Ladies and gentlemen, good day, and welcome to the Infosys Earnings Conference Call. As a reminder, all participant lines will be in the listen-only mode. And 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.

Hello, everyone, and wish you all a very happy New Year. Welcome to this earnings call of Infosys to discuss Q3 FY 2021 earnings release. This is Sandeep from the Investor Relations team in Bangalore. Joining us today on this call is CEO and MD, Mr. Salil Parekh; COO, Mr. Pravin Rao; CFO, Mr. Nilanjan Roy; along with other members of the senior management team. We'll start the call with some remarks on the performance of the company by Salil, Pravin and Nilanjan, before we open up the call for questions. Please note 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 risk 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'd now like to pass it on to Salil.

Thanks, Sandeep. Good evening and good morning to all of you. I trust each of you have had a great start to the New Year and continue to be safe and healthy. I am delighted to share that we’ve had an exceptionally strong quarter across multiple dimensions. This was made possible by the enormous trust of our clients and the extreme focus we have built for digital and the enormous client relevance that has created and helped support digital and cloud transformation journeys for our clients. Let me share with you some of the highlights. We achieved the highest large deal wins in our history with a deal value of $7.1 billion. This includes the largest deal we signed in our history and what we believe is the largest in the IT services industry in India. This will continue to expand our strong presence in the Continental European markets. Our overall deal value for the nine months of this financial year is over $12 billion and the net new large deal value for the nine months of this financial year is over $8 billion, positioning us very strongly for the quarters ahead. Revenues in constant currency grew by 6.6% year-on-year and 5.3% sequentially, on the back of a very strong momentum we saw in H1 and large deal wins secured earlier, further establishing our market share gains. Digital revenue grew at 31.3% year-on-year in constant currency and we have now crossed an important milestone, in that digital is now over 50% of our revenues. We delivered operating margin of 25.4%, which is an expansion of 350 basis points year-on-year and flat sequentially. Our operating cash flow was robust at $829 million for the quarter. Our balance sheet remains solid with cash and investments at $4.5 billion, which is stable sequentially…

Thank you, Salil. Hello, everyone. Wish you a very happy healthy and safe New Year. While there is increasing optimism due to the commencement of COVID-19 vaccination, we have also seen a renewed surge of infection in various parts of the world. Consequently, majority of our delivery centers are operating in BCP mode, with 97% of our employees globally continuing to work-from-home. Growth acceleration continued with sequential revenue growth of 5.3% in constant currency, accelerating further from the momentum seen in the first-half of the year. The year-on-year growth rate increased to 6.6% in constant currency for quarter three. Three business segments; Financial Services, High-Tech and Life Sciences reported double-digit growth. We have seen several operating parameters improving during the quarter. Utilization was at 86.3%, which is all-time high level. Onshore effort mix was lowest ever at 25.2%. RPP declined slightly on a sequential basis due to seasonal factors like lower working days, furlough, et cetera, but increased on a year-on-year basis. Subcon costs went up by 40 basis points on a sequential basis as growth picked up meaningfully. Let me talk about the large deal wins which was a key highlight of our quarter three performance. Large deal TCV crossed quarter two levels and marked the new all-time high at $7.13 billion. Share of new deals in quarter three was 73%. The net new deals we signed in quarter three is more than 1.5 times of what we signed in the entire fiscal 2020. As Salil said in quarter three, we signed what is probably the largest deal signed in Indian IT services industry. Apart from this, we signed another deal of $500 million. Overall, we won 22 large deals in quarter three, 18 financial services, four deal seized in manufacturing and energy utilities resources and services sector, three…

