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Birlasoft Ltd
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Ladies and gentlemen, good day, and welcome to Birlasoft's Q2 FY '25 Post Results Conference Call. [Operator Instructions] Please note that this conference is being recorded.
I now hand the conference over to Mr. Abhinandan Singh, Head, Investor Relations, Birlasoft Limited. Thank you, and over to you, sir.
Thank you, and welcome folks. By now, you would have received or seen our results. Those are also available on our website, www.birlasoft.com. Joining me on this call today are our CEO and MD, Mr. Angan Guha; and our CEO (sic) [ CFO, ] Ms. Kamini Shah.
As usual, we'll begin the call today with opening remarks from both Angan and Kamini and then we will open up the floor for your questions. But before I hand over the floor to Angan, a quick reminder that anything that we say on this call on the company's outlook for the future would be a forward-looking statements. And therefore, that must be heard or read in conjunction with the disclaimer that appears in our second quarter FY '25 investor update, which you would have received, and that is also available on our website as well as filed with the stock exchanges.
With that, let me hand over the floor now to Mr. Angan Guha, our CEO and MD. Over to you, Angan.
Thank you. Thank you, Abhi. So good evening and good morning to everyone wherever you are, and thank you for joining us today as we share some perspectives on our company performance during the second quarter of the current fiscal year. I trust all of you have seen the results.
So with regard to our Q2 performance, I would like to share a few observations. One, we are back to sequential growth in this quarter, even as demand conditions continue to be challenging. The strong rebound in our revenue performance during the quarter under review has been led by growth that has been more broad-based. So most of our industry verticals and service lines and accounts have grown. With an improvement of our revenue trajectory, we expect recovery in our margins as the investments start paying in as we go forward.
Through all of this, we -- I am pleased to note that we continue to generate very, very strong cash flow. So with that now, let me delve into the Q2 performance.
On a year-on-year basis, our revenues for the quarter grew 4.5% in rupee terms, 3.2% in dollar terms. On quarter-on-quarter basis, our Q2 revenues has grown 3.1% in rupee terms and 2.6% in dollar terms, which really represents a strong rebound in our revenue growth from a Q2 standpoint.
Our reported growth has been driven by stronger growth in all of our core services business, because of the quantum of the pass-through has been much, much lower in Q2 than it was in Q1. The rebound in our revenue performance has been driven by initiation and contribution of several of the delayed projects.
As you may recall, we had spoken about it in Q1, some of the projects have not started. They have started in Q2. And as a result, you are seeing improved growth from a revenue standpoint. The incremental business is also coming from consolidation deals, which demonstrates our ability to gain wallet share in an operating environment that remains very difficult. Such reasons, however, are often needed to be made with upfront investments and flexibility in terms of pricing, which affects margins in the short to medium term. But as the engagements normalize, I'm sure you will see an uptick in the margins.
There has been strong growth in our manufacturing and E&U verticals along with continued traction in the BFSI business. As you would recall, BFSI has grown strongly for the last 7 quarters, and we continue to see strong performance in BFSI as well.
Our Life Sciences business has been a struggle. I believe it will continue to be soft for a couple of more quarters before we turn the corner there.
Our margin performance has not been very good, and that is a concern for us, and that is something that we will work on as we go forward in terms of how to improve the margins. We have a lot of levers that we will be speaking about as we go forward in order to improve the margins.
The consolidation deals that I've mentioned has witnessed pricing pressure, and it's a natural phenomenon in these businesses where you start off the business with a lot of investments. But as you mature the engagements, it helps us with enhanced margin as we go forward.
Looking forward, I feel the demand environment has not really changed. And what we have seen over the past few quarters actually continue. Our client budgets have not gone down, but it is on a hold and wait pattern. So we will have to see how our client spending goes forward with the election looming in the U.S., which is our biggest market, it is a wait and watch for our clients.
Overall, while we do see some green shoots, there might not be too much clarity till the end of the year as things unfold in terms of whether our customers will be continued to focus on cost takeouts or start investing in the transformation projects.
While the growth is now back, we expect to continue the growth momentum in the coming quarter. The coming quarter, as you know, is a soft quarter, thanks to furloughs, but we hope the growth momentum will continue. It will take a couple of quarters for us to get the margin back on track, with the coming quarter, because we will be giving a salary hike. There will be a little bit of a dent in terms of how we deliver margins or we look at margins for 3Q. But we are very confident that starting 4Q, you will see the margin improving. And over the next subsequent quarters, every quarter, you will see a margin improvement going forward.
Our proactive deal pipeline remains very healthy. The customer decision-making is taking a little bit of time, which is why it is reflective on our TCV performance. But I strongly feel that our Q3 and Q4, we will have a better TCV performance than what we have seen in the first half year.
Our deal flow, our funnel, it continues to be very strong. One good silver lining in this entire chain is the fact that almost 50% of our deals that are coming in are either in existing new or in net new, which is a positive. And that helps me deliver better growth performance as we go forward.
So with that, I will hand it over to Kamini, our Chief Financial Officer, to share her perspectives of the quarter, that is under review. Over to you, Kamini.
Thank you, Angan. Good evening, everyone. Thank you for joining us. Let me take you through the financial highlights for the second quarter of the current financial year. On the quarter 2 performance, as Angan explained, our performance has been fairly broad-based with the majority of our verticals and service lines registering sequential growth. You may recall that in the preceding quarter, we had witnessed some deferment of new project ramp-up in our ERP service lines, which had also impacted some of our verticals. Manufacturing, in particular. Several of those delayed projects have started to ramp up during the quarter under review, and that is reflected in our financial performance.
Consequently, we have recorded a healthy revenue growth during Q2 FY '25 on both a year-on-year basis as well as a quarter-on-quarter basis. Our consolidated revenues grew 2.6% in dollar terms to $163.3 million. In rupee terms, it has been INR 1,368 crores, a sequential growth of 3.1% and a year-on-year growth of 4.5%.
Happy to say that the revenues of our Top 5, Top 10 and Top 20 accounts, have grown quarter-on-quarter by 3.9%, 2.4% and 2.3%, respectively. As a result, our Top 5, 10 and 20 accounts now contribute 36.7%, 52.5% and 64.9%, respectively, to our total revenue.
Amongst our verticals, both manufacturing E&U were up by 4.7% each quarter-on-quarter, while BFSI grew by about 1.4% quarter-on-quarter. The Life Sciences vertical remains weak during the quarter under review, and we do expect this to return back to growth in a couple of quarters as Angan has alluded to.
From an offering standpoint, our ERP business grew by about 4.3% sequentially due to the fact that some of our projects, delayed projects, came back on track. Our Digital & Data business that has been under pressure over the preceding couple of quarters has registered a strong inbound and it grew 6.6% quarter-on-quarter.
The Infra business, which has recorded a very strong growth in the preceding quarter witnessed a sequential drop due to the base effect, but this is expected to be returned to a growth trajectory going forward.
Moving on to the EBITDA performance. Our EBITDA for the quarter was at $19.7 million versus $23.4 million in the previous quarter, and the EBITDA margin stood at about 12.1%. You would recall that in the sequential preceding quarter, that is in Q1, there was a onetime benefit of $222 million, which has been written back. The quarter 2 FY '25 performance reflects the absence of that.
