Tata Consultancy Services Ltd

NSE:TCS

Earnings Call Transcript 2019-Q2

[Vivek Padiyar, Head of Corporate Communications]

Good evening, everyone. Welcome to TCS Q2 FY '19 Results. As always, we'll start our proceedings with Rajesh's initial comments and then more to the Q&A. Rajesh, please?

[Rajesh Gopinathan, CEO, MD & Executive Director]

Thanks, Vivek. And once again, good evening, everyone, and welcome to the earnings announcement. Let me start by saying that Q2 has been a good quarter and a landmark quarter for us in many ways. All of you know that almost 2 years back, we stepped down from our typical double-digit growth trajectory. And since then, as a management team, we have been very focused on getting back to this double-digit growth.It has been a journey that has been very fulfilling, something that's very encouraging and a reaffirmation of everything that TCS stands for in terms of its strategies and its choices and its differentiated positioning and its differentiated operating model. So it's with great pride and pleasure that I share with you that in this quarter, we have delivered a revenue growth of 3.7% cc, which makes our full year revenue growth in terms of constant currency at 11.5%. Even more importantly, in a onetime departure from our typical stance, I want to share that we now have the numbers on the board and the momentum to ensure that the double-digit trajectory continues for the rest of the year. And that's something that has been a big part of our strategic focus, and that's why I said that this is a great landmark quarter for us. On behalf of the -- of everyone, I want to thank all our customers, our associates, the management team for this great -- I think, a great achievement, which gives us the strategic space that we need to now shift focus into the medium and long term and execute on something that we have been talking about a lot about the whole growth and transformation and Business 4.0 journey.So I'll get in the specifics of the quarter, but it's a quarter which is structurally very, very important. Growth has come from areas that we have been investing in, whether it be in terms of services, whether be it in terms of the kind of client engagement that we have had. We just completed our main flagship customer summits in Europe and in U.S., and the kind of participation that we saw and the kind of reaffirmation that we saw of the Business 4.0 strategy gives us a great encouragement that we are on the right path. Our investments in our automation product, ignio, which completed 3 years and which we have shared with all of you a few months back, it continues to gain traction. And our experience on that and our focus on this space, we are now formalizing it into what we call our Machine First Delivery Model, which is also resonating very strongly with our customer base in terms of being able to take an integrated view across multiple technologies and to actually create a framework that allows it to be leveraged in a manner in which we offer technology, the first right of refusal for work and simultaneously elevate the positioning of human talent.Our delivery focus and our leadership and our operational excellence and our pioneering aspect of services delivery innovation continues with our focus on Enterprise Agile. Enterprise Agile 2020 is well and truly on its trajectory. And along the line, we are really fundamentally questioning many of the long-held beliefs on what Agile means and across multiple dimensions, 4 key dimensions, bringing Agile back into enterprise strategy context, driving enterprise transformation, operations transformation and significantly adding to the collective knowledge out there by introducing what we call the location-independent Agile methodology.So this, combined with our focus on talent development, especially our organic talent development, once again, the scale at which we've been able to execute it continues, continues to accelerate, and we have further increased our lead in this space. We're now rolling out a pioneering mechanism to actually engage with entry-level talent through the TCS National Qualifier Test, which we will be broad basing further as we go along. We had more than 200,000 candidates up here for the test, and we now have a standardized mechanism to actually democratize and broad-based hiring