Tech Mahindra Ltd. (TECHM) Q4 FY22 Earnings Concall Transcript

Tech Mahindra Ltd. (NSE: TECHM) Q4 FY22 Earnings Concall dated May. 13, 2022

Corporate Participants:

CP Gurnani — Managing Director and Chief Executive Officer

Milind Kulkarni — Chief Financial Officer

Rohit Anand — Senior Vice President of Finance 

Manish Vyas — President, Communications, Media and Entertainment Business, and Chief Executive Officer, Network Se

Vivek Agarwal — President – BFSI, HLS and Corporate Development

Jagdish Mitra — Chief Strategy Officer and Head Of Growth,

Harshvendra Soin — Global Chief People Officer and Head Marketing

Analysts:

Sandip Agarwal — Edelweiss — Analyst

Pankaj Kapoor — CLSA — Analyst

Nitin Padmanabhan — Investec — Analyst

Surendra Goyal — Citigroup — Analyst

Vibhor Singhal — PhillipCapital — Analyst

Gaurav Rateria — Morgan Stanley — Analyst

Ashwin Mehta — AMBIT Capital — Analyst

Dipesh Mehta — Emkay Global — Analyst

Manik Taneja — JM Financial — Analyst

Abhishek Shindadkar — Incred Capital — Analyst 

Presentation:

Operator

Ladies and gentlemen, good day, and welcome to the Tech Mahindra Limited Q4 FY ’22 Earnings Conference Call. [Operator Instructions] Please note that this conference is being recorded.

I now hand the conference over to Mr. C.P. Gurnani, MD and CEO of Tech Mahindra Limited. Thank you, and over to you, sir.

CP Gurnani — Managing Director and Chief Executive Officer

Good morning, good evening, everybody. Welcome to Tech Mahindra Q4 ’22 and FY ’22 results. Thank you all for joining us today. We are excited, happy regarding our financial performance, and overall, as a company, investing into future. It’s been a great year.

We started the year when I look back with our new framework, which is NXT.NOW. NXT.NOW was really taking into account the mix range of technologies which will lead to business transformation. We took into account some of the unique features of the company, which is communications, content, creativity through BORN or Pininfarina and also on commerce, which is really how to help our customers grow.

Now this 4C focus, I think, has worked well for us and our theme of NXT.NOW, which is basically to be agile to anticipate the future and do it now has worked well. Just to give you an example, February, our leadership did a simultaneous launch of TechMVerse in Barcelona as well as in Hyderabad. Again, very, very well received, and we believe that today, our use cases are helping many, many customers, few people on commerce, on NFT, a few people who are looking at creativity, a few people are looking at solving business challenges in retail sector or in some stages, working on the content again, which is about the teaching platforms or education or simulation for the sports. So your company will focus on 5G, will focus on the Wave 2. Wave 2, as you know, is an internal program, which looks at data flow from IoT, from various devices, from various other sources and how the data is managed. All the data is not only managed through conventional tools and platforms, but also through AI, how the data goes through edge computing or data centers or the cloud and how we are able to secure the data. But that journey for us is Wave 2. And I think overall, NXT.NOW has resulted in good results and good value creation for our clients.

The company overall signed more than $3.3 billion of large deals. We saw some of the very big, large deals and mainly in CME and BFSI. We are lucky and happy that our 5G investments are now yielding results. Our cloud business is growing very, very healthy. Overall, I can say that FY ’22, as Rohit tells me is that it’s one of our best years in 7 years. So I can only say is — so thank you, all of you for supporting us in FY ’22, supporting us in the previous years. I know Q4 results take us to almost a $6 billion company. Constant currency growth of 5.4%. And overall deal win, large deal win of $1 billion plus. I mean, CME business growing over the last 6 quarters consistently. I am only glad that I have a great team, and I have this leadership team right on this call.

So thank you for your support. The Board recognizes that our capital allocation should continue to reward the shareholders in short term also. So the Board has recommended the final dividend of INR30 per share in addition to INR15 per share, which was earlier given as interim dividend.

My focus for FY ’23 and my management team’s focus is organic growth, continue to look for improvement in our EBITDA improvement programs and continue our focus on Wave 2 and Metaverse — connectivity, Wave 2 and Metaverse will continue to be our focus, leading to business transformation.

I want to thank you all for attending the call. Handing over to Milind and Rohit to update us on all the financials. Milind, over to you. Thank you, guys.

Milind Kulkarni — Chief Financial Officer

Thank you, C.P. Good evening, and good morning, depending on the time zone you are in. Let me cover the company financials for the quarter ended March and for the year in a little more details. We ended quarter with a revenue of $16.08 million versus $15.33 million last quarter, constant currency growth of 5.4%. And as C.P. alluded, balanced growth with CME vertical growing at around 4.8% and enterprise growing at 5.8%.

We had another quarter of a strong deal win with TCV exceeding $1 billion for the second time in the last 2 years. Now overall, increase of about 50% plus in the — over the previous year in terms of TCV wins.

Revenue in rupee terms was about INR12,116 crores versus INR11,451 crores, which is a 5.8% growth in revenue terms — in rupee terms, sorry. EBIT for the quarter was about $211.5 million versus $228 million in Q3. EBITDA margin for the quarter was 17.2%, lower by about 80 basis points compared to Q3, partially on account of lower utilization, which is in view of the recruitment which we have done for the growth and juniorization, salary and retention-related impact because the cost — I mean the supply side pressure still continues and there are some one times which were there in last quarter, which obviously have not get repeated in the current quarter.

