LTM — earnings call
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Prepared remarks
MANAGING DIRECTOR · MR. SUDHIR CHATURVEDI – PRESIDENT (SALES)
MR. SUDHIR CHATURVEDI – PRESIDENT (SALES) MR. ASHOK SONTHALIA – CHIEF FINANCIAL OFFICER MR. NACHIKET DESHPANDE – CHIEF OPERATING
OFFICER · MS. SUNILA MARTIS – HEAD, INVESTOR RELATIONS
MS. SUNILA MARTIS – HEAD, INVESTOR RELATIONS LTI Q1FY21 Earnings Call July 16, 2020
Questions and answers
Ashok Sonthalia
Thank you, Sanjay.
Hello, everyone.
Let me take you through the financial highlights for the first quarter of FY21, starting with the revenue numbers.
Our revenues stood at USD 390.3 million, declining by 4.8% sequentially and was up 9.5% on a year-on-year basis.
The corresponding constant currency decline was 4.7% quarter-on-quarter and a growth of 10.6% year-on-year.
Reported INR revenue of 29,492 million, was down 2.1% quarter-on-quarter and up 18.7% year-on-year.
Now coming to profitability, EBIT for the quarter was INR 5,139 million translating to an operating margin of 17.4% as compared with 16.7% in the previous quarter.
Pressure on margins due to revenue decline was more than offset by tight cost control in SG&A, currency movement and lower product pass-through.
Reported profit after tax was INR 4,164 million which translated into a PAT margin of 14.1% this quarter compared with 14.2% in Q4. Lower foreign exchange gain and higher income tax expense than the last quarter has offset the increase in treasury income resulting in minor drop in PAT margin even though there was an increase in operating margin.
Moving on to the people front, utilization without trainees was at 79.6% as compared to 80.6% last quarter and utilization including trainees was at 79.4% versus 79.3% in Q4. Our net additions to manpower in the quarter was 40.
The total manpower stood at 31,477 of which our production associates were 94.4%.
In this quarter, attrition has improved to 15.2% versus 16.5% last quarter on LTM basis.
Now moving on to our hedge position, our cash flow hedge book stood at USD 1,098 million as at 30th June 2020 versus USD 1,251 million as at 31st March 2020; while the on-balance sheet hedges stood at USD 111 million versus USD 91 million last quarter.
We have been consistent in executing our hedging strategy in a measured manner keeping market uncertainty in mind.
Now talking about DSO, working Capital and cash flow, it was the second consecutive robust quarter for cash collection and DSO improvement.
In Q1, the billed DSO stood at 70 days compared to 77 days last quarter.
The DSO including unbilled revenue was at 99 days, an improvement of 7 days over Q4. The net working capital has improved by 2.5% to 13.8% of revenue as on 30th June 2020 over the last quarter.
For the quarter, the net cash flow from LTI Q1FY21 Earnings Call July 16, 2020 operations was strong at INR 6,347 million which was at 152.4% conversion of the net income.
At the end of the quarter, cash and liquid investments stood at INR 34,256 million adding INR 6,818 million to our liquidity during the quarter.
The effective tax rate for the quarter was 25.5%.
Earnings per share for the quarter stood at INR 23.9 per equity share as compared to INR 24.5 in Q4. Diluted EPS was INR 23.7 per equity share versus INR 24.3 last quarter.
On LTM basis, diluted EPS was INR 90.1 per equity share versus INR 86.6 in Q4. With that I would like to open the floor for questions.
Thank you very much.
Moderator · Conference Operator
Sure.
Thank you very much.
We will now begin the question-and-answer session.
The first question is from the line of Sudheer Guntupalli from Motilal Oswal Financial Services.
Please go ahead.
Sudheer Guntupalli
Sanjay, we understand that you do subscribe to the thought process that scale will not be a meaningful differentiator as long as you have a very strong value proposition.
But in the current context, are you seeing any early changes in the industry structure, be it consolidation in favor of large companies versus mid-sized players?
How do you see LTI positioned on this front versus both our larger peers and even the smaller ones?
