Updater Services Limited has informed the Exchange about Q3 & 9 Months ended FY 25 - Earnings Conference Call held on 28th January 2025 - Transcript
Redefining Business Services
Date: 03/02/2025
To: BSE Limited (BSE) Corporate Relationship Department Phiroze Jeejeebhoy Towers, 25th Floor, Dalal Street, Mumbai- 400001
To: National Stock Exchange of India Limited (NSE) Listing Department Exchange Plaza, 5th Floor, Plot No. C/1, G Block, Bandra Kurla Complex, Bandra (East), Mumbai — 400051
BSE Scrip Code: 543996
NSE Code: UDS
Dear Sir / Madam,
Sub: Transcripts of the Earnings Conference Call held on 28th January 2025
In continuation to our letter dated 21st January 2025, please find enclosed the transcripts of the Earnings Conference Call held on 28th January,2025.
We request you to take the same on record.
This is for your information and records.
Thanking you, For Updater Services Limited
Sandhya Saravanan Company Secretary and Compliance Officer
Updater Services Limited (earlier Updater Services Pvt Ltd) 1st Floor, No.42, Gandhi Mandapam Road, Kotturpuram, Chennai - 600085 +91 44 2446 3234 I 0333 I sales@uds.in I facility@uds.in I www.uds.in I CIN L74140TN2003PLC051955
Our Values: happy people I clear purpose I better everyday I do good I balance all
“Updater Services Limited
Q3 & 9M FY '25 Earnings Conference Call”
January 28, 2025
E&OE - This transcript is edited for factual errors. In case of discrepancy, the audio recording uploaded on the stock exchange on 28th January 2025 will prevail.
MANAGEMENT:
• MR. RAGHUNANDANA TANGIRALA – MD AND CHAIRMAN –
UPDATER SERVICES LIMITED
• MR. AMITABH JAIPURIA – NON-EXECUTIVE DIRECTOR –
UPDATER SERVICES LIMITED
• MS. RADHA RAMANUJAN – CHIEF FINANCIAL OFFICER –
UPDATER SERVICES LIMITED
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Moderator:
Ladies and gentlemen, good day, and welcome to the Updater Services Limited Q3 and 9 Months
Updater Services Limited January 28, 2025
FY '25 Earnings Conference Call. As a reminder, all participant lines will be in the listen-only
mode and there will be an opportunity for you to ask questions after the presentation concludes.
Should you need assistance during the conference call, please signal an operator by pressing star
and zero on your touch-tone phone. Please note that this conference is being recorded.
I now hand the conference over to Mr. Raghunandana, Promoter and Managing Director. Thank
you, and over to you, sir.
Raghunandana T.:
Thank you. Good morning, all of you. And a warm welcome to everyone present on this call. I
have with me Mr. Amitabh Jaipuria, Non-Executive Director; Radha Ramanujan, Chief
Financial Officer; and SGA Partners, our Investor Relations advisors. I hope all of you have
received the investment deck by now. But if not, you can still view them on the stock exchange
and the company website.
I'm pleased to share that we continue to maintain our growth trajectory, which is accompanied
by strong margin improvements on a consol basis. We continue to outperform our guidance in
terms of margin improvement. Our range of capabilities, coupled with the ability to consistently
meet high expectations of our clients has helped us maintain a strong market share position .
In today's rapidly evolving business environment, being flexible is critical. Our ability to quickly
adapt to meet our customer's needs has been the key to our success. We operate in the B2B
segment space, which can be classified into 2 major segments, the IFM segment, which is the
Integrated Facilities Management and the BSS segment. The BSS is the Business Support
Services.
Firstly, I'd like to share a brief update on the IFM segment. During Q3 '25, our IFM revenue
grew roughly by about 9%, on a year-on-year basis stood at about –INR 455.4 crores. The IFM
segment comprises a wide range of solutions such as soft services like housekeeping, cleaning
services, pest control and support services, while the hard services comprise of production
support, engineering and O&M services, including warehouse management.
Our strategy revolving around driving operational efficiency while actively optimizing our low
margin contracts have started to pay positive results, evident in improvement in having
witnessed the IFM segment EBITDA margins. During our active contract rationalization, our
IFM revenue growth has been lower than what we had expected initially, but the profitability
metrics are improving. I mean that was the whole idea of getting out of the lower-margin
business and concentrating and focusing more on the high-value, high-margin business.
While revenue growth has been slightly slower against our internal targets, we are outperforming
compared to the industry, not just in growth, but also in terms of profitability. Moving on to
other updates within IFM segment, we have received an approval to merge 2 of our subsidiaries,
which is Wynwy Technologies and ITSS during Q3. This decision was made to further simplify
and streamline our company's operations. We have also made a strategic decision to merge
Stanworth Private Limited and Tangy Private Limited into the parent UDS. This process is
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Updater Services Limited January 28, 2025
currently under consideration with the NCLT. Radha will provide you a detailed explanation on
the rationale and the benefit behind this decision when she speaks.