Thanks Pravin. Good evening good morning everyone. I would like to wish you all and your families the seasons greetings and a safe and healthy 2021. Q3 was another successive quarter marked by continued acceleration in revenue with the highest Q3 sequential revenue growth in the last eight years. Our unwavering execution over the past three years against our navigating our next strategy with client relevance at the core supported by digital, operational excellence, cost and cash management is clearly the driver of this all rounded performance and reflecting in our total shareholder return appreciation during this period. Revenue for the quarter stood at $3.52 billion a growth of 5.3% sequentially in constant currency. This translates to 6.6% growth year-on-year and 3.5% growth for nine months in constant currency. Operating margin stood at 25.4% were up by 3.5% year-on-year and stable sequentially. Sequential margin movement in Q3 comprised of a 100 basis points improvement due to better operating parameters like utilization and on-site mix and other cost levers. 20 basis points benefit due to cross-currency movements partly offset by rupee appreciation. These benefits were negated by a 50 basis point impact of transition and rebadging costs for recently won deals, a 20 basis point increase in costs relating to employee promotions and compensation corrections and the balance 50 bps impact due to a combination of higher subcon one-offs and others. Operating margin for nine months stood at 24.5% which is 3.1% higher compared to the 21.4% margin for nine months of the last fiscal. As mentioned last quarter, we will see higher costs in Q4 as we implement the salary hike for our employees effective January. Q3 EPS grew by 12.5% in dollar terms and by 16.5% in INR on a year-on-year basis. Nine months EPS grew by 10.6% in…

Thank you very much. We will now begin the question-and-answer session. [Operator Instructions] The first question is from the line of Ankur Rudra from JPMorgan. Please go ahead.

Thank you. Exceptional quarter yet again. Just starting with a question on budgets perhaps, Salil, a large part of your exceptional strong deal win momentum appears to be catalyzed perhaps with cost takeouts and consolidation you had alluded to at the beginning of this year. And I was wondering if this implies that enterprise tech budgets might actually shrink or stay flat as opposed to going up in C2021? And also, whatever was freed up by these cost takeouts, how do you see yourself participating in those sort of freed-up type budgets? Thank you.

Thanks, Ankur. The way we are seeing it today is, there is definitely some element of cost takeout. If you look at the wins that we have seen this past quarter and for this financial year and the three quarters, we see those are both cost takeout, but also what you all described in the second part as large enterprises looking to invest that amount into their own digital infrastructure and landscape for their growth with their end customers. So, the overall budgets are always difficult to estimate, as you know. And we have a number of other agencies we all depend on for those sorts of estimates. Those are all positive estimates at this stage for calendar year 2021. But the key is: one, to have the capabilities for digital and cloud and the transformation that these enterprises are driving, so those investment monies can be spent with us; and two, have the automation capability and the efficiency capability for the cost takeout which we have. So, it's a dual approach and we seemed -- we are playing quite on both sides of that.

Thank you for that. Just a follow-up on revenue conversion, clearly, very strong momentum here. I was wondering if you've seen an acceleration of the conversion from signing to recognition in the last few quarters, perhaps due to virtual onboarding? And would you expect those trends to go on for the large deals you've won right now?

Yes. We've not seen anything different in the way deals are converting. There are some deals which convert faster, some have a slower sort of transition. Pravin shared in his comments that some of the transition from what we see in Q3 will start to show up a bit later in Q2 of next year. So, that pattern has not changed. Some deals do have a faster conversion and some are more slow. Nothing's changed because of the virtual onboarding and so on.

Okay. Thanks for the color. Just lastly on margins, should we expect a significant impact perhaps in F 2022 as these large deals come through like you've seen in the current quarter? Thank you.

On margins, I'll request Nilanjan to step in. Go ahead, please.

Yes. So, Ankur, as you know, I mean we run with a portfolio. We have large deals. We have small deals. We have new deals coming into the pipeline. Also we are maturing large deals. So, we run with the portfolio. And if you actually see our history over the last three years, even as we've accelerated the large deal pipeline and the revenues, our margins also have gone up. And that's because couple of reasons. One is, of course, the strategic cost levers we continuously deploy each year, and we talked about that in our Analyst Day around the onsite offshore mix, the pyramid, automation. And this is something we relentlessly focus on. When we pick up large deals, we also start seeing the life cycle of the deals. And, of course, initially, these have higher costs in terms. Because they would not have enough automation or process improvement, they may not be enough in terms of onsite offshore mix. And therefore, when we look at the portfolio entirely, we also realized there are deals which will be maturing and hitting near portfolio margins and new deals will enter the portfolio at lower margins initially. And that's the way we manage our overall portfolio. Yes, every quarter you could have plus or minus. And, in fact, this time, we've had this mission in the margin or one-off on a rebadge deal. But I think if the flow is green, I think, we are quite comfortable with our overall performance as we are. And as we look into next year, of course, we will have the quarter four impact of the wage hikes cost. Some of the costs may come back in next year in terms of travel and all, but that maybe a bit further away. But like I said, again, the cost optimization which we have and as we approach this, we're quite confident.

