LTIMindtree Ltd (LTIM) Q3 FY23 Earnings Concall Transcript

LTIMindtree Ltd (NSE: LTIM) Q3 FY23 Earnings Concall dated Jan. 20, 2023

Corporate Participants:

Nitin Mohta — Investor Relations

Debashis Chatterjee — Chief Executive Officer

Vinit Teredesai — Chief Financial Officer

Sudhir Chaturvedi — President

Analysts:

Sudheer Guntupalli — — Analyst

Vibhor Singhal — — Analyst

Mohit Jain — Anand Rathi — Analyst

Saurabh Goela — Morgan Stanley — Analyst

Ruchi Burde Mukhija — — Analyst

Ravi Menon — — Analyst

Sandeep Shah — — Analyst

Pankaj Kapoor — CLSA — Analyst

Dipesh Mehta — Emkay Global — Analyst

Kawaljeet Saluja — Kotak Institutional Equities — Analyst

Ashwin Mehta — — Analyst

Mukul Garg — — Analyst

Presentation:

Operator

Ladies and gentlemen, good day and welcome to LTI Mindtree Q3 FY ’23 Earnings Conference Call. As a reminder, all participant lines will be in the listen-only mode and there will be an opportunity for you to ask questions after the presentation concludes. [Operator Instructions] Please note that this conference is being recorded.

I now hand the conference over to Mr. Nitin Mohta, Head Investor Relations LTI Mindtree. Thank you and over to you Mr. Mohta.

Nitin Mohta — Investor Relations

Thank you Tanvi. Ladies and gentlemen, good day and welcome to the LTI Mindtree quarter three FY ’23 earnings conference call. Please note that this conference call is being recorded. Today on the call, we have with us Mr. Debashis Chatterjee, Chief Executive Officer and Managing Director; Mr. Sudhir Chaturvedi, President market; Mr. Nachiket Deshpande, Chief Operating Officer; and Mr. Vinit Teredesai, Chief Financial Officer. We will begin with a brief overview of the company’s Q3 FY ’23 performance, after which we will open the floor for Q&A. Please note that the numbers presented in our earnings release and fact sheet and reference in call pertain to the performance of the combined entity LTI Mindtree, unless stated otherwise.

For the convenience of our investors, our Q3 FY ’23 fact sheet has an addendum that presents comparable quarterly performance of LTI Mindtree for the past seven quarters, starting Q1 FY ’22. During the call, we could make forward looking statements. These statements are considering the environment we see as of today and carry risks and uncertainties that could cause our actual results to differ materially from those expressed in today’s call. We do not undertake to update any forward looking statements made on this call.

I’ll now turn the call over to Mr. Debashis Chatterjee, for his opening remarks.

Debashis Chatterjee — Chief Executive Officer

Thank you Nitin. Good evening, and good morning to everyone on the call. It is an honor to be part of this historic moment as we report our first ever earnings at LGI Mindtree. We are proud to have entered the elite league of top tier IT services companies by merging LTI and Mindtree in a record time. What makes us reach even more remarkable is that we achieved it without taking our eyes off the business. This is validated by our strong growth in our very first quarter as a merged entity. It signifies the perfect launch pad to capitalize on a broader range of opportunities, created by the growing appetite for digital transformation across every sector.

I’m pleased to report that the combined entity has started out with a quarterly revenue run rate of more than $1 billion. For the quarter, our revenues came in at a healthy $1.05 billion, up 16.3% Year-over-Year in constant currency. We are pleased with our top quartile growth performance despite it being a seasonally soft quarter due to furloughs and fewer working days. We expect our sequential growth momentum to accelerate in Q4 as the impact of furloughs eases. We delivered an EBIT margin of 13.9%.

As expected, our Q3 profitability has seen a one-off impact of merger-related integration cost to the tune of 100 basis points. With the bulk of the integration cost behind us and in view of the growth tailwinds ahead, our endeavor is to return to our normalized profitability in Q4. We are pleased to report a robust order inflow of $1.25 billion. Although LTI Mindtree began operations only in the middle of the quarter, we are encouraged by early indications that the merger rationale is beginning to play out as expected. This ranges from complementary of clients and solutions, opening up Sigma due the increased participant to increase participation in multi year, multi tower deals by switching to either end-to-end solutions. I will cite a few examples later in my prepared remarks to illustrate this point.

Digital transformation as a means to serve the dual objective of driving revenue growth as well as cost efficiencies is an ongoing business imperative. We are at a point where technology and experience transformation have become so integral to business strategies that it is not easy to reverse or stall digital transformation programs. With our expanded well diversified offerings as a combined at scale entity, we are better-positioned to help businesses address both objectives of digital transformation.

LTI Mindtree combines LTI’s engineering and Mindtree’s experienced DNS blending the problem solving and digital-first trends into a unique value proposition that spans core to experience to edge. Clients across sectors recognize this value proposition. In several instances, our increased scale has started paving the way for our elevation to our tier one partner. We are pleased with our client conversations at around cross sell and upsell possibilities.

While we see a higher level of caution baked into spending plans across sectors on account of macroeconomic dynamics, there have been no program cancellations to date. Although some clients have deferred certain projects and are taking relatively longer to make decisions, the overall focus on longer term transformation remains intact across sectors. For now, there is a marked emphasis on initiatives that generate cash conservation and speedier ROIs. In a number of instances, clients are focusing on cost takeout to fund their in-flight transformation projects. However, the pressing urgency to drive technology-led innovation to prepare for future opportunities hold a significant long-term upside for our full stack end-to-end capabilities and deeper cross-industry exposure. With that, let me now turn to our businesses.

Our banking, financial services and insurance business surged 22% Year-over-Year. We are pleased to share that banking and financial services portion alone is that an annual run-rate of $1 billion. The continued revenue momentum was driven by significant deal wins, including new logos, rate increases and a growing pipeline of large deals. While marketing technology and operations, Cloud, risk and compliance and M&A integration drove sustained demand, we are seeing cost optimization, customer experience transformation and regulatory or efficiency focused initiatives emerged as the key areas of focus.

In case of an American multinational financial services company, we’re erstwhile Mindtree was supporting Martek operations, we have now expanded our engagement with erstwhile LTIs Temenos capabilities to modernize the clients’ core banking platform. In insurance, we are a partner of choice to global insurers in digital transformation and core platform modernization across segments that is property and casualty, retirement and health and life.

