Tech Mahindra Ltd

NSE:TECHM

Earnings Call Transcript 2022-Q1

[Operator]

Ladies and gentlemen, good day, and welcome to the Tech Mahindra Limited Q1 FY '22 Earnings Conference Call. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Mr. C.P. Gurnani, MD and CEO of Tech Mahindra. Thank you, and over to you, sir.

[Chander Prakash Gurnani, MD, CEO & Director]

Good evening, good morning, and welcome to Tech Mahindra's Q1 FY '22 results. Thank you all for joining us today. Your company continues to be focused on ESG, very focused on employees and the families of our employees. Your company also announced an appointment of wellness officer during the quarter because, as you know, the wave 2 in India did create a bit of a distress. And I can only say that the initiatives taken by HR, the wellness officer proved that we care for our customers, we care for our society, we care for our communities. But more importantly, employee first and employee families first was practiced during our daily call attended by the whole leadership every morning and every evening to monitor the progress of our community initiatives and employee initiatives. So in a lot of ways, I can only say that we practiced and showed that we are a company with a purpose and we practice what is not only good business but business for good. Sometimes, during these trying movements, a few awards got due. So for our sustained efforts in putting nature, people and planet at the heart of creating global value, we have received the HRH Prince of Wales Inaugural Terra Carta Scene. And again, I want to compliment all our employees, the leadership and people involved in the ESG frameworks for continuing to demonstrate that a healthy company is a company which believes in healthy communities and CSR and ISR are part of our right mix. Coming back to the business, your company has done well. We witnessed an all-around performance and growth across all our key markets and all the industry sectors. If you recall, I shared with you that the few matrices that we are monitoring is number of $50 million accounts, the volume and value of the large deals. Looking at revenue per account, I think that data discipline seems to be yielding results, and our large deal wins continue to be robust. I had promised some of you that it would be in the range of $800 million to $1 billion. I think we are within that range. Again, thank you for your support. Thank you that we are delivering 4.1% quarter-on-quarter growth, $1,384 million. For people in India, I mean, who believes in this terminology called lakhs and crores, I know Rohit Anand has been pushing our leaders to cross INR 10,000 crores in 1 quarter. I think, Rohit, thank you for pushing us because we did cross INR 10,000 crores. And now this quarter, we are INR 10,198 crores. So yes, 198 moments to save the rate. And I think overall, I can say that largest health care deals, largest BPS deal this quarter. Health care deal is clearly about hospital modernization or patient care modernization. BPS deal is for more digital integrated back office, provisioning and fulfillment. So I can only say that I'm happy that the investments that Tech Mahindra made over the last few quarters -- and let me again remind each one of us here, 5G, customer experience management, cloud, AI, data and analytics and IoT, these are the areas where we made investments. All your capital was deployed in acquiring companies in these spaces. And each of these acquisitions have now been well integrated, and you're seeing the results of these either acquisitions or setting up experience centers, setting up centers of excellence. Like for example, 2 years ago, when we set up this Open RAN center of excellence in Bangalore, I mean, there are a lot of people who questioned us. Will the radio network go in cloud? Will the radio network go digital? Will software-defined somehow just fade? And now we are seeing an increased traction because of some of those investments.I think the other highlight of this quarter is -- and I really consider them as highlights. Number one, we were -- high-tech vertical we've been tracking for the last 5 quarters. And this time -- and we appointed or invested in our management team that we had hired for the high-tech vertical. High-tech vertical for us is hyperscalers, product engineering companies and some of the unicorns. That high-tech vertical has now shown us the highest growth. Over the last 5 quarters and this quarter, particularly, they grew over 8%. So we will now be formally reporting to you every quarter on high-tech vertical. The second part is, as I said, BPS, digital BPS, customer experience side, we have continuously evolved. We have always shown you good results, but they have shown spectacular results this quarter. They are at 11% quarter-on-quarter. So thank you, Ritesh and Dilip Keshu for your leadership. But definitely a very strong demand and a strong performance. The third one is our platforms. Business process as a service and platform is a new business unit. And we do believe that it will become one of our high investment areas. One of the new platform launches that we have done is netOps.ai. Manish Vyas, when he speaks to all of you, will share why he is excited about netOps.ai. But I can only say from the numbers part of the platforms have registered 60-plus new wins. So 58 new accounts, 60-plus new wins, highest INR PAT in Q1, delivery excellence and overall growth, working from all vectors, I think, we are overall as a company is in good shape. We have focused on talent. We are focusing on talent supply chain. We are continuing to invest in M&A.Our capital allocation is doing well. I'm sure Vivek will share a lot more with you. Our partner's ecosystem is becoming stronger, both with the traditional players and some of the new-age companies. And really means is that we are creating new solutions through our partner ecosystem. Your company has also now realized that we need to be known for our thought leadership. We need to be known for our engineering excellence. We need to be known as one of the forward-looking companies. For this, we announced a partnership with FIDE to launch a Global Chess League. So your brand will now be visible through the Global Chess League, which is in tradition of things to come is a digital format, digital Global Chess League played across various countries. They are advised by the 3 time grandmaster, Viswanathan Anand, and we are also blessed that we would be doing both online and offline. So all I can say is huge recognition by partners, by the community, by the employees and an incredible work by the employees, company with the brokers, company doing extremely well on ESG. I would need another 20 minutes only to talk about all the recognition we have received in ESG. But overall, very proud and grateful for an excellent quarter. Thank you all for your support. I will hand over to Milind to take us through the breakup of the revenue and overall the quality of business that we have delivered.

