Mastek Ltd (NSE:MASTEK)Q2 FY23 Earnings Concall Oct. 21, 2022
Corporate Participants:
Damini Jhunjhunwala — Assistant Vice President, IR
Hiral Chandrana — Global Chief Executive Officer
Arun Agarwal — Global Chief Financial Officer
Analysts:
Baidik Sarkar — Unifi Capital — Analyst
Sarvesh Gupta — Maximal Capital — Analyst
Jay Daniel — Entropy Advisors — Analyst
Pratik Kothari — Unique Asset Management — Analyst
Mohit Jain — Anand Rathi — Analyst
Sachin Kasera — Swan Investment — Analyst
Ravi Naredi — Naredi Investment — Analyst
Chintan Patel — Satco Capital Markets — Analyst
Chirag Kachhadiya — Ashika Institutional Equities — Analyst
Parag Pandey — Investor — Analyst
Presentation:
Operator
Ladies and gentlemen, good day, and welcome to the Mastek Limited Q2 FY ’23 Earnings Conference Call. As a reminder, all participants are in a listen-only mode and there will be an opportunity for you to ask questions after the presentation concludes. [Operator Instructions] Please note this conference is being recorded.
I now hand the conference over to Ms. Damini Jhunjhunwala, AVP Investor Relations, Mastek Limited. Thank you. And over to you, ma’am.
Damini Jhunjhunwala — Assistant Vice President, IR
Thank you, Vikram. Good day to all of you, and thank you for joining our earnings call today. Welcome to the Q2 FY ’23 earnings call of Mastek. The results and presentation have already been mailed to you and you can also view it on our website, mastek.com.
To take us through the results today and answer your questions, we have the top management of Mastek, represented by Mr. Hiral Chandrana, Global CEO; and Mr. Arun Agarwal, Global CFO. Hiral will start the call with the business update, followed by Arun providing the financial update for the quarter.
As usual, I would like to remind you that anything that is said on this call that reflects any outlook for the future or which can be construed as a forward-looking statement must be viewed in conjunction with the risks and uncertainties that we face. These risks and uncertainties are included, but not limited to, what we mentioned in the prospectus filed with SEBI and subsequent annual reports that you can find on our website.
Having said that, I will now hand over to the — the call to Mr. [Technical Issues]Over to you, Hiral.
Hiral Chandrana — Global Chief Executive Officer
Thank you Damini. Thanks everyone for joining our investor call and analyst Call. First of all, let me start with wishing all of you and your families very best Happy Diwali and best wishes for the festive season. As, you would have seen the results we reported quarter-on-quarter growth of greater than 10% on a constant currency and 20.4% year-on year growth on the revenue again on constant-currency. We reported operating EBITDA of 17.3%, Arun, will get into a lot more details on the key metrics and financials. Let me spend a few minutes on some of the highlights of the business and also talk about how we are progressing on the strategic priorities and some flavor for what you can expect in the second half year and going forward.
As you know, there is a lot of geopolitical uncertainty in the UK so I wanted to spend a few minutes starting with the just business out there, which is the UK public sector. We’ve been in that geography for over two decades as you know, and are very deep rooted in some very critical areas of national infrastructure, particularly with borders, immigration, defense and security. While we understand there is a lot of flux in terms of the macro level environment out there, but our business is very resilient and we have actually announced a few wins out there and some very large [Indecipherable], which position us very well particularly as the digitization continues and we are working very closely with the top civil servants as well as key programs and key transformation programs which we expect to continue as planned.
The private sector in UK has also continued to show momentum. And our overall UK business, we are confident we will continue to grow going-forward. As you know we announced the MST Solutions acquisition and concluded that in the quarter. And it’s off to a really very positive start. We couldn’t be more happier that is a lot of activity going on across multiple dimensioned particularly as it relates to go-to-market motion and synergies that the rest of the Mastek accounts. So both when it comes to Mastek Services taking into MST accounts and sales force going into Mastek accounts we’ve seen some really positive momentum this in a few weeks.
As, you would be call or focus was on three or four areas when we made this acquisition. One was in the space of health care in North-America, where MST has got some really unique solutions. Second is in new vertical which is the state and local government in the America. We are now into four different states out there and see again a lot of areas where we can replicate the use cases. Account mining was one of the biggest areas where you would benefit salesforce and ecosystem. It’s going to be creating 90 million new jobs in the next few years in the next three years. And, they would be requiring about 350,000 more employees in the ecosystem. We had some amazing case study and I’m very bullish particularly after the Dreamforce conference that happened last month where see a, lot of clients actually together and are already bidding for joint deals and winning together along with the [Indecipherable].
Overall, our market visibility has increased we’ve been recognized by some top advisor analyst in the Americas. Particularly as it relates to ISG, we are part of the booming 15 list now, along with some key players as well as other signs recognized us for a disrupter in the Oracle Cloud service. Our order book backlog year-on-year continues to grow. The demand is cautious but we see some really strong momentum in larger deals–larger integrated deals more particularly. And, even though there will be some repurposing of budget. The areas that we operate in as, you know, is all-digital and Cloud services. So to continue to see customers investing in those areas going forward as, they continue to modernize and move their on premise workloads to the cloud.
As you know we had presented during the Investor Day last time on some very key strategy. And a key part of that building block is our people. And we are very happy to inform you that attrition has continued to be trending down last few quarters. There’s a lot of skill Transformation and people retention initiatives that continue and that’s like I’ve said before, a continuous process as we build our organization to sail for the future. We had also announced and Innovation and Platforms Group. And then again we are happy to inform that there is our first win on that front with the non-linear assets particularly in the workforce stability space. In the Middle-East market, however, we believe that this can be now replicated into other markets including the US and UK. Our Middle-East market actually has performed well frankly better than what we had originally expected. And we are involved now in some large accounts and build out in that market as well.
Lastly, if you look at our account focused strategy, we’re now in 27 Fortune 1,000 clients. We are being very selective in terms of new logos and new clients, where we want to focus on deeper account mining and cross-sell with our service line strategies. And you will continue to see that focus across all geographies.
