Mindtree Limited (MINDTREE) Q3 FY23 Earnings Concall Transcript

Mindtree Limited (NSE: MINDTREE) Q3 FY23 Earnings Concall dated Jan. 20, 2023

Corporate Participants:

Nitin Mohta — Chief Investor Relations Officer and Principal Director, Financial Planning and Analysis

Debashis Chatterjee — Chief Executive Officer and Managing Director

Vinit Teredesai — Chief Financial Officer

Sudhir Chaturvedi — Whole-Time Director and President, Markets

Analysts:

Sudheer Guntupalli — Kotak Mahindra Asset Management — Analyst

Vibhor Singhal — Nuvama Equities — Analyst

Mohit Jain — Anand Rathi — Analyst

Sulabh Govila — Morgan Stanley — Analyst

Ruchi Burde Mukhija — Elara Capital — Analyst

Ravi Menon — Macquarie Group — Analyst

Sandeep Shah — Equirus Securities — Analyst

Pankaj Kapoor — CLSA — Analyst

Dipesh Mehta — Emkay Global — Analyst

Kawaljeet Saluja — Kotak Institutional Equities — Analyst

Ashwin Mehta — Ambit Capital — Analyst

Mukul Garg — Motilal Oswal Financial Services — Analyst

Presentation:

Operator

Ladies and gentlemen, good day, and welcome to LTIMindtree Q3 FY’23 Earnings Conference Call. [Operator Instructions] Please note that this conference is being recorded.

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

Nitin Mohta — Chief Investor Relations Officer & Principal Director, Financial Planning and Analysis

Thank you, Tanvi. Ladies and gentlemen, good day, and welcome to the LTIMindtree 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, Markets: 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 factsheet and reference into this call pertain to the performance of the combined entity LTIMindtree, unless stated otherwise. For the convenience of our investors, our Q3 FY’23 factsheet has an addendum that presents comparable quarterly performance of LTIMindtree 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 risk 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 & Managing Director

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 as LTIMindtree. 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 the feat 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 USD1 billion. For the quarter, our revenues came in at a healthy USD1.05 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 view — 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 USD1.25 billion. Although, LTIMindtree 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 significant [Indecipherable] to the increase — to increase participation in multi-year, multi-tower deals by stitching together 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 stalled 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. LTIMindtree combines LTI’s engineering and Mindtree’s experienced DNS blending their 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 a Tier 1 partner.

We are pleased with our client conversations around cross-sell and upsell possibilities. While we see a higher level of caution baked into spending plans across sectors on account of macro-economic 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 at an annual run rate of USD1 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 emerge as the key areas of focus. In case of an American multinational financial services company where erstwhile Mindtree was supporting MarTech operations, we have now expanded our engagement with erstwhile LTI’s 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 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 competencies, our North American specialty insurer has chosen us to modernize and migrate to the cloud, it’s core platforms spanning multiple product lines and countries. Notably, the revenue from insurance platforms has hit USD100 million annual revenue run rate.

Our Hi-Tech, Media & Entertainment business grew 9% year-over-year. The strong growth momentum that we’ve 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 & Resources business grew 8.8% year-over-year. The growth in manufacturing was the result of an improved outsourcing pipeline at 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 continued 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 & 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 & 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 erstwhile Mindtree’s domain knowledge. Our Health, Life Sciences & 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 health care where clients are concentrating on areas such as remote patient monitoring and home health care. 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 are 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 1 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 are happy to start our combined reporting with a strong quarter on the top quartile performance. Our revenue stood at USD1.05 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 points. And increased employee and operational cost resulted in an impact of 130 basis points. Net forex gain for the quarter was USD5.9 million compared to USD2.5 million in the previous quarter.

PAT margin for the quarter was 11.6% compared to 14.5% in the previous quarter. The absolute PAT 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 56 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% versus 63.6% in the previous quarter. Our robust cash management led to cash and investment balances of USD978 million or INR8,086 crores, compared to INR7,703 crores in Q2 of FY23. 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 USD3,878 million, adjust on the balance sheet were USD370 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 & Managing Director

Thank you, Vinit.

As you are aware, LTIMindtree came into existence effective November 14, 2022. Since then, both organizations have fully aligned under the new jointly evolved organization 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 a roadmap to realize the revenue and cost synergies presented by the merger. It encompasses a wide spectrum ranging from further diversification of offerings, 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 a LTIMindtree from a position of strength. Our end-to-end 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 promises 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

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

Sudheer Guntupalli — Kotak Mahindra Asset Management — Analyst

Yeah. Good evening, gentlemen. Thanks for giving me the opportunity. DC, couple of questions. It looks like the weakness in both revenue and margin was largely led by the erstwhile top hi-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 distractions during the quarter?

