Tata Consultancy Services Ltd

NSE:TCS

Earnings Call Transcript 2021-Q2

[Arushie Sinha;Senior Manager;Corporate Communications]

Good evening, everyone. I'm Arushie. And on behalf of TCS, welcome to our second quarter FY '21 press conference. [Operator Instructions] Our leadership team is present here with us today. We have with us Mr. Rajesh Gopinathan, CEO and MD, TCS.

[Rajesh Gopinathan, CEO, MD & Executive Director]

Hello.

[Arushie Sinha;Senior Manager;Corporate Communications]

Mr. NG Subramanian, COO, TCS.

[Ganapathy Subramaniam Natarajan, COO & Executive Director]

Good evening.

[Arushie Sinha;Senior Manager;Corporate Communications]

Mr. V. Ramakrishnan, CFO, TCS.

[Venkataraman Ramakrishnan, Chief Financial Officer]

Hello, everyone.

[Arushie Sinha;Senior Manager;Corporate Communications]

And Mr. Milind Lakkad, CHRO, TCS.

[Milind Lakkad]

Hi. Good evening.

[Arushie Sinha;Senior Manager;Corporate Communications]

We will now begin the press conference with the opening remarks of our CEO, Mr. Rajesh Gopinathan, after which, we will take your questions. Over to you, sir.

[Rajesh Gopinathan, CEO, MD & Executive Director]

Thank you, Arushie, and welcome, once again, everyone, this evening. It's my distinct pride and joy to bring you TCS' financial results for the quarter ending September 2020. Before I get into the numbers, I want to start by saying that the quarter gone by has seen TCS deliver on 3 core fundamentals or 3 core pillars of its operating model. They are our deep connect with our customer and their -- our contextual knowledge about these customers and the deep relationships that we enjoy with them. Second is the ahead-of-the-curve investments that we have made in transformative technologies that is shaping and will continue to shape the business environment around us. And the third is our unrelenting focus on talent and investment into both retraining as well as retaining the best and the brightest in the country and driving that on a global scale. All these 3 pillars have contributed to the performance that I'm so excited to share with you about. Could I have the second slide, please? Looking at it from a number perspective. TCS delivered 4.8% constant currency growth from the quarter gone by on a sequential basis, hitting an all-time high revenue of INR 40,135 crores in INR terms. In dollar terms, that's $5.42 billion. And even from -- when you think of it from a sequential side, this is our best performance in more than 20 quarters. From a profitability perspective, it's even more heartening that this outperformance has come with improving profitability. And we have hit 26.2% operating margin or achieving INR 10,515 crores in operating profit in this quarter. The operating margin, again, is 8-quarter high. And it has translated into our adjusted debt margin of INR 8,433 crores, with a net margin percentage of 21%. Overall, the revenue growth, profitability and net margin expansion has translated into cash from operations of INR 10,618 crores and -- resulting in us ending the quarter with cash in hand of INR 58,000 crores -- INR, 58,500 crores. So overall, very strong quarter from a financial perspective, underlining the demand recovery that we have been speaking about for some time now and setting us up very nicely for participating in both the technology transformation and the overall transformation of the business environment that we believe will sweep across multiple industries as we look forward into the medium to long term. This performance has also been very broad-based, and that is one of the most heartening aspects of this quarter gone by.Most importantly, our core segment of BFSI has grown on a sequential basis by 6.2%, and retail and CPG, which bore the brunt of the downturn coming out of COVID last quarter, have bounced back very handsomely, recording an 8.8% sequential quarter growth. Life Sciences & Healthcare has been a very strong growth driver for us. And even in this quarter, they have continued to outperform, delivering on 6.9% Q-on-Q growth. And Life Sciences & Healthcare, especially so, has built upon their continuing outperformance, and this translates to a 17% year-on-year growth for this segment. Looking at it from a geographical perspective, again, our core market of North America has bounced back quite handsomely, growing at 3.6% Q-on-Q on a constant currency basis. And U.K., too, which suffered a deep cut last quarter, has come back with 3.8% quarter-on-quarter. Continental Europe, which has been, once again, one of the core growth drivers for us for the last couple of years, has again delivered a very strong quarter, growing at 6.1% sequentially on constant currency basis. From a customer perspective also, we have seen very strong expansion across our customer pyramid, both at the 1 million, 10 million range at the bottom of the pyramid as well as at the top where customers from whom we make more than 100 million in revenues every year has gone up by 1 to 49 customers. The growth, as we have also spoken about sometime in the past, was anticipated, and we added on our talent base in very systematically and very strongly both at the entry level as well as laterally, with our net headcount increasing by 9,864. This includes our fresher hiring of about 7,000 this quarter, and Milind will give more details on it, and gross hiring of about 16,000 in this quarter. Our attrition continues to tick lower, underlining our attractiveness as most preferred employer in the technology services industry. Finally, I want to reemphasize that this period has been one of continuous ongoing investment into intellectual assets. And we have now crossed 5,500 applied patents, and we have been granted an additional 122 patents in this quarter, taking our total count to 1,593. So overall, a quarter of all-around performance, from a financial perspective, from an operations perspective, from verticals, geographies as well as cash generation. And it gives me distinct pleasure to share with you that the Board has decided to continue our ongoing capital return to shareholder policy, and as announced, a share buyback of INR 16,000 crores at a price of INR 3,000 per share. And in addition, has also announced an interim dividend of INR 12 per share, reemphasizing, as I said, our commitment to return 80% to 100% of our free cash flows to our shareholders. Finally, this performance is built on the core foundation of TCS employees, and we are glad to announce that we will be reassuming our salary hike cycle in line with our previous years. And we will do that with effect from October 1 for the second half of financial year FY '21. So I want to thank all of you for your support and goodwill in the period gone by. And we look forward confidently at opportunities ahead. And we are well positioned, I believe, to participate in that. With that, I want to turn it over back to you, Arushie, and we can take questions after that.