across the entire organization. To put it in perspective, we typically used to hire from -- in the range of about 375 to 400 institutes nationally. We now have students appearing for this exam from 1,800 institutes all over the country. So we're no longer constrained by the institute that we go to. We are enabling the talent to come to us. It goes back into our hiring numbers. We added a net addition of more than 10,000 associates this quarter, which is our all-time high in the tier times, so significantly creating the structural supply needed to feed the kind of growth that we are seeing in these new service lines.So overall a very, very encouraging quarter strategically and also tactically and operationally. We'll get into the specifics of the quarter, and I'll be happy to answer more questions on it as we go along.For the quarter, we are closing with a revenue in reported rupee terms of INR 36,800 crores, helped significantly by the rupee depreciation, while the constant currency revenue numbers at 3.5% and 11.5% cc is also very strong. The dollar revenue came in at slightly more than $150 million for the quarter at $5.215 billion with -- for the -- just from a dollar growth perspective, delivering a 3.2% Q-on-Q dollar growth.Operating margins, once again, we -- as we had said, our margin performance is a combination of growth and the currency profile, and with both of these factors acting in our favor this quarter, we are back in our target range of 26% to 28% with operating margin at 26.5% and actual operating profit of INR 9,771 crores. In terms of net profit we delivered INR 7,900 crores of net profit with a growth of slightly more than 21%.Cash performance again continues to be strong in a seasonally weak quarter, typically, we have delivered more than 20% of revenue conversion into cash at about INR 7,363 crores. In this quarter, we have distributed between INR 16,000 crores in the buyback and another INR 1,800 crores in dividend distributed to stakeholders. So totally, we have distributed close to INR 18,000 crores to shareholders in this quarter.Compared to the same period last year, we are ending with a cash position of INR 36,800 crores which is about, what, INR 1,000 crores more, though we had distributed in the range of slightly more than INR 25,000 crores during this period.The client metrics, again, a reaffirmation of the success of our strategy. I'm glad to share that our $100 million-plus client set has increased by 4 customers in this period alone, and our $1 million-plus broad-based category is now at close to 1,000 at 989 customers. The -- I shared with you our people metrics. As I said, 10,200 net additions. Attrition continues to stay low. We are the industry's gold standard on retention, and we continue to be an attractive place for talent to both come as well as stay with us with attrition at 10.9%.North America. The acceleration in North America revenue is continuing. We have gone -- we were at 6% to 7% last quarter. We are now at 8.1% year-on-year in North America similarly, other structural elements like BFSI, again the year-on-year acceleration is continuing. In terms of BFSI services, which does not count the big platform deals that we did, we have seen steady acceleration, going from 3% to 6% year-on-year. Similarly Retail, which does include a lot of deals that we have spoken in Retail is now at 15% year-on-year growth. So these big, big chunks that we had of our customer segments, both from geography and vertical, are actually kicking in and delivering on the promise that we had seen. Otherwise, in other geographies, Europe continues to do well. And the U.K., primarily driven by performance both in BFSI as well as in the platform deals that we had, U.K. had a very good quarter with a 22% year-on-year growth.APAC also continues to do well with a lot of strength coming out of Australia and other markets.So with that, I want to turn it over to questions. But I would say -- summarize, as I said, that this is a -- it's a big landmark quarter for us as a -- both as a company and as a management team. And we're very happy that the position that we see ourselves in today and are resetting our focus now from a medium- to long-term perspective as -- and -- while we continue to execute in the short term to make sure that the strategic [ placement did ]. Thanks.