Our industrial catering vertical outperformed our internal targets and have also improved their
margins substantially. During 9 months FY '25, the IFM revenue grew by 8% and is at about
INR1328.70 crores, while EBITDA witnessed a growth of 46% on a year-on-year basis. We
have been lifting our operational margins gradually through a mix of high-quality contracts
coupled with operational efficiency.
In the industry terms as per Mordor Intelligence, the outsourced IFM market is expected to grow
at a CAGR of 10% and reach INR67,100 crores by 2029 from its current size of INR37,700
crores. We look to capitalize on the growth opportunities and outpace the industry level growth
through our commercial excellence and aspire to grow IFM segment revenue at 3x of nominal
GDP growth.
A few factors contributing to this growth would be the rapid expansion of India's IT ITES sector,
coupled with the rise of co-working spaces. GCCs are increasing investments in India and
require advanced facilities management solutions to meet global standards. Initiatives like Make
in India, China Plus One would also help us in the industrial segment. Booming e-com and
logistic sectors are also driving growth in warehouse requirements. And lastly, shift towards
outsourced IFM, which helps companies and asset owners to focus on their core business.
Now moving to BSS. Our BSS segment saw a revenue growth of about 19% in the 9 months FY
'25. I'd like to talk about each of the segments on BSS separately. Our largest vertical in the sales
enablement front, which is Denave, witnessed a few headwinds in terms of margins due to the
mix of business and the investment we are making in technology. We are constantly working on
the implementation of AI-driven technologies into Denave, which would help us improve our
efficiency, improve our margins and also improve our productivity.
This is what would happen going forward from now. We have been investing a little bit ahead
of the curve. We successfully have begun utilizing GenAI sales intelligence, which is our
proprietary technology called Intellibank . This would also start paying us back probably in the
next few quarters coming. This technology will help us become more efficient in terms of
helping our customers close deals faster and further improve our conversion rate.
We're also expanding our sales team, increasing leadership across all fronts, development and
deployment of new proprietary technology, development technologies through platform
integration, while also focusing on regional expansion of newer customers and in newer
countries.
We have commenced business in South Korea through our office setup in August '24. At
Denave, we have consistently fostered an entrepreneur-employee-friendly culture. In this spirit,
I'm proud to share that Denave has been honoured the leader in Business Contribution Award at
CC APAC. Our innovative people policies have also earned a Great Place to Work certification
for the fourth time.
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Updater Services Limited January 28, 2025
Coming to Athena. Athena witnessed a loss of a key client during the 9 months FY '25 as the
client itself is reducing operations in India. This led to a flattish revenue for Athena during the
last 9 months FY '25. We have been working continuously on reducing our customer
concentration in Athena and diversifying into other sectors like retail, education, etc. The lead
time for converting business is about 2 to 3 quarters. On the positive side, EBITDA margins
have remained the same. We are confident that we will get newer business lines from a diverse
range of segments going forward.
Secondly, in Athena, with the IT and ITES sector gaining momentum with the government's
large focus on development of tech parts and GCC , coupled with the focus on increasing
penetration and the last-mile delivery of BFSI services in India. We remain confident Athena
will bounce back in the next few quarters.
Matrix revenues have also grown about 17% year-on-year and is on pace to grow at about 20%
plus over the next course of FY '25. This growth stems from higher demand from employee
background verification services across sectors in the country. Stringent regulations and high
security concerns of employers would give us more kind of opening for the employee
background verification.
We have implemented a technology, which we call as Matex 2.0, which is a digital platform for
tracking and verification, which is also fully operational from this quarter. This would help us
in terms of improving productivity and efficiency, profitability.
The A&A segment, which is the audit and assurance segment within Matrix, is also seeing a
good growth in the country. As a direct result of more stringent regulations, the audit concerns
of companies and the general rising in focus of corporate governance for these companies would
give us much more opportunity to grow in this segment. The market is aiming to grow at about
5%-6% CAGR, and we are expecting nearly about 20-odd percent growth in this segment.
Avon, which is our supply chain and logistics company, which is set to achieve about INR100
crores of revenue this year, and it was of run rate revenue this year. Avon is extremely unique
and a one-of-a-kind company in India due to unique mailroom management software being
proprietary in nature.
With improved efficiency from warehouse management, transportation and logistics business,
the company has managed to grow revenue by about 56% year-on-year, while also improving
its operating margins. Our strategy around Avon will be centred around being a holistic supply
chain management and warehousing player in India going forward.
And coming to Global, which is our ground handling business, has break even this year. If you
look at the last couple of years, they have not been making profits. But this year, they have
broken even, and we expect them to be very kind of profitable going forward from the next
quarter. We have now started operational all the 22 airports, which Global has the concession.
It has taken about a year, 1.5 years for us to get all these airports actually operational.
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Updater Services Limited January 28, 2025
If the airports become popular and visibility increases, they will become more profitable.
They've also got additional inflows of flights from Air India Express. And on back of increased
traveling during this festival and holiday season, we see that the business adding good profits to
the group.
