Sonata Software Ltd (SONATSOFTW) Q1 FY23 Earnings Concall Transcript

Sonata Software Ltd (NSE:SONATSOFTW) Q1 FY23 Earnings Concall dated Jul. 25, 2022

Corporate Participants:

Srikar Reddy — Managing Director

Jagannathan C N — Chief Financial Officer

P.V.S.N Raju — Chief Delivery Officer

Samir Dhir — Whole-time Director and Chief Executive Officer

Analysts:

Unidentified Participant — — Analyst

Mohit Jain — Anand Rathi — Analyst

NGN Puranik — ENAM — Analyst

Baidik Sarkar — Unifi Capital — Analyst

Amit Chandra — HDFC Securities — Analyst

Jagannathan C N — Chief Financial Officer

Dhiraj Dave — Samvad Financial Services — Analyst

Presentation:

Operator

Ladies and gentlemen, good day, and welcome to the Q1 FY ’23 Earnings Conference Call of Sonata Software Limited. [Operator Instructions] I now hand the conference over to Mr. Srikar Reddy, Managing Director. Thank you, and over to you, sir. Sir, please go ahead.

Srikar Reddy — Managing Director

Okay. We lost you in the middle, Vikram, but we’ll go ahead. Okay. Good evening, everybody, and welcome to the analyst call post the announcement of our first quarter results for FY ’23. Here with me, Mr. Samir Dhir, the CEO of the company; Mr. P.V.S.N Raju, the Chief Delivery Officer; Mr. Jagannathan, the Chief Financial Officer; Mr. Sujit Mohanty, the CEO and MD of our subsidiaries Sonata Information Technology Limited; and Mr. Sathyanarayana, VP of finance.

We have posted the results on the website and the press release. So I’ll give a quick high-level summary of the quarter’s performance and where we are and probably looking at the future, before I hand it over to Mr. Jagannathan to take you through more detailed financial analysis for the quarter.

I think overall, given the various factors, we had a good quarter. [Technical Issues] Okay. All right. Yes. Okay. Sorry, we had some disturbance. But yes, so to continue, I was saying that the performance was pretty good given the various factors across both our main businesses, the international services and the India business.

Coming to the International Services business, I think we had about 4% growth quarter-on-quarter on the constant currency basis and about 6% on a rupee basis, about 2% on a value currency basis. I think our PAT has shown a pretty good quarter-on-quarter growth. We have seen, overall, I think growth across more segments, which I think have been reported in the investor deck, which has been shared with you.

Our digital business continued to show steady growth. We continue to reuse Platformation to drive growth with our existing clients and generating new business. Overall, I think we see the demand situation still being quite steady, both with our existing clients and new clients. We have had quite a healthy pipeline last quarter. I think we have had some pretty good deal wins last quarter in the International Services, but for some challenges on the supply side and some delayed projects. We could have probably had better numbers.

As you know we have got on board Samir Dhir as the CEO of the company at the beginning of last quarter. We also announced and strengthened our management team with the induction of Roshan Shetty as the Chief Revenue Officer based out of London, Mr. Balaji Kumar, the Chief Human Resource Officer; and Mr. Hemant Bhardwaj as the Chief Marketing Officer.

I believe that the team, the new team, has settled in under Samir, and we’ll hear from him later on with some of your questions. On the India business, as I said, I think we have seen tremendous performance continued from last quarter, both on the top line and bottom line. And the focus there is to become more of a rounded cloud service provider across all the three major Sonata platforms that we are executing on that strategy.

So to sum up, as we speak, we do see the demand situation quite stable because of the rupee depreciation. I think we’ve been able to hold our margins and, of course, we will have these cost currency headwinds as far [Indecipherable] the major U.S. dollar revenue business. But that’s a high-level summary of where our business is.

I’ll hand it over to Jagan to take you through the more detailed financial analysis of the quarter’s performance.