Thank you, and best of luck for the year.

Thank you. The next question is from the line of James Friedman from Susquehanna. Please go ahead.

Hi. Congratulations on the extraordinary results. Pravin, in your prepared remarks, and I know you've reflected this in the previous response, Salil, you're suggesting that the large deal wins that were currently addressed start to bill in the Q2. I realize that that can vary. But is there any -- can we think about those boarding linearly, or would that be a mistake in terms of our future modeling exercise?

Yes. As I said, all these large deal wins involve a period of transition and revenue will start kicking in only in the second quarter of next fiscal. Again, the trajectory of revenue also will vary on the nature of the deal. In some large deals, it’s primarily initially taking over providing services back to the clients and then maybe over a period of time modernizing. In some other cases, it could be taking over, but at the same time in parallel doing the transformation. So the nature of the deals actually varies. So it's, I don't think we can have a common yardstick to say how revenue will pan out.

And then, Pravin, you also mentioned “a good pipeline of deals.” I think you were talking about the communications vertical. You said despite weak media, you see a good pipeline in that vertical overall. Could you give us some context for that? Is the opportunity in that vertical equivalent to the, say, strength that you're seeing in manufacturing deals? When you say good pipeline about that vertical, what's that about? Some context would be helpful?

I think the number of opportunities in the communications segment, as I said, is fairly good, decent. And it's primarily in the telecom space, because when you look at communications, it's not only about telecom, it's also media entertainment OEM. So we do see -- find softness in media entertainment and OEM, but are seeing a lot more traction from the telecom segment. We have already won three deals in this segment in this quarter. And the pipeline, as I said, it continues to be healthy. I mean, given the pandemic, we have seen a lot of volumes improvement in telco, but it has so far not really translated into impact on their own revenues, but we expect this to probably change going forward. At least on the telecom side, we remain optimistic given the deal wins as far as the pipeline.

Great. And thank you so much for the color. I’ll hop back in the queue.

Thank you. The next question is from the line of Kawaljeet Saluja from Kotak. Please go ahead.

Hey, guys, fantastic quarter. Couple of questions. First is that there was a very healthy conversion of pipeline into TCVs in this quarter and actually in the last two quarters. Has this conversion left the pipeline a little bit lighter, or does it continue to be a robust as it was earlier? That's the first question.

Thanks Kawal. This is Salil. Yes, the conversion at that instant it comes out of the pipeline as you rightly point out, but the overall health of the pipeline is extremely robust. Of course with this level of large deal win in Q2, we will have that impact in the immediate outlook. However, we see across the different industries still significant opportunities and the pipeline is in all seeing that level of health and robustness. So still feeling quite good about the pipeline.

Thank you, Salil. The second question I had is on profitability. And it's the same question I asked in the previous quarter to Nilanjan. Nilanjan margin band in the last -- every year has changed. This year it has been a good thing that it has increased. But what's the real sustainable level of band of operating margin taking into consideration the large deals a possibility of two rounds of wage increases and possibly cost normalization as well, how should one really think about your profitability dynamics as we move into FY 2022 or even beyond that?