The merger has resulted in an increased breadth of coverage in this sector, especially in Life and Annuity. We have also deepened our domain expertise with significant skill sets across all major core Insurance platforms. For example, based on our enhanced competences, a North American specialty insurer has chosen us to modernize and migrate to the cloud, it’s code platform spanning multiple product lines and countries. Notably, the revenue from insurance platforms that has hit that $100 million annual revenue run-rate.

Our high-tech, media and entertainment business grew 9% Year-over-Year. The strong growth momentum that we witnessed in the hi-tech vertical earlier in the year decelerated on account of furloughs. We continue to see demand across operations, transformation, managed services and cloud engineering. Within Media and Entertainment, we secured renewals of some of our large managed services deals. In particular, we are seeing strong demand for platform services and application modernization, leveraging cloud for OTT streaming.

Our manufacturing and resources business grew 8.8% Year-over-Year. The growth in manufacturing was the result of an improved outsourcing pipeline and good deal wins, especially in the automotive sector. We are seeing good continuity of spending as well as cross-sell opportunities in ERP, customer experience transformation, IoT, AI cloud infrastructure and security. Our resources portfolio continue to see traction with clients focused on the digital transformation of core operations.

We are pleased with the opportunities we see across areas such as advanced metering, operational technology, security, Asset Management, ERP led large-scale transformation and cloud adoption and modernization. Our retail CPG and travel transportation and hospitality business grew 10.7% Year-over-Year. Within retail and CPG, clients are being cautious because of high inflation. Even so, they continue to invest in digital and data platforms to drive their digital transformation journeys.

Our travel transportation and hospitality business witnessed robust growth. We expect the momentum to continue in this business, except for the real estate portion of the portfolio that could experience headwinds due to the increase in interest rates. In the case of a global airline and existing ERP client of the erstwhile LTI, we have expanded our engagement into other cutting-edge business areas leveraging those domain knowledge. Our Health, Life Sciences and Public Services business grew 11.9% Year-over-Year. The strong performance of the health and life sciences business, which grew 23.6% Year-over-Year was partially offset by the project specific softness in our public services portfolio.

In the Health segment, we are seeing traction in consumer healthcare, where clients are concentrating on areas such as remote patient monitoring and home health kit. Life sciences clients are focused on clinical transformation leveraging digital engineering and cloud capabilities. We see significant market opportunity in health and life sciences and continue to make investments to drive further growth. In terms of geographies, North America contributed 72.3%, Continental Europe, UK and Ireland contributed 14.9% and APAC, Africa and Middle-East contributed 12.8% of our revenue during the quarter.

I take this opportunity to thank our expanded family of about 90,000 talented professionals for their dedication and hard work in seamlessly supporting our clients through the merger. We have undertaken a number of employee engagement initiatives and that encouraged by the response. An important part of the merger exercise has been to determine exact talent synergies and requirements for the combined entity to maximize its potential and the opportunities ahead.

With that done, we are now ready to increase the momentum of hiring in line with our business demand. As anticipated, attrition is showing clear signs of stabilizing. For the quarter, our LTM attrition was 22.4%. While we do not typically call out quarterly annualized attrition, it is pertinent to highlight that our quarterly annualized attrition declined by more than 6% to around 18%. We believe there is room for attrition to trend down further.

I will now turn over the call to Vinit for Q3 financial highlights.

Vinit Teredesai — Chief Financial Officer

Thank you DC. Good evening and good morning to everyone on the call. It is great to be with all of you for our first quarterly earnings as LTIMindtree. We celebrated the historic inception of LTIMindtree through a green gesture by planting one lakh saplings, one for each member of the LTIMindtree family across six states in India. Let me now take you through the financial highlights for Q3 of FY ’23.

We’re happy to start our combined reporting with a strong quarter on the top quartile performance. Our revenue stood at $1.05 billion, up 14% on year-on-year basis. The corresponding constant currency growth was 16.3%. EBIT margins came in at 13.9% as compared to 17.5% in the previous quarter. The impact of furloughs and fewer working days was 130 basis points. Integration-related costs amounted to 100 basis-point. And increased employee and operational cost, resulted in an impact of 130 basis-points.

Net Forex gain for the quarter was $5.9 million compared to $2.5 million in the previous quarter. PAT margin for the quarter was 11.6% compared to 14.5% in the previous quarter. The absolute pact in Q3 was INR1,000 crores. The effective tax rate for the quarter was 23.6% as compared to 23.9% in Q2 of FY ’23. Basic earnings per share was INR33.80 for the quarter as compared to INR40.20 in quarter two of FY ’23. In Q3 the billed DSO stood at 61 days compared to 46 days in the previous quarter. The DSO, including unbilled revenue was 90 days compared to 85 days in the previous quarter.

For the quarter, operating cash flow to PAT was at 65.8% was the 63.6% in the previous quarter. Our robust cash management led to cash and investment balances of $978 million or INR8,086 crores compared to INR7,703 crores in Q2 of FY ’23. Return on equity for the quarter was 30.3% versus 32.6% in Q2. Our utilization, excluding trainees in the quarter was 82.9% compared to 83.5% in the previous quarter. As of December 31, 2022, our cash flow hedges stood at $3,878 million. Hedges on the balance sheet were $370 million. The Board of Directors have recommended an interim dividend of INR20 per equity share.

I now hand it back to DC, for an update on integration and our business outlook.

Debashis Chatterjee — Chief Executive Officer

Thank you Vinit. As you are aware, LTIMindtree came into existence effective November 14, 2022. Since then both organizations are fully aligned under the new jointly evolved organizational structure and vision. Thanks to our extensive change management experience all vital aspects of the integration, including ongoing client projects, knowledge transfer and talent realignment are progressing as planned.

We are ready with the roadmap to realize the revenue and cost synergies, presented by the merger. It encompasses a wide spectrum ranging from further diversification of openings cross-selling, up-selling and cross-pollination of learnings and capabilities to gain wallet share across our expanded portfolios to pyramid optimization, working capital efficiencies. Inorganic growth and operating leverage resulting from scale. It is evident that we are embarking on our journey as LTIMindTree from a position of strength. Our influence services portfolio comprehensive capabilities, strong sales engine, proven account mining and healthy balance sheet position, position us well to continue delivering industry-leading revenue growth as a combined entity.

As clients are still finalizing their IT budgets for next year, we will have greater clarity on the exact spends only later during the fourth quarter. Notwithstanding any near term impact of budget changes on short notice, we still remain upbeat about the longer term demand for our end-to-end offerings. In a rapidly converging world, giving rise to newer business models and revenue streams, our promise is to help businesses harness the full power of technology and reinvention to get to the future faster. We are now ready to tap into our enhanced diversity of scale and capabilities to advance towards that goal and look forward to reporting many more successes in the coming quarters.

