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Tata Consultancy Services Ltd
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Good evening, everyone. Welcome to TCS, and thanks for spending your valuable time with us today. We are here to discuss our results for Q3 FY '19. As always, we'll start with the commentary followed by the Q&A. Once again, I request all media to restrict themselves to 2 questions so that everyone gets a chance. I'll now request Rajesh to share his commentary for the quarter. Thank you.
Good evening, everyone, and welcome to TCS' quarterly commentary for Q3. We've had a fairly strong quarter in a seasonally weak set of period. We are ending the quarter with a revenue of INR 37,300-odd crores, and in dollar terms, that's $5.25 billion in revenue. Importantly, the growth on a constant currency term is 12.1% on a year-on-year basis. And in dollar terms, we now have closed calendar year '18 with $20.5 billion of revenue for the calendar year. And that's a growth of 10.3% in dollar terms from calendar year '17 to calendar year '18. Overall, the rupee growth is at 20%, aided by currency benefits, and for the quarter, the year-on-year growth for Q3-to-Q3 is at 9.7%. The growth has come at -- with a good margin difference. We are ending at 25.6% for the quarter, and on a year-on-year basis, that's an increase of 44 basis points and a growth in terms of the annual operating profit growth of 22.9%. We are on target to improve our full year margins on a 9-month to 9-month basis. This is an improvement of 118 basis points at an operating profit margin level. Coming on to net profits. We have crossed another big milestone in our journey, crossing INR 8,000 crores of quarterly net profit this quarter, ending with INR 8,100 crores of net profit, which is a growth of 21.7% -- rather, it's a margin of 21.7% and translates at an EPS level to a growth of 26% for the full year -- for the year-to-year basis. Similarly, we are quite happy with the cash conversion. We generated INR 8,600 crores of operating cash from operations this quarter, which is a cash conversion of about 107%. We are ending the quarter with INR 43,800 crores of cash and investable surplus. So overall, a fairly strong set of financial performance and it is coming on the base of very strong business growth. I'll touch upon parts of that. Firstly, from a customer portfolio perspective, we have seen expansion across all customer portfolio levels. We have now added one more customer in the $100-million plus range from a quarterly basis, and on an annual basis, we have added 8 customers. So we've gone from 37 customers to 45 customers in this band of $100-million plus. From services perspective, digital continues to power growth. We have now crossed 30% of revenue coming from digital, and it's growing at more than 50% year-on-year. From a segmental perspective, North America growth acceleration continues. North America year-on-year growth has now come in at 8.2%. And Europe and U.K. continue to do well from -- coming from a -- which is continuing a trend that has been there for the last few quarters. The growth from industry segment perspective. Very encouragingly, BFSI continues to accelerate its growth trajectory. BFSI this quarter is at 8.6% year-over-year growth, with strong growth coming from North America, from insurance and very broad-based growth across insurance segment, and as I said, from North America, despite some impact in U.K. and Europe on the banking side of it. Retail, a very seasonally weak quarter for Retail. Retail continues to maintain its greater than 10% growth rate at 10.5% on a year-over-year basis. And other segments which have been showing good growth like Life Sciences, Health Care, Energy & Utilities, all of them have continued to deliver well on the growth journey. So overall, a strong quarter, a strong pipeline. Our order book for this -- or rather the total contract values closed in this quarter, which is at $5.9 billion compared to $4.9 billion last quarter. So good order closure into this quarter, strong pipeline build up also. And from a manpower perspective, our attrition continues to remain best, very low industry-leading retention. And we added 6,800 new headcount -- net headcount in this quarter and totaled 27,000 for the year. This compares to a net addition of about 7,000 last year. So very strong demand being serviced with a very strong addition on the headcount and on the capacity side. So overall, a strong quarter to wrap up the calendar year, and a strong pipeline and strong order flow that sets us up nicely going into the new calendar year. With that, I'll open it up for questions.