Thanks Kawal. I'm not sure you'll get a separate answer each quarter. So on a serious note, I think like where we are today at 24.5% on a nine-month basis, I think last time we were at 21.4%. We have seen about a 310 basis points improvement on a year-on-year basis for nine months. I think this is a combination like we said of some of the discretionary cuts, which we have done, which is largely the impact of the compensation hikes and that will come back in Q4. Also if you look at the temporary cuts, which we've done, which some of them were on travel or the brand side et cetera, some may open up but that's yet to be seen how fast the post-vaccine world normalizes. But I think we are very, very confident and you continue to see very strong metrics on our cost optimization, right? So the on-site/offshore mix improvement in the last one year has been something, which took three years in the past. And these all will open up a lot of opportunities as clients see and are open to more offshoring with 98%, 97% of our teams working from home literally over the last year. I think the confidence of clients as well to offshore will increase and that could be a lever we will step on. Our localization and local hiring in the U.S. as a pyramid is something very unique to Infosys creating the six digital hubs recruiting from universities, community colleges. Historically, you know, the IT industry has had a very deep pyramid on-site and 75% of employee count actually is on-site whereas only 25% of your headcount sits there. And therefore, if you don't address the on-site pyramid, you really have a battle up your hand. And I think what we've been doing over the years with our localization drive putting in our hubs and hiring pressure is helping us negate some of this. So without giving any numbers into next year, I think we are entering with some levers up our sleeves. Yes, there maybe some impact of compensation, but we'll see as next year comes and our guidance as we announce.

Thank you so much. Just a final question. It's on the largest ever deal that you have won. I mean, is it just typical large deals like the ones you have signed with Vanguard or maybe others, or is there something unique which you want to call out maybe in the form of a higher pass-through element or anything of that sort? Any color on this deal would be very, very helpful? And thank you so much that's my last question.

Let me try that Kawal, this is Salil. In terms of the large deals I think your question was on a specific deal. The way, I would characterize it is, it's a deal which relates to cloud and really a huge business to both public cloud, private cloud, insider service and bringing together an ecosystem to make all of that happen. The primary driver for parts of it is what we built in Infosys Cobalt, which was all of our cloud assets. And of course, we are working very strongly with ecosystem of partners, or together shaping what this cloud environment will look like.

Thank you so much and have a great year ahead.

Thanks.

Thank you. The next question is from the line of Yogesh Aggarwal from HSBC. Please go ahead.

Yes. Hi. Good evening, everyone and Happy New Year to the team as well and a good quarter. Just two questions from me. Firstly, on large deal wins which have been so impressive. Salil, is there – from an execution perspective, are there – the execution is different than a normal deal or they are almost similar? So in that context, do you need to make any SLA or milestone-related contingencies since these are a lot more complicated deals? And secondly, from a guidance perspective, the fourth quarter guidance is much weaker compared to what you achieved in the third quarter. So, was there some kind of a budget flush in third quarter, or any specific weakness which is leading to slower growth in fourth quarter? I have a follow-up after that on margins please.

Okay. On the first two points, I think the delivery risk profile across a large deal portfolio, if I look at the last nine months, the last quarter it's not any different from delivery risk of those type of deals in the past. Now, we're doing larger deals in this last few – last year or last few years. And so with that, the capacity increased. However, there is no provisioning in our books with regard to specific situations on SLAs as we start out the delivery of the deal. In that sense, this is something where we build out capabilities, and we are now putting together the approach to deliver on the various large deals that we've talked about. The second point, sorry, could you just repeat that please?

So, I was trying to understand the guidance for fourth quarter, which looks much weak – yes.

Yes, so on the guidance as you probably know, historically, Q3 and Q4 financial year are always softer quarters for the industry and for Infosys. So there is nothing different. In fact, this particular Q3 has been extremely robust. We had a phenomenal growth in terms of the revenue, constant currency growth that we have shared. But there is nothing unusual in that to point to you, any weakness in Q4. However, seasonally Q3 and Q4 have always been softer across the industry and for Infosys over the years.

Okay. Okay. Just another question on margins. Nilanjan, most of your operating metrics have improved quite smartly as you said utilization offshore mix et cetera, but the employee cost is still up around 5%, 6% sequentially. We have seen with other companies despite the wage hike, it's been largely flattish. So, what is leading to the employee cost increase if I may?