Then there was an additional charge of about 80 bps on account of depreciation and amortization, depreciation because of additional investment in the hardware and software, which we have done in the current quarter and amortization resulting from the acquisitions in the Q4, where the impact for the — impact on in terms of cost was for the full quarter, but the benefit we got was for part of the quarter.

So moving below EBIT line, our other income was higher at about $42 million compared to $30 million in the last quarter. And the increase was mainly contributed by the forex gain, which was about $27.8 million versus $17 million in Q3. We continue to follow the hedge policy which the Board has adopted a few — I mean for the last many years and this consistent hedging has helped us to deliver good returns over the period.

One redeeming feature for this quarter was a tax rate was about 17.5% as against 27% in Q3, and this was on account of onetime reversal of tax benefit — tax provisions related to season benefits. And that is a result of 2 factors. One is the pickup in the investment in plant and machinery in last year and our decision to opt for new tax regime from FY ’22, which means the investment that we will do in the next 3 years will be available for the utilization of seasoned investment reserves till FY ’21, ’22.

Now we will be under new regime, as I said, from FY ’22 onwards. And our normalized tax rate for the company would be in the range of over 26%. The net profit margin for the quarter is 12.3%, which is an increase of about 30 bps over the last quarter. Free cash flow for the quarter was — is about $111 million, which is 56% of PAT, lower than the last quarter. And that was — the cash flow was impacted because of the additional hardware investment — hardware and software as well as some OpEx payments which we had to make for the future, okay? And so the — some of the benefits you will see as we go along in the coming quarters. Our DSO days which have increased last quarter have improved by about 4 days to 97, and we hope to continue on that momentum.

Moving to full year performance. The revenue for quarter, we almost has $6 billion as alluded C.P. alluded to. We were at $5,998 million, a growth of 17% — 17.3%. During the year, our communications business grew by 17.2%, while enterprise business grew by 17.4%.

In the Enterprise, Technology and BFSI were major growth drivers for the current quarter. And coming to CME, the 5G revenues helped us to accelerate the goal there. EBIT margin for the full year at 14.5%, which is about 30 bps improvement over the previous year. In absolute terms, EBIT for the year was $872 million. Our EBITDA for the year was $1,076 million, a margin of 17.9%.

In terms of our other income. Other income for the year was $149 million, significantly higher than the previous year because of higher foreign exchange gains. Forex gains were about $75.5 million this year as against $12.6 million last quarter. Free cash flow for the year — full year was about $595 million, about 80% of PAT for the year.

As C.P. said, the Board has declared a dividend of INR30 per share. And with an interim of dividend of INR15 per share, dividend will be INR45 per share, same as last year.

As I said, we continue to follow our hedging policy consistently. Our hedge book was about $2.2 billion, almost similar to last year. And MTM gains as on 31st March were about $571 million, of which $16 million have been taken to P&L and $55 million are in the balance sheet based on the accounting that we do.

In summary, I would like to reiterate that we are taking the right steps towards the transforming our operations as we continue to focus on growth momentum moving into new fiscal.

With this remark, I will now open the floor for questions.

Questions and Answers:

Operator

[Operator Instructions] The first question is from the line of Nitin Padmanabhan from Investec. Please go ahead.

Nitin Padmanabhan — Investec — Analyst

So first is on — I had a couple of questions on margins, actually. In the last quarter, our SG&A was around 12.1% of revenue. And you have suggested that it could go closer to 13% on a sustainable basis. But this quarter also, it seems to be just about there. Is there any specific one-off there? Or how should we think about this particular cost cycle?

CP Gurnani — Managing Director and Chief Executive Officer

So Nitin, for convenience, I’m going to request Rohit Anand to coordinate all the question and answer. So Rohit, can you take over, please?

Rohit Anand — Senior Vice President of Finance

Yes, yes, C.P. Sure. Thank you. Yes. So Nitin, from a quarter-over-quarter perspective, there is absolute increase of $10 million in the SG&A spend. While as a percentage, yes, we’ve not seen that increase come through. But nothing from a dramatic one-off that we see this time versus last time, which is reflecting from a P&L standpoint.

Nitin Padmanabhan — Investec — Analyst

Sure. And from a margin perspective, overall, if you look at EBIT, how should we think about it on a going forward basis. I think you mentioned something on depreciation. So give a broad color on puts and takes on margin and how we should think about it on a going forward basis?

Rohit Anand — Senior Vice President of Finance

Yes, sure. So I think from an EBIT perspective, maybe the way to think about it is from where we are, let’s look at a little bit of recap. I think from the year perspective, we’ve had 14.6%, right, at an EBIT level based on some of the charges that came in in 4Q, which I’ll talk about. I think barring that, we were very close to the range that we had outlined for the year. So we’re in the ballpark. And we look at — as we move forward, right, and where we are from a quarter perspective, what has happened through the year is — so what’s happened through the year is the salary cost and the retention based on the supply side pressure has continued. And we’ve also seen in the second half, a little bit of advantage comes through the price, but that’s lagging the cost increase is dramatic. As we move forward, when we look forward, one of the big levers that we’ll continue to work on with our customers is going to be price increase, right? So that’s one looking forward from a margin standpoint.