Thanks, Rajesh. The first question comes from Kritika Saxena from CNBC-TV18.
Rajesh, as far as the overall deal pipeline is now concerned, we are beginning 2019, what's the sense that you are picking up? Because there seems to be some concerns with respect to macroeconomic stability possibly impacting deal pipelines. So where do you see year-on-year deal pipeline? Is it likely to remain flattish or could we see a marginal negative growth as well?
Kritika, from where we are, we see strong deal momentum. As I said, the order closure this quarter has been steadily increasing. It's grown almost 20% compared to last quarter. And on the pipeline trend also, we are seeing steady buildup of it. But macroeconomic trends are something that are external, hard to predict. If something like that comes around, definitely it will have some impact on it. But right now we are not seeing any impact into the medium term and we will -- but as the year builds up, we'll have better commentary on it.
But is it the same as last year or slightly better in terms of the deal?
In fact, our deal pipeline adjusted for the one-off platform deals that we had, we are much better than where we were last year.
Okay. Some color, Rajesh, with respect to BFSI North America. By when do you expect BFSI -- the kind of pace that you used to see, by when can BFSI growth come or cross-industry company growth average?
I will first let it come up to the company average. But say, if you look at it, it's been from 4% to 7% to 8.6% this quarter. So it is steadily improving Q-on-Q. And especially on the North America sector, BFSI is doing quite well. In fact, North America BFSI has done well for us, and insurance overall has done quite well for us. So we're quite positive about the momentum that we see in BFSI. It's difficult to say when it will cross a certain threshold, but if it continues in its current journey, we will be exiting the year close to a double-digit kind of growth rate. So that should be -- that would set us up nicely.
Okay. And how long would you expect the U.K. minor tremors in BFSI to continue?
Difficult to say. We'll have to wait and see. That market is right now fairly complex market. So we are participating well, but difficult to say as to what the impact of that will be, given the short-term uncertainties in that market.
Okay. Very quick last question, Ramki, with respect to margins, can you break it up for us? And also, as you enter Q4, the kind of volatility that you are seeing, be it on [ site ] costs or be it rupee appreciation is increasing. So a, do you stick to your margin guidance and by when can you reach that level? And if N.G.S. could give some more color with respect to the digital incremental growth, now that you reached scale, could a quarter-on-quarter growth perhaps reduce in the next coming quarters?
Okay. On the margins, from a revenue perspective, we had a 1.8% constant currency growth, but on a rupee, it is 1.3%. So obviously, the currency from a -- has -- there has been an impact of 50 basis points on the revenue. Dollar as a headline number, there has been some slight rupee depreciation. But across all the other currencies and a basket of currencies in which we operate, actually, there has been an appreciation. So on an overall basis, there has been a sort of rupee appreciation from that perspective. So from a margins, obviously, there is an impact from the overall at the revenue level. Also, we have added, as Rajesh said, close to 6,700 net in this particular quarter. And then over the last 9 months, we have added almost 27,000, which is -- last in the entire full year, we were doing 7,000. If you look at the orders we booked, the growth which we are seeing in the various markets as well as also in BFSI, et cetera, so we have been adding people. So the costs essentially in this quarter is primarily on the people cost, where it is -- where we are seeing the growth opportunities and we are feeling that. So that is where we are currently. On going-forward basis, it's very difficult to predict on currency, obviously. So -- and currency depreciation is intrinsic to our business because the model really works on the principle that where the -- it's an inflation difference between where we serve and -- from and where we serve from and where we serve our customers. That is really helped only by currency depreciation. So it's a mix of the constant currency depreciation, so we will see how it goes. We are very much focused on our preferred range. There is no necessity to look away from it because if you look at all the parameters, 9 months, 12 months, our operating margin, net margin, everywhere we are higher than even our revenue growth. We're talking of 25% growth year-on-year. And even on a 9-month basis, our operating margin is 25%. So absolutely no reason to look differently from where we have been. So we'll stay focused.