[Milind Kulkarni, Chief Financial Officer]

Thank you, C.P. Good evening to everyone. So let me cover the company financials in little more details. Our first quarter revenue was $1,383.6 million, which is a sequential growth of 4.1%, and it includes tailwind -- currency tailwind of 20 bps. So our constant currency revenue growth is 3.9%. What is more heartening is it's broad-based growth across all the verticals. Our CME business, communication, media and entertainment, grew by 3.2%. And that, too, despite a seasonal decline in mobility business. I mean, as you know, this is one of the -- this is normally -- the quarter one is the weakest quarter for us because of the salary increases as well as the mobility business with seasonal nature, okay? Our enterprise business has grown by about 4.7%, with key verticals like manufacturing, technology, high-tech driving the growth. Our deal wins continue to be healthy. As C.P. alluded to, they are in the range of $800 million to $1 billion. Our deal wins for the quarter were about $815 million. And they are both in CME as well as enterprise vertical. I think $360 million and $450 million are the kind of rough numbers, which are there for CME and enterprise vertical. Now -- and these included one of the largest deals that we have won in the health care and also in the BPS segment. The EBIT for the quarter was $209 million versus $219 million in quarter 4. And as I mentioned, this is one of -- I mean seasonally this is the weakest quarter for TechM. The EBIT margins have declined by about 130 basis points in Q1 versus Q4, impacted by salary hike, impacted by visa cost, seasonal decline in mobility business and higher subcon costs, which is partially offset by operating leverage and operating efficiency, lower SG&A over the last quarter. And now this has resulted in EBIT margin of about 15.2% for the quarter. We would look to improve the margins in the coming quarters because there are tailwinds which are expected to more than offset the headwinds which will be there. The net profit after tax for the quarter was about $183.2 million versus $147.7 million in Q4. It's primarily led by the higher other income of $34.4 million, coming out of higher income on our fund invested as well as ForEx gain, which we had in the quarter. And then we cut with -- and one of the other reasons for the higher profit after tax was our tax rate for the quarter was lower -- was at about 24% as against 22% in Q4, which had 2 one-offs in terms of higher tax by our -- at our subsidiaries. So our tax rate, as we have always said, will be in the region of about 24%, 26%, in that range. In quarter 1, it was at least around the lower end of the range we have indicated. So I mean, just to give you more details, we had a ForEx gain of $14.5 million in Q1 against a loss of about $8.6 million in the quarter 4 and miscellaneous and interest income higher by about $11.3 million aided, as I said, by improved returns on investment of surplus fund, which improved from about 2.8% last quarter to about 4.5%. Our cash flow for the quarter was $172.4 million, which is 94% of the PAT, quite healthy cash flow for the quarter. Our DSOs, despite our sales growth, are just up by about 1 day, from 92 to 93 days. We continue to follow the hedge policy, which we have. And our hedge book was about $2.2 million -- $2.2 billion, about 10% higher than the last quarter. Based on the hedge accounting treatment, the mark-to-market gain that we have taken to the P&L in effective ranges is about $7.5 million, and we have carried about $23 million of mark-to-market gain to reserves. I mean just to summarize, we are back on strong growth track with strong focus on profitability and operational improvement. Our endeavor will be to continue with the same operational rigor, and we'll embark on a strong growth journey in FY '22. With this remark, I will now open the floor for questions. Thank you.

[Operator]

[Operator Instructions] The first question is from the line of Sandip Agarwal from Edelweiss.

