Zensar Technologies Ltd
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Earnings Call Transcript

Earnings Call Transcript
2022-Q4

from 0
Operator

Good morning, ladies and gentlemen. Welcome to the Zensar Technologies Q4 FY '22 Earnings Conference Call hosted by ICICI Securities Limited. [Operator Instructions] Please note that this conference is being recorded.

I now hand the conference over to Mr. Aniket Pande from ICICI Securities Limited. Thank you, and over to you, sir.

A
Aniket Pande
analyst

Good morning, everyone. On behalf of ICICI Securities, I welcome you all to Zensar Q4 FY '22 earnings call. We have with us today Mr. Ajay Bhutoria, CEO and MD of Zensar Technologies; Mr. Sachin Zute, CFO, and a few other members from senior management team.

Before I hand over the floor to Ajay, I would like to highlight that the safe harbor statement is on the second slide of the analyst presentation and is assumed to be read and understood.

With this, I hand over the call to Ajay. Thank you.

A
Ajay Bhutoria
executive

Thank you, Aniket. Hello, Good morning, good afternoon and good evening to everyone. Thank you for taking time to join us today to discuss Zensar's financial results for the fourth quarter and full fiscal year 2022.

With me on this call are a few others from the Zensar leadership team: Sachin Zute, our Chief Financial Officer; Prameela Kalive, our Chief Operating Officer; Vivek Ranjan, our Chief Human Relations Officer; Harjott Atrii, Global Head of Hi-Tech and Manufacturing; Chaitanya Rajebahadur, Head of Europe; Harish Lala, Head of South Africa; Arjun Warty, Head of Corporate Development; and Ankush Akar, Global Finance Controller.

I'm pleased to announce that we registered yet another strong quarter with revenues of $153.2 million, representing quarterly year-on-year growth of 28.5% in constant currency and 27.4% in reported currency. The growth translates into a sequential quarter-on-quarter growth of 4.2% in constant currency and 4.1% in reported currency. With that, we closed fiscal year 2022 on a strong note, registering a full-year revenue growth of 15.3% in reported currency. This continued growth in our revenues stems from the strategy refresh and the subsequent execution efforts that we have undertaken in the last year.

Our growth in Q4 FY '22 was broad-based across geographies and verticals. The U.S. region posted a 28.8% quarterly year-on-year growth and a 3.4% sequential quarter-on-quarter growth, driven by the performance of the logos that we acquired. We have also added new logos, which are poised to expand the growth in the coming quarters. The Europe region registered its highest-ever quarterly revenue with quarterly year-on-year growth of 29.7% and a sequential quarter-on-quarter growth of 9.8%. This growth was driven by strong deal win momentum where we leveraged our experience by executing arrowhead to land new opportunities across verticals. The South Africa region saw a slightly muted performance with quarterly year-on-year growth of 15.7% and a nearly flat sequential quarter-on-quarter performance of 0.1%.

Moving to our verticals, we saw continued momentum in banking and financial services insurance with a quarterly year-on-year growth of 35.4% and a sequential quarter-on-quarter growth of 5.3%. This moment was aided by our growth in the insurance portfolio and by strong traction with our fintech clients. Consumer services registered a quarterly year-on-year growth of 34.1% and a sequential quarter-on-quarter growth of 3.9%, as we strengthened our client engagements across major accounts with domain-led capabilities, as domain-specific offerings have also received positive recognition from the analysts and advisor communities.

Hi-Tech and Manufacturing registered a quarterly year-on-year growth of 13.7% and a sequential quarter-on-quarter growth of 3.2%, as we saw an uptick in revenue from new accounts. We also won multiple new logos this quarter, driven by increased focus on strengthening our hunting and third-party alliances. We continue to grow in the emerging verticals with quarterly year-on-year growth of 148.5% and a sequential quarter-on-quarter growth of 6.1%.

Our gross margin stood at 30.1% in Q4 FY '22, representing a sequential quarter-on-quarter increase 50 basis points. Our EBITDA margin for the quarter was 14.1%, a sequential quarter-on-quarter decline of 20 basis points. PAT for the quarter stood at 11.2%, up 300 basis points quarter-on-quarter sequentially. We ended the quarter with a net cash position of $155.7 million.

The order book for Q4 FY '22 stood at $165.6 million [Technical Difficulty]. The order book of Q4 FY '22 stood at $165.6 million, a healthy 32% growth over the last quarter, supported by multiple wins across verticals. We have also scaled 2 additional clients to the $5 million-plus category, bringing the total number of clients in this group to 27.