I think digital at 30% growing at 52% is phenomenal. Every one of the -- our service offerings that we have launched under Krishnan's leadership has received enormous amount of traction in the marketplace. So I don't see it slackening at all. At some point in time, in fact, we earlier commented that everything that we do will turn out to be digital. So I don't see it slackening at all. And the demand environment that we see in the marketplace across geographies, across verticals, it's really encouraging. And we have further solidified our double-digit growth aspirations and growth momentum and have secured that pretty much for this financial year. It's a conscious call that we made to capture the demand that we have, to tap into the skilled resources that we need, right? So we have hired more in this quarter. It's a conscious call that we made. And that has impact us lately on our margin, but you will see that playing it out for us in terms of capturing the demand. And especially, that $5.9 billion sort of TCV that we have made this quarter should all come up nicely for the next financial year as well as the next quarter.
The next question comes from Neha from BTVI.
The first question is, as we enter the new year going forward, your outlook in terms of growth drivers for the year as far as your business verticals is concerned. First question is that.
As I said, we are going in with a pipeline that looks to be quite strong and better than where it has been in the past, both from an order book value perspective as well as from a pipeline. Obviously, there are challenges on the markets, which are fairly well documented and widely discussed. We have no incremental insights on it. As this quarter goes through, we will start getting early indications of whether this demand is really translating into [ closure ]. And that will be a good objective point to look at it. Right now we are well positioned and we are participating aggressively. And we are fully loaded, so.
But in terms of verticals, as far as [ it's concerned ]?
Verticals, almost all the verticals. If you look at the growth actually across the volume, you'll find very strong either double-digit or trending to double-digit growth. Communication, which had a weak quarter last quarter, that's back up. The residual impact is in manufacturing. And technology sector continues to be highly volatile and challenged. The manufacturing part of it, also, we are seeing strong offtake in North America. And it's really U.K., Europe manufacturing that is right now a bit soft. And obviously, the reasons for that are fairly well documented. The technology part of it is more there are accounts that are doing well, accounts that are not doing well. And that sector is a more very complicated sector. It doesn't have a secular trend. But beyond these 2, almost 70%, 80% of the remaining business is on a strong trajectory. And then if you look at it from a geography and market perspective, emerging markets are volatile, but the major markets, there we are seeing strong opportunities.
Okay. Secondly, a bit of an update on the acquisition that happened in November, I'm talking about BridgePoint Group and W12 Studios, an update on how the integration is going.
They're fairly small operations so integration is fully done. They're very, very unique assets. And it's really not an integration one. It is about how that grows in and how we leverage that and use that as a driver for our growth. But our -- it's as I said, the unit is fairly small, both of them. So integration is really not a big issue.
And the larger acquisition strategy for 2019?
No change to it. We are -- we participate and we are fully active in the deal market. Right asset at the right price at the right time, we are always game.
The next question is from Pranay from ET Now.
It seems that winter has been warm for your business. So good growth. My compliments on that. About the challenges, why I speak is because some recent comments from Accenture results indicated that BFSI, while North America is doing well, but Europe and parts of U.K. are now becoming a sore point. So do you think those challenges could actually manifest for some of the larger IT service vendors like yourself? And in terms of other areas, Retail as well as, let's say, even digital for that matter, do you think this kind of momentum which was witnessed in Q3 is going to extend through the next few as well? Because last quarter, you said that near-term outlook is good. You have enough business in hand. Focus is now moving to medium-term outlook. So double-digit kind of growth, can that be extended into 2019 as well?
