Mindtree Q4FY20 Earnings Call between Management and Analysts
On the Call
Amisha Ravindra Munvar, Head of IR
B. Senthil Kumar, Interim CFO
Dayapatra Nevatia, COO
Debashis Chatterjee, CEO, MD & Director
Ladies and gentlemen, good day, and welcome to the Mindtree Q4FY20 Earnings Conference Call. I now hand the conference over to Amisha Munvar, Head of Investor Relations at Mindtree.
Amisha Ravindra
Thank you, Stanford. I welcome you all to this call to discuss the financial results for the fourth quarter year ended March 31, 2020. Trust all your fellow mates and your loved ones are on safe and in good health.
Today, on the call, we have with us Mr. Debashis Chatterjee, Chief Executive Officer and Managing Director; Mr. Dayapatra Nevatia, Chief Operating Officer; and Mr. Senthil Kumar, Chief Finance Officer of Mindtree.
We will begin with a brief overview of company's Q4 performance, after which we will open the floor for Q&A. The webcast will be in listen-only mode, but you can post the questions. We will take the webcast question once we complete the questions through the conference call.
Please note that this call is meant only for analysts and investors.
Let me begin with the safe harbor statement. During the call, we could make forward-looking statements. These statements are considering the environment we see as of today and obviously carry a risk in terms of uncertainty, because of which the actual results could be different, as outlined in our financial sheets, which is available on our website. We would not undertake to update those statements periodically.
I now pass it on to Mr. Debashis.
Debashis Chatterjee
Thank you, Amisha. Good evening and good morning to everyone on the call. At the outset, trust you and your loved ones are safe and in good health. Financial Year 19-20 has been an exciting one at Mindtree. Our client-first approach has resulted in robust revenue growth and highest ever deal signings. Our relentless focus in operational excellence has helped us further expand our margins in Q4.
During the current pandemic situation, the leadership team at Mindtree and all Mindtree minds did a commendable job in navigating through the crisis. We were among the first few companies to make a quick transition to work-from-home model for almost all Mindtree Minds. Our proactiveness in setting up a crisis management team, operating in a hub-and-spoke model, robust business continuity processes and infrastructure at Mindtree ensured uninterrupted services to our clients, while maintaining health and safety of Mindtree Minds. We have received multiple client accolades for the smooth and seamless business continuity.
Giving back to society has been in the DNA of Mindtree. In these trying times, with our parent Larsen & Toubro, Mindtree donated RS 20 crores to PM CARES fund. Mindtree also contributed RS 1 crore towards COVID19 testing kits. In addition, Mindtree Minds with a matching contribution from Mindtree have scheduled various activities to fight the pandemic in partnership with respective state governments of our business presence.
With all these measures, I'm extremely proud of all the Mindtree Minds, our partners and our suppliers, all coming together for the cause of human life and well-being. The collaboration helped us to deliver on our commitments to all our stakeholders. I would like to extend my special thanks to all our clients for supporting us during this crisis and acknowledging our efforts in delivering seamlessly in this new normal.
Now coming to the earnings updates. We closed Q4 and the full year with record deal closures and margin expansion. We signed contracts worth $393 million in Q4 and $1.2 billion for the full year, thus underlying our strong transformational capabilities.
Some of the key highlights of the year are as follows: our approach to carve out strategic engagement team has begun to yield results. We closed a multiyear annuity deal with one of our existing clients, and more details will follow later in my commentary.
Our client-focused initiatives are yielding good results. Our pipeline continues to be healthy, and we continue to see increase in our win ratio. We have made key inroads into cloud and receiving good traction in the SAP areas. New wins reported throughout the year have ramped up as expected. Our annual client satisfaction survey results received in this quarter had all-time high ratings. The overall relationship index is better than that of previous years, reflecting increased trust and confidence of clients in Mindtree.
Advisers continue to recognize us as a market leader. ISG rated us as a market leader in digital business solutions and services and as an architect leader in digital transformation. Many more such accolades were received during this quarter, including indicating our continued position in the leadership quadrant in our strength areas.
Moving on to financial highlights for the quarter and full year. For the quarter, our revenue is $278.4 million, with 1.9% growth in constant currency and 1.2% in dollar terms. For the full year, our revenue is $1.1 billion, with a growth of 9.4% in constant currency and 8.7% in dollar terms.
I'm happy that our profitable growth strategy is resonating well. We could demonstrate improvements quarter-on-quarter. Our focus on cost efficiencies and standardization helped us to reach a desired band of 17% to 18%. Our endeavor is to continue to strengthen on the revenue as well as other operational efficiencies.
Amongst the verticals for the quarter, Hi-tech media grew 5.2% and other verticals declined. For the full year, we saw robust performance across all verticals. Hi-tech and media had a strong growth of 13.3%, followed by travel and hospitality, 10.6%; BFSI, 4.7%; and retail, CPG and manufacturing, 3.2%.
Amongst geographies, for the quarter, U.S. grew 4.1%, Europe declined 8.4%. For the full year, U.S. grew 10.7%, India grew 27.4%. Rest of the world grew 11.5% and Europe declined 3%. Amongst services, for the quarter, our digital business grew 1.8%, infrastructure management and tech support grew 4.9% and testing 4.3%. For the full year, we had a strong growth in infrastructure management and tech support, 15.9% and digital, 15.3%.
We continued focus on rationalization of tail accounts. We have 307 active clients with the addition of 5 new clients in Q4. $10 million clients increased by one, taking the count to 23. Our top 10 clients grew 5.2% quarter-on-quarter, and 17.3% year-over-year.