Yes. So, like I mentioned in the margin walk sequentially we had this 50 basis point impact of transition and rebadging of a recently won large deal. So, that's something clearly we called out. And the balance we had talked about a combination of higher sub-con one-off and others which was explaining about 100 basis points of the cost drag versus the 100 basis point improvement in operational metrics by utilization and on-site mix.

Great. Thank you so much.

Thank you. The next question is from the line of Keith Bachman from Bank of Montreal. Please go ahead. Keith Bachman, your line is in the talk mode; I request you to go ahead with your question.

Yes. Thank you very much. I had two questions as well. The first your cash flow was also very impressive this quarter. Was there anything that you want to call out that might have been unusual or one-time in nature? And anything that you want to call out on the cash flow that we should be thinking about over the next couple of quarters but certainly next quarter in particular?

Yes. So, I think as we've been showing for the entire year quarter-after-quarter, we have had very strong collections because I think that was our first concern when COVID stuck is the ability of our clients. And of course, the reality is our clients are Fortune 500 clients and very, very strong balance sheet as well. And across the three quarters we have not seen any impact at all in terms of our collection ability and that remains strong. Of course one reason for the cash flows improving is of course the lower CapEx. As everybody is now working from home I think that automatically has come down. And in fact we've repurposed some of our CapEx spend toward technology, so that people can enable -- being able to work from home with laptops rather than desktops. So, nothing really to call out on a cash flow basis. Yes, here and there we have received some deferrals of some indirect taxes, but nothing material really. I don't -- I mean I think that on an underlying basis we are still above 100% of net profits.

Yes, yes. Okay. Then the second question I wanted to go back to the deal signings. Again impressive deal signings particularly 73% being net new. If you took out -- A, if you took out the one large deal that you said was the largest in history what was -- any growth rates that you can provide just to give some dimensions? And then B, I'm just curious of the distribution. Is there any dimensions you could give around what was in the digital versus legacy of the signings this quarter or if you wanted to say over the last few quarters? But I'm just curious at the signings the distribution between the legacy and the digital side? Thank you.

Let me start. This is Salil and then Pravin might be able to add a bit more color on the distribution. In terms of what we did in Q3 we don't have a view to give a specific number for the one deal. What I would say is even outside of that we were running in an extremely robust space overall in terms of the sort of averages we have had over the last several quarters of a large deal signings. So, while it was a large specific deal that was not the only one. And as Pravin also mentioned there were 22 deals also referencing the one another deal, which was at $500 million just to give some color. Pravin, over to you for anything else.

Yes. So, I think, there is an element of digital in every large deal. Because end of the day large deal is not only about taking over and delivering the services, but it's also transforming over a period of time. So in that sense, it's a combination of digital plus legacy and we don't really give a breakup of that. And the nature of these deals also varies. I mean, there are some deals around infra modernization, cloud and infrastructure-as-a-service. There are some deals around ops transformation. There are some deals where we have taken over whole IT and delivering it back as IT-as-a-service. There are deals which are purely ADM where we are providing next-gen ADM services. There are deals where -- which is platform led where we have taken over some products not only maintaining, but also go-to-market with those products. There have been some captive forwards as well. Engineering is also a strong element in many of these large deals. Of course, BPM is also part and parcel of most of these large deals. So the nature of these deals vary, but there's always an element of digital in it. And I mean, as I said earlier, it'd be difficult to call out how much is digital and how much is non-digital.

Okay. Well, congratulations on the signing, so many thanks. Cheers.

Thank you.

Thank you. The next question is from the line of Diviya Nagarajan from UBS. Please go ahead.

Thanks for taking my question. Quite a few of my questions have been discussed already, but to kind of go back to this large deal that you talked about. Could you just kind of explain how this deal like this at this scale is typically structured? And anything that you would like to call out on how we should model some of these ramp-ups in these deals? Second part to that is that, for a contract like this and I think we've also seen some dilution that came in because of the large deal ramp up in Q3. Nilanjan, you spoke about a portfolio approach. When you think about this portfolio, what kind of a timeline do you typically price in for these deals to mature and then for margins to start coming up the curve so to speak?