Okay. Multiple questions, let me try to answer it. We are seeing growth. We are participating in growth in BFSI. As I said, North America, Banking is very strong. Insurance is strong. There are challenges in Europe and U.K., but what is the extent of the challenge will depend on vendor-to-vendor situation, I suppose. We are right now seeing good growth and we are participating aggressively. Beyond that, how does the macro play out? Very difficult to call. But we see ourselves as participating on either side of that. We are both part of the growth and transmission part of it as well as on the optimization side. So overall, I think there will be net opportunities, irrespective of short-term volatility. So we're quite confident about the BFSI story and it's -- the trajectory that it is on. Retail, it's a good question. Again, it's a complicated industry. If you have been following Retail sales data coming out, it's been a very strong holiday season for Retail. And that's very, very -- I think, it's about a 5%, 6% growth, and that should flow through into the financials of various companies. On the other hand, obviously, there have been bankruptcies and near-bankruptcies. So our approach to it is that it's an industry that is going through transformation, and we are participating very aggressively in the growth and transformation agenda of our clients, which is primarily driven on technology and digital. So we remain quite positive. And one-off events will have to be dealt with and those cannot be predicted by [ definition ]. What was your third question? You had Banking, Retail and...
Digital momentum. This 30%, 40% kind of growth, do you believe this momentum is going to continue?
We think so. It's now -- it is over a tipping point. So it's only a question of timing rather than any residual doubt of whether this technology transformation will continue. So it's well beyond that tipping point. And we are likely to see very sustained demand on it, which is the reason we are continuing to invest in creating that capacity for it, both training-wise and hiring-wise and building ourselves for that demand that we see.
So growth is going to be reasonably good and winning business is also not really any difficult for you given the large deal closures that you mentioned and the net additions that you are seeing throughout the sales. So you are clearly positioning to service that. But when it comes to execution, we have seen -- quarter-on-quarter, there is a volatility. This time, there's a 90 bps or dip on margins. I saw that in comments, you mentioned currency volatility is -- while you mentioned 50-basis-point impact of that, but also higher cost of doing business in some markets. So is this something which is going to be around 40, 50 basis points? Is that reasonable to assume? Why I say that is because you're sticking to your 26%, 28% margin band. And given that rupee has retreated, even if it stays stable, achieving or staying above the lower end of the band is going to be a little bit difficult, even though you have execution prowess and efficiency.
Let me take part of it and then I'll give it to Ramki. We saw -- typically, Q3 is a weak quarter. But going into it, we saw the demand pipeline. We saw the demand. And we wanted to make sure that we're participating in the demand and capturing as much as possible, especially in the North America sector. So yes, there are supply constraints and there is a cost element to it. But it's a strategic call to actually invest and pick up the demand. And we believe that we have the ability to optimize. It will take some time to optimize it, but -- so you'll find that we are higher on the employee cost compared to it. Bulk of the margin decline that you spoke about has primarily come from -- on the employee line, both on the capacity as well as on the subcontractor part of it. This is something that we can optimize over time, but it'll take some period of time to go through larger-term structural changes to it. Campus hiring, getting the pyramid right, substantially working on reducing the attrition to our India levels, in our foreign markets, these are all structural factors that will help us get the best part of it, right? It will take time to play out but this is essentially what has given us the margin leadership in India. And as we increase volume in other markets also, the same levers will help us play this out. So our strategic intent is to participate in demand and opportunity wherever we see it, and first to capture it and then optimize.
Just last thing. 27,000 is the addition so far this year. So what's the plan for this year-end? And how much of that is going to be a portion for U.S. or maybe overall developed markets, but particularly U.S?
So overall, hiring has been pretty strong. I think I've already mentioned this particular quarter. There's been about 6,800. And if I look at the first 3 quarters, Q1, Q2, Q3, it's about 23,000. And from last Q3 to this Q3 in the whole year, which is about 27,000 net. So given the demand, our strategy has been to capture the demand, and we are going ahead with hiring. I also talked about the kind of changes that we have done as far as our campus hiring is concerned in the last press conference that we had here. And we have completed our campus hiring for the next year, and we have given out offers for the trainees to come and join next year from that point onwards. So I see that the demand, given the kind of demand that we have, given the kind of pipeline that is there, our hiring is going to remain strong. And we are hiring pretty strong as far as our U.S. market is concerned and the major market is concerned. For example, this particular year, if I look at, our total net additions that we have done in U.S. is the highest that we have ever done in U.S. So we have been creating jobs. I think -- and it has come out earlier also, when we had stated that if I look at our own research, it shows that we are one of the top 2 job creators in the industry in the U.S. market. And we continue to remain in that. But at least, we feel pretty confident that we will be in that position going forward as well.
