3i Infotech Limited (3IINFOLTD) Earnings Call Transcript & Summary

Ladies and gentlemen, good day, and welcome to the 3i Infotech Q4 FY '25 Earnings Call. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Mr. Pratik Jagtap from EY Investor Relations. Thank you, and over to you, sir.

Thank you, Ziko. Good afternoon to all of you. Welcome to the Q4 FY '25 Earnings Call of 3i Infotech Limited. The results and investor presentation have already been mailed to you, and you can also view it on our website at www.3i-infotech.com. To take us through the results today and to answer your questions, we have the top management of 3i Infotech Limited represented by Raj Ahuja, acting Group CEO. Raj will start the call with business update. After that, we will open the floor for Q&A session. As usual, I would like to remind you that anything that is said on this call that reflects any outlook for the future or which can be construed as a forward-looking statement must be viewed in conjunction with the risks and uncertainties that we face. These risks and uncertainties are included, but not limited to what we have mentioned in the prospectus filed with SEBI and subsequent annual reports that you can find on our website. With that said, I'll now hand over the call to Raj. Over to you, sir.

Thanks, Pratik. Good afternoon, everyone, and thank you for joining us on the quarter 4 FY '25 earnings call. I'm pleased to connect with you again and share an update on our financial performance, key business developments and the strategic outlook. Let me start with quarter 4 and full year FY '25 financial highlights, followed by business update and the future growth strategy. For quarter 4 FY '25, we have reported revenue of INR 187 crores, a sequential growth of 3.1%, driven by strong traction in the U.S. market and effective execution across key client engagements. Our deliberate pivot to high-margin deals and exit from low-margin accounts helped strengthen profitability with EBITDA margins improving to 8.6% from 6.4% in quarter 3 FY '25, supported by better execution and cost optimization. So we have continued the momentum from last quarter and confident to sustain the traction in FY '26. Our closing headcount stood at 4,552 employees. While this was a net reduction over FY '24, it reflects our focus on aligning talent with business priorities. Our annual attrition rate stood at 17.9%. The billable count was 5,517 in quarter 4 last year FY '24 versus 4,196 in quarter 4 FY '25, whereas the nonbillable count was 637 in quarter 4 FY '24 versus 356 in quarter 4 FY '25. This has resulted into an improvement of the billable to total headcount ratio from 89.6% in FY '24 closing to 92.2% in FY '25 closing. For the full year, revenue was INR 725.8 crores, down 10.8%, primarily due to our strategic exit from loss-making and low-margin engagements. However, both EBITDA and PAT remained positive at INR 36.7 crores and INR 25.3 crores, respectively. We ended FY '25 with a strong balance sheet, 0 debt and a total cash of INR 33.25 crores. Total assets stood at INR 572 crores and net worth at INR 307 crores. Our DSO has improved from 88 days in quarter 4 FY '24 to 81 in quarter 4 FY '25. We remain focused on maintaining financial agility and working capital discipline. Coming to the segment performance. In quarter 4 FY '25, our AAA business contributed INR 131 crores, accounting for 70% of total revenue with a 16.3% gross margin. Growth was led by automation, advanced analytics, particularly in BFSI and government sectors. Infrastructure Services generated INR 36.1 crores in revenue with a 19.5% gross margin. We are focusing on expanding our cloud-native offerings and hybrid solutions and strategic partnerships to further improve margins. Business Process Services delivered INR 19.7 crores in revenue at a 16.4% gross margin. We are actively advancing process automation initiatives to enhance operational efficiency and unlock higher profitability. In terms of geography performance, U.S. revenue stood at INR 86.5 crores, growing 16.4% quarter-on-quarter and 7.2% year-on-year. The U.S. continues to be a strategic focus where we are emphasizing high-margin value-led engagements across automation, cloud, cybersecurity and digital services. India registered revenue of INR 81.1 crores, up 2.7% quarter-on-quarter, but down 9.9% year-on-year. The decline is primarily attributed to BPS segment, which has been impacted by regulatory shifts leading to in-sourcing certain previously outsourced processes. During the quarter, we secured 50 new contracts, comprising a healthy mix of engagement from new customer acquisitions. These wins reflect our growing relevance as a strategic technology partner in the IT services landscape. Another key update I would like to share is regarding the dilution of 3i Infotech stake in its subsidiary, NuRe MediaTech Limited. As announced in the last investors call, we entered into a strategic relationship with key investors, marking a pivotal milestone in the monetization of our RailTel project. I'm pleased to confirm that the transaction was successfully closed on 31st March 2025 with a total consideration of INR 17.5 crores. The Board has approved a rights issue of up to INR 100 crores to strengthen our balance sheet and support our strategic growth initiatives. This capital infusion will enable us to invest in expanding our high-margin businesses, enhance our digital capabilities and improve overall financial flexibility. The rights issue will be offered to existing shareholders, ensuring they have an opportunity to participate in the company's next phase of growth. We also continued our commitment to employee ownership by allotting approximately 3.96 lakh equity shares under our ESOP scheme, reinforcing talent retention and long-term alignment. As highlighted in previous calls, our core focus remains on sustaining scale and driving organic growth within our existing client base. We are also making notable strides in deepening our alliances with leading technology partners while co-innovating with our clients to deliver differentiated value-driven solutions that address our evolving -- their evolving business needs. In the previous calls, I have been asked that how I would be growing the company's growth and get back to profitability, what's the