[Sandip Kumar Agarwal, Vice President]

I have a bad throat, so please excuse me for that. C.P., congrats on a very good execution to you and your team and particularly the utmost care which you have taken off your people. I wish you best of luck for your own health as well and for the execution. C.P., I have just one question. I am just not able to comprehend one thing that with the kind of tailwind this industry is seeing for the first time in last maybe 2, 3 decades, I would say, and probably you have a bigger exposure to 5G, which may not show you immediately the same thing, but the kind of use cases which are happening in the world will give you that confidence. And the kind of execution you are doing, the kind of people you are having, the best team -- one of the best team you're having, why you are not providing us any easy way of modeling your growth and your financial for the future? I know it is against your policy. But if demand has changed in more than a decade, if pricing environment has changed for the first time in a decade, I think you should also be a little generous with the investors, and you should guide us something so that we can build something in our model. And you should provide us some kind of guidance, if not quantitative, at least qualitatively that you will be on the top end of the industry quartile or something like that. It will be very, very helpful. And similarly, on the margins, what is your aspirational range? Because with such a huge growth coming in and if your growth is going to be in double digit also you will start now seeing operating leverage playing out significantly. So if you can throw some light on that? And secondly, how far we are where we will see 3G picking up very aggressive -- 5G picking up very aggressively? So if you can help on that.

[Rohit Anand, Senior Vice President of Finance]

Yes. Sandip. This is Rohit. Thanks for the question. So as you know, Sandip, we don't have a policy of giving guidance. But despite that, in the last earning calls, C.P. had clearly given our golden aspiration to get double-digit organic, right? We'd articulated that and a 15% EBIT that we'll go for. Now if you look at the quarter result and break it out. So we -- 4.1% overall growth, 3.9% constant currency. And with that and the deal wins, which we've announced on the back of $1 billion last quarter, $815 million this quarter, the momentum and the qualitative commentary is available, right? I mean, we're seeing broad-based growth across the sector. It's not isolated to one particular deal. It's multiple deals, biggest ever in BPS, biggest ever in health care. So the commentary from that perspective is available, right? And we do talk about the details around it. So that's currently where we are. And given the 1Q and the momentum, including the deal pipeline that we see, we're pretty sure this trajectory will continue to expand further, right? So that's on the revenue side. And similarly, on the margin, as you rightly mentioned, we've executed 15.2% in 1Q. And with the revenue growth leverage, operating leverage, that's the tailwind that Milind indicated, will continue to drive our operational productivity that we've driven last year where we invested a lot in that. Including with the leverage, we will be able to manage the headwinds that we see and continue to drive that upside as we move forward. Given the policy, we don't give guidance, we will continue with that, but we gave enough qualitative commentary around it that should help you and the peers. That's all put in. On 5G, I like Manish to be invited here. Manish, can you give a little bit of context to Sandip on 5G and our development there?

[Manishkumar Murlimanohar Vyas]

Absolutely. So Sandip, thank you for that question, and I appreciate your kind words. There are 2 things, transparency in terms of our 5G strategy as well as consistency in terms of what we have said over the last few years from our perspective on 5G and why we are, a, very positive about it and at the same time what exactly is our framework. So just to remind all of us, our framework for 5G is that we will continue to do transformation work for 5G for the telcos, both in terms of network as well as the digitalization that is needed for 5G, whether it is cloud or all the systems underlined. Number two, we will do 5G for the ecosystem. And number three, we will do 5G for enterprises, which is what we were referring to as use cases. And you are right, there are plenty of use cases emerging. So as far as our CME business is concerned, I'm happy to say 2 things right now. One, as our strategy has been, that 5G is -- and our perspective has been that 5G is not about just network deployment. It is an overhaul from a complete transformation within a telco. I think our strategy and our investments are playing out quite well, and we will continue to see the results of that as we continue to sign and scale these projects around 5G. I'm also very happy to report that 5G is pretty much now deeply integrated in every single telecom transformation project. Just to make it even better, I believe that this year, almost 60% to 70% of our new signings are going to be built around either integrating or enabling the 5G, together my view, with a scale adoption of the cloud architecture as well as driving the greater intelligence into the network systems via analytics and data anyhow. So that, I think is -- you've all been asking for a while, and I'm very positive that this is the year of reckoning in terms of -- as we go along the -- what we have seen in quarter 1 and as we continue to keep looking at our pipeline, this story is playing out. I must also remind that we've also been very clear about not just what we will do within 5G, what we will not do. And we have said that we are not going to go for high-volume but very low-margin business in many markets. We remain very focused on that. You all are clearly advised. We are very clear on our game plan and strategy there, and we remain focused. Our 5G for enterprise use cases are getting fantastic response in the marketplace. However, we believe that story still has to play out, and it is still not ready for prime time for some time. Because it will start getting -- it's more complex and it involves a lot of other architectural changes, not just in the telco but also on the enterprises side. And I'm reasonably sure as and when that story shapes up, we will continue to -- your company will continue to remain at the forefront and from a leadership standpoint. I hope that helps, and I'm sure -- if necessary, we can always do an offline and give you more detail.