[Vivek Padiyar, Head of Corporate Communications]

Thanks a lot, Rajesh. Thanks a lot for the initial commentary.

[Rajesh Gopinathan, CEO, MD & Executive Director]

Thank you.

[Vivek Padiyar, Head of Corporate Communications]

We'll now start with the questions. I will just request everyone to restrict themselves to not more than 2 questions each in the interest of time and for everybody to get a chance to ask their questions. So the first question is from Neha from BTVI.

[Neha Dawda]

You had a very strong quarter. You met your targets as far as margins were concerned. What I want to understand is your guidance as well as outlook on demand considering the next 2 quarters are considered to be seasonally weak. Secondly, BFSI is moving up, but where exactly is the growth coming from? Basically, the breakup. And thirdly, your commentary on client budget and pricing.

[Rajesh Gopinathan, CEO, MD & Executive Director]

Actually, as we said, we now have -- we have had a series of strong quarters, especially in the last 2. But even Q4 was a good one that -- coming in. So we know about the trajectory, and we have the momentum to be able to maintain this trajectory. I don't want to comment further on it. This is not a start of a guidance season. We will not be talking more about it. I think I've said more than enough on it. In terms of giving color on where it is coming, BFSI is a very broad based. We have seen growth across all theaters, Europe, U.K., Australia, U.S., across the board on BFSI, and also split across both insurance as well as banking. So this is a very good, broad-based recovery that we're seeing in BFSI. And the areas of investment are pretty much across the full spectrum: migration to cloud, micro services architecture, front-end transformation, you name it. There is a lot of investment going in and a lot of momentum that we're seeing. So that's the BFSI story. Which was the other one that you asked?

[Neha Dawda]

Commentary on client budget and pricing.

[Rajesh Gopinathan, CEO, MD & Executive Director]

Client budgets, I think October is too early for testing. Our interactions with our customers in our customer summit gave us a fairly positive outlook. But of course, there is the overhang of whether there will be some other areas. We'll get a better feel for it during the course of the next 3 months and into early next quarter. There is nothing currently that is impacting. But early this year to talk about client budgets. Next?

[Neha Dawda]

Just your guidance, at least an outlook on the market, what you would -- this isn't what...

[Rajesh Gopinathan, CEO, MD & Executive Director]

I said more guidance than I did in the last 10 years, so.

[Vivek Padiyar, Head of Corporate Communications]

Okay, next question. Next question is from Kritika from CNBC.

[Kritika Saxena]

And Rajesh, not going into guidance, yes, but you seem to be bullish, you seem to be confident about the deal pipeline and the conversations that you're having with your clients so far. The fact of the matter is, Rajesh, that there are macro headwinds at this point in time. Keeping that into account, would the second half of the year continue to be in the trajectory of growth that you've seen so far? Or would it warrant a little bit of conservatism, keeping the macro headwinds in mind?

[Rajesh Gopinathan, CEO, MD & Executive Director]

You have a fair question, and it's important to keep in perspective what I said. We are very confident and very happy primarily because of the ratification of our strategy. And this has been something that we have been laser focused on and, frankly, in the face of a lot of skepticism. So to be able to get to that point and to be able to secure it and to be able to feel safe, I thought it was important for us to share as much as with you as with all our other stakeholders. And as I said, it's a point for us to thank all the people who have been in this journey with us and for us to step back and take a slightly medium-term view. The immediate short-term view is quite difficult to call. What you said is true, there are uncertainties out there. Is there any specific thing that is pulling it back? No. The uncertainties that are there are quite well known. There is the overhang of Brexit. There is overhang of trade war. There is everything that is there. So how that plays out into client budgets during end of the year, we will know it through the course of the next few months. But irrespective of that, I think the structural pillars are very strong. So the short term, I don't -- I can't comment on. And our momentum, and we have the numbers in place to make sure that we carry through in the -- in a reasonable sense.

[Kritika Saxena]

Rajesh, keeping in mind that second half of the year is typically seasonally weaker than the first half of the fiscal, would the second half -- would you still continue to see that the growth will continue? Would the -- would -- or could it possibly be better than first half of the year?

[Rajesh Gopinathan, CEO, MD & Executive Director]

Seasonality will play out, no doubt about it. Seasonality will play out, I'm saying more in terms of the -- where now we'd see the full year ending. We're quite confident that now we'll end at double digits for the full year.

[Kritika Saxena]

Okay. Ramki, a question as far as margins are concerned, 26.5%. You've come within the aspirational guidance of margin that you pointed out. Keeping the rupee volatility in mind, would you be able to stick within this range? Rajesh, can add to that point. And Ramki, if you can give us a breakup of margins in terms of the rupee impact as well as the organic impact that you've seen this time.

[Venkataraman Ramakrishnan, Chief Financial Officer]

Yes, on the rupee, I mean, total margins, operating margins, we had 26.5%. Impact of, I mean, benefit from the currency was 1.2%. And operational efficiencies was 30 basis points, basically. So currency, obviously, has a factor, and we always maintain this as part of our model. And on the margins front, we have said that the growth as well as also on the BFSI and Retail is coming back. So we are quite confident on where we are.

