Refused to commit on demand environment vertical quantified.

Yeah, thanks. Thanks for the opportunity and congratulations on a very good set of numbers. Sir, I have two bookkeeping questions. So, if I look at the nature of the software license revenue growth, in this quarter it has gone up by 40% q-on-q. And if I strip out from the total revenue, the services revenue has gone up by 2.6%. So how to read this line of software license revenue growth? And the second related question to Vinit sir, on the balance sheet, if I look at the intangible assets under development, it has been increasing. So, it constitutes 1% of the revenue, but it has increased incrementally by 50 bps for the last two years. So, what is the nature of this capitalization on the balance sheet?

So, Sandeep, I'll take the first question and I'll have Vinit answer the second question. So as far as the software licenses are concerned, there are three different or at high level two different components. On one side, these are software licenses that are third-party software licenses, where if we are doing let's say cybersecurity related managed services or overall managed services, then we need certain licenses, which are getting passed through us with certain margins. The second part of it is where we have our own technology stack, whether it is iAura, GenAI Hub, or SASVA, more and more, we are not pricing things in a way that we are taking these things as independent sales. These are integrated sales and the timing of the revenue recognition will depend on how these are priced. So overall, the combination that you see, if you see the 2.6% that you've quoted on services, I would want to say over a period of time, the IP and services will get clubbed together and these lines will blur. [Vinit Teredesai]: Yeah. So, Sandeep, in terms of the intangible assets that you're seeing on the balance sheet, as we called out that we have been heavily investing into developing new AI tools, productivity tools, SASVA platform, iAura, etc. As a result of that, you're seeing the increment that is happening on the intangible assets. I think so it has, they are now at a pretty good amount of maturity level whereby the growth in these intangibles will not be at the same level as what you have seen in the past.

Sandeep, I need your advice or maybe better understanding on this. So, this quarter, there's a 150 bps improvement in margins because of tools and pricing, tool-driven pricing models. How should we think about this logically? Because, one, it's a big margin jump in a single quarter. Second thing is that, is this for a specific large project where there was a large accrual this quarter or because people normally would tend to sort of extrapolate this linearly. So, better sort of thought process, how should we think about this? And the second thing is this obviously should have led to higher fixed price. We don't disclose that, but is that a fair understanding? And going forward, when you think about this, over a period of time, we'll have competition who also build these tools and accelerators and stuff. So, at that point of time, do you think this gets sort of commoditized in some way and just comes off? Or should this be a sustainable kind of margin that it'll pull up? That was the first one. And the second one was for Vinit. This quarter, we announced 1.1 million sort of share that we are sort of issuing to the ESOP Trust. How should we think about the impact on margins as we get into next year from that specifically?

Sure. So, Nitin, first of all, this 150 basis points increment that you're seeing, it's not on account of one deal. So, there are multiple deals that we have won using the SASVA side of it, iAURA side of it, GenAI Hub side of it. Now, if you look at these wins, some of these wins are scaling as we speak. And the way the business model in some of these things is when we are bringing our tool and IP, we are monetizing some amount upfront and some amount is basically through the productivity that get by deploying lesser number of people because we are using the technology. So, we have to monetize this technology because we are investing on the other side as well. So, we are trying to be prudent. On one side, we invest. On the other side, we harvest. So, that is the combination. Now, as far as competition is concerned, it will be a very healthy competition to have if everyone starts building tools, accelerators. It will also keep us on our toes. Today, we have a head start. And we believe with our continued investment, we should be able to manage our competitive differentiation. [Follow-up: Do you think this sort of improves the 200 basis points that you originally thought of?] [Sandeep Kalra]: So, look, there is only this much that we want to squeeze out of the system. We want to be able to reinvest to your point, making sure that we are ahead of the curve with respect to the technology progress in our competitive landscape. So, we are not aspiring now to take it another 200 basis points up. We are happy where we are reaching. And I think we have proven to the world we can achieve the margins we have to. And we should put this to rest, make sure that we are a growth engine for the time being. [Vinit Teredesai]: And, Nitin, your other question with reference to the ESOP 1.1 million shares that have been allocated. This is a part and parcel of the stock options of the RSUs that have been granted in the past. These are not anything new substantial that we have granted recently. So, whatever we have said in the past, it was a cost that came in FY25. This is a reduction in cost that is happening in FY26. There will be a further reduction in cost that will happen in FY27.

Hi, Sandeep. Just a couple of questions. Firstly, the kind of tools or partnerships we are kind of showcasing in AI, it looks like our client base is slightly more mature in the sense that we're talking less about the foundational stuff and more about sort of AI implementation, which probably happens beyond the POC stage and beyond when the clients have already sorted their data and foundational limitations. So how is that happening? I mean, is our client base just more mature or is the quality of the clients just that much more better? That's the first question. And secondly, on margins, I guess it's a very interesting case because while you highlight 150 bps of margin improvement because of internal tools, the revenue per employee has kind of been a little bit flat over the last, let's say, 3-4 quarters. So how should we sort of reconcile these two numbers? And to that point, if at all the internal sort of tools kind of improve, let's say, going forward as well, is there more margin juice coming from higher revenue per employee going forward or no?