Jagannathan C N — Chief Financial Officer

Thank you, Srikar. Good evening, all. Thanks for joining for this investor call. Now I’ll take you through the broad financial numbers. The consolidated financial performance of [Technical Issues] has been steadily growing, very higher than the industry averages. We have a CQGR of 6% quarter-on-quarter for last 12 quarters, and the EBITDA margin and the PAT margin also has been growing healthy 3.5%, 4%, we have been continuing to do both the — in the international business and also the India business have been steadily growing every quarter.

The international business, the revenue has been, this quarter, we had a 2 percentage quarter-on-quarter dollar revenue of growth and the constant currency is around 3.9% in terms of rupees, 5.5% growth, very, very stable at this kind of currency — cross-currency impact. We had a strong — in spite of a cross currency impact, our growth has been very, very stable and constant. We are, as mentioned earlier, we will continue to focus on the growth and the performance will continue to be steadily growing.

In terms of our profit performance, thanks to rupee depreciation, we have — we are able to observe some of the costs, deposit salary, increase cost of April, as well as the senior management investment in this quarter. We continue to outperform in the profit objective. Domestic business has been doing really well, consistent growth in their gross contribution and that profit element is continuing to grow. The revenue growth is also very, very strong with the new volume demand, which is continuing to be very, very strong across the market. We are very, very confident of performing well in volume terms as well as in the profitability in terms in the coming quarters. This business has been growing steadily well.

This is a broad financial number for your references. This has been shared in your press release also. Some of the operational metrics for you to review, you must continue to be at a stable level of 57 percentage revenue and Europe continues to be at 21%, 22%. The rest of the world contributes the balance in terms of revenue.

Our contribution of ISP has been stably at 32%, 33%, and that travel remains at the same level. [Indecipherable] there is no major change in the industry contribution in this. Competency wise, we have again contributed by Microsoft Dynamic Services and the Microsoft Digital Platform Services [Indecipherable] drivers. Apart from this, data services for data and analytics continue to remain the same level. The revenue mix on site we have got a benefit of this coming down against 2%, which has benefited our profitability, and the utilization remains at the same level as last quarter.

Operational metrics for other things like top 1 million clients has been stably going up. We have our 5 million and 10 million customers we are holding on. And top five clients contributed 54% of revenue as stably as it was last quarter. We have added about net addition of 50 employees this quarter, most of them are from the delivery side of it. And we have also invested in the [Indecipherable] also. But the headcount addition has been stable and is continuing to reflect on the demand scenario [Indecipherable].

There are supply constraint continue to be there, but our [Indecipherable] for this quarter has come down to 24% annualized for this quarter. This has been a good performance. We are very confident that in the coming quarters, it will be improved further and we will be able to address the supply chain constraint. We are confident of whatever is the guidance given at the beginning of the year, we’re confident of achieving the same, and we are expecting a good, stable growth prospects with a good profitability.

With this, I conclude the update on Sonata’s performance. I hand over back for the questions from the participants.

Questions and Answers:

Operator

Thank you very much, sir. Ladies and gentlemen, we will now begin the question-and-answer session. [Operator Instructions] We have a first question from the line of Mohit Jain from Anand Rathi. Please go ahead.

Mohit Jain — Anand Rathi — Analyst

Sir, two questions. One is on the cost side, like you said in your opening remarks. So should we assume bulk of the costs and hiring, both senior management and on the wage hike side are now built into the 1Q numbers? Or do you think something may come through into 2Q or 3Q as well. So that was one, and then I have a follow-up on the recent quarter.

Srikar Reddy — Managing Director

What is the question, Mohit?

Mohit Jain — Anand Rathi — Analyst

Sir, on the margin side, you spoke about costs and then rupee depreciation benefiting you in terms of adsorption of those costs. So from senior management hiring perspective and also from wage hike, supply side constraints, etc., so the cost for FY ’23. Now the 1Q cost number, when we look at it, is that a steady number or do you think there is some planned promotions increments, etc., coming up in 2Q and 3Q as well?