[Kritika Saxena]

You'll be able to maintain that?

[Venkataraman Ramakrishnan, Chief Financial Officer]

We're quite confident on where we are.

[Kritika Saxena]

Very quickly, Ajoy. Just a quick clarification. Now there seems to be a sense that non-digital revenues are gradually declining versus digital. Of course, at this point in time, your digital revenues will be higher. But in this quarter has there been a negative growth in non-digital? And what's your view then on the next coming quarters? Ajoy, just a very quick word on the net addition that you've seen, the highest in 12 quarters. How maintainable is the attrition as well?

[Ajoyendra Mukherjee, Executive VP & Head of Global Human Resources]

Yes, we have always stated that look, everything eventually will become digital, everything that we do. And we are glad that we are seeing the digital percentage of revenue from 25% to 28%, which is growing at about 60% on an annualized basis, right. So -- and I -- also, last time, I commented that this year is going to be a blockchain year. So we are doing about -- close to about 15 projects in blockchain. So I think now the new technologies, the Business 4.0 themes that we have -- transformation framework that we have launched to the market, all are coming into play. So we are seeing more and more growth and transformation projects. So that actually shows that the digital revenue has gone up from 25% to 28%.Net addition, we had 10,200-plus. And if you look at the last 12 quarters, in the last 12 quarters, this is probably the highest net addition that we have done. So significant as far the talent growth is concerned. At the same time, Rajesh mentioned about the TCS -- the National Qualification Test that we did. So given the growth, given the way -- the whole motivation and everything else that's going on within the company, I think everybody is sort of upbeat. In that case, the attrition, which is primarily the Q1, Q2 is higher, and -- but in spite of that, we have retained it or maintained it very much like what it has been so far. So I think we are pretty well positioned to retain the talent that we have. Given the kind of opportunity for people to grow within the organization, this is a very good time to be at TCS, so.

[Kritika Saxena]

Will you be able to maintain this attrition?

[Ajoyendra Mukherjee, Executive VP & Head of Global Human Resources]

Of course, within 10.9% is where we are at this point in time in IT sense. So we should be. So overall, we should be investing. And so it's very good.

[Vivek Padiyar, Head of Corporate Communications]

Next question is Sajeet from Bloomberg Quint.

[Sajeet Manghat]

Rajesh, you mentioned lines in that we have the numbers and now the focus as well. I just wanted you to elaborate on it. When you -- you've been growing. I think, if you want, from margins point of view, it's the highest margin in 7 quarters. You've gone to 26%-plus, plus, double digit happening after more than 8 quarters. So when you say that you have the numbers and the focus, what exactly are you looking at? What are the levers which you are talking about? When you -- and you have already said that you're looking at a 10% -- a double-digit growth for the full year going forward, so.

[Rajesh Gopinathan, CEO, MD & Executive Director]

So what I said is that especially from the revenue side, we have actually had enough of the revenue growth and the momentum that we have to be able to be confident that we'll end the year with double-digit growth. So that is the main aspect. On the margin side, we have always maintained that it's a combination of growth and currency. So we have seen a regime of fairly stable currency while we have gone through a couple of years of salary hikes and -- which is linked to local inflation. Typically, this differentiated is compensated by depreciation in the local currency. So that has caught up, and that is key to our business model. And that's why we are seeing the margin back in that trajectory. So it will be volatile depending on where the situation is. But with both -- we have 2 elements of the structural, what will I say, headwinds that we had are now tailwind's in our favor: growth and we have the depreciation.

[Sajeet Manghat]

You also -- we've been speaking to you every quarter, and you were talking about how North America is coming back this quarter. We saw nearly 8% growth coming in from North America. Which are the new areas where the growth demand is coming in from? Can you give us a flavor of that? Banking was one which was driving it for you. Are you seeing other sectors also now running in full gear?