For the fourth quarter, our LTM attrition or last 12-month attrition stood at 27.9%. Although the in-quarter attrition rate declined, the LTM attrition rate increased due to the scale effect. We expect the situation to gradually stabilize over the next few quarters.

To continue delivering on client commitments, we have increased both the pace of our hiring and our upskilling and reskilling initiatives. This quarter, we have created new benchmarks with an all-time high gross addition of 2,331 associates. Our total headcount stands at 11,839 employees, reflecting our enhanced recruitment and our ability to attract top talent. Compared to the previous quarters, we greatly increased our hiring of new graduates this quarter and we have plans to continue our hiring efforts in the coming years.

Our revamped fresher training program focuses on pre-onboarding guidance, as well as exponential engagement-led molding opportunities once on the job. Our upskilling and reskilling initiatives are equally expansive and includes many projects, technical mentoring, hackathons and leadership training, all geared towards helping our associates stay ahead of the curve. We are also working to expand our talent catchment area and I am excited to announce that we opened our Kolkata delivery center this quarter. Maintaining this momentum, we are actively planning to open other satellite centers in India and expand to nearshore locations in South Americas and Eastern Europe.

One year into the strategy refresh, we are happy to report that our 5 strategic focus areas are scaling up well and in line with our initial expectations. Experience services continues to gain momentum in experienced-led digital transformation with foundational wins in both product strategy and product engineering. Advanced engineering services is also elevating its game, making a major impact on the market as the practice moves from being a digital engineering provider to a full-scale enterprise transformation contributor across industries and geographies.

Q4 was a pivotal quarter for our data engineering and analytics practice. Our experience-led approach to cloud data engineering has resonated extremely well with our clients, which has helped us win new fintech and Hi-tech logos. In addition, our teams continue to deliver significant business value through a variety of solutions, from providing cloud-based data-driven insights, auto manufacturing firms to developing breakthrough AI and blockchain solutions for our clients. Our salesforce practice has gathered further traction with expanded focus outside of North America, engaging with local markets and creating localized solutions to drive growth. Lastly, our digital foundation services practice continues to grow and develop new solutions and capabilities that take advantage of our strong product partnerships and hyperscaler engagements.

As always, I am excited to speak about the work we do for our clients. We continue to develop multi-service line offerings to deliver targeted integrated solutions for each client's unique challenges. Let me take a couple of minutes to share some examples of the work we have undertaken. We are managing and transforming the end-to-end data center and workplace services for a public sector customer that provides benefits and retirement support for its employees. We are partnering with a global lifestyle brand for enterprise e-commerce support to enhance its online purchasing and shopping experience. We are 1 of the 2 partners chosen by a global fintech company to work on an end-to-end automation engagement. The program focuses on both customer-facing and internal applications across the development and support lifecycle.

We are expanding our workplace modernization program for a leading pharma company to enhance its associate experience. We've been selected to partner with a global non-profit organization for its digital engineering and foundation services. We're expanding our support for a leading financial services institution to improve its next-generation infrastructure for new delivery centers. We continue to grow our wallet share with a global specialty chemical company, providing experience-led product development solutions for its connected products platform. In the cloud engineering space, we have partnered with a major mobility service provider to modernize its cloud architecture and enhance its platform to cater to broader geographies. We are working on an agile and DevOps assessment consulting project for a major African financial services group.

Now, I'd like to spend some time calling -- talking about Zensar's commitment to our ESG and sustainability initiatives. We continue to take our sustainability journey seriously, making progress in line with our published ESG vision and mission. Regarding our carbon reduction plan, for achieving 0 GHG emissions by 2040, we are embracing renewable energy with an in-house solar plant. Combined with other renewable sources, the output from this plant has resulted in our renewable energy mix increasing to 17.5% at our Pune-based offices. Please note that these efforts are not limited to 1 region and we are targeting increased use of renewable energy at our own and leased locations.

Our community development activities are also noteworthy as we moved forward in our goal of impacting 225,000 lives by financial year 2030. In keeping with the Government of India's SWAYAM Initiative, our employability programs focus on enhancing education to bridge the digital divide, providing skills training and employment opportunities to people facing economic disadvantage and marginalization. We also continue the progress in our diversity and inclusion goals and our efforts in this area have been recognized by various awards and accolades. We are proud to be recognized by UN Women India group, which named us first runners up for transparency and reporting at 2021 Women's Empowerment Principles Awards.

As always, Zensar is committed to following and practicing the highest level of corporate governance within all our business functions. We continuously engage with our associates, shareholders, and clients to ensure that we adopt best practices at all levels of management.