strategy? So for last few months, we have been working on the strategy, which is included in our investor presentation as well for all the investors reference. Coming to the long-term strategy, I'm excited to share with you the road map that will define 3i Infotech's journey over the next 5 years, our Vision 2030. Over the next 5 years, 3i Infotech aims to establish itself as a high-growth innovation-led digital transformation partner by pursuing the following strategic pillars: our first priority is to deliver predictable and consistent financial performance. We are committed to revenue stability through disciplined execution and forging long-term client engagements. This will be key to building investor confidence and ensuring sustainable growth. To support this, we are driving operational excellence across the organization. This means optimizing our cost structure, increasing productivity, adopting automation and streamlining our delivery models. We are also sharpening our focus on outcomes. Our delivery approach will be guided by structured governance and KPIs that are directly aligned with our clients' business goals. This ensures we are not just delivering services, but making a measurable impact. Strengthening our sales engine is another key area. We are investing in building a high-performance sales organization with ongoing training tools and enablement focused on solution selling and industry-led value articulation. In parallel, we are leveraging on account mining across geographies. There is significant opportunity to grow within our existing client base through cross-sell and upsell strategies. Our focus on expanding our presence in the U.S. market will be critical with strategic client engagement and offering tailored to their needs. We are also deepening our ecosystem by forging strategic alliances, stronger collaboration with OEMs and hyperscalers will help us co-develop innovative solutions, boost market visibility and drive qualified pipeline growth. Inorganic growth will play a strategic role as well. We will pursue targeted M&As that enhance our capabilities and expand our delivery footprint, particularly in niche technology areas and new geographies. All of these initiatives are anchored by an aspirational yet achievable goal to triple our revenues and achieve a high single-digit EBITDA margin by FY '30 through focused investments and a small -- smart scaling strategy. Over the next 5 years, we will focus on robust execution and scalable growth across all 3 lines of businesses. A key part of this strategy involves strengthening our core offerings and expanding our footprint in high potential regions such as North America and the Middle East. We also plan to enrich our portfolio by integrating next-generation technologies like blockchain, AI, IoT and cybersecurity. Alongside this, driving improvements in key operational parameters will be critical to sustaining profitability and supporting long-term growth. To scale and grow our line of businesses, we have designed strategy for each LOB as well. So starting with our AAA business. For the business growth, we are deepening customer and leadership engagement while expanding BFSI opportunities through solution in data governance, AI/ML and RPA automation. On capability building, we are strengthening domain expertise in BFSI automation and data, while enhancing presale and solutioning to improve conversion rates. Expanding our talent pipeline with targeting hiring from Tier 1 and 2 institutions is a key focus. In workforce optimization, we are aligning talent deployment with business priorities through proactive hiring, upskilling and securing critical work permits in the U.S. and Middle East to retain top talent. Lastly, on technology expansion, we are investing in in-house capabilities across Salesforce, SAP and Microsoft Dynamics and establishing center of excellence in emerging technologies to ensure scalable growth. These initiatives are aligned to enhance our competitiveness, improve margins and create long-term value for our stakeholders. Moving to our BPS business. We have a well-defined strategy to scale operations and enhance profitability. We're expanding into high-value markets like U.S. and UAE, prioritizing midsized clients. From a positioning standpoint, we are establishing 3i Infotech BPO as a domain-led transformation partner, offering differentiated automation-driven services tailored to suit customer needs. On the talent front, we are investing in leadership development and AI/ML-driven training programs to build a scalable future-ready workforce while fostering a culture of continuous upskilling. To optimize margins, we plan to shift 25% of our operations to Tier 3 and Tier 4 cities, complemented by government apprenticeship programs. This will help us enhance cost structures and strengthen employee retention through an employee-first engagement model. Coming to our next line of business, infrastructure services, we are focusing on scalable output-driven solution in ITSM, AI Ops and cybersecurity to compete with global leaders. Our priority is to scale high-margin offerings in cloud, cybersecurity and AI-led IT operations with a strong shift towards outcome-based contracts that align with client KPIs and drive profitability. To support this, we are investing in talent retention, automation and innovation targeting sub-10% attrition and establishing CoE in AI, cloud and cybersecurity for differentiated service delivery. Financially, we will maintain a debt-free or a low debt, high-margin model, leveraging strategic OEM partnership for co-development and joint go-to-market initiatives, ensuring operational resilience and disciplined capital allocation. In conclusion, quarter 4 FY '25 has been a period of consolidation and strategic realignment. We believe that the foundations laid during this period will position 3i Infotech for sustainable growth in the coming years. I would like to express my gratitude to our stakeholders, employees, clients and partners for their continued support and trust in us. We are confident that our strategic initiatives, strong execution capabilities and dedicated teams will enable us to deliver sustainable growth and value creation in the coming quarters. Thank you. I will now hand over the floor to moderator for Q&A session.

