Hexaware Technologies Limited (NSE: HEXT) Q3 2026 Earnings Call dated Feb. 05, 2026
Corporate Participants:
Niraj Khemka — Head of Investor Relations
Srikrishna Ramakarthikeyan — CEO & Executive Director
Vikash Kumar Jain — Chief Financial Officer
Analysts:
Prateek Maheshwari — Analyst
Ankur Rudra — Analyst
Vibhor Singhal — Analyst
Anmol Garg — Analyst
Dipesh Mehta — Analyst
Presentation:
operator
Welcome to Hexaware Technologies Limited conference call for the Q4 CY25 earnings call. We’ll begin today’s session with a presentation from the Hexaware management team followed by a Q and a segment. To ask a question during Q and A, please use the Raise hand feature located at the bottom of your Zoom interface. This will place you in a virtual queue. I will now hand the conference over to Mr. Neeraj Kamka, head of Investor Relations.
Thank you. Over to you, Mr. Neeraj.
Niraj Khemka — Head of Investor Relations
Hello everyone. Hello everyone. I hope I’m audible. Welcome to Hixava Technologies Q4 CY25 earnings call. In the call today we have with us Mr. Ashri Krishna, CEO Mr. Vikash Jain, CFO. In the course of this call we may make certain forward looking statements which may involve a number of risks and uncertainties. All forward looking statements made herein are based on the information available currently with the management and the company does not undertake to update any of these statements in the made in the course of this call. In this regard there’s a full disclosure which has been provided in the earnings presentation and in the press release. We consider that as read.
W ith this I’ll hand over the call to Keej. Over to you. K.
Srikrishna Ramakarthikeyan — CEO & Executive Director
Thank you, Neeraj, if you could move slides please. Now, you know one announcement from Anthropic yesterday before shook our stock markets right globally for our industry. So I thought I’ll start with that today. We were anyway going to do the topic that we were going to deep dive on strategy is on AI. So actually I’ll start with that. One more slide please. So at the highest level our goal with customers is that every single day, every single client, the work we do is positively impacted by AI. And I think we’re going to get there sooner than we originally imagined.
Now to do that we are doing four things. First, we’re building AI into all of our platforms and reimagining our platforms. So whether it’s tensile for IT operations, RapidX for software engineering or Maze, the second thing we’re doing is to create and launch new services that deliver new revenue streams which are enabled by AI. The third are workforce training. We are already in the second generation of retraining a workforce on AI. And fourth and most importantly, processes need to be redone in AI. For example, SDLC as we know it in the past is completely being redone now.
If AI is in the sdlc, it is not just that the same people, same talent, same process, don’t run sprints the same way so these are four things that we are doing to get to our goal of impacting positively every single customer every single day. So what do we tell our clients? You know there is at the highest level there is AI for IT and AI for business. We tell our clients when it comes to AI for it, leave it works.
We k now how to get productivity and velocity executed for clients. Well, you set the guardrails, you set the rules and leave the execution to us. I think this narrative has found resonance. I think early, earlier, I’ll say last year people are not quite willing to do that but I would say far more so right now, especially when it comes to IT operations and data engineering. In SDLC I think it’s a little more complicated. We tell them on AI for business the roles are a little different. Our role is to enable you to meet what you dream of.
Now we certainly have multiple ideas on what they could do but our first job is to enable the technology to realize the velocity, the use cases that they want to execute. Now on AI for it we have been first off the block multiple times and consistently so. We were the first to Launch a product RapidX that focuses on legacy re engineering, legacy reverse engineering which is actually a crucial pre step required to any coding that is needed. In July last year we were actually the first company to launch a white coding offering and three weeks ago we launched an offering that goes to the heart of the anthropic release which says hey, software products or SaaS products can be replaced by hntki.
We agree. Well actually we think it’s a massive opportunity for us and the service we launch is a reflection of that. In these ones I spoke about are all as it pertains to AI for sdlc but in AI for outsourcing our tensile platform we would have built in the next I would say less than 2/4 and quite a bit of is already done. I’ll say 80 supervisory agents and underpinned by 400 what you call atomic agents that can operate in a mode which is assisting humans to all the way autonomous over time. In AI for business, what while we are telling customers we don’t know your business as well as you do for a number of industries we operate in we detailed out level five to level one process, level one to level five processes and for each business process we have a point of view on how can AI impact that process and if all of that is executed, what kind of business value will it deliver to customers.
So we make, we’ve been like I said first off on a Number of fronts now legacy modernization that we’ve been now talking about for over a year as growth accelerator for us is a very specific use case of new revenues cost per AI. We’ve been making good progress in that. I think in this year I can say with confidence that we will have at least two or three scale legacy modernizations completed and multiple other of smaller ones that we continue to execute.