Srikar Reddy — Managing Director

We said we continue to invest on the [Indecipherable] side throughout the year, so that will continue. And our wage revenue is in the January quarter, right? So that needs to come up for FY ’23, right? So we do it in January and then April from middle management. So that will continue, Mohit.

Mohit Jain — Anand Rathi — Analyst

Right. So June the quarter includes that senior management appraisal, right, which was done during [Speech Overlap]

Srikar Reddy — Managing Director

Sorry?

Mohit Jain — Anand Rathi — Analyst

So we are done from a 1Q perspective? Because you just did it back to back in the quarter. So Q2 and Q3, there are no incremental costs, so to say.

Srikar Reddy — Managing Director

There will be no — across the board [Indecipherable]. That’s correct. But we continue to — we have not completed our investment in talent of the leadership talent [Indecipherable] as I said last time we had opened up these development centers in Canada, Ireland [Indecipherable] something in Mexico. I think all these investments will come up in Q2, Q3.

Mohit Jain — Anand Rathi — Analyst

Okay. And second was on the retail side, like what kind of environment? Because you have retail essential, non-essential commodity business, etc. So is there any impact that you are anticipating there ahead? Or do you think it is — because you had a strong quarter. So from a deal pipeline perspective, do you think there is any slower growth anticipated through the year? Or do you think you guys can sort of maintain the current growth rate?

Srikar Reddy — Managing Director

[Indecipherable] and then I’ll possibly hand it over to Samir to say something else. I think it’s time we now combine both these essential and non-essential because that was a factor of the COVID where essential retail was okay and non-essential was not okay, because I mean there was not okay, and somebody wanted to consume it, but we will combine it back because that segregation is gone. So as we said, based on the deal pipeline, that’s a focal vertical for us and things are looking good. But as I said, I’ll possibly have Samir to add some more color to that.

Samir Dhir — Whole-time Director and Chief Executive Officer

Thanks, Srikar. Hi, Mohit. Hi, this is Samir. So I think across the board in retail, we didn’t see a good strong momentum. There’s some three factors on [Indecipherable]. Number one, we because the portfolio that is the traditional retail model of retailers, they have continued to invest in the consumer experience side and actually going aggressive to take a bigger wallet share from that.

Second, the trend to modernize their IT sales from a cloud perspective is also critical. And the third is the adoption of data and using data acquisitions to consumer data with [Indecipherable] programs. So I think across the board, we continue to see that at this point in time, good momentum across the retail sector.

Mohit Jain — Anand Rathi — Analyst

So overall, is it fair to assume from your current deal win deal pipeline perspective, you guys are more likely to sort of continue running on the growth path that you are currently on?

Samir Dhir — Whole-time Director and Chief Executive Officer

Yes, I think it’s a fair assumption [Indecipherable]

Mohit Jain — Anand Rathi — Analyst

Perfect, sir. Thank you. And this is actually our first con call. I think you were not there in the last one. Sir, we’ll keep interacting and all the best for the coming quarters.

Samir Dhir — Whole-time Director and Chief Executive Officer

Thank you, Mohit, and I look forward to the relationship going forward.

Operator

Thank you. [Operator Instructions] Your next question from the line of Dhwani Savla [Phonetic], an Investor. Please go ahead.

Unidentified Participant — — Analyst

Hi, sir. My question is with regards to our headcount. I can notice that our sales and marketing account has pretty much remained stable. Are we expecting to increase that on our work front and probably get more digital wins. And is there a particular target account which we had by the end of the year in mind that we are going to assume by end of this year?

Srikar Reddy — Managing Director

The line is very weak, I couldn’t understand your question. But from whatever I understood, you said that there was not too much of the headcount growth in the first quarter and we start the trend or whatever. I think the question was addressed by Mr. Raju last time, but maybe I’ll ask him to listen the question again in terms of the recruitment plans for the current year.

P.V.S.N Raju — Chief Delivery Officer

What we have seen in quarter one, we had a net headcount of [Indecipherable] number. That will have [Indecipherable] increased the addition rate that has come down now. Going forward this quarter, you can see a much, much higher accounting piece. We’ve also seen the [Indecipherable] capita is coming in. So next two quarters, we will see much larger numbers adding to our headcount.

