it is not significantly different from what we have done before. What we did want is 2.4 in the last.

If you look at in FY'15 on a constant currency basis, our sequential growth rate for four quarters was close to an average of 2.4% and I think guidance of 10% to 12% constant currency, it came between 2.8% to 3.5%. So it is going up from 2.4% to 2.8% at the lower end of the guidance.

Okay. And that’s fair. And then maybe it’ll be helpful if we can understand what happened during the quarter? Vishal, you spoke about loss of momentum. You spoke about a disappointment. Is there anything that happens throughout the quarter, January, February, March that kind of got you guys to that disappointment? Was there any sort of issue with specific clients, specific verticals, project ramp? Any color there, I think will be helpful because people are looking at the exit of Q4 and that's why I think there is -- that scepticism about getting to that inflection point to get to that acceleration?

Yeah. So, I mean we did see -- we entered the quarter with a higher expectation of volume and as a result, you see also the utilization has come down between that and the pricing. We did see significant ramp down, as well as -- just slowdown economically in many industries beyond energy and telecom. We also saw in other areas slowdown, maybe Praveen, you can talk about this.

At the beginning of the quarter, we had a decent pipeline and in fact, we did recruit people for our expected pipeline and planned utilization. We did anticipate slowdown and not because of oil prices but our pipeline in other vertical seems to be decent. But across the board, we saw performance of projects, planned ramp ups didn’t happen and we lost a couple of deals a well. So it’s a combination of things. We can’t ascribe it to a single vertical because if you look at it, almost all the segments have grown. So this was something, which we didn’t anticipate in the beginning. We are looking at the topline. But as Vishal said, when we look forward, the pipeline continues to be decent. We have many initiatives in place to improve the sales productivity. We are focusing a lot on better qualification of deals. We are focusing a lot on increasing the conversion data of slot deals and some of the initiatives around productivity and all, we believe will help us in improving the win rate. We are also focusing a lot more on managing the accounts better. Some of our top accounts have not really grown. So there are a bunch of initiatives and looking at the pipeline, we feel fairly confident that if we execute well, we should be able to reach our guidance.

So it’s a mix of execution and the environment, is that what it is?

Yes.

Yeah. Exactly.

Okay. Last question on pricing. Which part is it? The pricing pressure -- which part of the business is it affecting the most? And is it predominantly on renewals of legacy deals or this is pricing on new deals that are coming on board?

It’s both. I mean if you look at -- I mean other than renewal, I would like to characterize it as -- in the business IT operations space, when you are looking at the infrastructure management, application development maintenance, quality assurance, so that business has become commoditized. So there is tremendous pricing pressure. So it could be renewal of your existing deals or it could even new deals. We had new talks for that. So there is tremendous pressure there, so definitely we are seeing pressure. In other areas, I mean, when you look at package implementation or when you look at some of the newer areas like analytics channel, while it’s a competitive situation but there we are able to get better pricing because of the tools we have, because of the capability we have and so on. But a big part of the pressure is on the commoditized, on the business IT operations that of the business. And as Vishal said in the beginning, actual achievements has happened in the industry or the segment is commoditized. So we don’t expect that situation to change.

Okay. All right. Thank you very much.

Thank you. Our next question is from Omkar Hadkar of Edelweiss. Please go ahead.

Hi. This is Sandeep here from Edelweiss. Thanks for the opportunity. So, I have couple of questions. One, I think you have already answered a part of it but just wanted to know bit more. The way we are looking at the automation part and the artificial intelligence part, I think it will take some more time before it can become meaningful. And in the meantime, you already mentioned that growth has to come from the traditional side. But how are we doing things differently to ramp up that, one? Secondly, taken the pricing pressure in that space if you see the commoditized space, even if we ramp up, will it be meaningful enough to get us that growth? And second part of my question is when we talk about our executional target of $20 billion by 20-20 and if we assume even 12% growth in FY ’16, we required CAGR probably to do this at 16%, 17%. So do you think this industry is at a place where you can expect 16%, 17% kind of growth, not only for Infosys but does the industry give that kind of potential?