Let me start with the first part. This is Salil. We've not given anything more specific beyond what Pravin shared earlier in terms of sort of broadly on deal ramp-ups from the Q3 bookings. What I can say is the way this has been put together where we have a lot of the work that relates to data centers and the workplace transformation and all of that underlying with the cloud transformation to private cloud. We see that once this is not made to steady state, it's really the foundation of many things that we can do which run through on a steady basis over a number of years. And the timing of that we've not given anything more specific, which can give you a sense today of when specifically the revenue will come up beyond the comment that we made on Q2. And let me now pass it to Nilanjan for the margin profile of these large deals.

Yes. So like I mentioned earlier, we have various kinds of large deals some of them come initially with margin which unbind with portfolio or tagged below portfolio. Some maybe initially ones which require dramatic transformation because they are 100% on-site. There's no automation which has been done. Client expects savings from day one. So once we go in we are very, very clear over the deal cycle. Typically these are five, seven-year deals that we model literally on a quarter basis what is going to be done in terms of an intervention of moving work on-site/offshore putting automation inside to the pyramid side of it. And I think we look at that very, very holistically as part of the bid process so that we are very clear that there is a trajectory in the margins as well. So that's an ongoing process. And like I mentioned, we've been winning large deals over the last three years accelerating them quite sharply. But yet we've seen an improvement in margins because the way we've talked about it is these elements start kicking in. And at the same time new deals come in at lower margin whereas the existing deals start maturing and it will yield portfolio margins. But it doesn't mean that every deal will exactly be in line with what your operating margin of the company is. There will be deals above the operating profile margin profile of the company and there are deals which are below that. So it's a portfolio which we continuously look through and focus on the cost side.

Got it. And you spoke about potential margin levers one of it was the offshore mix. Pravin earlier alluded to how it's of the lowest offshore mixes that you've seen in a while. What is the room here that we have for further offshore mix shift, sorry lower on-site mix so far? So what's the potential there? And secondly on utilization, has anything structurally changed in how we look at utilization as a result of remote working and better employee allocations over various locations? And my question here is can these mid-80s utilization structurally move up from where they are?

Yes. So I think on the – on-site/offshore mix yes, there has been some firstly temporary benefits because of curtailed travel and therefore people have not been able to travel overseas as well. But having said that, I think the bigger strategic I think opportunity is that with work-from-home clients are now seeing over the last year, SLAs have been delivered on par. There's been no impact on whether signing deals or delivering and therefore the confidence of clients in terms of offshoring has also started improving. And in fact we are also now solutioning ourselves so that we can give near-shore facility. So Canada is a near-shore base, for the U.S. We have Mexico and both have seen dramatic growth in this time as well and Mexico being a low-cost location. So it's a combination of remote working in our hubs where we can create a pyramid that's one lever then move on to near-shore and then finally on to offshore. So I think these are three things which we can continuously press on. And I think these open up large opportunities. Of course as travel comes back, there could be some temporary lull. But secularly I think the downward decline is quite clear.

On the...

On the utilization?

Yes, let me add on the utilization. This is Pravin here. I think utilization, as I said, it's a record high. This is not where we want to be. Within the past few quarters I think we had comfort in operating between 83% to 85% and that's where we want to be. So we will look at much more aggressive hiring over the next few quarters and try to bring down the utilization to manageable levels.

Thanks for taking my questions. Congrats on a good quarter and all the best for the rest of 2021.

Thank you.

Thank you. The next question is from the line of Moshe Katri from an Wedbush Securities. Please go ahead.

Hey, thanks for taking my question and congrats on very strong results. I have two follow-up questions. One a confirmation regarding margins. Pravin, I think during the last call, you indicated that some of the margin gains that you've seen in fiscal 2021 will not be sustainable into fiscal 2022. Given some of the commentary that you made today, is that still the case? Because it seems like you talked about some margin leverage, you're talking about some encouraging signals of an accelerating the offshore trend. And one of your former executives suggested in the call that we hosted last week that he hasn't seen this acceleration into offshoring in about 10 years. And the second question is more about the sustainability of what we're seeing right now in terms of the demand trends, the pipeline and et cetera. Maybe you can give some color on both of these? Thank you.