During 9 months FY '25, the BSS segment contributed 35% to revenues and 46% to the total
EBITDA. EBITDA for the BSS segment grew by 22% year-on-year basis. EBITDA margins for
BSS segment stood at 9.5% as of 9 months FY '25, which was 9.3% during the same period 9
months FY '24.
Way forward, the overall Business Support Services aim to grow at about 9.5% CAGR. And
India stands to gain especially from the current economic scenario with impact from GCC
schemes, PLI schemes and employment generation incentives for companies.
Our BSS subsidiaries stands to gain from the organic economic growth. The key drivers for this
growth would be sales enablement, audit and assurance, employee background verification and
mailroom management. Mailroom management along with niche logistics and warehouse
management. We expect to achieve a 3x GDP growth even in BSS segment, which will further
improve the company margins.
To finally summarize, UDS is well positioned to grow, thanks to the strong industry dynamics
and our own proven track record in managing large contracts. We continue to scout for strategic
acquisitions that will enhance UDS' overall capabilities and contribute positively to our margins.
We are focusing on increasing cross-sales between our IFM and BSS companies, which will
create significant growth opportunities, unlock additional synergies.
We have made Mr. Snehashish, our BSS Group CEO, and seeing synergies across Denave,
Matrix and Athena. I mean he is given additional responsibilities as the BSS Group CEO, more
across the group for the synergies within the BSS segment. We have recently onboarded Samriti
Malhotra, our Group CHRO. And with her strategic guidance, we will further optimize people
synergies across the group.
With this, I will hand over this to Radha Ramanujan: for giving the financials and numbers on
the Q3 & 9 months ended FY '25. Over to you, Radha.
Radha Ramanujan:
Thanks, Raghu, and good morning, everyone. First, I will start with the Q3 FY '25 highlights
and then take you through the 9 months ended December '24.
Q3 FY '25, the revenues from operations grew by 9% on a year-on-year basis to INR7,006
million. IFM segment revenues grew by 9% to INR4,554 million and BSS segment revenues
grew by 7% to INR2,451 million in Q3. Revenue split between IFM and BSS segments stood at
65% and 35%. EBITDA for Q3 FY '25 grew by 18% to INR519 million. EBITDA margin stood
at 7.4% versus 6.8% in Q3 FY '24, an improvement of 60 basis points over last year same period.
Excluding our finance income, which most of you were asking me to populate, our EBITDA
grew by 24% year-on-year to INR486 million. And EBITDA margin, excluding other income,
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Updater Services Limited January 28, 2025
stood at 7%, which was 6.1% same time last year. And IFM segment EBITDA stood at 6.7%,
while BSS segment EBITDA stood at 8.7%. And PAT witnessed a growth of 52%, and it is at
INR312 million. Our earnings per share grew by 48% year-on-year to INR4.61.
And coming to the 9-month FY '25 highlights. The total revenue from operations grew by 12%
year-on-year, and we are now at INR2,046 crores. The IFM segment revenue grew 8% year-on-
year to INR1,328 crores and BSS segment revenue grew by 19% year-on-year to INR717 crores.
Revenue split between IFM and BSS continued at 65:35 ratio.
EBITDA for 9 months FY '25 grew by 34% to INR1,499 million, and the EBITDA margin for
the 9-month period is 7.3% versus 6.1% in the 9-month period ending FY '24, a significant
improvement of 120 basis points. Excluding finance income, our EBITDA grew by 30% year-
on-year to INR1,362 million.
The EBITDA margin, excluding other income, stood at 6.7%, which was 5.7% same time last
year, 100 bps improvement over last year. IFM segment EBITDA margin stood at 6.1%, while
BSS segment stood at 9.5%, as both IFM as well as BSS margins improved consistently
compared to the same time last year.
Our PAT witnessed a substantial growth of 101% and stood at INR848 million. Our earnings
per share grew by 71% to INR12.60. ROCE is at 22.3% and return on equity is at 14.6%. UDS
is a net cash company, and net debt to equity is negative 0.2 as on 31st December 2024. We have
overall 69,000 people, and IFM stood at 54,053 employees and BSS segment stood at 14,762
employees.
During the 9 months FY '25, we added 60 logos in IFM segment and 35 new logos in BSS
segment. And we call it out only the substantial and continuing logos, which are more than 5
lakhs. We keep adding a lot of clients, but what we call out is the substantial one.
With this, I will open the floor for question and answer. Thank you.
Moderator:
Thank you very much. The first question is from the line of Nitin Padmanabhan from Investec.
Please go ahead.
Nitin Padmanabhan:
Congrats on a good quarter. My first question is for Snehashish, which is about Denave and
Athena. So Athena will take some time to recover. So one on Athena, if you could give some
sense on what's happening there; the headwind from the RBI mandate, has that come off; and
should we start -- when should we really start assuming growth?
I think on Athena, in the first half, it declined 6% versus the first half -- in the first half. So does
it -- so has it grown in -- I think from what you're saying, it looks like it's grown in the third
quarter. So just wanted to reconfirm that. So -- and apart from that, I have a few questions on
Denave also, so I'll follow up with this.