So let me -- Sandeep, let me take that in two different parts. I think the way that you see this materialize, I think the key question that you have is how do you see this actually take shift? There are three parts to that. The first one is simple bread and butter operational efficiency. Getting better at deal mining, getting better at deal, better pitches, redefining, redesigning the RFP and all those process. Many things of this nature that we are putting in place that simply helps us get better at competing and pricing and things like that, that is sort of the basic of the business. The second part of it is -- where we are already bringing automation to our existing services. So, I mentioned the example of the package systems work where we are bringing in Panaya. We are also bringing the Panaya technology to other areas like verification, like application maintenance and things -- and infrastructure management. We are bringing this thing that we call the Infosys Automation platform that we are currently working on around 35 plus customer shift. I mentioned the example from Syngenta, which again helps to make infrastructure management more competitive by lowering the number of people, by increasing their productivity and by adding a software component to this kind of an IMS deal. So that gives us a differentiate -- ability to differentiate in our existing IMS service packages. So that has already started and that will continue to make our existing services more competitive. So that increases the win rate in our existing mills but makes the offering, the services more differentiated and that will lead to a revenue growth. And that is a primary basis of the revenue growth that we see that, and of course, the operational…

Yes. Sir, thanks for that. Just one small question related to that. If you’ll see the way things are moving in the industry, we are moving towards more and more artificial intelligence. And in my view, as well, artificial intelligence will become key component of the IT services part as well at some point of time. So biggest challenge I see is that we have three pyramid -- three parts of the pyramid where employees are and probably in the middle of the pyramid there has been not been much of change in last few years. So don’t you think that there either should be a very big churn in that middle of the pyramid to get this thing going or achieve our target or you will have to probably give a huge training exercise to this part of the pyramid? So in both because of probably the cost will go up temporarily? So what is your sense on that?

I think that to a last degree, I mean, if you look at the utilization and the existing fixed cost that we have already incurred in the training infrastructure. I mean, within the P&L that Rajiv just described, we trained 25,000 people on design thinking. And this is not a like a move, this is a one day immersive design thinking program, that was created by George and John Kindel and start totally go out from these school at Sanford. So we have already done that. And similarly things of this nature that we are doing, we can create large scale training kinds of offering without incurring significant additional cost. But we will incur and put the additional investment as necessary as innovation is something that I believe is essential to company -- certainly dollar company. So we will not, for a second, try away from investing in the kinds of innovation that are necessary in order to get these areas moving. So training is in particular something that is actually really important.

Thanks. That’s all from my side.

Thank you. Our next question is from Dave Conning of Baird. Please go ahead.

Yeah. Hey, guys. Good morning. I guess my question just as we look kind of sequentially through the year? Is Q1 -- because Q4 was a little soft, did something spot into Q1, so Q1 should be a little better than normal or should have falling to kind of that normal 1% to 3% sequential range that it is pretty typically falls into?

Hi. Rajiv here. We don’t give quarterly guidance. I would not want to give a color on how we see Q1 right now. But we have look at our pipeline. We have looked at this in our pipeline, our existing business, the book business and all the investors are making the changes and opportunity. And we believe that 10% to 12% on constant currency, because yes, that’s what mean that the first quarter has to deploy decent question. But we are doing -- we want every quarter to be good and every quarter to be better than the previous one. Having said, I would say just that our annual guidance we believe it should be in that range.

Okay, okay. And there wasn’t really anything that got pushed out from Q4 into Q1 that creates anything unnatural or unnormal, right, though?

No. Not in that. I mean, that is always a deal that we have and so forth, but nothing material like that.

Yeah. Okay. And then, the other thing is, your other income line, just that and most of the interest you run on your cash has ramped significantly over the last four or five years and now its like 20% of your pretax income? I don’t think we should model as quite as high in fiscal ’16 given some of the gains I think that you got in some of the FX move since starting fiscal ’15? But, I guess, is that the right way to think of it? Just -- maybe give us kind of a normalized 2015 number which we can kind of model fiscal ’16 off?