[Operator Instructions] First question comes from the line of Ram Kumar who is an investor.

Am I audible?

Yes, sir, please go ahead.

Yes. So I have 2 questions. First question is in the previous quarter, if I recollect right, the ForEx gain contributed quite a significant amount to the profitability. So is it similar for this quarter as well? Is it ForEx gain and something else that is contributing? That's the first question. Second question is with regard to the future, the next 5 years, that is by 2030, the earlier projections were to the tune of the revenue projection was around $1 billion. That's what the previous management has had spoken about. Now it is showing it will be around INR 2,000-odd crores, INR 2,250 crores, 3x from current revenue. So this drastic reduction, what are we -- how should we read into it? Is it because the market is not likely to grow at the expected pace? Are there other challenges that have come in? And anything else that can throw light on this reduced projection?

Okay. Thanks, Ram. Thanks for your questions. Coming to the first question on ForEx profitability -- ForEx movements contribution to the profitability. Last quarter, we had a huge ForEx gain, mainly because of the ForEx movements in the international markets, where the dollar rate appreciated and rupee depreciated. We have a lot of ForEx assets, and that's the reason why we had booked profits in the last year on the ForEx line item. This year, though most of the quarter, mainly January and February, the ForEx rate remained very strong. But in March, they were at similar levels in December, plus/minus a few small percentage points, but they were in the similar range of December. So there was almost near 0 movement on the regular operations as far as ForEx is concerned. If you have seen, we had a onetime adjustment, which we have done, which is part of our consolidated notes also, Note #8, where we had done one investments reevaluation, which was between India and our Dubai entity, which has given us a hit of around INR 27.16 crores in the financial year '25, which has been incorporated in the current quarter. Other than that, ForEx has been mostly stagnant for us throughout the quarter. Coming to the second point, I think we have clarified in the last 2 calls, I think this is my third call. Last 2 calls, we had clarified that the previous management obviously has very different aspirations. And once the management has left and I have taken over almost a year back now, our focus has been to grow very, very profitably and not focus on top line. So if you have seen our top line actually has degrown in this year as compared to many other players in the market where we have seen the growth. And the main reason for our degrowth has been that we have been focusing on cutting down the wasteful deals, which is yielding either very low margin or negative margins. So our base now has been corrected. And this has taken us obviously 3 years back because we were around INR 700-plus crores around 3 years back. So we are restarting the journey from there, but the journey is focused more on the profitability and not on the top line. And that's why we had to recalibrate our top line aspirations where we want to focus more on the value addition, focus more on creation of value and growing profitably. And that's the reason that we had to taper it down. The market obviously has their own challenges, but this impact is less because of the market and more because of our internal preferences changing over the period of time.

Mr. Ram Kumar, does that answer your question?

Yes, mostly. I just wanted to understand one extended query of the first question. So does it mean that the operating profit that is this core operating profit will take some more time because all this ForEx and the other -- this intercompany things are -- I don't know, from my understanding, they're not really core to the operation. So from a core operating profit point of view, I just wanted to understand how will we see that trajectory going forward?

You're absolutely right, Ram. I think you should be looking only at operating profits and most of the things, which includes ForEx as one of the items is -- though it is part of operations, but this is not the operational profitability, which has been contributed by the management. It is more external forces, which drives the ForEx. So if you see our EBITDA, which is prior to the ForEx implication, that itself has grown from INR 11.7 crores to INR 16 crores this quarter, which is an improvement of almost 37%. So -- and our internal -- all measurements also are done prior to the ForEx adjustments, depreciations, tax expenses, those things are excluded and our operational performance even then has improved 37% quarter-on-quarter. And there's no comparison to the last year because last year, we had -- at operating level, we have done INR 60 crores of loss full year at EBITDA level, while this year is INR 36.7 crores profit. So it's a swing of almost INR 90 crores improvement in profits since the last quarter -- last year. So your focus -- in my opinion, obviously, the balance sheet is important where everything is important. But from an operational parameter point of view, we focus more at EBITDA level and less on the PAT level.

I hope the growth -- the trajectory is intact. And like you said, the profitability aspect keeps growing so that -- because I've been a long-term investor, I've been holding on to this. And I just hope I see the light at the end of the tunnel one day.

Our next question comes from the line of Nand Kumar, who is an investor.

Congrats on a good set of numbers, sir. And congrats to you for turning around this company in such a short time. It's been just 1 year and you have been able to turn it around. Sir, you mentioned 3x revenue by FY '30, but you said high single-digit EBITDA is only possible, but already EBITDA is at 8.6%. So is there scope for further improvement of EBITDA in the next few years, EBITDA margins, I mean.

Okay. Do you have any other question?

Yes. And my second question is what's the purpose of the rights issue. So we are already cash rich. So what's the purpose of the INR 100 crores rights issues?

Okay. Thanks for asking. First of all, thanks for the wishes and congrats that you gave. I think this is a combined effort. It's not only my effort, it's a combined effort of 5,000 employees of 3i who has worked day in and day out in these tough conditions where the management was changing and there were a lot of insecurities and apprehensions were there. Everybody has contributed equally to the success and the results here. On our vision of tripling our revenue, 3x by 2030, while maintaining high single-digit EBITDA margins. The main reasons why we have given this guidance of high single digit as of now, while we are already at 8.6%, in this year, I think there are a lot of cost optimizations were done. And we have to get rid of a lot of revenues and a lot of other investments we had to stop to bring the company back to profitability first. While we continue to do so, while we continue to be more focused on our cost structures and manpower structures. When we want to grow at such a high speed, 3x 2030 means it's a CAGR of almost 20% plus, 24%, 25%. So we will have to do a lot of investments over a period of time. So we have to -- like I mentioned in my strategic thing that we have to do a lot of partnerships. We have to create a lot of center of excellences. We have to create a sales engine, which is almost nonexistence today. We have to do some other investments in the newest technologies, including the training, skilling and -- the training and upskilling of our employees. This all will require a lot of costs to be built up over a period of time. We'll continue to go slow. It's not that we are going to open the doors for all the expenses to flow in. But over a period of time, we'll have to keep allowing those investments to happen in various new initiatives, which will help us in growing at 25%, 26% CAGR in the next 5 years. And because of those investments, in the initial few years, we'll have to spend money, and that will put a little bit of a strain on our EBITDA margins. On the earnings side, our EBITDA margin will obviously continue to improve as we progress more towards the newer geographies or deeper in our client relationships, but that will equally get compensated by the increased cost. So that's the reason why we have given a high single-digit EBITDA margin prospect as of now. And we'll continue to review it and revise it if required in future based on how we progress and how the markets progress over a period of time. Your second question on the rights issue, this is actually linked to the question which I've answered -- the first question which I've answered. The rights issue will be required mainly to ensure that we have enough resources with us for doing these investments, what I just mentioned. And obviously, the investment happens first and the returns happens later in this kind of stuff. So we are building up this, let's say, this fund with us to ensure that we have the right amount of money in our bank accounts to spend and invest in these initiatives, which will help us in growing at a later stage. Currently, we are cash positive, but the cash positive is -- based on our scale is very, very less. Most of our cash balances are locked in, in the deposits, which are for the bank guarantees and for other deposits which we give to the government for the government bids and deals. And they are not freely usable to some extent. And that's why we need liquid cash to do some investments for future.