On the people front, we ended the year with close to 22,000 Mindtree Minds with a net increase of 430 minds for the quarter and around 1,800 for the full year. Our attrition has seen a gradual decline quarter-on-quarter with LTM being 17.4%. For FY 2021, our campus onboarding will continue as planned. In terms of lateral hiring, we continue to attract quality specialized talent in emerging technologies like Cloud, security, et cetera. And our hiring volume continues to be healthy. In the current business scenario, we continue to attract, qualify, acquire and onboard talent via our digital onboarding platform. We have moved campus training to Digital Orchard platform, through which we are continuing our campus training virtually as per original plan.
Beyond campus training, Mindtree Minds have completed more than 1 lakh courses on our signature online learning platform, YORBIT, amounting to 7.65 lakh hours of learning during the year. Mindtree was conferred by the Business World award in 2 categories: 1 for Excellence in Learning and Technology and another 1 for Excellence in Diversity & Inclusion. Also, Mindtree received an award by Coursera for Best Enterprise Partner.
Let me share some of the new wins for the quarter. Mindtree won the strategic annuity deal with an existing leading real estate services company to implement end-to-end digitally enabled technology services and help us embark on digital transformational journey. This deal is strategic not only from a size perspective, but also encompasses multi-service offerings, cutting across IT life cycle. The sale was announced in one of our recent press releases sometime back.
For one of the leading providers of supplemental and life insurance products in North America, Mindtree has been chosen as a strategic partner in a multiyear deal to enhance client experience through digital transformation services for their clients.
For a travel technology leader, Mindtree has been chosen to manage the outsourced product development, covering the large portfolio of airlines, hotels, travel agencies and airports.
For a leading manufacturer in outdoor maintenance and gardening equipment, Mindtree has been awarded a multiyear application development and maintenance services contract as part of their transformational journey.
As part of the deal, Mindtree would also help the client to migrate a data centre from a third-party provider to clients own data centre. Mindtree will provide application development, testing and support services for a niche technology player that specializes in benefits administration.
Now let me pass on to my colleague Senthil, to share other financial highlights.
B. Senthil Kumar
Thank you, DC. Good evening, and good morning to everyone on the call.
Our fee revenue for the quarter grew by 1.1%. Volumes increased by 4.1% and pricing realization declined by 2.9%. Drop in price realization is due to higher number of days as compared to Q3, and negative impact from cross-currency. Overall our contract pricing remains stable.
- Our reported EBITDA margin for the quarter is at 17.1%. Excluding onetime donation to PM CARES fund, the EBITDA margin would be at 18.1% as compared to 15.6% in Q3. Improvement in margin is led by 170 basis points from operational efficiencies and 80 basis points from favorable movement in currency.
- Our continued effort towards margin expansion are yielding good results and visible in our quarterly margin improvements. Our full year EBITDA is at 14%. The effective tax rate for the quarter is at 21% as compared to 23.6% in Q3. For the full year, it is at 23.9%.
- Due to sharp depreciation in RS, we had a net forex loss of USD 3.6 million for the quarter. PAT margins for the quarter is at 10.1% as compared to 10% in Q3. In absolute terms, it grew by 1.8%. For the full year, PAT is at 8.1% as compared to 10.7% in FY19.
- EPS for the quarter is at RS 12.5 as compared to RS 11.9 in Q3. For the full year, it is RS 38.33 as compared to RS 45.8 in FY19. DSO for the quarter is at 66 days as compared to 70 days at the end of the last financial year FY19.
- EBITDA to operating cash flow conversion for the year is at 75.7%, and EBITDA to free cash flow is at 64.3%.
- Our utilization, including trainees, improved to 76.5% compared to 75.9% in Q3. Utilization, excluding trainees is at 78.8% compared to 78% in Q3.
- Our record contract signing for the quarter is USD 393 million, out of which renewals were USD 206 million. New contracts were USD 187 million. Contracts to be executed within 1 year were USD 286 million and greater than 1 year were USD 107 million.
- As on March 31, our cash flow hedges are at USD 979 million, and on balance sheet hedges are at USD 138.7 million. The Board of Directors at its meeting held today recommended a final dividend of 100%, which is RS 10 per equity share of par value of RS 10 each, which is subject to approval of shareholders at the coming Annual General Meeting.
I hand it over to DC to cover an outlook.
Debashis Chatterjee
Thank you, Senthil. The current situation is creating unprecedented level of uncertainty. Major economies have virtually come to a halt. Clients in travel, manufacturing, retail verticals are more prone to immediate impact due to drop in demand, disruption in supply chain, et cetera. Clients in BFSI vertical would reprioritize their discretionary spend in immediate future to conserve the cash. We continue to see traction in Hi-tech and CPG verticals due to high demand in collaborative tools, adoption of cloud, data, SAP, IT modernization and workplace automation. We are working very closely with our clients in helping them deal with current pandemic and have launched several co-innovation initiatives.
Overall we foresee near-term challenges in Q1 revenues. We have reached the margin band of 17-18% and seen a quantum jump in the last 3 quarters. Considering the current challenges, there will be some pressure on the margin in the near term. However, our profitable growth strategy remains intact, and we'll continue to drive operational efficiency in our business.
A few reporting changes from next quarter. As a part of strategy refresh road map, we will change our reporting for service offerings, as disclosed in the fact sheet. We will be repositioning Hi-tech and media vertical to communications, media and technology. Considering the convergence of Ind AS and IFRS, we will publish financial results under IFRS on annual basis only from financial year 2021.
I will now pass this back to the operator for opening up for questions.
Questions and Answers
Operator
The first question is from Sandeep Shah from CIMB India.
Sandeep Shah
Hope everybody is safe at your end as well. The first question comes to the mind is because of the COVID and looking at travel hospitality being 16% of the revenue and also an exposure to manufacturing and retail, how do you see in terms of the volume or pricing pressure? If you can give color, will it be the pressure in the near-term would be largely through volume cuts? Or it also a combination of pricing? And directionally, you expect that margin may have a headwind. And directionally, it may come down in the near term. So if you can give some quantitative color, it will help.