[Arushie Sinha;Senior Manager;Corporate Communications]

Our first question is from [ Chandra Vikan ] from [indiscernible] [Operator Instructions]

[Unknown Analyst]

Rajesh, congratulations, not just on this, but the 10 lakh crore market cap milestone earlier this week. You mentioned in Q1 that you expect the recovery to happen in Q3. The fact that this already seems to have happened in Q2, what are the key drivers? Will this be sustainable? You also expected Europe to lead the recovery, but you have seen U.S. come back, BFSI come back, retail come back. So give us a sense of the deal momentum that you are seeing. Will this only increase after the U.S. presidential elections because there is going to be more certainty then? Secondly, just a couple of questions on the cost front. This is perhaps the first time you are provisioning for Epic System. It was a contingent liability item for the last 4 years. So does that mean this INR 1,000 crore payout is going to happen sometime in the third quarter, which is why you've kind of brought it to P&L? And also a word on the new changes with respect to H1B visa. They have hiked wages with immediate effect. They've also narrowed categories. What impact this is going to have on the existing employees that you have in the U.S. with respect to extensions?

[Rajesh Gopinathan, CEO, MD & Executive Director]

Thank you. Quite a few questions. So we'll take it in parts. First is about the demand recovery. I believe that we are in the midst of a sustainable demand recovery when we look at conversations with customers as well as if you look at our current and expected pipeline going forward. So it is a pleasant surprise. We were among the earliest to actually call it saying that we believe that we should be able to recover by Q3, and it is distinctly our pleasure that it has happened a quarter ahead. And we have been able to get back to that 40,000 mark that we have set ourselves 1 quarter in advance. Similarly, from a margin recovery, we had targeted a margin recovery by Q4. And it is, again, very, very heartening that we have been able to pull that forward into Q2. The drivers behind it, as I said in my opening statement, are threefold. First of all, it is coming in a very broad-based way across our customer universe and reflects the deep relationships that we have with customers and their trust and their confidence in us being part of their growth and transformation journeys. Second, it is coming on top of the investments that we have been consistently making in these transformative technologies and integrating that deep into our operating model and making it available in a seamless manner to our customers. And the events of the last 6 months have reemphasized the urgency of this technology transformation all around. And we have been best placed to actually participate and accelerate our customers' business value realization from these transformative technology agenda that is currently unfolding. And the third of it, of course, is a theme that we have emphasized again and again. It's the focus on talent development and focus on training that has allowed us to organically scale and capture this opportunity that is currently unfolding. So I know it's a long answer, but your question, is it sustainable? We definitely believe that it is sustainable. And leaving aside any unforeseen developments on the health front or on the economy front, we believe that this recovery has strong legs going forward. On the matter of the provisioning and accounting treatment of it and on the visa side, I'll hand it over to Ramki and Milind. Ramki, if you could.