Let me now open the floor for questions.

Questions and Answers:

Operator

[Operator Instructions] The first question is from the line of Sudheer Guntupalli from Kotak Mahindra Asset Management. Please go ahead.

Sudheer Guntupalli — — Analyst

Yes. Good evening gentlemen. Thanks for giving me the opportunity. DC, couple of questions. Looks like the weakness in both revenue and margin was largely led by the erstwhile top high-tech account. Is this entirely furlough-led or any part of this was driven by certain let’s say client specific spending bottlenecks or maybe our internal sales or delivery bandwidth issue, given that we are also going through integration and naturally, there would be some some distractions during the quarter?

Debashis Chatterjee — Chief Executive Officer

So let me give you some high level comments and then I’ll let Vinit and my other colleagues comment. See, as far as the margins are concerned and as far as the integration is concerned, we have been very upfront that we will see some one-time impact of integration and what you see in terms of the drop in margin, and as Vinit articulated 100 basis-points is due to the one-time integration cost, which we — majority of that which is already we have already baked into Q3.

You know that Q3 is seasonally weak quarter and we tend to have furloughs during this quarter, and also the number of working days are little less. So given all these things, we knew that there will be some impact on because of furloughs. And to add on to that, we have also seen that because of some macroeconomic conditions, some clients — we have witnessed a little higher furlough than what we anticipated. So that’s the furlough part and which is, again, we hope that as we get into Q4 and beyond, the impact on the furlough is not going to remain and majority of the loss that we had because of orders should be coming back.

In terms of your other point, in terms of sales and delivery, et-cetera, I don’t think there is any issue with that. I think the structures are all laid out, but you have to also appreciate that we just had six weeks of time beyond 14th of November for us to really share data, understand some of the synergies, et-cetera. So we had anticipated some of these things as we went along, but our overall endeavor and confidence is that come Q1 of fiscal FY ’24, we should be able to again get back to our industry-leading profitable growth story as we have demonstrated as the two independent entities erstwhile earlier. So I hope that clarifies and Vinit anything to add.

Vinit Teredesai — Chief Financial Officer

No. Sudheer and to specific points which you mentioned, while I don’t want to call out any specific client, I wanted to clarify that, there is no weakness bound in that erstwhile top accounts that you are referring to.

Sudheer Guntupalli — — Analyst

Sure. DC and Vinit, thanks for that. So basically a lot of this will be regained in the subsequent quarter, if it is just a furlough/working day kind of an impact. Is that understanding correct?

Debashis Chatterjee — Chief Executive Officer

I think that’s a fair understanding.

Sudheer Guntupalli — — Analyst

Thanks DC. And Vinit you mentioned there is an increased employee cost of 130bps. So is this a sort of one-time bonus or anything you have given to employees because of the integration? [Indecipherable] related question is that, I think some of your exchange filings earlier suggests that really is plan is being distributed to — the grants are being distributed to some employees. So if you can speak about how broad-based the coverage would be and what percentage of senior employees would be covered and how they would be taken care of given that naturally when the corporate actions happened, it is natural for everyone to expect some sweeteners or benefits.

Vinit Teredesai — Chief Financial Officer

No. So when I mentioned on account of operational aspect, I — we need to understand that as some of the revenue, which has got eliminated the percentage of employee cost to that extent has gone up, there is a see — one sort of once in a quarter seasonal impact of as the freshers come into the mainstream, some impact of their annual increment comes into the play.

And as soft [Phonetic] yes, that’s a new cost that has come in, in this quarter and — but it’s only for the part of the quarter. So there will be a little bit of an additional uptick in the next three quarters, after that it may start deliberate subsiding down based on the current grants that have been given. And you have to look at the cost, as I’ve said, our cost base, the percentage has not gone up. It is only because of the sort of revenue that is gone down because of the furloughs. It looks like the percentage of the employee cost has gone up a little bit.

Sudheer Guntupalli — — Analyst

Sure Vinit. And one last question if I may. Even if you expect there is some incremental ESOP related cost, you still believe that we’ll be able to reach back to our earlier profitability levels by the next couple of quarters?

Vinit Teredesai — Chief Financial Officer

Yes. Well the whole intention of this merger was obviously to get that revenue and cost synergies over of cost synergies over a period of time and revenue synergies on the front ending side of it. As we enter into that, our hope is that starting from FY ’24, we should be able to come back to our industry-leading profitable growth story.

Sudheer Guntupalli — — Analyst

Thanks DC and Vinit. All the best and wish you a great success in the larger organization.

Debashis Chatterjee — Chief Executive Officer

Thank you.

Operator

Thank you. The next question is from the line of Vibhor Singhal from Noah equities. Please go ahead.

Vibhor Singhal — — Analyst

Yes. Hi, thanks for taking my question. and congrats Dc and the team on the successful integration of the [Indecipherable]. So DC, couple of questions from my side, one for you and one for Vinit probably after that. So in terms of the overall — we’ve seen very good growth in the BFS segment and also the vertical that basically we are in terms of a stronger, leaner retail and transport vertical as you mentioned. Just wanted to pick your brain specifically in these two segments. I think our BFS, they would not have been too much for client overlap across the retail or travel or high-tech, but [Indecipherable] we’ve had, the little client overlap that we’ve had this, how is that versus are going on in terms of overall aligning the sales team and all?

And/or to that extent, how are we equipped? How much have been [Indecipherable] in terms of allocation of all the sales heads, geography heads, vertical heads to the entire team. Are there any white spaces which are yet to be addressed or is the integration and the allocation of course and it’s possibility is complete at the company level? If you can answer that, I’ll probably follow it up with a question for Vinit.

Debashis Chatterjee — Chief Executive Officer

Thank you Vibhor. See, as far as the — if I understand your question correctly, if you’re talking about the overlap of clients across the two erstwhile entities, they are very minimal. They are just a handful and I think that was one of the exciting part of this integration, because we can cross-sell and upsell to a host of 700 plus clients where only one of the organization was presented earlier. So one of the things that we ensure that none of this clients see any change on the ground in terms of the teams that they have been working with and we kind of took care of those aspects and all those designs are complete as we speak. So I don’t think there is anything else that we need to address per-se as we go along.