Debashis Chatterjee
So Sandeep - as I said in my commentary, near term we do expect some impact on margin. But our overall strategy in terms of the processes that you have put forward has been yielding good results. If you have been tracking the EBITDA quarter-on-quarter, we have been consistently improving. So we have a very robust process in place where we are very focused in terms of our profitable growth, and that will not change. That strategy remains unchanged.
Specifically to coming to clients in specific verticals, I think every client's situation is different. And it is probably very clear that every client is going through different kinds of challenges. And we are also discussing with them in terms of various options how we can help them navigate through this pandemic. So from that perspective, it's a client-to-client situation, but we also feel that clients are appreciative of the way we have handled the COVID situation. In fact, there has been 0 loss of productivity, no loss of productivity at all, for the clients whom we have been supporting. They're all long-lasting clients, long-time Mindtree clients. And those things are very well appreciated by the clients. So we also feel that by staying close to the client as the things improve, then we should be able to help them as we go along.
And the last thing I would like to highlight is, we do this quarterly project feedback survey. And this survey was kind of done launched before the COVID, but kind of ended through the COVID19 situation. And the scores that we got in the feedback is higher than what we got in the previous quarter, which also makes me believe that the clients believe in our overall capability, and they have a lot of faith on us. So that also will help us as we now look at the future.
Sandeep Shah
Okay. So sir, within your top 10 client list or top 15 client list, there could be some clients exposed to travel and hospitality. So you believe any major client-specific issue, which can come back in the near term, maybe in the first quarter and the second quarter, and it may lead to some serious issues because what we are reading in the media is in the clients in the travel may have some growing concern issues as well?
Debashis Chatterjee
Yes. See, I think there are clients in the top 10 who are in travel. But it's probably a little too early for me to assess the overall situation because right now we all understand that there will be impact, which I think we have also called out that we do see a softness in terms of our Q1, but we need to see how it unfolds and what are the other things that we can do to help our clients by which we can also have a win-win for both of us.
Sandeep Shah
Okay. Fair enough. Just on the cost management measures, can you highlight what additional measures we have taken? Because some companies have taken a call defer the wage hikes, freeze the recruitment. So how are we looking to manage the margins going forward?
Debashis Chatterjee
Well, I think the standard measures that we always take in terms of cost management are already in place. Like, for example, if you have been following the fact sheets, the number of subcontractors have significantly been coming down. And that is nothing to do with COVID. That's something as a part of the strategy we have been adopting. So some of those standard cost levers we have been following for some time, and those things will continue.
Coming specifically to anything, which is an employee or a Mindtree Mind action, I we feel that let the dust settle, let the things calm down, and then we will assess and take a decision. But at this point of time, we have not taken any decision. And we will we have also decided that the offers that we have rolled out so far, the campus hiring as well as laterals, we'll honor all the offers.
Sandeep Shah
Okay. Just two last bookkeeping questions. Can you give some color in terms of the average strike rate of the hedges, which are likely to mature in FY '21? And what could be the effective tax rate for FY '21 because it has been coming down on a significant basis Q-on-Q?
Debashis Chatterjee
I will request my CFO to take the question.
B. Senthil Kumar
Sandeep, if you looked at ETR for the FY 2021, it will be ranged around 26% in the range of 26%. On the hedges, overall, if you look at our portfolio of hedges, 1 to 3 years, currently stands at RS 76. But if you look at next 1 year, it will be around close to RS 73.5 to RS 74.
Operator
The next question is from Sudheer Guntupalli from Motilal Oswal.
Sudheer Guntupalli
The broad understanding is that in a post-COVID work paradigm companies like our top client should be the net beneficiaries because of the new normal of working from home, reduced travel, so on and so forth. So what is your assessment, preliminary assessment of the areas, which will see an increased spending by this particular account over the medium term? And what is our presence and prominence in these spending areas by that specific client?
Debashis Chatterjee
You're talking about the top client?
Sudheer Guntupalli
Yes.
Debashis Chatterjee
Yes. See, I think if you look at the work that we do with our top client, we are very well diversified within the within that client in terms of the nature of work that we do. We do a lot of work, which is annuity in nature. We do a lot of work, which is projects in nature, which are in the analytics and the marketing operations, networking. We do a lot of customer support, technical support. I can only say that, in my view, the top client has been a true client who truly believed in digital. And I think that belief is reinforced given the COVID19 situation.
So we continue to being a truly digital partner to the client, I think, we are in a very advantageous position to work with them. And many of the work that we do are leveraging our collaborative tools to enhance workplace automation, so on and so forth. So I believe that it's only going to be beneficial for us as a partner.
Sudheer Guntupalli
Sure, sir. And second question is the deal wins during the quarter were extremely robust. But some of these deals might have been signed before this entire disruption started. So what is the outlook now in terms of ramp-up of these deals based from the client willingness, financial stability standpoint or from our own readiness standpoint in terms of the virtual remote onboarding processes, which may be needed to ramp up?
Debashis Chatterjee
Good question. The deals that we have signed in the past quarter, those deals have been ramping up. The only change is that some of the transition activities that we would have done in person, some of those transition activities are happening, leveraging the digital platforms that you need to appreciate one thing that when we say digital, we are also digital insight, as in, like a lot of work that we do are leveraging digital platforms within Mindtree. So I would say that the transition activities are going on. In specific situations, they may be slowing a little bit. But overall, I don't have any concerns in terms of the transition that is going on for the deals that we have signed.