Radha Ramanujan:
I can answer the growth of Athena, while I request Raghu to give a high-level view on the
vertical. Athena's revenue has not grown in the third quarter compared to the previous quarter,
but Athena has maintained the profitability. They have to take certain action with respect to
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Updater Services Limited January 28, 2025
giving off the seats and other things, which took a little bit of a time. So in Q3, they have taken
all the measures and the profitability improved in Q3.
Yes, over to you, Raghu, if you want to.
Raghunandana T.:
Yes, yes. Snehashish is not on this call, so I will answer that. Athena lost a large account in the
beginning of this year. That's why you will find the growth being muted. When they lost this
account, not because of anything else, this bank, BFSI, had closed business in India. And
between first and second quarter, they've also lost another big account, which the company got
sold to another entity. So the business got restructured. However, we had anticipated this.
We are working towards adding different other accounts and probably not in the BFSI segment
also. And that will start giving us results from the first quarter next year. So that is how -- if you
look at headwinds when you said, this is how it happened. We did anticipate, but we didn't
anticipate this happening so fast. So that is the reason the revenue was bitter. But however,
profitability will still maintain because Athena is a high profit business and will continue to do
that. Does that answer? Or is there anything specific you want?
Nitin Padmanabhan:
Yes, yes, that's helpful. so obviously, Q4 also, there will be a revenue headwind here. so what is
the current revenue for the 9 months for Athena? And for the year, you expect it to be flat or
there will be a decline?
Raghunandana T.:
Yes, I expect it to be flat. But, Radha, can you give me numbers for 9 months and what is the
full-year number? We have it. We have the full visibility.
Radha Ramanujan:
Yes. The current revenue for the 9-month period is INR107 crores, and they'll be closing the
full-year period with about INR135 crores, which will be at par with last year what they did.
They may not show any growth in terms of top line. Similarly, the profitability also will be
similar to what they have reported last year.
Amitabh Jaipuria:
So if I may just add, given the fact that we have lost about 2 large customers for reasons of the
-- which are very specific to the customers. In the management's view, the fact that we will still
be able to hold our numbers from last year in terms of both revenue and profitability is actually
because of the actions that the local management, the Athena team, took to contain costs as well
as to maximize revenue from other clients. So it's -- from that perspective, we see it as a positive
because as the new logos kick in, the Athena growth platform remains intact. I just thought I
will add that.
Raghunandana T.:
Yes, that's right. We are actually confident on that. I would actually say we have -- the Athena
team had really worked very hard and then maintained without any negative -- any dip either in
revenues or in profit in spite of all this.
Nitin Padmanabhan:
Yes. Got it. On the Denave side, the question was considering this shift to an AI-based agent
selling, how should we think about growth? Because on one hand, as outsiders, there can be a
compression on existing customers, or do you see that not happening? Whereas, it just
accelerates the new customer additions. So how is adoption with existing customers? And if
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adoption rate is faster, does that mean that growth will be softer for a year or so and then sort of
pick up post that? How should we think about this dynamic?
Updater Services Limited January 28, 2025
Amitabh Jaipuria:
Raghu, should I...
Raghunandana T.:
Yes, yes. You can take it, and then, I'll add later.
Amitabh Jaipuria:
Yes. So basically, that's a valid question that you have because Denave is the one company that
in some sense is at the forefront of the technology piece for the group. And at the same time, the
area of sales enablement is itself going through a little bit of churn because of new technologies.
So we are adapting to that. The customers are also adapting to that. The business models are
changing to an extent. And, therefore, what is happening is that this space will remain slightly
soft.
So in the coming year, we expect new logos to kick in. And we also expect our own efforts in
AI and the remote agents, etc. Our own efforts there will start paying off. So -- but this year is
right now looking like -- the next few months, maybe 2 quarters, are looking like quarters of
transition. So that's -- that would be our commentary on Denave. Will margins soften further
from here? The answer is a no. We don't believe margins will soften further. Will growth
continue? Our answer is yes. We believe growth will continue.
Raghu, do you want to add anything?
Raghunandana T.:
I'd add to what Amitabh said. We had already invested into the new technologies or agents or
AI, whatever we call that, over the last 1, 1.5 years. This will start paying customer adaptability
very good. I'm a little more bullish on that. We would actually show a better growth next year.
And, of course, better the margin. There's no doubt it will go down.
This year, the margin is slightly muted or down compared to the last year or the previous year
because of business mix. It's not because of technology disruption. Because technology
disruption, we have already started working on that. As Amitabh said, we are on the forefront of
it. We see customers adapting to it. We have invested heavily on technology. We are using all
the agents what you said. And it would be a tech-driven business going forward.
Even earlier, it was largely tech-driven, though we were never calling it agents or AI, all that.
So that I'm very confident on in terms of Denave. I would -- I don't want to give you -- call out
numbers, but I'm definite it would do much better the next year or even from the next quarter.