Let me now take a moment to welcome our new Chief Financial Officer, Sachin Zute. Sachin joined us 2 weeks ago, and we are excited to having him onboard.

Before I hand it over to Sachin, I want to highlight that FY '22 has been a turnaround year for Zensar. Over the year, we have seen multiple green shoots that signal our renewal, 4 consecutive quarters of growth; Q4 FY '22 quarterly year-on-year growth of 27.4% and 15.3% year-on-year growth in financial year FY '22, net added headcount, steady growth in order book and large deal wins, a new strategy for growth and a refreshed Zensar brand, stronger sales and delivery leadership are reflected by the growth across verticals and addition of marquee logos. These and other achievements show that we are on the right path, moving ahead surely and steadily, confident in our strategic framework. For the next 4 quarters, we will intensify our focus on execution with a view to driving further resilience in our business.

With that, I will now invite Sachin Zute, our Chief Financial Officer, to provide updates on critical financial data, after which we will open the floor for questions. Sachin?

S
Sachin Zute
executive

Thank you, Ajay, for the warm welcome. Good day, everyone. Welcome to this call. In addition to Ajay talking about the business, I will take you through some of the details on the financials.

For FY '22, in U.S. dollar terms, the reported revenue is $569.4 million, reflecting growth of 15.3% over the previous year. For the fourth quarter of FY '22, in U.S. dollar terms, the reported revenue is $153.2 million, reflecting quarterly growth of 4.1% sequentially and 27.4% year-on-year. In constant currency terms, the revenue growth for the quarter is 4.2% sequentially and 28.5% year-on-year. The U.S. dollar realization during the quarter has been at INR75.2 per dollar against INR74.9 in the previous quarter.

Our gross margins increased to 30.1% as against 29.6% in the previous quarter. Increase in gross margin is due to improved utilization and volume mix.

Exchange rate also helped us partially, but it was offset by certain higher cost of delivery to the extent of 0.6%.

Our EBIT margin stood at 14.1% against 14.3% in the previous quarter. The effective tax rate has marginally increased to 27% against 26.9% in the previous quarter.

The quarter ended March 31, 2022, DSO including unbilled, increased by 12 days compared to the previous quarter and stood at 90 days against 78 days. The increase in DSO is mainly due to delay in billing for a few clients and we expect the situation to normalize in Q1 FY '23.

Cash and cash equivalents, including investments in mutual funds, decreased from $168 million in previous quarter to $155.7 million in the quarter ended March 31, 2022. The reduction in cash is mainly due to dividend payout of $4.5 million and increased receivables, as I mentioned earlier. The total amount of outstanding hedges as on March 31, 2022 was equivalent to $131.7 million against $124.5 million in Q3 FY '22.

Other income increased primarily on account of foreign exchange gains, write-back of earn-out provisions linked to stretched target for an older acquisition and reversal of certain costs relating to South Africa joint venture.

The Board of Directors have recommended a final dividend of INR3.5 per share for FY '22 subject to approvals of shareholders. With this total dividend payout, including the interim dividend for FY '22 will be 250%.

With that, I come to end of my presentation and, I open the house for questions. Thank you.

Operator

[Operator Instructions] The first question is from the line of Aniket Pande from ICICI Securities.

A
Aniket Pande
analyst

Congrats on great performance. I have a couple of questions. Sir, you have reported 15.3% dollar revenue growth for the full year. So how much of this was inorganic?

A
Ajay Bhutoria
executive

Yes. So, Aniket, we don't share the details, but -- in terms of organic or inorganic, but suffice to say that when we acquired M3bi earlier in the year, we acquired them when the run rate was about $7.5 million a quarter.

A
Aniket Pande
analyst

Okay. Secondly, sir, despite such strong hiring, we haven't seen any impact on gross margins in the current quarter actually. Okay? So will we see some impact in Q1 or any other views on that? Secondly, as we see that right now the demand fulfillment cost is quite high. Okay? So how you see your margin trajectory going forward from hereon?

A
Ajay Bhutoria
executive

Yes. Sure. So, Aniket, let me give you a quick snapshot and then I'll invite Sachin to give you a slightly more detailed view. So, as we had mentioned, we are working on a bunch of levers to drive efficiency within the organization. So what drove up our gross margin improvement in course of this quarter is improved utilization, largely through elimination of the Q3 furlough impact, increased volume and the reduced cost of delivery as we add freshers to the mix. Now, through course of the year -- this is gross margin alone, cost of delivery. And in course of the year, we've been steadily increasing our intake of pressures and we substantially elevated that in this last quarter that we are reporting on and the trend around pressure will continue.

So -- and then Sachin, please go ahead and add.