[Venkataraman Ramakrishnan, Chief Financial Officer]

See, on the provisioning which has been done, the development during this quarter was the decision of the appeals court. So, so far, the matter had gone for appeal, and it was in our contingent liability.At the appeal court, while we did get some relief, but it is not complete. And we still believe that we have enough grounds for the rehearing, which we have asked. And so this is -- but since it is at an appeal stage, the relief has not been granted. The provision has been made. But this does not mean that any payment is imminent. The provisions are made in line with accounting guidelines. So that is the position. Over to you, Milind.

[Milind Lakkad]

Yes. Thanks Ramki. With respect to the H1B visa, which came yesterday, too early to comment anything at this point. Our teams are still going through the documents, big, big documents that has come in. Having said that, I would still -- I would say and say it again, that our business model is strong enough to withstand any of these challenges which we come across, whether it is SBWS, whether it's our local model of local workforce or whether it is our value to our own customers, all of this come together. We'd deal with all of these challenges. We will be able to deal with it very, very well.

[Arushie Sinha;Senior Manager;Corporate Communications]

Our next question is from Reema Tendulkar CNBC TVA18.

[Reema Tendulkar]

A big Congratulations to the entire team at TCS, and I hope everyone is safe and secure. Rajesh, you had given us a couple of goalposts last time. Now you had surpassed them. You surpassed your own expectations with the kind of recovery that we've seen this quarter. So my question is, what are the new goalposts that you have set for yourself? How is Q2? How is H2 going to shape up? Is seasonality similar to what we've seen in the past few years? Or is it going to be different in account of COVID? And you are talking about a multiyear technology transformation cycle. What does that mean in terms of growth rate? Is double digit something that once again TCS can aspire to perhaps next year? And also on the P&L side. What is the quantum of salary increases, the impact it will have on your margins? And you could have done a bigger buyback. So why is it restricted to INR 16,000 crore?

[Rajesh Gopinathan, CEO, MD & Executive Director]

Thank you, Reema. Again, consistent with our ongoing a policy of not giving guidance, I will not be drawn into forward-looking numbers. We had made an exception in the end of Q4 and in Q1, saying that given extreme volatility in the environment, we believe that it was important to provide some directional flavor to how we see the environment unfolding. I believe that with these results now, we are past that phase, so we shall once again continue with our policy of not giving any numbers.From a qualitative perspective, as I shared, I believe that the recovery that we are seeing has strong legs, and it should continue, but the seasonal weakness of Q3 is likely to continue. And if at all, it might be a bit more exaggerated in a few verticals or a few regions, which will be offset by some amount of the demand momentum that we are seeing. So Q3 will be a quarter where we'll have to wait and see how the net numbers fall about. Your question on buyback. I think the buyback is very consistent with our long-term policy, and it is in line with what we have done in the past. And the dividend policy also continues along those lines. As I said, we have always maintained a very, very disciplined capital return policy, and it is very much in line with that, both the absolute amount as well as the price at which it is being distributed. Keep in mind also that as compared to our previous 2 buybacks, this buyback comes with the added cost on the tax side of it, which also needs to be factored in when we think about the total funds that are being committed to this process.On the third part on the employee side of it, the salary hikes, the detailing of it will be worked out during the course of the next few weeks, but it will be broadly in line with what we have done in the previous year, but effective for H2, starting 1st of October. So that's -- those are the 3.

[Arushie Sinha;Senior Manager;Corporate Communications]

Our next question is from Sajeet Manghat from Bloomberg-Quint.

