HGSNSEQ4 FY2022June 6, 2022

Hinduja Global Solutions Limited

6,738words
85turns
9analyst exchanges
3executives
Management on call
Partha Desarkar
Executive Director and
Srinivas Palakodeti
Global CFO. As a reminder, all participant
Partha Desarkar
Executive Director and Group CEO and Mr. Srinivas Palakodeti - Global CFO
Key numbers — 40 extracted
Rs.7,620 million
nue performance, you will see that the retained business has actually grown very handsomely, from Rs.7,620 million to Rs.8,655 million, a growth of about 13.6%. On an overall basis, the revenue number pertaining
Rs.8,655 million
will see that the retained business has actually grown very handsomely, from Rs.7,620 million to Rs.8,655 million, a growth of about 13.6%. On an overall basis, the revenue number pertaining to our business is
13.6%
as actually grown very handsomely, from Rs.7,620 million to Rs.8,655 million, a growth of about 13.6%. On an overall basis, the revenue number pertaining to our business is Rs.15,636 million coming d
Rs.15,636 million
a growth of about 13.6%. On an overall basis, the revenue number pertaining to our business is Rs.15,636 million coming down to Rs. 9,144 million. And this is where I think you will be able to figure out that c
Rs. 9,144 million
overall basis, the revenue number pertaining to our business is Rs.15,636 million coming down to Rs. 9,144 million. And this is where I think you will be able to figure out that compared to consolidated business,
Rs. 26,108 million
-Y revenue performance, then the retained business has actually grown even better. It’s gone from Rs. 26,108 million to Rs.32,637 million, a growth of about 25.4%, which is a very handsome growth. Whereas the growt
Rs.32,637 million
, then the retained business has actually grown even better. It’s gone from Rs. 26,108 million to Rs.32,637 million, a growth of about 25.4%, which is a very handsome growth. Whereas the growth numbers are more mu
25.4%
ally grown even better. It’s gone from Rs. 26,108 million to Rs.32,637 million, a growth of about 25.4%, which is a very handsome growth. Whereas the growth numbers are more muted on a consolidated b
Rs.55,889 million
ome growth. Whereas the growth numbers are more muted on a consolidated basis for the full year - Rs.55,889 million to Rs.57,959 million that constitutes a 3.7% growth, and the explanation for the muted growth is
Rs.57,959 million
he growth numbers are more muted on a consolidated basis for the full year - Rs.55,889 million to Rs.57,959 million that constitutes a 3.7% growth, and the explanation for the muted growth is the fact that healt
3.7%
consolidated basis for the full year - Rs.55,889 million to Rs.57,959 million that constitutes a 3.7% growth, and the explanation for the muted growth is the fact that healthcare business in Q4FY22 c
69.5%
fferent perspective. In rupee terms, we saw a 13.6% growth in revenues and dip in EBITDA of about 69.5%. A large part of the transaction cost pertaining to the healthcare divestment has actually been
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Guidance — 20 items
Partha DeSarkar
opening
“So some of these numbers will be a little difficult to interpret.”
Partha DeSarkar
opening
“And this is where I think you will be able to figure out that compared to consolidated business, Q4FY22 is showing a lesser number than the number last year because it only has five days of our healthcare revenue in the right hand side of that particular graph.”
Partha DeSarkar
opening
“More details on these numbers will be covered in the financial section by Pala.”
Partha DeSarkar
opening
“It is a range of about $96 million to $98 million, of which the digital customer experience management segment, which is HGS’ target market, has been growing steadily from 3.5% CAGR earlier to 4.6% CAGR.”
Partha DeSarkar
opening
“Going forward, we want to become a digitally-led customer experience transformation company.”
Partha DeSarkar
opening
“A large part of our growth in the future will be driven by technology partners; we have partnerships with Microsoft, Adobe, UiPath, AWS, Twilio, Automation Anywhere and Sprinklr, etc.”