So no acquisitions on the card, sir?

As of now, we don't have active acquisitions. We obviously keep a watch. We keep bearing some references almost on an every week basis. We keep evaluating some of them if we find interesting, but we don't have any active interest as of now in any M&A opportunity.

Our next question comes from the line of Shantha Kumaran, who is an investor.

Shantha Kumaran, a very long-term investor. Firstly, congratulations for turning around the company and you made it profitable. Congratulations. Now I got about 3 or 4 points. Almost all those points may sound a bit critical, but just understand these are the critical points, observations from a very, very long-term investor. I'm with the company from 2007 onwards and hadn't had even a single paisa [indiscernible]. So just take it as the grounds of almost any other investor in this company. First and foremost, how come that even after 1 year, though it is a question to be the Board, you are still an acting CEO. Why this demo clip is so hanging on your head? The Board should address it immediately and make you this thing so that you can carry on your -- the assigned task the way it should be. That is the number one point. Number two, I already gone through your strategic vision document, which you said. But the first sentence which you have mentioned in that is really troubling me. It says the weak leadership and lack of direction of the erstwhile management. That's a usual crib, almost every bureaucrat or any new person coming always say that the person before me was an idiot. I'm going to change everything. I will bring in the honey and this thing that kind of thing. So that's actually a point of a contentious point to me. Secondly, the next point, the earlier the CEO used to say that a revenue of INR 750 crores is a stake that even if the company stands still that you can make INR 750 crores of revenue every year. So we have in that presently now about INR 734 crores or whatever crores, INR 735 crores of revenue. So are we standing still? So please, as I said, many of my points will be critical. Please take it with a pinch of salt. The next point coming to that, again, the earlier slogan was $1 billion revenue by 2030 crores and INR 1,000 crores of revenue by end of financial year '25. Now I see that has been turned into, though you answered this question, 3x revenue. So almost everything is just a kind of the strategy direction. I'm not seeing anything which is so -- actually, okay. Yes, this is a great point on this company will do. That kind of revelation kind of a point I couldn't see is maybe my inability to spot it, please show it to me if there is anything like that. The fourth point coming to the forensic audit. You've said that we have been given such a green picture that the forensic audit was supposed to reveal something, something, something and many committees -- what I'm seeing is only earlier the management committee, now some external committees, some only committees are being formed and no actionable action has been taken and nothing what is the outcome of this forensic audit has not been revealed to the investors. One of the point, I don't know whether it is correct or not, my grouse is this company somehow exists only for the employees of the company. They have got 0 concern for the investors. I will just tell you one thing. Once upon a time, I think 2 or 3 years back, once the capital was reduced, the share price has shot up to INR 120. And just on the queue ESOP was of -- a huge amount of ESOPs were announced and all of them were given even to the people who have left the company who have gone and made a part of another company were also given these ESOPs and they promptly sold it all those ESOPs on the market and the share price crashed that we the investors got nothing. So is it this kind of that those ESOPs? Were they also part of the inquiry into the forensic audit that is -- please let me know. One more thing, just only the last point. See, most of these public sector companies and things like that do have shareholders represent you in the Board as a director, though the question is to the Board, shareholders representative. Here, most of the directors, I think almost all the directors, barring one person has got no skin in the game. I think one person had about 50,000 shares or something. I don't know whether he sold it or not. So the directors have got no skin in the game. So there should be a position given from the -- so much a vast number of the individual investors. At least one person should be given a representation into the Board so that the investors since you don't have a promoter, the investor's point of view is get reflected in the Board. Thank you. Please don't take it very personal, Mr. Raj, but you are doing a great job, but please take it as a grouse of a very long-standing individual investor. Thank you.