Unidentified Participant — — Analyst

Is there any target for which we have in mind, which we want to have by the end of this year?

P.V.S.N Raju — Chief Delivery Officer

We don’t have specific topic on the guidance on that, but we’re adding the 600 [Indecipherable] in the next quarters.

Unidentified Participant — — Analyst

Okay. All right. Thank you very much and all the best for the coming quarter.

P.V.S.N Raju — Chief Delivery Officer

Thank you.

Operator

Thank you. [Operator Instructions] We have next question from the line of NGN Puranik with ENAM. Please go ahead.

NGN Puranik — ENAM — Analyst

Hi, Srikar.

Srikar Reddy — Managing Director

Hi, Puranik.

NGN Puranik — ENAM — Analyst

I want to understand about your Microsoft relationship. So in terms of how big is the relationship in terms of current revenue and also in terms of the sales organization that’s working with them and which are the groups that you’re working with. You mentioned it worked with dynamic. So do you work on the power platform also and — only dynamic or other groups also?

Srikar Reddy — Managing Director

So Puranik, we don’t give the number, because we need Microsoft permission regards numbers, but there have been work place about four groups in Microsoft. One is the Microsoft Product Engineering, which is mainly the — as you mentioned, the business [Indecipherable] So there, we work across all the platforms, what they call F&O power app, power platform customer experience, etc. We work with the customer service function where we support maybe that’s also across the board, power platform, F&O and all our other —

NGN Puranik — ENAM — Analyst

Even the CRM dynamics part of the deal?

Srikar Reddy — Managing Director

Sorry, Puranik?

NGN Puranik — ENAM — Analyst

Even the CRM Dynamics?

Srikar Reddy — Managing Director

Yes. F&O, CRM, power platform, and also non-dynamics and the customer support. The third is we do internal IT in both data analytics and dynamics implementation.

NGN Puranik — ENAM — Analyst

And that’s not just the power platform other than that.

Srikar Reddy — Managing Director

Sorry, Puranik?

NGN Puranik — ENAM — Analyst

Is that power platform or internal IT, you said analytics and internal IT. That is other than power platform?

Srikar Reddy — Managing Director

It’s a third group we work with, which is the internal IT where we do analytics and dynamics implementation.

P.V.S.N Raju — Chief Delivery Officer

Dynamics implementation.

Srikar Reddy — Managing Director

[Indecipherable] with the consulting teams to serve that client there.

NGN Puranik — ENAM — Analyst

Is there a scope to mind the current relationship with various group and expand relationship to other groups in Microsoft?

Srikar Reddy — Managing Director

[Indecipherable]

P.V.S.N Raju — Chief Delivery Officer

What did you say?

Srikar Reddy — Managing Director

I said that is some Samir’s favorite topic. I’m handing it over to him to answer that question.

NGN Puranik — ENAM — Analyst

Each of these businesses are growing at 30%, 40%, 50%. That power platform is growing 60%, 70%. So it’s out there, it would be a lot more scope for you to grow.

Samir Dhir — Whole-time Director and Chief Executive Officer

Yes, Puranik, hi this is Samir. I hope I’m audible?

NGN Puranik — ENAM — Analyst

Hello?

Samir Dhir — Whole-time Director and Chief Executive Officer

Puranik, can you hear me? Can you hear me, Puranik?

Operator

This is the operator. We can hear you. But would you come a little close to the mic. You sound very distant.

Srikar Reddy — Managing Director

Is it okay now?

Samir Dhir — Whole-time Director and Chief Executive Officer

Hi, Samir. Can you hear me now?

Operator

Yes, better. Please go ahead.

Samir Dhir — Whole-time Director and Chief Executive Officer

No, I was asking, is there a scope to expand relationship by having —

Srikar Reddy — Managing Director

Puranik, I’ll hand it over the question to Samir about to address that question about the scope and what we are trying to do here, yes.