S
Sachin Zute
executive

Absolutely. Aniket, if you look at the gross margin trajectory have moved from 29.6% to 30.1%. That shows the operational efficiency which our teams are bringing on to the table, and I think that's the positive cost -- due to multiple cost optimization initiatives, which we are working on internally. A couple of them have just been briefed by Ajay as well like pressure infusion is also helping us from a pyramid perspective. And we expect that these initiatives will be useful for us going forward.

A
Aniket Pande
analyst

One last question from my side. Sir, in last 3 quarters, we have seen strong revenue growth coming from your retail and BFSI vertical. Okay? So going forward from hereon, any view on these 2 verticals?

A
Ajay Bhutoria
executive

So the 2 verticals, we made a lot of investments both in terms of enhancing our sales and market teams and our delivery capability over the course of the year and that is bearing fruit, and it puts us in both these verticals in a fairly strong position for execution. That is what I can share with you, Aniket. Okay. We've seen this in results in form of what we have done in the year and we feel very good about the momentum that has been generated by these 2 business units.

Operator

We'll move on to the next question, that is from the line of Mukul Garg from Motilal Oswal.

M
Mukul Garg
analyst

Ajay, just wanted to start with a sense of how we are looking at FY '23, we are just entering the year, in a backdrop of continuously weakening macro environment across both U.S. and Europe. So if you can just share some thoughts on whether we will continue to see acceleration in growth and strong demand over the year? And also, are we still on track after 4 quarters to catch up to industry growth rate by second half of this year?

A
Ajay Bhutoria
executive

Yes. Mukul, so I will divide my answer into 2 parts, Mukul. The first part is Zensar-specific and the second part is what's happening from a macro perspective. So from a Zensar perspective, we put the new strategic framework in place. The earlier quarters, we saw green shoots, as I reported in my earlier quarterly calls. What we believe and what we are very confident is, from the outcome of, especially the last 2 quarters is that, we are now firmly in the execution growth, right, and the various cylinders of the SGOs that we outlined are firing, and overall the Zensar franchise has been strengthened. And it puts us in a good place. So that is from a Zensar perspective.

From a macro perspective, as we speak right now, on absolutely the current basis, we haven't really seen much impact. However, we are watching the global economy and the global geopolitics very carefully. We can sense there could be some short-term impact with what's happening with the global economy and global geopolitics. Our view is that, this strong growth that we have seen in our industry, this strong secular growth that we have seen in our industry is here to stay. So, even if we see a little blip, I think medium- to long-term, the demand environment will sustain. This is a very secular trend. That is our firm belief.

M
Mukul Garg
analyst

Sure. And just are we still on track to catch up to industry growth by second half of '23?

A
Ajay Bhutoria
executive

So, Mukul, if you've seen, we grew pretty well overall, right? This has been the best quarterly revenue that we've had in the company's history. We grew year-on-year for the quarter at 27.4%, right, which we feel very good about. And then quarter-on-quarter, we've grown 4.2%. So if you look at the metrics, I think we've done reasonably well. So without looking into comparison with the industry, I think with these numbers, we feel confident that we are on the good track.

M
Mukul Garg
analyst

Sure. And Ajay, secondly, just wanted to pick your brains on the employee addition and overall hiring. I think this quarter was exceptionally large. Is that mainly on the fresher side? How should we see the overall pulls and pushes on margins over FY '23, given that supply scenario still is quite tight?

A
Ajay Bhutoria
executive

Right. So, Mukul, what we've been doing over the past 2 quarters is to grip increasingly from a reactive mode into a proactive mode in terms of how we manage our talent. Right? I spoke about in the last couple of quarters, the enormous effort that we put to build our organic talent engine and happy to say that, especially in the last quarter, we made huge progress, and within the last quarter also, in the last month, we made huge progress in terms of addition of freshers. And that momentum will continue. So that is number one. And, of course, the resulting benefits will accrue over a period of time.

The other thing that we are working on is, in order to more proactively meet the demand that is coming our way, we have also started doing a lot more proactive hiring than we did in the past. So we are hiring ahead of the curve just to manage the demand environment in a much better fashion than we did in the past in the first few quarters -- first couple of quarters in this financial year. Both these levers are having positive impact in terms of how we manage the demand that's coming our way. Now, in the short-term, there is going to be utilization impact, and I think in the medium-term, it is going to be accretive towards our efficiency efforts and towards our overall optimization and margin in addition to, by the way, a better ability to meet the demand that is coming our way.

Operator

We'll move on to the next question, that is from the line of Alroy Lobo from Kotak Investment Advisors Limited.

