Infosys Ltd

NYSE:INFY

Earnings Call Transcript 2018-Q4

[Salil Satish Parekh, MD, CEO & Director]

Good afternoon. I'm Salil Parekh, Managing Director and CEO of Infosys. I'm joined here by Pravin and Ranga, Pravin, our COO, and Ranga, our CFO. I'm delighted to report our Q4 results and our full year results to share with you our strategic direction and to share with you our guidance for fiscal '19. After that, I'll request Pravin and Ranga to share updates from operations and finance. In Q4, we had strong revenue growth, 9.2% in reported terms year-on-year for the quarter and 1.8% quarter-on-quarter again in reported terms. Our operating margin in Q4 was 24.7%. For fiscal '18, we had a growth of 7.2% and our operating margin was 24.3%.Our Financial Services business grew 7.2% year-on-year. Our Energy and Utilities business, 16.1%; and our Europe geography at 22.5%. These robust results demonstrate the underlying strength of our business, the commitment and trust of our clients and the dedication of our employees. Now for some highlights from our strategic review and the updates that have come from all of the internal discussions. The strategic review was informed by discussions with clients, with our employees, with the leadership and then through a review of the portfolio of all of our businesses. In fact, to share with you how our clients are looking at the world, the tech spend and the tech business, let me give you one example. Some weeks ago, I was with the CFO of a large U.S. Fortune 50 company, and a long-standing client of ours for over 15 years and his comment back to me was, he's delighted with the work we are doing for them. He has tremendous trust in our delivery and a tremendous respect for all of the work and understanding that we have of his technology landscape. And even -- he was even delighted in the work that we're doing to help him go on his digital journey as we were navigating him through all of the changes he was making, whether it was on data or analytics, on cloud or on Agile. Those were the sorts of discussions I've had with over 40 clients in the past few weeks and that has really informed our strategy. Our strategy comprises of 4 pillars: the first, scaling our Agile digital business. Today, our Agile digital business is about $2.8 billion for fiscal '18. It's a business that's growing robustly in the quarter and for the full year, and it's a business that we want to invest in and now scale for the markets, clients and opportunities ahead.The second pillar is energize our core. Our core businesses are extremely strong, and these are businesses that can benefit massively from AI, our Nia platform that will be applied all across and from automation. The third pillar reflects all of the aspirations and the goals we've set for our employees. I want all of our employees to look at a reskilling agenda, both for what they want to do in the future but -- also for what the clients are looking for from us and from our employees. And the fourth pillar really reflects the changing needs in the world today is localization for us within the markets that we operate in, for example, the U.S., Europe and Australia. The localization reflects scaling up of local talent in those markets and building some delivery centers as we've already done, for example, in the U.S. where we built in Indiana or in Connecticut. So those are the 4 pillars of our strategy: Agile, digital skilling, energizing our core, reskilling our employees and localization in the markets that we operate in. All of that around the framework, around the guidance of navigate your next, working with our clients to navigate their next.With that, let me come now to our guidance. Our guidance for fiscal '19 in constant currency terms: Revenue growth of 6% to 8% and operating margin between 22% and 24%. With that, let me pause and hand it over to Pravin, followed by which -- followed by Pravin will be Ranga and then we'll take questions from you. Go ahead, Pravin.

[U. B. Pravin Rao, COO & Whole]