Yes. So I'll take the first question, Moshe. So like I said, we are at – in the first nine months at 24.5% and we have the wage hikes coming up in quarter four. So that clearly will have an impact. And as we look into next year, there could be some easing off of travel et cetera, which will have some cost pressures. Now having said that, we said, we also parallelly will work on our cost optimization levers, which is something we continuously work on. So we are not at this stage saying that there's a margin guidance out there for FY 2022. But just the color of what's coming ahead we will have these cost pressures but we will also work on the cost optimization parallelly.

And on the second question, regarding at this point what you're seeing in terms of sustainability some of the trends that you're seeing in terms of pipeline strength? And maybe also -- maybe you can elaborate on what percentage of the mix in terms of the bookings came in from new logos versus renewals? Thank you.

Let me take that crack, Pravin, on the mix, you go head.

Yes.

Okay. Let me start on the sustainability trend. And then on the mix Pravin, you can go ahead. I think the way we see the pipeline and the movement of the deals, we still see a good demand environment across all the industry segments as we referenced at the start of the call. There are some where the strength is quite exceptional, but overall all of the industry segments are moving in a positive direction. On the mix, I think to your point on the offshore mix, there we've seen good movement this year. Of course, with some of the travel restrictions coming off, we will see some more movements from offshore to on-site, but our recruitment engine on-site is very strong as well. And so we'll wait and watch how that plays out. We don't see that it's immediately going to change, because fundamentally clients are seeing that delivering remotely from whichever location within office calls a broader set of functions. So we feel quite comfortable that over a period of time that will work to our benefit in terms of the mix and therefore in terms of margins. Pravin, over to you on the mix.

Yes. Yes. On the mix, again, we normally call out only what is net new and what is rebates, and in this quarter it's 73% net new. And if you look at for the first -- for the nine months of the year, when the total TCV is $12 billion, the net new is $9 billion of that. So from that perspective, I think in the last -- past nine months, we've seen a significant percentage of revenues coming from net new with -- which assured comfort on the growth momentum in the coming few quarters. Obviously, there is also a mix of new logos that will -- as part of this mix like, for instance, last quarter we had Vanguard, which was one of the large deals we announced and it was a new logo. But we particularly don't call that out. I mean, we normally look at what is net new and that gives us a sense of our deal flow and the growth momentum for the forthcoming quarters.

Thanks for the color.

Thank you. The next question is from the line of Pankaj Kapoor from CLSA. Please go ahead.

Yes, hi. Thanks for the opportunity. So, Nilanjan, I had two questions for you. First is on these very large transactions that you now signed again. Are there commercial terms of these deals any different from the regular deals that we do? What I'm trying to basically understand is that how is the cost statement done…?

Sorry to interrupt your Mr. Kapoor, but your audio is not very clear, sir. Mr. Pankaj Kapoor, your audio is not very clear. Please request you to check?

Yes. Sure. Is it better now?

Yes. It is. Thank you.

Okay. So, my question was for Nilanjan. So, what I was trying to basically understand is the commercial structure of these very large transactions at a generic level. Are costs in such deals typically flow through the P&L, or do we have like we do typically in a regular deals, or can some of these be capitalized also? So that is one thing which I'm trying to understand. And my second question is on the next year's wage revision. I mean, one of your peers, of course is talking about FY 2022 to be a normal year. So are you also expecting that the wage hike for next year will follow the regular pattern of being in April or sometime mid-year? These are the two questions I had. Thank you.

Yes. So on the first question I think all deals like -- and even Pravin mentioned they're all different. Some of them may have rebadging elements, some of them may have a comprehensive infrastructure with software. So it depends on deal to deal. I think there's no standard answer how -- or a generic way we can answer that question. And some of them may have a pass-through and some of them may not. So it depends service elements versus our entire transformation element. So that's quite different across deals. So, I don't think there's anything specific we can say more than that at this stage.