And so there is no whitespace per-se in terms of any of the accounts where we have to get new leaders and all these things. So this is like one of the objective of the integration was to ensure that we keep the same leadership, the same client behaviors, the client confidence in terms of most of the clients. And you asked about BFSI, I think I can say that BFSI is one segment, which had an overlap between the two organizations, but I’m happy to say that the growth that we’ve seen in BFSI, the accounts on both the sides have grown fairly well and now obviously we have an integrated BFSI practice where it’s kind of all come together and BFSI looks extremely bullish for us. I don’t think there is — so far we have not seen any indication that clients want to stop many of the programs that are doing, especially, BFS is very very strong.

And as far as the retail travel transport is concerned, as said, that has also done well, but we do have some portfolio, which is on the real estate site and obviously given the interest rates increasing, there has been some impact on specific portfolio which i think hopefully should come back at some point of time when the client is realigning their priorities and budgets.

So I hope I have answered the question everything. Anything that needs to add Sudhir?

Sudhir Chaturvedi — President

No.

Vibhor Singhal — — Analyst

Yes. It’s quite comprehensively. Thank you so much for answering that. Well, my second question for Vinit. Basically, Vinit just wanted to delve a bit deeper into the margin bridge that you talked about. So as you mentioned around 100 basis point was the integration impact which of course you and DC have called out is going to be non-recurring one and we’ll see that reverse next quarter. On the furloughs in the fewer working days of course, 130 basis-points. That of course should take care of itself when the growth comes and the quarter.

Just wanted to increasing quite well course if I can once again. So the impact of the 130 basis-points. If I understand that you trying to say that basically, as a percentage of revenue that has kind of gone up, but is that — has the cost gone up in terms of some retention bonus or annual increment as you mentioned in this quarter, which is going to maybe even out in the coming quarters as growth comes in or is it going to be a recurring part and is part of the base now?

Vinit Teredesai — Chief Financial Officer

No. So it is the latter. It is part of the base and it is going to continue. The only thing is, you will not see any incremental impact coming up. As I mentioned the majority — while it is from a percentage perspective, the cost has gone up a little bit, but compared to the revenue growth the increase sounds a little bit more higher. Only component which is driving — which has come up in this quarter, which is driving down the cost little bit is as I called out the cost on account of increased sorry, [Indecipherable] increment that gets rolled-out with the pressures as a part of that they come back after they come into the mainstream published.

Vibhor Singhal — — Analyst

Got it. And we are going to follow this Q3 incremental instrument cycle for the pressures here after or that’s yet to be decided in terms of then given to providers on annual basis?

Vinit Teredesai — Chief Financial Officer

No, it doesn’t — it is not a Q3 cycle, it all depends upon when the pressures come into the — come join us. So the impact of that gets scattered over a period of full-year. So we don’t take all the pressures in one go, we take them over a period of four quarter and as each one of them each batch completes the annual anniversary, they get that incremental in. Got it. Okay, thanks Vinit. Thanks for the taking my question and wish you all the best.

Operator

Thank you. The next question is from the line of Mohit Jain from Anand Rathi. Please go ahead.

Mohit Jain — Anand Rathi — Analyst

Sir just a follow-up on the previous one. So I was not sure if you were following the same practice because this time for the first time we had this 130 basis-point increment coming up in the third quarter. So while estimating ahead, should we assume that this will keep recurring every third quarter or will it sort of revert back to one wage hike cycle during the year?

Vinit Teredesai — Chief Financial Officer

Yes. You also need to understand Mohit, that both the companies had a different intake cycle of — they are the freshers. So now what you’re saying is basically a combined fact. So some will come in Q3, some will come in Q4, but with the growth, I don’t think so. This effect is a cause of worry. This will get easily absorbed our fresher intake and fresher absorption into the mainstream is very, very strong and that’s where we believe that once we are into the normal period of — once in a normal period in FY 24 we will be able to leverage this and gain momentum on our margins.

Mohit Jain — Anand Rathi — Analyst

So the next hike we should factor in is approximately Q2 or Q3, for FY 24?

Vinit Teredesai — Chief Financial Officer

No. Mohit, are you talking about the freshers or are you talking about the general?

Mohit Jain — Anand Rathi — Analyst

No. The overall impact that we are going to experience in the margin.

Vinit Teredesai — Chief Financial Officer

That — so that we are not yet defined because both the companies had a different cycle. We are in the planning process right now. So in the in the next quarter, we’ll be able to give color in terms of when do you anticipate that.

Mohit Jain — Anand Rathi — Analyst

Okay. And second one, is there any reclassification from gross cost to SG&A because of the integration, because when I try to adjust your INR80 crore amount for the 100 basis-point merger related expenses. Even then, it appears that SG&A has gone up quite sharply. And because of which my EBITDA growth is not there, even on a Y-o-Y basis.

Vinit Teredesai — Chief Financial Officer

No. There is no no reclassification apart from some marginal ones, but nothing material to call out.

Mohit Jain — Anand Rathi — Analyst

And this 100 basis point includes INR50 crores that you have put in the footnote of your release?

Vinit Teredesai — Chief Financial Officer

That’s right.

Mohit Jain — Anand Rathi — Analyst

The stamp duty provision in that the 100 basis-point includes that provision or should we take into account?

Vinit Teredesai — Chief Financial Officer

No, that’s right. That 100 basis points includes the impact of that INR50 crores.

Mohit Jain — Anand Rathi — Analyst

And last one on the revenue side, is there any pass-through which we have experienced because LTE usually had a strong seasonality in second-half? Is there any break-up that you guys can give on pass-through that we would have got in the third quarter?

Vinit Teredesai — Chief Financial Officer

Yes. We do have a pass-through, but now in a combined organization, that number has become insignificant to call out.

Mohit Jain — Anand Rathi — Analyst

So we will not get it going forward, is it?

Vinit Teredesai — Chief Financial Officer

No, we will, but that number from earlier from a $600 million to now looking at that number remains constant. On a — that now on a billion dollar base has become insignificant for us.

Mohit Jain — Anand Rathi — Analyst

Right. So we should safely assume whatever happened in 3Q should be the number in 3Q 23 as well?

Vinit Teredesai — Chief Financial Officer

Yes.

Mohit Jain — Anand Rathi — Analyst

All right. Thank you sir. That’s all from my side.

Operator

Thank you. The next question is from the line of Saurabh Goela from Morgan Stanley. Please go ahead.

Saurabh Goela — Morgan Stanley — Analyst

Yes. Hi, thanks for the opportunity. So the first question that I had was with respect to the normalized profitability levels. So DC, we mentioned that we hope to return to these levels in FY 24 starting from the next two, three quarters. So just wanted to understand what are those levels now? LTI used to operate at 14% to 15% PAT levels and Mindtree at 20% plus EBITDA. So in the combined entity, how should we look at that?