[Sajeet Kesav Manghat]

Rajesh, so my question to you is with respect to the multiyear tech transformation cycle which you spoke about. Can you elaborate how and what kind of opportunity that brings in for TCS going forward? And from an organization point of view, whenever an organization is moving towards that transformation, what is the kind of spend that they would be trying to meet and enhance the opportunity which comes in?The second one is on the revenue part. You have come up with a good set of revenue growth in Q2. Are we to assume that this revenue growth is now sustainable and it was not something that -- some of the orders which got pushed from Q1 to Q2 which led to a higher revenue growth? Or is it consistent for the next few quarters which is going to happen?And on the issue of margins, you have hit 26.2%. Last time, we saw you crossing 26% was in Q2 of FY '19. Is there any other pressure which is going to come in for you on the margin front going into the next few quarters? Because Q3 is a weak quarter, and you were also looking at a salary hike coming in, so will there be a dip in the margin going to that? And what constituted this jump in margin from Q1 to Q2? If you can give an idea of it.And my also -- my final question for Ramki is, with respect to the social code, which came into force after the 5 month past. There would be some issue -- cost with respect to gratuity for you guys. What could be that cost? And how much will it be there on your balance -- on your P&L and what kind of impact will it have on you?

[Rajesh Gopinathan, CEO, MD & Executive Director]

So let me answer the revenue and margin, and then I'll hand it to Ramki on the third leg, and then we will hand it to NGS to talk about the technology transformation cycles that you're talking about. So the first question that you had was, is the revenue reflection of deals that have been delayed? They are not. The deals that we are seeing are sustainable demand that we are seeing, and it is coming from demand to leverage a lot of these technology opportunities that are there, technology, transformation opportunities that are there. So we definitely don't see this as a catch-up demand but as a sustained demand momentum going forward. On the margin front, our current margins have also been built on the fact that we decided as an organization not to do the salary increases in H1, considering the scenario at that time. However, we have been very disciplined to ensure that the promotion cycles, and from a timing perspective, have continued. And the promotion volumes were factored based on the demand that we have seen and the performance that we have seen. So looking into Q3 and Q4, the impact of the salary hike will be felt on the margins, and we will try and see what kind of -- how much of it can be recovered using the demand momentum, well, as we get into Q3 and Q4. I don't want to speculate on those numbers currently. On the impact of the social one, Ramki will address it.

[Venkataraman Ramakrishnan, Chief Financial Officer]

On the -- as you know, the act has been passed. I mean it has received the President's ascent, but it is still not notified and also the rules have not yet been framed and published. So we'll wait for that because -- for the finer details. You're right, it may have an impact on the gratuity, but we will await the further details. So at this point of time, we have not assessed the -- what would be the impact.

[Ganapathy Subramaniam Natarajan, COO & Executive Director]

Thank you, Rajesh, and -- it's been a very challenging quarter, difficult quarter, given the circumstances in which we have delivered this. We have lost about 34 of our employees globally due to COVID. Personally, I would like to dedicate this quarter to them. And from a -- coming back to your question on the technology transformation cycle per se, in the last 6 months, the resilience of cloud, collaboration and the digital has been proven beyond doubt. So the whole approach has been what customers -- whoever has already made investments to digital, how could we help customers to actually realize the business value out of that investments in an accelerated manner. And I think that has been our focus. And the investments that we have made in multiple areas, whether it is way of working, whether it is SBWS, whether it is the 25x25 Vision and the Location Independent Agile methods that we have put in place, all of them are coming into play. And customers have seen the resiliency of our methods or models or way of working and wholeheartedly have approaching TCS to help them to put in that similar amount of resiliency in their business models. That's the first one. So the cloud -- investments in cloud on the part of our customers is happening, and they are looking at, how can I move everything in the cloud? How can I put in my digital core lot more in the cloud? Second is that the whole Business 4.0 approach that we delivered to our customers meant that they're also seeing the cooperation and the ecosystems as taking off in a big way, and how can we help them to open up a lot more of micro services, a lot more of APIs so that they can build partnerships and -- in a collaboration, not just internally within their organization, but externally, with many people, so that, that can actually reaccelerate their growth. And then the third cycle -- third one is that really about the investments on innovation. The investments that we have made on products and platforms, how is it that's going to take up in variablizing their entire cost structures as well as adopting something which is native to the cloud, right? These are multiple things that are at play. And all this is happening in a touchless and accessibility is a very, very important attribute, as I have mentioned in my quote. And this is what drives the multiyear transformation technology cycle that we have seen.