[Rajesh Gopinathan, CEO, MD & Executive Director]

Actually, Banking and Retail were the ones which were, what will I say, soft in North America earlier, and both of them are turning around. I think Banking has turned around structurally. A lot of the headwinds that Banking faced are well past, and we're seeing money coming into the system. Retail is a more complex story. We are seeing a resurgence of more traditional retailers investing in technology and getting back and becoming much more competitive. But the structural challenges to the industry are still not over, so I wouldn't rule out a one-off kind of an event still happening there. But there is a significant shift into investment. And more importantly, we're participating very, very strongly into this investment pie. So that's where the momentum is turning from a North America perspective.

[Sajeet Manghat]

I want your perspective on this 10,000-plus associates which you added. And at one point in time, we used to look at the growth of IT companies based on the kind of hiring they do. Now I think more than -- after more than 12 quarters, you've added nearly 10,000-plus associates. And this is at a time when the entire industry dynamics has changed from now being the industry going to add more machine learning, digital. What is it that getting into -- bringing more -- 10,000 people? Do you see a good tailwind coming in to absorb the entire 10,000 into the office?

[Rajesh Gopinathan, CEO, MD & Executive Director]

Absolutely, it's calibrated to the demand that we see. We have always maintained that this whole idea about machine first delivery and the strategic element of automation is not about replacing human with machine. It is about using technology in a more sophisticated way to change the nature of services that is delivered, and it'll only open up greater opportunity. So we have seen both of these. We don't see this as a duality. We see this going together, both the demand for services and the demand for enhanced technology.

[Vivek Padiyar, Head of Corporate Communications]

We'll go to the next question from...

[Sajeet Manghat]

I have one, Ramki, on the margins front. You spoke already about that you'll be putting your confidence on the band which are there. But from a currency point of view, will you be able to give us some color of what is the amount of about hedges that you have? Do you see any cross-currency headwinds coming in either going to the end of the year or early next year?

[Venkataraman Ramakrishnan, Chief Financial Officer]

We have a hedging policy, there is no change in that. We've been continuing on the same -- and so we do some minor tweaks in the execution of the strategy. But otherwise we continue to stay hedged for the near term. It's very difficult to predict how the currency moves because in this quarter itself, it's -- there has been so much of volatility. And so the moment -- so it is very difficult to hazard a guess. So we'll see how it plays out. But within what we can do, we manage our lead to make sure that the volatility is -- does not lead to too many surprises for us.

[Vivek Padiyar, Head of Corporate Communications]

We'll now move to Pranay from ET now.

[Pranay Jain]

I'll ask the first one on growth. While you are comfortably paced for double-digit growth in dollar terms this year, in terms of in North America is growing in single digits and moving up sequentially, acceleration is visible. So I just want to understand if that is also going to come close to the double-digit mark by the time we close this year, one. And secondly, on U.K.. Growth is solid, but there is some uncertainty around Brexit. And I just want to understand, what is the cross-currency impact on your numbers this time and also for Continental Europe?

[Rajesh Gopinathan, CEO, MD & Executive Director]

So as I said, I have gone out of the way to talk about the future. Look, I'm not going to break it down by segments, geographical or otherwise. So we are seeing structural recovery across many of our large segments. I don't want to get down into more granularity below that. U.K., as you rightly said, we are seeing good ramp-ups and good business coming out of some of the larger deals that we had announced there. We are also seeing good ramp-up from BFSI perspective even outside the large platform deals. So we are being opportunistic in U.K., participating in areas where there is growth. There are sectors in U.K. which are also showing the signs of the uncertainty in that local market. So U.K. is a complex market, very difficult to call right now. But we are one of the largest players there. We are very well positioning on the ground, and we will opportunistically participate wherever the growth materializes. Europe is more homogeneous. We are seeing growth across almost all regions in Europe. And that is continuing at about -- I think, if I remember correctly, about 18% year-on-year is the growth that we've seen in Europe this quarter, and I don't see that changing significantly in the near term.