Yet I think that the biggest opportunities are still ahead of us. Now w e spoke about a key growth level for us is launching a technology vertical. So we hired somebody last quarter that we spoke about. We launched a new vertical called. We renamed it as TPP technology products and platforms. And from Q1 onwards you will see us reporting on this vertical as a separate vertical from where it is currently in HTTPs. We did launch three new services on AI Squatter. One of the most exciting things we did is this. I think we are the first first company in the world to implement a completely AI first global multilingual help desk in production.
So we now have 33,000 employees who if they call our help desk it’ll be answered by AI. And I think we are the first company in the world to put it in production. You know we private equity markets. Private markets in a more broad sense is a critical growth driver. Companies are staying private for longer and for larger and there is no more important time than now in for value creation in these companies. Amit which joined us as the chief private markets officer he’s done this for a living for over 20 years in different firms most recently in Tech9Run.
So we are pleased to have Amit. He joined us about two weeks ago. Our revenue and our people metrics continue to be positive. We closed with close to 34,000 headcount. We continue to have amongst the lowest attrition in the industry. In it it was 11%. Our utilization ticked down a bit in anticipation mainly of growth in 26. We’ll talk about that later. We last year we crossed one customer with 100 million. This year we crossed two customers with 100 million and we added one client in the north of $50 million category. Our revenues for Q4 were I would say tad lower than what we expected.
I will say there are, you know three things to call out. One is that one of the gscs again had I would say a substantial cut which I amounts to about 70 bips annualized. This had an impact in Q4. It also will have an impact in Q1. We will talk about 26 later. The second thing is a client that normally does not do furloughs, actually did a significant furlough and the third and you’ll see numbers that are pass through revenues are materially lower than the normal and average. So but given all that it was a tad lower than what we expected on profitability, again we were, you know, in absolute terms in reported profitability we were solid.
But there’s a number of puts and takes on our EBITDA and profitability which I think Vikash will walk you through later. And as always we had outstanding cash conversion and an outstanding cash balance. If you go to the next slide, please. The best part of the quarter for us is that we won any number of deals. We won pretty much everything that we expected to win, expected to close and, and some more. And last quarter I said hey, just given kind of the volume closures Q4 maybe our pipeline will release actually dent our pipeline continue to go up and actually it is crossed 4 billion for the first time.
So some of the deals, I think the most important one is a very large consolidation deal in a big tech. This is a process that’s been going on for a very long time. To be sure this doesn’t come with like a predefined book of work, but it does give us the right to hunt and the right to receive RFPs in a very, very large pool of spend. The second one here is a bank that we had won earlier last year but there’s a significant deal in this. So you know what the deal does is to put us in a position of nice growth for us in 26 and forward the product.
The single largest, actually the single largest deal we did is who’s now probably the globally largest credentials company. They’ve been acquiring companies at a rapid pace and we do multiple things for them starting from integrating backward entities into a common IT framework. And now we are running all of it everything in tech, infrastructure, applications and in future also the modernization for a new platform. There’s another very large insurance company that is modernizing the core to Guidewire and we have a role in that. You’re not the leaders, we know the only people. But we have a significant role to play in that modernization.
I was talking to you about AI for business where for multiple industries. We mapped out the process and showing what are possible to clients of where can Agent Aki play a significant role in transforming operations. So this deal here, Global CRO is an example of that where we are building agents for multiple steps in a clinical research process that will bring substantial efficiency with the customer. We’re a deal with the world’s largest casual dining. It’s a holding company. They own multiple large brands in the US and some elsewhere in the world as well. And again we will do much of tech for them.
A very large tech services company in Asia. There’s a scale GCC deal that we won late last year and finally one of the large PBMS which is also happening, owned by PE firm. We are doing product development and platform support and engineering support for this organization. There are more deals we stuck to the eight year old. You know we will talk about 26 later after Vikash goes a little bit into details but at the highest level our deal wins with the best part of Q4.
Vikash Kumar Jain — Chief Financial Officer
Thanks H. Thanks H.
If you can go to the next page please. A little bit more color in terms of our revenue so Q4 revenue was 389 million. Sequential decline of 1.5 percentage. In absolute terms this represents a $6 million of decline. The decline was primarily driven by calendars and furloughs which are seasonal in nature, close to $9 million, lower license revenues of 7 million and marginal headwinds from forex. So FX was a headwind in the current quarter on revenues and also in terms of margins. The 16 million of headwind that we had in the current quarter was partially offset by a robust volume growth and a little bit of contribution from cybersorg which we closed in the middle of the quarter.
Now calendar and furloughs are seasonal items and will come back in future quarters. However, the way the calendar days line up in 26 it comes back in a more positive way in Q2 and Q3. Q1 will still be a net headwind versus Q4. License revenue for the quarter was at $11 million versus 18 million in Q3, a drop of 7 million on sequential basis. This was also lower than our historical average which is anywhere around 12 and a half to $13 million a quarter. So the volume growth is also reflected in our headcount additions that we have done during the quarter.