Second, we’ve invested consciously in the last 2 quarters for future, which means we’ve invested in juniorization. We’ve done a lot of fresher hiring. And that’s the long-term impact we want to get to bring our average resource cost down, right? So that gives a short-term impact. So our utilization has gone down. If you look at that from a 2-quarter standpoint, we are operating at almost 87-plus percent which is gone down significant. If you look at the future, there is an upside on utilization that will pay out, right? So that’s the second broad thing as we look at it, right?

Third, I think we’re continuing our journey on offshoring. I mentioned that multiple times before, as we look forward, I think we see a definite improvement opportunity for us available on doing more and more offshoring. And short term, the demand because of travel restrictions, etc., has also been fulfilled onshore. And that as the lot of deal wins that we’ve done, the -work will start getting transitioned to offshore. So that will be an opportunity that we’ll see.

If you our subcontracting costs, right, that’s another lever that’s gone up to get the growth that we’ve been able this year. But as we stabilize in those programs, as we get maturity, we’ll continue to work 2 things. One, wherever there is resource lie to be onshore, those subcon will be replaced by on-site people who are full-time head count and also there, we’ll play the — in terms of how do we hire the right fit candidate. That will give us an advantage from a cost benefit by substituting subcon to head count, right? So that’s another lever that will play for us.

And then we — this also I’ve mentioned in the past, and we’re continuing pursuing it. We’re trying to look very strongly on geographies that are low margin for us, countries that are not giving us the return we want. We’re taking conscious effort on taking those portfolio out, which doesn’t fit strategically, which is not giving the return, one, by organically not focusing on that. Or second, packages from our perspective, we’re seeing that, can we make a better realization for somebody else there, right, versus the fitment to our portfolio.

So those efforts in our perspective, will give a better business mix as we look forward and give us upside from a margin perspective. So these are the levers as we look forward will continue to work for us. And you know well, right, from a supply side perspective, salary cost, travel coming back, some of the facility costs while we continue to work on a hybrid model, those will still be headwinds for us. But given this and the growth prospects, given how the deal wins have been and what the pipeline looks like, it makes us continue to believe we continue to progress as we grow sequentially to the quarter for the year to improve our margin story as we move forward.

Nitin Padmanabhan — Investec — Analyst

Sure. Thank you, Rohit. I’ll fall back in the queue.

Operator

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

Pankaj Kapoor — CLSA — Analyst

Thanks for the opportunity. So Rohit, a question on the revenue outlook. If I look at this year, you have added over 7-8 odd million dollar of organic revenues. And now for the next year, if I see the booking this year, of course, has been 50% higher than last year. So how should one think about the incremental revenue addition on an organic basis for next year? Do you think we should sustain this level? Or it could be even better than this.

Rohit Anand — Senior Vice President of Finance

Pankaj, I mean, obviously, we don’t give guidance, but I can give you some trends that we’re seeing from a market and our vertical perspective that give a flavor of what the future is, right? So communication, right, you’ve seen that grow consistently over the last few quarters. So that from our perspective, deal wins that you see in the quarter is almost $600 million plus of the win that we got in the fourth quarter, including a significant win that C.P. also mentioned on the 5G space. So communication with all the levers that we said on 5G are kicking for us. So that will continue to, including the pipeline that we see that will continue to fire. So that’s a positive for the year from a momentum standpoint.

Second, if you look at enterprise, from the different vertical perspective that we’ve articulated before, technology continues to be a positive momentum for us while we saw some quarterly fluctuations in the last one. But as we look going forward, that’s another area that consistently will grow for us similar to last year. We’re seeing a ton of opportunities in the technology space. So that’s the second area where we’re seeing demand continue, right?

And then you’ve seen BPS. BPS has grown significantly for the year. And when we look at the way we are bidding for deals, the way the opportunities are stacking up, that’s another area where we continue to offer better solutions to our customers. And you know we have also done a lot of solution capability adds in our BPS segment, including the — consulting, getting earlier in the cycle from a BPS process perspective.

So that all from a go-to-market perspective is coming together for us to give us better leverage and new deal wins. So that’s another area that we continue to see positive momentum. And then the whole customer experience area, the XDS pillar that Dilip Keshu leads and we’ve been talking about that. That continues to help us a lot on giving the positive side on deal wins. And a lot deals that we win which get reported, they pay a very active role in helping overall solution on customer experience standpoint.

So I think from a momentum standpoint, as we were last year same time, our pipeline is looking good. Our deal win momentum is similar. We ended the year last year with a similar deal win, and that’s the same position we’re in. So that’s kind of from a demand standpoint, Pankaj, that we’re seeing.

Geo wide, you see Europe, we made some leadership changes there. We put different leaders. We articulated it that segment was slowing down for us. That gave us a positive momentum in the year. We’ve done similar changes in the Americas segment. And that, again, this year, from a geography mix standpoint, we aspire to continue to grow.

Pankaj Kapoor — CLSA — Analyst

Fair enough. Any headwinds you see, maybe not immediately but in the second half given the kind of networks that we have?