[Arushie Sinha;Senior Manager;Corporate Communications]

Our next question is from Harshada Sawant from CNBC Awaaz.

[Harshada Sawant;CNBC Awaaz]

Second quarter has been very strong for you. Rajesh, to that effect, I would like to know, are you more confident than you were in the first quarter about how the second half of this fiscal is going to turn out after this Q2 performance?My second question would be in terms of your TCV being at $8.6 billion. Would you give us a breakdown as to how much of it belongs to BFSI or retail and the other sectors?Also how much has pricing improved or increased in these particular sectors in Q2? And will pricing continue to go upward from here onwards?And a follow-up on Sajeet's question to Ramki was, what has contributed to the jump -- a substantial jump in margins from Q1 to Q2?

[Rajesh Gopinathan, CEO, MD & Executive Director]

Okay. Thanks, Harshada. Definitely, we are more confident about H2 compared to where we were 3 to 6 -- 4 months back or 6 months back. So our confidence levels are much higher. And as I said, we think that this demand recovery has legs.Having said that, I want to reiterate that we are not out of the woods by any stretch of imagination. And both on the economy side as well as on the health side, we need to be very careful.Like NGS said, we are being -- putting the health and safety of our employees as the first priority. And it is a testament to the robustness of the SBWS model that NGS helped roll out and the 25x25 operating philosophy that has been -- we are starting to execute on that we are able to participate so strongly in this opportunity while keeping the health and well-being of our associates and our customers at the front -- at the forefront.So definitely more confident about the demand trajectory, but cautious about the realities of the environment that we are currently operating in. And that's something that I would like to emphasize to everybody.Your second question was about the deal pipeline. Our $8.6 billion also includes a $2.5 billion from the deal with Phoenix Systems that we have already spoken about a few quarters back, but the contract for that got executed in this quarter. So adjusted for that, it is still a very healthy $6.1 billion. This quarter's deal pipeline has been characterized by a very broad-based pickup in deal signings for relatively mid- and small-sized deals as opposed to very large-sized deals. And that, again, is in keeping with the overall demand that we saw, the broad-based nature of the demand that we saw, and the nature of technology consumption that we are seeing from our customer base. Because many of the technology themes that we are actually participating in, in many ways, the beachheads for these, the foundational set for this had already been established with customers earlier. We are seeing an acceleration of the consumption pattern. And our ability to actually help them accelerate business value from those investments is what is driving the growth that you're seeing in this quarter. And it has come in a very broad-based manner in a series of medium and small wins that we're seeing. So that's the nature of the deal, TCV, that we have announced in this quarter.When we look into the pipeline on the other hand, the pipeline, especially if you take middle-stage and the early-stage pipeline, has a very even mix of large and small opportunities. And there are some very exciting ones that we are working on, but we are not sure what the time frame for closure on those will be. But the pipeline is more classical pipeline that you have -- that we have seen over the last many quarters.So that was on the TCV. What else was -- and the question on the…

[Venkataraman Ramakrishnan, Chief Financial Officer]

Margins, I see the -- we have always, in fact, in previous quarters, when this question has been asked, we've said that growth is a strong driver for even margins. When growth comes back, we did expect that margins will also -- will be helped. The second is, of course, across -- if you look at our financial statements and look at across various line items, everywhere, there has been a very strong execution, and we have been able to manage that. Other parameters like utilization has been up. Attrition has been down. So all these contribute. The other factor is that has been broad-based growth across various segments. So when that happens, a lot of economies of that sort of all-around performance also helps out in margins. And what is more gratifying is, in this quarter, it has been -- currency has been almost neutral. Though there has been fluctuations during the quarter, overall, it has been neutral. So I think from those perspectives, I think this has been really a combination of all the things which I talked about.

[Arushie Sinha;Senior Manager;Corporate Communications]

Our next question is from Saritha Rai from Bloomberg.