Debashis Chatterjee — Chief Executive Officer & Managing Director

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 — a majority of that which is already — we have already baked into Q3. You know that Q3 is a 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 furloughs that what we’re 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 furloughs 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 over there. 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 now clarifies.

And, Vinit, anything to add?

Vinit Teredesai — Chief Financial Officer

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

Sudheer Guntupalli — Kotak Mahindra Asset Management — Analyst

Sure. 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 furloughs/working day kind of an impact, is that understanding correct?

Vinit Teredesai — Chief Financial Officer

I think that’s a fair understanding.

Sudheer Guntupalli — Kotak Mahindra Asset Management — Analyst

Thanks, DC. And Vinit, you mentioned there is an increased employee cost of 130 bps. So is this a sort of one-time bonus or anything you have given to employees because of the integration? Secondly, related question is that I think some of your exchange filings earlier suggest that the earlier ESOP 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 retainer 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 obviously one sort of a 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 ESOPs, 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 additional uptick in the next three quarters after that it may start little bit subsiding down based on the current grants that have been given. And you have to look at the cost, our cost base, the percentage has not gone up. It is only because of the sort of revenue that has gone down because of the furloughs, it looks like the percentage of the employee cost has gone up a little bit.

Sudheer Guntupalli — Kotak Mahindra Asset Management — 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

Yeah. The whole intention of this merger was obviously to get the — that revenue and cost synergies over a — 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 profit — industry-leading profitable growth story.

Sudheer Guntupalli — Kotak Mahindra Asset Management — Analyst

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

Debashis Chatterjee — Chief Executive Officer & Managing Director

Thank you.

Operator

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

Vibhor Singhal — Nuvama Equities — Analyst

Yeah. Hi. Thanks for taking my question and congrats DC and the team for the successful integration of the business. So, DC, a couple of questions from my side, one for you and one for Vinit probably after that. So in terms of the overall, I mean, we’ve seen very good growth in the BFS segment and also the vertical that basically in terms of a strong growth in the retail and transport vertical as you mentioned. Just wanted to pick your brain, specifically, in these two segments, I mean, I think BFS, they would not have been too much of a client overlap, but lets say, retail or travel or hi-tech. For the client overlaps that we’ve had — I mean, the little client overlap that we’ve had in this, how is that process going on in terms of overall aligning the sales team and all?

And to that extent, I mean, how are we equipped? I mean, how much have we reached progress in terms of allocation of all these sales heads, geography heads, vertical heads to the entire team? I mean, are there any white spaces, which are let to be addressed? Or is the integration and the allocation of roles and responsibilities 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 & Managing Director

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 present earlier. So one of the things that we ensured that none of these 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 white space per se in terms of any of the accounts where we have to get new leaders and all those 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 with 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 indications that clients want to stop many of the programs that are doing especially BFS is very, very strong. And as far as retail, travel, transport is concerned, I said that — that has also done well but we do have some portfolio, which is on the real estate side 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’ve answered the question.

Anything you want to add to this?

Vinit Teredesai — Chief Financial Officer

No.

Vibhor Singhal — Nuvama Equities — Analyst

Yes, which we are quite comprehensive. Thank you so much for answering that. My second question ask for Vinit. Basically, we 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, even DC have called out is going to be a non-recurring one and we’ll see that reversal next quarter.

The furloughs in the fewer working days, of course, 130 basis point that of course should take care of itself when the growth comes at the earlier quarter. Just on the increased employee cost if I can ask that once again. So the impact of this 130 basis points, I mean, if I understand correctly you are trying to say that basically as a percentage of revenue that has kind of gone up. But I mean is that the — 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 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. Now, all the thing is, you will not see an incremental impact coming up. As I mentioned, the major — 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 our cost a little bit is as I called out the cost on account of increased — sorry, the annual increment that gets rolled out to the freshers as a part of after they come back into — after they come into the mainstream population.

Vibhor Singhal — Nuvama Equities — Analyst

Got it. And we are going to follow this Q3 incremental cycles — increment cycles for the freshers hereafter or that’s yet to be decided in terms of when we are going to provide those on annual basis?

Vinit Teredesai — Chief Financial Officer

No, it doesn’t — it is not a Q3 cycle, it all depends upon when the freshers 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 freshers in one go, we take them over a period of four quarters and have each one of them — each batch completes the annual anniversary, they get that incremental effect.