Rohit Anand — Senior Vice President of Finance

So it’s difficult Pankaj to kind of really outline right now. What we’re seeing is visibly the pipeline, the pipeline continues to be strong. I mean there could be certain short-term pressure on costs that might come at a client perspective, but it’s also an opportunity for them to use our capability to even give them better structuring — long-term structuring of the cost, right? So it’s an opportunity for further offshoring for some of the clients, right, because they get the cost pressure.

So it will play out from a short-term, medium-term perspective. We are proactively working with customers early to give the right solutions upfront, so that they can think about what is bothering them instead of having easier reactions. So I think those discussions are early in the phase, but overall, we’re not seeing too much reactions come through.

Maybe I’ll just ask Manish and we wait for their segments and Jagdish, if they want to quickly comment on what they feel in their segments.

Manish Vyas — President, Communications, Media and Entertainment Business, and Chief Executive Officer, Network Se

Sorry, you want me to go first Rohit?

Rohit Anand — Senior Vice President of Finance

Yes, Manish, why don’t you?

Manish Vyas — President, Communications, Media and Entertainment Business, and Chief Executive Officer, Network Se

Yes. No, absolutely. I think the overall trend as we have been seeing through the year through the last year has continued to play out exactly in that fashion, which is the digital transformation driven by 5G and the need to be ready for 5G revenue growth, whether in the consumer realm or in the enterprise. That continues to drive the transformational activity within the telecom ecosystem.

What also continues to drive growth for us is the adoption of cloud. That is also a pretty solid secular theme across the world, and that’s largely for transforming their existing stack as most of it will continue to drive the digital transformation as they adopt some new software as well. So I think those 2 broad themes will continue. What has also been helping us over the last year or so is the investments that we have made in our digital engineering capabilities, and that’s as well helping where now we are in pretty good positions to provide engineering capabilities in the Metaverse ecosystem, from network to devices to applications and use cases or for that matter, offering the software product development and capabilities therein. That’s also another solid theme that is continuing to emerge.

And like Rohit said, there will be some pressures because as the economy evolves, there will be pressures to try and conserve some cash. But the broad demand sentiment remains that the telecom ecosystem has benefited a lot over the last 18, 20 months by digitizing as much as they can. And we believe that, that process will continue. And we are — we continue to have that privileged access rights across all the major operators for us to get a pretty good view of what’s happening from some of these transformational projects to be able to take advantage of, whether it is in the network space, in the infrastructure cloud space or in the software transformation.

Rohit Anand — Senior Vice President of Finance

Vivek?

Vivek Agarwal — President – BFSI, HLS and Corporate Development

Yes. So I think just from a BFSI perspective, we had a good year with a 19% year-on-year growth. And that obviously takes us on a certain trajectory as we look into next year. Q4 obviously included the CDC acquisition. And as we explained in the last earnings call, with that acquisition, we’ve now created a stand-alone focused team to drive insurance growth and drive synergy with the new acquisition, and we’re making good progress there. And I think just reiterating what Rohit and Manish said in different contexts that we do continue to see robust demand. I mean there isn’t any impact on the wider economic issues of the war on the demand scenario right now.

Rohit Anand — Senior Vice President of Finance

Jagdish?

Jagdish Mitra — Chief Strategy Officer and Head Of Growth,

Sure, sure. So thanks, Vivek. So I think overall, I think a couple of things that are playing out in our strength, I think, overall for the enterprise business, but I guess for the whole company as well. Large deals, specifically, I think we’ve more than doubled in our performance for — from last year to this year. And that I think augers well in terms of what we see as an opportunities and we aim to add at least $1 billion revenue next year. And we had about $1 billion of deal wins each quarter is what we’re trying to go to and maintain that momentum, which should show a good number of sequential growth.

As far as the verticals are concerned, especially on manufacturing and high-tech manufacturing, as you know, for us includes auto, discrete, oil and gas, and utilities. All of them have shown more than double-digit growth this year. We are also progressing enough to be able to manufacturing for us is very close to BFSI in terms of $1 billion vertical. So we should hit that very, very soon. And the rest of them in terms of high-tech, et cetera, should start entering that leave at the end of the year as we get into that kind of a run rate, at least a course of sequential growth line, upwards of high double-digit pain.

So bullish on large deals, bullish on the vertical growth. And as we said, primarily transformation towards revenues from Americas and Europe, that’s where we see most of the growth happening.

Pankaj Kapoor — CLSA — Analyst

Got it. Thank you for the detailed answer. Wish you all the best.

Rohit Anand — Senior Vice President of Finance

Thank you.

Operator

Thank you. The next question is from the line of Sandip Agarwal from Edelweiss. Please go ahead.

Sandip Agarwal — Edelweiss — Analyst

Good evening. Thanks for the opportunity, sir. I have only one question. How you are seeing the demand for telecom and enterprise evolving? Do you see that telecom demand, particularly in the 5G will take over the demand in the enterprise side? Or you think that it is too early to call that out?

CP Gurnani — Managing Director and Chief Executive Officer

Rohit?

Manish Vyas — President, Communications, Media and Entertainment Business, and Chief Executive Officer, Network Se

You want me to take that, Rohit?

Rohit Anand — Senior Vice President of Finance

Sorry, I was on mute, talking. Apologize. I think Jagdish and Manish just articulated that, but maybe quickly, Manish, if you want to just add anything to what you just explained?

Manish Vyas — President, Communications, Media and Entertainment Business, and Chief Executive Officer, Network Se

Yes. I think if I understood the question, your question is, will 5G and enterprise overtake the demand in enterprise from other digital transformation areas?