A
Alroy Lobo
analyst

Yes. Ajay, I just wanted to get from you, when you started your journey at Zensar, you did give yourself about 4 to 8 quarters to get things right at Zensar. So where are we in the journey? And what are the areas that are still left to sort of fix at Zensar from here onwards?

A
Ajay Bhutoria
executive

Yes. So, Alroy, as you rightly pointed out that we put the new strategic framework in place almost exactly 4 quarters back. And I had mentioned that it's going to take 4 to 8 quarters for this to take deep roots. Confident that we are on the right track. I can -- let me start with that statement; confident that we are on the right track.

Now, over the year, a few things have happened, which has caused us to tweak ourselves a little bit. So first of all is that, the attrition, industry-wide and for Zensar overall, came up a little higher than we expected. So we had to tweak our approach towards how we were managing attrition, how we were managing talent, and then the overall cost that we were incurring on that counter. So that, we had to tweak ourselves as we went through the year. Now, outside of that, I think we have put in place the 5 strategic focus areas or what we call SGOs. This instantiated by 21 playbooks, and then supported by 4 pillars of execution, one of which is sales transformation, the other is talent transformation, and then M&A and partnerships.

We have got in with sizable number of new leadership into the firm, both in verticals and in geographies on one side and to drive our service lines on the other side. And I think we've made very good progress and we'll continue to make those investments as we go into the future. As we stand today, my short answer is, we are making steady progress. We are making steady execution on that framework that we put in place 4 quarters back.

A
Alroy Lobo
analyst

So from here onwards, you're saying that nothing to fix as basically it's only the outcome of these initiatives that need to be seen now. You have fixed everything that you needed to fix.

A
Ajay Bhutoria
executive

Yes. So, Alroy, the fix is, unfortunately, much as I would like it. It's not -- not a 0-1. It's a progress, right? So every quarter, we progress a few percentage points towards, let's say, our end goal of achieving predictable, sustainable and profitable growth, right? So every quarter you will see improvement over the previous quarter. That is how I would characterize it.

A
Alroy Lobo
analyst

Just on the...

A
Ajay Bhutoria
executive

I still maintain it is 4 to 8 quarters from the original date, and then of course, we've had to tweak based on some of the events that happened, especially around inelasticity of talent in the market.

A
Alroy Lobo
analyst

In terms of client profile qualitatively, I understand the growth numbers, but if you can just give us some perspective qualitatively how has your client profile really improved? And what are you doing to improve the client mix going forward?

A
Ajay Bhutoria
executive

Sure, Alroy. So, Alroy, we added 43 new clients this financial year. It is an unprecedented high. In a single financial year, we added 43 clients, let me start with that. The other key metric that is useful to follow here for us is that, we classify our clients in 25 plus -- 10 to -- sorry, 20 plus, 10 to 20, and then 5 to 10. In each one of these categories, we have improved the numbers. We added 2 clients to the 20-plus bracket. We added 2 clients to the 10-plus 20 bracket, outside of the 2 clients that graduated and we've additional clients in the 5-plus bracket. So overall, if you look at the client mix and the revenue mix, that has improved. And the last metric that we track is the concentration of revenue in the top 5, top 10 and top 15 clients and there also the metric has moved very favorably.

Operator

[Operator Instructions] The next question is from the line of Manik Taneja from JM Financial.

M
Manik Taneja
analyst

Congratulations for a steady performance. Just wanted to pick your brains around the margin trajectory that we should expect for Zensar, both over the near- to medium-term, given the fact that some supply side headwinds remain elongated and one is also going to see a resumption in terms of travel and facility expenses. So if you could give us some sense on how we should be thinking about our margins going forward?

A
Ajay Bhutoria
executive

Sure. Manik, I'll actually refer that question to Sachin. Sachin, can you take that question, please?

S
Sachin Zute
executive

Sure, Ajay. So, Manik, our endeavor is to reach mid-teens during this fiscal, and I think we are well set for that, given the multiple levers through which currently we are working. And from a longer-term perspective, we are definitely looking at higher teens -- going into higher teens trajectory. I think that's the broad picture, which I would like to paint for you.

Operator

The next question is from the line of Mayank Babla from Dalal & Broacha.

M
Mayank Babla
analyst

Congratulations on a good set of numbers in this quarter. Sir, my first question was pertaining to this other income. Could you please elaborate a little more on this stretched target for the acquisition in case of the earn-outs?

A
Ajay Bhutoria
executive

Right, Mayank. So, Mayank, in other income, for an old acquisition -- so whenever we do an acquisition, we put SPA targets and stretched SPA targets. So in case of an old acquisition, due to inability to move the stretched target, we wrote back that SPA amount back into the PAT.