Vibhor Singhal — Nuvama Equities — Analyst

Okay. Thanks, Vinit. Thanks for taking my questions and wish you all the best.

Vinit Teredesai — Chief Financial Officer

Thanks.

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 we were following the same practice earlier because this time for the first time, we have this 130 basis points increment coming up in the third quarter. So while estimating ahead, should we assume that this will keep recurring every third quarter or will you sort of revert back to one wage hike cycles during the year?

Debashis Chatterjee — Chief Executive Officer & Managing Director

Yeah. You also need to understand Mohit that both the companies had a different intake cycle of the freshers. So now what you’re saying is basically a combined effect, in fact, so some will come in Q3, some will come in Q4, but with the growth, I don’t think so this in fact 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 in FY — 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 time we should factor in is approximately Q2 or Q3 for FY’24?

Debashis Chatterjee — Chief Executive Officer & Managing Director

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.

Debashis Chatterjee — Chief Executive Officer & Managing Director

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

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?

Debashis Chatterjee — Chief Executive Officer & Managing Director

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

Mohit Jain — Anand Rathi — Analyst

And this 100 basis points includes INR50 crores that you have put in the footnote of the release.

Debashis Chatterjee — Chief Executive Officer & Managing Director

That’s right.

Mohit Jain — Anand Rathi — Analyst

These can duty provision in that — the 100 basis point includes that provision as well or should we take into account?

Debashis Chatterjee — Chief Executive Officer & Managing Director

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

Mohit Jain — Anand Rathi — Analyst

And last one on the revenue side. Is there any pass through, which we have experienced because LTI 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?

Debashis Chatterjee — Chief Executive Officer & Managing Director

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?

Debashis Chatterjee — Chief Executive Officer & Managing Director

No, we will, but the number from — earlier from USD600 million to now looking at that, that number remains constant on a — that now on a USD1 billion base is becoming significant 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?

Debashis Chatterjee — Chief Executive Officer & Managing Director

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 Sulabh Govila from Morgan Stanley. Please go ahead.

Sulabh Govila — Morgan Stanley — Analyst

Yeah, 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 next two, three quarters. So just wanted to understand what are those levels now, I mean, LTI used to operate at 14% to 15% PAT levels and Mindtree at 20% plus EBITDA. So in a combined entity, how should we look at that?

Debashis Chatterjee — Chief Executive Officer & Managing Director

So, Sulabh, 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 will be — we are 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 headcount 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 excess hiring than what is needed. Leverage our bench very well. So these are couple of things, which we will be in a position to sort of use it very, very to our advantage and bring the margin back on track.

Sulabh Govila — Morgan Stanley — Analyst

Understood. And with respect to Q4, if I may, I mean, out of this margin impact that we mentioned, how much of it is sort of reversing 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 number. There might be some portion, marginal portion, not definitely, not to the extent of 100 basis point impact coming up in Q4. Similarly on furlough, the impact is 130 basis points. Some portion may remain, but not to the extent of 130 basis points as what we have called out. So you can make the math and look at what to expect.

Sulabh Govila — Morgan Stanley — Analyst

Okay. Sure. Understood. And then my question was with respect to the leadership structure that we have right now. So I just wanted to understand that which verticals and subverticals right now would have co-head structure, given that some of the verticals were — also verticals were overlapping? So how have you gone about that?

Debashis Chatterjee — Chief Executive Officer & Managing Director

See, I think there are — so 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 of the prime consideration as we design the structure. And while designing the structure, we also ensured 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, insurance of both the erstwhile 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’s a lot of cross-selling and upselling that needs to be done. And keeping that in mind, we have gone with the structure that we have talked about.

Sulabh Govila — Morgan Stanley — Analyst

Okay. Understood. And if the last question, if I may, just a bookkeeping 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%.

Sulabh Govila — Morgan Stanley — Analyst

Okay. Thank you. That’s all from my side.

Operator

Thank you.

Debashis Chatterjee — Chief Executive Officer & Managing Director

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

Operator

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

Ruchi Burde Mukhija — Elara Capital — Analyst

Hi, congratulations on the merger. My first —

Operator

Sorry to interrupt you, Ruchi, if you are using external headphones, we would request you to use the handset.

Ruchi Burde Mukhija — Elara Capital — Analyst

Is it better?

Operator

Yeah.

