HGSNSEQ1 FY2023August 23, 2022

Hinduja Global Solutions Limited

5,541words
39turns
6analyst exchanges
2executives
Management on call
Partha Desarkar
Executive
Srinivas Palakodeti
Global CFO. As a
Key numbers — 40 extracted
14.1%
I go to slide #3 of the presentation deck, we're happy to report a very strong revenue growth of 14.1% year-on-year. We are pleased with this number because there were many concerns raised when we div
₹ 73.3 crore
14.1%, which I believe is a fairly handsome number. Under these circumstances, the net profit was ₹ 73.3 crores. Again, a very good number to talk about because it's 9 times the year-on-year growth on a lik
₹ 5
mand. We have rewarded our shareholders like we have done in the past, the interim dividend is ₹ 5 per share. And the total dividend outgo as a result of this announcement is to the tune of ₹ 21 cr
₹ 21 crore
is ₹ 5 per share. And the total dividend outgo as a result of this announcement is to the tune of ₹ 21 crore. So, I will now move to slide #4. It shows you the revenue growth from ₹800 crore to ₹ 912 cror
₹800 crore
o the tune of ₹ 21 crore. So, I will now move to slide #4. It shows you the revenue growth from ₹800 crore to ₹ 912 crore. This is the 14.1% growth number that we talked about. EBITDA has had a slight dip
₹ 912 crore
₹ 21 crore. So, I will now move to slide #4. It shows you the revenue growth from ₹800 crore to ₹ 912 crore. This is the 14.1% growth number that we talked about. EBITDA has had a slight dip of 16.1% from
16.1%
₹ 912 crore. This is the 14.1% growth number that we talked about. EBITDA has had a slight dip of 16.1% from ₹ 46 crore to ₹ 38 crore, whereas a profit before tax and profit after tax has seen really
₹ 46 crore
. This is the 14.1% growth number that we talked about. EBITDA has had a slight dip of 16.1% from ₹ 46 crore to ₹ 38 crore, whereas a profit before tax and profit after tax has seen really good numbers.
₹ 38 crore
14.1% growth number that we talked about. EBITDA has had a slight dip of 16.1% from ₹ 46 crore to ₹ 38 crore, whereas a profit before tax and profit after tax has seen really good numbers. Hinduja
57%
ts are very happy with. The digital business continues its strong momentum, the business grew 57% on a year-on-year basis. Cloud & security and automation practices are the ones that are growing
9.8%
ally well .Last year during Q1 FY22, the contribution from digital services to HGS revenue was at 9.8%; now in Hinduja Global Solutions 16th August 2022 Q1 FY23, it is up to about 14.3% and
14.3%
as at 9.8%; now in Hinduja Global Solutions 16th August 2022 Q1 FY23, it is up to about 14.3% and gives you a sense of the fact that the digital business is really growing fast. We signed abo
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Guidance — 9 items
Partha DeSarkar
opening
“Two more centers will be closed in August in Canada.”
Partha DeSarkar
opening
“Our buyback of around ₹ 975 crore based on FY22 audited financials will be announced at a later date upon completion of the requisite approvals and in compliance of the relevant portion of companies Act, SEBI listing regulations and SEBI buyback regulation.”
Partha DeSarkar
opening
“We expect this to take place in the second half of FY2023.”
Saloni Desai
qa
“So, how much will digital contribute by the end of this fiscal, like can we expect it to grow by approximately 30% this year?”
Partha DeSarkar
qa
“As far as buyback is concerned, we had calculated the buyback amount based on the 31st March balance sheet; this is up to about ₹ 975 crores… this is something which will be done during sometime later this year, as permitted by Companies Act and SEBI guidelines for buyback and restructuring.”
Jyoti Singh
qa
“And my second question is on the margin and revenue side, so how much growth we are expecting for the revenue and how much margin we are targeting going forward?”