This will start to work.
Moderator:
The next question is from the line of Deep Shah from B&K Securities.
Deep Shah:
So the first question is basis your commentary. If I understood it correctly, the IFM business,
you've done slightly lower than your expectation in terms of growth, but it's still better than the
market. So any particular reason why the market is slowing down? And given that you've been
doing this for some time, how do you see it working out? Because typically, why would a market
which has such a structural tailwind slow down, so your comments on that would be useful.
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Updater Services Limited January 28, 2025
Second, on the global front, so I understand that you've broken even. And you also mentioned
that 7 airports you are doing Air India Express. So how should we think about this? Is this -- I
mean, would Air India eventually -- would we be doing for them or Air India Express would be
separate? And then if it's separate, will we be doing all 22 airports? How should we think about
this?
Raghunandana T.:
Yes. Should I answer? See, I'll answer your last question. On Global, yes, it took us time to
actually start operations in all 22 airports. Even now, when I say we have started operating 22,
still 6 or 7 airports are not being 100% operational in terms of getting all the clearances and
starting off in terms of equipment and all that. However, all these will be operational, definitely
100% operational, by first quarter of next year.
We see Global to grow at -- in terms of -- particularly on numbers, it looks like 100% to 200%
growth because the last year or the last few quarters we were not operating all the airports. So
that would give very good numbers. From a minus INR8 crores or INR9 crores last year, this
would -- this year itself, we will show profit because this quarter, 9 months itself, we have broken
even. So that would grow as per what we planned or even slightly do better than what we
planned.
Coming to Air India Express, we have a contract with them. I mean this is a contract for all our
airports, wherever they fly. Now I said 7 airports because these are the 7 airports where they are
flying in now. So we have a contract with Air India Express for all -- any airport -- all these 22
airports. It's only the 7 which are operational now this quarter and the next quarter, but it could
increase. So that is left to them, but that was how -- that's how we got that 7 airports of Air India
Express. So that is on the Global.
And IFM, yes, whatever we called out, we will grow on that. The margin improvement is
because of a small mix within the IFM business. Like for example, our industrial business could
be warehouse, production support, some engineering services mix we have to increase. So if you
look at, even the growth was only 8%-9%, but our margins improved because of our efficiencies
and the business mix. This is a combination of both.
Deep Shah:
Right, sir. But if you could like give us some color on why the industry as a whole is slowing
down because that is what I understood from my opening remarks. Or is that not the right
conclusion?
Raghunandana T.:
I don't think -- sorry, sorry, go ahead. Go ahead.
Amitabh Jaipuria:
Okay. So we're not saying that the industry is really slowing down because new construction
keeps happening. So customers are trying to figure out what kind of model serve them the best
in terms of service providers. And the vendor consolidation anyway continues to play in favor
of companies like us, which is UDS, and the larger companies.
So it's not really slowing down. And 8%, 9%, 10% industry growth, because the industry report
earlier, of course, did paint a slightly more bullish picture, but they had included other segments
which we are not operating in.
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Updater Services Limited January 28, 2025
So -- and if industry grows at 10%, Raghu has already talked about, the fact that we will grow
ahead of industry, that's our objective. And that will be our attempt because we will continue to
win new logos. And like we have already won 95 new logos this -- in the 9-month period, we
already see that in our results, and these will start paying off as well.
So our commentary is not that the industry is slowing down significantly. Minor blips here or
there keep happening because of various different kinds of things, which we understand, not all
of which we control. But overall, if you look at the 3- to 5-year horizon and even a longer-term
horizon, this industry is set to grow low-double digit, and we will grow ahead of that.
Radha Ramanujan:
And if I may add one comment, growth, what is compared is also what the similar peers who in
the last 2 quarters, what they have reported as a growth and our growth was much better. It's
more on that comparison as well.
Deep Shah:
Understood. This is useful. A couple of bookkeeping questions if I could. One, could you provide
margins without other income? Second, what would be your cash balance?
Radha Ramanujan:
See, I had clarified our margin with income and with interest income, both have been given to
you. And our cash position at this point of time is INR176 crores.
Raghunandana T.:
No, just -- can you just give that once more, Radha, with other income and without income?
Radha Ramanujan:
Yes. The EBITDA margin for the Q3 is 7.4% versus 6.8% last year. And EBITDA margin,
excluding other income, is 7%, which was 6.1% last year. So the other income is 0.4% this
period, and the other income is 0.7% last year, because last year we had the full cash lying with
us in the Q3.
And on a 9-month period, our EBITDA margin without income is 6.7% this year and 5.7% last
year. And if I include the other income, it is 7.3% YTD 9 months this year versus 6.1% last year,
which is 120 bps improvement. And excluding the finance income, it is 6.7%, which was 5.7%
same time last year. Excluding finance income also, we have grown 1% compared to last year.
Raghunandana T.:
Yes. YTD 9 months, 1% improvement without finance income is the number for the EBITDA
margin.