And Keith spoke about the fact that that it also had an impact, particularly with respect to some bit on the utilization given the fact that we have been building up capacity to service the demand that we have been seeing on margins. Reported EBITDA for the quarter was 17 percentage. This includes impact of few one timers during the quarter. Normalized for the one timers the margin for the quarter was 15.4 percentage. Now it’s a drop of 210 bit. Sequentially the major contributors were forex which was a headwind during the quarter of 20 pips. Operationally it was a tailwind.
But then from a hedge perspective for the hedges that we had started taking it was close to a 40 pips of headwind. So the net of operational tailwind plus the hedge headwind we had a net impact of close to 20 pips of headwinds. Calendar was a 60 pips of headwind, utilization was close to another 60 pips and we did give merit increases which was close to 90 pips. So if you think about it, a lot of the drop that we had in the current quarter were seasonal in nature and will come back forex we expect will recover back soon.
Calendar is going to come back starting Q2 and utilization. Talk through in terms of details how we are thinking about it in terms of recovering some of it. One time was during the quarter I spoke about the adjusted view. One time was during the quarter. In EBITDA we’re on three fronts. The first one was we acquired soft click in 2024 and there was an earn out related to the deal which was payable based on the asset delivering a great financial milestones. Soft click missed those targets so the unnotes are reversed out. This was close to $25 million associated with that.
And for the others assets we did an impairment testing. It’s an annual exercise which we do every year and based on that there was an impairment testing done on client relationships and a charge of close to 15 million. So when you think about the reversals, you need to think about the reversals and the impairment charges at the highest levels in conjunct because they are closely interlinked. So those are the two items. The third one in EBITDA in terms of one timers is an additional expected credit loss of credit loss provision of close to $4 million.
Now last couple of years we have seen an increase in credit risk and account collections on a prudent basis. We have taken an additional provision during the current quarter. Now this is one timer in nature. This is an additional generic credit risk provision and not related to any client specific issue. Now if the collection pattern improves in future this will come back into the P and L in future years. So this is. I just want to call out that what you see as an expected credit loss provision is generic in nature and not associated with any specific client.
So the net of the three is close to 160bps of one timer credit at an EBITDA level. In addition, there are two more items which are one timer in nature. If you recall in Q2 we had announced a restructuring in one of our European countries. Now that’s progressing on track. Now with the labor footprint reducing in that country. In the European country there’s a need to optimize on the rental state footprint we have. Now some of these leases are committed and are long term in nature. Now as these offices are underutilized, we have taken an accelerated amortization towards the unused office space.
That impact is close to $3.5 million. Now this impact has been taken at an EBIT level, so that makes the total one time a credit of close to 64 pips at EBIT level. Last one is the impact of labor code. All of you are aware of the context on labor code change, so I’m not going to get into that detail. Impact for the same for us is close to $12.5 million in Q4 on a continuing basis. We expect the impact to be close to 20 pips on margins the full year next year. Let’s go to the next page.
Revenue for the full year was 7.6%, 7.1 percentage in constant currency pro forma growth was close to 6.6%. Now reported margin for the year is 17.1 versus 15.9% last year, an improvement of 120 pips. Even if you normalize it for the Q4 one timers the margin is 16. So that’s a significant improvement on a full year basis compared to where we were from a 25 perspective. Next page, A little bit of color on the unit level performance for the quarter. All vertical except STP is delivered year on year growth and on a full year basis all verticals delivered year on year growth.
Financial Services has been the strongest performing vertical and delivered and has delivered both sequential and year on year growth in all the four quarters of the year. And if you recall this is after absorbing a material headwind from budget cuts in One of the GSEs in Q1 and some bit of it in from a Q4 perspective growth was delivered and the growth in this vertical was delivered by a combination of scaling, existing clients and new wins. HNI for the full year growth was largely in line with the company average. The decline during the quarter as we had called out in the last earnings call was driven by an increased license revenue in Q3.
This is a vertical where we are seeing the maximum amount of deal traction from a new logos perspective. MNC Manufacturing and Consumer. We started the year with significant headwind driven by macro and tariff uncertainty. We called out in our last earnings that the headwinds in the vertical has started to bottom out and we see growth coming back at a gradual pace. There are green shoots both in terms of existing account and new logos. We delivered a healthy year on year growth for the quarter and back to green from a full year perspective, high tech and professional services on a go forward basis which is starting next quarter.
We’ll report it as two different verticals, one as a professional services, the other as TPP which is going to be technology platform and products and platforms. Now on a combined basis, performance for the quarter was impacted by decline in two large accounts of the unit. Now these are in line with what was expected and each had in fact called it out in the last earnings call. We expect both the units to get back to the growth from a 26 perspective and more color on that Keech will anyway provide at the at the end of the present at the subsequently in the in the presentation banking a third straight quarter of strong sequential and year on year growth and again here growth is being driven by a combination of scaling existing accounts and opening new logos.