Sandip Agarwal — Edelweiss — Analyst

No, I just wanted to understand whether going forward, you see more demand in 5G coming in? Or you think that enterprise business will equally grow strongly or it will be ahead of telecom? What is the sense on that? And also, if I can add another question on the attrition side, when do you think that the attrition will cool off and where is more attrition, whether it is more in enterprise or in telecom? Thank you.

Manish Vyas — President, Communications, Media and Entertainment Business, and Chief Executive Officer, Network Se

Okay. So I think let me comment on the growth. I think I did — in response to the previous question, I did highlight where we are seeing the demand sentiment coming from within the telecom ecosystem. And that, like I said, is largely — and we’ve been consistent about it, if you recall that. This is a wholesome, very comprehensive digital transformation that is underway. And digital transformation in the telco realm is not just about changing the front end or changing from BSS systems. It goes all the way back into the way the networks are operated. And before that, how networks are built and how the network compute happens now going forward with a cloud-based model. So in totality, it is a complete transformation that is underway, and we believe that this momentum of where the need for continuing and completing at least this phase of the digital transformation is going to still continue to play out the next 12 months also. Our pipeline reflects that. Our current advanced conversations with various operators indicate that.

And clearly, what is driving most of that digital transformation is clearly the power of 5G and 5G protocol that will allow the operators to offer services to their enterprise customers, to their partners and to their consumers slightly and very differently with what we have done in the previous generational wireless technologies. So that’s going to continue.

As far as the enterprise commentary is concerned, I’ll hand it over to Jagdish and Vivek, because I think they’ve given you broad answers about how the growth cycles will be. Jagdish?

Vivek Agarwal — President – BFSI, HLS and Corporate Development

Jagdish, if I may, Sandip, I think, to your exact question, I think — the great news is actually as Manish articulated, that’s 40% of the business. We are seeing great demand driven by 5G and everything else. I think on the enterprise side, between what Jagdish and I said, high-tech BFSI continue to grow very well for us. So it’s a healthy competition between the 2 parts, right, that where can we outdo each other from a growth perspective. But the demand scenario is pretty robust across the board.

Rohit Anand — Senior Vice President of Finance

Thank you. And on attrition, I mean, there’s no specific trends between the verticals, but it’s more driven by the skills. Certain high skills, niche skills, we see that trend higher. That’s the general trend, but not across the 2 segments. I don’t know, Harsh, if you want to add anything? We’ve seen improvement on attrition sequentially quarter-over-quarter at point of time, while LTM continues to be flat. So that trend is improving. But Harsh, you can comment if you’re on the call.

Harshvendra Soin — Global Chief People Officer and Head Marketing

Yes. Thanks, Rohit. So Sandip, thanks for asking that. And you would see our trend, we’ve actually bucked the trend by showing a flat on attrition this quarter in the last 12 months. But if you really look at our annualized quarterly annualized number, we’ve seen a considerable downward trend. Now obviously, that means that all the efforts that we have put in place about 4 quarters more or 2 quarters ago, seem to be paying off now. As Rohit said, we don’t see a particular trend among between CME or enterprise. It’s more skill-based as well as tenure-based. So obviously, at the junior level, we’ll probably see slightly higher as we’ve always been the trend. But the real good news is that our quarterly annualized number is actually coming down, which is really bucking the trend from last few quarters as well as from what we see in other companies. So that’s a very healthy sign for us. And we do believe that all of the steps that we have taken at Tech Mahindra will ensure that this downward trend continues and the stabilization of attrition happens.

Sandip Agarwal — Edelweiss — Analyst

And that’s very helpful. Thank you, and best for the current quarter.

Operator

Thank you. The next question is from the line of Surendra Goyal from Citigroup. Please go ahead.

Surendra Goyal — Citigroup — Analyst

Thanks. Good evening, everyone. Rohit, just wanted to know when the next wage hike cycle kicks in? And secondly, do you expect the Comviva seasonality to impact margins in the coming quarters? Thank you.

Rohit Anand — Senior Vice President of Finance

Yes, Surendra. Sorry, I didn’t get the second part of the question. Could you just repeat?

Surendra Goyal — Citigroup — Analyst

So I was talking about the Comviva seasonality in the business. And do you think that impacts the June quarter margins?

Rohit Anand — Senior Vice President of Finance

Yes. So from a salary high-cycle perspective, while we’ll be doing some — we’re already doing some sequentially in batches, but the main cycle is for us going to be July. And from a Comviva perspective, we’ve structured the business where we’ve over a period of time, reduced the seasonality impact that we typically saw in the last few years. While it will be still there from a June quarter standpoint, but be relatively lower than what we’ve seen in the past.

Surendra Goyal — Citigroup — Analyst

Sure. Thanks for that. And could you also comment on visa costs. Any idea about the quantum and timing of that for you?

Rohit Anand — Senior Vice President of Finance

Timing usually is going to be the current quarter, Surendra. And from a quantum standpoint, say maybe an impact of 30 — 25, 30 basis points from a lower margin standpoint.

Surendra Goyal — Citigroup — Analyst

Yes. Thanks a lot, Rohit.