Moreover, as Angan had also spoken about, we have gained some wallet share through consolidation deals that do require some pricing flexibility. These days tend to be more on-site centric to start with, which is also reflected in our on-site ratio in the current quarter, and this becomes a margin lever as our engagement mature.
The investments that we have been making have already started reflecting an increased recognition of our capabilities in the marketplace. We will continue to make investments as necessary, but we are now focused on driving returns from this investment.
Our PAT stood at about $15.2 million, which is about INR 1,275 million in rupee term. Effective tax rate for the quarter has been about 24.9%. We do expect the ETR for the full year to be in the range of 25% to 26%.
Coming to some key balance sheet items. Our cash and bank balance at the end of Q2 stood at about $221.8 million. This was up by 27.8%. This is after reflecting the payout of $13 million as dividend, which was made in Q2.
Our operating cash flow for the quarter was at about $12.9 million on the back of a sequential improvement in our quarterly collections during quarter 2, which stood at $176 million, which has been the highest in the last 6 quarters. DSO continues to be a focus area for us. While it was at about 58 days of Q2, this has gone up quarter-on-quarter, primarily because our shifting of some collections that came in the first couple of days of October, and this will definitely show up in the quarter 3 DSO, which actually has been better and in line with our historical levels.
As you would have observed, the Board today has recommended an interim dividend of INR 2.5 per share. This reflects our intention to reward shareholders while also keeping in mind our capital allocation requirements.
In conclusion, I would say that we expect to stay on the growth-oriented trajectory going forward. We have made investments necessary to ensure that we have a differentiated value proposition in the marketplace. We will continue to focus on generating strong cash flows with an eye on key performance metrics in order to drive margin recovery. And this will be aided by an upturn in the demand conditions as and when this happens.
Thank you very much. Back to you, Abhi.
Thank you, Kamini. Thanks, Angan. Moderator, let's start with the Q&A session, please.
[Operator Instructions] We'll take our first question from the line of Ravi Menon from Macquarie.
Angan, could you talk a bit about the on-site increase in revenue of about $13 million or so and offshore? Why has it declined by $9 million. I imagine this also had a big impact on the margin. So maybe Kamini can comment on that.
Yes. So you're absolutely right, Ravi. Because the shift in the on-site ratio that we have seen in this quarter, we have to almost 51%. And like we mentioned, that a lot of our consolidation deals are largely on the on-site space. And that's the reason why we had this impact from a margin standpoint.
Right. So over time, we would expect this to shift offshore?
I kind of missed what you said. Could you just repeat that, Ravi?
Mr. Menon, can you use your handset mode, please?
Would this shift offshore over time coming? Is that what we should expect?
Yes, Ravi that is the intention. Which is why I also called that out. Right? Typically in some of these consolidation deals, they start to be more on-site centric. And we do expect that to start shifting more offshore.
That really explains the on-site revenue increase. But offshore, why should this decline?
So there are -- I think, some of our engagements that came to an end, Ravi, which is the reason why, from our ratio standpoint, and that's the reason you see more of the growth that is coming from an on-site standpoint.
All right. Great. And one last follow-up, if I may. The deal wins, we are still a bit below what we were clocking even last year. I thought that the demand situation is a bit better. So Angan, if you could comment on that?
Angan, would you want to comment? Are you there?
Yes, I'm there. Sorry, sorry, I was in mute. Okay. So Ravi, first of all, thank you for that question. If you look at our half year performance on deal flow, we've delivered about $300 million worth of signing. That is obviously lower than what we delivered last year. But that is not such a big concern for us at this point in time, because we've not lost any deals. Some of our decision-making of our customers have got pushed out to 3Q and 4Q. So you will see an uptick in deal flow in third quarter as well as fourth quarter.
But the good news in this entire thing is our pipeline is still improving. And almost 50% of our deal wins are in the net new or the existing new space. So there are some green shoots there. But clearly, our focus -- if there are two focus, Ravi, that I would call out in the next 6 months will be improving deal flow and, of course, needless to say, improving margins.
We will take our next question from the line of Sudheer Guntupalli from Kotak PMC.
The first question is, I'm just trying to understand what your underlying core business growth would have been, given that there is a reduction in the quantum of pass-through compared to the last quarter. So is it fair to say that your core underlying business growth would have been somewhere in the range of 4.5% because there is a 220 basis points, 230 basis points sort of a sequential reduction in pass-through. Is that a correct assessment?
Yes. So Sudheer, well, the way we look at it, and pass-through obviously has reduced significantly. So you're right that the core business, services business would have grown at a faster [ pace. ] But equally, we would love to say that, as our infrastructure business matures, the pass-throughs are not a manifestation of a pass-through in itself. It will be a part of the deal going forward, correct?
So from that standpoint, a pass-through is also a kind of services. But at a fundamental level, what you're saying is right, Sudheer, that the growth has got rebounded because of the projects starting in the ERP space, that Kamini mentioned in her opening remark.
Fair enough, Angan. So I understand that it is now, pass-through has been an integral part for most of the companies. But I was just trying to separate out and see how the underlying business momentum would have been from the previous quarter to this quarter. So you are saying that it is fairly in the range of that 4.5% ballpark?
That's correct, yes.
Okay. And just on this 260 basis points, 270 basis points sort of margin drop, let's say, I think, following up on Ravi's question earlier, some impact of it was obviously because of the on-site ramp-up that happened, on-site heavy nature of it. But you also alluded to the word pricing flexibility. So how much of this 270 bps drop was due to pricing flexibility and how much is because of the early onset and because of that ramp-up?
Yes. So Sudheer, let me try and answer that question and maybe then I'll hand it over to Kamini for her comments also. So Sudheer, if you really think about it, right, quarter 1, we delivered an EBITDA of about 14.7%, correct? Now that obviously had an exceptional item of about $222 million, which we kind of didn't have in quarter 2. So technically, our like-to-like margins would have been at about 13.1% EBITDA. Now this quarter, we've delivered 12.1% EBITDA, right? So that 1 percentage point, 100 basis points, you can -- probably half of it will be because our revenues have come more on-site, with by nature is lower-margin business, as a part of the consolidation deal and half of it is because of the pricing flexibility.
But like Kamini said, these are new deals that we are winning. We are helping our customers transition. And over a period of the next 2, 3 quarters when these deals will mature, you will see the margin coming back.
But equally, Sudheer, I would also take this opportunity to make one more comment. So we are going ahead with our salary hike in quarter 3. So really, as a salary hike will dent our margins by 150 basis points further. But obviously, a part of it, we will definitely recover operationally. So Q3 will be a muted quarter from a margin standpoint. But Q4 onwards, you will see a clear margin improvement.
So I wanted to give you the entire picture, Sudheer, so that you're clear. But we have a complete program that is running in our company today where we are looking at every single lever to get the margin back to where it ideally should be, which is our desired levels. And that you will see a lot of effort from the management team starting Q4, because Q3, like I said, it is what it is due to the salary hike. But Q4 onwards, you will see an uptick in the margins. And then subsequently, every quarter, you will see an uptick in margins. Kamini, do you have a comment?