When you say strong, [ part of your ] business comes from U.S., how much is [indiscernible]?
So percentage-wise, it is difficult because then it is the way that things get allocated. Some of it will be in the U.S. Some of it in various other markets. Delivery is happening globally and in an Agile world, so it will be different. But as I said, we have not been giving, geography-wise, breakup in our numbers, whatever numbers that we have been hiring. But I'll give you some indication that what we have hired net, as far as this year is concerned in U.S., is the highest ever that we have done. And the hiring demand is pretty strong.
Our next question is from [ Sudeep ] from [ Global Print ].
Rajesh, I wanted your thoughts on the Gartner statement that for 2019, the IT spend would be around 3.5% versus 2018's 4.2%. In your interaction, which you did with many of your clients in Q3, did you see some bit of slowing down of IT spend going into 2019? Can you give us an idea of what kind of -- because you did a survey with all of your clients.
I don't know the specifics of the Gartner report that you're referring to, so I can't comment on it. But from our own interactions with our customers, we have not picked up [ saying ] that it's going to be a significant reduction next year compared to last year. We have not picked up any such trends. But as I said, the quarter in which you get better clarity on what the real budget and spending pattern for the year is likely to be is this current quarter, so the Q1 of the calendar year. So we'll see how the year unfolds.
Your digital revenues are now 30% and growing at over 50% year-over-year. When we spoke to you in Q3, you spoke about the fact that -- how IT spend are now becoming part of SG&A expenses. Do you see a growing trend of that happening? That it's not incremental now, it's part of the entire process chain? And now the TCV which you've got of over $5 billion, is more of that coming into play rather than incremental ones?
I think so. In many of the industries, the spend is coming across multiple functional areas, both on the SG&A side as well as on the core side. So that is part of it. When we say we are becoming more embedded in the growth and transformation agenda, that participation is across a variety of functional lines. And that is what is driving this increased spend, increased participation.
And the TCV, which you've got of over $5 billion, will you be able to give a breakup of, segment-wise or vertical-wise?
So we've been giving broad breakups. From a geography perspective, North America is continuing to be strong. It's more than $3 billion of that is coming from North America, which is considerably up compared to where it was last quarter. From a vertical perspective, BFS is contributing more than $2 billion in that. And similarly, Retail is about $800-plus million out of that. So it's fairly well balanced across both geographies as well as verticals.
Is Energy back in the play?
Very much so. Energy is growing at, if I remember correctly, 17%, 18%. So that's [ this thing].
N. G., I just want your comment on Europe and U.K. business. U.K. is growing in mid-20s and Europe in high-teens. Do you see that continuing? And what is another challenge that you see? Because going into next week, we have a Brexit vote coming in and it's a challenging time there because of -- for the Prime Minister to get that out as well. What is your view on it?
Well, we can't comment on Brexit or no Brexit.
How are you prepared for it? Let me ask you this one.
So I think we are pretty focused on the -- our clients and the demand environment that we see out there and the opportunities that our clients are giving towards us, right? You see an all-around demand across verticals. There is some softness that we see in some of the customers, especially in the Banking in U.K. and Europe, but I think it's only a question of time before they also catch up with it, right? Whether it is manufacturing, whether it is Retail or across Central Europe or U.K, we don't see any particular thing to call out, okay? There are certain uncertainties linked to Brexit. I think we hope that, that will get resolved.
[ Sundeep ], we'll come back to you again. We'll come back to you again.