[Pranay Jain]

The reason why I asked for it is some segments [indiscernible], are you seeing overall improvement in demand in [indiscernible]? As you also mentioned, broad-based growth that you are seeing in BFSI. So last time that we chatted, we had good demand in some large clients. Whether that has percolated into other smaller banks as well. You mentioned that it's -- even if that's within banks and insurance. But in North America, which is the most important focused result? The reason why I'm asking, you've had the best deal closures, solid momentum in the bank line.

[Rajesh Gopinathan, CEO, MD & Executive Director]

It's -- North America is a good story overall. There's not much sectoral things to call out on. It's coming across most of the sectors. Definitely, the primary story there is BFS and Retail. One was slow, the other was negative. And the negative drag on Retail has gone a bit. There is investment happening. And BFS was struggling because of the multiple headwinds that they had or demands on their capital. That has gone away. The tax benefit is on. The tax break is also helping them, and that money is hitting the ground and getting converted slowly into investments. So it's really a story on these 2 sectors. In the other sectors, there's not much change to report.

[Pranay Jain]

Could you give us any detail, what will be the expectations [ around the global financial key markets ]. Why I'm asking that, let's say, for example, what is your latest reading on Retail? The way we've seen that, it also became the [indiscernible] is impacting. You can see some evidence happening. It's -- on the ones impacting us. Last time we chatted, [indiscernible] and [indiscernible]. So are you solving these? And what kind of a structure? Would they be like this -- around this space that you have in industry?

[Rajesh Gopinathan, CEO, MD & Executive Director]

Retail, I mentioned this earlier, I think, in Kritika's question also. Retail is not structurally out of the woods yet, right. We are seeing significant amount of technology investment happening in Retail as traditional brick-and-mortar retailers turn around and invest in technology to be successful. We are seeing very, very strong competitiveness emerging in brick-and-mortar retail and that they're really taking the fight on the online sale. However, as I said, we can't rule out an occasional one-off event. It's very difficult to call. If it happens, it happens. But the industry is at the forefront of the war.

[Vivek Padiyar, Head of Corporate Communications]

Okay. Pranay, we'll come back to you if we have time. The next question is from [ Joshel ]. We'll come back to you.

[Unknown Attendee]

And so you said that now that you have returned to double-digit growth, you are looking at medium- to longer-term trajectory. So can I ask, are there any milestones on those trajectories that you may have set that you'd be willing to share? Not guidance, not numbers, but any qualitative, something that you hope that TCS manages to get?

[Rajesh Gopinathan, CEO, MD & Executive Director]

I think we have been so focused on getting back here, that this is an opportunity for us to step back and really find it. So if you look at all the key areas, we spoke about participation in digital, that has got ratified. We spoke about internal talent development, our ability to do large-scale talent transformation. That has got ratified. Our key call on betting on organic investments, that has come true. Our ability to participate in the transformation that is going on, both from a platform perspective as well as from a product perspective. Our ability to lead on automation and its integration into enterprise technology delivery. So each of these elements actually over the last few quarters, you're seeing the, what should I say, the payback on those investments. And this is a moment to step back and say, okay, fine, we have the trajectory. What's the next set?

[Unknown Attendee]

Just one last question. Out of that 10,227 people that you hired, sir, could you give me a break down on how many you've hired yourself from the market versus how many might have come in through these large deals that you've done where you may have had to re-badge your client or employees?

[Venkataraman Ramakrishnan, Chief Financial Officer]

So typically, we do not give those breakups as to what the numbers are. But in most of the large deals, there will be some amount of insourcing that happens, and that is very much like all other quarters. The number this quarter will be very similar to what we had last quarter also. So there's not much of a difference. But large deals -- as we are doing more and more of these large deals, there will be some amount of insourcing that has happened, yes.

[Rajesh Gopinathan, CEO, MD & Executive Director]

And out of the total that we added, majority of them were people who we have hired.

[Venkataraman Ramakrishnan, Chief Financial Officer]

Oh, yes. Yes.