A bit about what you can expect going forward, we believe that while our health care business percentage would have dropped and we had communicated this last time in terms of a single account in the UK, we are seeing really strong momentum when it comes to pipeline, particularly in health care and public sector. Our manufacturing and retail accounts also are showing promise. And we believe that even though the data and analytics percentage and the health care percentage has dropped because of that one account, the pipeline that we see in those two areas across all geographies, particularly in North America, is very positive. The key will be to execute during the quarter, both in Q3 and Q4, as we have multiple large deals and integrated deals along with our joint activity with MST Solutions.
We just came off a successful Oracle CloudWorld conference as well. Again, these conferences are happening after a gap of three years, as you know, 2019 was the last in-person conference. And there’s, again, a lot of discussions around the investment Oracle has made in Cerner and the potential of repurposing some of that investment into the health care US market. I’d like to thank all our Mastekeers, employees, all our stakeholders, including all of you on the call, our investors, analysts as well as our customers for their commitment and trust.
And I’ll turn it to Arun now for financials, and looking forward to the discussion in our Q&A. Thank you.
Arun Agarwal — Global Chief Financial Officer
Thanks, Hiral. A very warm welcome to everyone on the call. While deck containing details have already been circulated ahead of the call, I will focus on key financial and business highlights on top of what Hiral had covered much more detailing about how our businesses are growing and what key initiatives have been driven in Mastek.
It was an eventful quarter on multiple terms. While we have seen quarter-on-quarter and year-on-year growth in revenue led by both organic business and also accretion of MST for part of the quarter, we witnessed decline in our operating margin which is primarily because of increments which we have done across all the geographies and currency headwinds. We concluded our acquisition of MST in the month of August, and as Hiral alluded to, we are experiencing synergistic momentum in Americas as this acquisition strengthened our integrated offering across cloud transformation, architecture, customer experience, data and business intelligence.
Key financial highlights for the quarter includes, we have reported revenue of INR625 crores for the quarter, up 20.4% year-on-year and 10.7% quarter-on-quarter in constant currency. During the quarter, we have seen good momentum building up in our UK public sector business and also in Middle East, both in order book and revenue terms.
US continues to be an important market. In Q2, US contributed 24% of our Group revenue progressing in line with our Vision 2025, where we want one-third of our revenue to come from US as a market. We added 20 new clients during the quarter. And a point to highlight, five clients of that 20 had their turnover more than five — more than $1 billion, which gives significant opportunity for Mastek to do further account mining and make them a customer for life.
Our operating EBITDA stood at 17.2% versus 19.2% in the previous quarter, a reduction of 200 bps quarter-on-quarter. As I mentioned earlier, it’s primarily due to impact of currency and salary increments. However, we continue to invest in sales and capabilities. There are multiple operating levers which is helping us to offset some of this impact as we operated in this quarter and we move into future quarters.
PAT stood at INR86.2 crores versus INR84.4 crores in the previous quarter, up 2.2% quarter-on-quarter. Our borrowings stood at INR388 crores as of 30th September, which includes funds which we borrowed for the purpose of MST acquisition. Our gross cash stood at INR352 crores versus INR655 crores in the previous quarter. We have discharged all the payments relating to MST acquisition and also released all the final dividends in quarter two.
Our headcount stood at 5,810 for the quarter, reflecting a net addition of 257 resources. This includes addition of MST resources as well as the consolidated MST in this current quarter. We will take more details and we’ll provide more input as we get into Q&A session. I would like to thank all of you for your continued support and trust in Mastek.
Wishing you all a very happy and prosperous Diwali. Going back to moderator to open the house for Q&A session.
Questions and Answers:
Operator
Thank you very much sir. We will now begin the question-and-answer session. [Operator Instructions] We have a first question from the line of Baidik Sarkar with Unifi [phonetic] Capital.
Baidik Sarkar — Unifi Capital — Analyst
Hello. Arun, good morning. Good evening. Thanks for the update. Am I audible?
Hiral Chandrana — Global Chief Executive Officer
Yes, you are, Baidik.
Baidik Sarkar — Unifi Capital — Analyst
Lovely. I would like if you could just take a step back and some light on how the various categories is moving so far and how the top line number are doing. And if you could please start with an update on when we expect some kind of acceleration in the UK public sector? I understand from your opening comments that you drew reference to a large — obviously, a large deal there. So yeah, when — by when should we expect an acquisition there?
Followed by a comment on your Oracle practice, how have growth rates there been like? If you could please quantify a broad range. That will be helpful. And I call up Oracle practice due to a simple reason that the commentary from Oracle itself has been so encouraging and aggressive. So it will help us see how as a vendor in the ecosystem we’re keeping up.
And lastly, if you throw some light on the few sales force practice area that you keep acquiring with this new mandate. How much of MTS largely project implementation oriented and how does scale up here look like?
Hiral Chandrana — Global Chief Executive Officer
All right. Thanks for the question. I mean, I know there’s two or three parts to it. Just to clarify, your first point was on the UK public sector, right?
Baidik Sarkar — Unifi Capital — Analyst
That’s right. That’s right.
Hiral Chandrana — Global Chief Executive Officer
Okay. Right. So yeah. I mean, if you look at it, outside of some of the large frameworks that we have announced and these are very competitive frameworks, right? And one of them, which is a technology services 3 — Tier 3, we’re actually officially in the top two among the top 15 suppliers as part of the data and analytics framework, we are also expecting a significant amount of work in the medium-term.
Having said that, in terms of the near-term wins and some of the key elements of the UK public sector, we’re actually continuing to win on three or four fronts, right? One is in terms of the future borders and trade. As you know, our business is critical — managing some of the critical infrastructure. So for example, we process about 5 million visa applicants given — in any given year. We are actually involved in protecting some of the irregular immigration, where we process about 25,000 cases every year. Some of these critical elements continue to get modernized then digitized and these systems are very critical for the future of the government as well.
Even in the government — and even in the health sector out there which is under the government, where we saw one particular program dip, and that obviously impacted our Q1 and Q2 from a health sector perspective, but we are continuing to see a momentum in a few other areas, particularly in the shared services unit and some of their data processing services. And we’ve announced a couple of wins out there as well.