Sudheer Guntupalli
Sure, sir. And one last question. So while our top account has been doing quite well for a few quarters, growth in rest of the accounts was a little underwhelming. We have been talking about client de-risking. So what is our progress and thought process on this line?
Debashis Chatterjee
Yes. I think the reality is that we have been very focused in terms of client de-risking, and there have been initiatives that have been put in place. But I think you have to also appreciate that these things won't happen in just 1 quarter. I can only tell you that there are initiatives that we have launched. There are efforts that are underway. And we also feel that some of these clients will be post-COVID probably think of more digital way of working, where we are positioned, we can position ourselves in a very advantageous position. So our hope is that with the efforts and the mechanisms that we have put in place, we should be able to change it. It may take a little bit of time, but that is our intention as well.
Operator
The next question is from Sandip Agarwal from Edelweiss Securities.
Sandip Kumar Agarwal
First of all, I would wish everyone good health and stay safe. So I have only one question. You have done extremely well in this uncertain environment both on the cost management, on the revenue growth front as well. I just wanted to ask a particular question that our Hitech has a very good momentum right now, and I don't see any big reason for that to derail, primarily because our clients are doing extremely well. So we definitely get some benefit out of it as well. Is there a way we can kind of guide? I'm not asking for a number guidance, but I'm just trying to understand the losses, which you see in the travel and transportation segment, which right now is very difficult to assess. But do you have a sense that even the worst-case scenario, travel and transportation losses could be broadly with the significant tailwind we are seeing in the Hi-tech? And I believe that Hi-tech probably will not see challenge because the whole pandemic disruption may actually, after 3 or 6 months, structurally help that segment more.
And secondly everyone is comparing this pandemic with GFC, while the loss supplies and other things are much more severe and it's very unfair to compare. But do you see that there is a change in minds of the clients on how they perceive IT during GFC time? So that's all from my side.
Debashis Chatterjee
Yes. I think you have partly answered the question that you asked. So definitely, there is a within our Hi-tech clients, we do see a lot of I mean more opportunities, let me put it that way, because they seem to be leveraging more digital platforms and digital ways of delivery. And we also feel that there is a good momentum over there. That's one vertical where we can see good momentum. But it may be a little too we also see good traction in CPG, for example, the consumer goods vertical, where, again, there's a lot of digital initiatives being discussed. But it may be a little too early to call out what offsets what because we still don't have a complete picture in terms of how long is this going to continue and how long is the what is the new normal and when is the new normal. So I think it is difficult to comment on that. But yes, so we understand that we need to have a strategy to kind of offset some of the losses on the game. And that strategy is something that will evolve, and that's something we are working on.
In terms of specifically, as you rightly said, comparing the global financial crisis and this pandemic, it could be it may not be absolutely accurate because one was the financial services practice was in the middle, and here, it is started with travel and hospitality. But I can only tell you one thing, which I see as a common trend is, I think when we talk to our clients, when we as I said, I'm actually thankful to our clients for helping us in terms of executing the BCP, and we did it at a very record time. They were all very appreciative, came out in the quarterly surveys, and we received a lot of accolades from the clients. I think they are also very keen to understand the new normal, and they're also very keen to bounce back as soon as possible.
So as a strategy we have been staying very close to our clients. We have been thinking of what are the things we can help in terms of leveraging our digital platforms, where can we get a jump start. And we are also ensuring that if we can understand some of the initiatives where we can it can be a win-win, we definitely want to help them in terms of getting ahead of the curve. I had seen in GFC as well as now, where clients are very keen to as soon as this gets over, how can they again get back to normal, but we don't know what is the new normal.
Operator
The next question is from Divya Nagarajan from UBS Securities.
Divya Nagarajan
This is Divya Nagarajan. I think I'm trying to understand what your customers are saying in this context. I think in your conversations that you've had, what is the feedback from customers? What kind of activity are you hearing them put on the back burner right now? And where do you see acceleration in terms of activity levels? That's part one.
And part two, and I think it kind of ties to your earlier question. While there could be some near-term negatives because of the shutdowns and the impact, is your large clients likely benefits from collaboration platforms and everything else likely to offer any resilience against some of those negatives?
Debashis Chatterjee
Yes, Divya, so let me answer the questions one by one. I forgot your what was the first question?
Divya Nagarajan
Client feedback.
Debashis Chatterjee
So I think Divya, for most of the clients when we started engaging with them in communicating with them in terms of this pandemic, I think the first priority was safety and health and safety and how do you ensure that everybody is safe. And the next conversation was how can you ensure that some of the critical work, that we are supporting them, that doesn't get impacted. So I think the first level of conversation was just to ensure that we can provide the BCP, the work-from-home and all those things. And I think given the fact that the entire organization has been mostly on laptop, as a philosophy, and we had the securities and all those things built-in, it probably did not take a lot of time for us to implement work-from-home. And I think that is something which almost every client has appreciated.
And subsequent to that, I thin, again, it's a client to client situation. There are certain clients with whom we have been doing some transitions. I think they have been very supportive in terms of helping us go with the continue with the transition. Many of the transitions are happening remotely, which is a new thing for the client, which is a new thing for us as well, leveraging digital platforms. And that's going on. I would say again, there's no one-size-fit-all, but there have been a few cases where it has kind of slowed down a little bit, but nothing of big concern for me. Whatever deals we have signed earlier, I think the transitions are still going on.
And the third thing is, what is the new thing that we can talk about. I think that's something, which will emerge, but I can see that clients in Hi-tech, clients in CPG, I think they are willing to have some conversations in terms of what can we do differently, especially in the areas of collaborate with tools, in the areas of virtualization, in the areas of Cloud, I think they're still they know that these are some of the things they want to probably accelerate. And if we have the capabilities in terms of doing that, some of those conversations can slowly get started. And some of the conversations have been started in a small way. And I'm hopeful that those conversations will accelerate as we go along. But it's we used to appreciate that it's a client to client situation, and there is no 2 clients who are thinking the same way. It's the new normal will be defined, and we have to just ensure that whatever is the new normal, we are ready for the new normal.