[Operator]

The next question is from the line of Sandeep Shah from Equirus Securities.

[Sandeep Shah, Director of Research]

It's pleasant to see that this kind of performance is all around, not just in scale or margin, it has come in with the parameters available. The first question, Manish, again to you on the 5G. So I think last 2 quarters, you were saying that a lot of discussion around 5G with the clients have started maybe in terms of small-sized deals as a whole. But the way we look at and read the transcripts of the OEM on the telco side, I think their order intake on the 5G equipment has also started improving. So is it fair to say, Manish, that by the year end, there could be larger deal conversions, which can happen around 5G? And your order intake on the telecom and communication start inching up and may pick up the pace starting from FY '23 as a whole? And this could be a growth accelerator starting from FY '23? So some color will help as it is.

[Manishkumar Murlimanohar Vyas]

So I will again -- Sandeep, again, thank you for that question and very insightful. I think it's important to recognize our role, our strategy and our position in the ecosystem. It's very clear -- our customers are very, very clear about their positioning. They know exactly what we stand for. What we stand for is a more integrated holistic transformation. There really are 4 big levers there. It's driving -- the telecom companies clearly recognize therefore them to be able to generate a greater momentum on both their enterprise and the consumer business, they need to continue to transform their customer experience. If you really see the acquisitions and the integrated story that we build is all directed towards the 5G enablement in that space. It's not pure-play network, but it is really a transformation around bringing in more digital in that space. Moving leftwards, we are then talking about driving a greater product and product engineering around 5G. I'm happy to report that, that story has started shaping up quite well. Our engineering business, our product development business, both for the ecosystem as well as for the telcos is seeing pretty good growth. There is a good solid demand. I think there are various conversations happening both on the device as well as on the software and equipment side in that area. And number three -- number four. Number three is where we're talking about the new digital infra, which is really what you're talking about, the OEM models and the stuff. In that ecosystem, we have decided on what we would do. We will play very big on OSS orchestration. We are building IP in that stage as well as we speak. We are integrating a lot of those systems. We are focusing on core. For example, one of the very interesting case study shaping up in the U.S. is where we are helping a new operator to integrate their 5G architecture, test and certify that, and that's a very scaled, very successful case study that we have for the last few years. And then, of course, we continue to do integration around O-RAN. But we are at the same time very clear that we are not going to get into the low margin, high-volume field-type activity, except in some cases where it is very integrated as part of our deals. So that is the third thing. And the fourth is a more inherent digital growth, which includes our transformation of their underlying systems as a whole. So all of those are absolutely at this point. I'm just giving you a more detailed answer, and some of this could be an expansion to the previous answer I gave, Sandeep. We're clearly busy across all the 4 levers, all the 4 areas. Not just in -- like I said in the last 2 quarters, in conversation, but starting to close those deals. Like I said, 60% to 70% of all our new signings are already showing a trend that it will be in the transformation -- in the 5G and transformation.

[Sandeep Shah, Director of Research]

Yes. So I think, Manish, your discussion clearly implies that the deal activity on the 5G has started moving up. So can you believe that discussion may result into even larger TCV wins for Tech Mahindra? Or do you believe the TCV win maybe in a smaller in size but maybe more consistent over next 2 to 3 years time?

[Manishkumar Murlimanohar Vyas]

No, our large -- no, absolute, I get it. Our larger deals will also be predominantly now transform -- are already transformation-oriented.

[Sandeep Shah, Director of Research]

Okay. Okay. And you expect more to close on a consistent basis going forward?

[Manishkumar Murlimanohar Vyas]

That absolutely is the intent.

[Sandeep Shah, Director of Research]

Okay. Okay. Okay. And just in terms of the question about the guidance rate, what we have said is the double-digit organic growth as a whole. So now with the good start where we are at pace with this booking kind of a growth for the first quarter on a Y-o-Y, it looks like for the full year also achieving a booking kind of a growth may not be a big task including the inorganic as a whole. So is it a right way of looking at it as a whole? And second, the question in terms of margins. So I think, yes, the delivery execution is good, but the attrition is a big challenge as a whole. Where, for us, it's not only attrition is higher, but the utilization is at an all time place, which could be counterproductive to each other as a whole. So in this scenario, do you believe on lifting the margin may not be an easy task going forward and there could be a possibility of second round of wage hikes? Or you believe no attrition can be well managed and utilization can also be well managed going forward as a whole?