In the UK public sector, we also have a Council, state and local government that we are working with about 28 or 29 city Council. And we used to do primarily Oracle Cloud work out there in the past until about six months, nine months ago. Now we are starting to cross-sell the Digital Services and winning more larger integrated deals. In about five of those councils, we’re actually starting — or we have actually started in two or three of them architectural assessments. And we believe that some of those councils could be quite interesting going forward as well.
So while you have seen the US business improve from a share perspective and that’s in line with our strategy, our UK public sector, particularly our Secure Government Services, the SGS services will continue to grow. And we’re actually seeing wins even in the first two, three weeks of October here as we get into Q3. So that’s as far as the UK public sector is concerned.
Baidik Sarkar — Unifi Capital — Analyst
So the deal wins in October should reflect by Q3 itself. Is that a fair assessment?
Hiral Chandrana — Global Chief Executive Officer
Yeah. The two wins that we’ve had are wins where we would start to ramp up in November itself. These are wins in our existing accounts in different divisions and that will continue to build in Q3 and Q4 as well.
As you know, the Oracle business that we have as it is, is multifold. So I just want to split out a little bit because it will give you some flavor. The Oracle cloud commerce — and there has been enough public announcements on this. Oracle has been deprioritizing some of the cloud commerce elements, which is the CX part of the Oracle business, right? And we’ve had some exposure out there which has impacted some of our Oracle components.
Having said that, the Oracle cloud ERP, supply chain, HCM and some of the elements of the mid- to back-office transformation is something that they continue to grow, and we continue to see positive momentum. So while the CX part has definitely been impacted, the rest of the Oracle business which is our core ERP, HCM continues to build, right, as we look at larger deals.
Now it’s an interesting kind of timing for us because its a good segue to your third question. We now have an additional ammunition with the Salesforce commerce as well as our Salesforce CX practices. So in our existing incumbent accounts, we’re now able to guide them through the front office transformation journey, whether it is in the Salesforce CX, CRM space or even in some of the new MACH alliances which are the headless commerce areas, where some customers are investing. So we’re seeing it as a challenge as well as an opportunity there on the commerce space, because now we have an additional stronger practice where customers are investing in.
Lastly, the MST acquisition — and we’ve shared some more details in the deck as well. We are really excited about this entire new vertical that has opened up. Normally, it would have been very difficult for us to get into state and local government sector. But the spend out there continues to increase in digitizing multiple elements of economic and land development, water resources, licensing and permitting. And these are some very unique use cases, right, transportation, health services, where we are able to take our capabilities in Salesforce and penetrate into the state and local government. And hopefully, we can build from there and replicate those use cases as well, including some of the Blue Cross Blue Shields, where we see some good use cases in the health sector, both in the provider and the payer market as well.
So hopefully, that covers the UK public sector, the Oracle as well as the Salesforce question.
Baidik Sarkar — Unifi Capital — Analyst
Yeah. But here, I was wondering if you could quantify some of the expected growth rates here. I will — I understand ramp up in UK will happen. But just to give us a ballpark on how the scale up in MTS could be like. They disclosed — I think they were at $30 million last June so what’s the run rate we’re looking at here?
Hiral Chandrana — Global Chief Executive Officer
Yeah. So we don’t share the split of the acquisition numbers. And like you said, when we acquired they were $28 million, $29 million last 12 months prior — the prior 12 months and June timeframe. We expect the growth in high-single digits with MST Solutions quarter-on-quarter. And the ecosystem is fairly large, as you know, with the Salesforce.
Salesforce is — as we had shared last time, is a much more broader platform with the customer 360 degree focus. So there is sales cloud, service cloud, marketing cloud, integration cloud, analytics and some very specific industry solutions that MST brings to the table as well. There is a platform called Vlocity, which is where we build our industry solutions.
So that, we continue to see high-single digit quarter-on-quarter growth. Obviously, it’s on a smaller base. And we’re seeing growth across geographies out there, not just in the Americas. [Technical Issues] add anything on the numbers.
Arun Agarwal — Global Chief Financial Officer
Absolutely, it’s covered, Hiral. And Baidik to your point, while US it is primarily focused how we have done the acquisition, but we are seeing a lot of good synergies coming out of UK and other markets as we are building it up. So we are very positive both from the market opportunity perspective and from the capability which we have as a company now.
Baidik Sarkar — Unifi Capital — Analyst
Sure. Thanks, Arun. Arun on margins, could you break up the constituents within our other expenditure that saw this 200 bps hit at an EBITDA level. And despite the depreciation, is it just a effect of MST acquisition? Or was there something else there, because it looked rather sharp? And would you reckon we’re at bottom EBIT levels? Or should we wait for Q3 for the full impact of the integration to play out?
Arun Agarwal — Global Chief Financial Officer
Sure. So, you’re right, Baidik. Depreciation is the reflection of the acquisition as per Ind AS and IFRS. As we know, there’s a intangible which has to be created on every acquisition and you need to amortize it, right, so — which has led to increase in depreciation, which will continue. But that’s part of the acquisition.
And margin, as you saw, other expenses is the reflection of subcontractors and other related costs, right? As we’re ramping amid couple of accounts, including public sector, which includes secured cleared resources, you need to hire subcontractors because there you get those talent rather than in the employment market. So it’s a combination of both which is leading into it. But from the operating EBITDA perspective, which is a consummation of everything plus and minus, which is moving across. As I mentioned earlier, it’s a combination of currency and also the salary increments which we have given across geographies. Otherwise, everything else is balancing each other out.
Baidik Sarkar — Unifi Capital — Analyst
So just one last thing from me, Arun and Hiral. This is really a comment for your Board and obviously, for both the CEO and the CFO’s office. Look, I understand M&A will be a key component of your growth and your new value creation over the next many years, right? But even keeping that in perspective, we cannot discount for 50% correction that your own stock has taken because this is now at multiples that is probably lower than the deals that you would enter into the market to fuel your own inorganic growth ambition.