Vinit Teredesai — Chief Financial Officer

So Saurabh, we are not giving any guidance. What we are saying is that we will return back to those industry-leading profitable growth. That’s our aspiration and that’s what we were confident on. As you know that the levers are pretty much the common, we will try to leverage more on getting us much more I would say, going to the customers, getting little bit of a price increase benefit for the niche skills, keeping our utilization in check, keeping our head count given that the base has now become pretty strong. And also right now out of the general macroeconomic caution, we will not go and do exist hiring than what is needed, leverage our bench very well. So these are couple of things, which as — we will be in a position to sort of use it very, very to our advantage and bring the margin back on track.

Saurabh Goela — Morgan Stanley — Analyst

Understood. And with respect to Q4, if I may. Out of this margin impact that we mentioned, how much of it is sort of reverse thing because it wasn’t very clear to me if everything is reversing here with respect to furloughs and the merger-related cost.

Vinit Teredesai — Chief Financial Officer

See, the merger-related cost as DC called out, most of that has been already baked-in in Q3 numbers. There might be some portion marginal portion, not definitely not to the extent of 100 basis-point impact coming up in Q4. Similarly on furloughs the impact is 130 basis point. Some portion may remain, but not to the extent of 130 basis point, as what we have called out. So you can make the math and look at what we expect.

Saurabh Goela — Morgan Stanley — Analyst

Okay. Sure. Understood. And then my other question was with respect to the leadership structure that we have right now. So I just wanted to understand that to which verticals and sub-verticals right now would have a full head structure given that some of the verticals we’re or sub-verticals for overlapping. So how have you gone about that?

Vinit Teredesai — Chief Financial Officer

Yes. I think there are — you have to understand one thing that one of the things that we thought about as far as this merger is concerned, that we should have minimal impact to our clients and that’s why that was one the prime consideration as we design the structure and while designing the structure we also ensure that we can get the synergies across the leadership and across the organization in terms of the various industry practices.

So for example, we have now brought in the banking, financial services and insurance of both those 12 companies into under the leadership of one particular leader in the organization under one market leader. So we have done some of those adjustments internally just to share one example but overall, we have ensured that there is zero disruption and we feel that there’s a lot of work to be done. There is a lot of cross-selling and up-selling that needs to be done and keeping that in mind, we have got with the structure that we have talked about.

Mohit Jain — Anand Rathi — Analyst

Okay, understood. And if the last question if I may, just a book-keeping one, that Vinit, how should we expect on the tax-rate going-forward? Is the current tax rate the tax rate we should be building?

Vinit Teredesai — Chief Financial Officer

So for the next quarter you may see it to be pretty much in the current range of 23.6% to 24%. From FY ’24, you can anticipate it to be in the range of 25% to 25.5%.

Mohit Jain — Anand Rathi — Analyst

Okay, thank you. That’s all from my side.

Operator

Thank you.

Vinit Teredesai — Chief Financial Officer

Obviously, so this is subject to no changes in the budget.

Operator

Thank you. The next question is from the line of Ruchi Burde Mukesh Shah from Elara Capital. Please go ahead.

Ruchi Burde Mukhija — — Analyst

[Technical Issues]

Operator

Sorry to interrupt here Ruchi, if you’re you think external headphones, we would request you to use the handset devices.

Ruchi Burde Mukhija — — Analyst

Firstly, congratulations on the merger. I wanted to take your thoughts on the cost deals. We have heard from you also from your peers, so that there are lot of cost focus or cost optimization deals. Could you talk about in terms of tenure and other deal dynamics, how — what do you see the large 10 years or any other characteristics that you would want to call out?

Debashis Chatterjee — Chief Executive Officer

Let me give you some color and then I’ll request Sudhir to add. See Ruchi, what happens is typically when clients are looking at cost take-outs, it has to be a a multi-year transformation deal, because you typically cannot do the caustic out unless it’s four, five years at anyhow. That’s something which we are seeing right now in the marketplace, but the [Technical Issues] we need to understand is that the last two years, the clients have started so many transformation initiatives within their organizations.

It is very important for them to continue with the transformation initiatives and not stop them because if they stop them, then they will lose the benefit of all the effort and cost them spent. So keeping that in mind, given the fact that there are sub uncertainties in the macro economic — economy at the uncertainties in terms of recession in terms of interest rates, all those things, clients are now looking at how can they self-fund their transformation, which means that you can look at opportunities of cost-out and if you can take that cost-out and fund your ongoing transformation.

So we are seeing quite a few opportunities like that where are very keen to discuss in terms of cost take-out and typically their four to five years or even five years or longer as well, in some cases. And the only difference, I would say is that, it is purely, it is very much, keeping in mind that they want to continue with ongoing transformation. So again, going back to the commentary that I made, there are certain situations where we see clients are slowing down their programs. But we have not come across any situation where clients are completely stopping their program.

Sudhir you want to add anything?

Sudhir Chaturvedi — President

Yes. I think DC the only thing I’ll add is that the — if you look at there are pockets of growth in every — in some verticals and service plan, but from a cost perspective, there has been a quite a significant investment in digital data and cloud-related technologies, especially over the last three years, and clients are looking at the ROI from these investments and those they’re structuring as multi year deals and that’s where we see net new deal activity happening besides the multi-generational outsourcing deals that continue.

Ruchi Burde Mukhija — — Analyst

Okay. I have one more question. Are you seeing your competition changing? This is I’m asking more in the context of multi tower deals that DC spoke earlier. And this I’m asking, keeping in mind that the formal or the legal entity took shape in mid November, this merger wasn’t making for close to one year. So have you seen a change in competition, especially for large deals that you might be, I would say might be in pipeline for you?

Debashis Chatterjee — Chief Executive Officer

Well look, I think even if you look at the erstwhile entities of Mindtree as well as LTI we were anyway winning deals and competing — we were anyway competing and winning deals against the tier ones as well as mid-tier et-cetera. So I don’t think there is any change in terms of our competitive landscape, but the good thing is given the fact that we have brought the strengths of the capabilities together, our ability to support deals, which is typically core to experience to edge proposition. I think that’s much more compelling at this point of time, and we think that that is going to give us an edge in terms of switching end-to-end solutions with many of the deals that we are pursuing right now.

Ruchi Burde Mukhija — — Analyst

Thank you.

Operator

Thank you.

Sudhir Chaturvedi — President

Thank you.