No, Angan, I think you've covered it. Sudheer, I think, to a large extent, I think, the focus will be on how all the levers that we have defined to be able to get the margins back on track. And it's really a combination of the -- in fact, it is a combination of being more on-site centric. As we look at more offshoring, I think we will be able to recover that back.
That helps. So Angan, again, just to clarify. So you are saying if you remove the one-off benefit that you had in the denominator in June quarter, operationally, your margins have contracted just 100 basis points this quarter despite the very sharp rise in on-site centric nature of the ramp-up and some amount of pricing flexibility? So, just operational contraction in margin is just 100 basis points?
Yes. I mean, arithmetically that is true, Sudheer. But obviously, I mean, we are not happy. I mean -- I mean, it's just stating the obvious, because we would love -- as I had always said in the last year that we wanted our margins to be between the 15%, 15.5% to 16.5% range. So we are far away from there.
The point I'm making is, yes, if you were to compare quarter-on-quarter, we have 100 basis points of degradation of margin. But clearly, we are nowhere close to the 15% to 16% range. So our endeavor is to start improving starting Q4 onwards. And then over the next 4, 5, 6 quarters, get toward that levels.
And just one last question, if I may. So while PCB trends obviously on a year-on-year basis were down. And I know that you don't report on an ACV basis. But internally, when you look at the ACV trends for the H1 on a year-on-year basis. So are you very worried? Are you concerned about the growth implications that it may have? Or that is broadly in the same ballpark that you might be expecting?
So two things, Sudheer. Our win ratios are anywhere ranging between the 30% to 32% range at this point in time. Clearly, there is an opportunity to improve the win ratio. Ideally, we want our win ratios to be 35% to 38%. So there is an opportunity there. But it is also a manifestation of how the clients are deciding.
Now I can only tell you two things. One, we have not lost a deal to competition, a significant deal. I mean, we would have lost some small little deals here and there, but we have not lost a significant deal. And our pipeline is probably only improving at this point in time.
So I'm not so worried per se, because to add to it, like I said, almost 50% of our order book is now either EN or NN, which also adds to the fact that it gives me a little bit of confidence that the growth momentum will continue in the future quarters.
But Sudheer, at the end of the day, we aspire to grow order book year-on-year also, which we have not done well. Which is why I said, apart from the revenue growth that we have to absolutely focus on, the two key focus areas for us as the management team is to deliver a strong order book in Q3 and Q4 and start the margin improvement journey, which may not happen in Q3 for obvious reasons, but starting in Q4 keep improving quarter-on-quarter, so that over the next 4, 5 quarters, we can get to a desired level.
Fair enough, sir. And your -- actually, despite the impact of furloughs, you seem to be confident about the current growth momentum continuing into Q3. Is that because of the fact that the ERP seasonally has a good dip in the quarter every time? Is that the correct assessment, that gives you confidence? Or is there something else in the pipeline which might be giving you that confidence as well?
Yes. So Sudheer, two reasons. One is, we are also affected by furloughs, right? So I don't want you to take away saying that the growth momentum will be significant. I'm only saying the growth momentum is back in Q2, which we missed in Q1. Q1, if you remember, we degrew revenues quarter-on-quarter. So Q2, we are back on quarter-on-quarter growth. We will strive to deliver quarter-on-quarter growth even in Q3. Quantum, I can't say. It may be a muted quarter overall, but we will still be on the growth trajectory.
Our focus, however, will be to start -- keep investing in our business, which we have always done and start improving margins starting Q4. But yes, I mean, we are relatively comfortable to say that our growth momentum will continue from here.
Next question is from the line of Hasmukh Vishariya from Tata Mutual Fund.
I have two questions. One is, so you have fairly spoken about the deal events and existing EN or NN component of it and probably H2 would be better than H1 in deal wins perspective. But can you throw some light in terms of renewal rates for you guys?
Yes. So Hasmukh, again, a very important question. So look, our renewal cycle essentially comes in more in the third quarter and the fourth quarter of the financial year. So our renewals will be much more than it is in the first and second quarter. So obviously, our net new and existing new business will be a lower percentage of our overall order book. Because there'll be a lot of renewals that happen typically as a business cycle between October and March, which we will play through.
Now we are discussing with our clients in terms of the renewal work as we speak. So I can't really comment whether renewal work will have pricing pressure or not, it is hard for me to say. We are working on it at this point in time. And we will see how we can continue to negotiate with our clients and work with our clients to make sure that we keep renewing our business at healthy margins. So it is a little bit of a wait and watch, but we will not lose any renewal business. If that is what you are referring to, Hasmukh, we will renew everything. At what price points we renew, we will only know as we go through our Q3 and Q4.
And if I may just add on to what you said, Angan, Hasmukh, I think, most of our renewals are typically in the second half of the year. And there's no indications as of now that there is any concern from a renewal standpoint.
Got it. Got it. My second question is on the, let's say, your comment about you have not lost any significant deal win to competition. So just wanted to understand whether this has any element of, let's say, pricing discounts or probably on-site heavy sort of ramp-ups are in relatively lower margins in the near term. Does that is linked to this point? Or is there anything else?
No. Hasmukh, you're exactly right, correct. So because we are winning some of the deals which are more consolidation orientated, in the medium term, you will see pricing pressures, because we are -- in the medium term, the revenue is coming from on-site. And over time, as the engagement matures, the revenues will start moving offshore, which will automatically give us higher margins. So from that perspective, Hasmukh, our on-site revenues are up, which is why you see the margin pressure.
In terms of new deal wins, when I said that we have not lost a deal with anybody, any significant deal. It is also a manifestation of our real estate, right? The deals that we are fighting in our existing clients and deals that we are fighting in our new clients. In that space, in our real estate, we have not lost anything. Some of the deals that got pushed out to future quarters, which we are still tracking on. And we don't see that to be a big concern because at some point in time, we will close those deals.
Got it. Got it. And my last question is on the ERP front, right? So we have seen companies are talking about, let's say, the traction coming in the ERP front, be it SAP or Oracle, any other ERP system, right? But if I look at your deal wins, your growth, that traction doesn't look in your numbers. So any clarification there?
Yes. So Hasmukh, one is our ERP business has grown in this quarter. Now I'm not saying whether we are happy with that growth or not, because just like you alluded, Hasmukh, there is an enormous opportunity on the ERP space going forward based on everything that we have heard from both SAP and Oracle. So we want to capitalize on that opportunity. So we are putting in place a proper strategy to win more deals there.
Our pipeline on the ERP side is looking up. Q2, we have seen growth. Q3 seasonally, it's a weak quarter, which way it will be muted. But I'm reasonably confident that Q4 also you will see good growth in the ERP business.
We'll take our next question from the line of Dipesh Mehta from Emkay.
A couple of questions. Angan, you, I think, highlighted a couple of times, some of the factors, which weigh on the performance. And deal intake, I think for last few quarters, we expected to improve so far not improved. So progress on some of these improvement measures is not progressing to the extent that which you might have anticipated a few quarters there. So can you help us understand how much of it is because of external factors? And how much would it be because of internal factors, which you can course correct and which you've identified? And let's say, steps taken to improve on those parameters. If you can give some broad sense around it.
Second related question is also on margin side. Because our aspirational range is much higher than where we are currently operating. If you can provide some color around those things from medium-term perspective?