Ruchi Burde Mukhija — Elara Capital — Analyst

Yeah. Firstly, congratulations on the merger. I wanted to take your thoughts on the cost piece. 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 are the large tenures? Or any other characteristics that you would want to call out?

Debashis Chatterjee — Chief Executive Officer & Managing Director

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 takeouts, it has to be a multiyear transformation deal because you typically cannot do the cost takeout unless it’s four, five years tenure. So that’s something which we are seeing right now in the marketplace. But what 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 costs they have spent.

So keeping that in mind, given the fact that there are some uncertainties in the macro economy and 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 if you can look at opportunities of cost takeout and if you can take that cost out and fund your ongoing transformation. So we are seeing quite a few opportunities like that where clients are very keen to discuss in terms of cost takeout. And typically, there are 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 the 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 programs.

Sudhir, do you want to add anything?

Sudhir Chaturvedi — Whole-Time Director & President, Markets

Yeah. 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 lines. But from a cost perspective, there has been quite a significant investment in digital data and cloud-related technologies, especially over the last three years. Hence, clients are looking at the ROI from these investments and those they are structuring as multiyear deals, and that’s where we see net new deal activity happening, besides the multigenerational outsourcing deals that continue.

Ruchi Burde Mukhija — Elara Capital — 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. This I’m asking, keeping in mind that those are the formal or the legal entity took shape in mid-November, this merger was in making for close to one year. So have you seen 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 & Managing Director

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 Is as well as mid-tiers, 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 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 — Elara Capital — Analyst

Thank you.

Debashis Chatterjee — Chief Executive Officer & Managing Director

Thank you.

Operator

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

Ravi Menon — Macquarie Group — Analyst

Hi gentlemen, congrats on the merger. I have two questions. One, DC, do you think with the merged entity having a size close to a 100,000 people, are you able to now target larger deals and are you starting to set up a large deal team to go after perhaps even deals as big as USD500 million?

Debashis Chatterjee — Chief Executive Officer & Managing Director

Yeah. 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 erstwhile 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 is when 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 — Macquarie Group — Analyst

Thanks, DC. And second is, as a combined entity, do you think that absolute — because employee base is now much bigger, we’ll be top out utilization at a higher level than we did as individual firms?

Debashis Chatterjee — Chief Executive Officer & Managing Director

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 — Macquarie Group — 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 — Equirus Securities — Analyst

Thanks for the — yeah, can you hear me?

Debashis Chatterjee — Chief Executive Officer & Managing Director

Yes.

Sandeep Shah — Equirus Securities — 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 these KPIs in terms of large deal traction where average size of deals above USD50 million, USD100 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 USD50 million, USD100 million cross-selling, up-selling has started firing or it will take slightly longer time and one can expect this to happen more in FY’24 rather than second half of this financial year as a whole? So how are we tracking this as a metric?

Debashis Chatterjee — Chief Executive Officer & Managing Director

Well, that’s a great question, Sandeep. I think one plus one more than two is not just only for deals, only — it’s across the organization. If there is any internal message that has gone to the organization is everybody whoever is doing whatever in their sphere of life, they should think of how can they do things better. And that is what we mean by one plus one more than two. So across the board, across all activities, across all aspects of the business. But to your specific question on deals, yeah, we don’t — we talked about the — 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 large deals in the pipeline.

As I said, that some of the cost takeout deals as we are pursuing now they tend to be multiyear, 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 be able 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 — Equirus Securities — Analyst

Okay. And this still order is the maximum one can expect this report in each quarter?

Operator

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

Sandeep Shah — Equirus Securities — Analyst

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

Vinit Teredesai — Chief Financial Officer

Yes. That’s the intent.

Debashis Chatterjee — Chief Executive Officer & Managing Director

Yes. And also, just to add on, Sandeep, I think the other thing which I should also call out is as a management team, when we have got together and tried to look at the metrics, the other important metric is that over a period of four to five years, we want to create a synergy revenue of at least USD1 billion, and we should be also able to get a synergy of at least 200 basis points in terms of margins over the next four to five years. That’s the target at a very broad level, we want to set for ourselves.

Sandeep Shah — Equirus Securities — 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 and lot many has announced the cost takeout plans and layoffs as a whole. So is there any budget pressure in some of our top clients as a whole?

Debashis Chatterjee — Chief Executive Officer & Managing Director

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 takeout because the reality is the amount of transformation at 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 has slowed down a little bit in some cases, but there are also cost of 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 — Equirus Securities — Analyst

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

Vinit Teredesai — Chief Financial Officer

So that continues to be in line with what we have delivered in the past by both the erstwhile companies, while we are not stated that in those many terms, but our intent is to sort of give the — keep the payout in the 35% to 40% range annually.