So in a nutshell, the point I’m trying to drive at is that from a financial management perspective, buying back your own stock is something that you should consider, because if you are indeed headed for $1 billion, say, by FY ’25 or FY ’26, the risk to reward that your own stock offers is possibly better than actually the smaller back pledging [phonetic] ones that you might be seeking to acquire. So this is a comment I wanted to leave with your Board. If you have a comment on this right away, I’d love to hear it as this is a formal suggestion for your Board. Thank you.
Arun Agarwal — Global Chief Financial Officer
Thanks, Baidik. We have noted the suggestion. Definitely, this is also one of the factors which is always discussed. But again, its the capital allocation how we believe will contribute to better shareholders’ return. But point taken, Baidik. Thank you.
Baidik Sarkar — Unifi Capital — Analyst
Thank you and best wishes. Thank you.
Operator
Thank you. We have next question from the line of Sarvesh Gupta from Maximal Capital. Please go ahead. Sarvesh, your line is unmuted. You may go ahead and ask your question.
Sarvesh Gupta — Maximal Capital — Analyst
Yeah. Hi. Good evening. So first question is, what was the MST contribution in the quarter in terms of the revenue because we are trying to analyze the organic versus inorganic growth?
Arun Agarwal — Global Chief Financial Officer
So again, very quickly, as we mentioned, again, this is acquisition which is done in the month of August, where we have consolidated numbers. We are not providing — or we don’t provide the breakups, but a very high level, which you can take as a number. Organic business has grown quarter-on-quarter and year-on-year. Quarter-on-quarter growth is in low-single digit and year-on-year growth is in double digit as a reference. However, we are not providing breakup, and hence, will not be able to give you specific breakup of MST and organic numbers.
Sarvesh Gupta — Maximal Capital — Analyst
Okay. But for how much time has it been consolidated? Can you at least tell that?
Arun Agarwal — Global Chief Financial Officer
It’s part of the quarter, as I mentioned. The consolidation has been done effective August, so part of the quarter.
Sarvesh Gupta — Maximal Capital — Analyst
Two months?
Arun Agarwal — Global Chief Financial Officer
Approximately.
Sarvesh Gupta — Maximal Capital — Analyst
Okay. And on the health care key win where we have been sort of — that win has gone back. So is it expected to come back? What is the current status? Will it come back? Or is it just gone and now we have to start again from the scratch as far as that key deal win is concerned?
Hiral Chandrana — Global Chief Executive Officer
So Sarvesh, health care, of course, there are multiple components to our health care business. As you know, we do business in Middle East, in the US as well as the major clients in the UK, which we talked about last time. And that particular health care business has four or five divisions, right? There is an improvement division. There is a digital division. There is a shared services division. There’s an England division. And those departments and leadership have been consolidated, right? So the way we are approaching that account is slightly different. It continues to be a key part of our strategy. Our pipeline is actually healthy. The decisions that we are going to take are — have slowed down in the last one or two quarters because of the change in leadership and reprioritization, right?
The win that we announced in the collections, which is the data processing services, which is to look at taking some of their legacy environment into the cloud and also building on the data access environment and some of the trusted secure access that they want, right, for critical data, that was the win in that same account. So we’re seeing different elements of pipeline now. The deal that was envisaged as it was constructed about nine months back is now being implemented with a different approach. And like we had mentioned, right, it would come in phases with a much spread out phase for that particular account.
However, we continue to being very bullish on the health care sector as an overall industry vertical, right? We’ve actually run some accounts in the US. Actually, a very interesting case study that we published recently was along with MST, where they have completely revamped a member portal and mobile experience of an integrated patient going through — and this is a public case study, so I can name the customer, Banner Health, which is one of the leading payer providers in the country. And we’ve actually not just won the deal, but we are executing that with some really good feedback from both Salesforce as well as from the customer. So health care in North America is actually a big focus area as well.
As it relates to the health care account in UK, we do continue to see opportunities where they are now much more willing to do offshoring, which they did not. And so we are sort of constructing some different engagement models with them as well. So hopefully, that covers it, Sarvesh.
Sarvesh Gupta — Maximal Capital — Analyst
Understood. So do we expect the share of health care in our revenues which has seen a large dip? Do we expect that to improve back to the median sort of a level? Or it is going to be the new normal now?
Hiral Chandrana — Global Chief Executive Officer
No, we expect — it’s a good question, Sarvesh. In fact, we had shared our vision for health care and life sciences business to be 30% as part of our vision in FY ’26 game plan. We are still very confident that, that’s the mix that we’re aiming for. In fact, MST Solutions’ business has an element of health care, as you know, and we’re seeing good pipeline over there.
So we will continue — so I would say that this is probably like a bottom level on that mix. You’ll continue to see that going forward grow. And hopefully, we can get to almost 30% of our business from health care and life science.
Sarvesh Gupta — Maximal Capital — Analyst
Understood. And Arun, just one last question if I can chip in, it is alluding to the previous participant’s question also. So we’ve seen like even if we talk about high teens, we are probably at the bottom range of the high teens in terms of the margins. So assuming currency stabilizes, pound stabilizes at this level, do you see this being the bottom of the margins for this year? Or, do we expect any further positive or negative levers on that particular margin levels where we have reached?
Arun Agarwal — Global Chief Financial Officer
No. Sarvesh, a brilliant question. Definitely, all our efforts — there are multiple operating levers, including utilization and other specific ones where the management is working very diligently. Subject to currency, we believe there’s more than enough rooms and opportunity to improve margin profile. And we expect those improvements to start reflecting quarter four onwards.
Sarvesh Gupta — Maximal Capital — Analyst
Understood. Thank you and all the best.
Operator
Thank you. [Operator Instructions] We have next question from the line of Jay Daniel with Entropy Advisors. Please go ahead.
Jay Daniel — Entropy Advisors — Analyst
Yeah, sir. I just wanted to know quarter-on-quarter, has there been a reduction in head count net of MST? Because head count moved up by a net of 257 from 5,553 to 5,810 and MST brought in 325.
