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Infosys Ltd
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Good evening, everyone, and thank you for joining us for Infosys Q1 FY '21 financial results. I am [ Garima ]. And on behalf of Infosys, I'd like to welcome you to this press conference. In these unusual times, I hope you, your family, and your dear ones are safe and well.Before we begin, I wanted to share a few guidelines with our attendees today. [Operator Instructions] And with that, let me invite Mr. Salil Parekh, CEO, Infosys to take us through the quarter 1 by. Over to you, Salil, please.
Good afternoon, everyone. I trust each of you and your loved ones are safe and healthy in these times. We've had an exceptionally good quarter in our first quarter of this financial year. I'm extremely proud of what we have achieved as a team. Let me share a few highlights, rest you've seen within our press release as well.First, our revenues grew in this quarter by 1.5% [ year-on-year ] and constant currency [indiscernible]. Our digital revenue grew at 25.5% and now accounts for 44.5% of our overall business. We delivered 22.7% operating margins, which is an expansion of [ 220 ] basis points year-on-year and 160 basis points sequentially. This was achieved after rewarding our employees with higher variable pay. Our employees have displayed incredible dedication and resilience and have been an integral part of our Q1 performance. Our large deal wins were at $1.7 billion in the quarter. I'm also happy to report that yesterday, we announced a landmark digital transformation engagement with Vanguard. We will partner with Vanguard to drive digital transformation of their record-keeping services onto a cloud-based platform. Coupled with our strong Q1 results, this gives us a powerful foundation for the rest of the year. [ Notwithstanding ] the large stimulus programs in the U.S. and Europe, there are still economic uncertainties in those markets as there are still emerging medical scenarios.There are also emerging medical outcomes in India that are not fully known. However, with what we have learned in Q1 and ongoing strong client connects, we feel the strength of our franchise is coming through clearly. And with that, we will reinstate our guidance. For the full financial year, our revenue growth guidance is 0% to 2% year-on-year growth in constant [ currency. ] Our operating margin guidance for the full year is 21% to 23%.[indiscernible] you for questions.
[Operator Instructions] Joining Salil, we have [ with us ] Pravin Rao, COO with Infosys; Nilanjan Roy, CFO, Infosys. [Operator Instructions] Our first question is from Kritika Saxena from CNBC.
Salil, you've given a guidance, you've gotten back to giving out the guidance for FY '21. And the margin figures as well seems to be that you are set to expand margins. You have actually come in with a good set of margins in this quarter as well. Help us understand what the recovery trajectory is going to look like. Can we assume then that recovery is going to be back on track in the September period, roughly, September to December period?And very quickly, a couple of questions as far as the margin trajectory is concerned. Nilanjan, can you just break up margins for this quarter? How -- what was the exact impact of COVID-19 pandemic? I believe that you took in a full impact. So how were you able to expand margins in that time period? What was the kind of operational efficiencies you saw? And Pravin, to you, I wanted to just get a quick sense. You had said last quarter that you're going to try to absorb all the commitments that you have made with respect to employee engagement, lateral hires, campus hires. Can you give us some numbers? And there have been some reports on possible involuntary attrition in mid and senior level roles. Can you give some clarity on that?And also the attrition figure has come down quite substantially. So some color on that as well.
Thank you for the question, Kritika. I think in terms of demand and where we see the business scenarios, we felt that in Q1, we had a very good [ large deals with ] [indiscernible].
[indiscernible] quarter and COVID had just broken out in the world. There were 3 large headwinds we were fundamentally facing [indiscernible]. And therefore, first thing, from a margin perspective, we had to [indiscernible] more about that. The second was the uncertainty of the demand equation and since we're already hiring [indiscernible] for maybe temporary pricing reduction. So with the background of these 3 factors which have played out in various degrees, we looked at our overall cost structure in 3 fundamental ways. First is what we saw was what could we do to avoid cost increases, right? And some of them we've announced last time is looking at the utilization curve, in terms of our promotion freezes or fresh offers, which were put on hold, although we've onboarded everybody. We'd made offers in the previous quarter. So these were -- these moves in terms of cost avoidance, reskilling existing talent for new demand exactly in the quarter, like new digital demand, we didn't hire, but actually reskilled our employees. So these were largely what I call cost avoidance. And if we hadn't done this, we would have actually seen some distress on our margins. The second is what we call the short-term and temporary cost cuts, which we have done on discretionary work. So for instance, travel and visa costs have come down, nobody is traveling now, as you know. So we've got a benefit of that. We will have to see as it pans here, pans out how much of that will continue. Same thing in terms of discretionary spends, we have, of course, cut back on things like branding, marketing, done aggressive rate negotiations. So these -- like I said, will be the ones which have flown into margins. I mean I gave you the margin walk. And finally, we have a strategic cost levers, which we've been continuously talking about, which are our levers around the pyramid, around the on-site offshore mix, around subcon costs, around automation. Those are the ones we continuously work on. So these are the 3 things we focused on. And in terms of our margin, we've seen a sequential improvement from 21.1% to 22.7%. Specifically from a walk perspective, first thing is margin helped us in terms of currency. As you know, the average rates for the quarter in terms of rupee were depreciated. So we got about 70 basis points benefit of that. We got about 230 basis points of benefit between visa and travel costs. And the third, we got about 100 basis -- 110 basis points benefit due to other discretionary costs of SG&A, et cetera. So that was about 410 basis points. We lost about 150 basis points on operational parameters, as you saw. Utilization came down because of the demand gap. We faced some pressures on RPP. In fact, on-site also got hit by about 30 basis points, and those all 3 impacted our margins as well.And finally, we actually, in this time, as Salil mentioned, we thought it was very, very important to reward our employees and we've actually upped the variable pay. So part of the other cost increases we've had, including a variable pay hike, was a hit of about 100 basis points. So net-net, that is the overall 160 basis points quarter-on-quarter increase in our margins.