Sanjay Jalona
I continue to believe in that very strongly.
If you have a value proposition, your story will be heard and you would continue to grow.
Obviously, in these times, logical thinking says that consolidation would happen.
But as I have been saying for the last four or five years that LTI plays in the mature market and our typical customer base is of the large companies.
We also do not believe that there are Tier-1 partners and Tier-2 partners.
So, we fundamentally and strongly believe that our size today allows us to bid for the largest deals because also the deal sizes have shrunk in a meaningful way.
So, we continue to believe in that.
We have always been disrupting the market.
We like to be in a position of being the underdogs and we strongly believe that we will continue to gain share.
Sudheer Guntupalli
And the large deal wins in this quarter seem to be much lower than the typical run rate.
Of course, we do understand that these may be the deal wins over a truncated period of two months and not the entire 90-days.
But how comfortable are you with the large deal win numbers this quarter and the current deal pipeline?
Sanjay Jalona
Our deal pipeline continues to be strong.
As I said in my initial commentary, the win rooms continue to be extremely busy and we do hope to give you some news on some of the large deals in Q2 as well.
So, lots of activities are going on.
Obviously, as you can expect some amount of hold activity has also happened, but by and large what we see is that there is a continued activity on large deals and customers are continuing to go on that path.
LTI Q1FY21 Earnings Call July 16, 2020
Sudheer Guntupalli
Just one last question to Ashok.
So, you managed margins quite well in a quarter which is heavily disrupted.
Does that leave you with a good headroom to roll out a salary revision and bonuses in the near future?
And given that now you may be having better visibility on revenue trajectory and cost structure, what is your thought process on margins for the full year?
Ashok Sonthalia
Sudheer, we were definitely able to protect our P&L in Q1 through tight cost control in SG&A and operational efficiency and of course INR depreciation also helped.
But where we stand today and as Sanjay spoke, we expect Q2 to be flat with some positive bias.
If the situation remains normal, growth should start returning, and with that we also believe some of the things which were helping us in terms of saving expenses particularly travel, etc., some amount of those will start coming back.
As far as the first part of your question on salary increase is concerned, we have deferred the July cycle and we are going to consider the same only after our Q2 performance and some more visibility around the market and growth trajectory.
Whenever it is announced, the future quarters will get slightly impacted.
So, having said all these things, I believe we will operate in FY21 in a very narrow band from where we have delivered our Q1 margins.
There are many uncertainties and unknowns and we will have to watch very carefully but we continue to be focused on each cost element which LTI incurs and question everything.
At the same time, we keep ourselves in a position that when growth returns, we do not regret that we had tightened our cost so much that we must now wait to capture those opportunities.
So, it is a good balance that is being implemented.
Moderator · Conference Operator
Thank you.
The next question is from the line of Sandip Agarwal from Edelweiss.
Please go ahead.
Sandip Agarwal
First question to Sanjay, what is your view on the three things where most of the global players are seeing a huge upsurge in demand - one is the cloud part where the capacities have been exhausted.
Secondly, the core transformation, what is your thought on that?
I believe based on data that ‘the core’ has not been transformed or not been invested in for quite some time in a big way, so there is a big lag on spend which should be there in the core.
And finally, the digital transformation journey.
I think it will accelerate much more with the online activity.
So, what is your sense on this jump in online activity assuming that some part of this activity will recede in future?
And to Sudhir, what is your sense on the future of marketing and sales?
Will the pattern of how we do marketing and sales change permanently or do you think once the lock down opens up, probably people will get back to the old ways or you think the new way of going through some of the internal software like teams or Zoom would do wonders for marketing and sales as well?
LTI Q1FY21 Earnings Call July 16, 2020
Sanjay Jalona
As I said in my initial brief, cloud is seeing huge adoption across.
The world over people have realized that anybody who was totally on premise has struggled to go and operate in the Work from Home model.
We have COVID specific offerings for customers to rationalize and help them operate in a hybrid cloud model and rationalize their expenditure as well.