Samir Dhir — Whole-time Director and Chief Executive Officer

Yes, absolutely. And I think we’re in the process in more orders and one Puranik, to address that. So pursuing a good growth in the last several quarters at Microsoft. We continue to take market share from competition, the Microsoft relationship overall. But to your question, can we do more? I think the answer, the short answer is yes. Microsoft is just completing their annual plan process in June-July timeframe.

The recovered trend process will look to align our sales investment dollars with their plant. And that exercise is coming beyond. As you probably know, that happened on 19th of July, just a week back. And our teams are on hand into with them to take a larger share of the pie from Microsoft from a sales perspective. So that’s a short answer. And across the board, and power platform included, it’s really a go-forward strategy to shore up business in the direction plan.

NGN Puranik — ENAM — Analyst

Will it help expanding relationship with more people? Or it would be important to work with other groups? I think these two groups itself has enough and more opportunity.

Srikar Reddy — Managing Director

It’s not either/or, it’s both. So we have to get bigger wallet share from the existing people that we have a relationship with, and we continue to hunt into account to build a stronger relationship with other buyers that are not buyers [Indecipherable] So we’re looking at strategy.

P.V.S.N Raju — Chief Delivery Officer

Is there a low-code no-code projects that you work with then?

Srikar Reddy — Managing Director

Yes, we do. We are already part of that, and that’s an increasing part of the focus on Microsoft. And before, you heard, Sathya also talked about a big focus on the power cut on the local [Indecipherable]. I think that’s an integral part of the go forward path.

NGN Puranik — ENAM — Analyst

So that learning has been used in your project development, product development, various projects, the low-code, no-code.

Srikar Reddy — Managing Director

I’ll let Raju respond to that.

Samir Dhir — Whole-time Director and Chief Executive Officer

Yes, Puranik, they are doing two things. One is, we’re on the side working on the power platform, both on the data side and also on the application side. We really work [Indecipherable] And I think a lot of things we’re learning from that, of the two applications we are [Indecipherable]

NGN Puranik — ENAM — Analyst

It’s interesting. And what are the typical project sizes, the deal wins when you get Microsoft deal? Typically, what size it is? And they all must be real annuities?

Samir Dhir — Whole-time Director and Chief Executive Officer

What happens is with power platform [Indecipherable] that the customers are going digital and want to get the digital processes and customize their applications that are using power platform. [Indecipherable] depends on and we’ll have a team of [Indecipherable] that’s what we have proposed to customers. So each project itself [Indecipherable].

NGN Puranik — ENAM — Analyst

And bulk of it is all offshore projects?

Samir Dhir — Whole-time Director and Chief Executive Officer

But of it is offshore, but [Indecipherable] some of the people who understand go digital [Indecipherable] it must be online.

NGN Puranik — ENAM — Analyst

Good. Interesting. So you’re working on other groups also to looking at building relationships with other groups also?

Srikar Reddy — Managing Director

Yes. I mean that’s absolutely the strategy. Because power platform is not a singular vector within Microsoft. They’re looking at it as a for example, capability across all units. As we got our plans with them for the next fiscal, the interlock is happening in the speed and [Indecipherable] all units. Like Raju said, we are looking at not only doing it for Microsoft, but growth in Microsoft will do it for our other banks as well and generally taking the modus operandi [Indecipherable] because these are bespoke projects to start with [Indecipherable] big fan. So if you set up a period, then we’re getting the completion for a bigger place moving forward, and that’s the part that we’re looking this.

NGN Puranik — ENAM — Analyst

And that means hiring more client account partners.

Srikar Reddy — Managing Director

That means, yes, exciting both on our sales and hunting perspective, both, because we have to mind what were the relationships already there and also look for new relationships to a strategy [Indecipherable].

NGN Puranik — ENAM — Analyst

Good. Thanks a lot. Wonderful. Bye.