M
Mayank Babla
analyst

Okay. Sure. And my second question, although you've already commented on that, but just wanted to harp a little more on this FY '23. While I respect that you don't give quantitative guidance, but can we assume FY '22 growth to be the base at least going ahead?

A
Ajay Bhutoria
executive

So, Mayank, the way I would like to respond is that, this has been a huge turnaround year for us. It has been a turnaround year and it's a year that -- if you compare especially what we did this quarter with what we had done the same quarter of the previous year, it's over 27% growth, right? Gives us confidence that the strategic framework that we laid down is firing, the leadership team that we have brought in is firing, right, our verticals, our geographies and our service lines, all 3 are firing. So gives us confidence that we are on a strong wicket when it comes to driving business momentum.

M
Mayank Babla
analyst

And, sir, can I squeeze in one last question?

A
Ajay Bhutoria
executive

Sure, Mayank.

M
Mayank Babla
analyst

Yes. Sir, in the case of our top 10 -- top 5 to 10 clients, I just wanted your view basically what are we doing in terms of ground level or in sales transformation to focus more on these top 5 to 10 client additions going ahead? Because I believe that's where the -- a major transformation at least in terms of growth will come by for the company. So if you could throw some light on your actions in that space?

A
Ajay Bhutoria
executive

Sure. So, Mayank, there are 2 or 3 motions that we are driving, right? The first motion is that, we are expanding the overall breadth of our sales efforts so as to increase our ability to catch wider demand. And that has paid strong dividends this last year. And the result of which is that, if you look at proportion of our top 5, top 10, and top 15 clients to overall revenue, while all of that piece has grown in absolute dollar terms, the top 5, 10, and 15, the absolute dollar terms of those clients have grown, but their share of revenue to overall revenue has come down, the proportion has come down, which gives you a view that the growth has been broad-based. So that's number one.

Number 2 is, the second motion that we're driving is that, we have increased our -- as I was just responding to Alroy a little while back, so our number of clients in the 20-plus bracket, in the 10 to 20 plus bracket and in 5 to 10 bracket have all grown, right, 2, 2 and then I think 4. What that does for us is that, our ability to drive engagement, to increase engagement within these clients also goes up. Our ability to -- and the potential of driving repeat business with these clients goes up. So even for these clients, we have created a much better position for ourselves in course of the year. Now, of course, from time to time, there is going to be client issues in one client or another, but on a broad basis, and -- every now and then, we may see ups and downs, but on a broad basis, if you see what's happened during the year, we have done really well on this metric as well. So it puts us in a good place going forward.

Operator

[Operator Instructions] The next question is from the line of Nilesh Jethani from BOI Mutual Fund.

N
Nilesh Jethani
analyst

My first question is on the leadership transition. So I believe since Mr. [ Ashok ] has joined in, the many new senior leaders have come in. So wanted to understand, are we still planning to add a few more, or most of the transition has been done now?

A
Ajay Bhutoria
executive

Yes. So, Nilesh, we've -- and we have added a sizable number of new leaders into the firm. A, is to backfill some open positions; B, is to drive new leadership in a bunch of service lines, and 3, is to strengthen both our verticals and geographies. As we go into FY '23, it's something that we are watching over and looking at very carefully all the time with a view to bring top talent into the firm. And we will continue to -- continue with our hiring, maybe not as the same pace as we did in FY '22 because in FY '22, we did hire a sizable number, but that hiring process is going to continue in FY '23.

N
Nilesh Jethani
analyst

Okay. Got it. My second question was on the top accounts now. So are we seeing some transition, some traction on that with regards to on-ground implementation, considering it is more equipment-led clients? So I wanted to have understanding on that.

A
Ajay Bhutoria
executive

Right. So, Nilesh, I'll speak to you broadly about our top clients instead of referring to one client or another. But in terms of our top clients, especially in the 20-plus bucket or the 10 to 20-plus bucket, right? The first is, overall, the relationships are stable. Second is that, I think almost invariably all of them are driving transformation, and again, this is a macro phenomenon. This is a global phenomenon. And for all of them, all of our top clients, we are a part of this transformation that they are driving. So in one program or another, we are a part of this transformation. So that is how I would characterize as to what is happening with our top clients.

N
Nilesh Jethani
analyst

Okay. And lastly, on the margin front, so we aspire to have mid-teens margin in FY '23. So I want to understand what are the levers for this sharp rise in the margin? Of course, we have achieved that in FY '21, but I want to understand what are the levers now to -- for what jump in the margins?