Deep Shah:
Okay. Understood. And sir, one request. We have multiple businesses with different viewers. So
if you could provide this on a consistent basis, it would be useful because today, Athena, Denave,
Matrix, we are all following different numbers and different guidances. So if you could make
this as a part of the PBT, revenues, margins, that would be very useful.
Amitabh Jaipuria:
Yes. So we've got that feedback from some other people as well. And next cycle onwards, we
will do that.
Deep Shah:
That would be really useful. All the best.
Raghunandana T.:
Yes. The next quarter, we'll definitely do that. We'll do that. But at least 80%, 85% of the
businesses within both the segments.
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Updater Services Limited January 28, 2025
Amitabh Jaipuria:
Yes. Major companies. Yes, major subsidiaries, we will do.
Raghunandana T.:
Yes, yes. This will cover 80% to 90% of our both revenue and PAT. Next quarter onwards, we
will call out these names. There's only 3 companies in BSS and 3 in IFM, which I take 90% of
the revenue.
Moderator:
The next question is from the line of Pritesh from Rathi Securities.
Pritesh:
Sir, on the revenue growth side, how should we incrementally look for next year in terms of your
revenue growth, especially when I'm seeing that since last 3 quarters, we've been slowing down.
And on the other hand, we have this larger revenue growth guidance given. So how should we
look at the revenue growth next year?
Amitabh Jaipuria:
See, we have always guided that we will grow at about 2.5 to 3x of the economy. But we are
dependent on other economic agents. So if the overall economy slows down, like this year, for
example, from the earlier projections, the economic growth rates are now being projected that
we will be down by about 1%, right, compared to the projections earlier.
So if the overall economy slows, we will slow as well. Our growth rate will slow. We will
continue to grow strongly, but our growth rate will slow. And we continue to maintain that we
should be growing between 2.5 to 3x of the overall economy.
Pritesh:
See, by whatever means that means between 15% and 20%, whatever be the number, is it 15%,
16%, 17%, 18%, 19%, 20%, right?
Amitabh Jaipuria:
That's right. Between 15% to 20%, it should be our growth rate.
Pritesh:
Yes, right, so when I look at the absolute number in that. But when I look at the last 4 quarters,
your growth has never been above 13%.
Amitabh Jaipuria:
Yes. So we've been growing at about 2x, you're absolutely right. And what we are seeing in the
future is an acceleration of that growth to some extent because we do believe the economy will
look up, number one. Number two, Global, as Raghu pointed out, that is poised for a bit of a
breakout because the other -- all the other airports will come online. We expect the A&A
business and the employee background verification business to continue to grow. But (WHC)
will continue to contribute to margins.
IFM has continued to show growth, as well. And we are expecting the decline in the margins of
Denave and the softness there to stabilize and improve as we have already said in our earlier
commentary. So if you look at most of our business components, that is what is looking good.
Over the past 3 to 4 quarters, if you look at it, we have always given the commentary about some
business or the other being slowing down. This quarter, for example, Athena had an issue, right,
with 2 large customers dropping out because of reasons which are internal to them, and they
shared our comment on. So -- and we have not lost that by the way. So we are not losing to
competition.
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Updater Services Limited January 28, 2025
Moderator:
I'm sorry to interrupt. Sir, we are unable to hear you.
Amitabh Jaipuria:
Am I audible? I'm sorry, the connection is actually bad. Am I audible now?
Moderator:
Yes, please go ahead.
Amitabh Jaipuria:
Yes. So, therefore, what we believe is that between 15% to 20% and, as you pointed out, 14%,
that's pretty close to the range that we have talked about. So, between 15% to 20% is what we
should be doing. So, can we give very, very precise number?, the answer is a no.
Pritesh:
Sir, can you give some idea on what kind of deals are you discussing? Because for next year, if
you have this aspiration, you should have some ongoing discussion or transaction or an order
book to support it, so if you can tell any of those points.
Amitabh Jaipuria:
Yes. So we have 3 active conversations that are going on right now and of varying -- one is a
fairly large transaction, the other 2 are slightly smaller. And -- it will add significantly to our
bottom line and, more importantly, to our capabilities and to our topline also, to an extent, if the
deals actually happen. So there are 3 active conversations. That's what we can tell you.
Further detail, obviously, we cannot because right now the conversation is going on. When we
say no guarantee that a transaction -- so we want you to remember that and note that because we
don't want to misrepresent. So there is no guarantee that a transaction will materialize, but there
are 3 very active and promising conversations that are on.
Raghunandana T.:
Okay. Yes. And just to clarify, see, we are confident of doing that 15% to 20% growth without
compromising on margins. As it what is today, we'll only want to improve it. This is what we
are talking organic. We're not talking of any inorganic addition. So that will happen definitely.
As Amitabh said, we are active, advanced stages in some -- 1 or 2 smaller ones. But we cannot
kind of tell you with a complete certainty this is going to happen in the next 1 quarter or 2
quarters, but that is the whole idea that we would want to do it. But this growth, what we spoke
is all organic.