Thank you, Mr. Shantha. I think your feeling is all well accepted. So there's nothing wrong in whatever you have mentioned. Because I've also been investor in companies and I've also been holding shares in the past. And I also have seen that the company has not been doing so good and you also get frustrated on how the things have panned out. Your point is right. I think when we said that we started with the first -- very first point in the Vision 2030, we said that the FY '24, we had a weak leadership and lack of direction. That was not a complaint about the management. I think the management -- past management also has been very professional. The Board members have been professional and coming from good backgrounds. And it is -- I think it's about the objective with which they were working with and whatever like the goals they had in their mind. That was not commensurate with the kind of resources which have been deployed and the kind of the team building, which has happened in the past. So this was not a complaint or a grouse against the previous management. It was more about their thought process, which has not helped the company. And I think the results were visible. Last, I think, 7, 8 quarters, we have been booking losses. And the Board has to take whatever calls has to be taken, some people left, some people have been told to leave. All those actions were taken. And when I started a year back, I have not started with that negative thing when the previous management was weak. I think they did whatever they thought was right at that point of time. Maybe it has not yielded results in the right way. But there is not a lack of professionalism from their side. That's what my take is on this matter. As far as acting CEO is concerned, I think that's beyond me to comment. I will pass on this message to the Board and Board is the right team to consider this request from you. I will obviously be much happier if I get a formal CEO position. But having said that, Board has given me full authority. From a day-to-day point of view, there is nothing which they have not authorized me to work like a full-fledged CEO. And I have been acknowledged by the teams, my teams here in 3i as a CEO, acting, no acting, I think I'm still work like a full-time CEO here. And just because the acting tag has not demotivated me for delivering what I'm supposed to deliver. On your $1 billion versus INR 2,000 crores, I think that I've already clarified that the strategy has changed. There was a lot of product which was being -- there are a lot of money which was being invested in a lot of products businesses, which would have given us huge $1 billion revenue. Those product projects have not yielded any results. We had to shut down after I took over. We have closed down a lot of such projects, which has not yielded any results in the past. And we continue to stay focused on being an IT services and solution company rather than doing heavy investing in the products business. We continue to have some products in our portfolio, which is there in the investor presentation. But those products are more helping us as tools and not being sold as a product in the market. So investment in product, which has not yielded has been closed, and that has resulted into our top line being recasted or recalibrated at the number what we have said in our presentation. Forensic audit, the progress, like we reported in the last quarter, the forensic audit got concluded. We had made the finding in our disclosures, whatever we could do within the confidentiality norms. We had like announced that there is no financial implication on the balance sheet of the company. So we stay strong and profitable from that point of view. But yes, there are certain things which we still need to conclude as a part of the forensic audit. And we don't want to take the next formal step till we are very, very clear that we have a tenable case over there. And for the sake of confidentiality, I can't share more information than what we have already made public. So we had taken some legal opinions on how to conclude that forensic audit and which has been positive. And now we -- before we start any other further legal or otherwise proceedings, we decided to like take help of some of the esteemed people as a part of the committee. This is not a long-term committee, and this may be the final step in our journey to conclude the forensic audit positively. And this will happen in this quarter itself. So quarter 1, we are targeting to close the outcome of this committee and the next steps after that. And once I will be in a position to share more information, we will be happy to do so. But since the matter is sub judice, I'll not be able to give you more details than this at this stage. I was not there at that point of time when this product business was sold and your mention about ex-employees who moved to Azentio also was given ESOPs. This was -- at that point of time, I was told that this was done as a part of our ESOP schemes. Whatever is employee entitlement, even though the businesses got separated that point of time, based on whatever entitlements they were having, they were given those ESOPs. It was not that they were given any kind of favors as compared to what they were entitled to. So nothing wrong has been done or no favoritism has been done to the people who are living. And once you get an ESOP, it's your prerogative when you want to sell in the market, whether you want to sell immediately or later. That is -- once the shares are issued, then it is up to the shareholder to decide when to sell. And we can't control whether the employees sold after that or not. We are equally concerned for the shareholders. You mentioned that there is a 0 concern for the shareholders and only company works for employees. In my opinion, I think employee gets only a salary, and they obviously don't have any vested interest in the share and the share market of 3i other than the ESOPs, what they hold. At least the team which is there with me in this room, including myself, we have full respect for the shareholders who has shown faith in our operations and shown faith in this company, and they are spending so much of time that they are in this call and asking very rightful questions. And we are all working towards shareholders' value creation and the efforts which we are putting is all to create the profitability and the value for the shareholders. At least from my side, I can assure you that shareholder remains at the top of my priority. And obviously, employees are important because they are the people who are helping me to deliver this. So that's the statement I want to make here. You mentioned about the director shareholding. There is currently no present director who is holding any share in the company as of now. And yes, they are -- to that an extent, they are all independent and don't have vested interest in the company's performance. As of now, if you see the process which is followed, the directors are not appointed by the directors or by management. All the directors are appointed by the shareholders. And so to that an extent, all the directors are representative of the shareholders. It is not only 1 or 2 directors. Everybody is representative of shareholders and shareholders have all the rights to approve or disapprove any such appointments. And there are independent directors, which basically -- they have a legal obligation under the various acts and statutes to take care of the interest of all the retail shareholders. They have also have a fiduciary responsibility. And they're also accountable to that an extent, if there is any mishap happens, they are also accountable to the authorities to justify that whatever decisions or whatever steps it took, how that has helped the company. I think I have tried to answer all your questions. I don't know if I missed out anything, Mr. Shantha. Or if there's any other trailing questions, I will be happy to answer those.

Thank you, Mr. Raj. You addressed all the questions which I raised. But certainly, just as I said that when the directors does not have a skin in the game, why should they -- then they are working only for the sitting fees. Let's forget it. And all the very best. You have taken the company in the right direction. Hope you will be able to deliver all that which you have thought of. All the very best from all our side to take the company to greater heights.

[Operator Instructions] Our next question comes from the line of Tushar Giri who is an investor.

My question is what is the rationale behind deciding for rights issue? And did you explore other funding options?

Okay. And any other questions, Tushar?

So not question, but just the concern that from my understanding, the rights issue will dilute the existing shareholding and bring down share price even further, right, which is already at the bottom. So do you think that the existing shareholders would participate in the rights issue whose investment is already wiped out in case if the issue is undersubscribed, say, by 50%, do we have plan B? Yes, that's a question I have.

Okay. So as of now, rights issue has been approved by the Board, and we had -- the Board has created a rights issue committee, which obviously will look at all the aspects of how much actually the funding has to happen. We have got approval of up to INR 100 crores. It doesn't mean that we will actually do INR 100 crores. So the rights issue committee, which is a Board committee, will determine based on the various requirements, based on the budgets, which I'll be placing in front of the committee on how do we want to spend the money. So the INR 100 crores is not just granted. It is -- firstly, it has to be proven that how much money is required and on -- what are the heads under which this money will get spent. So we'll have to wait for some more time before we can say that what level of money is being raised from the market. On the rationale, I have already mentioned that now since we need to grow, I think this last year, we have spent a lot of time and energy on ensuring that the company is stable. It goes back to the profitability. And now we have to start spending money to grow ourselves, and that investment is important from that point of view. With that investment happening, obviously, the growth will happen, the revenue top line will grow, the profitability will be increased, and that all will lead to the increase in the shareholder value. So it is more like what -- when you invest in the right place at the right time, obviously, then your value will go disproportionately higher as compared to not doing any further investment. There will not be any dilution in my opinion, to the shareholders' value and individual shareholders' value also, mainly because it is being offered to the existing shareholders. So whatever value is created, it is distributed among the existing shareholders only and not a third party coming from outside. So whatever investment happens and whatever value gets created, it gets distributed in the same ratio provided the shareholders apply for the rights issue and subscribe to the rights issue. We had evaluated a couple of options. And each of those options, we thought the rights issue is a better option at this stage in the company, knowing that we had gone through a debt restructuring around 3 years plus, 4 years roughly. We had gone through debt restructuring, banking -- availability of funding from the banks and other institutions is difficult for us even now, even though we don't have an embargo no, but it's very difficult for us to get bank funding at this stage. Plus with focus on profitability, we don't want to have interest-bearing borrowing at this stage. And that's why after a lot of deliberation on various options available, we decided that rights issue is a better option because that gives the current shareholders to participate and create more value for the company. I think that's all from my side on the rights issue matter.