With regards to transformations and core transformation, we strongly believe there are four themes that are playing in the marketplace - operate to transform, how do you use operations as a lever, not to just do maintenance, but basically to create a backbone for transformation.
Second is data-driven organization - how do you use data to actually do meaningful decision-making.
Thirdly, digitizing the core and fourth is experience.
Digitizing the core is very important because you need to simplify things to a level whereby you can launch products and platforms in a meaningful way.
So, yes, transformations will continue, we are seeing transformations continue even at these times but obviously depending on the vertical and on a company situation, some of the discretionary work will get halted or go slow, but these journeys will continue.
I will let Sudhir answer the question on sales and marketing.
Sudhir Chaturvedi
Thanks, Sandip.
As Sanjay mentioned, it has been a busy period for us across the organization, especially from the concept of win rooms that we have in place for deals that are under way.
So, if you ask me how does sales and marketing change in the environment that we are and whether this change will continue to be the way we work in the future.
I think the key thing is that there are certain aspects that have improved.
For example, Sanjay, Nachiket and I are on multiple calls with clients almost every day, in fact even today we had two calls with clients this morning before getting onto this call.
So, I think the first thing is that we are able to stay close especially to our existing clients and are able to have multiple conversations with them.
That is happening across the board.
But it is harder to connect with new clients.
Having said this, we have had some good new logo wins this quarter.
But I think on an ongoing basis, face-to-face meetings and in-person discussions are important when you are forging new relationships and building on those.
The second thing is that though we have got a very healthy large deal pipeline, I think going forward what we will see is that big decisions on large deals do require some level of interaction.
I think there are some natural limitations with this way of working.
I do not think we will go back to the way we used to work.
I am sure that all of us will have an opportunity to travel a little less and still connect with clients as effectively.
I think we are moving towards the hybrid model, but I still believe that in our business, face-to-face interaction especially to build and sustain relationships is something that cannot be underestimated and cannot be done as effectively on remote channels.
And to your previous question on whether COVID has accelerated cloud and digital, which it definitely has.
We used this opportunity for a significant amount of training and enablement of the entire sales organization in cloud and digital.
When you ask about how we are executing in LTI Q1FY21 Earnings Call July 16, 2020 these times, Nachiket will answer, but LTI Canvas has been a fantastic way of us delivering to clients.
How we do work is also a key part of the sale, it is not only what we do, it is about how we do it and we are able to demonstrate with clients that we are able to do transitions remotely.
For example, the large deal win that we spoke about, was a transition that we carried out remotely.
We are also able to do implementations - we actually talked about an SAP, warehouse management implementation that we did with the client.
There is a change in what we sell and how we convince clients that we will continue to be able to deliver even in the new normal that we see.
Sanjay Jalona
If I may add one small thing, I think we need to keep good habits from COVID and not go back to old ways of doing things completely.
And there are many good things.
As Sudhir said, I think I am having more customer discussions than I normally did.
I used to also travel 140 days on the road.
Today in the discussions, there is no status quo.
You can question the customer on any and every decision, every past theory that one has ever had.
If you have a story to tell, I think they will listen.
This situation also allows us to bring the best of the company to bear.
In the past, you will typically have a few people travelling to customer orals, now we have had situations where we have 60/ 70/80 people being on our oral, so you can bring the best of the company to bear in these times.
But you also need a social fabric when you do business development or even actually software development.
So, we take those good things, bring back those good things, use the opportunity of higher productivity in these times and not go back to some of the old habits that we have had.
Sandip Agarwal
Extremely helpful.
And I am sure that you save a lot of carbon print also by travelling less.
Thanks a lot.
Moderator · Conference Operator
Thank you.
The next question is from the line of Sandeep Shah from CGS CIMB.
Please go ahead.
Sandeep Shah
Sanjay, just wanted to understand that we really appreciate your industry leading growth even continuing in this bad year of FY21. But your premise of better growth versus industry is also dependent on consistent large deal wins.
And we do understand that the pandemic is leading to some amount of delay in the decision making, as you are seeing in the pipeline.
So, large deals may not be very healthy in this year.