Thank you, Salil. We had a good quarter on the operation front as well. Revenues from digital services increased to 26.8% in quarter 4 and for fiscal '18 it stood at 25.5%. During the quarter, we also saw 10 large deal wins, total TCV of $905 million. This is the highest quarterly TCV win in this particular year. Total TCV win for the year crossed $3 billion. The pipeline remains healthy. Utilization, excluding trainees, remains stable at 84.7%. Revenue per employee crossed $54,600 as compared to USD 53,700 in quarter 3. This is a clear reflection of increased adoption of automation in our core services and improved operational efficiencies. In fact, while revenues for the year grew by 7.2%, the employee headcount increased by only 1.9%. Volumes increased 1.1%, and price realization was steady, was flattish, once again a reflection of increased mix of newer services and digital services in our portfolio.Attrition increased to 16.6% as compared to 15.8% the previous quarter. However, the high-performer attrition has come down dramatically at 9.4%. We are also pleased to announce compensation revision for 85% of our employees, starting April. For rest of the employees, primarily middle-management and senior management, it will be effective July 1. This for both on-site and offshore. Similar to last year, they'll be more focus on differentiated -- differentiation based on performance and contribution. Majority of the employees in India will get raises ranging from mid-single-digit to high single digit.With this, I will pass on to Ranga.

[Mavinakere Ranganath;Chief Financial Officer]

Thanks, Salil and Pravin. As Salil and Pravin mentioned, fiscal '18, we saw overall, very good performance and most importantly, resilient performance. I'm going to talk about the margins, the cash flow generation, the capital allocation policy and the dividends.In fiscal '18, our operating margins were very resilient at 24.3%. It was on the back of several operational efficiency measures that we undertook plus productivity improvements. Talking about productivity, our revenue per employee crossed $54,500 in fiscal '18. It was a year-on-year increase of 6.3%. This is primarily on the back of the revenues growing at 7.2%, whereas the headcount grew just 1.9%. Our free cash flow during the year was very strong. It grew 15.3% year-on-year, double the rate of the revenue growth of 7.2%.And today, the board approved a revised capital allocation policy. The capital allocation policy has 2 parts: the first part, as announced in fiscal 2017, the board decided to continue to pay up to 70% of free cash flow to the shareholders for the corresponding financial year. In addition, for fiscal '19, the board has identified up to $2 billion to be returned to shareholders in a manner to be decided by the board subsequently. Out of this up to $2 billion, $400 million would be paid by way of a special dividend, which we have announced today. The balance up to $1.6 billion, would be paid in a manner to be decided by the board subsequently. We'll make announcements in this regard as we make progress.Dividend, the final dividend that was announced today of INR 20.5. And if you include the interim dividend of INR 13, the total dividend is INR 33.5. The total dividend payout this year, excluding the special dividend, is 30% higher than last year. With this, let me stop here, and we will await for questions.

[Sajeet Manghat;BloombergQuint]

I'm Sajeet here from BloombergQuint. Mr. Parekh, a couple of questions to you and then to others. The first one is with respect to the guidance of 6% to 8%, what are the factors you've taken into account while going for that guidance? You spoke about the strategic review, which you've done. How is this different from the strategic path which was laid by your predecessor? And there has been a sale -- or you're planning to sell Skava and Panaya. What is the reason for that? Do you think in hindsight that, that was a wrong acquisition that you did? That's one. For Mr. Rao, you spoke about digital. What is the kind of -- of the $905 million TCV, what is the new orders which came from digital and what kind of margins are we seeing in that? Are you seeing still small deals coming in or bigger ones coming in? For Ranga, the margins 22% to 24% guidance, you are bringing down by a bit. What is the reason for that? Are you seeing any headwinds coming in the quarter?

[Salil Satish Parekh, MD, CEO & Director]

So let me start. Thank you. I think the 3 components or 3 questions. First, on the guidance and revenue, my sense of the market is we see a market that is in a stable-to-good condition. Our own businesses are doing well, as I described some of them. You heard from Pravin on the specifics of some of the other businesses within our mix. Given those external factors and our own positioning that was a range of guidance that we developed. In terms of the strategic review, the approach I've taken, as I shared, was really meeting with our clients, our employees, our leadership and then reviewing our portfolio. What you heard from me about our clients is really what's informed where we are going. Our strategy is built on where our clients' digital journey is taking them and, for us, to have relevance for the future with our clients. And that's really why we have the 4 pillars, the first being Agile digital. The second being energizing our core, the third being reskilling our employees and the fourth pillar being building localization in the markets we operate in. In terms of Panaya and Skava, we did a strategic review of our portfolio. We looked at where our strategy direction was, which is what I just described. It comprises of digital and our core IT services and a strong suite of product portfolio, for example, Finacle, platform such as Edge, Nia, which we are further expanding and McCamish which is an insurance platform. And within that strategic review, we decided to initiate active interest in Panaya and Skava from external buyers because it did not fit all of the criteria we have today for scaling our businesses, given the conditions we have for the business today.

