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Our view

Overall performance was as per expectation. There has been some uptick in revenue growth momentum led by ramping up of previous deals wins. The growth in   CME(Communication, Media and Entertainment) segment(40% of revenue) continues to be modest but has started picking up. The 5G related deal activity has started showing initial momentum, though it is still far from being a meaningful contributor. The uptick in attrition to 17% and along with travel expenses coming back by the end of year are potential margin headwinds. We maintain ADD rating on the stock  with revised target price of Rs 1,334 at 18.5x on FY23E EPS. Trades at PER of 16.8x on FY23 earnings.

Result Highlights

* Revenue was broadly in line at $1,384 mn( up 4.1% QoQ ). Growth was led by strong performance in enterprise segment that grew 4.7% in USD terms; whereas CME( Communication, Media and Entertainment) reported modest growth of 3.2% QoQ in USD terms.

* In term of geographical break up, growth was supported by strong performance in the Americas (up 6.8% QoQ) and Europe( up 6.6% QoQ), while Rest of World showed degrowth of 2.7% QoQ in USD terms.

* EBIT margin declined 133 bps QoQ to 15.2%( as per expectation), sequential dip on account of wage hike in the quarter  

* Offshore revenue mix grew 100 bps QoQ to 38% as per industry trend.

* New deal wins remained strong‐ at $815 mn vs $1,043mn in Q4FY21 and $290 mn in Q1FY21. Number of active clients grew by 51 QoQ.

* LTM Attrition has jumped 400 bps QoQ to 17% in the quarter ( area of concern). Utilisation increased by 100 bps QoQ to 88%. 

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