Are you worried about the growth entering into FY22?
This is a slightly longer-term question, but does it give you a bit of discomfort if you think beyond FY21?
Sanjay Jalona
We announced one large deal, albeit a little small in size, but as I said, we will hopefully announce a few deals in Q2. Our deal pipeline looks healthy.
But we have to see how the next three to six months hold up.
In our business, the pipeline and discussions we do today help us in two or three quarters down the line, when the deals close and the ramp up happens.
Today where we are, we are very busy.
I don't think it will impact anything significantly in FY22. This year obviously is going to be tough because customers are spending in a very measured way.
But we will have to see.
There are so many unknowns, it is difficult to quantify.
I think the next three to six months LTI Q1FY21 Earnings Call July 16, 2020 will define what happens in FY22. But irrespective of what happens, we want to continue to focus on capabilities and on building an A-plus team so we can continue to partner with customers and create opportunities for our businesses.
Sandeep Shah
Sanjay, last time you were the first one to call out that there could be some demand headwinds in the banking, financial service, insurance, etc. in the second half of this financial year.
Can you update in terms of a demand outlook in that segment as a whole?
Because some of the large peers are showing deal wins in that segment and incrementally, they are not sounding that much cautious.
Sanjay Jalona
It's a good question again and frankly where we are, we are also not seeing anything so far.
But what I did say, not to get misinterpreted in any way, we were thinking that there could be some pressures coming in from defaults etc. We have not seen any of it, our top client continues to grow, it grew in Q1. We have a healthy pipeline.
But, again, things are changing on a daily basis.
So, we are yet to see how things pan out.
But today where do we stand, I also do not see any problem right now.
Sandeep Shah
Just a book-keeping question to Mr. Ashok.
Treasury income has gone up significantly, is it more to do with the notional gain, fair valuation of some of your debt securities?
And do you expect that may lead to some amount of QoQ dip in the coming quarters?
Or there is actually an increase in the yield because of the cash increase which is happening?
Sanjay Jalona
Ashok has got dropped off.
Sandeep, we will come back to this.
Moderator · Conference Operator
Thank you.
We move to the next question.
The next question is from Vimal Gohil from Union Mutual Fund.
Please go ahead.
Vimal Gohil
There were two questions, I just wanted to understand the cost savings.
You had a good amount of cost savings this particular quarter.
I do believe that there will be some cost like travel costs, etc., that could come back once things normalize.
So, how much of your cost savings probably will return when growth returns?
And how much of your savings would you be able to hold on as and when things normalize?
The second thing is you have also shown improvement on your working capital.
Should we continue to assume this level of working capital as a percentage of sales going forward as well?
Yes, these are my two questions.
Ashok Sonthalia
If we allow all the costs to come back, then it means that we have wasted this crisis.
So, we are thinking as to how we can ensure that whatever pain got created because of the crisis, at least we create some structural changes, so we can retain some of the cost savings.
Of course, some of the situational savings which have happened, they will come back, and we will see how it works out in future.
As far as our working capital is concerned, this quarter has been very good, because we largely collected for Q4. So, going forward, our focus would be to maintain this level, because I LTI Q1FY21 Earnings Call July 16, 2020 see some pressure.
When we talk about commercial concessions, in some of the cases there are payment term accommodations for a temporary period and those may play out going forward for the next one or two quarters.
But our whole focus is on maintaining this level in spite of giving certain concessions.
On the treasury income gains, these are mostly realized gains and there is a small amount of MTM.
So, we don't expect them to reverse until and unless we assume that the interest cycle is going to reverse in a hurry.
And we don't see that, so I think they are realized and are going to stay.
Vimal Gohil
Just continuing on the follow-up, so on the cost front, which are these costs that you will be able to defend, and may not increase in line with revenue?
If you can just highlight some bit, even qualitative comments will do.
Ashok Sonthalia
I don't think travel costs are going to come back to the same level, there will be some savings around that.