Moderator:
The next question is from the line of Nihal Shah from Prudent Corporate Advisory.
Nihal Shah:
Congratulations on a great set of numbers. So, when we talk about BSS, so there, how much of
it is because of the 2 client’s reduction? And how much do we see the economic activities as
well softening? Because as you said that the RBI itself has reduced the growth guidance for
Indian economy, so how much of that could be attributed to the slowdown in economy as well?
Raghunandana T.:
So, Radha, if you can just give the numbers of the Q3 reduction in revenue in Athena, that is
really because of loss of customers, right, that's the number. Yes.
Radha Ramanujan:
Exactly. The reduction what Athena has reported, in Q3 their top line went down by 12% to
INR33 crores, and it is primarily on account of missing the 2 large clients who were with them.
As on date, there is nothing that has hurt them in the existing business with the RBI regulation,
but the new inflows are stagnated.
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Updater Services Limited January 28, 2025
People are continuing with the current business. What may happen with the regulation, so we
are not able to compensate the lost business with new business, because there is -- everybody is
holding off to the current way of operating. We are not able to get new clients in the BFSI
segment.
While saying so, they are now aggressively looking into non-BFSI segment, and it may take --
now they are doing the POC, they are now getting into the client relationship. This quarter and
next quarter could be challenging, but the new avenues, non-BFSI, will help them to scale up in
the subsequent quarter. So far, they didn't focus on this, on the non-BFSI because BFSI was a
profitable client for them.
Nihal Shah:
Okay. So when we talk about the others, so their airport handling services which we were
expecting it to breakeven or give some amount of profit in this year, so how has that profitability
phased out in the next -- in the 9 months?
Amitabh Jaipuria:
So we have delivered on that. And we had said that we will break even, and we have done that
already. So this year, Global will be a positive contributor. Last year, it was an INR9 crores loss
because of Global, because we were investing ahead of the business as we were required to do.
And now that has come through, and we have already broken even, and Global will be a positive
contributor this year.
Raghunandana T.:
It would be roughly about INR1-2 crores this year.
Amitabh Jaipuria:
Yes. So it will be an INR10 crores swing from last year. Last year was minus INR9 crores. This
year, it will be a positive INR1 crores or INR2 crores.
Nihal Shah:
Okay. So in the next year in FY '26, so as we were saying that the operations are ramping up
currently and will ramp up in the coming couple of quarters or so, so can we expect that to go
up to a higher single-digit kind of a margin in FY '26?
Amitabh Jaipuria:
Yes.
Raghunandana T.:
It could be a little more than a single digit because you know that we have already made the
investments, but it would definitely be a much bigger number going forward next year, FY '26.
Moderator:
The next question is from the line of Sakshi Pratap from Pratap Securities.
Sakshi Pratap:
What benefit are we expecting from the upcoming budget for employment? And how do we see
this benefiting our IFM segment?
Amitabh Jaipuria:
So we don't -- since we have a varied set of businesses, we don't see the budget as an event that
can be very negative or very, very largely positive. The -- what we do see is that if there is action
on the corporate tax front, obviously, that will be a positive, but we don't anticipate that.
We do anticipate that there will be encouragement for job creation and that there will be
encouragement for relocating or setting up infrastructure here on both the services side by way
of GCCs as well as on the industrial side by way of further PLI schemes and encouragement
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toward large-scale electronics outlets and those kinds of things, electronics and those kinds of
things.
Updater Services Limited January 28, 2025
Moderator:
Sorry to interrupt you, sir, we are losing you. We cannot hear you that clearly. Your voice is
breaking.
Amitabh Jaipuria:
Raghunandana T.:
Okay. I can take that. I can just tell what Amitabh said. Yes, there is no direct benefit or the
advantages we're looking at the budget. But indirect, yes, like what Amitabh said, the more --
when the manufacturing gets more, yes, we get benefited. That's what is indirect. Because
directly, we don't see budget impacting us either negative too much or positive -- it could be
only positive, sorry. So that is what I'm thinking, but we have now not seen the budget directly
impacting us, negative at least. So that -- does that answer the question? Otherwise, I can
elaborate.
Sakshi Pratap:
Yes, yes. Understood. Congrats on the good set of numbers.
Raghunandana T.:
Thank you.
Moderator:
The next question is from the line of Harsh Sharma from HS Securities. As there is no response,
we'll move to the next question, which is from the line of Nitin Padmanabhan from Investec.
Please go ahead.
Nitin Padmanabhan:
What is the borrowing number for the quarter?
Radha Ramanujan:
This quarter, we have closed all the borrowing. Initially, we had deposited the IPO proceeds in
fixed deposits, and we continued the borrowing. And in October, since all the fixed deposits got
matured, our -- we are a net cash company, there's no borrowing. There could be minor on a
day-to-day fluctuation, INR1 crores, INR2 crores cash credit received in it. But otherwise, there's
no borrowing.
Nitin Padmanabhan:
Right. So the finance cost will be -- that we see now is -- or at least the next quarter will be more
or less just the lease cost, there won't be any financing?