[Rohit Anand, Senior Vice President of Finance]

Yes. Sure, Sandeep. So any -- on the growth side first. So if you look at what we said earlier, we said organic double-digit with 1Q results,and the deal win momentum continue and the view we have in the pipeline. Definitely, from aim and from a visibility perspective, we see an upside to that case, right? And that's where we're kind of looking at. And in a good part, as Manish mentioned, the results that you see on the communication and media and entertainment space is also rallying a similar growth trend, right, which is helping overall. So we will continue to see an uptick there. And as we keep on progressing in that journey, we'll keep on updating where we stand on that path, right? So that's kind of on the growth side.Second, on the margins, while we've done 15.2% in the current quarter, we definitely see headwinds to the point you're trying to make, which will continue given the demand environment we're in. But we've very well articulated and discussed our action items to have tailwinds to offset that and manage it efficiently. So we have incremental levers that will help us position ourselves in that journey as we move forward. And in our discussions and previous conversation also, it's a long-term journey for us. It's not current quarter. It's not next quarter. We will sequentially continue to work towards the productivity levers. Even if utilization is high, we have other measures that we have significant headroom to work with, and we will continue to deploy it. And example we've given is on our strategy change on M&A side, where we're centralizing most of the back offices. So projects like those have been identified and well defined with ownership and outcomes. That we're constant to deliver that tailwind as we move forward, including the operating leverage that we'll see with the volume growth. So hence, that gives us the comfort on incremental progress that we'll continue to make in this journey on margins, I think.

[Sandeep Shah, Director of Research]

And just the last question on the order intake. With the demand picking up, also the telecom communication growth may be better because of 5G and the other transformation which Manish has spoken about. One can fairly say that our new business TCV wins can be now approaching a new normal operationally around maybe anywhere between $700 million to $1 billion most of the quarters going forward? Or do you still believe it is too early to call out this trend as a whole?

[Rohit Anand, Senior Vice President of Finance]

So I think, obviously, I won't again give a guidance, but what I can say is pipeline is good. The momentum is strong, as you heard from Manish and you probably hear from other leaders as well and you heard from C.P. So that's reflective of how we look at the future. But the deal closure time lines are not -- can varied from a time to time perspective. But given the pipeline and reflection of that convertibility, we are confident that we'll continue to be below the normal average that we had earlier. We see that trend playing out as we move forward.

[Operator]

The next question is from the line of Pankaj Kapoor from CLSA.

[Pankaj Kapoor, Research Analyst]

Manish, again, on 5G, sorry to persist, but just a clarification. The way you described 5G is now getting integrated in all the deals that you are seeing in the market, does this mean that spend is not really as much incremental, but is more replacement of existing dollars? And if I just take that logic further, does it mean that the reported growth in telecom obviously will accelerate, but may continue to lag the overall corporate growth? If you can clarify that, please.

[Manishkumar Murlimanohar Vyas]

Well, I think as far as the latter part of your question is concerned, I'm not sure I can comment on that. I don't think that's how we look at things. But your primary question is, 5G is indeed and indeed -- 5G is one of -- 5G is -- an integrated 5G story is one of the transformation program that we have, and that continues to stay. That continues to be new set of capital expenditure projects that we are deriving the value from as far as the telcos are concerned. But I think you all know and we have been saying it very clearly that the telcos have not -- has always been allocating their total CapEx as a percentage of their revenues. It's not that they are spending 30% more than the previous years. Most of them predominantly have kept that line flat. And hence, there is a repurpose of that money from what they were doing earlier to fewer -- 2 or 3 things, whether it is cloud, whether it is 5G network or for that matter data transformation. And all of that is stitched together to direct a more intelligent network, which is built on a 5G core. That exactly is the strategy that we are mimicking because that has been your company's key strength of aligning with how the telco strategy develop. So that's the strategic part of the answer. As far as the upsides are concerned, I think we have been very clearly saying that our non-5G revenues will continue to grow as well. Our legacy will continue to remain under challenge and we continue to replace that with new business. We'll be in a single-digit growth area. But as the 5G revenue kicks in, we will start scaling our revenues into a double-digit kind of a trajectory. And we remain very positive on that. So more than that, we have no doubt, but I think we are very happy with the execution of our overall strategy at this point.

[Pankaj Kapoor, Research Analyst]

Understood. That's helpful. And my next question is on the technology vertical. If you can give some sense of how is the client concentration there? I mean is it dominated by a few large accounts, very large accounts? And a sense, in terms of how sustainable is that growth there?

[Rohit Anand, Senior Vice President of Finance]

Yes. So maybe I'll start off and maybe hand over to Jagdish to add on, Pankaj. Just from a concentration perspective, first, I mean, simple answer it's not highly concentrated. It's quite spread out. So there's no concentration risk there. I think the biggest customer as a percentage of the total vertical would be probably 15% odd broadly, right? So I don't see that as an issue. And that engagement journey with all those customers are gaining traction quarter-over-quarter, as C.P. mentioned, and we are seeing a lot of positive progress there, which we'll continue to reap benefits, including all the pillar penetration as you know that we have defined 5 core pillars from an offering perspective. We see that growth across these customers across those 5 pillars, not isolated to IT transformation, it's across the pillars that we have. So that's a good story given it's broad-based, both from an offering perspective, and it's highly kind of broad in terms of customer orientation perspective as well. Jagdish, would you like to add anything on top?