I am also sure that when we plan our future capacities, the hybrid model of Work from Home and working in a distributed manner will also play some part on the capex, and then consequently on the depreciation, amortization, etc. I also believe that some of the things that have happened, like certain negotiations which are temporary, around rent etc., and some around conveyance are also partly going to stay with us.
So, some of these are going to partly stay with us and some will return as growth comes back.
Moderator · Conference Operator
Thank you.
The next question is from the line of Manik Taneja from Emkay Global Financial Services.
Please go ahead.
Manik Taneja
I just wanted to understand your demand commentary with regards to geography.
And, also should the regular pattern of H2 being stronger than H1 hold true for FY21 as well?
Sanjay Jalona
Look, I would like Sudhir to comment on the demand overall.
But guys, I have given you as much on where we stand today that we see the trough behind us, Q2 will be flat to a positive bias.
We do not typically give revenue guidance, but I have given you more.
But there are many things which are changing on an everyday basis, we are dealing with an unprecedented problem.
Things keep changing but let Sudhir articulate clearly on the demand question.
Sudhir Chaturvedi
Sure.
Thanks, Sanjay.
So, let me cover the pipeline and associated large deal question.
So, pipeline, for us, if I compare it with the same time last year, is up 19% YoY.
I think the good thing about the pipeline is that, except for manufacturing, oil & gas and automotive, where I think the pipeline will start to return in the coming months, the other verticals, the pipeline is holding up pretty well.
We see reasonable pipeline of growth in US, Europe, and emerging markets, which are India, Middle East and Asia Pacific - business is showing some good resilience in terms of pipeline in this market.
As Sanjay mentioned, we have been very busy in our win rooms which essentially are for the large deal activity.
So, there is a healthy amount of activity that's underway.
And we hope, to see if we can get some closures within the next couple of months.
But what is happening is that LTI Q1FY21 Earnings Call July 16, 2020 deals could take a little longer to close.
Some deals are going on hold where some clients are looking for more time to make their decisions going forward.
Because it's a dynamic business environment, not just for us but obviously for our clients.
I think one of the concerns that was there was whether the new logos would be possible.
Though we announced 16 new logos, including Global Fortune 500 logos, I think the key thing here is the move to cloud and digital, that acceleration is what we want to capitalize on.
So, this is where our partnerships with the large cloud players and the major product players in this segment has been very helpful in terms of driving that pipeline.
So, a multi-faceted pipeline is currently what we see, though there are certain deferrals and deals on hold, but overall, we think there is a demand environment.
But I will not make any bold projections, because things tend to change quite rapidly, and I think we will see that kind of scenario for a few months going forward.
Manik Taneja
So, what we have been hearing from the industry is that some customers have been asking for differential pricing for Work from Home deliveries.
Are you seeing that play out in the market as well?
Sanjay Jalona
No, not at all.
Sudhir Chaturvedi
No. So, are you saying differential rates for people working from home?
No, certainly not.
See, client asks are there, more around discounts due to the demand pressures that they are facing or project deferrals or certain project timelines being extended.
But no, nothing, no rate reductions because of where people are located.
Moderator · Conference Operator
Thank you.
The next question is from the line of Vinit Manek from Karma Capital Advisors.
Please go ahead.
Vinit Manek
I had two questions.
So, first one is with respect to the CPG, retail and pharma.
Within the pharma and life sciences, we have seen a large surge in the spent within the IT and the transformation that is happening.
So, for us, where do we stand for that segment?
And my second question is in terms of our strategy with regards to the new client acquisition.
So, we largely had a strategy of mining the existing client with more deals and more traction.
So, with all this COVID happening around, are we seeing even the midsize companies coming to you for cloud transformation or other digital platforms to be connected for the better working of their businesses?
Sanjay Jalona
Okay.
Vinit, let me answer CPG, retail, pharma.
Yes, we have minimal footprint on retail, but yes, CPG and pharma are two important sectors, they have grown really well for us.
And I think they will grow above company average this year as well.
Even if you look at pharma companies, lots of investment dollars from them are going in actual drug discovery on COVID right now.
But we still feel very positive compared to a lot of other verticals on CPG, retail, pharma, to be driving the growth for the company.