Sandeep Shah — Equirus Securities — Analyst

Okay. Thanks and all the best.

Operator

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

Pankaj Kapoor — CLSA — Analyst

Yeah. Hi, thanks for the opportunity. DC, my first question is on the order book that we have reported. I’m presuming it, it is for the entire wins, that not just limited to large deals. So if you can give some perspective for this USD1.25 billion number, how does it compare to on a Y-o-Y or a Q-on-Q basis, so we can understand how does it aid on — we can interpret it? That’s the first question.

Debashis Chatterjee — Chief Executive Officer & Managing Director

So let me request Sudhir to answer that.

Sudhir Chaturvedi — Whole-Time Director & President, Markets

So Pankaj, this USD1.25 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 have adopted this measure and we’re disclosing it. So this will be tracked 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 trend. So that’s our advice on this new disclosure that we are 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%, previous quarter we have 17.5%. And I understand that some of the costs over here are onetime, which will not be recurring. So still looking it from a longer-term perspective, when the merger synergies should come in, especially on the cost part, the thing we should go back very quickly to the pre-merger margin level of 17.5%? Or do you think it will take time? And I think you spoke of 200, 300 basis points improvement over a period of time. But if you can give some color in terms of how we can actually go back to the pre-merger levels itself?

Vinit Teredesai — Chief Financial Officer

So Pankaj, as I mentioned earlier, the expectation is that the 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 the industry-leading profitable growth story. And the point which DC mentioned about 200 to — 200 basis points incremental margin, that is over a period of four to five years, compared to what both the companies would have probably were — or were delivering independently. So that’s in addition to what our aspiration 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 a bit not clear about the employee-related costs, which you explained. Is it something different, which we are doing for pressures compared to the earlier practice, which both companies used to have about giving annual increment? Because I think that might be the usual practice, where we might be giving annual increment at the end of first year, if you can clarify that thing.

Debashis Chatterjee — Chief Executive Officer & Managing Director

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 the cost 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 difference is both the companies have different cycles of intake of pressures. That’s why you will in the past, in independent companies, 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

Yeah. So broadly, furloughs impact is separately given. So 130 bps what we called out, but this 130 bps is now part of the cost structure and likely to persist, that’s what broadly you’re suggesting?

Debashis Chatterjee — Chief Executive Officer & Managing Director

Yes.

Dipesh Mehta — Emkay Global — Analyst

Understand. And last question is about if you can provide some sense about how we should expect growth trajectory in Hi-Tech, Media & Entertainment considering the overall macro situation? And I think some of the peers indicated some kind of softness in that sector? Thanks.

Debashis Chatterjee — Chief Executive Officer & Managing Director

So, let me request Sudhir to take that.

Sudhir Chaturvedi — Whole-Time Director & President, Markets

I think, I mean, let me give you a broader demand outlook, right. So if you look at the overall demand picture, so there is a — there is actually work to be done. If you look at the CIO book of work, right, 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, that there are certain projects that are being done over a longer period of time are being deferred. Now in that if we look at verticals, 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 continue to be unaffected. And actually clients — the spend on the experience related technology base, which is critical for their 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 were — for example Hi-Tech is one of them. But we are — we’ve got — I think the good thing as LTIMindtree is we’ve got overall group of verticals where we can continue to focus on the right verticals for growth. And we should see some return to growth back in these — in the 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 in some participants earlier question that the impact in this quarter in Hi-Tech is not related to the largest account of erstwhile Mindtree, is that correct? Is that something that you mentioned?

Debashis Chatterjee — Chief Executive Officer & Managing Director

That’s right.

Kawaljeet Saluja — Kotak Institutional Equities — Analyst

Right. So how come basically then the — I mean, given the dominance of that client in the overall vertical revenue, I’m just surprised that why did the margins of Hi-Tech segment then declined so much on a sequential basis?

Vinit Teredesai — Chief Financial Officer

It’s on account of furloughs that you have seen in some other accounts in the Hi-Tech’s part of it. That’s the reason for the decline.

Kawaljeet Saluja — Kotak Institutional Equities — Analyst

Okay. Seems to be disproportionate. Okay. The second question I had is, Vinit, again on profitability. You mentioned that 130 basis points impact was due to compensation increase at possibly the threshold level. Is that reading right? And I mean, do pressures cost that much of a hit on profitability?