[Jagdish Mitra, Chief Strategy Officer & Head of Growth]

Yes, sure, Rohit. So I think the -- as Rohit said, the -- it's not -- definitely client concentration is not a challenge. We are quite broad based on that. As far as the growth is concerned, it's been driven by 3 areas primarily. Obviously, a lot of engagement with hyperscalers, an area of work with product engineering and the third area being primarily investments and build in the areas of semiconductor and the way it's starting to play out. We see that as a critical driver. Other -- I think we expect this growth momentum to continue because we think that the growth is going to be driven by revival across the globe and also the pandemic and geopolitical impact of it, which is primarily focusing a lot of offshoring and also supply chain-related opportunities that are coming across in the high-tech area. So we see all of that but also the 5 pillars that Rohit talked about, including our new age BPS and cloud DNA and digital engineering driving the growth.

[Operator]

The next question is from the line of Manik Taneja from JM Financial.

[Manik Taneja, Research Analyst]

While it is good to see the improvement in terms of order intake over the last couple of quarters, I just want to understand if that is enough with regards to your growth ambitions because when we look at some of your peers, the order book to bill ratio seems to be much in one time, while mark is that -- still below one time. So any thoughts here.

[Rohit Anand, Senior Vice President of Finance]

Yes. So I think we will look at what we report. So when we report the deal wins, we talk about greater than $5 million deal wins, and we talk about incremental growth deal wins. We don't talk about renewals here, right? So these are all incremental to the business perspective. So the definition might vary. And hence, the correlation is not as easy to do, but maybe I'll give you a couple of more data points. So if you look at our reported wins in the 2 quarters. Obviously, when we don't report less than $5 million there, again, we're seeing significant growth broad-based across the geos which has significantly gone up versus what we've seen in the past. So hence, that's another interesting data piece that is coming out, which demonstrates the growth that we're seeing. But broadly, it's a comparison that you can't do given the definition difference across the board.

[Manik Taneja, Research Analyst]

I also had a follow-up question related to margins. So if you could call out the bridge for the margin or for the factors affecting margins in the coming quarter. And also help us understand the lower that you think will help us build up further on these margins in subsequent quarters despite supply side requirements?

[Rohit Anand, Senior Vice President of Finance]

Sure. So let's look at maybe the headwinds first. So if you look at the challenges on what we see from a margin perspective, I would say we will have a supply side talent situation that will continue in the industry, which we have a focused strategy, as I articulated before to kind of manage and be ahead of the curve there. So that's kind of first area that we look at. Second, from a challenge perspective is, as we move forward, continues to be travel coming back. So if you look at this quarter as well, the travel is not yet back. Some of the regions are getting vaccination drives through. People have started moving around. If you look at the data from an aviation perspective, the takeoffs are almost at a 60% to 70% level of 2019. So hence, it's getting back to normalcy. So that will get to customer travel, et cetera. So that's another headwind that potentially will come as we move forward. And from a tailwind perspective, obviously, growth is positive for us. We're strong with all that we're seeing from a pipeline deal win perspective. So that gives us the operating leverage. That's a strong one. From a productivity standpoint, the journey we did on automation, the journey we've created digital assets helps us on that journey strongly on all the space, including IT and BPS where we'll continue to digitize a lot of our operations that gives us the upside. And then if you look at our offshoring also, we've seen substantial growth there from year-on-year and even quarter-over-quarter perspective. And as compared to the industry, we still have headroom there, right? So that's another journey we continue. And I mentioned earlier on the G&A centralization initiative for all the portfolio companies that we have. That's another one. So I think we have significant actions there that we'll continue to work on and drive execution on, which keeps us of the view and the confidence that we -- as we mentioned earlier, it's a long-term journey, and we will continue to work on it and get better incrementally as we move forward.

[Operator]

Next question is from the line of Gaurav Rateria from Morgan Stanley.

[Gaurav Rateria, Research Associate]

Congratulations on good performance. Two questions. Firstly, on margins, are you also baking in any incremental interventions in the coming quarters, which is probably leading to margin outlook remaining unchanged despite a very strong performance in 1Q?

[Rohit Anand, Senior Vice President of Finance]

So again, from an outlook perspective, I'll reiterate that we're not giving an outlook. We had mentioned we will deliver 15% earlier, and I'm saying that we will have plus to that. We're looking at continuing to drive better results as we move forward, but I'm not calling out a guidance there, right? So in that perspective, as I mentioned, the headwinds and the tailwinds that gives us enough confidence on the progress that we'll make in that journey.