LTI Q1FY21 Earnings Call July 16, 2020 Every call I say this, there are four pillars to our strategy.
Growth accounts, these are large accounts, right, that we need to continue mining.
Invest accounts, which could become growth accounts for the future, so we need to continue to throw the kitchen sink at them.
New account openings, which could become invest accounts and growth accounts in the future.
And large deals to change the trajectory.
So, it will not be right for you to think that our strategy is pivoted only on one part, we continue to drive new account openings very similarly.
We opened as we said, 16 new logos, including one Global Fortune 500.
As Sudhir pointed out, it is a little more difficult in these times when you are not meeting customers face to face.
But again, as I say, it will be difficult, but it's not as if it can't be done.
And which we have shown with one logo, we will hopefully close a few more in the subsequent quarters on Global Fortune 500 as well.
Moderator · Conference Operator
Thank you.
The next question is from the line of Madhu Babu from Centrum.
Please go ahead.
Madhu Babu
So, because of this work from home and lower travel, overall, the savings for the industry has been huge.
I think at least for the short term, most of the companies have shown strong margin performance this quarter.
But gradually do you expect the pricing to fall because of this?
Because being a competitive industry, once the clients return back to normalcy, do we expect a pricing erosion because of this whole change in the cost structure and obviously a lower capex?
That is the first question.
And second, can the onsite-offshore mix structurally change?
Because after executing so much from Work from Home, whether clients might be more comfortable with much higher offshore?
Sanjay Jalona
Madhu, both very good questions.
As I said in my initial commentary, you need a social fabric that binds people.
I think we have capitalized a lot of social fabric, because people knew each other for a long time, so you can easily Work from Home.
But we are social animals and we are in a team sport rather than an individual sport.
So, it's not to say that it will be 100% or 75% Work from Home, or it will not be 100% get back to work either, it will be a hybrid model.
And these hybrid models take time, energy, effort, cost to make them work.
So, I think that is there to play out, we will see how it goes.
With regards to onsite- offshore ratios, you can clearly see, we are at around, 21% onsite, we are one of the lowest ones globally.
And we have continued to keep pushing work offshore, and we will continue to do so.
This is one good habit that can come from the pandemic.
How can you push even more?
You can reduce your dependence on immigration, you can actually work and execute things a lot better in this model, and we have proved that everyone can do that.
So, yes, we will continue to see that and hopefully we will start to put efforts towards that.
But that also depends on the kind of work we are doing, right.
So, it will not be immediate, it will be gradual, it just cannot be done overnight, but it will happen, I think.
Moderator · Conference Operator
Thank you.
The next question is from the line of Vibhor Singhal from Phillip Capital.
Please go ahead.
Vibhor Singhal
So, just two questions from my side.
Sanjay, if you could just basically throw some light on the energy vertical, you mentioned that this is what was impacted in a twin manner from COVID as LTI Q1FY21 Earnings Call July 16, 2020 well as low crude prices.
So, have we seen any kind of revival in at least talks about clients coming to us in terms of maybe deals or some kind of expenditure that maybe happening, if not immediately, in maybe one or two quarters down the line?
So, is there some recovery in sight or will that be weak for the good near to medium term future?
And my second question is to Sudhir, just wanted to get a perspective on the way we are approaching the deals right now.
So, if I were to basically understand, as Sanjay mentioned in his opening comments, there have been one time commercial discounts that we have given to clients, so is the pricing for new deals also a bit lower than hypothetically what it would have been, had it not been the current environment?
So, is there a feeling that we would have got a better pricing on a new deal had it been won maybe three or six months before?
Or there isn't much of a price erosion that you are seeing in that part?
Sudhir Chaturvedi
So, on oil and gas, we saw a steep decline, sort of immediate reduction from a client spend perspective.
But what we are saying there is that, the nature of asks are changing.
For example, from a cloud perspective, from a digital perspective, there is more to do.
From a data perspective - is something that we think we can exploit a lot more going forward.
So, I think we are still in the wait and watch phase for uptick and demand perspective in this vertical, but it will come in these new areas going forward.
