Encora's first quarter delivered 16% consolidated EBIT ahead of the 15.5% guide.

My first question is on the fresh order intake number. How much is the fresh order intake number driven by Encora and how much is the core business within that? And is the UK trade deal now part of this fresh order intake or does it still continue to be outside?

The $691 million, Sulabh, does not include the order intake from the Encora portfolio. That is only the organic piece that has come from what used to be standalone Coforge. As far as the framework agreement and the likely further incremental work that we are likely to get, they are still not included in the order intake. That will continue to come and sit on top of the order intake that we have already announced.

On net working capital on cash flow this time around — is the absolute number increase just because of consolidation of Encora or is there something more?

The absolute increase is because of consolidation of Encora, but the number of days have actually come down.

How do you see the overall enterprise application adoption in the AI space leading for Coforge? Is it similar to the 2018 cloud adoption scenario? And how does an enterprise differentiate between which companies to choose at this point?

Most enterprises are not tying themselves to a specific model. They are not tying themselves to a hyperscaler or a set of clouds, because access to models through clouds that are out there can change. We are at a stage right now where, from a Coforge perspective, we have come up with service offerings on a very quick basis when it comes to token ops to manage token economics. We are at a stage where we have been working with our partners like Zscaler to come up with service offerings that have already got monetized around partnering on the Guardian AI platform and come up with managed services-based constructs around Mythos-related security vulnerability assessments. The smart enterprises are not tying their wagon to any particular stack, to any particular LLM model provider, or to just one or two cloud providers. We are seeing enterprises increasingly focused on what they are calling enterprise sovereign AI or enterprise open intelligence and increasingly trying to divorce their data processing and moving it in-house with the associated security and governance issues that are going on.

Is the aversion to Chinese LLM models still there in Western markets, or do you see enterprises opening up to those models?

We are not working with Chinese LLMs as Coforge at this point in time. We are not working with enterprise clients in North America who are leveraging China-based models actively within their realm. But that is just us, Vibhor.

The $230 million deal announced last week — is it part of the deal count this quarter or will it come in Q2?

No, it was a Q2 deal, so it is not included.

On the lower goodwill due to the Encora transaction closing at INR 1220 vs INR 1815 at signing — did that also lead to lower intangibles and lower amortization?

It is only the goodwill that has reduced by $600 million. The intangibles, the amortization impact was roughly $4 million per annum, and we have kept it at the same level. So the intangible on account of customer relationship is close to 30% of the valuation.

Q1 used to be seasonally weak in terms of cash flows. This quarter showed very strong free cash flow. Can we expect this trend to continue?

Vibhor, we had taken this feedback from all the investors, and I had structurally made that change of improving the free cash flow quarter-on-quarter. It was not just Quarter One, it was H1 which used to be almost near zero for us for many, many years. It has taken us two to three years to come to a point where we stand today, and we feel very confident that we will only build on to this in years to come.

G&A people cost has increased faster than revenue. Are there any one-time costs there? And the interest rate on the three-year loan at 4.6% is only 30 bps higher than the three-year U.S. treasury yield — is that better than expected and are there any restrictive loan terms?

The G&A has actually come down as a percentage of revenue. Just the two companies coming together, the absolute number has gone up. If you look at Coforge standalone G&A, last quarter was 6.7%. And I had mentioned in my December call when we announced the acquisition that Encora G&A was at 10%. The combined G&A in the current quarter stands at 6.6%. Which means that there is a 40% cost out that has already been done on the Encora G&A. This will further come down as a percentage of revenue. The increase is because Encora company got consolidated in the current quarter.

Are there any restrictive terms on the $550M loan or restricted cash?

There is no cash that is restricted. The reason why it is only 30 bps higher from the SOFR which is a three-year SOFR standing today. We signed this deal at a fixed rate of next three years. The price, the interest rates were expected to move in all directions. We did not want to bet on that. And that is why we signed a three-year fixed term loan and that is why it is standard 4.6%. The post-tax impact is actually cost in the P&L is 2.99%. Because this loan is sitting in India, we get 35% tax benefit on that. So the P&L will see an impact of only 2.99%. But there are no such fancy terms which will restrict any action that company might have to take in future.

Is the $158M deal announced in April largely ramped up, and when will the $230M deal ramp up? When will wage hikes happen this year?