A
Ajay Bhutoria
executive

Yes. So, Nilesh, margin is something that we are watching over extremely carefully, right? And here is -- just to give you a sense, broadly these are the levers. First is, a massive effort that we put in to crank up our organic talent engine. That is number one, right, so which is the whole fresher program. We have significantly elevated that program last quarter and that is going to continue in the next fiscal year. Second thing is, continued focus on right-shoring, right?

Third is expansion of delivery locations. That talent availability has been a big factor in ability to -- and to drive growth as well as magnitude of growth. So what we have done is that, we have expanded our delivery locations both in India and in nearshore geographies, right? In nearshore geographies, the last quarter we announced Columbia. We are actively looking at Eastern Europe now. It's a little delayed because of what happened in Ukraine, but we are actively working on that. And then we opened up the Kolkata development center. There is going to be more coming up so that we can increase our talent catchment. The fourth one is, selectively looking at improved commercials with our clients. And the fifth one is, there is about 5 other smaller operational levers that we are driving so as to overall improve our margin to drive optimization and efficiency.

N
Nilesh Jethani
analyst

Got it. I don't know if this question was asked earlier also on the call, but any guidance on what is the expected wage hike when this would be done in Q1, Q2? And how's -- guidance of mid-teens, does it incorporate such wage hikes? Any color on that?

A
Ajay Bhutoria
executive

Yes. So there will be wage hikes. It typically hits us in Q2. I can share that with you. Broadly, yes, there will be wage hikes and it's going to hit us in Q2.

N
Nilesh Jethani
analyst

Okay. Got it. I guess, those were my questions. And one quick suggestion probably now, at our annual run rate of around $600 million, $620 million, growing annually on Y-o-Y basis more than 25%, I guess, we should come out and give a growth trajectory, which we were pushing off for last 3 to 4 quarters now where the growth guidance trajectory, et cetera, is -- still we are shying away from that. So probably at this run rate, that would have been expected from the investor community. Yes. That's it from my side.

A
Ajay Bhutoria
executive

Right. Yes. So, Nilesh, as a practice, we don't give forward guidance, right? But what I can share with you is that, last year, we mentioned that with the new framework, with the new focus on execution, with extremely clear approach towards how we wanted to drive growth and the investments we were making towards growth, 4 to 8 quarters to drive this transformation, we are well within that. We are executing well despite issues such as inelasticity of supply chain and the industry attrition, et cetera. We've taken that in our stride. We have -- we are executing well. And our objective, as we mentioned very clearly is -- all along is, to drive sustainable, predictable, and profitable growth. I think we are well on progress towards that and our eventual goal is to be in the top quartile of our space. So that is our aspiration from a growth trajectory.

Operator

The next question is from the line of Amit Chandra from HDFC Securities.

A
Amit Chandra
analyst

Yes. Sir, my first question is on the TCV number. So, we have seen healthy growth here. So if you can provide some more color on it? Maybe how much of it is being driven through M3bi? And how much of it is like new wins versus renewals? And also, if you can throw some color on how the mix of this TCV has changed, maybe like 4 quarters back wherein it was more onsite-led versus how it has been now and also the mix in terms of how the mix has been in terms of short-term deals or longer term deals in this mix?

A
Ajay Bhutoria
executive

Sure. So, Amit, let me give you a quick sense. I caught most of your questions, but let me answer one at a time. If I miss anything, do ask me again. So first of all is, $165.6 million, right, which is 30% over what we had in the previous quarter. So the bookings have been good compared to what we did in the last quarter. That's number one. Number 2 is that, the mix is 40-60, which is slightly better than what -- also slightly better than what we did quarter, right, 60% renewal, 40% new.

Third is that, it is broad-based. It is across board; all verticals, all geographies, all service lines. So that has been one of the highlights of this quarter is that, it is across board. And number 4 is, I'm not sure if I got that right is, it's a good mix between discretionary projects and projects that can yield repeatable business over a period of time.

A
Amit Chandra
analyst

Okay. And, sir, secondly, if you can throw some more light on the insurance and the BFSI vertical? So what have -- what -- I know that we have been doing good there. So if you can throw some more light, whether the investments are done there or maybe like you want to invest more and -- especially on the insurance side, like what kind of growth you are expecting there on the insurance vertical?

A
Ajay Bhutoria
executive

Right. So, Amit, there is banking and there is insurance, right? Together, they grew year-on-year over the quarter, they grew 23.5%. A big, big highlight of this is growth in our banking business. Traditionally, we've been strong in -- stronger rather, I should say, not strong, stronger in insurance when compared to the 2 sectors. So banking business, all the investments that we've been making over the last 18 months are beginning to bear fruit, number one.