So, on the second one, let me address that. With respect to the wage hike, we've announced the salary increase effective January 1 of this year. We've not made any comments with respect to the next year situation. We will come to that once we conclude this and start the next year. And at that stage, we will share with you, what the approach is.

Salil, I just wanted to also...

Yes, go ahead.

I wanted to make a correction to my last response to Moshe I think. As I said, total TCV of large deal wins for nine months of $12 billion which is correct. And the total net new out of it is $8 billion. I think, I said $9 billion. It's not $9 billion, its $8 billion I just want to clarify that.

Understood. Thank you and wish you all the best for the year.

Thank you. The next question is from the line of Sudheer Guntupalli from ICICI Securities. Please go ahead.

Good evening gentlemen. Congrats on a good quarter and thanks for giving me the opportunity. Salil, regarding the last deal, for a deal of the size, we assume almost all the Tier 1 vendors might have aggressively completed. Some of them might be native European companies. Some of them might have a larger revenue base in Europe or in the infrastructure kind of service offerings. So, can you help us understand, what are the, let's say three, four variables that have given Infosys that extra edge to win this deal over the competition?

Sudheer, you're right. This is an extremely competitive situation with several European, U.S. and Indian companies competing for this work. One of the elements that really stood out that I could see and we could see was, what we understood from the clients to be the technical strength of our solution. And this is a solution which they've found on something we've shared before, the Cobalt suite in the cloud. The approach that we put together to give the clients a solution which was both flexible, scalable and secure, while globally spread out operations of theirs could enable it was very valued by them. We also benefited I think from the way that we make sure that all the different elements of their business objectives in how they wanted to focus on the business and how they wanted to perform the cloud journey we incorporated quite fully into the solution. But this is really extreme win in that sense from the technical capability perspective. And that's why we are extremely delighted because it opens up a new area for us, something in which we were previously doing well. And now we can do further better, as we go ahead.

Sure, Salil. And second question is on the gross client addition during the quarter which seems to be significantly higher than the typical run rate in the previous quarter. I think we are at around 139-odd clients. Can you please throw some more color on, what has driven the strong addition, nature of these clients, their potential scalability? And if this has to do with the entry into new sub-segments that Pravin has spoken about in his opening remarks?

Let me request Pravin first to address it. And if there is anything else, I'll come back.

Salil, I missed the question. Can you repeat it?

Sure, sir. So basically if you look at the gross client addition during the quarter, it seemed to be significantly higher than the typical run rate in the previous quarters. So my question is, if you can throw some more color on what has driven this strong addition and the nature of these clients potential scalability. And if this has to do with the entry into some new sub-segments you spoke about in your press meet and in your opening remarks as well?

I think we had seen strong new account openings, new logo openings across the sub-segments. I don't think there's any secular trend. We have seen good openings across many of our segments. And we have been consistent over the past few quarters as well. So I don't see any pattern in this or any specific thing. And again the opportunities also vary. And many of them we are opening the doors with transformation opportunities. Some of them are -- a few of them are opening with large deals. So it's a combination of things. There's no specific pattern or anything specific to a particular sub-segment.

Yes. Just to add to Pravin, I think there's, also some client additions we've had to the new acquisitions we made.

Sure, sir. And that’s very helpful and all the best for the future.

Thank you. Ladies and gentlemen, that was the last question for today. I now hand the conference over to the management for closing comments.

Salil, do you want to give some closing comments, please?

Yes. Thanks Sandeep. First thank you everyone for joining us for this session. As you can see, we're extremely delighted with the performance for this quarter, standout being an exceptional large deals win, phenomenal growth at 6.6% year-on-year. And a strong operating margin performance backed up by extremely robust cash collection and conversion that was noted. We feel confident to revise the guidance upwards as we shared on both revenue and margin. And we have a strong outlook as we go into the next financial year which will start for us in April, so, overall, extremely delighted with this. And thank you again everyone for joining us.

Thank you very much, members of the management. Ladies and gentlemen, on behalf of Infosys that concludes this conference call. Thank you for joining us. You may now disconnect your lines.