Arun Agarwal — Global Chief Financial Officer
Yes, Jay, there is a reduction in the head count, because as we have invested ahead of the curve and we are doing very tactful hiring to replace the attrition and as to hire for the future growth wherever we are seeing the pipeline. But we are not backfilling the attrition where it is not matching with the pipeline at the moment, right? So there’s a net reduction other than MST.
Jay Daniel — Entropy Advisors — Analyst
Okay. And in the previous call, you had alluded — I mean, I think I missed this — alluded to two large $30 million to $50 million deals in the previous quarter call. That was on the verge of conversion to orders. Where do they stand now? And over and above this, there was a couple of more deals in the same range expected in the next three to six months, where do they stand now?
Hiral Chandrana — Global Chief Executive Officer
So Jay, just to first of all clarify the previous point, right, we had continued to ensure that we take freshers and trainees last quarter. And so our focus there is to ensure they get deployed and get them skilled for the demand that we’re seeing. And so we thought it would be prudent to first integrate the MST acquisition, which also came with some interesting cloud engineering and architecture talent as well as the trainees that we had taken on board. But we expect to see the head count continue to grow going forward.
As far as the deals are concerned, we had announced the digital specialists and programs framework last time. And that was the last quarter announcement that we had made, I think that’s what you’re referring to. This is where we are now empaneled on the DevOps space as well as the development services in UK.
The two new framework deals that we’ve recently announced actually are in newer areas, one in the strategy and consulting area, where we will be getting involved in the transition and transformation of the state, particularly in the UK public sector, not just in the Home Office or in the Borders and Immigration, but other areas as well. And the second area is on the data and analytics framework, which is again reported publicly. This is where the entire data life cycle is getting looked at. And we’re among the 29 suppliers, so it’s a very large space of providers. But we have a fairly good niche when it comes to analytics and cognitive data solution areas, where we believe there is a huge potential as well. So those are the two new frameworks that we’re involved in.
Jay Daniel — Entropy Advisors — Analyst
So these are the $30 million to $50 million deals?
Hiral Chandrana — Global Chief Executive Officer
So we are being cautious, to be frank, and not including them in our order backlog and order book, right? We would like to be on the conservative side and make sure that as we start winning specific SOWs in specific areas, only those get counted in our order book. So you will not see some of these larger deals and frameworks that are being counted in our order backlog. Having said that…
Jay Daniel — Entropy Advisors — Analyst
So these were the two deals we were mentioning in the last quarter. That’s what I wanted to know.
Hiral Chandrana — Global Chief Executive Officer
No, these are two new framework deals.
Jay Daniel — Entropy Advisors — Analyst
So the $30 million to $50 million deal which you mentioned last year, what is the status on that — last quarter?
Hiral Chandrana — Global Chief Executive Officer
No. So if you — I don’t know which specific deal you’re referring to, but the digital specialists and programs deal — there was an area — were you referring to the UK public sector or the NHS?
Jay Daniel — Entropy Advisors — Analyst
No, no. This was given by — given out by you on the last quarter con call.
Hiral Chandrana — Global Chief Executive Officer
Yeah, yeah. So this is the collections space where we actually have gotten selected in the — the data processing service that you see out there in our announcement, is that win. So we’ve actually concluded that. And that will continue to ramp up for the next 12 months. So…
Jay Daniel — Entropy Advisors — Analyst
So they will be in the range of $30 million to $50 million?
Hiral Chandrana — Global Chief Executive Officer
It’s a GBP20 million GBP value.
Jay Daniel — Entropy Advisors — Analyst
And you have some more in the pipeline that’s what you had mentioned last time over and above these two which were to be converted into the next three to six months.
Hiral Chandrana — Global Chief Executive Officer
That is correct, those are still in play and, those are both in the health sector as well as in the future borders and immigration sector. One of them has been constituted a $10 million deal, not $30 million deal that we originally envisaged and the remaining ones in the clinical space as well as in the the it’s marke space are still in the pipeline. So that will continue to be — our pipeline has actually continued to improve from the previous quarter so we’re being very cautious in terms of qualifying certain new accounts and new logos as well but these deals as you can imagine takes time and we’re still play on those deals there.
Jay Daniel — Entropy Advisors — Analyst
Okay I’ll join by if I have any additional questions here.
Operator
Thank you. We have next question from the line of Pratik Kothari with Unique Portfolio Managers please go-ahead.
Pratik Kothari — Unique Asset Management — Analyst
Hi thank you. Sir couple of clarifications on the MSP. The margin we had mentioned earlier were, 18%, 20% business after all synergy benefits that will come in maybe a year down the line or was it trailing margin.
Arun Agarwal — Global Chief Financial Officer
So, Pratik, as we mentioned the margin is in-line with what market margin is at the moment. So it’s quite similar to what Mastek organic business was delivering. With synergies we believe better progress both in terms of top-line and margin but that’s that’s the further development, but as we speak, the margin profile is quite similar.
Pratik Kothari — Unique Asset Management — Analyst
Okay, fair enough. Sir this profit number that you mentioned [Indecipherable] I believe this includes exceptional items, right. Am I missing something there.
Arun Agarwal — Global Chief Financial Officer
No, it’s right. There is an exceptional item both from the income and cost perspective. We have sold-off our non-core asset which is a property. There is a one-time gain associated with that which is included into the numbers and there one-time acquisition-related cost as well which we have incurred, so both has been included into exception items.
Pratik Kothari — Unique Asset Management — Analyst
Fair enough. Sir earlier when we made the — versus acquisition. I think I believe for a year or more we used to separately call on quarter organic growth is. organic margins are versus what Evosys did. Why not follow that process this time. I mean because we’re trying to get a sense of how our organic business is doing. I mean at least in dollar terms if we include MSC, the numbers don’t look so encouraging. So, why not factor that we used to a couple of years back.