[Gaurav Rateria, Research Associate]

Okay. Second question is on the pipeline. You have had very, very significant deal wins in the last 2, 3 quarters. So after the deal wins typically the pipeline -- these are dipped. So just trying to understand better how your pipeline looks versus last few quarters? And what really needs to change within the pipeline for you to be able to get to a double-digit growth in the communication business? Is it -- because your win rates are already very strong, right? So I believe the things have to change on the pipeline side. So I'm just trying to get a better color around your pipeline, especially in the communications business.

[Rohit Anand, Senior Vice President of Finance]

Sure. Maybe, Manish will answer, given it's more directed to comms. Why don't you take it on the pipeline concept?

[Manishkumar Murlimanohar Vyas]

No, no, absolutely, Rohit. My pleasure. I think the -- thank you for that comment on the deal wins, and we are very happy about the way the deals are fructifying for the last few quarters. I'm happy to report that the pipeline continues to look very robust because both the programs were running in parallel, the task of continuing to create proactive proposals and pipelines around our transformation bets. At the same time, whatever deals that were in the funnel to continue to engage and ensure that the clients got this. So with the efforts and the investments that we have made, particularly in the last 2 or 3 quarters, in our client engagement, the program that we have put together and categorizing our account relationships into areas where we have a greater potential to get a tailwind, we continue to build the pipelines across all our theaters. Whether it is APJI, EMEA or Americas, our funnel continues to evolve into a pretty healthy trend.

[Gaurav Rateria, Research Associate]

Okay. Any quantification around the pipeline versus last year or last couple of quarters? That will be helpful.

[Manishkumar Murlimanohar Vyas]

Yes. I think I would even give you better than that. I think overall, our absolute pipeline is -- maybe at an all-time high in comparison to last year or even before. But what is more important is -- and I'm emphasizing on this one. I'm sure you'd appreciate it that our qualified -- qualifications of that pipeline has even further improved, become a little bit more smarter about what are the areas that we take versus we don't. Even that qualified thing, which we are very clear that it's aligned to the client strategy and our strategy, even that overall trend is even better than the absolute number. So percentage, well, I don't have the numbers off the hand, but we can provide you with it.

[Operator]

The next question is from the line of Rishit from Nomura.

[Rishit Parikh, Associate]

Congratulations on a decent quarter. Just 2 questions, just reiterating a little bit on guidance, right? Given the quality of the deal pipeline or deal wins for the last 2 quarters, right, stronger pipeline and stronger key retention, what stops you from giving a more definitive guidance? And I think you also talked about 5G, which could be a year of reckoning, right? Anything that is more like a caveat which sort of stops us from giving a more definitive guidance versus, I think, last time you used to talk about double digit more or less?

[Rohit Anand, Senior Vice President of Finance]

Yes. Rishit, so it's more a policy that we don't give guidance. And despite that, I think we've given an indication for this year when we started 1Q that we'll be double-digit organic. Now based on 1Q and what we see moving ahead, what I've indicated is, we're seeing almost all verticals being in the double-digits soon, right? So comms, as Manish mentioned, has moved from high single digit to double. And similarly, we see similar traction in all of the verticals in the enterprise side. So hence, that's looking favorable. And we've also mentioned BPS which had a stellar quarter, the visibility looks very positive. And we're looking at industry-leading growth there. So I think from a narrative standpoint, we are giving a visibility of what we see in the future. Given our policy of not giving hard guidance, we don't want to do that. That's where we stand.

[Rishit Parikh, Associate]

Okay. Fair enough. And just if you could provide us any color on the hiring plans we have, both on-site, offshore, that would be helpful.

[Rohit Anand, Senior Vice President of Finance]

Sure, Rishit. I'll invite Harsh to take that question, Harsh, who is our Chief People Officer.

[Harshvendra Soin, Global Chief People Officer & Head of Marketing]

Yes. Thanks and thank you for asking the question. Clearly, we've stepped up our hiring engine in this quarter, not only by making sure that we have enough and more recruiters on our roles, but also stepped up our partner, whether they are RPOs or others. We are very confident that we will hire significantly both for lateral and as you would have heard earlier, C.P. said, that our fresher intake is going to go up significantly. And you've seen what we've done in quarter 1, but we are going to significantly take it up in this year.

[Rishit Parikh, Associate]

Is there a number that you're alluding to or?

[Harshvendra Soin, Global Chief People Officer & Head of Marketing]

Well, I would rather say that we would follow the trend that we've done this quarter, and if anything, enhance it significantly.