Coming back to the specific question on the large client, yes, I think the large client, given the current situation, being a digital native, if I can say so, my large client, I think, it was and we being a truly digital partner for them, I think it has been a win-win for both of us. But I feel that I think we have to we have a strategy to focus on, as I answered sometime back, we have a very clear strategy to focus on the other clients as well. So we want the large client to grow. But at the same time, I don't think we can just rely on large client. We have a robust strategy to ensure that given our capabilities and assuming the fact that clients will try to buy digital solutions more and more, I think we are well positioned to cater in the new normal.
Divya Nagarajan
Just a follow-up on the cost side. In addition to the regular levers, would you consider anything new, specifically on furloughs loss as well as employee salary?
Debashis Chatterjee
No. I think whatever you heard so far is the normal discipline that we have put in place. I think you have heard us from me in the previous quarters as well where we put our process in place. We put a disciplined way of managing the operational efficiency. And what you see is the gain that we have obtained in the operational efficiency using multiple levers, and the levers are whether it's utilization, whether it's subcontractor reduction or it's the pyramid. So all these levers come into play together to give us the overall operational benefit. And that will continue as a that has now, I would say, it's like the third quarter for me that I think has already been established as a discipline. I think that discipline will continue. There may be ups and downs, but that discipline will not go away.
Divya Nagarajan
No. I was referring specifically to the near-term where you could see these volume disruptions and demand softness.
Debashis Chatterjee
No. I think in the near term, there will be some softness in the near-term in terms of our overall revenues. At least in Q1, we see some softness. And if there are softness, then we can probably see some softness in terms of our margin as well. But in terms of specific, with respect to furloughs and all these things, we have deferred all the decisions related to the livelihood of people until we return to some normalcy. And because we don't want to cause agony in people's minds. And I think that's the way we have played it. And we will also honor all the jobs, that offers that we have rolled out, the campus hiring, and et cetera.
Operator
The next question is from Manik Taneja from Emkay Global.
Manik Taneja
I had a couple of questions. Number one was that we've been focusing around rationalization of our deal accounts. Just wanted to understand if that has had any impact from a revenue standpoint in recent quarters. And is that beneficial from a margin standpoint? That's question number one.
The second thing that I wanted to understand from you is that you said that you've not seen any significant impact on deal transitions in recent weeks. But have you seen any instances of customers coming back to you and asking for some sort of price discounts?
Debashis Chatterjee
Okay. So let me answer the first question. Your first question is regarding the tail accounts. I think, again, just like I talked about multiple initiatives, this is one initiative that we had launched, which is which has been launched sometime back, where as a part of our strategy, we wanted to rationalize the tail accounts. It has got nothing to do with the COVID19 per se because this has been an ongoing initiative. We also had added 5 more new clients this quarter.
So rationalizing of tail accounts, is again, as a process, it will go on, and we feel that it will be benefiting us in the long run. And I also feel that it is not something which is a which can happen in 1 quarter or 2 quarters, but it will happen over a period of time. But that focus will continue. So and we want to we form this strategic engagement team. The view is that we want to have more focus in terms of closing multiyear annuity deals. And that's why by rationalizing the tail accounts, we can actually divert the energy in terms of specific accounts where we can close larger deals. So that's the whole initiative that we launched, and that will go on, and there is no connection with respect to COVID per se. You had a second question. What was that?
B. Senthil Kumar
Transition.
Debashis Chatterjee
As I said, the transition that we have been doing, I don't think there is anything which has been stopped. As I said, there have been a few transitions, which may be going a little slower. But overall, I'm very happy with the way transitions are going. In terms of when you're talking about whether any clients are talking about rates and all these things. This is like client to client, it's a very different situation. It's not and there is no one scenario, which can describe.
But yes, there are some conversations we are having. And we feel that in the current situation, I think that's the best way we can help our clients. And I'm sure that this is something which will help us also in the longer run.
Manik Taneja
Sure. If I can ask one more. Just wanted to understand from you while we've been doing well in the US geography, in our case, the traction in Europe essentially has been extremely weak. So any possible gaps in terms of our positioning or presence in that geography?
Debashis Chatterjee
There are things that we have been running as initiatives. One other thing is to revive Europe. It will definitely take a little bit of time. But again, all focus is to how can we grow the but if you look at the overall situation in Europe is the economy of Europe, also you need to keep that in mind, in terms of what can happen in Europe. So there are there are macro factors that we need to take into consideration, but at an overall level, yes, we are focused, but it will take a little bit of time. But, yes, the growth has been mostly from North America.
Operator
The next question is from Madhu Babu from Centrum Broking.
Madhu Babu
Sir, on the post-COVID world, work-from-home can be a new normal in the sector. So would we choose any strategy to disrupt the industry through this model? would there be a significant traction on work-from-home even in the post-COVID world? And what are your views on that?
Debashis Chatterjee
That's too early to say. But I think I can talk about, specific to Mindtree, and I will probably start, and I'll request my COO, Dayapatra, to comment as well. I think, see, work-from-home is it may sound simple, but you have to also understand that you need to have the readiness to work-from-home, which gives the confidence to client that, yes, they can. Because none of this work-from-home will happen unless the clients also agree to that. I mean and all the things that we have done are, almost 99.5% work-from-home. I think that's a significant accomplishment. Maybe I can ask Dayapatra to comment on some of those aspects.