Arun Agarwal — Global Chief Financial Officer
Again there is no specific negative sentiments on that aspect. Just to let you know last year when we acquired Evosys the integration was not planned to be done immediately and hence we were giving that information separately because we were running as a separate business. This is a different smaller range of the acquisition and integrated from day one. So we have a joint go-to-market strategy, we are working on — we have got five synergistic deals where we have been successful, though smaller in size, but there is a good ramp of opportunity out there. So now bifurcating numbers is going to, be much more difficult. Right. Oracle when we acquired it was completely which Mastek was not doing at all and hence we reported separately. There is no other reason then. And I mentioned earlier in one of the remarks being what is the organic growth. So we will continue to give those guidance how organic business is moving but it’s more integrated business and offering now.
Operator
Thank you. We have next question from the line of Mohit Jain with Anand Rathi please go ahead.
Mohit Jain — Anand Rathi — Analyst
Sir, just one question on the US side. So while our commentary remains positive but numbers do not move there. Like if we remove the contribution for inorganic, this quarter also seems flattish. So what is happening in US and this is not a quarterly question but more from last five-quarter perspective and what challenges are there in growing in the US while our deal win et-cetera remains healthy as far as commentary is concerned.
Hiral Chandrana — Global Chief Executive Officer
Yes Mohit, let me start and Arun can add but the. account mining strategy out there which we have shared in the last two-three quarters is starting to now yield results. It has taken longer than the expected to be frank, because when we structured our teams we are looking at client partners, program management, delivery management and different rhythm when it comes to some of these enterprise accounts and larger customers. Having said that one of the metrics that we will start sharing going-forward Is that top 25 accounts in the US, right. To give you some flavor, that top 25 accounts contribute to roughly about 70% of our business in the Americas. And this is now even consolidated with the MHC which brings in a couple of accounts as well and we’re tracking that metric very-very closely right, because otherwise we will always be in this business of opening new logos which is an important part. We want to focus more energies on directly going to the customer. Historically as you know for the Oracle’s cloud side of the business we were dependent on Oracle to provide us the pipeline. So the change that we’re making there which is again taken a little bit longer but we are seeing good leading indicators in the pipeline is now going directly to the customer right and that’s not an easy change particularly when it comes to the entire service portfolio that we have right which is digital engineering data. Cloud implementations as well as Digital Experience.
So those two elements are critical parts of the change. One is account mining of the top 25 accounts and second is the direct go-to-market of some of the large enterprise accounts. And lastly we are seeing a joint integrated synergy now already with another ammunition that we have in salesforce. So if you look at what we have talked about in the past, we’re truly able to make an integrated lead to cash deal happen right, which is the front-office being salesforce, the back-office being Oracle Cloud ERP or HCM and the digital engineering work and the data work that we do in the middle. So now we are able to construct those larger deal. We feel confident that we can take it to more Fortune 1,000 customers which again is focus area and we’ve seen that increase. I think our Fortune 1,000 list has increased by 2.5 times from the year before. So those two or three elements of our strategy has taken longer to yield results but we are very confident that the US market, which is now 24% we’ll continue to move-in that direction that eventually we will be at about one-third of our overall business.
Mohit Jain — Anand Rathi — Analyst
So sir by when do you think you can fix this this piece and what should we expect in the next two-three quarters like, how much time could there be before we see meaningful growth in there.
Hiral Chandrana — Global Chief Executive Officer
You will see this in the second-half of the year as well Mohit. In terms of the US growth, quarter-on-quarter as well as year-on year.
Mohit Jain — Anand Rathi — Analyst
All right thank you, sir. That’s all.
Hiral Chandrana — Global Chief Executive Officer
Thank you.
Operator
Thank you a reminder to participants to restrict questions to two per participant. We have next question from the line of Sachin Kasera with Svan Investments please go-ahead.
Sachin Kasera — Swan Investment — Analyst
Yes my — two-three questions. One was on the leverage on the balance sheet. So we have one more round of. I think you will see there stake increase due in the H2. So will that increase the net-debt on the balance sheet in by end-of-the financial year.
Arun Agarwal — Global Chief Financial Officer
No Sachin we’ll be using our cash and bank balance to use to acquire the balance 10% for this year, but there is no debt which is planned for this round.
Sachin Kasera — Swan Investment — Analyst
Yes, because from what I could see in the presentation, more or less now we are zero with cash, net cash is more will become zero as on September post the acquisition isn’t it.
Arun Agarwal — Global Chief Financial Officer
Yes, at the moment, yes Sachin, but we have good healthy cash generation which we expect to continue to happen because the quality of revenue is good, collection timelines are improving. There is lot more work to be done in H2. We believe with those organic cash coming in, we’ll be good enough to take care in terms of this 10% acquisition of Evosys.
Sachin Kasera — Swan Investment — Analyst
Sure. The other one on this vision 025, ’26 that you have put out in the presentation. One was in the top three in terms of the growth rate so one does that include organic inorganic both when you say on the top three in the industry and secondly, when do you think we will start reporting those type of numbers.
Hiral Chandrana — Global Chief Executive Officer
So Sachin we want to make sure that we’re comparing us, comparing ourselves with the top 10 in that mid market space and while there has been some consolidation out there the — want to see that as a medium to longer-term Journey. That is an important metric that we have already started tracking internally. We don’t report that necessarily externally, but we can look at that going-forward in the next fiscal onwards. But just to give you some flavor, we actually have incorporated that metric even as part of the leadership team’s variable pay percentage. So it’s a very critical metric there because it’s a true part of our vision where we want to be in the top three in terms of growth year-on year. Our customer focus as well as our employee focus are equally important as far as part of the vision because we believe you get those two things right then the growth will all be — will automatically happen.
Sachin Kasera — Swan Investment — Analyst
Sure. And the last question was on this billion-dollar vision. So if I do the math, unless we are looking at some significant debt on the balance sheet or some significant dilution, organic that looks like a very-very tall ask. So if you could give us some insights, in order to reach a billion dollars will be need to do some significant dilution of our equity because organically in of all the acquisition from cash looks quite challenging basis the current status where we are.