[Saritha Rai;Bloomberg]

I have 2 questions. One, a lot of COVID time spending is supposed to center around digital transformation. In fact, these are the 2 words I constantly read and hear in terms of IT services. I wanted to ask you, on the ground, how much of it is hype? And what is the reality when you're meeting customers?And question 2, last night, overnight, I would say, the U.S. changed dramatically the H1B rules with special waivers. I know you said you haven't had the time to look through all the documentation. But I just wanted to ask you, if 1/3 of all H1B petitions will be rejected, I think that warrants a reaction without reading the documents, at least I hope so. So I'd love to hear what you, gentlemen, have to say about that.

[Rajesh Gopinathan, CEO, MD & Executive Director]

Saritha, the technology transformation that we are talking about and which you're probably reading about and referring to is very real. And what the current pandemic and the challenges that it posed did was to bring home the reality and the urgency of the technology solution. These are of 2 natures. One is in terms of building a resilient digital core on the infrastructure side and having accessibility that NGS spoke about. As said, I would say secure accessibility was one of the big drivers for it. And almost each and every enterprise has actually seen the need for achieving that, including enterprises such as [ EOS ]The second big driver for that has been to provide a seamless digital collaboration solution that emphasizes on customer experience and even more importantly employee experience. So both these themes, a secure, reliable, resilient digital core that delivers accessibility and a seamless collaboration environment that emphasizes customer and employee experience are very real value propositions. And their urgency and their need has been significantly emphasized in the last few months, and we are seeing customers essentially driving up both investments as well as consumption of these technologies.So the short answer to your question is, is it real? It is very real. And it is something that we are significantly betting on to continue to be a big demand driver for us.On the second question, I think Milind quite very well articulated our stance on it. We have nothing further to add. I want to reemphasize that we are quite confident in our business model and our ability to deliver technology and business transformation solutions to our customers. The jurisdictional rules and regulations as they change, we will adopt and adapt accordingly. Beyond that, we have no further comments on it.

[Arushie Sinha;Senior Manager;Corporate Communications]

Our next question is from Romita Majumdar from Mint.

[Romita Majumdar;Livemint]

So I have a query for Rajesh. Why did TCS choose the buyback route given that taxation rules are now pretty much uniform for both dividend and buyback? And also, is Tata Sons participating in the buyback and to what extent?There's also query for NGS. We had discussed that there were supply chain issues in the past and some residual supply chain issues as well in the previous quarter. Are we done with those supply chain issues? Has the pricing kind of -- has TCS kind of managed to come to a price premium in terms of all the digital solutions that are being offered as well?

[Rajesh Gopinathan, CEO, MD & Executive Director]

Yes, buyback. Romita, we have always emphasized that the choice of how this capital return to shareholders will be done will balance the needs and the demands and the perceptions of multiple stakeholder communities. So it has been a ongoing stance that we have taken. And the convergence of the taxation structure makes it even more a balanced choice between both those channels of capital return. And if the Board considered our history of these capital return policies, last year, as you know, we went entirely with a special dividend structure, and this year, we are going with a buyback. Beyond that, I don't think there's any further change to either our stance on how much capital to return or what instruments to use to do that capital return. NGS, you want to take the supply side question?

[Ganapathy Subramaniam Natarajan, COO & Executive Director]

Yes. Romita, thank you for that question. And I think the supply side of issues that we had the last quarter largely has been resolved. I think more than 99% of our employees are -- nearly 100% of our employees are enabled for SBWS, and they are capable of delivering the services remotely wherever they feel safe and secure.However, there are a few customers of ours still they would prefer that their services are provided only from offices. And in that context, there are a few, probably less than 1% of people are not fully dedicated for remote working in that context.Secondly, in terms of pricing, there are areas, for example, in the digital world. And it -- almost everybody is talking about how can I make these transactions invisible, right? How can I make those transactions touchless, right? And at the same time, accessibility standards have to be given and everyone, every customer of all different segments need to be given access to this, right? They are -- those kind of skills are -- those kind of solutions are very much in demand. And in some pockets, I think we are able to charge a premium in terms of pricing, let's say, something.But more importantly, I think the world is moving to a model of a completely SaaS-based, so it's pay-per-use. And if you can take whatever they have and if you can put it, host it in a cloud and then convert it into a price per whatever in a variable model, that's what people prefer, and that's what people want to have, right?So overall, I think it's a quarter in which we have seen growth. We have seen efficiency, we have seen innovation. All of them coming together and our ability to stitch all these things together to give the apt and right solutions for our customers has been phenomenal.