See normally income has two components, one is the interest income on our cash balance. So last year we have been -- we have done a great job in terms of ensuring that our yield on the investment that we have made up is pretty high. But as you would know, most of our money is in banks in India and interest rates in India has started softening and the yields will likely to come down next year and that will be pressure on operating income. Secondly, the exchange gains and losses depending on your hedge position that you take every quarter, we have been lucky in the last year and we have done a good job -- treasury team had done a good job in terms of ensuring that we are positive on the exchange differences. That is something which is very difficult to predict, because you take hedge positions across multiple currencies, against USD, INR, and that is always a thing bet that you take on the currency. So we really cannot model the exchange gain that we’re likely to get next year over the one of the losses depending on the volatility on the currencies. But on the interest income, the interest rates are softening in India and yields are likely to come down. Second is we’re trying to make an investments through acquisitions and the investments through innovation fund, which is going to bring out the cash balance. We have also increased a dividend payout ratio. So based on that, you would start seeing an operating income in the first year as the total profit started declining over the year, but the right way of matching the business definitely would be the operating margins.

Yes. Okay. And can we assume that if you make an acquisition because the rates have been so high on your cash that it’s a lot harder to make an acquisition accretive, like you could actually do dilutive deals from an EPS standpoint, whereas it seems like a lot of U.S. companies can buy stuff at just giving up 1% cash returns or something that quickly make things accretive that you could make dilutive acquisitions. Is that fair?

No, we believe our M&A strategy is not driven by trying to increase our earnings for the quarter or the year. It is in line with what our strategies. We want to make strategic investment. We wanted to grow fast with the company, have a multiply impact on our traditional business. We definitely look at how much time will it take for us to get the payback period or what is the -- how much time it will take to get the EPS accretive. So yes, in the year when you make an acquisition is what tend to be an EPS dilutive. But I think, we are very, very sensitive to that part and we make sure that wherever we invest money, it is properly for longer term and with a -- in terms of the longer-term strategy.

Yes. That makes sense. All right. Thank you.

Thank you. Our next question is from Rishi Jhunjhunwala of Goldman Sachs. Please go ahead.

Yes. Thanks for the opportunity. Vishal, just a question on the overall discretionary spending, right. It seems like you’ve been doing some full day workshop with some of top clients that you have. Just wanted to get some sense in terms of what are they saying around where the discretionary spending is going to go incrementally? What we hear is it seems like most of it is going towards digital. And if that’s the case then assuming that the Indian IT sources companies in generally are not 100% equipped to cater to that kind of demand. Are we looking at another one or two years of subpar growth in general just because the discretionary spending bit is going to be coming in a lower share to the Indian companies vis-à-vis some of the other peers?

That’s a very good question. My sense is that the discretionary spending is going towards what you could say next generation growth area for business, a new growth area. These are typically based on software, on computing technologies around digital, new ways of acquiring customers, new kinds of experiences for consumers and things of this nature, new ways to connect to them and exploring the markets and so forth. So, I mean, we did the Skava acquisition precisely for this reason. And so we do see a lot of growth in this area. And it is not that there is anything particular to India where we have any reason to believe that we cannot cater to that. I think the structural issue around the revenue decline and the pricing pressure and so forth is more around the back-office operating areas where things have become a lot more competitive and you have to assume than the pricing pressure there will continue. And again, when we look at the long-term future of the company, we see this breakdown between -- as I mentioned, a relatively small amount of inorganic growth, but about 10% growth from these completely new kinds of area. And when you look at the remaining one, we are basically talking about 13%, 14% cumulative growth rate, this is out of our aspiration. I mean, obviously, we can do 10% to 12% this year that leaves a five more year to get to those kinds of growth rates and then time will tell that, but we want to sort of spear the company, make that sort of a NOC star for us and spear the company in that direction where we look to get to $20 billion and 30% margin on $80,000 per employee. Because we want to get into this next generation kind of solution model that people are surrounded by much better software around them. And then we use back to create much more efficient solutions in the operational areas but with much more high value services in this next generation area.

Thanks. And just one quick question on capital allocation, right, you’ve increased the payout ratio to 50%. You’ve talked about investing in acquisitions and building technology and infrastructure. And all of that can pretty much be funded through the massive amount of the cash that you generate on an annual basis. Just wanted to get some sense around, do you have anything in mind in terms of the cash that you’re currently sitting on which is also quite a hefty amount? Thank you.