You take the...
Okay. On the commitment made to employees, prospective employees in the last quarter, which we had deferred, almost 90% of the people we have already onboarded. Balance, about 10% of people will be onboarded this quarter. We have already communicated the joining dates for these people. In -- I mean these are laterals. In terms of freshers, as I said last time as well, we expect over 20,000 plus people to join. For them, we will start on-boarding in a phased manner starting later this quarter. But again, I mean, normally, we take 2, 3 quarters to on-board freshers from campuses, and that is something which we'll continue to follow.In terms of attrition, the voluntary attrition from a services perspective has declined to 11.7%. As compared to over 20.2% 1 year back or even 15.2% -- 15.3% over a quarter back. So we have seen a significant decrease in -- combination. I meant combination of all the employee engagement activities and things that we have done over the last few quarters. All this has resulted in a much lower attrition.
Our next question is from Chandra from ET Now.
Salil, when we spoke to you in the first week of June, I think you gave us many clues in that interview, you said there have been no large scale cancellations of projects, pricing is stable and that you will take a call on guidance by the end of the quarter. But in the same interview, you also mentioned that there is some pressure on discretionary spend and in verticals such as retail and manufacturing. So have those also started rebounding, bouncing back? And in that case, can you see perhaps upping the guidance for the next quarter? And the second part is in the recent AGM, you spoke about actively looking for acquisitions outside India. Can you take us through that? I mean is this, I suppose, a generic statement? Is it something you're consciously looking at? Nilanjan, a question on the pricing. How is it trending? Are clients renegotiating contracts at this point? Is it stable? And finally, Pravin, I think I'm not sure if you answered the question on the moves that Infosys is making to sort of correct the employee pyramid if you are going to do away with some senior roles, if you can give us some clarity on that. And also, if you have a proportion of work from home versus work from office, like is it going to be 75-25, 50-50 if you can give us a percentage.
Thanks. Chandra, you're right. When we had that discussion, some of these points, we had started to elaborate. In terms of acquisitions, first, I think what I shared at our AGM was essentially what we've been engaged in all through at least in the past couple of years, which is looking at available opportunities from a large array of opportunities. We have continually a list of possible acquisition candidates that we're evaluating, and that goes on. We feel quite good that now the market is evolving that we will continue to do these sort of acquisitions. So there was nothing more specific in that. In terms of the sectors, Pravin will elaborate a little bit more on the specific sectors. I'll give you some initial color.We had discussed manufacturing. We had discussed retail. We don't see that something is dramatically in that. What I would like to say is we don't see that those are further declining at this stage. We, of course, have specific data on each of our sectors. And for example, Hi-Tech has done extremely well in Q1 for us. We see some of the strengths in other sectors, which have done quite well as well. Let me now pass it on to Nilanjan first for his part.
Thanks, Salil. See, on the client renegotiations, as we mentioned, and expectedly so, few clients have come back and basically on 2 types of issues. One is, of course, pricing and discounts, some of which are temporary and some more longer term. And of course, we work through that with the clients. And since we have had long relationships with them, we support them wherever required. Other clients have come back some of them on the cash side because who are facing a cash crunch cycle have come back sometime [indiscernible].