[Arushie Sinha;Senior Manager;Corporate Communications]

Our next question is from Anandi Chandrashekhar from ET, Economic Times.

[Anandi Chandrashekhar;Economic Times]

My question is for Milind. I just wanted to understand the salary increase. Will it be across all bands of employees or it will be across select bands?And also wanted to understand from Rajesh, basically, you said that the mid- and small sized, there's been a combination of a lot of mid- and small-sized deals. So I wanted to understand, as we go, will the size of the deals also incrementally go up based on the rates that you've laid down now? Or has the nature of the market fundamentally changed?

[Milind Lakkad]

First, so Anandi, the salary increments will be across all bands and it will be similar to what we have done in the past. That's how it's going to be.

[Rajesh Gopinathan, CEO, MD & Executive Director]

From the deal perspective, as I said, when we look into our deal pipeline, I don't see significant variation compared to our historical trends of a mix of large and small deals. So nothing in our pipeline indicates convergence towards either side.

[Arushie Sinha;Senior Manager;Corporate Communications]

Our next question is from Swathi Moorthy from Moneycontrol.

[Swathi Moorthy;Moneycontrol]

I just have a couple of questions. One is about the hiring outlook. Rajesh had mentioned that the company had hired 16,000 people and 7,000 are freshers. If you can give me some sense of how many of the laterals and also what is the outlook for the coming quarter, it would be great?And the second question, I'm sorry, but it's again about H1B. Last time, when the visa ban was announced, sir, you had said it was unfortunate. So this time, sir, the restriction has only increased basis and also the visa rules, which might be contested [indiscernible]. But again, sir, do you see that changing your on-site/offshore model? And also it is going to impact your margins? So If you can give me some sense on that.And one last question about the recovery in North America and U.K. Last time, Mr. Rajesh had mentioned there was softness in North American market and also in U.K. If you can just give me a sense of what all led to this bounce back in these 2 markets, it will be great?

[Rajesh Gopinathan, CEO, MD & Executive Director]

Sure. So I'll take the second 2, and then Milind can address on the hiring side. The H1B regulation, as I said, we have no further comments about it. We believe that our business model is robust, and we will be able to continue to serve our customers, and we are committed to be compliant with whatever would be the jurisdiction -- that jurisdictional changes that happen in those -- in each market. So beyond that, there's nothing further for us to comment on. What was your last question?

[Unknown Executive]

North America.

[Rajesh Gopinathan, CEO, MD & Executive Director]

North America and the U.K. North America, the bounce back has come from across multiple sectors. We have seen strong uptick in the BFSI, banking and financial services and insurance segment, as also on retail. It is interesting that, as you know, our industry segment consists of retail, CPG and travel and hospitality. And if you take only retail and CPG as a group, that has actually now become positive on a year-on-year basis in this quarter. Retailers have dramatically realigned themselves in the new era, and really, on the e-commerce and touchless contactless commerce and delivery paradigm. And all of that, as you can imagine, has involved significant technology leverage. And our deep relationships has led us to participate in those technology investments, and that is where the demand side recovery that you've seen in retail and CPG is. Travel and transportation continues to be a very challenged sector for obvious reasons. So that is what is still leading to the year-on-year decline that you have seen in that retail CPG reported numbers. So retail and consumer products as a group is positive year-on-year. And it is being dragged down by travel and transportation. Coming to U.K., as a market, it is in a very volatile state. We have had a relatively good quarter coming off very significant lows where we were in Q1. But it is still a structurally volatile and weak market, and we will wait for a few quarters before we can share any significant change to our assessment of the situation on the ground. Milind, if you can take the…

[Milind Lakkad]

With respect to hiring, we have onboarded about 7,200 trainees in India, all virtually onboarded, 1,000 trainees in the U.S. and about close to 100 in Europe. We just [indiscernible] about our overall net addition, about 9,869, and you know the attrition number. You can do the math on laterals.

[Arushie Sinha;Senior Manager;Corporate Communications]

Thank you. That was the last question for this evening. With that, we come to the end of our press conference. Thank you, everyone, for joining us today. Please stay safe. Take care and have a good evening.