One last question to Ramki. Ramki, except for Q2 where the margins were about 26%, Q1 and Q3 margins were below 26%. And I want to repeat the same question, are you in line to meet this 26% to 28% margin by the end of this financial year? And what are the levers you're looking at? Because then what you're looking at is a high 26% margin -- EBIT margin, coming to get that to the bottom of the band.
Actually, if you -- I know within the 3 quarters, there is a -- sort of went up and came down. But if you look at the 9 months, it is 25.7%. So it's not very far off from at least the lower end of the preferred range. So it's very difficult to say when, et cetera, because definitely, currency is also a factor because that's there also to take care of some of the costs. So -- but the point is that we are not moving away from our strategy. We are very much focused on what we are set out to do. And I think most -- or all the other pointers in terms of the growth opportunities which are there, the pipeline, the across broad-based growth, gives us the confidence that we can definitely -- and the execution, we have definitely demonstrated. So we'll continue to focus on that end domain. So while it is a preferred range, we are quite satisfied with the trajectory in which we have been moving and how we are going. As Rajesh said, over the last 1 year, our margin has expanded by 114 basis points. So that's a journey we are on.
Our next question, from Swati from Zee Business.
Rajesh, congratulations to the team because numbers, despite being a seasonally weak quarter, are good. You talked about TCS Pace in your presentation and your remarks and the press release. That's a new brand that you've come up with. And there's a digital disruption piece that you've talked about regarding some retailing and connected cars. Just give us a sense on where have you progressed on it and how far do you think you want to go there?
One of the elements that has driven our outperformance is the fact that we have very strong domain knowledge and very strong technology capabilities which have over time been, what should I say, instantiated and externalized in various products, frameworks, solution sets, et cetera. But we have typically done this in different, different parts. Parts -- some of it come out of our research center at TRDDC. Sometimes it appears as ignio product. Sometimes it comes as a solution accelerator. And there have not been an integrated view of the work that we do under the research and innovation part. So TCS Pace is a brand identity, under which, we will bring our research and innovation and our design thinking and digital solutions set into a common pool, so that we give an integrated view to our customers and other stakeholders on the work that is happening on the research and innovation part in TCS, which is a core component of our outperformance. So this is an early stage of that journey, but I think it will be a big component of our transformation and our positioning journey as we go forward.
Right. One question. I know a part of it is what you've talked about, but the big -- from the big clients, the performance that has come, how do you see that translating as we go into the fourth quarter and for the next year?
Growth has been fairly strong across client sizes. So if you look at our client portfolio, $100-million plus has grown by 1. $50-million has grown by 1. $10-million, $5-million, at all levels, it has grown. So we see growth across the full spectrum. It is not lopsided. I see larger accounts are growing and small accounts growing. We're seeing a fairly balanced growth across the full portfolio.
Our next question, Romita from Business Standard.
Rajesh, just wanted to understand, you said there was a large impact of subcontracting and employee costs on margins. So if you could just elaborate a little on that. And also, in addition to that, I wanted to understand, when you talk about subcontracting costs, is this something more seasonal for this particular quarter? Or is this something that you will see going on for some time until your headcount reaches a particular threshold in the region or something, maybe if you have add some client. How long is it going to be?
Combination of everything, both seasonality as well as the market phases. So one is that from a seasonality perspective, when we saw strong demand in this. That provides a very quick ramp-up channel because you can -- when you're hiring full-time, it takes much longer, whereas the contract staff can be hired much faster and onboarded much faster. So there is definitely the demand component of it. The market per se is supply-constrained, and therefore, you will see us participating across all sources of supply, both the direct hiring as well as the contract labor pool. So there is a combination of both in it. The demand fluctuations are period-to-period, so it don't necessarily -- might not continue in other periods. But the market structure issue, the supply-constrained market, that will take some time for it to play out. We are participating very strongly in trying to drive the STEM capacity in U.S. by participating at the high school level and trying to increase the supply side into the colleges. Others are also similarly doing that. So as the supply base builds up, some of that pressure will go off.