[U. B. Pravin Rao, COO & Whole]

On the large deal front, 32% of $905 million TCV was net new. We don't track how much of percentage of digital from a large deal perspective. But there is an element of digital in most of the large deals, particularly with respect to cloud transformation, modernization and so on. And in terms of overall, the size of digital deals, the sizes are definitely increasing. And -- but the deals are also becoming more complex because now digital is moving beyond the user experience, the front end to modernizing the back-end, analytics, the integration between the front end and back end and so on.

[Mavinakere Ranganath;Chief Financial Officer]

And the operating margins, as you know, for this year that is fiscal '18, we had given the guidance of 23% to 25%. Finally, we delivered 24.3% higher than the midpoint. For this year, the primary reason, there are 4 reasons. One, clearly, we want to invest in digital where we are underinvested; two, we want to foolproof our U.S. talent model; three, we also want to revitalize our sales for further accelerating their deal wins; four, we also want to repurpose our employees given our digital journey. So these are the 3 things. So that's why we have said 22% to 24%. But nevertheless, all the operational efficiency, productivity focus that we have shown in the last 2 years, they'll be unwavering focus on that. But at the same time, we want to invest to leverage the business opportunities.

[Sajeet Manghat;BloombergQuint]

Just to add one. The write-down on Panaya and on Skava, if you can elaborate on?

[Mavinakere Ranganath;Chief Financial Officer]

Sure. See, Infosys has over 40 subsidiaries, right? Of this Infosys Limited is the largest group. So Infosys Limited invested in Panaya and Skava by way of acquisition, if you recollect. Now for the reasons that Salil mentioned, the company is exploring opportunities for potential buyers and evaluating them. Now once such a decision is taken to evaluate sale, we have to classify them as assets held for sale in our financial statement. That is the requirement of accounting standards. So we have done that. And after reclassification, we have assessed the fair value and taken an impairment. In the consolidated books of Infosys Limited group, it is $18 million, but the write-down of value in the stand-alone books of Infosys Limited is $90 million.

[Kritika Saxena;CNBC]

Kritika Saxena from CNBC. Let me take that first question, Ranga, since he was talking about Skava and Panaya. Will there be a further impairment given that you are looking at March 2019, a, why such a long period for the sale? Are there any potential buyers that you have already identified? And I don't want to go into what has happened in the past, of course, but the fact is that a lot has been talked around Skava and Panaya. You bet big on Skava and Panaya. So what changed then? Are you admitting that it was perhaps a mistake to acquire these companies? What changed then? Salil, I want to understand the acquisition strategy from you as well now. There's a $75 million acquisition that has come in. It's largely around digital creative and consumer insights. So specifically in terms of acquisition, what are the areas going to be? Based on your strategic review, is it largely going to be these niche digital-focused companies? Could there be traditional firms as well that you would want to -- firms with traditional capabilities that you want to -- you would want to bring in? So that's for Salil. Salil, I also wanted to understand from you based on your guidance, it does look like FY '19 is going to be a better year, but if you can just give us a breakup? The fact is that U.S. is -- was expected to be slightly soft last quarter. There was -- you were bullish on BFS, so I want to understand by when are you going to see that volatility in BFS reduced? In 2 quarters time, do you expect that to start seeing a significant jump up? Will India continue to remain volatile for you in the near term? Pravin, a little understanding as far as the impact of the compensation is concerned. 80% already going to be given out. So remaining 20 -- 85%. So remaining, by when would that come in? In terms of attrition as well, is there -- given the fact that Q4 is slightly weakish on attrition, I want to understand from you what's your outlook in terms of bringing that down further? And Ranga, also if you can give us a breakup on margins. And I know there's a lot of questions to remember. I'll reiterate if you need.