On the pyramid side, pyramid is integral to our operating model. I mean it's been there for ages together. In fact, when we started our on-site localization effort as well, we have really not only recruited locals with experience, but we have also recruited people from universities as well in an endeavor to build pyramid on-site as well. So that remains integral to that. So I don't think there is a [ change ] in strategy. We will continue to [indiscernible]. And in fact, 70% to 80% of the people we recruit every year are from campuses that help us in building the pyramid. And we are not really looking at any -- just because of the pyramid, we are not really looking at letting go any senior people, as usual, every quarter -- every cycle, we have performance-based exits and that something as a high-performance organization, we have always endorsed and adhered to. But there is no structured program for letting go senior people. In terms of the operating model, our vision or our view is that we need to have a hybrid operating model where people will have the ability to work from office or work from home in a seamless manner. All our efforts today are in that direction. At this stage, it's really academic to say whether it is 20%, 50%. There are a lot of variables in that. But we are very confident. I mean, today, there is less than 1% of the people are working in office and 99% are working from home. And we have enabled it very successfully. So I think -- I mean, our effort and focus is mainly on making an operating model where we can seamlessly swap between work from home and work from office. And beyond that, I don't think we are really at this stage, looking at any specific numbers.
Now we will move to our next question, which is from Agam from BloombergQuint.
This is Agam from BloombergQuint. Salil, my question to you is that I'm sure COVID-19 has now accelerated demand for certain products and services over many others. Can you elaborate a little more on what kind of conversations you're having with your clients when it comes to these relatively new requirements? Also, I know this is probably going to be a hard one to you, but a probability of a possible increase in guidance going forward. If that is the case, what would you like to see before you start evaluating a revision in guidance? Pravin, if you could tell us a little more about how the supply side of things have changed over the last 3 months? I'm sure a lot must have been done. And what are these changes, which will remain permanent according to you? Nilanjan, a word on capital allocation. If you could just give us an idea about whether or not there are any changes at this point in time?
I'll start off. Agam, I think part of your question to Pravin was missed out. So maybe, later on, you can repeat that. But on your first part, which is focused on what are the things which our clients are looking for. We see that this whole crisis has really accelerated the digital thinking across most large enterprises. There, we see a lot of demand in the area [indiscernible]. We see more demand for workplace transformation projects. We see more demand for doing digital transformation activities. We're also seeing demand for automation and cost efficiency, and we are seeing demand in the area of consolidation. Clients have seen that we have delivered quite effectively in this work from home environment and giving them seamless service and they also see the strong financial position that we are in. So we are seeing some conversations in that regard. The other bit with respect to guidance, I think the thing I had to say about guidance I've already said.
Agam, can you please...Yes, please.
On the -- [ Can you please ] repeat that?
Yes. Yes. Well, Pravin my question was -- to you was to do with the supply side of things, and I'm sure there were a lot of challenges in the last quarter. [indiscernible] we have changed actually in this particular quarter when it comes to adapting to the new environment out. Among all the changes that you have brought in, in the last 3 to 4 months, what of that is expected to remain permanent going forward in Infosys?
Yes, you rightly said we have done multiple things in terms of enabling the supply side and ensuring the business continuity. And we have done that without compromising on the safety and the health of the employees. First, obviously, we have enabled everyone to be able to work from home by providing the right level of computing assets. Today, more than 99% of the people are enabled to work from home. The balance, while they are enabled, they are required to work from office based on the client requirements. So that is the first thing we have done. And today, it's very easy for us to switch back from work from home to work from office because people have been enabled.We have also invested in network infrastructure. We have invested in cybersecurity tools. We have invested in collaboration tools, productivity tools, and so on. So that when people are working from home, there is no -- there is no decrease in productivity, and we're able to maintain the service level to our clients. And so far, we have not seen any negativity there. So this is one thing, as I said earlier, in the new normal, people will have the ability to flip from working from office to working from home. And it's not the same set of people. I mean there are a set of people who may work in office for some time, they may choose to work from home for a few days and so on. So these assets and with the infrastructure today, we have enabled people to do that. That's number one.Second one, in this quarter, even though there has been in general and hiring freeze, we have on-boarded more than 5,000 laterals globally. And we have been able to onboard them remotely. So again, we have used infrastructure, we have used our investment in Lex platform to enable. And again, the feedback has been pretty positive. In fact, we have even onboarded -- when we had some [ vetting ] from some clients, and we have been even able to onboard them virtually. So that's again something which will become part of the new normal because this pandemic could remain for some time on and off. And remote onboarding will probably be an element, which will continue to remain going forward as well.Similarly, for training as well, we have seen huge adoption of training. Again, Lex platform has been a huge positive. When COVID broke out, we had 5,000 plus people who were undergoing training in Mysore. They had to abort the training. But since then, they have completed training in a virtual manner. And this quarter, we'll be even certifying them and deploying them in production. So net-net, in terms of all -- everything required in supply chain, whether it is hiring, whether it is training, whether it is enabling, whether it is inducting them in projects and so on. They have been able to do it remotely. And that mechanism and that practices will hold good going forward as well whenever there is a need.
Nilanjan, do you want to address the last question, please?