Operator

Thank you. We have next question from the line of Baidik Sarkar with Unifi Capital. Please go ahead.

Baidik Sarkar — Unifi Capital — Analyst

Gentlemen, good evening. Srikar, recently left about 2%, 2.5% of revenues on the table in the previous quarter, Q4, given supply side issues we faced in Q4, right? And on the back of that, this quarter, you’ve reported about 4% in constant currency. Is this reflective of the revenue potential in its entirety? Because it looks like there has been a significant amount of backfill from the previous quarter. And adjusting for that 4%, it looks a very okayish number. A, am I missing something? And B, should we expect a significant acceleration going forward in the next few quarters?

And also while you’re at that figure, if you could just comment on the reiteration you’ve seen on Microsoft account. I think after several quarters of 7%, 10% kind of growth, I think the numbers this quarter has been slightly underwhelming. Any color on that?

Srikar Reddy — Managing Director

Okay. I don’t know what the second question where you are getting this information from because we don’t publish it. No, I think —

Baidik Sarkar — Unifi Capital — Analyst

I’m looking at your reported numbers on 3.3%, where the Microsoft digital is adapted 2.2%. And you reported sequential growth in Microsoft Dynamics [Indecipherable]

Srikar Reddy — Managing Director

No. This is nothing to do with Microsoft in a contract. This is the overall services market, which includes what we sell to other customers not just Microsoft.

Baidik Sarkar — Unifi Capital — Analyst

I’m aware of that, Srikar. Anyway, let’s go sequentially. If you could just take the first question, and then I’ll [Indecipherable]

Srikar Reddy — Managing Director

Yes. Like I said in the beginning of the call that the backlog effect will remain. So it’s not that — we completely backlog of [Indecipherable]

Baidik Sarkar — Unifi Capital — Analyst

Srikar, if you could please speak closer to the microphone. I’m afraid we can’t hear anything at all.

Srikar Reddy — Managing Director

So as I said, the backlog effect still remains and the backlog of the previous quarter for was what was delivered this quarter and the beginning of the call that we still need to get that fully done. So that’s the answer to your first question. I will ask Jagan to answer your second question.

Jagannathan C N — Chief Financial Officer

Which data you are referring to, this is the analyst what we have now I showed to you now operating metrics.

Baidik Sarkar — Unifi Capital — Analyst

Well, this is your reporting thing. I think this is on Page 22 of your reported — on the reported deck. Okay. You know what, I can take that offline. But if I can either request Samir or Srikar to comment on the quantum of acceleration we should expect going forward. That’s more important.

Samir Dhir — Whole-time Director and Chief Executive Officer

Yes. That is Microsoft digital platform services alone you’re talking about, where we have to combine the Microsoft [Indecipherable] other areas are also there. This is one aspect of the Microsoft.

Baidik Sarkar — Unifi Capital — Analyst

Sure. If I can get your comments on the quantum of acquisition going forward. And just to rehash in terms of guidance, was it a number we have guided closer to 20% for your core IT services at the beginning of the year?

Samir Dhir — Whole-time Director and Chief Executive Officer

We don’t give it, right? We don’t give a quantitative balance, but we said it many times.

Baidik Sarkar — Unifi Capital — Analyst

Sure. But in terms of acceleration, just given the quantum of backfill that’s still pending, just trying to expect that we have continued delivering at this run rate?

Samir Dhir — Whole-time Director and Chief Executive Officer

As I said, you can expect, given the current feasibility under the same case in the future, we can expect an acceleration for the future quarters.

Baidik Sarkar — Unifi Capital — Analyst

Sure. That’s very helpful, Srikar. And second is [Indecipherable] Samir. Samir, welcome aboard and good to say hello. I hope this is a good journey for you. Could I perhaps ask you to quantify the direction of IT services growth in the non-Microsoft part of the business, right? What are you seeing? What are you excited about? What is our right to win? And is there a number that you have in mind you’d like to cater the next two, three, four years?