[Mavinakere Ranganath;Chief Financial Officer]

Thank you. Let me take one by one. Coming to the Panaya and Skava, as I was explaining earlier, based on the management's intention to pursue sale, we have to reclassify them as assets held for sale, and we had to apply specific requirements of the accounting standards to assess the fair value, and we have taken a diminution in value and write-down of value of $90 million in the stand-alone books and $18 million. So aggregate at the group level, the impairment impact is $18 million. So the reason for March 2019 is not that we're going to wait or -- it's a requirement of the accounting standards that within 1 year we need to really see what opportunities are there to pursue the sale. Something like that. So I think that's where it is and is based on the fair value assessment.

[Kritika Saxena;CNBC]

Margin?

[Mavinakere Ranganath;Chief Financial Officer]

Margin, I think, overall, as is -- as I was responding earlier, last year we gave 23% to 25% margin guidance, and we had a very robust operating margin performance. We ended at 24.3%. This year, we looked at all the investments that we need to make in underinvested areas of digital, as I said; two, revitalize our sales for much more accelerated deal wins; three, to foolproof our U.S. talent model, which we started last year. We want to further accelerate that; and fourth, of course, repurposing the employees, retaining the employees. So while we had given this guidance, at the same time our focus on operational efficiencies, productivity that we have carried out, for example, all the indicators that I keep talking about that unwavering focus will continue. So that's where we are.

[Salil Satish Parekh, MD, CEO & Director]

On the acquisitions, I think, first, so our view is we are committed to continuing with the approach on acquisitions, which fit in with our future focus on strategy, again, along the 4 elements: Agile, digital, energize the core, reskill and localization. The acquisition we announced today squarely fits into the digital scale-up for us. So it's really underwriting the strategy that we are more fully exposing in the market and executing upon. In terms of where we go in the future, we will continue to look for those. There's no time frame by which we'll do X or Y. We'll be continuing to look at what will fit in to this digital framework that we've developed.

[Kritika Saxena;CNBC]

Second question was on FY '19, U.S. softer areas, BFS by when do will be completed at all?

[Salil Satish Parekh, MD, CEO & Director]

Right. On -- the way we see the guidance for fiscal '19, my view is given all of the dynamics in the market and our own internal businesses that's the reason we set the guidance at 6% to 8%. Financial Services, we shared with you -- I shared with you the numbers. In the fact sheet, we have more granular numbers for Financial Services as well. And we see that being the case for fiscal '19. On India, we had negative growth in fiscal '18. We have large project which were coming off. We see that the business in India outside of those large projects is in a good shape. Those business will continue, but as the large projects wind down, that effect will stay in the business.

[Kritika Saxena;CNBC]

Sir, on the 2 quarters these soft areas will -- were temporary.

[Salil Satish Parekh, MD, CEO & Director]

We've not given anything more specific than the 6% to 8% for the full year at this stage.

[U. B. Pravin Rao, COO & Whole]

On the compensation front, as I said, for 85% of the employees both on-site and offshore, compensation will be effective April 1. The remainder 15%, it will be effective July 1, so that's the thing on the compensation. And from attrition front, well, attrition has marginally increased as compared to quarter 3. The high-performance attrition has dramatically come down from 14% to 9.4%. So our focus is primarily focusing differentiating people and making sure we continue to invest in people in terms of reskilling. That's very critical for us. And provide an environment where people are engaged and happy and motivated to work. So that effort will still continue. And we are not too worried about the 16% thing. It's in a normal band that we typically see. We normal...

[Kritika Saxena;CNBC]

Yes. And that's seasonal, right, for Q4?