Travel and transportation delivered a healthy year on year growth both in Q4 and full year terms on GEOs for the quarter. All the GEOs grew year on year sequentially. What you see as a decline in North America was actually driven by lower licenses and calendar plus furlough. The underlying volume growth continues to be very strong from a North America perspective on a full year basis. North America growth was contributed by FS&BANKING which were one of the best performing even from a unit perspective. APAC is trailing growth, however we expect to see a turnaround in 26. More commentary on the 26 outlook will be covered by Keech later during the call. If you go to the next page, We continue to add meaningful clients to our client base. Keith speaker spoke about the fact that now we have 200 million dollar clients and we have also added one to a 50 billion dollar client base.
Next page please. Now this chart lays out the key operational parameters on the offshore mix. Now offshore mix has improved by close to 440 pips on a near on year basis. Now there’s a bit of a decline in the current quarter is a mix of a few aspects related to how the deals have shaped up. But at the highest level if you zoom out and look into it on a year on year basis there’s an improvement of close to 440bps. 100bps of this was contributed by SMC. SMC being in the GCC space is completely offshore centric so that is helping and heating outside of SMC2. We continue to make significant progress in terms of improving our offshore mix on the headcount side. During the quarter we added close to 254 resources 10th straight quarter of headcount addition. Now during the quarter it was a net headcount add of 585 andbps was a decline of 331.
On a full year basis we added close to 1535 resources with it adding close to 2000 and a net reduction inbps of close to 500 resources utilization Keith spoke about the fact that we did have a bit of a softness from a neutralization perspective. There was a 300bps decline in utilization compared to the prior quarter. The 300bps is contributed 156 by three factors, two of which are seasonal in nature and will is expected to sharply recover in the in the next quarter or the quarter after close to 100bps of the decline was low driven. The next hundred bips was on account of employees taking higher number of leaves during the quarter being the year end and how the holidays stacked up.
The employees took a higher number of holidays in Q4 compared to Q3 and the last hundred bps drop was a driven by the bench we are building during the quarter to support the new deal ramp ups. We expect the utilization to materially improve next quarter. Let’s move to the next page. We continue to generate very healthy cash. Our closing cash balance is close to $235 million plus its balance sheet is completely debt free. DSO for the quarter came in at 67 days. It’s a combination of both build plus unbuild and is one of the lowest in the industry.
In fact the 67 days is lower than our guided range of 70 to 72 days and that helped a lot in our cash conversion. Our OCF to EBITDA on an LDM basis was 76% which was higher than our guided range of 70%. ETR for the quarter came in at 10.4 percentage. This had a one time impact associated with earnout reversals. Adjusted for that, ETR for the quarter was at 25%. We expect the ETF for CY26 to be between 25 to 26 percentage EPS for the quarter. What you look at 4.79 obviously has a one time impact associated with labor code. If we adjust for that just the labor code impact, our EPS for the current quarter is close to 6.15.
With that I’ll hand it over back to Keech.
Srikrishna Ramakarthikeyan — CEO & Executive Director
Thank you Vikash.
If you go to the Next slide please. I want to end by talking about the future first. I’m going to say demand environment is improving and decision making is better. And I will say this specific to the customer base and the deeds that we are fighting. It doesn’t necessarily mean macro. I think macro is still spotty. You saw the jobs report from yesterday in the US was pretty bad. But certainly the customers and the deeds we’re seeing it is better in the long term. Like I said, we are progressing very well on deals in Q4.
We won pretty much everything we expected to win and more. And the headline was the consolidation deal in the big tech. The other there is one, the one deal that is not desired yet which was, you know, could have been late Q4 early Q1 is the GSC consolidation deal that is still WIP now. A little more on that, you know, later. I think AI, you know, I’ll say it has two factors. One, it does have a dampener for our or you know, whether it’s software engineering, testing IT operations, it is a dampener on our revenue. And you know, we have whatever best estimate we have, we’ve included that there’s, I’ll say for now two, maybe three quarters every single deal we do has kind of productivity and impact from AI baked in. And we expect more of that will continue through the year. That’s why I said there will be a dampener on revenue growth due to it, which we’ve accounted for. On the other hand, I think it is creating exciting new opportunities and avenues for growth.
The most recent one, we’ve been speaking about it for a while, for a bit but you know, suddenly, you know, the whole world is speaking about it, you know, an opportunity to replace SaaS. Now if you think about it, that’s a massive opportunity. And I’m not sure about of course some of the reaction is initial but if you think about it, Sassano want to replace its itself, you need somebody needs to work on it. And I think there are two parts to it. One part is if you know what to build, you still need somebody to work on it to build it. But there’s a bigger part of knowing what is in something you want to replace or rewrite. And that is a pretty tough problem to solve. And frankly that’s a secret sauce that we built.