Hiral Chandrana — Global Chief Executive Officer
Yes so Sachin, that is a fair comment. As we have communicated even in our annual report right, we’re looking at that that vision and goal in the second-half of the decade. While we understand that there will be some level of macro uncertainty that will continue right in the environment but have the ingredients and the recipe right in terms of capabilities as well as now increasing market visibility to aim for that. So we want to still aspire and be ambitious towards that vision. We’ve communicated that will happen sometime in the second-half of the decade. Having said that right it will be a combination of organic and inorganic and it’s not going to be purely organic play. There are certain areas we are continuing to build., particularly in the data space we had communicated that that’s one of those areas where both organic and inorganic is going to be a critical component. As what we saw in infrastructure and what we saw in applications in the last 20 years it’s going to happen with the entire data continuum right, right from discovery to observability and everything in-between where the data is moving to the cloud.
We won a very interesting engagement where we replaced the Tier 1 provider on the AWS data cloud stack recently and we’re getting into Snowflake in a couple of accounts in the US as well. So those types of newer areas which we did not have in the portfolio will be important both from a build and partnership perspective in addition of course to our inorganic plan.
Sachin Kasera — Swan Investment — Analyst
No I understand that, my question was a little different. I think for the inorganic part of this billion dollars, will we — will the cash generation be sufficient or will we, because when we do the numbers we were not there, looks like either way we’ll have to take some debt on the balance sheet or we have to do some good again dilution of equity otherwise to be able to generate resources for inorganic and this billion looks little challenging even by whatever that we are indicating that was my research.
Arun Agarwal — Global Chief Financial Officer
No Sachin you’re right. So there’ll be a combination of both, one is healthy cash generation which is part of the plan of the organization. We expect raising capital as well at the right time. So initial any [Indecipherable] acquisition can be done with the help of combination of internal cash and the borrowings. As we get into little larger size or combination of acquisition we will look for capital raise at the opportune time. Maybe the [Indecipherable] is about the right time but we look for at the right time we’ll do the needful.
Sachin Kasera — Swan Investment — Analyst
Sure, that answer for my question. Thank you.
Operator
Thank you we have next question from the line of Ravi Naredi with Naredi Investments please go-ahead.
Ravi Naredi — Naredi Investment — Analyst
Sir, my question is quarter two employees cost is rises 10%, but since quarter one, while no revenue rises in UK. Middle-East, while USA rise only 107 million to 151 crores, sorry. Then why the employee cost 31 crores rise so much in this quarter two.
Baidik Sarkar — Unifi Capital — Analyst
I mean, again maybe it’s not comparable apple-to-apple because we have the MST acquisition and all the equivalent lines in employee expenses and others have gone up because because of MST inclusion as well. So both revenue and cost has been, has been changed accordingly.
Ravi Naredi — Naredi Investment — Analyst
And sir what is the target of the US top-line in next 3-year and what is in your mind, that is the main question.
Hiral Chandrana — Global Chief Executive Officer
Yes so Ravi we had communicated and we’ll continue to drive towards that Journey where we would like our US business to be roughly one-third if not more part of our overall business right. Sure so right now in the latest quarter we are at 24% a little over that and we believe there is more headroom that to get to closer to 35%.
Ravi Naredi — Naredi Investment — Analyst
Okay, thank you. Thank you sir.
Operator
Thank you we have next question from the line of Chintan Patel with Satco Capital Markets Limited please go-ahead.
Chintan Patel — Satco Capital Markets — Analyst
Sir, our margin is continuously declined. So is it deteriorated due to the consolidation. If it is yes, then what would be the sustainable margin post consolidation for FY23 and going ahead.
Arun Agarwal — Global Chief Financial Officer
Yes. Chintan, our margin as I mentioned earlier, the reduction which you’re seeing currently it’s a combination of two things. One is increasing cost of salaries including the increments which we are — how GP earner is moving along it’s also impacting our overall margin. However we believe high-teens has been our aspiration and our endeavor is to continue to build-on that and as I mentioned quarter four onwards you will start seeing the positive movements on the back of operating level and, definitely subject to currency because 20 is something which we don’t control.
Chintan Patel — Satco Capital Markets — Analyst
Okay.
Operator
Thank you. We have next question from the line of Chirag Kachhadiya with Ashika Institutional Equities. Please go-ahead.
Chirag Kachhadiya — Ashika Institutional Equities — Analyst
Hello. Sir. I have a few questions right. What, whatever the situation is there in Europe and particularly UK have we protected ourselves from this because every day some new news come from Europe geographically with — and new countries and particularly in the last two days the incident of UK, the geopolitical situation is very uncertain over their end with ministers resigning and all. So, is there any strategy, alternative strategy we put in place to protect ourselves even in worst-case scenario if anything happens.
Hiral Chandrana — Global Chief Executive Officer
Yes, so Chirag let me maybe recap a couple of things out there in UK because it’s continuing to be a, it will continue to be a very critical market for us. Clearly we are observing some of the the geopolitical scenario and some of that has been around for the last few months as well as you know. We work very-very closely to — with multiple levels of civil and senior services and while there might be some ministerial changes the people that we’ve worked with and are working with will continue to, continue to be doing critical roles in these transformation programs right. Whether it’s national security, whether it is border, some of the trade-related aspects and immigration as well. Some of the type of work that we’re doing, biometric, data matching exchange in terms of validating some other systems right, is fairly cutting-edge and, those will continue. Now having said that right, we want to make sure that we continue to have a risk mitigation plan, but the areas that we are in are very deep-rooted. We actually believe that it is going to get very tough for new competition to come in some of these areas that we are present in. And while there will be some element of potential realignment or reprioritization on some of these initiatives, the areas that we are working and will continue to grow so we could potentially see that as an advantage when we convert some of our long-standing relationships and presence to build-on some of these systems that we have continued to support right.
Having said that, Europe which is the non-UK part right, we have a small presence in Europe as well, there there is definitely delayed decision. So we have actually put more focus on the UK and the US market and like I said our Middle-East market has shown good promise as well. One of the interesting things that we’ve observed recently in the last three to six months and we’ll hopefully see some announcements on deals related to this is the accounts that we had opened in Europe and some of these large manufacturing accounts. These are $10 billion, 15 billion accounts if not more they have large presence in Americas as well right. So we are taking a very global accounts strategy. In fact we have three deals in the Americas with customers who are actually headquartered out of Europe but they are driving large North-America rollouts right. Whether it’s in the Oracle space or in the digital engineering space. So we are adopting different strategies out there even for some of these accounts that we have our debt. But we are very confident about our public sector business in UK. We understand there is geopolitical stability issues but our areas we are very confident we’ll continue the growth.