I'll do that. So Agam, on your question on capital allocation. As you know, last year, this time, in fact, we had increased our payout ratios from 70% to 85% of free cash flows. And that the whole idea was to give back more to the shareholders and to make the dividend payouts or buybacks much more predictable. And in fact, in the start of this year, when we announced our final dividend in the midst of the crisis, we continue to hold our dividend. And in fact, we just paid out over INR 4,000 crores at the beginning of July to our shareholders. So we continue to follow our capital allocation policy as of now.
We'll now move on to our next question, which is from Kushal from Zee Business.
So my first question would be to Mr. Parekh about the deal pipeline, like for instance, we know that ABN AMRO you have had a deal before and now Vanguard, we are seeing the partnership blooming. So now can you give us a count of how many deals are in the pipeline right now, you are in negotiations with -- you are trying to be a partner with -- for the next 2 quarters? And secondly, the question would be on particularly to Mr. Rao, about the H-1B visa impact, which we could possibly see, which we have seen. And I also wanted to know under this that what is the current percentage of localization in U.S. right now? And the third question is directed to Mr. Roy, about the verticals, like how is the growth shaping up for BFSI as well as retail, wherein we are seeing, amidst the current pandemic, a second wave of coronavirus is also like coming up. So how are we planning for that?
Thanks for that. Let me start off with the first part, which is focusing on what are we seeing in the deal pipeline. I think we -- in the new areas of service that we've really pivoted to very quickly, we've seen a nice expansion of our pipeline in those areas. And we feel comfortable that for those areas, for example, in cloud or in automation and cost efficiency of workplace transformation, even more work in cybersecurity. And then in consolidation, we will see some good activity over the coming quarters. I'm not able to give you specific numbers. I don't share those externally but suffice it to say that our pipeline is looking quite okay. Let me pass it on to Pravin for the next part.
On the H-1B visa, obviously, it doesn't really make any logical sense. Today, various independent studies have clearly demonstrated the value that Indian IT service providers bring to the U.S. economy and how they make the American companies very competitive. Having said that, in the short term, we don't see any impact in that because anyway, there has been 0 travel due to the travel restrictions and even the consulates are shutdown. So in the short term till December end, it doesn't make any difference. But having said that, from an Infosys perspective, our focus on localization has really helped us. Today, more than 60% of our employees are visa independent. Visa journey, we started about 2, 2.5 years back. And since we made the announcement in May of 2017, we have recruited more than 13,000 U.S. nationals. So from our perspective, we are entirely [ derisked ] and I mean, even in the medium to long term, we don't see an impact. Even though, I mean, personally, we do feel that it doesn't really make sense. Even the unemployment rate is very low in the tech sector, all the value adds that we are doing. But from Infosys perspective, I mean, given our localization efforts, we are fairly comfortable.
Nilanjan, I believe there was a question for you as well.
Yes. I think Salil mentioned that as well on the pipeline. I think we've seen a strong pipeline across our verticals. Of course, FS being the largest we've seen a heightened level of conversation and the recent deal, which you've seen yesterday, it's just one of the reflections. Of course, Healthcare and Life Sciences continues to do well. CMT does -- continues to do well. It's not impacted much by the pandemic. And of course, on retail and on the manufacturing side, there are a lot of conversations, which are self-sourced, which we are talking to a various number of clients. So all in all, like Salil has said, there's a heightened level of activity much than we've ever seen before, and that's very positive news for us.
We will now move to our next question, which is from Ayan, Economic Times. Ayan couldn't join us right now here. So I'm going to read out the question he has sent. The first question is, you had announced the Vanguard deal yesterday that involved a transfer of 1,300 people. Do you see more such deals happening given the slowdown? The second question is, what is the breakup of voluntary and involuntary attrition? And the third question is 1 of your peers said the H-1B is unfair and impacts business. What is your view? Salil, maybe you can take the first question.
Let me start off. I think we were delighted yesterday when Vanguard announced the strong partnership with Infosys for the digital transformation of a critical component of their business. We are delighted to work on this. And we are delighted to look at several large enterprises in their digital transformation journeys. We have active discussions across a number of sectors, as has been referenced through earlier parts of the call.In terms of what we see going ahead, clearly, as we progress through the quarters, there we'll be more able to share as opposed to talking about it at this stage upfront. The second one, [ Garima ], maybe if you can just repeat that?
Should I repeat the question, Pravin?
Yes.
Sure. The second question was, what is the breakup of voluntary and involuntary attrition?
See, we don't -- as I said earlier, voluntary attrition for IT services is 11.7%. We don't give a breakup between voluntary and involuntary attrition. And there was a question on H-1B, which we had already answered. As I said earlier, it's unfortunate. It doesn't make any logical sense. But from Infosys perspective, we have a very derisked business model, and we should be okay in dealing with it.
We will now move on to our next question. It's coming from Varun Sood from The Morning Context.