Dayapatra Nevatia
Sure. Thanks, DC. So Madhu, work-from-home, as DC was saying, work-from-home is not something which is new to Mindtree. In Mindtree, we have been having very strong processes, tools, infrastructure built in, and we have had work-from-home policy for quite some time for our employees where they could periodically also work from home. So whether you look at governance mechanisms, project delivery processes, tracking, using digital collaboration tools, et cetera, we have very strong foundation of that. So yes, in the new normal, post-COVID, work-from-home, or remote working, is going to be a lot more prevalent than it has been. During this crisis, most of our customers, I would say, almost all the customers had the opportunity to understand how the work-from-home can still deliver the service to them in these kind of tough situations. We have not had a single engagement where we had any delivery issues. So we have been able to successfully deliver in last 1.5 months, since the crisis started. So I think going forward, clients will be a lot more open to let, if not the entire team, part of the team, work remotely from home and some of the people continue to work from office.
Madhu Babu
Yes. And just one more. In terms of Q1 the softness, one of our larger peer was indicating a quantum similar to the GFC crisis, would imply like 5% to 6% kind of decline. So would that be the worst-case for Mindtree?
And second thing is that in the new normal, CapEx can also be lower considering that you're going to use this collaboration tools and work-from-home.
Debashis Chatterjee
It's difficult to call out specific numbers, but I can only say that, yes, we do see some immediate softness in Q1, and we have to see how it evolves.
Madhu Babu
And on the CapEx outlook, would that be cut?
B. Senthil Kumar
So let me take this, Madhu. So on the CapEx outlook yes, if you look at the current scenario, cash is king. So everybody will defer CapEx investment. I think we are cautious on the CapEx. And we will invest only whether it's at the bottom line or top line. So we are very cautious on the CapEx.
Operator
The next question is from Vibhor Singhal from Phillip Capital.
Vibhor Singhal
Congrats in these uncertain times. So just two questions from my side. One is on the strong deal show that we reported in this quarter. Would you be able to give some color as to what part of that deal show that we did this quarter was probably related to travel segment? And is there a risk to some of those deals, which we might have closed in the month of January and February. Is there a risk of some of those deals maybe ramping down or reduced in scope or maybe, I think, being delayed in terms of execution over the next few quarters?
Debashis Chatterjee
I think the short answer is that the deals that we have signed in this quarter, I don't think there is any risk in terms of those specific deals. As I said earlier in my commentary, I mean there is there are some transitions, which probably just took a little slower pace because of the situation. But there again, they will get back on track. But otherwise, none of those deals that we have closed I don't see any concern on those.
Vibhor Singhal
Sure. Would you be able to share how much part of that came from travel?
Debashis Chatterjee
We don't provide breakup on vertical wise.
Vibhor Singhal
Sure, sir, not a problem. If I could just squeeze in one more question. A lot of industry experts have been talking about large companies monetizing their captives in the post-COVID world because of the inefficiencies that they provide. And that probably presents an opportunity for IT services players like us and, of course, other place as well. So just to keeping the recent comment that surveyed about cash is being king, are we open to some kind of, M&A activity in medium to longer term future? Or at this point of time, nothing on the cash, and we aren't even looking at that direction?
Debashis Chatterjee
Yes. So we are open on the investment. So if it adds to the top line, definitely, we are open. We have a good balance sheet, and we have a good amount of cash. If it adds to the value to our top line, definitely, we are open.
Vibhor Singhal
Sure. Just last question, if I could just squeeze in one more, please. So a decent part of our business is also in the engineering services business. So any and that largely pertains to discretionary spend . So any color in terms of what the feedback that we might have got from clients? Is there any pushback in those spends? Or as of now, nothing much is being talked about?
Debashis Chatterjee
Your question if I understand correctly, is on discretionary spend. I think it was in some client segments, like, for example, in case of Hi-tech as well as in the case of CPG, where I think clients have also realized that probably the new board of delivery should be more digital platforms and the more digital transformation that they need to undergo. I think there's a good traction there.
But in case of some of the other verticals, if I call out BFSI, I do see that it's not to say that things are getting cancelled, but things are getting a little deferred. And in other industries, also, we see some deferment. But that is more in terms of making sure that everybody is watching and observing how things unfold. So it's not a cancellation, but it's kind of a differing and see how things normalize, and maybe they will again bounce back.
Operator
The next question is from Rishi Jhunjhunwala from IIFL Institutional Equities.
Rishi Jhunjhunwala
Yes. Just one question on your segmental profitability. So if we really look at, for past, 2 years, FY19 and '20, the 2 verticals, which is BFSI and retail, CPG and manufacturing actually had relatively weaker growth rates. But we saw substantial improvement in margins in both these verticals. On the flip side - the technology vertical, which seen which has been the fastest-growing vertical for you, we have actually seen a significant contraction in EBITDA margins when we compare FY20 to FY19. So if you can just give color on all these 3 verticals in terms of what led to those diverse movements?
B. Senthil Kumar
Yes, so Senthil here, Rishi. Let me pick the decline in the Hi-tech vertical. If you see our revenues in Hi-tech vertical, growth is very high. And during the year, we had big transition, which had only costs but not revenue. But if you look from the exit perspective, you could see there is an improvement in the margin. On the other side, if you look at the BFSI side, yes, our margin were lower digits in the past 8 quarters, but if you could see, last 3, 4 quarters, we could do a lot of more operational improvements. And on the RCM, yes, there are concentrated effort on operational improvements as well as some pricing increase in few customers.
Rishi Jhunjhunwala
So how do we look at it going forward, right? in the sense, say, for example, in technology, is it fair to assume that a lot of the investments went into FY20 and as a result, things will go back to FY19 levels, going forward? And on the other side, in case of BFSI, where historically, margins have remained fairly low, the current levels could be sustainable?