Vinit Teredesai — Chief Financial Officer

So the 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 numbers, some portions of the costs that were there in Q2, not fully baked in for the quarter are now hitting us from a run rate basis for the full quarter, for both the companies put together. So there are those two, thee factors that put together are causing that impact.

Kawaljeet Saluja — Kotak Institutional Equities — Analyst

Sorry to persist, Vinit, but wasn’t the full comp increase in both the companies already announced effective 1st of July? I think in the case of LTI, it happened in the first quarter itself. So what was that incremental cost?

Vinit Teredesai — Chief Financial Officer

So Kawaljeet, 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 the attrition numbers are showing the softening of demand, there are 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

And how do you claw 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 in the coming year.

Kawaljeet Saluja — Kotak Institutional Equities — Analyst

Okay. Just a final question, Vinit. I guess you would have had too many on profitability. So various participants have asked what’s the normalized level of profitability, 18%, 17%, 17.5%, 18.5%? Now I understand that our focus is profitable growth, whereas what all of us are waiting for is that the definition of that profitable growth. So would you be able to detail out would that profitable growth implies?

Vinit Teredesai — Chief Financial Officer

So Kawaljeet, nice try. But as you know that we do not give any guidance with reference to our profitability. See, what we intend to say is that both the companies independently were 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, gain 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 were trying to say. So I think, so while I’ve not called out the numbers, but I’ve given you the indication in terms of where it’s likely to be.

Kawaljeet Saluja — Kotak Institutional Equities — Analyst

Right. Now I’ve got it and we are taking indications. So, but anyway I think this answer is very helpful there. Thank you so much.

Vinit Teredesai — Chief Financial Officer

Thanks, Kawaljeet.

Operator

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

Ashwin Mehta — Ambit Capital — Analyst

Hi, thanks for the opportunity. Just wanted to check in terms of our cash generation, our cash generation seems to be muted at around 48% CFO to EBITDA, 36% FCF to PAT and this was similar last quarter as well. So what essentially is driving that and when do we see that come 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 innovation agreements et cetera with the customers. This being sort of a 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 15th of December. So we had only 30 days honestly to push for and get few of these things done. This delay in some of these innovation, 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 tacked 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 nitty-gritty 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 mojo 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 may return back to those holidays.

Ashwin Mehta — Ambit Capital — Analyst

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

Vinit Teredesai — Chief Financial Officer

So Ashwin, I don’t think — see, first of all, as far as the large deals 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 multiyear deal, the first 12 to 18 months 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 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. Last year itself, 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 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 are having with respect to some of these multiyear cost takeout opportunities.

Ashwin Mehta — Ambit Capital — Analyst

Okay. Thanks, 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 — Motilal Oswal Financial Services — Analyst

Yeah. Thank you. Just a couple of clarification. First one for Sudhir. Sudhir, while we understand right now, this is the first time you guys are giving that combined order inflow number, but can you just help us qualitatively how we should kind of look at this? Because earlier, obviously, both these companies used to adopt different ways of kind of sharing that information. While we are seeing a fairly strong growth in terms of the deal inflow across your peer group, can you share some sense in terms of how you are seeing order inflow versus how things used to be earlier?

Sudhir Chaturvedi — Whole-Time Director & President, Markets

Yeah. So Mukul, I think, just let me reiterate, there’s a difference between order inflow and order book, okay. So this is not a book, this is the inflow within the quarter. So the deal wins within the quarter totally added up is what we 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’ll see, it’s approximately 20% above our revenue run rate for the quarter, that is the metric you should keep in mind and then track it over a four quarter period. I mean use this as a base and then — but we’ll continue to provide this data to you across the two companies — I mean, as LTIMindtree.

Mukul Garg — Motilal Oswal Financial Services — Analyst

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

Sudhir Chaturvedi — Whole-Time Director & President, Markets

Yeah. So I think as DC mentioned, the overall pipeline actually of the organization continues to be strong. In fact, 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. They are — there’s a cost takeout play that is there in every — there are several deals where there are cost take our play, as well as there are deals where clients are still continuing on multiyear transformation programs, whether it be in the digital and cloud arena or in the ERP arena. So we are seeing both those spends continue.

Mukul Garg — Motilal Oswal Financial Services — 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, will that also continue? Or is that being folded in now?

Debashis Chatterjee — Chief Executive Officer & Managing Director

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

Mukul Garg — Motilal Oswal Financial Services — Analyst

Great. Thanks for answering my questions.

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 — Chief Investor Relations Officer & Principal Director, Financial Planning and Analysis

[Operator Closing Remarks]