No. It is a perfect thing. You may call it a hefty amount. What we did this time was we put off financial model for five years based on the target that Vishal had articulated session court if the law say. We’re looking at the investment need of the organization. We have looked at the needs to make M&A. The area that we need to make M&A and some of those areas are -- where the multiples are pretty high, look at the needs to make investment in terms of employee, infrastructure, technology assets. And all the investment typically have to be made two or three years ahead of time, in terms of infrastructure and land and everything else. When we made our financial models, we looked at our cash flows. We felt that we need to keep that cash and that is something we would need to hold and the cash that we generate every year, 50% would go towards paying dividend, the balance 50% we would spend towards the M&A which is strategic M&As and towards investment in the multiple areas of the business. Having said that, it doesn’t mean that, in case, we come across an opportunity which is much large in terms of M&A or investment, we would not do that. That’s what this $5 billion will help us. It’s also for derisking. It’s also for ensuring that we’re able to take a quick decisions, strategic decisions based on the need of the hours and we don’t have to run around for cash. So I think the way we to look at is also that over the last 12 months, we have increased our dividend payout ratio 30% to 50%. The 57% increase in dividend payout. Our opportunity has increased in the year. Our EPS growth is about 15%. So it’s kind of year-on-year basis. The dividend payout has increased significantly for the shareholders.

Great. Thank you and best of luck.

Thank you. Our next question is from Edward Caso of Wells Fargo. Please go ahead.

Hi. Good evening. If I did my math correctly, taken the mid point out of the ‘16 guidance and then working up till the 2020 numbers, you’re somewhere between 18% and 20% CAGR revenue growth with or without the acquisitions, not that far apart. Now automation is driving down deal sizes, the new efforts tend to be smaller deal sizes, and you’ve got a law of large numbers problem. So I guess, help me, how do you get to 18% to 20% revenue growth in years two to five in the plan? Thanks.

I think, Edward.

Ed, we -- I don’t know, we can probably connect and look at the math because our numbers shows about 17% of CAGR over the next five years including the M&A part. So if you exclude that it comes to about 15%.

And then off of that 15%, if you’ve done further breakdown, separate the new from the renewal of the traditional ones. And the renewal comes to between 13 and14, which we believe is much more doable. And the new one has to ramp up to about a $2 billion business. And we see the path to getting there. Now there is a very big difference between having short term aspiration and making an operational plan but that’s too early to obviously do that. Right now, our visibility is for this year and our general guidance that we want to get to industry leading growth by financial 2017 which is why we’re searching for time and Mr. Murthy came back. So we are holding on to that, but we have set this as an inspirational goal and it is something that we believe with the mix of capability that we can build and services we can offer we believe that...

Ed, I just got a clarification from my team, I think that $20 billion by 2020 what Vishal was referring to was a calendar year 2020 and not the financial year. So when you change that, that change the metric.

Okay. Great. Thanks. And if you could also talk a little bit about the operating cash flow was the first negative quarter that we’re seeing and as long as we’ve got a model that we’ve been go back a long time. I have to say, there appear to be something about the tax payment but it seems like it was sort of negative across the board, was there something unusual this quarter and does that have implications for cash generation going forward? Thanks.

No. If you exclude those, looking that our affiliations are cancellation has been strong but we spend -- we did acquisition -- we completed the acquisition of Panaya during the quarter. And they just have a little bit more about that was about $221 million, CapEx of $106 million, which is kind of CapEx and the working capital moment is going to normal. What is of the exception item in this quarter was payment of tax, which is we paid of $561 million out of which, though, towards the tax demand that we received form Indian tax was a result of about $280 million. It is for the fiscal year ‘10 and ‘11 and probably a large part of industry body and all the company have been appealing against the audit of income tax operated in India and have filed an appeal. But we need to make the payment to a wide interest accumulation on this demand. So most of us make the payment, and then we go into appeal. And that was the payment that we made during the quarter.

Great. Thank you.

Thank you. Ladies and gentlemen, that was our last question. I now hand the floor back to Mr. Sandeep Mahindroo for closing comments.

Thanks everyone for joining us on this call. We look forward to talking to you again.