[Vivek Padiyar, Head of Corporate Communications]

Next question is from Romita from Business Standard.

[Romita Majumdar]

One query for Ajoy, a net additions query. How many of these people who have been added at this time are fresh intake? And also, you've been -- you spoke about the National Qualifier Test. Just want to understand, is there any particular number that you are planning to hire for '20 -- FY 2018, '19?

[Ajoyendra Mukherjee, Executive VP & Head of Global Human Resources]

Okay. So last year, as I had mentioned, we had given offers to about 20,000-plus campus hires. And they came in, and so they have been joining from Q1 onwards, Q1 and Q2. And going forward to the next 2 quarters also, they will come and join us. So this quarter, we have had the trainees as well as the experienced or the lateral hires that we have taken in. And the lateral hires would include the people who have come in as a result of the large insourcing deals as well, right. So that is the kind of trend we'd have. We have not really given the breakups of how many trainees and the number of trainees this particular quarter would be. Probably more than -- close to about 5,000 will be the number of trainees that would have come in. So as far as next year is concerned, our whole process of going to certain institutes, running our campuses and then the interviews and then giving the offers, that we have changed now. And we said that given our Business 4.0 framework, given the whole reimagination and everything, so [ Sri ] is the one who was driving that, so we said, okay, let us also look at it. And can we reimagine our whole -- the campus hiring process itself? So we said, okay, let's do a National Qualifier Test, TCS National Qualifier Test, where we will democratize the intake. So people from anywhere within the country can participate. That does not mean that our relationship with the institute is different. We still have the relationship with all the institutes, the premier institutes. And now this time, we have had more than 1,800 colleges participate in our National Qualifier Test. So as he mentioned, that we had more than 200,000 people who appeared for the test. So from thereon, we are doing the selection. At this point in time, the process is still not closed. But my expectation is that our -- the number of offers that we will be giving will be somewhere around 28,000 will be the number of offers that we will be giving. And then there's a question of the joining ratio, et cetera, that whatever comes out, those are the people that will join. But let's not take that number at this point in time. We'll have to wait till the process is closed. And so that is one. And in addition to that, we also did the hiring of -- from the National Qualifier Test. The top are the ones that we have moved into the digital hiring. So they are the ones who went through our digital hiring, and that is for the much higher competencies for very specific niche kind of roles. And that is the same thing that we will also be extending to our existing employees who have been with us for some time. So they would also get an opportunity to participate in that test. So that's what we are attempting to do at this point in time. A lot of things are work in progress, so it'll take some time to get done that.

[Vivek Padiyar, Head of Corporate Communications]

The next question is from [ Varun ] from Mint.

[Unknown Attendee]

Rajesh, one clarification and 2 questions. In the first quarter, I believe you had $4.9 billion of deal wins. In this quarter, what was the total deal wins? If you can just clarify that, sir.

[Rajesh Gopinathan, CEO, MD & Executive Director]

It's about the same.

[Unknown Attendee]

$4.9 billion?

[Rajesh Gopinathan, CEO, MD & Executive Director]

Yes, $4.8 billion something. $4.9 billion you can say.

[Unknown Attendee]

Fair enough. Sir, the first question is, when you said in your opening remarks that you were -- it's a landmark quarter, you are resetting it for the medium to long term, this fiscal year, for '18, '19, we understand you're pretty confident you'll land with double-digit growth. In the medium to long term, should it be fair to infer that save for any macroeconomics downside risk, TCS now has the momentum for '19, '20 also to continue on this double-digit growth? I'm not asking for -- it just gives some kind of confidence that what -- is this momentum for the long term? Like for '19, '20 also?

[Rajesh Gopinathan, CEO, MD & Executive Director]

[ Varun ], this is the risk of, I suppose, talking too much, but let me put it this way. The way we see it today, our exit rate in Q4 will be better, and, therefore, the momentum will carry into next year, one that will be -- is too far away to take a call. But we will enter next year with a higher momentum than what we have done in -- many years in the past. Thank you.