Debashis Chatterjee
Yes. On the BFSI current level would be sustainable. So I think, Rishi, I would like to look from the exit perspective. I think full year would be very low because we had a H1 very bad H1. And if you look from the exit perspective, yes, on BFSI, it is sustainable. And Hi-tech, if you see from Q2 to Q4, there is a 2% to 3% improvement in the segment margin. So that is the quarter, Q4 margins are sustainable from the segment perspective.
Rishi Jhunjhunwala
Great. And just one last thing, if I can ask. Any thoughts on capital allocation in terms of where you want to increase it because I realize that this year, your numbers have actually gone down in terms of dividend payout. So just wanted to understand what is the thought behind that.
B. Senthil Kumar
Not really, Rishi, if you look from our dividend%, last year, we had an extraordinary special dividend of Rs 20. If you exclude the Rs 20 special dividend, last year, we paid close to Rs 13, and we have matched that now. So if you look from the payout perspective, in fact, a little higher than compared to the last year, maybe it is in the range of 35% to 36%.
Rishi Jhunjhunwala
Which is where you want to maintain it going forward?
B. Senthil Kumar
Yes. Our effort is to always return to the maximum to the shareholders. So we always look how can we return. I think if the profit is increasing. And we look out from the sales perspective from time to time.
Operator
Our next question is from Sumeet Jain from Goldman Sachs.
Sumeet Jain
And congrats DC for a great execution. So firstly wanted to understand, could you quantify the demand impact on your revenues in March since we saw the demand slowing down post mid of March, both in Europe and U.S.? Can you quantify what was the impact on the demand side?
Debashis Chatterjee
I think, Sumeet, on the demand side, the only thing I can say at this point of time is there is softness. And but as we don't I don't want to kind of call out a specific number. I can only say that which are the verticals where I can see which are the industries where I can see the softness, which is, of course, retail hospitality. And if you look at Q4, there was no really impact of COVID in Q4. But yes, Q1, there is a softness. And even within Q1, I expect that we should be able to see something in terms of Hitech and consumer goods, where there are clients who are very keen to move into more digital.
B. Senthil Kumar
If I can add, DC, if you look from the demand perspective, with our record order booking is the best example of no challenge on the order book. I think we had a good quarter both on the order as well as on the delivery side. So in the Q4 perspective, no impact.
Sumeet Jain
Got it. And can you also comment around your order book and the pipeline, how it is shaping up in this last 4 weeks? So how much reduced intensity are we seeing and then within that, what is the kind of a breakup are you seeing around discretionary projects versus more of a managed service or an annuity kind of a deal?
Debashis Chatterjee
I think I'll just take a stab and then let Senthil add. If you look at the specific order book right now, I think that's well protected. But if I look at some of the projects where some decisions were to be taken, I think some of those decisions are getting deferred for obvious reasons. But I'm hopeful that as things stabilize, we will be able to have those discussions comments at an appropriate time.
Sumeet Jain
Fine. Yes, and just a follow-up on that, DC. as you mentioned the demand for collaboration and virtualization tools are definitely going up, so are you able to sign certain annuity managed services deals around these kind of demands?
Debashis Chatterjee
In fact, if you look at our focus is, going back to what I said earlier, and this has been something while that I have been saying for a while, that we would like to focus more and more on annuity deals. We would like to rationalize the long tail of accounts, so that we can focus more on a limited set of clients and go deeper into those clients.
So keeping all those things in mind, if you look at what we have shared with you in the commentary, most of them are of annuity nature, where it's a longer tenure deals, multiyear deals, which we are signing. So that's what the focus is. And that's that's what we are working on.
Operator
The next question is from Shashi Bhusan of Axis Capital.
Shashi Bhusan
And good show in a quarter full of disruption. Any impact of supply side constraint in Q4, when if we can quantify the same? Or is it all well with no impact of transition when we say we managed a 99.5% work-from-home?
Debashis Chatterjee
I can only say that the team has done a commendable job. I think we have been very proactive. We and again, I don't want to take anything away from our clients. They have been very supportive in terms of helping us to do the BCP implementation.
On the supply side, I think I'm absolutely proud to say that everything came together and we have been able to implement the work-from-home, the security controls, the encryption in our machines. All those things what you need for moving towards work-from-home, they were pretty much ready with us, and this actually helped us in terms of implementing the and others. On the supply side, I would say, there was no disruption at all. You want to add anything?
Dayapatra Nevatia
No absolutely, DC. So Shashi, we have not faced any supply side challenges. As DC was saying, we could move almost all our employees very, very quickly to remote working. We had set up the war room in first week of March itself, much before this crisis became really big and Government of India announced the lockdown in on 24th of March. So we were very well prepared, and we have moved already 98% of our people before lockdown was announced.
We have not only people who are on the project, but we also migrated to end-to-end virtual hiring process, including onboarding. And our learning platform also has been helping us to continue our strategy of making our talent future ready. Even our campus training program has moved to the digital platform, and there has not been any impact to that training program as well.
Shashi Bhusan
That's commendable, sir. And when we are saying soft Q1, does it mean softer than Q4? Or does it mean revenue decline in line with what our larger peers are saying?
Debashis Chatterjee
I can only say with respect to now what we have in Q4, I think it will be softer than Q4.
Shashi Bhusan
And how do we see margin trajectory for FY '21 at the current currency level because our average for, I think, full year, would be somewhere around 72 for FY 20, and we are currently at 76 so.
Debashis Chatterjee
Look, I think the I will let Senthil add. But I would say that if you look at, our overall focus has been to get the margin to the band of 17% to 18%, at least. And I think we achieved that in this quarter, and I think we achieved in a very quick time. And we have all the mechanisms in place by which we should be able to maintain that as we go along or improve on that further. But there could be some blips in some situations. But overall, we are very confident that we want to be in that range. Senthil, you want to add anything?