Congratulations firstly on a good set of numbers, especially for the times where we are in. Sir, 3 quick questions, and I'll leave it to the management to answer, whoever wants to answer each of these 3 questions. First question is, have [ you found ] bottom yet on utilization? That's the first question. The second is, sir, do you see work from home, say, in a long-term period to be a margin driver, considering, among many things, work from home is leading to higher productivity. So can I [ have thoughts ] on this work from home being a margin driver in 8- to 24-month time? And sir, third question quickly is [indiscernible] budgets [indiscernible]. If not, and if the -- if more clients are coming back and spending, what is new -- if I can say, the new [ normal ] which we are seeing [indiscernible] answer earlier that this post-pandemic -- in the midst of this pandemic, you are seeing a lot of transformational work. So when spends in the transformational work, does this mean that inventory business in new translating more revenues for you? Just to quickly give you an analogy, in publishing world, for almost all newspaper companies monetized on the [indiscernible] always very difficult. They are [indiscernible] money monetizing in a web, then selling it, selling [ a user. ] Is this similar kind of analogy, which is playing out in the IT services when you're moving to [indiscernible] you are getting back revenue [indiscernible] some of [indiscernible] technologies?
Let me start off, and then Pravin or Nilanjan will add as appropriate. Varun, first, we couldn't hear everything in the question. It was breaking in and out. So I'll address what I thought I understood. And the first point, the third question about what is really the client demand side or what is selling or what is growing in IT services. If you look at our numbers for Q1, we had a digital business growing at 25%. We've also seen since the start of the crisis, more and more interest with our clients in the areas of digital, of cloud, some more interest in the areas of cybersecurity, workplace transformation, and then on cost efficiency, automation and consolidation. So those are things we are doing.Now it is also [indiscernible] that in general, the overall IT spend is constrained. So we have to be very careful that it doesn't mean the overall pie is at a growth level. We do see some growth in these specific areas, and we ourselves have seen a growth overall for our company. In terms of utilization, the first point that you made, I'll start off, if Pravin wants to add something else, he'll add to it. On utilization, we've certainly seen our utilization reduce in Q1. We'll have to wait and see how the rest of the demand throws out. We see that we had some difficult impact in that in the first quarter. However, we also see some of our utilization in the U.S. coming back up as well. And then I don't -- I couldn't hear other parts of the question. But Pravin, if you picked up something and you want to answer, please go ahead.
Yes, I think, Salil will respond on the utilization. And obviously, it's a function of demand. Thankfully, after the initial drop, we have seen utilization on-site come back to normal levels. So that's less of a concern. Offshore is probably still a concern. And as Salil has said earlier, we still have to onboard campus offers that we have made for this year, which we'll do over a period of time. So again, it's -- based on the demand we will see utilization may be operating in a narrow band. There was a question on productivity during work from home. So far, we have seen productivity holding good. By and large, we have seen productivity stable. We have seen parts in some areas, productivity actually improving, in other areas we have seen some marginality. Overall, I have -- we have not seen too much concern. But again, this is early days, we are really talking about 2, 3 months of experience. And we have to also remember, when you talk about work from home, it's not only about technology, enabling people to work from home, but there are a lot of software factors which we have to really figure out because how do we engage with people better if there is a lot of work from home. I mean there are -- I mean, many people have adopted well, but some people are still stressed out by the work-from-home thing. How do you deal with that? How do you provide them emotional and physical well-being kind of thing? Then when you're inducting new people, how do you imbibe your organization's trust, organization's culture, and values.So there are a lot of unanswered questions or lot of things we have to learn from work from home, and many of them will have some bearing on the productivity. So our sense is, while it has held good. It's too early to conclude whether work from home will always be more productive than work from office.
The next question is from Debasis from Business Standard, which I'm going to readout. He asks, will Infosys look at acquisition in FY '21 to boost growth given the guidance of 0% to 2% revenue growth?
Let me take that. The view that we have on acquisitions is really where it makes strategic sense to help us in the areas that we want to drive our business towards, which we've defined in our digital framework within the pentagon. Those are the first areas that we look at. It's not driven specifically to boost or not boost growth in general. In addition to that, there are sometimes opportunistic acquisitions where we see something in a specific sector or a geography or offering, which has a strategic fit but also gives us new capability where we are already strong or want to be stronger. So those are the ways we look and continue to look at acquisitions, not more to do some sort of compensation. Our business, as we've shared with you, we feel our [indiscernible] is doing well, and we feel quite confident given some of the factors of what we are seeing going ahead.
Now we'll move on to our next question, which is from Shilpa Phadnis from The Times of India.
You signed about $1.7 billion of deal in the last quarter. If you can take us through how much of it came from vendor consolidation? Also, if you can help us understand how are these deals being structured? Is it a combination of upfront payments or deferred payments or a deep discounting? That's my first question. Second, if you can also talk about the potential pricing pressure that could weigh in on the revenues going forward. Third, digital comprises 45% of your revenues. The pace at which it has grown in your overall revenue books to the revenue per employee comparison, that's really not caught up. It's still at $53,500. So I just wanted to understand from you, do you think the pricing differential is getting blurred with digital becoming more mainstream? If you can help us with your responses.