And that’s one of the services that we launched this quarter. And I think eventually all these services will create net new after accounting for the dampness positive growth for us. Now what does kind of all this mean for 26 right now? We given where we kind of how 25 panned out, you know, clearly we have some lessons learned on how to communicate with you. So what we’re saying is that we expect our revenue growth to be better than what we reported in 25, which is 7.6. I don’t want to mention we don’t think of this as like a new baseline.
Our core thesis of growth in base growth in teens, low teens and acceleration levers to get us to mid to high teens remains completely intact. We’ve been through many bad growth cycles in the past and we’ve recovered pretty quickly. In the last 11 years, I think we’ve been through three times when we’ve grown less than 10%. One is Covid. The other, interestingly was in 2016. For those of you that may have followed us then, at that time one of our largest clients who still is did a significant drop in that client and we recovered very quickly from there in the following years.
So we fully expect that that theme will continue. Now CY26 can be better depending on the following. Okay, better depending on deal ramp ups. I told you for example the consolidation deal in big tech and actually when the consolidation deal we announced prior quarter on a big bank. These don’t come with big books of work attached ramp ups and how will we execute in those and how much market share we can grab. The fact that the largest consolidation deal is still WIP and here unlike in other cases we are an incumbent. So we actually accounted for some downside in that when we called the 7.6 number.
So depending on how all of those pan out, we can do better. Now I’ll come to Vertical Outlook in a second. Q1 is always seasoning week for us and you already heard Bash say this year actually Q4 Q1 also there will be a headwind on calendar that doesn’t happen every year but it is going to happen this year. But we’re also going through some additional one off negatives. Okay, I told you about the GC that cut another significant chunk. This is the one where the the consolidation deal is still WIP. That impact for us full year is 70 pips.
And so there was some impact in Q4. There is a full quarter impact in Q1 every year. I think customers have there is a lag between when they get budgets at a company level to when it gets allocated to projects. That’s one of the reasons why Q1 is seasonally weak. But I’ll say this year it’s a little more than what we see. Long day. It was in the beginning of the year. But even a few days lost revenue means a lot. And so we bake that all into kind of the full year growth outlook and we say Q1 will be weaker, will always be seasonally weak and it will be weak for us this year.
We will accelerate kind of growth Every quarter after Q1 and you will see that in our numbers from a vertical perspective, Banking and HNI will lead growth for the company. They will be higher or probably quite a bit higher than company average. MNC will be back to growth Professional services. I call up the two clients last time that that led to kind of one which had a significant ramp down the other which had a specific beginning of the area budget issue. We’ll kind of get back to growth but lower than company average. Now TPP which is a new vertical will grow but from a small pace.
And finally GTT and FS will grow at company average. So this is our expectations because we are MNC and HNI lead. FS>T will be at or thereabouts of company average. MNC and Professional services will trail. TPP will be faster but from a smaller this. Finally on margins, we will change our reporting to EBIT from Q1. This is of course based on feedback from you. What we see the market, you know, there are various reasons from an IPO we had to do EBITDA about which we’re going to change it. Our EBIT outlook for the year is at a 13 to 14% we which is lower than the current year.
What will happen essentially is that the first half of the year you will see actually quite a reduction. This is an account in Q1 apart from other things. It’s also an account of 100 wips headwind calendar. But there is lots of deal ramp ups in the first half of the year including two or three that include rebadging components. Quite a bit of rebadging components that will depress the margins. It will recover pretty sharply as we kind of right show those deals that we execute in the first part of the year in H2. So actually you’ll see 20 H2 exiting at better than the current year. But in aggregate because we start with a low lower start point. In aggregate it will be at 13 to 14% but with a stronger X customer margin.
With that I will pause and take questions. Thank you.
Questions and Answers:
operator
Thank you very much. We will now begin the question and answer segment. To ask a question, please click on the raise hand button at the bottom of your Zoom interface to enter the queue. Once announced, kindly unmute Yourself, state your name and organization and proceed with your question. If your query is addressed before your turn, you may press the lower hand button to exit the queue. We will pause briefly to allow the team to assemble the list of participants.
Our first question comes from Pratik Maheshwari at hsbc. Your line is open. You may now unmute and ask your question.
Prateek Maheshwari
Hello. Thank you for the opportunity. So Keech, I had one question around the the expectation for next year. So, so I, I understand that probably OneQ has a lot of headwinds both around the calendar days, client specific issues. Right. So. But to hit again the mid teen guidance, right. Do you think how, how do you think probably 2Q and 3Q will pan out? Right. The deal wins and the deal pipeline is very strong as you’ve said. So see. But it seems that there’ll be, it will be a very high ask rate for those two quarters as well. So just wanted to kind of if you could double down on that.