Yes. I got my answer. So just one follow-up question. So regarding the top line, so we have been observing that there's not much improvement in our top line from past several quarters, right? So -- and neither we see any large deal getting materialized. So why are we not hiring competent salespeople having proven track record in other well-known IT companies? So we are granting ESOPs, right? So are we actively considering that to build a strong sales team?

So top line has been growing in the last 3 quarters, though obviously, it's very small percentage. It's growing. But after taking control on the baseline, I think now we have started growing in the last 3 quarters, very small. And yes, the focus now has shifted for the last 1 quarter, the focus has shifted on creation of a sales engine, which has not been very, very fruitful until now. If you would have seen our disclosures, we have appointed our Chief Growth Officer, Vinod, Vinod Pahlawat, who joined us from CMS IT as who was the CGO over there also. And we are creating a very strong second line below him. We are doing right kind of hirings. We are going slow because like you rightly said, we want experienced people. We want performing people at the right cost with the right blend of the fixed pay versus ESOPs versus incentives. So we are very, very careful in hiring, especially salespeople. But that exercise has already started. And some of the investment which is required, which will be used from the rights issue is all investment in the sales. So that's the topmost agenda item for the usage of the rights issue money. So I think you should just keep a watch on the sales piece. We are focused on that. And for the last 3 months onwards, we have started focusing on building up the sales funnel and the sales teams.

Okay. One last question. So are you seriously thinking about any merger and acquisition deal where 3i can be a strategic target for any other IT company? If not, then why?

As of now, we are not actively looking at either acquiring or getting acquired. That nothing is on the table very clearly. Like I said, I think in one of the previous questions that there are queries which keep coming, not for acquisition, but for us to acquire. We keep getting queries, and we keep evaluating them and keep taking the call if it makes sense or not, at least we stay connected to the market. So if not, I don't know why if not. As of now, I don't think we have even thought through that piece. But there is nothing on the table at this time.

Our next question comes from the line of Sanjay, who is an investor.

Congratulations Raj on, obviously, stable quarter that this some positive -- second, I will be looking for the rights issue? I mean is it going to be next quarter or next 6 months? And what confidence you are getting -- giving? What is giving you confidence that the rights issue will be successful? Because right now, I don't think any intentional investors are really into the company on that. And second question is about -- you mentioned like 50 new logos have been added, right? So in last 1 year, I have not seen any announcement about the new deal or any customer added from the company. So why -- I mean some announcement, some information to take some of what is important. And third question is about -- I think since last couple of years, there have been CFO was talking about, I think, the Vashi property to be sold off or to be leased out. So what is the status of that?

Okay. Thanks, Sanjay. Rights issue, I think -- as I said, I think we are still discussing with the Board and now the committee has been constituted under the legal regulation. So that will take help of the committee to see that how do we pass through this rights issue. We are planning to -- obviously, it's too short a time for this quarter. I think this will happen somewhere towards the end of this quarter to the beginning of the next quarter. I think it will -- time line will be around beginning of next quarter, if I can estimate at this point of time. How much rights issue will get subscribed and how do we ensure that I think we have to do a little bit of a dip stick before we go live on the rights issue. And that also depends upon what the kind of value we are talking about. There are active interest. There have been a lot of investors who have been talking to us in the meantime, who are interested in participating. Some are existing shareholders, some are not existing shareholders, but they obviously will have to subscribe as existing shareholders when -- if they buy from the market. So we are evaluating all those parameters from our sources. And at the right time, when we are confident, then only we will come with the rights issue. Obviously, we don't want the rights issue to fail because that will be another big problem from our market standing. So we'll come to the market only when we are sure of it. And 50 new logos, we have -- this is across the geographies. We have added roughly around 24 logos in U.S. We have added 21 logos in India, 4 in Middle East and 1 in Asia Pacific other than India. That's the broad split of this 50 clients. Most of the clients may be very Tier 2, Tier 3 kind of customers, but out of this, around 5 customers across 2 in U.S., 2 in India and 1 in Dubai are the big clients, which is more like top 1,000 companies in their respective countries, top 500 in their respective countries. We don't announce -- I think last time also this point had come. As a matter of practice, in the past, we have not been announcing individual deals. Some -- also because of the confidentiality reasons, the customer doesn't want the name to be published. And each of those separate deals are not big enough deals for us to be legally reporting in the market. So that's why we don't report deal by deal winning. But as a matter of this last, I think, 2, 3 quarters, we have started this practice of at least giving the overall numbers and some flavor in the quarterly calls and investor presentations. Vashi property, yes, we have been talking. We have a big space over there, which is utilized, almost 80%, 85% is utilized. And we are evaluating that how do we make use of the balance 20% at this stage, which includes shifting of our existing headquarters from the narrow location to Vashi, the same property or looking for a tenant and -- or selling other property. So it keeps getting discussed. We are talking to a few people who are active in this market and the monetization of this property is underway. I think in the next 1 quarter, we should be able to close either utilization of that property or disposing of that property either way through tenancy or through selling. So selling may not be possible, I think, either through tenancy or utilization within our own company. We also have a huge growth plan and that growth plan of the next year plan, what we have, that will require a lot of extra space depending upon which city and which thing if Vashi or Bombay becomes that place of growth, then obviously, this will fully get utilized in 2 to 3 quarters from now. So this Vashi property is not lying idle. It is being utilized. It is monetized, except for this 15%, 20% free space.