Jyoti Singh
qa
“So, we should be seeing good growth going forward.”
Jyoti Singh
qa
“My question is that, in Q4 FY22 you did mention that we are expecting that the gap because of healthcare will be filled within 2 – 3 years.”
Partha DeSarkar
qa
“So as soon as that is completed, we will do the buyback, which we expect to happen in the second half of the current financial year.”
Risks & concerns — 6 flagged
Hinduja Global Solutions 16th August 2022 Let me spend some time in trying to explain to you why the EBITDA has taken a hit, it is not a cause for concern.
— Partha DeSarkar
So these are ramp costs that are showing up in Q1 FY23 and causing some pressure on the EBITDA.
— Partha DeSarkar
There is enough business available, the challenge is to hire people in time to be able to deliver revenues.
— Partha DeSarkar
So this is the net impact of the overall effects of fluctuation.
— Partha DeSarkar
This also reflects the impact of the exchange rate between 31st March and 30th June.
— Partha DeSarkar
There are no areas of concern given that we have a very solid customer base.
— Partha DeSarkar
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Q&A — 6 exchanges
Q
I had two questions. So are there any more M&A deals expected in this quarter or are there any in process currently?
Partha DeSarkar
I cannot give you a specific reply to that question because that's very forward looking. I'm sure you are aware of that. We continue to evaluate M&A deals on a day-by-day basis. So yes, we are looking at Hinduja Global Solutions 16th August 2022 evaluating M&A deals as we speak, but that is business as usual. I cannot confirm whether that is going to close in this quarter or not. Okay, all right. And I had one more question. So digital contributes to approximately 14% to the total revenue. So, how much will digital contribute by the end of this fiscal, like can we expect it to grow by approxim
Q
I need to understand one thing, few months back in one of the interviews, Partha said the EBITDA margin for the retained business is in two digits. But we can't see that number reflected. Second question is about the buyback, you were saying that this is a non-cash thing but the buyback is structured in a fashion that the NXTDIGITAL shareholder is also getting the buyback amount. Could you explain these two parts please?
Partha DeSarkar
Yes, so I'll answer the first part and Pala will answer the second part. Yes, our intention and our plans are to improve the EBITDA of the business for the coming quarters to a level which is minimum double digits. We are working on that, be a little patient with us. I've explained to you the circumstances under which the EBITDA has gone down this quarter but I'm trying to see by end of the year, we can get to the number that we talked about. So that's on the EBITDA side. And Pala I'll hand it over to you to take question on the buyback. Srinivas Palakodeti: Thank you Partha. So, as far as the
Q
My first question is on the healthcare side business. So, last time in the Q4 FY22 you mentioned that we will see gap filling in the line of 2-3 years. So are we seeing any visibility for that? And my second question is on the margin and revenue side, so how much growth we are expecting for the revenue and how much margin we are targeting going forward? As currently mentioned by the management that we are optimistic going ahead, but if anything on the numbers, can be helpful. Partha DeSarkar: We don't give specific numbers, I'm sorry. The margins on the coming quarters are expected to be much
Jyoti Singh
Partha DeSarkar: What is the question on the healthcare business side? My question is that, in Q4 FY22 you did mention that we are expecting that the gap because of healthcare will be filled within 2 – 3 years. So are we seeing any visibility on that front? Srinivas Palakodeti: Yes, once we are able to pull off some of the inorganic acquisitions which we were talking about, then we should be able to fill up the gap.
Q
Again, a question to you is that as an individual investor, I can see that you are sitting on such a high cash pile, but the dividend that you have mentioned is not going to cheer the market. And it didn't earlier as well when you sold off your healthcare business and it's not going to help this. So how do you go to make the grounds for the individual investors like me?