Operator

The next question is from the line of Ravi Menon from Macquarie Group. Please go ahead.

Ravi Menon — — Analyst

Hi, gentlemen, congrats on the merger. I have two questions. One, DC do you see do you think that with the entity having a size close to a 100,000 people? Are you able to target larger deals and are you starting to set-up a large deals team to go after, perhaps even deals has because $500 million?

Debashis Chatterjee — Chief Executive Officer

Yes. So the answer is absolutely yes. We don’t need to set up a large deals teams, we already have large deals teams across both the soil entities. We have just ensured that we have a common leader across those two and bring all the capabilities together. And one of the rationale of this merger was that we should be able to pursue larger deals and when we talk about cost takeout that has been the large deals get created, and I’m hoping that we should be able to talk about more of this in the coming weeks and quarters.

Ravi Menon — — Analyst

Thank you. And second is, as the combined entity, do you think that absolute — because employee base, much bigger will be top out utilization at a higher-level than we did as individual hubs?

Debashis Chatterjee — Chief Executive Officer

That’s the endeavor. I think we should be able to do that, but you have to give us some time, but we will be definitely — we should be able to do that as we bring in more operational efficiencies and rigor.

Ravi Menon — — Analyst

Great. Thank you so much and best of luck.

Operator

Thank you. The next question is from the line of Sandeep Shah from Equirus Securities. Please go ahead.

Sandeep Shah — — Analyst

Thanks for the — yes, can you hear me?

Debashis Chatterjee — Chief Executive Officer

Yes.

Sandeep Shah — — Analyst

Thanks for the opportunity. DC just wanted to understand because the expectation from the management side as well as investor side is the merger will lead to one plus one being greater than two. So how are we measuring this KPIs in terms of large deal traction where average size of deals above $50 million, $100 million? Are you witnessing that despite we are very new in terms of post the merger announcement, the pipeline in terms of number of deals above $50 million, $100 billion cross-selling, up-selling has started firing? Or it will take slightly longer to nine and one can expect this to happen more in FY ’24, rather than second-half of this financial year rather. So how are we tracking this as a metric?

Debashis Chatterjee — Chief Executive Officer

Well, that’s a great question Sandeep. I think one plus one more than two, is not just only for deals, only for — across the organization. If there is any in total message, that has gone to the organization is everybody whoever is doing whatever is their sphere of like we should think of how can they do things better and that is what we mean by one plus one more that two. So across-the-board, across all activities across all aspects of the business, but to your specific question [Indecipherable] we don’t we– talked about that order inflow and the and also the pipeline, which we have not talked about, we have a very-very healthy pipeline and we are seeing some the large deals in the pipeline.

As I said that some of the cost takeout deals as we are pursuing now, they tend to be multi year and eventually they also tend to be slightly larger in terms of size and scale. So absolutely, yes. And as I said earlier in the previous answer that, we are very hopeful that we should do to talk about some of these things, some of these large deal wins because we are in advanced stages in many of these opportunities that we should be able to talk about this in the coming months and quarters.

Sandeep Shah — — Analyst

Okay. And order the one can expect this [Technical Issues]

Operator

Sorry to interrupt you. Sandeep, your voice is breaking up in-between.

Sandeep Shah — — Analyst

The total order intake, which we have reported this quarter is a metric which can repeat every quarter.

Sudhir Chaturvedi — President

Yes. That’s the intent.

Debashis Chatterjee — Chief Executive Officer

Yes. And also just to add on Sandeep, I think the other thing which I should also call out is as a management team that we have got together, I tried to look at the metrics. The other important metrics. Is that is that over a period of four to five years, we want to create a synergy revenue of at least $1 billion and we should be also able to get a synergy of at least 200 basis-points in terms of margin over the next four to five years. That’s the target at a very broad level we want to set for ourselves.

Sandeep Shah — — Analyst

Okay. This is helpful. And because of the macro issue, is there any client-specific issues, are we witnessing in our top 10 or top 20 accounts as a whole because we have lot many clients within the Hi-Tech as a vertical lines lot many has announced the cost take-out the plan to layoffs as a whole? So is there any budget pressure in some of our top clients as a whole?

Debashis Chatterjee — Chief Executive Officer

No. As I said, Sandeep there is no pressure per-se, but there is definitely at least in isolated cases where clients have — they have deferred the start of some programs and they have also slowed down some programs, but I guess this is purely temporary in terms of In nature. But in the same client scenarios, we are also working with them in terms of cost take-out, because the reality is the amount of transformation that each of these clients have started in the last two years, they just can’t stop the transformation. So they can slow it down, but slowing down doesn’t mean you don’t do anything. Instead, what they’re doing is they’re looking at how can we take some cost-out of the system. So as we are doing transformation which is slowed down a little bit in some cases, but there are also cost takeout opportunities in the same client. So we are working on that and that’s what I told you that we are very confident that we should be able to talk about more of some opportunities in the coming months.

Sandeep Shah — — Analyst

Okay. And last question, any policy on a payout as a merged entity in terms of cash distribution back to shareholders?

Debashis Chatterjee — Chief Executive Officer

So that continues to be in-line with what we have delivered in the past by both the Ostrand [Phonetic] companies. While we have not stated that and those many dumps, but our intent is to sort of. You’ll be keep the payout in the 35% to 40% range annually.

Sandeep Shah — — Analyst

Okay. Thanks and all the best.

Operator

[Operator Instruction] The next question is from the line of Pankaj Kapoor from CLSA. Please go ahead.

Pankaj Kapoor — CLSA — Analyst

Yes. Hi, thanks for the opportunity. DC, my first question is on the order book that we have reported. I’m presuming it for the entire and wins that not just significant largely. So if you can give some perspective for this $1.25 billion number, how does it compare to a YOY or Q-on-Q only basis, so we can understand how does it or we can interpret the developers? That’s the first question

Debashis Chatterjee — Chief Executive Officer

So let me request Sudhir to answer that.

Sudhir Chaturvedi — President

So Pankaj this $1.25 billion is the overall order inflow in this quarter. Okay, so that’s the way to look at it. And this is the first-quarter that we adopted this measure and we are disclosing it. So this will be we not track from this quarter onwards going forward. And if you were to look at comparison. I think you compare it with quarterly revenue. But look at it over a four-quarter cycle at least. That will give you the overall trends. So that’s our advice on this new disclosure that we’re making from this quarter onwards.