Operator

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

Vibhor Singhal — PhillipCapital — Analyst

Yes. Hi. Thanks for taking my questions. Rohit, just one small question. The incremental, depreciation and amortization cost that we saw this quarter, that’s going to be a recurring one? So basically, the — should we model the current cost this quarter going forward as well? Or was there some one off costs in terms of acquisition which was there in this quarter?

Rohit Anand — Senior Vice President of Finance

Yes. So I think for next year, the way it works is some of the amortization, obviously, for 1 odd year. So that’s a reduction that will happen, but not for this year. It will be a reduction for the following year, right? And in the quarter, while there was some catch-up, etc. But broadly, you can assume that to be recurring as we move forward.

Vibhor Singhal — PhillipCapital — Analyst

Got it. Okay. And any other incremental expense that we’re expecting, maybe from any of these acquisitions, which might not have been fully integrated in the next quarter to hit us? Or do you think everything has been taken into account in these quarter numbers?

Rohit Anand — Senior Vice President of Finance

Yes. I think we’ve done a thorough due diligence. So we’ve accounted almost all the activity that happened.

Vibhor Singhal — PhillipCapital — Analyst

Got it. And just again, maybe one last if I could squeeze in. Any color on the tax rate, should we consider it to be in a similar range that we had before?

Rohit Anand — Senior Vice President of Finance

Any color on? Sorry.

Vibhor Singhal — PhillipCapital — Analyst

ETR, tax rate.

Rohit Anand — Senior Vice President of Finance

So on the current quarter, is the question?

Vibhor Singhal — PhillipCapital — Analyst

I mean going forward. Going forward, should we separate them out?

Rohit Anand — Senior Vice President of Finance

Yes, range going forward that we’ve articulated is around 25% to 26% — 26%. That’s the range that we modeled and we end up being that on a normalized run rate basis.

Vibhor Singhal — PhillipCapital — Analyst

Got it. And this quarter was exceptionally low?

Rohit Anand — Senior Vice President of Finance

Yes, yes. We did have some benefits that we got on account of HCV [Phonetic}. So that’s reduced effective tax rate for the quarter.

Vibhor Singhal — PhillipCapital — Analyst

Okay. Thanks a lot. Thanks for taking my question and wish you all the best.

Rohit Anand — Senior Vice President of Finance

No worries. Thank you.

Operator

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

Gaurav Rateria — Morgan Stanley — Analyst

Hi. Thank you for giving me the opportunity. So 2 questions. Firstly, when I look at your commentary, when I look at the deal win numbers, it’s significantly better than the last year. So is there anything that precludes you from commenting that next year growth could be better than the last year? Is macro creating that kind of uncertainty, which is precluding you from saying that? Or are there any other factors around renewals or anything which one should be aware of from a growth perspective for next year?

Rohit Anand — Senior Vice President of Finance

So you heard Manish, Jagdish and Vivek talk about it from a demand perspective, looking favorable, right, across the sector. We’re seeing positive demand, discussions are favorable, communications, obviously, to our strength and the capability that we have. And when we look at also the pipeline, where we were last year, where we are now, I think that is also showing significant improvement, right? So all the trends are positive. And from our perspective, as we discussed macros obviously, an uncertainty and how it pans out as we move forward and it’s very difficult to predict. So I think that definitely is something that we’ll have to keep on monitoring as we move forward quarter-over-quarter. Though right now, we don’t see that in the data.

Gaurav Rateria — Morgan Stanley — Analyst

Got it. Second question is on margins. Your ex of amortization related charge around acquisitions, your organic margins would be in ballpark in the range of 15% in fiscal ’22. What kind of a pricing lever is required to be able to absorb the incremental cost on hiring, et cetera, and manage stable margins in fiscal ’22 on an organic basis without including the effect of amortization? And secondly, within the amortization, is there any schedule that you can share, which can help us to model it better from a 12- to 24-month point of view? Thank you.

Rohit Anand — Senior Vice President of Finance

Yes. So pricing is not a lever, but I mean — not the only one, right? So there’s definitely a lag on pricing, as I mentioned. We’ve seen some positive impact come through in the second half more towards the fourth quarter. And I think the active discussions by the commercial delivery and the leaders are moving in a favorable direction. So that should start kicking in. But that is one of the levers that will be required for us as we move into next year. Beyond that, as I mentioned, a lot of focus being driven on business mix, growing geographies that are giving us better return. Also kind of looking at low-margin areas where don’t fit us strategically trying to actively work on finding the right fit there. So I think beyond just pricing, which is going to be an active lever as we move forward, it’s a bunch of these actions and some of the investments we’ve already done on juniorization that will start kicking in for us. As we move forward with utilization rate going back to the levels we were comfortable with, which you saw first half of the last year.

Gaurav Rateria — Morgan Stanley — Analyst

Great. And any schedule for the amortization charge for 12 to 24 months just to help us model the D&A chart better?

Rohit Anand — Senior Vice President of Finance

So it — as I mentioned, I think from a run rate perspective, FY ’23 will be similar what you’ve kind of seen. And as we go into the next year, the following year, it will go down. Specifics, I think Kaustubh can help share with you.

Gaurav Rateria — Morgan Stanley — Analyst

Sure. Thank you.

Operator

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

Ashwin Mehta — AMBIT Capital — Analyst

Yes. Thanks for the opportunity. One question in terms of acquisition intensity. We’ve spent almost $940 million plus on acquisitions since the start of last year. In terms of acquisition intensity, how are you seeing things going forward? Do you think this pace continues or we look to consolidate our acquisitions and possibly focus more on organic in the subsequent year?