Yes. One more question about right now for last quarter, there is a growth in PAT and even some revenue. So are we seeing that quarter-on-quarter for FY '26, are we going to see that the growth will continue? Or this is one of the quarter again, there will be a dip in revenue or profit? I mean will it be a continuous profitable year?

So you asked 2 different questions. One is the revenue, second is the profitable year. So on the revenue side, if you have seen, though we are growing quarter-on-quarter, our growth is very small as of now, it's 2%, 3%. So depending upon 1 or 2 small deals or small movements in one of the geographies, this can go either way. So as of now, we are continuing to maintain that like we'll be in the same ballpark number for the next 2 quarters. Obviously, we continue to grow, but it will be a small negligible growth in the next 2 quarters. And by the time the sales engine will start kicking in and then we'll start having growth. We have a huge pipeline, and we have created this pipeline with the efforts of the last 2, 3 quarters now. where we have started engaging clients very aggressively, both on the upselling, cross-selling, new clients, new geographies. So we have started very -- working very actively in this space. My guesstimate at this point of time is that quarter 3 onwards or end of quarter 2, somewhere, we will start seeing a sizable growth across the 3 business lines what we have. We're also talking about a lot of partnerships and a lot of OEM relationships to start. That also has -- the work has already started, and that will also start yielding results in 1 to 2 quarters from now. So with all that thing, I think we will be well poised for growth in the next full year as compared to the current year for sure. And profitability, I think that's given now. We are not going to go back to the losses, unless something else happens externally. We are well poised for, let's say, creating even 1 more year of profitable year, improved profits next year.

[Operator Instructions] Our next question comes from the line of Kiran Rao, who is an investor.

Can you hear me?

Sir, may I request you to use your handset, sir. Your audio is muffled, please.

Okay. So congratulations on the good set of numbers. I hope we'll sustain these profitable interim numbers going forward. Okay. So while my first question is a little qualitative. How much do you think this management contributed to the turnaround? Was it the old management was trying to turn it around from 2022? And then this management was right at the time when it was almost turning around. So that is question number one. How much do you think the balance sheet -- the wins that the balance sheet can support in the sense, can you handle INR 100 crore contract that you might win? Considering that the hike and the bonuses period is around, what do you think will be the guidance on the profitability for the coming quarters? The next question is, can you give a guess number as to what will be the ROE and ROCE year-wise, do you plan to give any guidance on your -- on the numbers rather than having a Vision 2030 kind of thing?

Thank you, Kiran. Thanks for your questions. The first question, obviously, you yourself said it's very qualitative that how much this management contributed to us in the old management. I think the fact of the matter, the results, I think which -- when the previous management left, the results till March '24 were, I think, made public and everybody is aware of what kind of investments have been done, the full balance sheet annual report disclosures, everything is there. And I think it is left up to the judgment of the individual shareholders to judge that how much value had been created in the past versus the last 1 year. And the fact is that there was a complete cutoff because almost all members of the previous management left around the year-end of last year. And this management is completely new. So there is no continuity of the management except a few members. Everybody else has come a fresh. A lot of activities have happened and that internally, we know that what are the things we have done to put a lot of brakes on the investments, the cost and optimization at various staff, including consolidation of our physical offices, including employee -- new employee sets hiring and this whole results have come post that. So not to take a credit, but I think this management in the last 1 year has done a lot of work to ensure that company turns around. These activities have not started in the last year. So all these activities what has contributed to the profit. I can vouch for it that 90% or 95% of these activities started only in this year, mostly after I have taken over or maybe a little bit before that after the previous management has left the gap in between. So I think some work has started, but most of the work started after that. So difficult to say, but I don't think anything has happened on these initiatives by the past management. Balance sheet can easily handle -- I think it can handle a growth of around -- in my opinion, very rough estimate. I have not done the math. But my gut feeling says that I think around 10% to 15% of the growth, the current balance sheet can handle without any further investments. If you need to grow more than 10%, 12%, I think we'll need support from the funding point of view. But existing businesses can keep running at the same pace, plus around 10% annualized growth without asking for any investment from anybody. But like you have seen, our aspiration is not to grow by 10% because I think the market is huge. There are a lot of things happening with the new age technologies, a lot of offerings happening and requires a lot of investment from a lot of companies. So we can grow at much faster pace as compared to 10%. And that's why part of the rights issue will obviously go in that growth capital and not just an investment. Profitability, obviously, we will not come to that session when we're talking about the payroll adjustment for this year. That's an agenda for the next quarter for us. And we'll take a call based on the first quarter results, we will take a call on how we are working on the plans of this year, and then we accordingly we will take a call. But yes, I think market practice we have seen a lot of IT companies have delayed or deferred or reduced their pay increases and to like say neutralize the impact, which has come through a lot of external sources, including what is happening in U.S. and or Ukraine or Middle East. So I think those things are a little dynamic. And at the right step, I think Board and the management will propose and take a call on what is the right thing to do for the employees at that point of time. We have not thought through -- obviously, we had planned for it, but we're not thought through the execution piece as of now. Our ROE, which is at around 8% currently, ROCE is at around 5% that we've not given any guidance in the past. And neither we have, let's say, calculated or given any -- planning to give any guidance at this stage. We'll see if we can -- next quarter, if we can do some calculation and come back with some proper numbers, then we will see. At this point of time, these are the historical numbers, which I just shared. Thank you. If there's anything else, Kiran?