[U. B. Pravin Rao, COO & Whole]

Yes. It's seasonal for Q4, even in Q1 also, you will probably see a marginal upside because there are people going in for higher studies and so on. But the -- I mean, attrition will normally be in this band of 12% to 14%, 16%, so we are not unduly worried on that account.

[Rahul Dayama;ET Now]

This is Rahul Dayama from ET Now. Salil, first to you and, of course, a few questions for both of you. How different is your articulated strategy from renew and new because you spoke about focusing on the core business and also digital, really being the big focus area? And with the guidance that you've come out for FY '19, is there confidence now to give out industry-matching growth rates that sort of also sets in with what NASSCOM has guided for next year? Pravin, for you, in terms of geographies really, could you elaborate a bit of a stress on North America. Is this a 1 quarter issue? India is something that you've pointed out. Is this because the GST payments had sort of come by that you're seeing that dip really? Ranga, we should again ask you about the subsidiaries really. In terms, does it really validate the concerns that the promoter group had raised because all these 3 acquisitions that you made were done under the previous tenure of Vishal Sikka, and they're all future businesses really looking ahead in terms of digital. Salil, if you could also talk about all 3 of them really the business that you're looking to sell, really are future businesses in a sense, so why the strategic review of that side?

[Salil Satish Parekh, MD, CEO & Director]

So the first question, I think, was on the way the guidance flows into....

[Rahul Dayama;ET Now]

The strategy -- really articulate the strategy? How different really it is...

[Salil Satish Parekh, MD, CEO & Director]

How different -- yes. So our strategic approach going forward is squarely focused on digital and let me really talk about where we are going. The thinking there is our clients have a huge relationship and trust with us today. We understand their landscape, their technology foundations. They are themselves transforming and going on a journey. Whether they're doing that via the cloud, via digital, via data, via analytics, to have a position that we have, which is having that deep understanding of where they are, we are the best positioned to navigate for their future. So that is our strategy. Our strategy is we build out our digital business with our clients because that makes us relevant for our future. The core is extremely critical because we need that -- we have a deep strength in that and our clients appreciate the confidence that we bring in delivering the core to them. And so that's the approach we've taken, and then the 2 other pillars, which relate to reskilling and localization. Then...

[Rahul Dayama;ET Now]

Given it was in the NASSCOM guidance in terms of matching industry...

[Salil Satish Parekh, MD, CEO & Director]

Our guidance is based on where we see the market today and where we see our own business, whether the business is across service lines or sectors or geographies. Given those 2 combinations is how we've set the guidance.

[U. B. Pravin Rao, COO & Whole]

So on the -- from a geography perspective, for the year, we had tremendous growth in Europe, even in rest of the world, the growth has been higher than -- at Infosys level. North America has been soft, but there is no real macro trend, per se. In some of the verticals like banking and they are some of the large banks, there have been softness in spending. So it's difficult to predict whether things will improve in the coming year. Our expectation is some of the spend should come back given that there is less focus on regulatory staff and almost every client in every industry is focusing on changing the business versus running the business. So there's a clear expectation that spend will come back, but it remains to be seen, but we have factored all these things when we gave the guidance.

[Rahul Dayama;ET Now]

On the subsidiaries...

[Mavinakere Ranganath;Chief Financial Officer]

On the subsidiaries, as I said, we have over 40 subsidiaries. And periodically, we undertake the review of the subsidiaries. And as Salil said earlier, in this quarter, we undertook a strategic review of all our portfolio, all the services, platforms, products to see where we need to accelerate our investment, given our digital priorities and where the alignment is not diminished in terms of the overall strategic direction that we have laid out. So in that regard, the intention to sell both the Panaya and Skava was result of that exercise. After that, we have reclassified them, and we went ahead with the accounting standards and it resulted in the diminishing value of $90 million in the stand-alone books of Infosys Limited and aggregate the consolidated impact was $18 million.