Rohit Anand — Senior Vice President of Finance

Yes. So I think from a capital allocation standpoint, this year is going to be more organic focus, for sure. We will focus on consolidating the assets that we’ve acquired last year. I think lot of work has to go there to make sure that we set it right, get the structure going and make sure that we can long term get the benefit of synergy that we’ve planned for those assets, right? So that’s the view. So you’re right, focus is going to be more organic and getting these aligned to our infrastructure — overall in the structure so that we get the right potential benefit. And Vivek, you can also add anything on this front.

Vivek Agarwal — President – BFSI, HLS and Corporate Development

I think Rohit, you laid out the direction. I think the only color I would add to that is that we’ve always stated in terms of our acquisitions are largely focused on fulfilling capability gaps. And we’ve done a lot of them over the last 18 months. And hence, there is less white spaces to go after. That’s just an outcome of what we have done. And hence, the focus will be on driving synergies, value integration, creating value from the investments we’ve done in the last year.

Ashwin Mehta — AMBIT Capital — Analyst

Thanks. And just one follow-up on an earlier question. So from an SG&A perspective, do you still think you’ll go back to those steady levels of more closer to the 13% odd levels? Or there have been some structural savings that maybe help us operate at the current levels?

Rohit Anand — Senior Vice President of Finance

I think there will be upside movement to the current level for sure. I think there are a few areas where some cost increase perspective, one, obviously, we spoke about facility at some point coming in that’s the infrastructure cost that we have, and some of the other costs that has been subdued for us for the year. But I think as the operating leverage and the growth continues to pick up and the demand continues to be what it is, I think from a leverage perspective, we might see some benefit. And hence, maybe it will be somewhere in the middle that we might land up, while there might be some quarterly variation.

Ashwin Mehta — AMBIT Capital — Analyst

Thanks, Rohit. Thanks for the answers.

Operator

Thank you. The next question is from the line of Dipesh Mehta from Emkay Global. Please go ahead.

Dipesh Mehta — Emkay Global — Analyst

Thanks for the opportunity. A couple of questions. First about, if I look our standalone profitability, it declined sharply 430 bps quarter-on-quarter. So can you help us understand what played out in stand-alone numbers?

Second question is about fresher addition. I think you alluded to we have increased juniorization. So can you help us with some data about how many freshers we added during FY ’22 and how we intend to increase for ’23?

And last question is about the EBIT margin aspiration. Earlier, you always alluded 15 percentage EBIT margin aspiration and our medium term taking it to high teens. How we look at numbers shaping up for ’23? Thanks.

Rohit Anand — Senior Vice President of Finance

Yes. So I think first question from you was on standalone. So I think you’ve got to look at it consolidated margins because there’s a lot of intercompany deals and transactions that happen that truly don’t give the right picture. And that’s the way we look at it. So that’s one.

Second, in terms of freshers, we’ve added more than 10,000 in the year, last year. And I think, as I mentioned, one of the big levers that we will continue to drive this unitization and addressing the pyramid. So I think that’s an area we’ll continue to pursue while we move forward into this year as well because it’s an important area for us to structurally address the cost structure, right? So that’s the second point.

And from a margin standpoint, I think as I mentioned, when we look at this year, we been organically close to that number that we had articulated. I think for following year also, our positive levers that are articulated will continue to drive it through the year. And from a journey perspective, continue to pursue sequential improvement through the year and get towards a similar range that we articulated on.

Dipesh Mehta — Emkay Global — Analyst

Understood. And we are seeing sequential improvement. You are ripping from Q4 exit, we expect Q1 to Q4 will be a better kind of trajectory?

Rohit Anand — Senior Vice President of Finance

Sorry, I didn’t get that question. Can you repeat please?

Dipesh Mehta — Emkay Global — Analyst

You said — one of your comments was we expect sequential margin to improve. Now in that, one of the quarter would have salary hike. So I just want to understand from Q4 to Q4, we should expect steady improvement in trajectory or how one should build it?

Rohit Anand — Senior Vice President of Finance

Yes. So I think they’re probably cyclic. As we mentioned, there are certain cyclic aspects for us, right? So we spoke about seasonality of Comviva that comes for Q1 with certain visa costs, etc. There is certain cyclic nature of cost that comes in Q1 for us. So I think looking at that, there will be certain headwinds going into the quarter. But I think, as I mentioned, the positive momentum that we’re seeing on all the actions are starting to yield results. As I said, the cost obviously increased last year and lagging by the price increases, the price increase momentum is coming in, right? So I think as that kicks in, that will start offsetting some of these impacts. And as we move forward, in our view and the way we’re driving these actions, the positive momentum will carry us through better margins through the quarter moving ahead.

Dipesh Mehta — Emkay Global — Analyst

Understood. Thank you very much.

Operator

Thank you. The next question is from the line of Manik Taneja from JM Financial. Please go ahead.

Manik Taneja — JM Financial — Analyst

Hi. Thank you for the opportunity. Am I audible?

Operator

Yes, sir, you are audible. Please proceed.