Srikrishna Ramakarthikeyan
Hey Pratik, you know I said our growth will be better than 7.6. I said a long term thesis of teens and low teens to mid teens is intact. But you’re right, no matter what number you pick, the growth ask in Q2 and Q3 will be high. Like I said, we do expect to kind of accelerate growth every quarter from Q1. So yes, that is the expectation that there will be a growth. Now the, the calendar in itself this year actually is going to give a little bit higher than usual growth from Q1 to Q2, much like it is a tailwind for Q4 to Q1. It’s a little more than normal headwind for Q1 Q2 as well.
Prateek Maheshwari
Okay. And beside the, beside the headwind from the GC client, do you think the headwind which company face from the professional services client, do you think that is curtailed now and probably that should start growing as a run rate basis?
Srikrishna Ramakarthikeyan
So there were two clients in PS1 where we kind of won the consolidation deal. We’ve been gaining market share. There was a kind of plateauing at the beginning of their fiscal year which is July and that is, that’ll come back to growth. The other one where we had a very sharp decline, you know, I’ll say like 75% decline from where we were a year ago that stabilized. So I think what you see is that we will get group growth again from Q2 in this vertical. On the other one, the GSC. I mean our best read is this right now that they still haven’t decided on the consolidation deal.
You know, the cuts and the lack of allocation of budgets early in the year is essentially kind of, we think pending the decision. So we expect that once they make a decision, those factors will change. Nevertheless, you know, again, in our base growth that we put here, we haven’t assumed that. In fact, we’ve assumed because we’re an incumbent, we’ve assumed some downside case because they haven’t decided we could win or lows. We assumed downside case too. But you know, that’s the commentary on the gsc.
Prateek Maheshwari
Okay, thank you, Keith. Those are my questions.
operator
Our next question comes from Ankur Rudra from JP Morgan. Your line is open. You may unmute and ask your question.
Ankur Rudra
Thank you. Just, you know, thank you for your comments on AI Keech. Just zooming out a bit. What’s the best way to assess your relative competitiveness here? And I’m asking this because in the lack of anything else, investors normally look at growth. And on that basis, if one looks at the growth trajectory on the last five quarters, we’ve gone from 16% organic growth cc basis to perhaps flat this quarter, maybe 1%. It’s a bit of a contrast versus what we’ve seen in your peers with broadly similar mixes. So maybe you can highlight why the investors should not assume AI is more negatively impacting you versus others.
Srikrishna Ramakarthikeyan
So if you recall, I think last quarter or even last quarter prior to that I said that 4.25 our performance issues are not to do with AI. And I’ll say that my view in general for the industry, I do think there’ll be an impact on growth for the industry and for us. And we’ve accounted for it in 25. Now I will reiterate why I think actually not only are we, I think we are way better. We first off on a number of fronts and I’ll recount them again, some of them again and what you will see that these are all long term large opportunities don’t necessarily translate to bookings or revenues in any material term in the short term.
So we were the first to launch legacy modernization platform. There are any number of clients that have given us a trial run. These are very large customers that don’t do it only with us. They benchmarked us with any number of others in industries and they think they’re the best. I could, you know, potentially think of having one of those clients speak to you guys. Okay. If it’s of interest, we can certainly show you what we do. And I think seeing will be believing. July last year we launched a web coding offering Essentially we said we can build software 10x faster and nobody else will.
The market will with that at that point of time. Three weeks ago we launched an offering called Zero License. Essentially it’s a think of it as a SaaS kill. What we’re telling clients is we can get you to license off, we can exit all your license software o ver time. We identified a number of what we think will be easier to execute use cases and types of software to do initially before people kind of start getting closer to the core. So and lastly these are all the more, you know, I’ll say esoteric stuff. The base stuff is the AI embedded in our platforms for outsourcing. We certainly went through a phase where that was weak. I think in Q3 and Q4 could be significant wins to be sure that performance is not demonstrated in our numbers yet, but you will see it in future.
Ankur Rudra
Thank you. Just if you could clarify, you know you mentioned you baked in the AI as a dampener in the existing business as you renew things for this year. Also how should we think about the level of impact on an existing renewal? Is it 30, 40%? Is it a lot more? And given it’s evolving at a very rapid pace as you mentioned as well, you know, how is this changing?
Srikrishna Ramakarthikeyan
Yeah, so I’ll say if the scope were to remain the same, it could be in that 30 to 40%. You know I’ll say 20 to 40% depending on the type of work. But we in some cases at least I think it comes with a higher volume but for the same scope that’s the order magnitude production.