Pankaj Kapoor — CLSA — Analyst

Okay, fair enough. My second question Vinit is on the margins. So last year same quarter we had 18.5% figures for those, we have 17.5%. And I understand that some of the costs over here are one-time, which will not be recurring. So it’s still looking at from a longer-term perspective and merger synergies should come especially on the cost part, you think we should go back very quickly to the pre-merger margin level of 17.5% using it will take time? And I think, spoke of 200 basis points, 300 basis-points improvement, but if you can give some color in terms of how quickly we actions go back to the pre-merger that was [Indecipherable]

Vinit Teredesai — Chief Financial Officer

As I mentioned earlier, the expectation is that Q3, we had the maximum impact on both operational as well as the merger related issues. Marginal impact will come up in Q4, but we — on an overall note, our expectation is that we should be able to climb up on our margins. Starting FY ’24, our intention is to return back to be industry-leading profitable growth story. And the point which DC mentioned about 200 basis point to 200 basis point increase incremental margin, that is over a period of four to five years. Compared to what both the companies would have probably or we’re delivering independently. So that’s in addition to what our expiration of industry-leading growth is going to be in FY ’24.

Operator

Thank you. We’ll move to the next question from the line of Dipesh Mehta from Emkay Global. Please go ahead.

Dipesh Mehta — Emkay Global — Analyst

Thanks for the opportunity. Just on continuing on the margin point, I am bit not clear about the employee related costs which you explained, is it something different, which we are doing for prices compared to the earlier practice, which both company used to have? Are both giving annual increment, because I think that might be the usual practice where we might be giving annual impairment at the end of first year. If you can clarify that thing?

Debashis Chatterjee — Chief Executive Officer

So this is not something new, this is something which we have been doing it consistently in the past. As we mentioned that in the past two years, we were in a very-high growth trajectory. The impact of furloughs, et-cetera was not as high as what we have seen in this particular quarter. That’s why you are feeling it that this time that the cost is as a percentage has gone up because of the severe impact of the furloughs. But this is not something new, this has been done in the past. The only differences both the companies at different cycles of intake of freshers, that’s why you will — in the past, an independent company, you would have probably seen that impact in one or two quarters. Now you may see it slightly evenly spread-out across the year.

Dipesh Mehta — Emkay Global — Analyst

Can you hear me?

Operator

Yes.

Dipesh Mehta — Emkay Global — Analyst

Yes, so but only furloughs impacted separately given. So 130, this what we call out, but this is 130 bps is now part of the cost structure and likely to purchase, that’s what broadly your suggesting?

Debashis Chatterjee — Chief Executive Officer

Yes.

Dipesh Mehta — Emkay Global — Analyst

Understood. And last question is about, if you can provide some sense about how we should expect growth trajectory in high-tech, media and entertainment, considering the overall macro situation and I think And some of the peers indicated some kind of softness in that sector? Thanks.

Debashis Chatterjee — Chief Executive Officer

So let’s me request Sudhir to take that.

Vinit Teredesai — Chief Financial Officer

So I think — let me give you a broader demand outlook. So if you look at the overall demand picture. So there is actually work to be done. If you look at the CIO book of work, there is work to be done, but there is boardroom caution which is filtering down to spending decisions. So that is what we are seeing in the market on an overall basis, which was DC was referring to. There are certain projects that are being done over a longer period of time are being deferred. Now in that if we look at vertical so, banking, insurance, energy utilities travel and public sector seems to be resilient even in these macro scenario.

And from a offerings perspective, the multi year transformation initiatives continue. In addition to this, the spend on data, cyber, cloud continued to be unaffected. And actually clients spend on the experience related technology base, which is critical for the revenue growth that also continues to be resilient. So in that context, there are a couple of verticals where there has been some reset in terms of budgets. And in terms of priorities of spend which we — we’re for example I think is one of them, but we are we’ve. I think the good thing of LTIMindtree is we’ve got to overall group of verticals, where we continue to focus on the right verticals for growth. And we should see some return to growth back in these verticals that were slightly soft in Q3, we should see that back-in Q4.

Operator

Thank you. The next question is from the line of Kawaljeet Saluja from Kotak Institutional Equities. Please go ahead.

Kawaljeet Saluja — Kotak Institutional Equities — Analyst

Hi DC, hi Vinit. My question is twofold. Vinit you mentioned and some participants earlier question that the impact in this quarter is Hi-Tech is not related to the largest account first LTIMindtree, is that correct?

Debashis Chatterjee — Chief Executive Officer

That’s right.

Kawaljeet Saluja — Kotak Institutional Equities — Analyst

Right. So how come basically then the given the dominance of that client in the vertical revenue. And I’m just surprised that why did the margins of ITEC segment then declines so much on a sequential basis.

Sudhir Chaturvedi — President

It is on account of furloughs that you’ve seen in some other accounts, and the high-tech part of it. That’s the reason for the decline.

Kawaljeet Saluja — Kotak Institutional Equities — Analyst

Okay. Seems to be disproportionately. Talking about the second question I had is recently on profitability. Vinit you mentioned that 130 basis-points impact due to compensation increase that possibly the freshers level, in fact, leading right and do freshers cost that much of hit on profitability?

Sudhir Chaturvedi — President

So that entire 130 basis point is not on account of pressures. It is one of the component that is driving down the cost, which I wanted to call it out, but obviously as we look at the comparative number. Some portions of the costs that we have there in Q2, not fully baked-in for the quarter are now hitting this from a run-rate basis for the full-quarter for both the companies put together. So there are those two three factors that put together are causing that impact.

Kawaljeet Saluja — Kotak Institutional Equities — Analyst

And [Technical Issues] evidenced by watching the comp increase in both the company has already announced effective first of July. I think in case of API, happened in the first-quarter. So what was that incremental cost?

Vinit Teredesai — Chief Financial Officer

So Kawaljeet we while we do our annual increment cycle in our specific period, but we also continue to do certain interventions in-between wherever the need arises, because the demand, while while the attrition numbers are showing, the softening of demand, the certain skills certain niche skills do still have certain inflationary pressures, and we have to do those interventions also and do some corrections on the way.

Kawaljeet Saluja — Kotak Institutional Equities — Analyst

Right. And how do you got this back Vinit given that the cost increase seems to be intervention based and sticky in nature?

Vinit Teredesai — Chief Financial Officer

So we continue to go back to our clients and look at price increases, rate increases wherever possible. We have been able to gain that in the past, multiple times and we intend to get this back, what — in the upcoming year.