And last question is about maybe if you can answer this, and then I have one follow-up.
Sure, Dipesh, sure. So Dipesh, I will give you my point of view, and then I will ask Kamini also to add in, right? So look, Dipesh, the reality is that the first quarter, the quarter 1 and quarter 2, we have not delivered on our margin goals. That is the reality, right?
But look, we are -- we have a clear plan that has got outlined. Now I can't discuss the plan in too much detail, but suffice to say, there are three or four areas that we will definitely look at which are more internal, right? So one is clearly the on-site and offshore ratio. Like we said a little while ago, our on-site revenues have gone up over time as there is a maturity in the engagement. We are very confident, and we have done it in the past. So that gives me confidence that the team will be able to execute well, move more revenues offshore and automatically, the margins for those engagements will start looking up. So clearly, an on-site offshore ratio is one area.
The second big lever for us is in terms of our utilization. Our utilization is off from the peak. Our peak utilization was at a much different level. And our endeavor would be to continue to drive utilization upward. So that will also give us another lever for margin improvement.
As a part of regular business, course of business, we are also looking at working with our customers. Though we have pricing pressure on the new deals in our existing book of work, where we have served customers for the last 4 years, 5 years, 6 years, we are going to customers and see if we can get some pricing enhancements with those customers. Not enhancements for all our colleagues in that particular project, but some of the very senior colleagues. So that is another lever that we will use.
And finally, our quality of revenue. Though we are doing our infrastructure business is looking up slightly, but you have seen our digital business also grow. So as a part of our digital business trust, our quality of revenue will significantly improve. So these are the three or four levers that, Dipesh, we are very confident about of implementing to get the margins back to where we want it to be.
The only reason I say that Q3 will -- in a matter of sense being muted, is because we will give a salary hike. And like I clearly pointed out, that will have 150 basis point impact on our margins. But of course, we'll recover. We will try and recover part of it or most of it as we go forward, we will see how that goes. But Q4 onwards, you will clearly see a margin improvement.
Now when you win deals, we also have to gain market share, which we are gaining, some of these deal margins are -- will come up as you go forward, which is why I said, Dipesh, if you must give us a couple of more quarters to really see the margin turn around, and over the next 4, 5, 6 quarters, you will see the margin bounce back to the levels that we were in, let's say, Q3 and Q4 of last year.
Sure. So similar question on revenue side and deal intake side. You addressed it well on margin side. If you can help us understand, because your deal intake continued to remain muted, revenue growth is also, let's say, this quarter is decent. But if I look Y-o-Y, it is still weaker. If I put that in context of $100 million deal, which started ramping from April. So two-part question. First, $100 million deal, whether ramp-up is there on schedule? And second thing is, despite $100 million deal, growth is muted, if you can address these things.
Yes. So Dipesh, again, a great question. So first of all, the $100 million deal is on schedule. And one more thing I want to say, Dipesh, see structurally, there is no issue, either with our clients nor with us. Right? It is only a matter of seasonality in terms of when we win a new deal at our size of the business, how much time will it take me to turn that into profit. So with that backdrop, let me talk a little bit about the revenue.
See, we've grown revenues 7 quarters in a row till the last quarter where we degrew revenues. And this quarter, we have bounced back on revenue growth. I'm reasonably confident that the revenue growth will continue. Now Q3, again, let me state this upfront, is going to be a muted quarter because of seasonality, but you will see growth in Q4 for sure and even in Q3 to a very large extent.
So from my standpoint, the growth momentum will continue. Now -- the order book, and I'll tell you why there is a scientific analysis there, though my order book is being muted, like Kamini also suggested a little while ago, most of my renewals happened in Q3 and Q4. So by Q1 and Q2, a large part of our order intake has been net new, which will obviously give some growth momentum going forward.
Now the trick though, Dipesh, I will admit that apart from renewing our existing book of work, which we do in Q3 and Q4, we have to win more deals, more net new deals in Q3 and Q4 also. If we can make that happen, then even I'm -- then one can confidently say that not only Q3 and Q4, but Q1, Q2 of next year will also show a good revenue growth.
Understand. Last question relatedly, whether you require some course correction to improve it? Or you think current way of operation is sufficient for us to deliver desired results?
No. So, Dipesh, we always look at ways to improve. We don't need to course correct. We are set on a course. We have identified the areas that we want to focus in, and we are firmly on our way to building a great business. So we don't need to course correct on anything, but there are a lot of areas of improvement. So for example, our sales cycle needs to improve. We are investing in that. Our capabilities need to continue to be stronger. We will invest in that. We have created a rest of the world business. We want to invest in that and start growing businesses in those areas. So a lot of these small little areas that we need to invest and grow. Our Life Sciences business has not delivered for the last three quarters. They have to come back to growth.
So the overall strategy of the company remains the same. There is no change there. But we definitely need to course correct in the small little area where we need to double down on our investment.
Now, Dipesh, one of the questions that you asked me on margins. We overinvested in my mind in capability building, but our investments will not stop. We will continue to build on this investment. And as we build this investment, these investments have to deliver results to us. And that is what we will very closely monitor going forward that whether these investments that we've already made or we will continue to make in the future, what returns are they delivering to us. And that is also another big lever we are looking at, Dipesh.
[Operator Instructions] We'll take our next question from the line of Sandeep Shah from Equirus Securities.
Angan, I just wanted to understand what has made you so go so aggressive in terms of a vendor consolidation deal? Because in the last 6 quarters, we were investing, we were expecting the growth to remain better on a Y-o-Y basis, which we have delivered in the first 4 quarters. So is it some portfolio specific issue or plan specific issue, which makes you compelled to go on vendor consolidation deal and take the margin to 10% multi-quarter low?
Yes. So Sandeep, so first of all, Sandeep, let me start by saying we are not proud of the margin situation that we are in today, right? I mean, we definitely want to get the margins to our desired levels, which I have consistently maintained at 15% to 16%, right? So are we comfortable or are we happy where we are at the margin levels? We are not happy.
And it is my commitment to you. And when I say my commitment, I mean, the entire management team's commitment that we will, over time, get the margins back to where it should be.
But let me answer the question that you asked, which is a very pertinent question. See, we grew six quarters in a row quarter-on-quarter, right? Now the consolidation deals are important, Sandeep, because we also need revenue certainty. Right? As the world becomes much more -- how do I say it, it's very difficult to predict, unpredictable. It is important for me also to start winning some annuity kind of business. And as you focus on annuity business, Sandeep, you know that in any case, that in the first couple of quarters, it is about investment, it is about knowledge transfer in those investments mature and then you can start making money.
So it is important, because, look, Sandeep, I mean, I understand what you're saying that, what was the need of going after consolidation deals when we had a high margin and a reasonable growth business. But remember, Sandeep, we are not here for quarter-on-quarter. Quarter-on-quarter is important. But we have to build a business for the next decade, if you will.
And unless I pivot the company to build more annuity kind of work, we will never ever get there. But the trick, Sandeep, would be to continue winning consolidation deals, but also start winning much more digital deals, transformational deals. And as you know, because of the uncertainty, there are not too many transformation deals on the table. There is tremendous uncertainty in the market. So in an ideal world Sandeep, I would like to win many more transformation deals in our customers, especially in the Life Sciences and the BFSI space, as we start winning market share on the consolidation bit.