Number two is, M3bi as an acquisition has been extremely good for us, especially when it comes to banking and insurance business, but they've also helped us in a couple of other verticals. Number three is that, this year we saw stabilization of our insurance business. We were in a bit of a sticky wicket when we closed last year, especially the last couple of quarters of last year, and when we opened this year in the first quarter. Over the course of the year, we have stabilized our insurance business.

Now, from a leadership perspective, we brought in a lot of leadership. So we've strengthened the leadership team both within. That is organic leadership within Zensar, and we've infused a lot of external hiring that we've done both in banking and insurance vertical, and that has borne us good fruit. And to that, add the leadership that we acquired as a part of the M3bi acquisition, we have made very good progress on this segment, the BFSI segment.

A
Amit Chandra
analyst

Okay. And, sir, like one last question from my side on the margin side. So I know that you have actually given an exhibition of the margins. But just I would like to understand how we are going to manage the on-site attrition, that the on-site attrition is going up and also, we are seeing higher off-site attrition, which was not the case earlier, right? So -- and especially we have higher on-site presence. So what impact this can have on our margins?

A
Ajay Bhutoria
executive

Right. Actually, Amit, the shore mix improved this quarter, right? The offshore revenue mix went up by almost 200 basis points. That aside, attrition has been, through course of the year, a huge challenge, right? We have unprecedented levels of attrition in the firm. Last 12-month attrition that we counted was at 27.6% on-shore and -- both geographies and delivery centers combined.

Now, having said that, our in-quarter attrition for Q4 was less than the previous 2 quarters. So all the measures that we have taken to address attrition, some of them are bearing fruit, and we reduced our in-quarter attrition actually. So, some early signs of success, some green shoots in that area, right?

Now, specifically to answer your question, I think broadly, the attrition trend on-site, offshore has been consistent through course of the year. So we haven't seen any major spike in one location or another. It's been rather bad all around, and all around, we have made improvements this quarter.

Operator

The next question is from the line of Alroy Lobo from Kotak Investments Advisors Limited.

A
Alroy Lobo
analyst

Yes. Ajay, recently you all had a big senior management meet and you had come down -- can you hear me?

A
Ajay Bhutoria
executive

Yes, Alroy.

A
Alroy Lobo
analyst

Yes. You all had a big senior management meet recently when you were down in India. I think it also set-up your Kolkata center, et cetera. If you can just highlight a few takeaways which could make a very big difference to Zensar over the next 12 months based on the feedback you've got from your senior management or employees in your recent meeting?

A
Ajay Bhutoria
executive

Yes, Alroy. Alroy, it was my first trip after I came onboard, after I took charge, and it was an amazing trip. With the pandemic easing out, with Omicron kind of slowing down, we made the trip. It was the leadership team and me, most of the leaders; not all leaders, but most of the leaders made the trip, and then, of course, we got into a huddle. And there was 2 parts. One is leadership team coming together. One is actually -- and more important than leadership team coming together is the outreach to our associates. And I'll tell you, Alroy, the response was overwhelming. Starting with the number of people who showed up in our town halls, I mean, it far outstripped the numbers we had planned for. We had packed rooms, packed stadium, and the response was overwhelming.

So what I can see from the trip is that -- A, is that, I think people are looking forward to make the human connect again. I think the motivation levels are going up, are getting high. I mean, all said and done, the pandemic did take its toll. And overall, the spirits were high. Outside of this, specifically, we started the Kolkata -- like you said, we started the Kolkata center, right, and we are looking to expand our core delivery centers, Pune, Hyderabad, Bangalore. We continue to do that, and we will announce a couple of other satellite centers in India over the next few quarters. We got a very good trip. Bottom line, very good trip.

Operator

Thank you. Ladies and gentlemen, that was the last question. I now hand the conference over to Mr. Aniket Pande for his closing comments.

A
Aniket Pande
analyst

Thank you, Zensar management for giving us the opportunity to host you, and thank you for the participants for attending the call.

Now, I will hand it over to Ajay for his closing remarks.

A
Ajay Bhutoria
executive

Yes. Thank you, Aniket. Thanks a lot for giving us the opportunity to present Q4 FY '22 results to the analyst community and to the market. Good morning, good evening, good afternoon to all of you and stay safe. Thanks a lot.

Operator

Thank you. Ladies and gentlemen, on behalf of ICICI Securities, that concludes this conference call. We thank you for joining us. And you may now disconnect your lines. Thank you.

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