Partha DeSarkar
So what is your question? We want to know why the dividend is so less when the cash is so high with the company? Srinivas Palakodeti: There are various ways of rewarding shareholders. As of now, the buyback is the most tax efficient way of rewarding shareholders. We've already announced that; Apart from that, there is dividend which is not a very tax efficient way of rewarding shareholders. So we have actually increased dividend. If you look at our dividend, it's actually much better than what we have given previously. Hinduja Global Solutions 16th August 2022 And the buyback is going on for o
Q
Do we envisage a change in the amount of the buyback, given that the NXTDIGITAL business gets consolidated and a balance sheet is made again as of 31st March 2022, the net worth of the company will also increase with the increase in share capital? Srinivas Palakodeti: You are right, so the appointed date of the transaction with NXTDIGITAL is February 1, 2022. So, we'll in fact get two months of NXTDIGITAL. If that has the bearing on the networth, we will take that into account.
Imran Contractor
Okay. Do we have any idea about how is the performance of the NXTDIGITAL business which is coming into our company in the June current quarter? Srinivas Palakodeti: Yes, this is a company whose results have already come out. So those are available. I can send them across to you, but the results are available.
Q
My question is regarding NXTDIGITAL. So this company has been in loss for quite a few years in the past and the free cash flow has also been negative. So, I just wanted to know, what's your plan regarding turning around this company or does this become part of HGS division and that’s not a drain on the existing business of HGS? Srinivas Palakodeti: Navneet thank you for the question. So, if you look at the year ended March 22, NXTDIGITAL as a whole was actually PAT positive and not PAT level negative; it made profits of ₹ 7 crore. It is a business which Hinduja Global Solutions 16th August 202
Navneet Bhaiya
What’s the kind of investment that this business will require on a yearly basis to sustain or grow the revenue, I can see the CAPEX intensity is quite high in the business. So, have you done any plans for that, when it becomes a part of HGS? Srinivas Palakodeti: We are working through that. So actually the bulk of the investment goes into setup boxes. So those boxes cost about ₹ 1,000 per setup box. And these are setup boxes, which are deployed at the customer premises, for delivery channels, internet, etc. So that's the biggest capital expenditure for this business. And those growth plans are
Speaking time
Partha DeSarkar
10
Moderator
9
Anand Onea
5
Rahul Patalkar
4
Jyoti Singh
3
Navneet Bhaiya
3
Saloni Desai
2
Imran Contractor
2
Rushabh Shah
1
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Opening remarks
Rushabh Shah
Thank you. Good evening everyone and a warm welcome to the Q1 FY23 Results Conference Call of Hinduja Global Solutions Limited. We are joined by Mr. Partha DeSarkar - Executive Director and Group CEO and Mr. Srinivas Palakodeti - Global CFO to discuss the Q1 FY23 results and key developments during the period. Before we begin the conference call, I would like to mention that some of the statements made during the conference of today's call, maybe forward looking in nature, including those related to the future financial and operating performances, benefits and synergies of company strategies, future opportunities and growth of the company services and solutions. Further, I would like to mention that some of the statements made in today's conference call may be forward looking in nature and may involve risks and uncertainties. I would further like to mention that if Hinduja Global Solutions 16th August 2022 there is a call drop during the course of the conference call, please bear with
Partha DeSarkar
Thank you and a very good evening to all of you who have joined us for the conference call for our first quarter earnings for this fiscal. We do have a presentation that we have posted on our website and I am going to refer to the presentation as I talk to all of you. Hopefully, you've had an opportunity to go through the presentation and are able to refer that as we go through this call. I go to slide #3 of the presentation deck, we're happy to report a very strong revenue growth of 14.1% year-on-year. We are pleased with this number because there were many concerns raised when we divested the healthcare business whether the rest of the business has the momentum needed to grow the business. The proof of the pudding is in the number 14.1%, which I believe is a fairly handsome number. Under these circumstances, the net profit was ₹ 73.3 crores. Again, a very good number to talk about because it's 9 times the year-on-year growth on a like-to-like basis. Also our fact sheets have the comp
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