So I agree with you. It is a couple of quarters of dip in margins. But when I look at the long-term goals in the long-term picture, even you will realize that it is a sound strategy.
So Angan, any number you would like to throw in terms of percentage annuity business versus project based today versus when you joined?
No. So I don't -- we don't want to give a view like that at this point in time, Sandeep, only because some of these deals, we have just won. We are just about to work on building on those deals. But give us a couple of quarters that we will clearly call out in terms of what will be our annuity business be, which will be a part of a quality of revenue, right? How am I moving the quality of revenue from more staff [ outage ] to more annuity work. So at some point in time, we will come back on that. Not that we don't have the figures today, but it is more of a foundational level today. So in a couple of quarters, we will be back with those statistics as well.
So in this journey from taking a vendor consolidation deal to improve the annuity, don't you believe a margin aspiration which you still have at 15% to 16% would be difficult? Because these vendor consolidation deals are more competitive. And in that scenario, this aspiration of 15% to 16% could be difficult.
So Sandeep, I wouldn't say that, and I'll tell you why I wouldn't say that. Look, it may take time for me, okay? It may take longer than expected. But the reason why we want to keep that margin profile going is, because it is not that we want to build our company only on consolidation deals. Consolidation deals will be a part of our business from a market share perspective, but we also want to build a great digital business, a great data business. And that business is also growing. I don't know if you realize this, but I'm sure you do, our Digital & Data business has also grown to become almost $250 million to $280 million, right? So I'm not so worried that we will not win Digital & Data.
So if I were to win more consolidation deals and make more money in the digital deal that we will -- that we will continue to win, I think we can balance the margins out.
Now can I get to a 15% margin 2 quarters out? The answer is no. But over a period of time, is that my aspiration? It absolutely is, and we will drive towards that.
Yes. Just a follow-up. In the earlier reply, you said we may touch the margins of 3Q and 4Q of FY '24 after 4 to 6 quarters. Is it -- I have heard correctly?
That is our aspiration. Now we'll have to see, in today's market, Sandeep, it is very hard to predict what is going to happen 5 quarters out. But I can only say two things, Sandeep. One after Q3, which will be an absolute bottom because of the salary hikes. Q4 onwards, we will start improving margins. And Q4, Q1, Q2, Q3 of next 4 quarters, you will see our margin uptick coming in. Because by the time all the deals that I and Kamini spoke about will also mature and the margin uptick will happen.
Now when will I get to our Q4 levels, which was at whatever, 15.8% or 16.3%, that is hard for me to say. It's too volatile for me to comment on that, Sandeep, at this stage.
Okay. And the last question, despite core services growth being higher, while utilization has gone up by 30 bps because this time, the growth is more through services and less through pass-through.
Yes. So Kamini, would you take that question?
Yes. So, Sandeep, I think that's largely because of the fact that some of our revenue growth has come through. As we mentioned earlier, consolidation deal. And a lot of it has been done also through subcontracting agencies that we've worked with, which will not get reflected in our utilization to that effect. So that's the reason why you would probably see the utilization only at a marginal increase on that.
So Kamini, in that scenario, if these deals move from on-site to offshore, even subcontracting costs will come down?
Yes, that's the expectation as we start replacing these people with our own employees. Yes, we would expect this cost to come down, Sandeep.
Any color, what was the subcon cost?
Sorry, go ahead, Kamini.
Just any color in terms of what was this subcon cost in 1Q and 2Q FY '25?
No. So Sandeep, we don't give specifics regarding that, right, but it's definitely a lever on which we will work on.
No, no. I was saying, Sandeep, that is the point that Kamini was making as these deals mature and the work moves from on-site to offshore, offshore becomes a far more higher leverage for margin improvement. That was the only point I was making.
We'll take a next question from the line of Shradha from AMSEC.
Two questions, Angan. First is, we've seen that our on-site mix has improved by some 700 bps. And despite that, revenue has grown by only 2%. So just wanted to check the underlying volume growth, because much of the revenue growth seems to be led by a shift in business towards on-site?
Yes. So, Shradha, well, it is not that we have shifted work from India to the U.S. It is a manifestation of the deal wins that we've had. The newer deals ramp up has been more on-site. Correct? Now the reason why our revenue growth has been, what about 2.6% quarter-on-quarter, whereas the on-site ratios have gone up higher, it is only because there are certain projects that have also come to a closure. So you have to look at it from that perspective. But like, clearly, like Kamini said, from a margin improvement standpoint, over time, we would like to improve our offshore ratios to get back.
And Shradha, if I can just add to what Angan said, right? In the last quarter, we've had some element of pass-through revenue, that we spoke about, which were more offshore-centric. And I think that has also played a role in terms of our on-site being a little lower in last quarter from a ratio standpoint. Which is why I think you shouldn't compare it directly. If you look at our previous quarter trend, I think the differential would be, we were operating at about 46%, 48% range, and that's probably what's gone up to about 50%, 51% that you see this time. I hope that clarifies.
Is it also to do, Kamini, with the fact that probably the on-road employees growth have seen a decline, whereas revenue growth this quarter would have been led by increase in subcontractors?
I think, it would be a combination of both, Shradha, because a lot of the consolidation we doing more taking over of subcontracting parties that are based on-site, and that's the reason why you would see that.
Right. And secondly, when I look at the sales and support of headcount, that has also seen a decline of almost 10% sequentially. So just to get clarity out here. Is it more of support staff rationalization? Or are we consciously looking at some sales head count rationalization as well?
Shradha, right now, our focus is a lot on our support staff optimization that you see over here. At this point of time, like Angan said, I think we continue to invest in space, both general and specialist space. So I don't think that's an area of investment that we would cut back on.
So we are looking at optimization all the time in terms of how do we do a lot more automation in our existing processes that will enable us to reduce head count associated with that.
Right. And just last question. Angan, you've been mentioning that the deal pipeline looks quite strong and robust. So any characterization in terms of what is the mix of small or large deals? Or is it still more of vendor consolidation deals in the pipeline? Or do you see more of transformation-led deals with some improvement in the macro environment? So just some characterization on the deal pipeline would be helpful.
So Shradha, our deal pipeline is definitely strong, and it is improving quarter-on-quarter. I feel that the answer to your question will only lie after the stability comes in. Correct? Now is the cost of doing business in our customer location -- if our customers become higher going forward, depending upon the outcome of the election results, I see more cost optimizing -- optimization deals back on the table.
Now Shradha, I don't want you to take away the fact that cost optimization deals are margin diluter. They maybe the margin diluters in the medium term, but in the long term, they can definitely deliver a lot more margins for us as we go forward. So consolidation deals are not a bad word. It is, in fact, good that we will be winning market share.
So currently, the deals that we have on the table is really 50-50. We've got 50% transformation deals. We've got 50% vendor consolidation deals. But these deals have to convert. Even the transformation deals are market deals. We are doing some great work with our E&U customers, with our BFSI customers. There are some really, really good work and good deals on the table. The issue is when will the stability happen and those deals convert. If some of those convert in Q3, you will see the deal flows, one, improving, but the quality of those deals will also be far better than just doing consolidation, Shradha. So we will wait and watch. We are hopeful that some of them will convert in Q3.