[Operator]

The next question is from the line of Surendra Goyal from Citigroup.

[Surendra Goyal, MD & Lead Analyst of India Equity Research]

So Rohit, just wanted to understand. If there are no one-offs on margins that we should be aware of, right? And I was just looking at the margin for stand-alone and consol and the margins look a bit different despite stand-alone being 80% of consol revenues and hence the question. Could you just assure that there are no one-off in the margins and what is something a bit more recurring in nature?

[Rohit Anand, Senior Vice President of Finance]

Yes, Surendra. So when we look at the P&L across the lines, we do have plus and minus, which kind of nets off. So at a net off level, we don't see significant one-offs that will give us tailwind or headwind. So from a margin perspective, it's quite operational, right? That's the way to look at it. But from certain line aspects, we do have -- that doesn't drive the overall result. Milind, do you want to add something?

[Milind Kulkarni, Chief Financial Officer]

Yes, yes. So we have certain write-offs of investment in subsidiaries. And obviously, there -- that means there is a corresponding credit on the other side. So the net -- at a consolidated level, there are no write-off. At a stand-alone level, there are certain write-offs. So that's the difference you see in the margins of the year in stand-alone and consol.

[Operator]

The next question is from the line of Rishi Jhunjhunwala from IIFL.

[Rishi Jhunjhunwala, Research Analyst]

One question on your deals, right? So your average deal wins over the past 2 years or so have clearly doubled from just the average 300-odd deal wins that you used to do before that. Just wanted to understand how the tenures or TCVs of those deals also gone up accordingly or is it more that the quantum has had remained the same?

[Rohit Anand, Senior Vice President of Finance]

There's a little bit of disturbance, but let me articulate it what I got. Question on deal wins value, which has gone up significantly over the last few quarters to last 2 quarters. And is there any change in the tenure of these deals? Is that the question?

[Rishi Jhunjhunwala, Research Analyst]

Exactly.

[Rohit Anand, Senior Vice President of Finance]

No. From a deal tenure perspective and the way we're reporting, we don't see any meaningful or significant change here, and the average tenure continues to be the same.

[Rishi Jhunjhunwala, Research Analyst]

Understood. And just a follow-up on the previous question, right, on the subsidiary profitability. So you've talked about improving profitability in the portfolio companies as a lever in the medium term. I could also see apart from the difference between consol and stand-alone, which you talked about, is probably because of write-offs, could also see that your minority interest for the first time in many years have actually gone into negative. So is it something which we can assume to be more sustainable going forward as well in terms of improvement in profitability of the portfolio companies or something which is -- those peers are often discussing?

[Rohit Anand, Senior Vice President of Finance]

So maybe subsidiary and consol, the way to look at it is maybe not the right selection of portfolio company performance because a lot of the business that we drive through the portfolio company is through synergy and the value that we get on revenues they add on the other entity. So if you look at entity to entity there, you won't get the right comparison. So hence, you have to look at the integrated portfolio company, which will be across multiple entity stream, right? So hence, that's probably an indication, but that can drive wrong answers also sometimes, right? So while you're linking it this time and you're getting that answer, but generally, that might not flow through based on actual operating results of the portfolio companies.

[Rishi Jhunjhunwala, Research Analyst]

So you're saying that it will not reflect the minority interest as well. I can understand stand-alone versus consol, but at the end of the day minority...

[Rohit Anand, Senior Vice President of Finance]

Yes. So those are only legal entity performances. But there's a lot of businesses that those entities will drive and enable sales across other TechM entities, right? Because that's the synergy case that you get through that capability building. For example, I'll give you a couple of them. The acquisition we did on digital on our -- stand-alone that entity might perform a particular financial, but the deal that helps win TechM on customer engagement that we already own, that really is part of the synergy case that we try to drive through that, and that's not going to be built in the legal entity, right? So it's not the complete picture that you get.

[Operator]

Ladies and gentlemen, due to time constraint, that was the last question. I now hand the conference over to Mr. Rohit Anand for closing comments. Over to you, sir.

[Rohit Anand, Senior Vice President of Finance]

Yes. Thank you. So again, I wanted to just reiterate. Thank you all of you for your support to the company. Your company has delivered a great quarter, 4.5% revenue, the highest we've seen in any quarter, highest INR PAT, EPS is highest as well at 15.3%. And our deal wins are quite spread out between the verticals we have, including the geos where we're seeing growth, which is broad-based. So thanks to all of you for all the support, and thanks for joining and for the questions. Look forward to the engagement. Thank you.

[Operator]

Thank you. Ladies and gentlemen, on behalf of Tech Mahindra Limited, that concludes this conference. Thank you all for joining us, and you may now disconnect your lines.