Ankur Rudra
Thank you. Just the last question. You know you mentioned one Q is going to be softer than seasonal. Fourth quarter is seasonally soft. So the bulk of your ability to beat last year’s 7.5% number overall perhaps organic of 6% falls to the two quarters. Just wanted to know how much visibility do you have to hit those sort of mid single digit kind of growth rate you need sequentially for those two quarters.
Srikrishna Ramakarthikeyan
Like I said, we kind of have some lessons learned from communicating and setting expectations. So you know there’s a basis, the deal wins. There’s a lot of confidence these numbers. What can happen more is if the deal wins that don’t have a number like the consolidation deal. Some of the consolidation deals if they grow and we grab a lot of market share there talent group but the base is based on deals that have won.
Ankur Rudra
Appreciate it. Thank you and best of luck.
Srikrishna Ramakarthikeyan
Thank you.
operator
Our next question comes from Vibhor Singhal at Nuvama Equities Your line is open, you may unmute and ask your question.
Vibhor Singhal
Yeah, hi, thanks for taking my question each couple of questions from my side and then I have one question for Vikas. So on the healthcare vertical, just wanted to pick your brains on how are you looking at the outlook given that the US Government Medicare spending next year is expected to be flattish as against it has been growing around 5% historically this quarter also we saw basically a sharp correction in the healthcare vertical. So how do we tie these two things together and be overall outlook for the healthcare vertical for us specifically and maybe for the industry in CY26.
And second, my second question was on the margin outlook for next year. From the face of it looks like that we’re kind of downgrading the margin and by almost 100 basis points. So if you could basically call out the puts and takes for this that what are the major reasons for this and also do we expect this band to be back to the 14 to 15% in CY27 or do you think this is where we will kind of settle it and find the negligence?
Srikrishna Ramakarthikeyan
Okay, so the first one on healthcare for good or bad, we don’t have exposure to much exposure to careers or providers. Now that’s a huge net new opportunity for us. We do have some but our historic presences in the insurance side and life sciences less so on core healthcare and that’s a net new opportunity for growth. So notwithstanding the headwinds in the industry, our start point is at a much lower level. The person we hired, Chanthu was twice I think rated as top 25 healthcare IT execs. So we feel good about where we’re going in that business and we will do very well.
On the the second question, I’ll retreat a couple of things. I said the margins are going to be lower because of deal ramp ups in the first part of the year and including. Sorry, somebody needs to unmute. Sorry, moderate. Can you figure out. Okay, thank you. The setup the margins will be lower primarily because in the first half of the year especially primarily because of deal ramp ups and the deal ramps also have three of them actually have rebadging compounds which will depress our margins as you normalize the right the shoring for those deals, it’ll actually improve in second half of the year. So actually if things go right we will not get back to normal in 27. Actually we’ll get back to normal a little better even in the second half of so the, the margins that I’m talking about in this are not the new base actually There there’ll be quite a bit of difference you see between H1 and H2 and H2 will be higher than or at least as much as the normal base.
operator
Our next question comes from Anmal Garg at Dam Capital. Your line is open. You may unmute and ask your question.
Anmol Garg
Yeah. Hi. Hi. Thanks for the opportunity. A couple of questions. Firstly if a bookkeeping one. If I look at our note 13 in our BSC release results then the impairment there is written a around 107 crores. However in our PPT the impairment is, you know, near about 3.7% of revenues which comes a little higher than that. So wanted to understand where is this 60 to 70 basis point kind of difference coming from?
Vikash Kumar Jain
No, there’s no difference in terms of the numbers. It’s the same number what I called out in terms of the impairment.
Anmol Garg
So basically what I’m referring to is in the note 13 the impairment charge written is around 107 crores. Whereas we have indicated 3.7% of revenues in our PPT.
Vikash Kumar Jain
In the notes. If you see there are two notes with respect to the impairment, you need to add both the amounts to the impairment to get to the same number what we have from a presentation perspective of what I covered. So it’s been split into two different line items in the notes. I’ll give you the specific note reference numbers. If you have any other questions, you can continue. I’ll come back on the specific note references.
Anmol Garg
Sure, sure. Second question is basically on, on the growth for next year. So there will be some incremental impact of cyber solve as well which will add in around three odd quarters or three and a half odd quarters of impact. So are we saying that growth next year would be better than that? You know, excluding the acquisition impact as well?
Srikrishna Ramakarthikeyan
So we’re seeing our growth will be better than the 7.6 which is reported this year. This year also there was an impact due to acquisitions takes it also there will be some carry forward impacts. But what we’re saying is our reported number will be better than 7.6.
Anmol Garg
Understood. And one last thing, just want to tie up utilization dip in this quarter along with the headcount increase that has come in. And with that we are indicating that 1H particularly would be slight negative during the quarter. So why are we inching up headcount over the last couple of quarters? Just wanted to understand.
Srikrishna Ramakarthikeyan
P reparing for deal ramp ups.