We will also see some core modernization happening here, which will also be something that will be in one of our sweet spot areas.
Sanjay, anything you want to add on oil and gas?
Sanjay Jalona
No, I think it will take some time.
But it's not to say that you are not conversing.
You need to keep conversing and keep having a dialogue, whether it's related to how you can save money, how you can help them operate better in the new normal, how can you run oil fields the way they have to be, how do you actually monetize the last drop of oil from the existing oil fields, etc., so the dialogues have to continue to happen.
Sudhir Chaturvedi
And your second question, I think was on new deal pricing.
So, on new deal pricing, it's a competitive environment out there, but I am not seeing specific asks for these new deals to be priced differently.
There have been asks, as I mentioned especially between March and June, regarding investing in clients in their difficult times, which we have done as true partners.
But most of the projects that are happening right now are based on clients looking at a combination of their consolidation efforts for cost reduction, as well as transformation efforts from a digital and a cloud data perspective.
So that pricing, I don't see a big shift from terms of where it was, but it's a similar type of pricing, but the discounts were between the March to June period, that's where we had majority of the asks.
Moderator · Conference Operator
Thank you.
We will be able to take one last question.
We take the last question from the line of Ruchi Burde from BOB Capital.
Please go ahead.
LTI Q1FY21 Earnings Call July 16, 2020
Ruchi Burde
My question is to Sudhir.
June quarter was a very unusual quarter because of COVID-19.
It would be helpful if you could characterize that due to COVID, how the deal pipeline has changed in terms of deal sizes, mix of new client and the existing conversations or repurposing or the change in the scope of work?
Sudhir Chaturvedi
Okay.
So, I did talk about the pipeline earlier, I will just cover some of that again.
So, as I said, the pipeline is up on a year-on-year basis.
From a vertical perspective, manufacturing, oil & gas and automotive pipeline has been a bit soft, but we expect that to start returning in the second half of the year.
Pipeline growth in other verticals continues to be healthy.
From a geography perspective, U.S. and Emerging Markets are doing well for us.
In terms of the nature of deals, we are seeing a combination of deals.
Clients are looking for either cash generation or cash savings.
So, we are seeing certain large deals which include vendor consolidation.
We currently think that most of these deals are in our sweet spot areas without much risk to our portfolio.
So, we see net gain possibilities in many of these large consolidation deals.
On the transformation deal side, if I refer to the conversations that we have had just this week, we are having ERP closure conversations.
Because, I think as Sanjay mentioned earlier, whatever was digital, whatever was in the cloud, and whatever was from a processing perspective, did not rely on manual processing, and it actually got done and got done very efficiently from a client perspective.
So, if anything, there is an acceleration in those transformation programs, and that's the other area of growth that we are seeing from a pipeline perspective.
So, it's a combination of the two.
I still think that some decisions may not happen in the timeframe that we normally see.
So, we are seeing certain deals on hold, certain deferrals.
So, it is a dynamic decision-making environment, but if I just measure the team on how busy it is, there is a lot of activity going on right now.
Ruchi Burde
Just one more follow-up to that.
Sudhir, you mentioned some deals, some conversations are deferred or put on hold.
The characteristics of those conversations, are those large sized deals or do you see a combination of both?
Sudhir Chaturvedi
It's a combination.
It's a client specific thing, as clients are looking at their own demand environment or their business environment changing.
There isn't a clear pattern or anything.
But it's a combination of both deals being held or being deferred to a later decision.
Moderator · Conference Operator
Thank you very much.
We will take that as the last question.
I would now like to hand the conference back to the management team for closing comments.
Sanjay Jalona
Folks, this is Sanjay again.
Thank you all for joining us on this call.
And wish you, your families and loved ones good health and safe passage through these trying times.
We will see you on the other side.
Take care guys.
LTI Q1FY21 Earnings Call July 16, 2020
Moderator · Conference Operator
Thank you very much.
On behalf of LTI, that concludes this conference.
Thank you for joining us, ladies and gentlemen.
You may now disconnect your lines.
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