[Unknown Attendee]

Sir, the second question, North America is still growing at 8.1% year-over-year, BFSI 6.1%, both in constant currency. Digital is growing 60%. Help us understand that our clients in North America are not really -- is TCS not able to get many of the digital spend from the large banks, large retail peers based out of America? Because America still accounts for 50% of your total business, BFSI 30%. If these 2 growth drivers are significantly growing lower than the company's overall growth but your digital is growing at industry leading, how should we infer the two? Because for me, I cannot really understand.

[Rajesh Gopinathan, CEO, MD & Executive Director]

So it's a point that we have kind of -- we have said it many times. The way to think about it is that many programs, as they end, the newer programs and the places where the new investment go are almost entirely into digital. So it is not that existing programs are being called off, but as programs end, the incremental investment and the incremental programs and the incremental demand is likely to come from the new areas. And this is the big thing that we've been talking about in digital, that there is an architectural transformation that is getting triggered so that at a very large scale, the -- it is no longer about should we do one digital project or 2 digital projects, it's a fairly large-scale transformation ongoing. So you should expect this kind of a thing to go on, which is that it's highly unlikely that a traditional program that ends is going to be renewed with the same set of services that will be renewed in a new technology, starting a new operating model. So that's the reason that you're seeing this kind of a shift coming through.

[Vivek Padiyar, Head of Corporate Communications]

Next question is [ Sumanth ] from ET.

[Unknown Attendee]

I was hoping to get some insight on a situation like this when there's currency volatility. How does it affect your strategy in terms of vying for contracts, sir? You don't know -- how do you go about it? If you can just give us some insights on that.

[Rajesh Gopinathan, CEO, MD & Executive Director]

Two perspectives on it. One is that the currency should be seen from a slightly longer-term perspective. And when you take it over a 2-, 3-year or longer perspective, the currency levels that we see is not far away from the trajectory that you would expect, looking at the inflation differential between the economies. So this is -- the event is a one-off, but structurally, it is not very different from what we have been seeing over the last 10 years, if you will. So from a very macro perspective, it's not a very different one. And it's been long anticipated. We are on one side of it. There's other set of people on the other side. So that's one. That -- the currency has not suddenly turned from a strategy perspective. In fact, our strategy and our operating model is dependent on systematic and sustained depreciation of weaker currencies to compensate further differential on the inflation. We have been continuously giving salary hikes in the range of 8%, which is benchmark for the local inflation. Our pricing is benchmarked to inflation that happens in the developed markets where we serve. If you look over the last 10 years post the financial crisis, those markets have been at practically 0% inflation, whereas we have seen inflation ranging from 15% all the way to 7%, 8% here, and our salaries have been benchmarked to that. So this is critical to the strategy. In fact, the shift in strategy would need to be called if the currency were to start moving in the other direction, that you see inflation here where the currency is strengthening. Then you need to sit back and look at a strategic change.

[Vivek Padiyar, Head of Corporate Communications]

The last question of the evening is from T Surendar from Fortune.

[T Surendar]

Yes, Rajesh, if you can tell us, how has the average ticket sizes of the digital deals mandates grown over the last 6 quarters? Have they really sort of increased a lot? And also, which is your largest digital band? And how many people are deployed in that?

[Rajesh Gopinathan, CEO, MD & Executive Director]

I don't have specific numbers to share with you in this quarter, but we have shared in the past when they really started becoming a big one. But almost digital deals are now becoming very large. As we said, core transformation is the name of the game, and that is coming through in the deal sizes also. So the last time we shared this number, I think, was when the Rolls-Royce deal was announced, which was $50 million. And it's no longer a one-off. You've seen many more of that nature.

[Vivek Padiyar, Head of Corporate Communications]

Okay. Thanks, everyone, that's -- thanks, everyone, for joining us for the conference. We'll now request you to join us for refreshments outside. The TV gents can come over for the bites. Thank you.