Next question is from the line of Manik Taneja from Axis Capital.
Angan, I just wanted to get your thoughts with regards to something that you've really emphasized since you came on board. You've been talking about significant focus on in-quarter execution and bringing in credibility to the company. But what we have seen play out over the course of last couple of quarters, is things unraveling quite sharply.
So essentially, would you want to essentially give us some sense as to what has -- what adverse things may have happened at an internal or within the organization level, given the fact that from a macro backdrop standpoint, FY '24 was equally bad, but you ended up delivering reasonably well. And now we've seen this unraveling. So it would be great to understand what challenges you have faced internally, because of which the performance has taken such a big hit?
Yes. So Manik, I will be as brutally honest as I possibly can on this question. So it's a very important question. So look, I am not worried about our execution capability. We have got a strong team, our teams can execute. And I feel very confident that we have the right team to execute.
Now of course, we will look at people based on performance. If people do not deliver, then we obviously will get new leaders in. But by and large, I'm pretty confident that the team that we have on the ground can deliver. But look, we will continue to make that investment. So I wanted to get that off the -- out of the way to begin with.
So Manik, look, last seven quarters, we've executed significantly well. So what went wrong in the last two quarters? And look, I can -- I would say that we are not very proud of it. Right?
In the last two quarters, we focused on winning some deals from a market share standpoint, which is basically infrastructure deals, which give us long-term revenue certainty, et cetera. Now like I was probably answering Dipesh, I could have taken a call that we will do those deals at all. We would stay out of it. But then, at some point in time, my growth trajectory would have stopped, Manik, because the market is getting incredibly volatile as well as competitive, and I need to win market share.
Now as you win deals of this nature, by traditionally, these deals, you will have to invest in them before you can start seeing returns. And that is what has happened. That is why you see the last two quarters being very unpredictable. And it is also a manifestation of how our clients perform. Say, for instance, Q1. Why did our revenue shrink? Because the deals that we had won, our customers did not ramp them up. As a result, we could not get revenues in Q1. That has come back in Q2. Right?
Similarly, now the deals that we have won on the Infra space or the other consolidation space eventually will start delivering margins as well. So Manik, in an ideal word, I would have loved to say that I will always be predictable, but as couple of quarters, you have situations like that. We are not proud of it, but we don't want to be defensive on it.
My job is to create more predictability, I understand that. And we will create more predictability going forward. But Manik, I will also say this, even in the future, will there be a couple of quarters where there will be a little bit of unpredictability, it will happen. Because the markets are very volatile. But our job now going forward is to be very predictable over the next 6, 7, 8, 9 quarters so that investors like yourself also get a view on it.
But there will be, I will admit. There will be a couple of quarters in between when the unpredictability will be there. But I do not, for one moment, doubt the execution capability of the team. That, I think, is strong. Equally, if people, like I said, we are a performance-oriented organization. If people do not deliver, we will change. We will make necessary changes.
Appreciate that input, Angan. A couple of directing questions. Given the challenging demand environment that you've spoken about, do we probably see a rehash of our strategy around cutting the long tail of customers? That's question number one.
The second question was a bookkeeping question around the sales and a couple of headcounts. This number had gone up sharply between Q4 of last year to Q1 of FY '25 and then once again has come back to a similar level in the current quarter. What explains this quarterly changes on this head count, on this metric?
Yes. So I'll answer the first question. The second question, I'll probably ask Kamini to comment on. So look, we are on an endeavor to cut our tail. We've done a lot, but given the circumstances, like you rightly pointed out, Manik, we'll do even more. Right?
My original thought was that we were at an optimal level. But with the market uncertainty and with the way that things are happening in the world, I feel we have more possibility to cut down the tail. And so the team has a plan in place to reduce the tail even further, right? So we will be on it. Because that also has a manifestation of redeploying your human capital for growth rather than for sustainment. So that we will continue to do.
On the SG&A, I will hand it over to Kamini for Kamini's comments.
Yes, yes. So yes, thank you, Angan. So Manik, while it does appear to be that 1 quarter, the headcount has gone up and come down on the, in the next quarter, primarily because of two reasons, right? The reason that the headcount went up, as you know, a couple of quarters, we have spoken about our investment in our tech transformation internally within Birlasoft, what we call the project called Optimus, where we had actually started ramping headcount on that project and that continues. The reduction in this quarter that has happened has been in other areas where we have started optimizing some of our support staff in areas that have been automated and as we are realizing the benefits out of that. So I think that there are two different and distinct levers while it appears to have happened quarter-on-quarter.
Next question is from the line of Vibhor Singhal from Nuvama Equities.
And Angan, real appreciation from my side. I think, you've taken real trouble to explain the situation that the company is in. Really appreciate, I think the company, as you rightly said, I think there will be overtime quarters here and there. And amidst that, a company of the management should not lose the long-term goal that they are after. So I completely appreciate that.
But I have a more strategic question, which is not related to just 1 or 2 quarters, but from a longer-term point of view. Now we've been saying that the last 2 quarters have been weak in terms of TCV. But if I look at our FY '24 TCV also, that was also up only 1% Y-on-Y.
So actually, if you look at it from -- if we compare the numbers from FY '23 onwards, our deal flows for the past 6 quarters have not been that great or have been quite modest. So -- and in that, we have also taken some vendor consolidation and infrastructure deal, which have basically impacted our margins. So if I remove those deals, our deal win in our core area, which was transformation projects and all, that has been pretty weak, so to say. So is it that these kind of deals have dried up? Or is it that we are not able to match up as to what exactly is required in those kind of deals? And when do you think this situation can change over the course of, let's say, maybe 2, 3, 4, whatever quarter, whatever time that it takes? And then I have a follow-up to that question.
Yes. So Vibhor, first of all, I think your analysis is spot on, correct? So last year, if you look at it, our order signings were just 1% growth over the previous year, FY '24, over FY '23. So clearly, that was a cause of concern. But even though that happened, if you look at our net new and existing new business that has shown reasonable traction, which is why barring Q1, we are able to show growth in Q2 and hopefully in Q3, though Q3 is a negative quarter again, but definitely in Q4, correct? So that is a manifestation of the fact that though the overall deal flow may be soft, correct? But at least the net new is going up. So that's number one.
Number two, are we happy with the situation of our deal signing? Absolutely not. There is a lot of focus within the company as a part of the management team to drive the deals up. So hopefully, Q3 and Q4 will be better. But in the longer term, there are two points that I want to make, Vibhor. See, we have the pipeline that I am absolutely certain about.
The pipeline also has a large number of transformation projects that we are working on. Apart from we are also working on a lot of vendor consolidation projects. There are two issues in the market, though. The real estate that is our current real estate, I can't talk about the market in general, but in our current real estate, right, our deal signings are getting delayed.
Now not that our customers that we serve are in financial trouble or anything, I mean they are very strong financially, but it's a wait-and-watch model in our customer in real estate in terms of how the election results would pan out. And hopefully, after that, the things will start looking up and start looking better.