And if you could also give the breakup for the margin impact.
That's there in the financials. It's about -- 60 basis points of that is coming from the subcontractor. But if you look at our core SG&A breakup, you will find it delineated by line items. But about 60 basis points is coming from subcontractor costs.
Next question, [ Varum ] from [ Baird ].
Two questions. Firstly, you mentioned U.S. BFSI grew faster than Europe, right? And BFSI growth was 8.6%. So I would like to believe U.S. BFSI grew faster than this average, 8.6%.
Okay. So yes, but I will not further disaggregate. This is the problem of giving these things. No, but you're right. Your math is right. Correct.
So I am just trying to understand, sir, for the second successive quarter, North America growth year-over-year has been lower than the company average. Last quarter, it was 8.1%. This quarter, it is about 8.2%. What is really holding back your growth in your largest geography when BFSI has been growing at a much -- or rather, declines in the Banking sector in North America are growing at a fast pace? What's really holding back? Is there a kind of a soft corner or soft spot in North America? That's the first broad question, sir.
There's no one specific soft spot. Obviously, the market has been growing slower than the company average, primarily because a lot of the growth has been lopsided in other geographies. But North America now is coming back across multiple sectors. So we see increasing momentum in North America. No specific spots per se that we can identify which has weaknesses.
How about the federal government?
What's that?
Federal government.
The federal government is not a large segment for us. It's not a material segment for us at all.
Fair enough. Sir, the second question is on the large deal wins, the TCVs, $5.5 billion in this quarter. Is this correct?
$5.9 billion.
$5.9 billion. So that takes in your 9 months about $15.8 billion in deal wins, $4.9 billion, $4.9 billion.
$4.9 billion, yes.
Sir, can you just cover how much of this $15.8 billion was new deals and how much was renewals?
We're not giving that breakup. So I am trying to think whether I can give it to you in a different way. But we're not giving that breakup.
Okay. So the second question over here, can you sustain this in the medium term? Because this year, you obviously saw a lot of mega-billion-dollar deals. In the medium term, can this run rate of deal wins be sustained?
The entire $15-point-odd billion that you spoke about does not have any mega win in it because all the mega parts of it was in the previous year. So this $4.9 billion, $4.9 billion. $5.9 billion, does not have any one-off or very large deal. It's fairly regular deals.
So can it be sustained, sir, in the medium term?
We have started sharing this metric only recently. I don't want to get ahead of myself. But as I said, we have had both strong order closure in Q3 as well as a strong pipeline buildup. So -- but how does that pipeline translate into closure? We will see. But our pipeline, qualified pipeline, aggregate pipeline, everything is building up nicely. So the demand outlook is quite strong.
Okay. Last question with regards to this TCV only. $15.8 billion in the first 3, give or take, another $5 billion or whatsoever you do in the fourth quarter, that means your order book for the whole year would be more than your revenue, the annualized revenue of TCS. Now I don't really know how -- I mean, if you speak to different people, they say about 10% of the business probably flows in or translates in the first year. So that will [ make ] your incremental revenue to about $2.12 billion. Yet, your incremental revenue for this year would be about $1.8 billion of whatever be that. That -- is this mismatched? How do we really understand this math, where there is a mismatch between the total TCV wins and the incremental revenue? Is it on account of --
Change the 10% to 8%, it will -- the math will work out. I'm not being frivolous with you, but these -- the translations are very, very aggregated assumptions because underlying that, there are different deals at different structures. So I don't -- that 10% is nowhere near something that I would subscribe to.
It's not about any loss in traditional business? Retail shop?