Manik Taneja — JM Financial — Analyst

Rohit, sorry to pester you on the margin outlook. I just wanted to get a sense as to what are the different moving parts that have impacted our margin performance in the second half of the year? Because six months back, you hosted an analyst day, suggested significant confidence on sustaining 15% EBIT margin. And then subsequently, in second half, you list or margins have been lower than that level. So if you could help us understand what are the different levers that have been working against you now? That’s question number one.

And the second thing is, do our wage hikes happen in once again quarter now? Or because I got one comment suggesting that wage hikes might be happening — would be spread out during the course of this quarter and subsequent quarters. So if you could help us understand that. Thank you.

Rohit Anand — Senior Vice President of Finance

As I mentioned — maybe I’ll take the wage hike first. I mentioned that we do that in batches. There’s one big batch which will be predominant that we said is going to be in June, July, right? That’s the point we mentioned from a wage hike perspective.

From a margin perspective, let’s kind of backtrack on what we said. I think we said that we will be closer to the vicinity of 15%. I think the main difference from us being there versus the current 14.6% number is the amortization charge from an accounting perspective that we had to take on, some of the M&A activities that happened in the last few months ending of the year, right? So that caused a little bit of a headwind, which diluted the benchmark that we’ve kind of outlined for ourselves.

As we look forward for next year, I think good part is the actions that we’ve outlined for ourselves for giving us a positive momentum are starting to kick in. The structural actions on unitization we’ve taken has already given us the headwind it had to on the utilization being lower. Now I think that will start turning around. Some of the investments we’ve made in areas of expanding our market to delivery centers to nearshore operations as well as Tier-2 cities are also starting to help us on spending attrition. As we move forward, we will see some of these investments giving as a benefit. And hence, from a parts perspective, I think that journey continues, but the pressure on the cost side is the it continues right, that market is still strong. So hence, all these actions from an execution perspective has to be implemented impeccably for us to continue. And that’s what we are aspiring for.

Manik Taneja — JM Financial — Analyst

Sure. Thank you.

Operator

Thank you. The next question is from the line of Abhishek Abhishek Shindadkar from Incred Capital. Please go ahead.

Abhishek Shindadkar — Incred Capital — Analyst

Hi. Thanks for the opportunity and congrats on the Q4. The first question is, can you give us a color about how the CY ’21 numbers look like for some of the larger acquisitions like project activity and analysis? You had shared 9 months and 11 months data, and CPC as well during the acquisition details, but any color in terms of how CY ’21 full year numbers were and calendar ’22 looks like?

And the second question is on the capital allocation. What is our strategy going forward? Any color on that would be helpful. Thank you for taking my questions.

Rohit Anand — Senior Vice President of Finance

Yes. So maybe I’ll take the capital allocation first. So as I mentioned, we continue to last as we — our policy is to keep on looking at niche and complementary assets that add a win in the marketplace and situationally, we got good assets last year, which added up to as somebody has articulated also a high M&A spend for us, right?

Now when we look at the following year, I think our focus is going to be more organic and ensuring that we assimilate all these acquisitions into the company from a cultural as well as go-to-market perspective, so that we can get long-term synergy benefits that we envisioned with these assets, right? So that’s going to be the focus. And from a capital allocation perspective, you see while we had articulated over a batch of three years, whatever we earned as FCF minus the M&A spend, we’ll turn back to the shareholders. But this year, that mad — is just giving us no return from a shareholder perspective. But still, we said in that situation also, we are comfortable with the cash balances we have and we have dipped on that to continue to offer the similar return as last year to shareholders, right? So that will continue to stick to our capital allocation policy that we articulated before with a focus next year on more organic and assimilating the M&A. So that’s on that.

In terms of numbers of all the acquisitions, exactly for calendar year, I don’t have it with me, but if you can offline touch base with Kaustubh, whatever we published, we’ll share that with you.

In terms of trend, all those acquisitions have been closely monitored. Vivek, who heads our M&A portfolio, maybe can add a comment, but we have a robust process, ensuring that we continue to see growth in those portfolios, including the synergy revenue and that visibility for calendar year ’22 looks very positive.

Vivek Agarwal — President – BFSI, HLS and Corporate Development

Rohit, I think the only thing I would add is the numbers on those three specific acquisitions which were later in the year. We are pretty much on plan and working very closely with the management teams to drive synergy and growth apart from whatever is the organic growth plan of those business is. Yes. That’s a quick summary of how those specific ones are doing.

Abhishek Shindadkar — Incred Capital — Analyst

Great. Thank you for taking my questions and best wishes for ’23.

Operator

Thank you. Ladies and gentlemen, due to time constraint, we take that as the last question for today. I now hand the conference over to Mr. Rohit Anand for closing comments. Over to you, sir.

Rohit Anand — Senior Vice President of Finance

Thank you. Just thanks to everybody for joining the call. I just recap the year for us, top line growth of 17% margin, EBIT expansion year-on-year basis. We’ve given record wins of $3.3 billion on deal wins, which is a 50% increase versus last year. All our significant verticals have grown, communication leading the way and BFSI as big ones. And then if you look at dividend, we continue to commit — continue to stay on the commitment we had on dividend to shareholders, and we’ve given all together between interim and final dividend of INR45.

So overall, that’s the summary for the year, and we’ll continue to keep on working as we move next year for a similar performance. Thanks, everybody, for the support, and thanks for joining.

Operator

[Operator Closing Remarks]