Thanks, Shilpa. I'll try to go through some of the points, and then Pravin and Nilanjan will add to it. I think the first question was the segmentation of the $1.7 billion of large deals. We don't typically share that sort of segmentation externally in the dimensions that you were referring to. I think the second question was on pricing. I will give you a little bit of color. And after I finish, there could be some more additions from Nilanjan or Pravin.On pricing, we have seen some level of impact, but it's not been broad-based or widespread at all. We've seen some pricing discount very narrowly with a few clients. In the impacted sectors in retail and manufacturing. And in the third, in terms of our digital business, we've shared this in the past, our operating margin for digital is, in fact, [indiscernible] than the company had in the past. We feel quite good about how our digital business is growing. And we feel that it's at the right level in the way we are structuring these deals. Of course, we'll always look for ways to improve that, keeping the client interest, and Infosys interest in market. Anything else Nilanjan or Pravin?
No, Salil, I think you answered the pricing question, and I had already answered it earlier.
We will now move on to our next question, which is from Ayushman Baruah from Mint, which I'm going to read out. His first question is, do you see recovery in Q2 or Q3, what will -- what will drive the demand in a post-COVID world? The second question is, hasn't digital become mainstream yet as you continue to call it out separately? And the third is what led to increase in profits year-on-year? Salil, may I please request you to speak a bit louder while you take this question?
On the first one, what do we see in terms of the time line for recovery, we've not specified and not looked at that from an external perspective. Our guidance is really for the full year. As you saw, we've seen the growth in the first quarter, and we continue to see our pipeline in a good place. So we feel that that is a measure that we will track to, but then really look at the overall economic environment as well. As I mentioned earlier in my opening comments, there are still a lot of uncertainties in that environment, but we want to make sure we look at that carefully on a week-by-week, on a month-by-month basis. Then there was, I think, another question maybe, Nilanjan.
Yes, I'll take that. Yes. So the question on operating profit, like I had mentioned earlier, it was -- last year, in this time, we had had 20.5% operating margin. And now we are at 22.7%. So as the year has progressed throughout last 4 quarters, we've continuously shown the improvement in margins from the various cost optimization levers we've talked about consistently around the pyramid and the on-site offshore mix, automation. So all that is helping us, in the long run, to structurally improve our business. It was a very important last year as well to show stability in margins after the FY '19 decline. And again, because of these tailwinds, we've also continued to hold and show resilience on our margin guidance for FY '21, which Salil mentioned, remains the same as a guidance, which we gave last year, which was at 21% to 23%. So I think all these things are contributing to our confidence in ensuring that we have a stable and a margin guidance, which we can continue to hold and show.
We will now move on to our next question. Can we have our next question from Saritha from Bloomberg, please?
I had a couple of questions. One is the feeling that I get that Infosys has somehow overcome all of the challenges, whether it's work from home, travel restrictions, or the visa ban. So I would really love for you to give me an idea of what the challenges are from here on. Your margin guidance is extremely positive. I want to understand what the challenges are for you ahead. And then also, would love to hear -- you talked about heightened level of deals. I would love to hear what kind of deals, what kind of verticals are you talking about? And last question for you on the visa situation. You talked about derisking the visa situation completely. How have you done that? And what is -- what are the plans if the situation goes beyond the year-end, as it is supposed to. It's only supposed to last through the year and for now.
Thanks, Saritha. Let me start off. And certainly, on the visa piece, I know Pravin will add a few thoughts as well. On the challenges first, we feel good with how the Q1 outcome has developed. However, the global economic environment has still got uncertainties, as I shared in the opening statement, and those are things we have to watch carefully. We have some understanding and experience and learning how the Q1 progressed and how all of these parameters that you described, for example, work from home or, for example, engaging with clients in this contactless manner or, for example, how transitions happen in a remote digital fashion. But this is still a crisis the world over in different ways, and we have to be extremely careful how we navigate that. It is not to say that, that is behind us by any stretch.I just want to mention a little bit about the visa situation and localization. One of the things we put in place a few years ago was this idea of building local talent in all the geographies we operate in. We started with the U.S. We have -- we had set out a large target for recruitment locally. We've far exceeded that target. We've set up [indiscernible] digital centers in the U.S. We've also set up digital centers in Europe and in Australia. Our thinking really is, and Nilanjan and Pravin alluded to this earlier, is to do college recruitment and build a full pyramid in those environments. By doing that, we build or building a business model that is more and more resilient in the future. It is not to say that we anticipated something like this that happened in this past quarter to happen. It's more to say that because of those decisions, and the investments we made in building the model, we feel more able to manage in this environment. Of course, it's not to say that we have all of the answers, but our business model is much more resilient, we feel, than it was in the past and maybe much more resilient than what we see that is going on in the market today.With that, I'll just pause and [ if there are any ] points to be added by Pravin or Nilanjan.