No, I don't think so. We have not seen that, I think. So no such trend that we see that has to be called out. Obviously, with very strong momentum on the digital deal side of it, the rest of it, the incremental deals are more and more happening in digital rather than all the deals shrinking away. So if you are an enterprise and if you have a new project or a new investment, almost 100% of the time now, you're going to be investing in one of the digital technologies stack. The only amount that you will do is some maintenance work on your old technologies stack. So it is not very surprising for us that the growth is entirely coming from digital technology stack because, as I said, we are over the tipping point. Now in no enterprise is there any lingering doubt as to what is the technology stack of the future. So every incremental investment that will happen, will happen almost entirely in the digital stack.
Our next question comes from [ Dhishel ] from Economic Times.
Sir, I just -- I have one question. Digital is now 30% of revenue. Could you start breaking out as to what particular parts of the digital stack are growing? And at what point will you give color between them?
We'll see. When we have stable and meaningful data to be shared, we'll come back on it. But we have always had a lot of data point that we put out. We're trying to rationalize it and combine it to what the global standards are, international standards of companies of comparable size. So you should -- we'll see what would make sense. There will be -- at some point, we will give some color.
Sir, at what point exactly?
No idea.
Next question comes from [ Ranjay ] from Bloomberg.
You have mentioned about the kind of the healthy pickup in the growth in the BFSI sector in North America. Any possibility that you could share some color on the factors kind of driving that growth and outlook on that?
I think the BFSI, there are 3 or 4 things which happened from a technology perspective: move towards micro-services, API-fication, move towards cloud and cloud migration of applications. That's one big chunk of work that's happening across financial institutions. More from a domain-centric perspective, I think payments is a very big thing; and then trading systems, trading platforms; and then related to that, an adoption of blockchains in the area of settlements and market -- creating marketplaces and ecosystems. These are areas where we see a lot of opportunities, both in North America as well as in Europe.
Last question for the evening comes from Sankalp from Reuters.
Rajesh, I missed your commentary, the first part of it. I just wanted to ask on -- or N.G. S., I mean, the -- as far as North America is concerned, is BFS still -- do you still see us remaining healthy and growing at almost the same rate that it has grown so far? That's one. I'll just come back with 2 little more questions.
Yes. We have clarified that. North America BFSI is fairly strong, and we're seeing decent growth in North America BFSI.
Okay. And you spoke about uncertainties in Europe and U.K. So is there a plan to sort of double down on North America, perhaps, to be able to drive growth from there while Europe remains a challenge?
We don't think it's a mutually exclusive strategy. We'll participate in both markets and we are well positioned in both markets. So we'll participate aggressively in both places.
So this year now, what is your key growth-driving vertical, apart from digital and BFSI?
It's fairly broad-based right now. As I said, other than Manufacturing and Technology, most of the verticals are in a good position. We'll wait and see how this quarter turns out and we should have greater color on where the demand is over the course of the next few months.
Okay. And Ajoy, last question for you. I mean, what's the hiring scene across North America and Europe? I mean, given the fact that this has been a year where Facebook has seen some turmoil, global tech giants aren't -- possibly, 2018 wasn't the best year for them. So does that give you all any leverage in terms of campus hirings in order to attract global talent? And you obviously pay competitive salaries. So how much of the hiring is happening there? You also reduced your dependence on visas here. So just wanted some color on that.
I think I have already mentioned that as far as this year is concerned, we have been hiring very strong in U.S. And the total number that we have added in this particular year is the highest that we have done so far in our history in TCS. And we have been hiring in campuses in most of -- in U.S. And I think I have already mentioned somewhere that we have -- we go to typically 70 institutes from where we do our campus hiring. And campus hiring is also pretty strong as far as our -- the U.S. market is concerned. Coming to Europe, Europe is similar to what we have been doing earlier. So there's not much of high [ counts ] as Europe is concerned, but most of our intake has been in U.S. and Latin America and in Asia Pacific. So these are the 3 main geographies where our hiring is pretty strong.
And do you expect your hiring to remain strong in North America?
In North America, yes. We expect it to remain strong.
Okay. Thanks, everyone, for joining us today. Please join us for tea outside. Or TV channels can come forward for the sound bites. Thanks.