B. Senthil Kumar
Yes. Thanks, DC. So for FY20, if you look from FY20 perspective, the H1 has been a very low margin, but H2, we have picked up. So from the full year perspective for FY '21, yes, we will end higher than what FY20. That's all we can say at this juncture.
Shashi Bhusan
And from the deal perspective, I think one large deal would have cropped up this quarter deal. So next quarter deal pipeline, do we have something similar? Or how do we see deal pipeline shaping up for Q1 or maybe H1?
Debashis Chatterjee
Yes. As I said some conversations have been deferred, but we are very hopeful that as we start as these things normalize, we should be able to get making roads into some of those discussions that we have been having.
Shashi Bhusan
And the last one from my side. DSO has been holding pretty good. Any view going ahead, how clients are talking about
Debashis Chatterjee
Yes. So there will be some challenges in the near-term because some deferment in the segment terms of that stuff. But we could maintain 66 days in the last 4 quarters. Maybe next 1 or 2 quarters, there may be some challenge, but we will continue to ensure that DSOs are at a lower level, but there will be some short-term challenges.
Operator
We take the last question from Dipesh Mehta from SBICAP Securities.
Dipesh Mehta
Just two questions. First on the if one look at we have not seen much impact from COVID19, but outside of Hi-tech, we are seeing weakness in rest of the 3 verticals for last 2 quarters. So if you can help us understand how one should look growth going forward in the remaining 3 verticals, Hi-tech, it is doing well. And I think top client also one of the fastest for us from a business perspective. But remaining three, we are seeing weakness for now 2 quarters in a row.
Second question on the service side, ADM and product engineering, showing kinds of weakness. If you can help us understand how one should look that service line going forward?
Debashis Chatterjee
Yes. I think the point is that if you talk about vertical-to-vertical, there is always a quarterly phenomena. Some projects will come to an end. We will wait for the next set of projects to start because everything is not an annuity kind of a thing. So I would say that this is more of a client-specific quarterly phenomena in terms of when you see this situation.
But our efforts are, as we said, that our strategy is to get into more and more annuity, our strategy is to work with limited set of clients with deeper relationships. I think those things will help us in terms of changing that over a period of time. But the only thing which can change is annuity, which we are aiming for. But otherwise, I will read that purely a quarterly phenomena and a client-to-client phenomena. What was the other question?
B. Senthil Kumar
ADM. So Dipesh, if you look from the ADM perspective, our endeavor is to increase the portfolio of services within our client clientele list. So if you look from our digital revenue perspective increase, for example, this is from the Q4 perspective, it is close to 10% growth, which is higher than a company. So yes, naturally, I think our preference would be add more digital revenue. That's why the reason that our ADM from a full year perspective is down.
Dipesh Mehta
No, I just want because now you alluded, because of nature of business from project-related business exposure, whether in this time, it can bring additional challenges for us to sustain and maintain growth momentum, which we have sawn in or maybe demonstrated over last few quarters? Because this is a tough time and maybe for project business, do you think incremental challenges compared to some of the annuity side?
Debashis Chatterjee
No. As I said, some conversations some of the deals that we are working on, some conversations have been deferred. So there will be some short-term challenges. But as we my guess is that I don't think the COVID situation is not to anybody in terms of how long it will last and what is the new normal. So clients are talking about new normals. Sometimes, clients are opening up the conversations, but many clients are also waiting for things to settle down. So given that scenario, we are quite confident that as soon as the things start getting back to normal, we should be also able to bounce back along with the client, it could be a win-win for us. But beyond that, it's very difficult to say anything else at this point of time.
Dipesh Mehta
Understood, sir. Just one clarification I wanted. As part of your disclosure, we have said transaction price allocated to the remaining performance obligation in revenue from operation , which include within 1 year, 1, 2, 3 years and more than 3-year kind of revenue breakup. Can you help us understand how to read it?
B. Senthil Kumar
It is more from the FEC/FMC revenue perspective. So there's a disclosure requirement of contracts in which it's beyond 1 year and beyond 2 years. So that's more from the revenue recognition perspective. It's more to do with the FEC and FMC kind of growth.
Dipesh Mehta
Sir, so when it shows within 1 year substantial increase, in a way, it reflects your annuity business built-up or no?
B. Senthil Kumar
Yes. Annuity business went up. If you see, even in the current quarter order book, our contracts with less than 1 year is $286 million and expiring greater than 1 year is $107 million. So annuity business is picking up.
Operator
Thank you. Ladies and gentlemen, that was the last question. I now hand the conference over to Ms. Amisha Munvar for closing comments.
Dayapatra Nevatia
I'll request DC to read out the closing comments.
Debashis Chatterjee
Yes. I think, first of all, thank you for joining the call. I really appreciate. So just want to make some closing comments. I think for Q4, we had a revenue growth of 1.9% in constant currency and 1.2% in dollar terms. For the full year, our revenue is 1.8 USD 1.1 billion, with a growth of 8.7% in dollar terms. I'm happy that our profitable growth strategy is resonating well. We could demonstrate improvements quarter-on-quarter. Our focus on cost efficiencies and standardization helped us to reach our desired band of 17% to 18%. Our endeavor is to continue to strengthen on revenue as well as other operational efficiencies. Our endeavor to stay close to the clients, be nimble and work with the clients in terms of new offerings. Retail, re-skill talent pool to have smooth continuity to fight the current pandemic and also continue the rhythm of delivering profitable growth. Thank you, stay safe and healthy.
Amisha Ravindra
Thank you, everyone. I will look forward to connect with you during this quarter. Stay safe. Good evening.
Operator
Thank you very much. Ladies and gentlemen, on behalf of Mindtree that concludes this conference.