Regarding the initial deal announced, yes, the ramp up has been completed. We did the transition from the incumbent in a record time in less than four months. And we are now north of 300 plus FTEs focused on that account across 15 to 20 teams. And yes, the full recognition of revenue is tracking going forward. On the second deal that we announced, the 230 million plus deal, that the ramp up has already initiated on that, and that is expected to add an additional 20 to 30 teams. And I will also note that that second deal is a complete digital modernization program spanning multi-years.

When will wage hikes happen this year?

Wage hikes are concerned, for a very select group, and I mean a highly select group, wage hikes did go into effect in Quarter One. But for the broader organization, we anticipate no wage hikes at least till the first of January of next year. And that too is uncertain. So we may not have hikes in the current fiscal, and if we do at a broad level, it is not going to be before quarter four.

How are you planning to grow Encora revenues? Most Encora revenue appears to come from clients below top 10 — is the strategy to take those clients to larger buckets or to take Encora's engineering capability to existing Coforge clients?

By Q3, which is just a quarter away, we see some very large opportunities in what used to be the Encora client portfolios. Today one of our top 10 clients of the merged entity is a client that has come in from the Encora portfolio. That is a relationship that we expect to scale up almost immediately and very rapidly. We do think if things go well there is a path to making it a $50 million-plus account over the next 12 to 18 months. There are two other accounts in account list 11 to 20 of Coforge that have come in from the Encora portfolio. From our vantage, the case that we had made when we acquired Encora had a few axes. One, we said the AI-led engineering capability and the combined engineering data cloud core will be on a composite basis a great differentiator. There is a tick mark against it. The second thing we had said was the acquisition will give us a new vertical Hi-Tech. We will also nearly double our health care business. Third, of course, something that we have always talked about taking clients and amping them up. The cost synergies, have been an exceptional 40%. You look at our consolidated EBIT, that is 16%. Everything points to this is going to be a defining acquisition and a very successful one for us.

Now that you have done the culling in rest of world business, will all verticals grow as strongly as Europe did this quarter?

Every one of the industry verticals, Banking, Insurance, Travel, Healthcare and Hi-Tech, of course, are on steroids. The geos, all of them are primed for exceptional growth. We would not have given the very buoyant commentary we have if we thought that we had a few engines that were firing. Right now, every engine is firing. In the real world, when you have every engine firing, at times a few engines fall off. But given the fact that every engine is firing, we feel really good that irrespective of what happens, this is going to be yet another industry-leading growth year for us.

Our India government business run rate was $50M last year and we had a $15M ramp down in Q1. Is the rest of the $35M ramp down expected uniformly over the next three quarters?

Aditi, it is part of the base now. So, there is no incremental impact that will come from a growth standpoint. It is part of the base. The reduction is already there.

How is pricing done in outcome-based contracts?

There is a clutch of models that we use. At an extreme, there are models where we take over legacy modernization on a significant risk basis where only part of the revenue that should come to us for the effort is assigned to us but the profits post-program success using our Forge-X and our Nuuron operating system are supernormal. The second model that we use is a subscription model that we use for the Coforge Mod Squads, which are our hybrid agent-human pods. These are monthly subscription-based models. And we allow clients to flex across FTEs, choosing the FTEs, choosing the agents from the 100-plus, the 130-odd agents that we have. And the third one that we look at, again, are different flavors of outcome-based, but some of them are tied to technology options, and others are tied to business also.

Has anything changed in the industry demand backdrop, or how would you characterize deflation trends versus tailwinds?

I think the industry has deflationary trends linked to efficiency, but the industry also has significant tailwinds around legacy modernization, around creating AI-ready data foundations, around creating cloud infrastructure ready for AI that is scalable, that will allow for compute at scale, that will allow for model hosting, that will allow for MLOps. The industry also has significant tailwinds on account of everything that is happening on the security side. Of course, all that is here and now. Yes, efficiency-related deflation is a reality, but the opportunities around legacy mod, data AI-ready foundations, cloud scalability, MLOps, model hosting, security are real here and now. In the medium term, there are more. We have talked about it. Custom agentic solutions, creating agent harnesses, managing the agentic ecosystem that is going to get formed, helping with model development and deployment.