Salil, you have added all the points. Nothing more to add.
Back to you, [ Garima ].
We'll now move on to our next question. It's coming from Derek from Reuters.
First of all, congratulations on the numbers. I had a couple of questions. The first one was, I wanted some clarity on the BFSI segment itself. I see that the revenues have risen, but I want to know like how the sector is doing as a whole and how it will continue to do going forward for the rest of the year also, given the current environment? The next question was to Nilanjan. I know he said that you are in talks with clients on contracts needing renegotiations.But I want to know if that will trim margins and what sort of an impact the company is expecting to take on that? And the third thing to Salil is, I just want a little more color on the guidance and what gave you the confidence to provide that guidance of 0 to 2% revenue growth.
So on the financial services, let me request Pravin to kick that off. And then after that, Nilanjan, and I'll come back for the guidance.
On the [ financial services ], we had a positive constant currency year-on-year growth. At the beginning of the quarter, we were seeing some concerns in that segment. But as the quarter progressed, we saw volumes coming back and demand uptick. With that result, we have seen some positive growth, primarily in banking in Americas and Asia Pacific. We have also seen a very healthy pipeline. In fact, of the 15 deals that we won large deals in quarter 1, 5 of the large deals from BFSI space. And you have heard about the recent Vanguard deal in the early -- it is not reflected in the quarter 1 large deal count. But earlier this quarter, we have already won the Vanguard deal. So the deal pipeline is healthy.We see some weakness in -- continued weakness in capital markets and cards and payment space. But on the positive side, I mean, as I said, we have this [indiscernible] pipeline. And we have also done a phenomenal job in terms of enabling people to work from home, and that's one of the reasons why we have seen volumes come back and an uptick in financial services. So we remain reasonably optimistic about this sector.
Thank you so much for those answers. Nilanjan, do you have anything to add?
Yes. So on the question on deal renegotiation, I think deal renegotiations happen every quarter because every quarter, there are certain deals which expire. That's nothing new. And we could closely work with our clients on these matters. People look for productivity improvements, some people look for some pricing benefits. So I think there's nothing new. And like Salil mentioned, in terms of pricing, we have seen some impact and in the sectors, which were in the forefront, like retail and manufacturing, but not broad-based. And we, like I said, we have deep relationships with our clients, and we continue to work with them.
On the guidance, as I shared earlier, we saw first a $1.7 billion in large deal wins in the first quarter. We also saw yesterday a very significant announcement from Vanguard digital transformation work, we'll partner with them on. And we've seen through this past quarter, good traction with some of the newer areas, for example, on cloud, for example, on cost efficiency, automation and, for example, on consolidation. All of those factors, we felt even with a significant uncertainty in the global economic environment where we see still some different scenarios for the medical situation. We felt that we were in a position to give a guidance for growth of 0 to 2% for the full year in constant currency terms.
Now our next question is from Srinath from Financial Express. I'm going to read out this question. In the interest of time, I'll be reading out only one question that he has sent. Can you share about investments in R&D and how they have changed post-COVID?
In terms of R&D investments, we continue to invest in innovation, which is something we look at for newer technologies, especially focused on artificial intelligence, machine learning. However, we don't have an R&D investment, much like a research company. What we are clear about is those investments in artificial intelligence, machine learning, or some of the new areas of cloud actually are continuing even in this new environment because those are areas where we see more traction with our clients.
Our next question is coming from Nikita from Cogensis, [Operator Instructions] Okay. While we get back to Nikita there might be some network issues, we'll move on to our next journalist, Jochelle from ET Prime.
I have just two. ISG seems to suggest that though the number of deals in this -- in the quarter had held up, the sizes have decreased dramatically. I think they said 90% of the deals at an average contract value of $5 million to $10 million. Infosys seems to be bucking that trend. Could you give me some color on just how you see the sizes of deals in your pipeline holding up? And the second question, cash collections were fantastic in the quarter. How much of that do you believe is related to the stimulus that governments have provided to their companies? And do you have a view on how cash collections might hold up once the stimulus is removed?
Jochelle, we are not able to hear you very well.
I got it.
Let's get the first question [ again, please. ]
Go ahead, Nilanjan, on the cash, and then we look at the deals, yes.