So, we'll just keep it high level. We have 10 minutes in the call, but we will answer it at a high level. The revenue per employee, if you were to factor out the impact of the one-time thing that you talked about, you will see a certain different thing than what you're seeing there. Now, obviously, the intent here is build better technology, leverage it to deliver more productivity per employee so that our revenue and headcount have a breakage from the linear correlation versus a traditional tech services world. We'll let it pan out. This is going to mature over a period of time, and I'm hopeful that it will move in the right direction. Now, you talked about the client base, more mature, beyond POC stage. Look, in our industry, and if you look at our top 100 customers, they give us 82% of our revenue. We're trying to go deeper. We're trying to understand their business challenges better. We're trying to take our technology in the context of their business challenges, doing proof of concepts, sometimes even a number of these are proactive, and so on, proving to them that we have the technology that can solve for their business problems. So, it is not about selling a model versus another model. It is about understanding what is the business issue that we're trying to solve for, what is the right tool to bring, whether it's our tool or a partnership, and as long as we can prove we are able to win the business. [Follow-up on hi-tech vertical]: [Sandeep Kalra]: So, if you look at traditionally, where Persistent has played in the hi-tech market versus a number of our peers are playing in hi-tech market, number of our peers address what is the typical IT part of the hi-tech customer. We are at the core of the engine. We are in the product development and the related side of it. Our pitch is very, very different, very differentiated in the hi-tech space as compared to most of our competition.

Sandeep, just on the healthcare vertical, in the past you had mentioned that this year you anyways expect BFSI and hi-tech to lead the growth and it's playing out pretty much in the same manner. But how has the hi-tech vertical overall demand environment kind of played out over the past two quarters? The big beautiful bill, of course, is behind us in terms of how clients are looking to change their spend in this vertical. And more importantly, the payers and providers, where do you see a higher delta or a higher growth potential in the coming quarters?

So, Vibhor, you talked about hi-tech vertical. I'm assuming your question was on the healthcare vertical. [Vibhor Singhal: Oh, I'm sorry. I meant the healthcare vertical.] That's fair. So, if you look at our healthcare vertical, we are very pleased with the way we have seen the demand shape up. Partly it is the market, and I would credit our team more than just the market dynamics for getting to the right audience, understanding their imperatives and the kind of wins that we have highlighted that Saurabh talked about. A number of them are new logos in addition to the expansion in the existing accounts as well. Now, if you look at it, you talked about the payer-provider ecosystem. Actually, if you look at our wins, they are in the payer-provider tech side of the house, provider side of the house, pharma side of the house, and so on. So, it is fairly broad-based, and a number of them are forward-looking programs. So, it's pretty heartening, and I'm pretty hopeful healthcare should do well with time. [Follow-up to Vinit on 150 bps margin accounting]: [Vinit Teredesai]: So, Vibhor, without getting into the details of specifics of what happens. As we said, there is a combination of multiple deals that basically have a component of certain license and services. Sometimes there is a component of license that comes in, in terms of the revenue play, because that gets delivered and gets recognized. Sometimes it's over a period of the entire contract because it's not specifically identified. So, the commercial construct defines how we recognize the revenue.

I had a question about this last deal that you mentioned for modernization of a bank. Can you explain what sort of productivity benefit that you're getting in this mainframe modernization? Is it like about 20 to 30%? I think you mentioned a number, but just wanted some clarity on that. And second is on the platforms that you have for the cyber productivity, you put in GitHub, Copilot, Cursor, Windsurf, stuff like that. Are you seeing your customers actually adopt multiple platforms or are people pretty much standardizing on using one platform? And what sort of productivity benefits are they seeing on their own without your IPs coming in?

Sure. So, I'll try and keep it brief. We are at 6:58. We have two minutes. So as far as the productivity benefit for the mainframe modernization or I will just keep it at application modernization or platform modernization. So, see, it's not just about how much effort, effort is one part of it. But there are a number of these programs where people were not able to reverse engineer manually the business logic of these platforms because these are built over the last 20-30 years and people have gone...it's very, very difficult. Using our platforms, we are able to get to 60 to 70% of reverse engineering of business logic, convert that to even an English document so that the business users can understand. And by doing this, we are able to get them off of legacy platforms, legacy technologies onto modern platforms, which are much more nimble, agile. Now on the second side of it, Cursor, Windsurf, Copilot. So many of our customers are adopting one. Some of the larger customers are adopting two or three as well. One of our largest FinTech customers is a big-time user of two of these platforms in conjunction with each other. And we are also a part of their ecosystem. So, it is their own team as well as us who are using these tools. And from a coding perspective, just the code part of the software development life cycle, people are able to get 20 to 25% benefit using these kinds of tools from the code part of it. [Follow-up about overall SDLC productivity benefit]: [Sandeep Kalra]: Yeah, that's exactly where our platforms like SASVA come in. Because when we bring in SASVA, we are talking of right from requirement gathering to grooming it into a technical kind of backlog to doing the implementation in terms of coding, release management, nine yards. And then even doing things like maintenance after that and so on. So, all these tools are very good, but they solve for a sliver of the entire software development lifecycle.