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Result Highlights

* Overall, the result was below consensus expectation as it reported revenue of $2,696mn (up 3% QoQ; up 2.5% QoQ in CC terms). In INR terms, it reported revenue of Rs 196. 4bn (up 1.8% QoQ), impacted by INR appreciation during the quarter. It has witnessed sequential deceleration in QoQ growth over last 3 quarters. The revenue growth was led by strong performance of Mode 2(digital technologies) that grew 25.2% on YoY basis in constant currency this quarter.

* EBIT margin (excluding milestone bonus) declined by 260 bps QoQ, which was more than expected decline; led by wage hike, and higher SG&A and higher depreciation expense for the quarter.

* However, the deal win momentum remained strong as it signed net new deal of $3.1bn (up 48% YoY), led by traction in digital technologies

* LTM attrition declined by 640bps YoY to 9.9%. However, it is expected to pick up going ahead with increased demand for talent.

* Gross Cash stands at US $ 2,803 mn and Net Cash at US $ 2,268 mn at the end of March 31st, 2021.

* Declared interim dividend of Rs 16/ share. Included a Special Interim Dividend of Rs 10 /‐  per share as a milestone to mark the Company crossing the $10 B milestone.  (Dividend is Rs 26 for FY21).

* FY22E Guidance: Has guided for double digit revenue growth (in cc terms) for FY22; with EBIT margin between 19%‐21%.

Our view: The revenue and margin performance was below expectation. However, On the positive side, the broad outlook remains positive as the deal win momentum remains strong led by deals in cloud migration, and other digital technologies; and the company continue to focus on investments in talent and other geographies to boost long term growth potential. The company has provided robust guidance of double digit revenue growth (in cc terms) for FY22, while maintaining broadly stable margin in the range of 19‐21%. The valuation remains attractive as the stock trades at 16.3x on FY23 earnings. Initiate coverage on the stock with BUY rating

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