Chirag Kachhadiya — Ashika Institutional Equities — Analyst
Okay fair enough. Thank you so much.
Operator
Thank you. We have have next question from the line of Parag Pandey [phonetic], an investor. Please go ahead.
Parag Pandey — Investor — Analyst
Yes hi. Can you hear me?
Operator
Yes, please go ahead, Parag.
Parag Pandey — Investor — Analyst
Yes. Hi. I want to understand why there is reduction in the client edition. So let me, let me take that I don’t know if you want to add please jump-in. So but this is something that we have been very consciously been communicating as well as part of our strategy. If you looked at our size of business, the number of clients that we have is way too many to define right. Now that’s an advantage in some ways, but there is also a long-tail of clients, where some of those customers may never grow beyond a particular point, right. Where we have done in implementation or a project and then it ends. So we are taking very consciously calls on deeper account mining where we are re-purposing some of our top talent globally, the region as well as the global centers to focus on those top 40, 45clients. We’ve identified globally these top 40, 45 clients which will drive good part of our growth strategy.
So you will see us being much more selective when it comes to new client addition and this is taking a medium-term view as well because we believe the wallet share increase in our existing clients it’s going to pay-off much more dividends as well as higher-quality revenue and this holds good for even regions like Middle-East where we now have identified 10 accounts where we will grow there, right. UK where we have identified 10 accounts, Europe we’ve identified a few accounts as well as in US about 20,25 accounts.
So, I think that account mining rhythm is going to be critical having said that we will continue to go after larger more integrated deals where we see potential downstream potential in the customer. If we see that it’s going to be just a project of 300K, 500K and that’s we all that we do in the client they being more careful and judicious about taking on new clients, whereas if you see that going to be a strategic partner that now with our sales force capabilities Oracle Cloud, data and engineering capabilities on the digital side, we can be a much more strategic long-term partner. Then you would go after it. So it’s a design philosophy where we believe number of accounts it’s not going to be a metric, but revenue from our, top 25, top 50 accounts, revenue from accounts, which are greater than one billion in revenue you would have seen that now we are increasing our number of accounts when it comes to companies which are greater than one billion so that’s a good method that will continue to report going-forward.
Operator
Thank you we have the last question from the line of Jay Daniel with Entropy Advisors. Please go-ahead.
Jay Daniel — Entropy Advisors — Analyst
Yes, sir. This is regarding the $1 billion target. Now you are saying it will be in the second-half of this decade, well as investors are assuming it will be 25, 26 and the second thing the second part of thing is how personally invested are you in achieving this $1 billion target. I mean how much of, I mean as investors would like to know whether you’re on our side of the table as far as your reserves et-cetera are concerned, which are linked to this one billion achieving this $1 billion target.
Hiral Chandrana — Global Chief Executive Officer
So the some background noise. So it’s a good segue for us to actually maybe make some closing comments as well because it’s a good question. So first of all we are entire ELT which is our executive leadership team and our management is very committed to our one billion vision right. We have communicated that it is going to be early part of the second-half of the decade, which is hopefully in the first two years right off the second part of the decade and we believe that there is going to be a lot of activity that we collectively need to do right, because there are certain market factors we may not be able to control, but there are many factors that we can’t control right as an organization.
There is elements of newer areas that going to come in, we’ve talked about some of them whether it is data and automation whether it is the Cerner acquisition that Oracle made and how we make a bet on healthcare in North-America. So some of the strategies that we have shared in the past while we are making tweaking– we’re tweaking those strategies based on the market, fundamentally we have beliefs that strategic big bets that we’ve outlined are the right, but that will take us going-forward, including our inorganic strategy right. am personally very committed to your point and looking-forward to this journey because it is not going to be easy the price to what we’re trying to do is Mastek has done in 40 years from timeframe perspective it is to do that in the next four years and if you look at it the market opportunity of customers one of the big things that customer have none bidding it’s not stopping investing in digital engineering and cloud transformation areas thus some of the customers that didn’t do that missed out on the opportunity.
Now our entire business missed in that area and if you continue to build partner and buy the right assets and build the right capabilities and have of course executive that with a lot of rigor. We see that that’s a journey that is possible. So with that I think the full commitment on my side exists. We obviously don’t talk about specific elements of et-cetera, but as far as the journey is concerned the entire leadership team has done a fantastic job. It’s not an easy environment in the grand scheme of things right. We are obviously coming off of two years of challenging times for people personally and I think have shown tremendous resilience right and the spirit of what this and for we recently celebrated our 40th anniversary. We welcome the MST Solutions. Tim and as part of our family culture for us is a very important part of our fabric. Well, we are always going to be true to our values and the market potential definitely exists right, the room that we have in Americas and healthcare and some of the newer emerging technologies as customers continue to grow in the Digital and Cloud journey. So with that hopefully that covers Jay the question that impacted.
Jay Daniel — Entropy Advisors — Analyst
Thanks a lot.
Operator
Thank you. Ladies and gentlemen that was the last question. I would now like to hand the conference back over to Mr. Hiral Chandrana for closing comments over to you, sir.
Hiral Chandrana — Global Chief Executive Officer
Thank you again. I as always we enjoy these questions, because we learned a lot as well in terms of how are supports, investors, analysts are thinking. I do want to once again wish all of you a very Happy Diwali and festive season with your families. The environment and the demand outlook is still strong in-spite of some of the macro-level uncertainty and we will continue to make progress in our strategic priorities and continue to update all of you on specific areas of progress, but I want to reemphasize the support and and the the commitment that all of us have to making that vision possible and again thank you to all of you on the call as well as our investors and analysts who will continue to support us through this journey as well. Thank you.
Operator
[Operator Closing Remarks]