Anmol Garg
And just one last thing is on the, on the license. So we are, we have indicated that there is 6 to 7 million license drop during the quarter. So is there any resale component as well into this license or this is something which. Which are our own products.
Srikrishna Ramakarthikeyan
So d idn’t hear the last phrase. Is there reserve component or.
Anmol Garg
Or these are our own. Or these are our own IPS that we are selling.
Srikrishna Ramakarthikeyan
No, no, these are not our own ip. These are third party licenses. It’s, you know, gets baked in into the work we do, but it has renov cycles. Sometimes it gets baked in the work we do, sometimes independent for example ServiceNow. So we do quite a bit of work. Some of the clients do the licenses also with us. No, these are not our IPs.
Anmol Garg
So assuming.
operator
Our last question comes from dipesh mehta@mk.
Vikash Kumar Jain
Just wanted to clarify on one thing. The impairment numbers what we were trying to look for from a balance sheet perspective. If you look at Note 10 on the balance sheet it calls out the console impairment impact of INR 1302 million. So you can look into that.
Dipesh Mehta
Yeah, thanks for the opportunity.
Vikash Kumar Jain
Over to you. Operator.
Dipesh Mehta
Can you hear me? Hello?
Srikrishna Ramakarthikeyan
We can hear you. We can hear you.
Dipesh Mehta
Okay, thank you. Thanks for the opportunity. Couple of questions. First, just want to understand about the acquisition how those acquisitions are playing out. If you can give some sense about SMC and cyber how those acquisitions are playing out. Because now I think a number of quarters have played out in terms of synergy benefit. What we envisage as well as capability expansion help us to extend our overall addressable market perspective. So if you can give some sense, we made some impairment provision in some of the past acquisitions. If you can help us understand it pertains to what Second question is about the overall deal intake. We said we have a good healthy intake in quarter four. But can you provide some sense about how the ACV played out in CY25 compared to let’s say CY24. Kind of. And any change we made to guidance practice the way we guide for future. If any changes be made to give some comfort about the way we guide. Thank you.
Srikrishna Ramakarthikeyan
Okay. There are a number of questions in that. So b ecause the first question.
Niraj Khemka
F irst was an M and A performance.
Srikrishna Ramakarthikeyan
M and A performance. Okay. So I think our soft click, which is not in 25, which is 24 is not doing well. That’s why you’ve seen the impairments. You to be sure the payout kind of goals were aggressive. Maybe they are for there are other acquisitions we made as well. So you know, reversing payouts doesn’t necessarily mean bad performance. But in this case I would say the performance was not good. And I think that’s part of the reason why we didn’t do it in 25. I’ll say kind of, you know 2 of software clients went bankrupt during the year.
Two substantial ones during the year as in 25 vast majority of the work is also in the consumer sector, fraction consumer sector and that’s not a sector that’s done well, did well, did macros but what are the reasons are in aggregate it didn’t do well. Cybersol is still too early. It is not even a quarter, not in a full quarter yet. So it’s still too early. We expect it’ll do well. It’s very adjacent to what we do in cyber security. It’s a service that we sell otherwise when we have been selling we didn’t have the capability to execute so we actually sub a bunch of that work.
So very adjacent we expected to do well. Smc, you know, the world, you know is going to GCC who is not there is going to set up one who is there is going to grow. And of course you know it’s not only India, right. So I think the, the fact that you need a capability to do what SMC does is necessary. I think it gives us visibility. You know lots of customers who are thinking about GCCs who are not thinking about us before clearly do now because of this acquisition. Every quarter since we acquired we announced a deal including in Q4 we said major IT services firm in Asia scale GCC did we want.
Niraj Khemka
The next question was on guidance practice feature.
Srikrishna Ramakarthikeyan
So I think our most important kind of is to be more conservative right Is to make sure that we can meet what we said we will do.
Dipesh Mehta
Sav trend if you can give some sense how it played out CY25 versus CY24?
Srikrishna Ramakarthikeyan
Where we ended in 25 is better than where we ended in 24 quite a bit. So in terms of bookings that we carry forward into the year and in addition our pipeline is also materially better now we kind of spoken about some structural things that went into this. We built a new hunting team through 24 through the second half 24. So essentially the current team as it stands came together in end of 24. I think it took some time for them to learn, settle in, become productive and it is now working well and the results for us were in booking in second half of 24. That’s why I said on where we ended the year was much better than where we ended 24. You’ll see that translated into revenues through the course of 26.
Dipesh Mehta
Understand, thank you.
Niraj Khemka
I think, I think that is that’s the last question that we take. We have significantly short over the time. Keesh, any final remarks and then we close the call.
Srikrishna Ramakarthikeyan
Okay. Thank you all. Look forward to talking again next quarter.
Niraj Khemka
Thank you.