[Swati Khandelwal;Business Television India]

I'm Swati Khandelwal from Business Television India. Most of it is, of course, being answered in terms of the guidance and all of that. But I want to still understand from you, on the valuations for Panaya and Skava, what is it that you're expecting with -- and the time line you've mentioned, but the kind of valuation that you think it will fetch? One. Biggest risks to your guidance that you've given, while it's in line with the expectations pretty much from the Street, but there was a section of analysts who expected slightly higher than 8% perhaps. So why the guidance is in this range that you thought? And what are the biggest risks to the same? Road map for digital growth. I know you specified about this acquisition which is again in that space, but what is the road map looking like? And specific to this acquisition, how much or what kind of EPS acquisition are you looking to get from this one? Also, biggest risks, as I asked you, on on-site hiring and sectoral growth that you would like to talk on.

[Salil Satish Parekh, MD, CEO & Director]

Yes. Sure. Okay. Maybe I'll start with the -- one of the questions which relates to what is the detailing behind the digital thinking. There are 5 elements within our digital thinking. They relate to what we call experience or user view of digital and then it was mobility and user interfaces. It relates to insights which are about data and analytics and AI. It then relates to modernization or acceleration, which are about taking skill change to the portfolio of technology that clients have, for example, a cloud migration or modernization of legacy applications. And then relates to innovation, where we talk about things like IoT or vertical platforms, for example the McCamish one I described before. And then finally it relates to assurance, which is about cybersecurity and about the rejuvenation of our testing approach in the digital world. So all of the focus going ahead in terms of our digital detailed service architecture falls in these 5 categories. The acquisition that we have made and announced today is squarely within the experience part of that 5. And we focus our thinking, execution, investments in those 5 areas to scale it up. This is where our clients are going and then making sure that as we look at some of the acquisition in the future, how they relate to these 5 and fit into this architecture.

[Swati Khandelwal;Business Television India]

On the subsidiaries that you're looking to...

[Mavinakere Ranganath;Chief Financial Officer]

That's right. So I think once the classification is made, that is asset held for sale, there is very specific methodology that we need to adopt to assess the fair value. We engaged an independent valuer who will assess the fair value. I think that's what has been reflected and based on which we have taken the impairment in the books of both the Infosys Limited as well as the consolidated. So our objective is to pursue in such a way that makes economic sense to the company at what price we sell it.

[Swati Khandelwal;Business Television India]

On-site hiring and security.

[U. B. Pravin Rao, COO & Whole]

Yes. On on-site hiring, on an average, we typically recruit about 800 to 1,000 people per quarter. As you are aware, we have an ambitious program to localize, starting with the U.S. We have made a commitment of about 10,000 hiring -- local hiring in U.S. in the next 18, 24 months. So we are also looking -- we are looking at both hiring fresh graduate from colleges as well as lateral hiring. We have had good successes in the last 2 quarters on hiring from campuses. We have hired about 800 graduates so far, and we expect to continue. And most importantly, we have seen about 60%, 65% of those people. We have been able to deploy them on projects as well. So the on-site hiring is going well, and we are fairly confident of meeting our commitment of about 10,000-plus people over the next 18, 24 months. On the sectoral front, this year, we have seen tremendous growth in insurance. We have seen tremendous growth in energy and utilities and in telecom space, whereas growth has been a bit muted in the manufacturing and retail. Going forward, we'll continue to see strong growth in utilities, in energy, particularly with oil price stabilizing, we expect a lot more spend coming back in the energy space. We continue to see good momentum in telecom. BFSI to some extent was a bit of an aberration for us this year. If you ignore the -- if you consider the insurance as well on a constant-currency basis, BFSI was -- growth was similar to Infosys growth. But if you remove insurance and consider only BFS, the growth was much lower. But we have had an impact of -- last year, we had RBS, one of our clients where we had to ramp down because one of the programs got canceled. If we ignore that impact, if you normalize for the RBS impact, the growth of BFS also would have been similar to Infosys thing.

[Swati Khandelwal;Business Television India]

Sure. So one aberration, as you say. What are the concerns or the risks that you see to the guidance that you've given? And why lower guidance? I mean, why could not it be higher than what you've given?