Samir Dhir — Whole-time Director and Chief Executive Officer

Yes. Very glad to meet you as well. I think very consistent with 3%. Demand pattern is very secular at this point in time. And in the industry that Sonata has invested in the past, whether the retail or manufacturing business, I think we continue to see a good demand pattern. I think at this point in time, as we know, the economic conditions are revolving around this all the time. But as we speak, the demand pattern is pretty secular.

The question specifically was the trend outside of that. We continue to see the moving across our operating serves U.S., U.K., Singapore, Australia will continue to build momentum from a pipeline perspective. In the current environment, early supply constraints, and we’re really working hard to get fully supply at this point in time.

We don’t think the demand side of the equation is holding us, especially the commentary that we do, when do we expect the acceleration and the [Indecipherable] comes in. We think that it gave us a further content supply side and then we start [Indecipherable] in the coming quarters and [Indecipherable] on the line.

Baidik Sarkar — Unifi Capital — Analyst

Thanks everyone. I wish you all the best. Thank you.

Srikar Reddy — Managing Director

Thank you.

Operator

Thank you. [Operator Instructions] your next question from the line of Amit Chandra with HDFC Securities. Please go ahead.

Amit Chandra — HDFC Securities — Analyst

Hi, sir and thanks for the opportunity. So my question is on the travel vertical. So if you can provide the constant currency growth for the travel vertical. And also, I know that travel is coming back in the Europe and to US, reporting 80% to 90% of their takeaway bookings turning back. So when can we see travel coming back because we are still at 50% of pre-COVID. If you can throw some light there, whether our engagement has completely changed. Now allow it to [Indecipherable] to do pre-COVID and what we’re doing now.

Srikar Reddy — Managing Director

Okay. I think — Can your me?

Amit Chandra — HDFC Securities — Analyst

Yes, I can hear you.

Srikar Reddy — Managing Director

[Indecipherable] Okay. Hello?

Amit Chandra — HDFC Securities — Analyst

Hello. Yes, sir.

Samir Dhir — Whole-time Director and Chief Executive Officer

We can hear you.

Srikar Reddy — Managing Director

Okay. So as I said last time, there are two growth patterns. One is where they’re investing and building new technologies, and that’s where we are. So we’re waiting for the business to fully come back for the investor on [Indecipherable] as usual. So we expect that to happen by Q2, Q3, and we can see that trend going upwards. As I also said last time, post COVID very big shift from onsite to offshore. But for sure, but 200 people on site, I think now that people have come down to about quite a people, because people have come back. So that measurement of that revenue has to be from [Indecipherable] factor in, when you say that we can go back to where we were pre-COVID.

Amit Chandra — HDFC Securities — Analyst

Okay. And in terms of the constant currency growth for travel vertical, if you can provide?

Srikar Reddy — Managing Director

Constant growth for travel vertical, you’re asking about this quarter?

Jagannathan C N — Chief Financial Officer

This quarter, we — it is in line with — its same level. We see the revenue option have any numbers, but I can say [Indecipherable] vertical.

Amit Chandra — HDFC Securities — Analyst

Okay. So actually, your voice is not very clear. It’s breaking.

Srikar Reddy — Managing Director

Okay. Amit, you are able to hear me now? Am I clear? Hello operator? Can I update now?

Operator

Yes, please go ahead, sir.

Srikar Reddy — Managing Director

Are you okay now? Are you able to hear me?

Amit Chandra — HDFC Securities — Analyst

Yes, better.

Jagannathan C N — Chief Financial Officer

Okay. Amit, the constant currency growth will be a little more than the more than the company level because there was a cross-currency impact was much, much bigger in the Europe revenue. I will — I don’t have the number ready made with me. I will have to take the number and update you separately.

Amit Chandra — HDFC Securities — Analyst

Sure. And sir, on the net of mix, obviously, we have seen shift to offshore. But now, things are reversing and for some companies, onsite is actually better. But we have seen a significant increase in offshore revenue. So is it because of the change in engagement or because of travel, as you said, because a lot of the sold offshore. And the incremental growth is coming offshore? Or in any way it’s helping our margins? But is it going to be a headwind like in the coming quarters mainly we can move faster.