See, our dream is to deliver growth on order book even this year, though it is going to be a very tall order, because in the first half year, we've delivered only $300 million of signings. And I really need to deliver more than $550 million in the next 2 quarters even to show growth. But we will endeavor to do that. Because at the end of the day, if those deals close, we can really make it happen.
But in the longer term, once the election cycle is over, I think, based on what I know today, based on all my customer interactions, the transformation projects will be back on the table. Typically, after the election cycle happens in the U.S. since almost 86%, 87% of our business is in the U.S., it will take a lag of about 6 months, but I'm damn sure that all the transformation projects will be back on the table.
But equally, in the board, we have put a lot of investments in Europe and in Asia, and under Manju's leadership, who's our leader for the Rest of the World, we are now starting to at least get pipeline in the table, which are more transformational in nature rather than vendor consolidation in nature. So it has taken me about 6, 7 quarters to get the deal flow right, but we are in the right trajectory and we are in the right direction, Vibhor.
Got it. Got it. That was very helpful. Just a follow-up to that, Angan. I mean, at this point of time, from a near-term point of view, I mean, it appears that we have got into a kind of a vicious loop. We are chasing -- I mean, we've got maybe one or two Infrastructural consolidation deals, because of which our margins have fallen from 14% to 10% this quarter and maybe next quarter because of wage hike will probably come to maybe some single-digit number.
On one hand, just one or two deals have taken our margins to this. And now we are actually looking to expand margins next year. Because most of these projects will move from on-site to offshore. But at the same time, we are chasing more deals in the consolidation and the infrastructural space, in which the year was itself will be margin dilutive. So that will be kind of a recurring phenomenon for us. If we don't go for those deals, our TCV growth will be muted, so our revenue growth won't come. But if you go for those deals, there will be margin dilutive and our margins won't come.
So I think it's become a kind of a judgmental or, let's say, call that we have to take a dilemma between whether we go for revenue growth or margins, because it appears from the current scenario in the near term, it is difficult to achieve both.
No, no. But Vibhor, again, I will not debate what you're saying. I think you're saying the right thing. But Vibhor, look at from our perspective as a management team. Right? Our job is to focus on all the three parameters: revenue, margins, as well as order book. All three parameters. Right?
Now that shift would be to kind of deliver margins through our existing program, drive a lot of efficiency, cut costs in our existing programs and still continue to deliver to our clients, cutting the tail. And I think we have enough and more opportunities to improve margins there. But clearly, I'm going to go after market share, I'm going to win deals at slightly lower margins in the market. But if I'm being able to balance that out. And Vibhor, again, I can't tell you everything that we are running within the company in terms of initiatives, but I'm reasonably confident that I can win market share through the vendor consolidation deals, I can win more digital and data deals as well as the markets turn.
Equally, there is a lot of opportunities of cutting the tail optimizing by cost, project Optimus that Kamini spoke about, will contribute over the next 3, 4 quarters to cost takeout. All of these initiatives will come together. So I mean, I know what you're seeing in the medium term. It may look like that, but we don't see it like that. Because end of the day, it's not a question of 1 quarter or 2 quarters or 3 quarters, I want to clearly win market share, deliver a lot of growth and still maintain the margin band. Now you're right. I mean, in the medium term, it may look like that, but we and the management team are pretty focused on the long-term goal.
Got it. I appreciate that detailed explanation. And I hope the management continues to focus on the long-term growth. I think that is what will probably deliver value to the stakeholders also.
We'll take the next question from the line of Anmol Garg from DAM Capital.
So a couple of things. Firstly, I wanted to understand what is the size of the vendor consolidation deals that we are talking about? Because these deals generally tends to be longer in sizes. And if you can also talk about what kind of vendors from which we are consolidating these deals from? And what is the typical nature of such deals?
So Anmol, I can't tell you which vendors we are consolidating from. Because that is a really confidential information. But the deal sizes range from anywhere between $10 million to $30 million. But there is a small change, Anmol. In today's world, the long tenure deals are pretty much over. I don't think there is any customer who's going to come to the table and find a 5-year deal, right? So we are also seeing consolidation deals from a 1-year to a 3-year perspective, right? But look, I can't talk about who we are consolidating from et cetera, because that will be a pretty confidential information, Anmol.
Right. And like you said that these deals are typically not that longer in division. So would you say that the revenue conversion in such deals would be much faster?
Not necessarily. See again, it's very difficult for me to answer that question, Anmol, because it depends upon client to client, right? In certain client situations, yes, what you're saying is, right? In certain client situation, they may have signed up for a year, but they will -- with a confirmed extension going forward.
And you also must understand Anmol, why customers are signing deals for a lesser tenure than a longer tenure today, it is only because of the uncertainty, right? The same reason is why large mega deals are not yet on the table, and the deals are becoming smaller, is the same reason why the tenure is also becoming smaller. So we'll have to see how that plays out, Anmol. Hard for me to answer that question specifically.
Right. And just one last thing, is that we are talking about a lot of winning more vendor consolidation deals going forward. And like you said, that these deals are typically $10 million to $30 million in size or maybe even bigger. So from that perspective, can we expect that overall, the TCV for the company can get relatively better from here on and can even get bigger upwards of $250 million or so?
Yes, so Anmol, look, first of all, I don't again want any of you to feel that we will only run the company on vendor consolidation deal. That's not what I said. I said, vendor consolidation deal will be a part of my overall deal flow, maybe 30%, 40% to 50%. But I will also win 50% transformation deals. It's only taking a little bit of time, because of the seasonality and the uncertainty there in the market. But we are also winning our fair share of transformation deals.
Otherwise, my discussion with Vibhor and Manik, I will never be able to get the margins up to my desired levels if I don't bring transformation deals. So for one moment, please don't take away the fact that we are only focused on vendor consolidation deals. We'll definitely do vendor consolidation deals, but we will do transformation deals as well. So that's number two.
I was about to say to Anmol, yes, Anmol, it makes sense for us to do only consolidation deal where it is strategic and where we are able to actually integrate sideways in terms of the opportunities, and that gives no play to the areas that Angan spoke about in the digital space, right? So I think it will essentially be a strategic call. It's not that we're going to be looking at vendor consolidation for every opportunity. I just wanted to call that out, right, given the fact that you shouldn't take away anything else from what we are trying to do. Sorry, Angan, please go ahead.
Yes. So the second question, Anmol, in terms of whether we can get to a $250 million per quarter deal signing. That's our dream. We want to get into -- get into that mode, so that every quarter, we can sign $250 million. I don't know whether Q3 can be that. It's a short quarter. But do we want to attempt to get to $250 million of deal signings in 4Q? Absolutely. That's our goal. But we will see. We will see how Q3 converts, and then we will start focusing on Q4.
We'll take our next question from the line of Aayush from B&K Securities.
So just a couple of questions. So if I recall it better, so last quarter before the last quarter, we were chasing the shorter-term lease and now we are chasing the vendor consolidation deals. So is it true to understand that we are chasing the growth on the back of margins right now and sacrificing to just get the growth wherever we are seeing the opportunity. That's the first line. That's the first question.
The second question is that why we are facing the pricing headwind? Because if we see the commentary of the larger peers or maybe the mid-cap peers of ours. So there has not been such a negative comment on the pricing front. So is it something has to do with the capabilities that we are having in? Or what's the rational behind that we are having some of the pricing pressure in the consolidation deal?