Kawaljeet Saluja — Kotak Institutional Equities — Analyst

Okay. Just a final question Vinit, I guess you would have had, have you not too many on profitability. So various participants have asked, what’s the normalized level of profitability 18, 17, 17.5 and 18.5. Now I understand that focus is profitable growth whereas what other folks are waiting for is that they not good definition of that property, with the growth. So would you be able to detail out for their top participant growth implies?

Vinit Teredesai — Chief Financial Officer

So Kawaljeet nice try, but as you know that just not give any guidance with reference to our profitability. See what we intend to say is that both the companies independently we’re delivering a certain amount of profitable– profit margins. Our intent is to return back initially to that margins in FY ’24 and from there over a period of time as a part of this merger gained momentum and add another 200 basis point over the next four to five years in terms of profit margins. So that’s the intent, what we we’re trying to say. So I think so, while I’m not called out the number, but I’ve given you the indication in terms of where it’s likely to be.

Kawaljeet Saluja — Kotak Institutional Equities — Analyst

Right. No, I got it. I’m weak at picking indication. So but anyway, I think the answer is very helpful. Thank you so much.

Operator

Thank you. The next question is from the line of Ashwin Mehta from Ambit Capital. Please go ahead.

Ashwin Mehta — — Analyst

Hi, thanks for the opportunity. Just wanted to check in, [Technical Issues] our cash generation, our cash generation seems to be muted, around the 48% CFO to EBITDAR 36% FCF to PAT, and this was similar last quarter as well. So what essentially is driving that and when we see that coming back to our normalized levels?

Vinit Teredesai — Chief Financial Officer

So Ashwin, as you know that our merger happened in the middle of the quarter and we initiated the novation agreements et-cetera with the customer. This being sort of probably a very difficult. It probably is not the best quarter in terms of getting those contractual changes done in a very quicker way because most of the customers go on vacation post the 15th of December. So we are only 30 days, honestly, to push for and get few of these things done.

This delay in some of these are novation et-cetera is resulting in delay in doing the invoicing as well as delay in collection of some of the past dues because some of the customer systems also need to update the latest name of the company and ensure that the bank accounts related to the right profile are being to. So all of these things, I don’t want to bog you with the operational details, but the fact is that this sort of difficulties have resulted into a little bit of a lower cash generation this quarter.

We are absolutely putting our best foot forward to bring back that module of doing the collections well in time. Our anticipation our my personal aspiration on this would be to get back to that 50% to 55% days — billed DSO range in the next couple of quarters. So between Q3 and Q4, you may see a little bit of a disruption, but starting Q1, we made return back to those old days.

Ashwin Mehta — — Analyst

Thanks Vinit. Thanks for the explanation. Just one more strategic question. So as we start to chase some of these larger multi-year cost-efficiency deals, would we need to spend or invest in terms of the large deals team, as well as maybe the relax some of our operating parameters like, so we are we the most offshored in terms of in terms of best part of it in the, within the IT universe at almost 85% offshore efforts. So what some of the change because some of your larger because work at almost say 8% to 10% higher offshore, onsite effort compared to you?

Vinit Teredesai — Chief Financial Officer

So Ashwin, I don’t think — see, first of all, as far as the largest deal is concerned, we already have everything in-place. So, I don’t think there is anything to do additional. But in terms of some of these large deals, what it tends to happen is for a multi year deal, the– first 12 to 18 months, it seems to be a little challenging in terms of the margin dilutive to some extent and we have to take a prudent call in terms of how to manage that so that overall over a period of period, it is kind of profitable for us. But beyond that, I don’t think there is anything specific that we worry about, largely this are we are very excited that we are able to engage in some of these conversations. And as I said earlier, we should be able to burn and talk about some of these things, some of the announcements as we go along, but I can only tell you that as a part of the pipeline, there are quite a few conversations we’re having with respect to some of this multi year cost takeout opportunities.

Ashwin Mehta — — Analyst

Okay. Thank you Vinit. Thanks for your answers.

Operator

Thank you. The next question is from the line of Mukul Garg from Motilal Oswal Financial Services. Please go ahead.

Mukul Garg — — Analyst

Thank you. Just couple of clarification first on from Sudhir. Sudhir while we understand that this is, on the first time you guys are giving, that combined order in-store numbers, but can you just help us qualitatively how we should kind of look at this because earlier, obviously, this company is used to adopt a different ways of kind of sharing that information, while we are seeing a fairly strong growth in terms of the deal in across your peer group. Can you share some sense in terms of how you are seeing order inflow? What is how things used to be earlier?

Sudhir Chaturvedi — President

Yes. So Mukul. I think I just let me reiterate, this difference between order inflow and order book. Okay, so this is not a book, the inflow within the quarter. So the deal wins during the quarter totally added up is what we what are reporting to you on an order inflow basis. I would say — I would reiterate what I said earlier, please compare it vis-a-vis our revenue run-rate, so you will see it’s approximately 20% above our revenue run rate for the quarter, that is the metric we should keep in mind and track it over a four-quarter period. You know this is the base and then, but we’ll continue to, to provide the data to across the two companies as LTIMindtree.

Mukul Garg — — Analyst

Right. But just the storyline persist on this, how should we look at this inflow number? Are you seeing more in a kind of increase in deals which are kind of flowing in from your clients? Or like, now is the pace kind of moderating as the decent cycle kind of gets elongated?

Sudhir Chaturvedi — President

Yes. So think as DC mentioned, the overall pipeline actually the organization continues to be strong effect the large deal pipeline. I would say is at a record level at the LTIMindtree level. So we are seeing good deal traction as clients look to do both, right. There are — there is a cost takeout play that is there in every, there are several deals that our cost takeout as well as there are deals where clients are still continuing on multi-transformation programs, whether it be in the digital and cloud arena or in the R&D [Phonetic] arena. So we’re seeing both those spends.

Mukul Garg — — Analyst

Sure, and DC one clarification. You mentioned that you’re kind of trying to keep the structure intact. So how should we kind of think about the structure of Co-Head of Sales, we’ll also continue or is that being folded in though?

Debashis Chatterjee — Chief Executive Officer

Well, I think the the initial thought process has been that there is so much of activity right now with regard to market leaders, but at some point of time, I think it will get folded. But at this point, uptime, given the activities, given the clients given the cross-selling, up-selling, we need to do that fleet, we wanted to have that, but over a period of time, we will see a change.

Mukul Garg — — Analyst

Great. Thanks for answering my question.

Operator

Thank you. Ladies and gentlemen, that was the last question for today. I now hand the conference over to Mr. Nitin Mohta for closing comments.

Nitin Mohta — Investor Relations

Thank you everyone for joining your call and support. You may now disconnect your line.