Srinivas Palakodeti
opening
“So, going forward, we don’t expect this cost to continue.”
Srinivas Palakodeti
opening
“5,120 million is the outgo on the dividends, taking into account the final dividend, which will be done around in September subject to shareholders approval.”
Srinivas Palakodeti
opening
“The consideration will be through issue of shares to the shareholders of NXTDIGITAL, that for every 63 shares held of NXTDIGITAL, the shareholders of NXTDIGITAL will get 20 shares of HGS.”
Jyoti Singh
qa
“What are the strategies that company is adopting to build HGS 2.0 and how much margins are expected going forward and what will be the revenue growth for the FY23-24?”
Risks & concerns — 3 flagged
So some of these numbers will be a little difficult to interpret.
— Partha DeSarkar
14 crores is the impact of dividends, which were paid out during Q4FY22.
— Srinivas Palakodeti
There is some pressure to bring people back to work in Philippines.
— Partha DeSarkar
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Q&A — 9 exchanges
Q
On the healthcare side, after divesting the healthcare service business, is the company looking to expand any other segment?
Partha DeSarkar
Yes. As mentioned in our presentation, we are looking at fast growing tech, e- commerce, retail, technology media telecom and banking & financial services. What are the strategies that company is adopting to build HGS 2.0 and how much margins are expected going forward and what will be the revenue growth for the FY23-24? We will not be able to give you forward guidance. In one of the presentation slides that we shared, we did cover the strategy. If you go back to slide #15, we have tried to cover that in fair amount of detail. So, I would request you to go through that slide. In terms of margi
Q
My first question was with regards to our healthcare business. So, approximately how much time are we expecting to take to fill the gap created by divesting this healthcare business?
Partha DeSarkar
I would say it will take us approximately three to four years. Okay, right. And also amongst the other segments that we have, like public sector telecom and TMT business, where do we plan to focus more and where do we expect to receive larger revenues from? Public sector is the one that I would say would be our focus for this year at least. Okay, great. My second question is with regards to our digital space… which type of mandates are we targeting in this digital space and are we having any prominent names of companies that we are catering to, because in the last quarter the management mentio
Q
I have a couple of questions. From the funds that are available for deployment, how much of that will go into organic and inorganic in value terms and the percentage terms?
Partha DeSarkar
Yes, again that’s not a number that we’re disclosing as of this point of time, but it is something that will be a function of what opportunity comes in front of us and what makes sense from a long term strategic perspective. But I have to say that a large part of the funds will be deployed for both organic and inorganic. We want to make the company a technology company and therefore our focus would be on acquiring technology. Okay, fair enough. The second question is, could you just elaborate on this partnership between Digital and Khoros? Khoros? Yes. It’s not just Khoros; we have multiple pa
Q
My first question was regarding the transaction expenses. Could you comment on that and tell us the quantum of the fees that was put in the Q4FY22 and anything that will be booked in Q1FY23?
Srinivas Palakodeti
The transaction expenses total is about Rs.2,438 million, that was lawyer fees, etc. We don’t see anything spilling over into Q1FY23 because the transaction has been completed.
Q
On a normalized basis, it appears that your retained business is at best about 3% EBITDA business as of now. So, could you please give us any idea about how or you would be able to improve the margins substantially compared to your other peers in India?
Partha DeSarkar
That’s a very good question. Our principal focus this year would be to shrink our real estate footprint. As you know, a large part of our business after COVID has moved to work from home. And therefore, we are stuck with many leases and properties, which we own or lease today, that are not required and people are not working from those. We are trying to see how many of the leases we can be exit from or how many of the real estate can actually be sold out. That could help lower our operating expenses. When I spoke about the 38 operating centers, most of these operating centers are vacant today.
Q
I was asking you about the NXTDIGITAL transaction. So, in the situation when we are issuing the shares, are we acquiring the entire company or only a portion of that company as it’s not very clear from your comments in the press release?