Yes. So, Aayush, first of all, sorry, repeat your first question again, Aayush. I got confused with your second question. Repeat the first question.
Yes. So first question was that, if you recall it better so last quarter to last quarter, we were kind of chasing the shorter-term deals, we were seeing kind of an uptick. So we got the growth from there onwards. And in this quarter, we are highlighting kind of that we are chasing kind of the consolidation deals. So is it some kind of a change in its strategy is there that we are ready to sacrifice the margin to just to obtain the growth or the opportunities that are available in the market?
No, no. So, Aayush, I don't think or agree with that at all. Even our shorter-term deals, which we did last year, and you must also realize when we talked about shorter-term deals, it was pertaining to our clients. When our clients have shorter-term projects, we came in to help our clients execute those projects. Those projects necessarily did not mean they were low-margin projects. They were domain-related projects, they were technology-related projects, we made good money. And we helped our clients. Our clients wanted us to come in and execute a particular program in a fixed period of time, which we did. We made our money. So it was not margin dilutive.
The vendor consolidation deals are also not margin dilutive. It is only the timing issue. That when you do a vendor consolidation deal, you take over people, et cetera. For the medium term, you would see pricing pressures and margin pressures. But over time, when you start moving work offshore, like Kamini spoke about, you drive a lot of efficiencies within the program, productivity gains you get, you will be able to get the margins back on track.
So we absolutely do not want to chase growth and sacrifice margins. That's not our strategy at all. We will be a growth-oriented business. And we strongly feel that if we can drive our investments and get return on our investments well if we can do that, talk well and we are on the journey of doing that. Revenue growth will automatically deliver more margins, because then the operating level kicks in. So we are very focused on revenue growth, which is profitable growth, Aayush.
So I do not want you to think about us as a company that will do growth at whatever cost by sacrificing margin, far from it. We want to build a healthy growth business with a reasonable margin profile.
And Angan, if I can add to what you said, right? Aayush, like I mentioned earlier also, see our consolidation deals are not going to be a large part of the growth or the TCV that we will be going behind, right? It will make sense for us to only look at those part of the deals which give us integration opportunities to grab a larger wallet share. So we will -- it will be very strategic in nature. I want to reemphasize that, so that it becomes very important for us to understand as to why we are doing some of these and not because we just want to grab some revenue at this point of time. I think that is the kind of view that we are taking as far as consolidation deals are concerned.
So clearly, on top of consolidation deals that we get, in the interim, like Angan said, we are looking at getting more and more digital and data transformation work that will help us grow our existing portfolio and also moving to adjacent areas.
Great. And the second question is that if you see the TCV across the board is kind of is in the comfortable range for each and every other company. So just trying to understand what are the problems that we are facing that still -- that TCV still remains the subdued or maybe below the comfortable range, what we actually aspire for. So just trying to gauge what is going wrong or what has led to the soft TCV numbers in this quarter?
Yes. So Aayush, nothing is going wrong. Fundamentally, I think our customers are fine, our customers are healthy. So there is no issue there. It is only a delay of decision-making. Like, for instance, I mean, there were certain deals that the papers got signed only after the quarter was over. So we couldn't count it in the previous quarter. The deals were already won and the deals are done and the papers came in only now. So like I said, am I satisfied with our deals, is absolutely not. We have a lot more to do. But I don't think I'm concerned about it from a revenue growth for the future perspective.
So if your question is, if there is a soft TCV position this year, will my revenue growth for next year not happen? I don't think so. My revenue growth for next year will continue. But of course, also fix my TCV, right? Like I said, I mean, I will be more comfortable if I can consistently deliver $250 million to $300 million worth of TCV every quarter. We are not there yet. First 2 quarters have been a disappointment. Let's see how Q3 goes. Hopefully, Q3 will be slightly better. But again, it's a shorter quarter. Maybe Q4, we will be back on delivering a good quarter in terms of TCV signing. So we would see, Aayush, we will work towards that.
And Angan, we also would like to add, right, that we have a healthy pipeline at this point of time. And I think some of the conversions that have got a little delayed, which hopefully will start getting converted in the upcoming quarters, right? So I think that lead indicator gives us the confidence to say that it's not that we don't have a pipeline that we should be worried about. It is a question of conversion, which we are working with our real estate at this point of time.
So just a follow-up on that question only. So if we see the commentary of the SAP or the Hyperscaler over table, the companies that we are entrenched with. So those have been calling it out very strong demand kind of a thing, but our numbers aren't showing in terms of deal wins. So is this something to -- has to do with the capabilities that -- or the investments are still be going on to catch that demand at what the SAP and other companies are kind of saying?
Yes. So Aayush, look, I mean, whether it's SAP, Oracle, everybody is giving a strong commentary going forward, right? So there is a cycle. There is a big cycle coming in with some of these large hyperscalers or the ERP businesses as well. We hope to catch that cycle. We have a lot of deals that are currently on in both sides of the aisle, a lot of JD work, SAP work, a lot of digital deals are on the table. We are fighting to win it. We'll win our fair share.
So look, I mean, I don't know what more to say. I mean, we are well invested in those businesses. We are going after customers. The pipeline is there. Now within the question of converting, but to your question, Aayush, that you asked a little while ago, is there a problem with our clients? I don't think there's a problem with our clients. It is only the fact that the timing of these deal closures is the issue, which is what we are working on.
Healthcare vertical, when we say that we are not facing the client as a issue. So is it fair to understand that on the healthcare side, also, we are not facing the specific client kind of a issue?
Yes, Aayush, Abhinandan here. We have run over substantially. Okay? But anyway, I'm just, maybe the last follow-up, and then we can wrap up.
Yes. Abhi, let me answer this question. So Aayush, look, healthcare, I admit, that for the last 2 to 3 quarters, we haven't muted growth, right? But you give it a couple of quarters, you will see the healthcare bounce back very, very strongly. Now why this happened? It is not a sector issue or a client-specific issue. It is only because the real estate that we have, the projects that we've signed, like I said, the projects are maybe a 1-year project or a 2-year project. The project has got completed. We've delivered the program. The new project is taking probably another quarter to come, and that's all there is.
But in the healthcare space, in fact, we work with very marquee names, very strong companies with strong balance sheets. So it's only a question of timing. But I'm very confident that the team will get the healthcare business also back on growth very, very quickly.
Thank you. I now hand the conference over to Mr. Angan Guha, CEO and MD, Birlasoft Limited for closing comments. Over to you, sir.
Yes. Thank you. So first of all, thank you, everyone. Thank you for joining us in the conference. Hopefully, we've been able to answer all your questions. But if you have any further questions, please do reach out to Abhi and we will try and attempt to answer all other questions that you may have.
Thank you, once again, for your support to Birlasoft. We and the management team are committed to build a long-term sustainable growth-oriented business with a high margin profile that we have committed on. Quarter-on-quarter, we will focus on execution, and we will get our company there. I look forward to speaking with you again as a part of our next earnings call. Thank you, once again. Have a good evening, good morning, wherever you are.
On behalf of Birlasoft, that concludes this conference. Thank you for joining us, and you may now disconnect your lines.