No, I'm good with [ relations ] and let's hope we'll continue the momentum.

Thank you, Kiran.

Our next question comes from the line of Anurag Singh, who is an investor.

Am I audible?

Sir, may I request you to use your handset, your audio is low, sir.

Sir 2 for us. First, I wanted to understand the development or the growth that we're planning in the product space, specifically NuRe Campus and what are you doing with the NuRe subsidiary and the retail project? And the second question is linked to this that most of the investments being done in 3i right now was for the product that is being developed. At least that was my take because that gives us the opportunity for explosive growth in the future, whereas focusing everything back on services doesn't. So how are you trying to realign the 2?

Okay. Thanks, Anurag. On the -- a little bit on that NuRe and NuRe Campus and the NuRe Products. We have started this product journey by the previous management somewhere, I think, around 2022, where we decided to start some development around products. We had, I think, worked on almost 10-plus products. NuRe Campus was one of them. And if you've seen our investor presentation, NuRe Campus is one of our continuing product. So 4 of those products out of around 10-plus products are continuing as of now. Though we still continue to be like in the analytic phase as of now that how do we make that -- make the monetization of this product happen in the market. NuRe Campus is doing fine. It's a separate subsidiary, and the product is already launched. We are live in almost -- at this point of time, 14, 15 institutions. That's a product for the educational institutions. It's an ERP for the educational institutions. So we are already live at 14, 15 educational institutions across the country. And we have intentions on -- so it is at this point of time, just a little below breakeven. It's making small losses on a month-to-month basis, but it's already driving almost INR 2 crore of revenue every year, which we plan to make it a little bit more than 1.5x next year. A lot of good projects coming up over there. And with that, I think we also have plans to take it to the global levels, start working with the global universities and institutions and all that. So we have plans to take that product aggressively in the market. Other than that, other NuRe subsidiaries, almost we have closed on most of the other products. There are 3 products which we are still continuing and we still trying to evaluate if we can monetize those. Those are good products, near closed products, and we are working on monetization of those products, whether through revenue or through a partner like what we've done in RailTel. Either way, I think we need to take a call in the next 2 quarters based on our commitment to the Board, if we can convert those products also to profitable products. Other than that, last year, other than NuRe Campus, no product has contributed anything in revenue. It was all cost only till the last year other than NuRe Campus and some small revenue here and there. NuRe Edge and NuRe Flexib, which were 2 other products, which continues to give us the revenue. Those were the tools which is developed for our -- as a part of our offerings, and those 2 products also are giving positive results as of now. That's all on the product side. We have no intentions of further adding any products as of now. Our philosophy has changed in the last 2, 3 quarters a little. And we have realized that there are a lot of innovation happening across India and other geographies. We intend to play along with those innovations rather than trying to do innovation of our own, where we are trying to do partnerships. We have already started talking to a lot of companies who are actively working in AI, IoT, blockchain space. And we are talking to them for a common GTM strategy, the go-to-market strategy at this stage, where we use our market reach with those new age products and going together in the market. So our focus is going to be more like we are going to sell the product, including the implementation and including other [indiscernible] are attached to that, but not by creating and investing in the products, but by taking somebody else product to the market as an OEM or own as a partner. So that's the little change in the philosophy. We have decided that we are good in -- our DNA is more for services-based offering, and we continue to be continuing as that our DNA for the time being. I hope I'm able to answer Anurag.

Yes. Just one more. So I understand what we're doing in NuRe. And one suggestion that even if we can't -- even if 3i cannot disclose any information related -- announcements related to what it has done, at least let NuRe as a start-up do it. There should be some active news in the market, some positive news in the market about the company. Secondly, could you give more details on what is happening on the RailTel project, the stake was divested? And what is actually happening on ground in terms of implementation of the same?

Sure, sure. So I missed that RailTel point of yours. So like we had made public disclosures that we have got the partners in the last quarter closing, which is going to partner with us to manage this RailTel project. This was a project which I think we got it around '22 mid and couldn't monetize it properly. So we got this investor who obviously has funds to invest in this project as well as has the capability and expertise to manage advertising and media kind of a business, digital media kind of a business, which we didn't have expertise in-house. The deal, which was closed -- which was MOU was signed and agreement was signed last quarter. We have moved forward in this quarter where we have -- they have done the initial investments, both whatever was the structure in terms of the working capital financing as well as the equity capital in our one of the subsidiaries, NuRe MediaTech. So we have diluted 49% to them and 51% continues to be with 3i. And their responsibility, as we had made public that their responsibility is to do all the working capital financing as well as the execution and operations of the project under the governance structure of 3i. So this is what has been discussed and been put in place. At this stage, we -- they have taken over the operations. Now we are revamping the complete operations. We are reviving all the sales and revenue deals what we had signed up as a part of the RailTel. That work has already started. And I think around 4 weeks from now, around a month from now, I think the project will be back on stream with full-fledged operating platforms available. And we're also in parallel in discussion with RailTel on how do we work together in the future. And the new partners also have been introduced and RailTel is also aligned to these developments. So that's where we stand. I think next 4 to 8 weeks, most of the things will be up and running back on stream. And there may be some results coming into the next quarter's financial from RailTel.

Ladies and gentlemen, due to time constraint, that was the last question of the Q&A session. I now hand the conference over to the management for closing comments.

Thanks. I think people have been very, very positive in the call where I think I can see a lot of expectations building up with the results what we have shown in FY '25. And that's a challenge, which I think management will have to deliver in the next quarters to come in. I have my management team sitting in the room, and I think we are all committed to continue to do -- continue to be in this journey for a longer period. And thank you once again for your support and looking forward to see you again next quarter. Thank you.

Thank you. On behalf of 3i Infotech Limited, that concludes this conference. Thank you for joining us, and you may now disconnect your lines.