Srikar Reddy — Managing Director

I think that some of it has been driven by the ability to travel and Visa regimes, etc., where I think that can be done also. But I think your point is correct. Once [Indecipherable] inside revenues will increase on a percentage basis. But I think right now, there has been a very [Indecipherable]. We are in a long line, six-month rate period.

Amit Chandra — HDFC Securities — Analyst

Okay. And also in terms of the domestic business, there, for the first time, we’ve seen another cloud company coming down. So obviously, things are reversing. But can that have an impact on our margins on the domestic on the growth because last two years have been strong for the domestic services business. So what is the normalized growth rate that we can expect in that business?

Srikar Reddy — Managing Director

I think we are steadily growing the cloud component in the domestic business. [Indecipherable] number from?

Samir Dhir — Whole-time Director and Chief Executive Officer

In terms of the percentage contribution, it has come back in this quarter.

Srikar Reddy — Managing Director

Hello?

Amit Chandra — HDFC Securities — Analyst

Yes. So on the cloud piece, it was 78% come down to 76% revenues on paid numbers [Indecipherable] on cloud.

Jagannathan C N — Chief Financial Officer

The quarterly number, that it’s just a quarterly trend. There is no one way drive quarterly number. That’s it.

Amit Chandra — HDFC Securities — Analyst

Okay. So for the longer-term, 24% plus kind of growth is achievable in this, still in this business. And in terms of margin —

Jagannathan C N — Chief Financial Officer

It’s very unclear. What’s the question?

Amit Chandra — HDFC Securities — Analyst

[Indecipherable]

Jagannathan C N — Chief Financial Officer

Yes, I think the trend so far, I think that looks doable.

Amit Chandra — HDFC Securities — Analyst

Okay. Okay, sir. Thanks and all the best for the time here?

Operator

We have next question from the line of Dhiraj Dave with Samvad Financial Services. Please go ahead.

Dhiraj Dave — Samvad Financial Services — Analyst

Yes. Basically, how you see your main power supply constraints and what are your plan? Because you indicated some kind of addition. In fact, that figure also missed out, although I was on call. So what is your plan to address the supply side and how it has affected our margin?

Srikar Reddy — Managing Director

Okay. I’ll ask Rajiv to answer that question.

P.V.S.N Raju — Chief Delivery Officer

You can clear me now, Dhiraj?

Dhiraj Dave — Samvad Financial Services — Analyst

Yes.

P.V.S.N Raju — Chief Delivery Officer

So the supply rate, we are doing four or five things, one is [Indecipherable] result or the impact in the appointment. We started building capabilities in [Indecipherable] and center in Ireland, we also center in Canada. Also, we’re looking for hiring in U.S. and Australia last month. Second this is, [Indecipherable] we are making 600 campus, we already hired them. They’re coming on board this quarter and next quarter. We also started —

Dhiraj Dave — Samvad Financial Services — Analyst

The 600 would be — yes, sorry, sir. The 600 would be for full year or just two quarters, right?

P.V.S.N Raju — Chief Delivery Officer

We’ll take them in two quarters, but we’ll utilize about two-year Dhiraj. But [Indecipherable]

Dhiraj Dave — Samvad Financial Services — Analyst

Okay. And how is the manpower part of [Indecipherable]

P.V.S.N Raju — Chief Delivery Officer

Manpower we’ve already taken compensation is already given now in January and April. So they might be a little spread [Indecipherable] in the past. [Indecipherable] confident on that part.

Operator

[Operator Instructions] As there are no further questions from the participants, I would now like to hand the conference back over to Mr. Srikar Reddy for closing comments. Over to you, sir.

Srikar Reddy — Managing Director

Yes. Thank you all very much for joining the call today, and thank you all for your support. Look forward to seeing you all again in the next time. Thank you. Thank you, Vikram.

Operator

[Operator Closing Remarks]

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