Yes. So on the cash collections, again, I think we were very, very focused as the quarter started in times of this pandemic when liquidity becomes very, very critical to ensure we set up a cash collection office, so to speak, and monitor all our collections on a daily basis. I must say that the sales teams have really risen up and work with our clients to make sure that there has been no slipup in our overall collection cycle. And like I said, at the same time, we have been able to also extend temporary credits where our clients have come back and have seen some stress on their balance sheets. So we have been able to navigate this part of the collection cycle very, very well. As related to the stimulus part, I'm not sure how much of that is coming to the stimulus side because a lot of the stimulus is directly to individual employees, et cetera. Most of the -- actually, cash has come from companies' borrowing. And if you know in the overall global bond markets have already borrowed about $1 trillion in the first 5 months of this year versus $1 trillion in the full last year. So a lot of this cash collection is actually coming from the borrowings, which companies are doing. But having said that, a lot of our franchisees are all in the top U.S. Fortune 200 companies, which also have strong balance sheets as well. So I think we've been quite confident in terms of overall outlook on our DSOs.
Now we'll move on to our next question. It's coming from Mini Tejaswi from The Hindu. Mini, can you hear us? While we get back to Mini, let's move on to the next question. It's from Rukmini Rao from Business Today. I'm going to read out Rukmini's question. Can you give us some sense of around how vendor consolidation opportunities are looking like?
Let me take that, [ Garima ]. On vendor consolidation, what we've seen, as was shared by Pravin earlier, our work, with the approach we put in place, has resonated with our clients. And through that and through the strength of our business and financial position with a strong balance sheet, we see some increased interests with some clients to consolidate [ with us. ] We'll now see in the next quarters how that plays out. There are active discussions in our pipeline, but we'll see how that plays out in the coming quarters.
We'll move on to the next question, which is from Swathi Moorthy from Money Control.
I have just 2 questions. One is about, do you see -- your core has come down by 14%. So do you see digital overtaking core at some point? And how is COVID going to fuel this particular -- some color on that. And to Pravin, Pravin, the voluntary attrition number, you used to give the last quarter. Is there any reason why the company is not sharing it this year? And some color on the lateral hiring and fresher hiring plan for FY '21? And if I can just one more question about how will...
Swathi, I'm so sorry. I'm so sorry. We're running out of time. We'll take your first 2 questions.
Thanks for that question. I think one of the things we've put in place is really how we want to drive digital. And the reason is that's where clients are making the biggest changes and that's the transformation journey that they're embarking upon on [indiscernible]. By bringing digital component to 44.5%, we feel more and more strong that we aligned with what is relevant for our clients as they're navigating their next. So it's not a question whether core will replace or be bigger than digital. It's really being much more aligned to what our clients are looking for and then make sure that we have those capabilities to provide them the right service. That's the approach. For the other part, Pravin, over to you.
On the voluntary attrition from this quarter, we'll be disclosing only voluntary attrition for IT services because that is what we have seen most people in the industry use, and that's what really makes sense. So that's what we will disclose going forward. And as we said, this quarter, it was 11.7% as compared to over 20% about a year back. In terms of lateral hiring, as I said, in April, there is a general freeze of lateral hiring. However, we will continue to look for talent in niche areas. In quarter 1 itself, we had a 4,000 plus lateral hiring. And that trend will continue going forward as well based on the needs, we will look at it. From a fresher hiring, from campuses, again, we had already said we are looking at about 20,000 plus people joining us towards the later part of this year and early next year.
Since we couldn't get Nikita at that time, she has sent her question across, which I'm going to read out. Want to get a sense of -- sense on interactions with clients in the retail and insurance space.
I'll request Pravin maybe to give some color, please?
Yes. See, on the retail front, it's obviously very stressed at this stage. Barring the grocery segment, all other segments of retail, be it apparel, be it specialty retail, logistics or any other segment in retail, they are seeing huge demand contraction and a lot of supply chain disruptions. So obviously, clients are trying to grapple with it. And one of their big focuses is on verbalizing their cost structures and taking cost out. So that for now the conversations they are having with the clients. And second one is, obviously, they're also looking at continued investment in digital and that's the other level of conversation we are having.Likewise, on insurance, I mean, in most sectors in today's pandemic time, one of the common theme is, everyone is looking at virtual ways of engaging with their stakeholders, that's one common theme. And that's a theme. That we are having with the insurance companies as well. And the second one is they're also accelerating the digitization because, again, insurance has been a little bit behind in terms of digital transformation. So given the [indiscernible] given a lot of focus on digitization, there is a lot of uptick in that. So these are some of the conversations we are having both with retail clients as well as insurance clients.
Thank you so much for answering all the questions so patiently. That wraps up our Q&A segment for today. Thank you, gentlemen.
Thank you. Thank you, everyone.
Thank you. Thank you, [ Garima ].
Thank you.
We shall now conclude today's press conference. As we sign off, I'd like to inform you all that the archived webcast of the press conference will be available on the Infosys website as well as our YouTube channel sometime later today, please keep an eye out. Thank you once again for joining us. Please take care and stay safe.