Radha Ramanujan:
Yes, there will be this lease cost, and maybe the timing difference, the collection uses a payment
that a couple of days cash credit and other things. Predominantly, it will be the lease finance
cost, unless we go for an acquisition and get into borrowing.
Moderator:
The next question is from the line of Rahil Shah from Crown Capital. Please go ahead.
Rahil Shah:
Yes. Sir, just one question on the margins, if you can guide something overall for the company?
What do you expect to end this year with and the next year, FY '26? EBITDA margin statistics?
Amitabh Jaipuria:
So if I may -- so am I audible? Can I -- yes?
Raghunandana T.:
Yes, yes.
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Moderator:
Yes, you are. Please go ahead.
Amitabh Jaipuria:
Yes. So on the margin, see, we don't give formal guidance, and we will stay with that. We are
Updater Services Limited January 28, 2025
not giving formal management guidance. What we have said is that because of operational
leverage, we will grow margins of 20 to 25 basis points year-on-year, and we expect that to
continue.
We expect a little bit of contribution also because of the fact that our higher-margin businesses
such as EBGC, (WHC), Denave, etcetera, should start contributing more as well. So there may
be a little bit of an improvement on that front as well. So that is what we can tell you on margin
improvement for next year. Does that answer your question?
Moderator:
The next question is from the line of Sunil Kothari from Unique PMS.
Sunil Kothari:
Congratulations. Sir, what is the scope of removing some less profitable business, reducing
costs, like in IFM we have substantially improved our profitability? So as a whole organization,
where do you see the scope of reducing costs or maybe removing less-profitable businesses? A
little more -- from a year or 2 point of view, not a quarterly point of view.
Amitabh Jaipuria:
See, we continuously review our portfolio of businesses to understand where we can optimize,
either on the growth side or on the profitability side. And cost is a major contributor on the
profitability side. So that's a continuous process. At this particular point in time, we don't see us
divesting any business, at least in the next 2 to 3 years. That's not on the horizon.
And cost will -- we are very conscious of our cost base. And you will see and we are working
on cost side actions in this year's planning cycle now. So you -- so that's what, idea is clearly to
improve our cost position, but there is no divestment of any existing business being planned.
Sunil Kothari:
So if I understood right, sir, this IFM, we restructured some businesses. We have allowed to go
away some less-profitable businesses. Now any scope there or that process has been done?
Amitabh Jaipuria:
There is some scope. But by and large, a lot of the low-margin businesses we have got rid of
already as we have been saying over the past 2 quarters. There is still some scope. Because you
see it's like this, right? If you remove the bottom 10%, then the next 10% becomes the bottom
10%, right? So there is a continuous culling of less-profitable contracts or contracts where we
find that our cost doesn't allow us to make a decent return.
Sunil Kothari:
Right. Sir, next question is to Mr. Raghu. Sir, basically, we are acquiring so many different
companies, different business segments, business mindset and culturally different organizations.
How difficult or easy this style rather than, say, growing organically?
Raghunandana T.:
Yes, that's a good question. However, we've not done many. It may look like we have done
many, it's only largely 3 companies. It is -- I mean, we need to put in focus and work on it to get
it kind of integrated with the overall philosophy or the business, how we do with the parent
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Updater Services Limited January 28, 2025
company. So that's happened very successfully so far. So going forward, yes, what you're saying
is right, it's not an easy thing, we will have to do it.
However, we'll do that, like I think Amitabh mentioned this earlier, only if it is going to add
value to our existing business or if we can add value to a business which we're going to acquire.
So that would be the basic underlying kind of philosophy or policy for our acquisition strategy.
So that would make our business actually better because it will add kind of synergies, add
capabilities, add value or we could do that with the acquired business. So that is the whole idea.
That's what has happened so far. If you look at all our acquisitions, they have been very
successful. When we say all, it's basically 3 or 4, the other things happen much earlier.
So today, I would even say if you -- if after acquisition and the businesses are kind of integrated,
more than 2 years, I wouldn't even call them as inorganic. It's part of the overall thing. I think 2
years is a pretty decent time. By that time, I wouldn't even call them as a kind of an acquired
business or a business which is new to us.
So all our businesses are now more than 3, 4, 5, 6 years after our acquisition. So our last
acquisition was Athena, which is now 2 years into it. And next year, I think we will be 100%
owning that or 90% something, we have some structure with the promoter.
Moderator:
Ladies and gentlemen, this was the last question for today. I would now like to hand the
conference over to the management for closing comments.
Raghunandana T.:
Okay. Great. Thank you all of you. Thank you for joining us. I hope we've been able to answer
all your queries. Look forward to such interaction in the future. In case you have any further
details or queries or any further clarification you require, you can contact the company. You can
contact Deven of SGA, our Investor Relations advisor. So feel free. You can mail to us, you can
write to us. So thank you again for joining.
Moderator:
On behalf of Updater Services Limited, that concludes this conference. Thank you for joining
us, and you may now disconnect your lines.
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