Partha DeSarkar
Pala you want to take the question? Yes, Thank you Rajesh. To clarify, we are only acquiring the media and digital business of NXTDIGITAL and not the entire company. Okay, alright. And then in terms of the ICDs, what is the maturity profile of that and are you planning to do more ICD to the related parties in this current year? These are all repayable on short notice, essentially money deployed on demand. And the maturities are all maximum one year from the date of disbursement. As and when we need the funds, we can call the money back. Right. So, is there any plan to reissue these ICDs as the
Q
You would have seen that within a few weeks of selling our healthcare business, we acquired a business in Australia. So, that was the first one we did, and within another few weeks, we did the merger… even though the merger is going to be a share swap and not going to be cash. So the short answer to your question is we need to acquire digital capabilities to be a technology company. Therefore, we are going to deploy most of the cash that we have in our books today to build that capability… either build organically or build through acquisitions in the technology space. That is the vision for ut
Shailendra Mundra
Okay. So, if you get opportunities you will like to invest all that Rs. 6000 crores in acquiring new companies or capabilities or businesses? That is correct. So, till such time we get a concrete opportunity which is good, the money is parked in short term securities.
Q
Thank you for the opportunity in response to one of the participant questions that you would vacate some of the current leases, so assuming those all the employees were occupying those leases or those offices, our margins would be 3%. Is that correct?
Partha DeSarkar
Yes, so that is the current number. Yes. Is there a spare capacity also as far as the number of seats are concerned, or that’s not the case? Yes, there is spare capacity. So, spare capacity could be 10%, it could be 40% so any magnitude because you said that the vacating of lease would lead to a substantial rise in EBITDA margin. So, the idea to understand is about vacating of lease and ramping up as far as the new clients or new businesses are considered. So, from a shareholder perspective, we just want to understand that when can we see the ramp up as far as the new business is considered in
Q
Good evening again. Thank you everyone for joining our Q4 and FY22 full year financial discussion. We look forward to meeting with you again in a couple of months’ time to discuss our results for Q1FY23. Thank you once again for joining this call. Good evening and have a good day.
Management
Speaking time
Partha DeSarkar
31
Moderator
11
Srinivas Palakodeti
9
VP Rajesh
8
Avinash Nahata
8
Jyoti Singh
6
Shailendra Mundra
5
Rutvik
4
Ruchika Sharma
3
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Opening remarks
Partha DeSarkar
Good afternoon Snighter and a warm welcome to all of you on behalf of Hinduja Global Solutions joining us for the conference call. I’m sure all of you’ve got the earnings deck that we have posted on our website. And I’m going to refer to that as I take you through my takeaways from this quarter’s performance. So, going to slide #3, we’ve made one segregation… with the healthcare business being divested, we are now showing you the performance of the remaining business as well. And since most of the year has been a combination of two businesses, and even quarter four had about five days of healthcare business (the divestment of January 5th). So some of these numbers will be a little difficult to interpret. But bear with us, we’ll try to see how best we can provide you more clarity on those numbers. Just on quarterly revenue performance, you will see that the retained business has actually grown very handsomely, from Rs.7,620 million to Rs.8,655 million, a growth of about 13.6%. On an ove
Srinivas Palakodeti
Thank you, Partha. Good evening everyone. So, I will now move to slide #17. This gives the quarterly view of the retained business. As Partha mentioned earlier, on a sequential basis, revenue growth has been 7.8% and year-on-year growth has been 13.6%. In dollar terms of course, it’s about 10.4%, given the depreciation of the rupee against the dollar. EBITDA margins for Q4FY22 were muted. As Partha mentioned, there were several costs during the quarter, including the cost related to the transactions of both the sale of the healthcare business as well as acquiring Diversify, which happened during the quarter. So, margins for the quarter of the retained business do look muted. The only other thing to call out is on the exceptional items there was a query last quarter as well. This pertains to the healthcare business, which the buyer has not taken over. So, from an accounting point of view, this is a classification issue being shown as part of the retained business but actually belongs to
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