[Mavinakere Ranganath;Chief Financial Officer]

Well, I think you're referring to the revenue guidance or the margin guidance?

[Swati Khandelwal;Business Television India]

Yes. Revenue guidance.

[Mavinakere Ranganath;Chief Financial Officer]

Revenue guidance, as Salil said, I think, is always based on what we see and at this point in time based on the visibility.

[Swati Khandelwal;Business Television India]

What challenges that you see and meeting that if at all?

[Mavinakere Ranganath;Chief Financial Officer]

I think whatever at this point in time we know and we could assess, we have already incorporated in those guidance.

[Swati Khandelwal;Business Television India]

Okay. Because it's the last question, I would like to know, Salil, it's been 3 months that you took on and a very interesting challenging job in that sense. But how is it that you've spotted or any specific remarks that you would like to make on what you found was something that you would like to change in the way the company worked on the strategy front?

[Salil Satish Parekh, MD, CEO & Director]

Actually, what I have discovered is something hugely positive. The loyalty we have from our clients, the trust that they have in us and the delivery capability that I think we have and then the clients perceive we have is usually positive. So I will look forward to actually expanding on that foundation and building this really great Agile, digital future for the company.

[Sajeet Manghat;BloombergQuint]

And Ranga, can you elaborate on your capital allocation policy?

[Mavinakere Ranganath;Chief Financial Officer]

Yes.

[Sajeet Manghat;BloombergQuint]

The thinking behind it was from FY '18 to FY '19 there has been changes. Nearly INR 20,000 crores you gave last year in dividends.

[Mavinakere Ranganath;Chief Financial Officer]

Yes.

[Unknown Executive]

We can take in the press conference perhaps.

[Mavinakere Ranganath;Chief Financial Officer]

I'll just one -- answer that point.

[Kritika Saxena;CNBC]

And one more. I would like to add one more, Ranga. Also want to understand from you, the innovation fund of $500 million that you have since you've had a strategic review. Has any thinking gone behind the innovation fund that you have, given the fact that you were investing on new age businesses and start-ups, all of that?

[Mavinakere Ranganath;Chief Financial Officer]

Well, let me come to the capital allocation policy. I think our objective is always to give a capital allocation policy that is comprehensive and most importantly, predictable. Predictability is important. So we have addressed this in 2 ways: one, we have clearly articulated that every year, up to 70% of the free cash flow will be returned to shareholders in a particular manner. That is the new cash that is generated every year. Second part is we have also addressed how the current cash that is sitting on the balance sheet would be distributed to the shareholders. So coming to the second part, we have said that up to $2 billion would be returned to the shareholders in a manner that would be decided by the board. Out of that $2 billion, board has already decided that $400 million will be given as a special dividend immediately. The balance, $1.6 billion, would be decided in what manner to be returned to the shareholders at the appropriate time by the board.

[Rahul Dayama;ET Now]

Is there a internal targets you have with respect to return ratios -- return ratios or...

[Unknown Executive]

We have to go for the press conference. We can take this...

[Mavinakere Ranganath;Chief Financial Officer]

No that 70% free cash is flow already there. I mean that's very widely.

[Kritika Saxena;CNBC]

Salil, on the innovation funds which you...

[Mavinakere Ranganath;Chief Financial Officer]

Innovation fund continues to be important for us and in fact, the last quarter also, this quarter also we made one more investment. We enhanced our investment stake in a particular company. That's integral to our digital journey.

[Kritika Saxena;CNBC]

So the $500 million fund that you kind of thought of still remains?

[Mavinakere Ranganath;Chief Financial Officer]

Of course. That is earmarked, always.

[Unknown Executive]

Thank you, gentlemen.

[Mavinakere Ranganath;Chief Financial Officer]

Thank you.

[U. B. Pravin Rao, COO & Whole]

Thank you.

[Salil Satish Parekh, MD, CEO & Director]

Thank you very much.