Alldigi Tech Limited (ALLDIGI) Earnings Call Transcript & Summary

Good day, ladies and gentlemen, and a very warm welcome to the Allsec Technologies Earnings Conference Call, hosted by IIFL Securities Limited. [Operator Instructions] Please note that this conference is being recorded. I'm now glad to hand the conference over to Mr. Ashish Johri, CEO of Allsec Technologies. Thank you, and over to you, Mr. Johri.

Thank you. Good morning, everyone. Thank you for joining our earnings call today. The results and the presentation have already been uploaded on our website. Anything we say, which refers to our outlook for the future, is a forward-looking statement and must be read in conjunction with the risks the company faces. These uncertainties and risks are included, but not limited to what we have already mentioned in the annual report. Let me now start with a very brief overview of our financial performance, following which, I will go on to the business update. Let me start first with financial performance. We have achieved a revenue of INR 77.1 crores during the quarter, a growth of 8% over Q1 and 14% over Q2 FY '21. Our EBITDA at INR 18.8 crores is a growth of 19% quarter-on-quarter and 35% year-on-year. Our net profit at INR 12.9 crores is a 64% growth over the previous quarter and 101% higher than year-on-year. For the half year, we have achieved a revenue of INR 148.6 crores, 13% higher than H1 FY '21. Our EBITDA for H1 FY '22 is at INR 34.7 crores versus INR 26.9 crores previous year. The Board has also declared an interim dividend of INR 45 per share, after considering the strong cash position and the positive outlook for the company. Before I move on to the business update, I would like to thank all our employees and acknowledge the role all employees have played over the last 6 months as we have battled jointly the second wave of COVID. We have been unfortunate to lose a couple of our associates. But I'm glad to say that we have come out stronger, and we are poised extremely well coming out of this second wave. I'm also pleased to state that 80% of our employees in India are now completely vaccinated. Now let me kick things off with an update on strategic themes that we have been working on for the last 12 months and the continuing 6 months as well. First is improving top line growth. That's the first theme. North America has always been the key focus for our DBS international business. We have expanded our sales teams over -- towards the end of last financial year and also over the last 2 quarters. We have added some real heavy weight leaders on the team, and I'm delighted to welcome a couple of leaders over the last quarter as well. We have also been running very strong digital marketing campaigns in North America. And those campaigns have yielded results in [indiscernible]. Our inside sales teams have also been revamped, are extremely strong now. And their activities are also yielding higher proposals and wins. Our joint GTM strategy with Quess' North America sales team has also helped us reach more targets, and we have a strong pipeline building along with them as well. All of this has borne fruit. And over the last 6 months, as you guys are aware, we have added 5 new logos in this year and added almost INR 30 crores in ACV with these new logos. In addition to these 5 logos, we've also expanded -- with our -- a few of our existing customers, we've added new entities with these customers, new referrals with these customers. So even we are seeing good growth coming from existing customers as well. And we believe this growth story should continue. Our DBS domestic business, which had a COVID-related volume drop in Q1 has also rebounded with a 10% quarter-on-quarter growth in revenue. During H1, we have added 2 new logos in this space, with ACV in excess of INR 4 crores. We have also seen volumes returning with our existing customers on the domestic side. Moving to HRO. HRO also has seen strong growth momentum, which was moderated in the last 12 months because of COVID lockdown. But we now, over the last quarter -- of this quarter, we are seeing strong growth momentum. We believe that we have passed the sales as can be seen from a strong 9% growth quarter-on-quarter in this segment. We have also increased the sales force in this business substantially, both in India and our chosen global locations. And we are also focused on building our partner network and global payroll partner network to service some of the global geographies. In H1 FY '22, we have added 46 customers with an ACV of INR 3.5 crores. Our cross-sell initiative. So that's the second theme. Our cross-sell initiatives are also seeing traction. We have added almost INR 2.5 crores in ACV, cross-selling to our existing HRO and compliance customers. And we continue to have a very, very strong pipeline with existing customers where we're upselling them and cross-selling our existing solutions. We will continue to pursue this stream of revenue with existing customers and leveraging the larger Quess network as well. Moving to the third theme, our cash position and collections, both continue to be extremely strong. Our OCF for H1 FY '22 was INR 30.6 crores, an increase of INR 11 crores -- 11% over H1 FY '21. Our DSO also continues to be very strong at 53 days. Moving to our fourth theme on investments in innovation. I'll touch upon the HRO payroll platform that we have been working on. That platform modernization continues to progress on schedule, and we expect to start onboarding customers towards the end of this financial year. In anticipation, we have already started building a software -- SaaS sales team, and we've already started forming channel partnerships in anticipation of being actively in the market end of the financial year. I'll now move on to the detailed business segment performance. Let me start with the HRO business first. The HRO business continues to perform well to end the quarter at a revenue of INR 28.4 crores, a growth of 9% over previous quarter. We have added 21 new customers and more than 2 lakh payslips during the quarter. Our EBIT in this segment grew by 13% over Q1 and 6% year-on-year. We continue to invest significantly in the digital innovation, as I briefly touched upon, and this is driving both revenue and margin improvements. This business currently has a very strong pipeline. Our win rates -- both our pipeline and our win rates continue to get historical highs. I would also like to add that in September 2021, we crossed a very significant milestone of processing more than 1 million payslips in a month. In the last year, our payslip count has increased by almost 31%, an addition of 230,000 payslips per month. This is a strong -- this is a testimony to our strong technology and the client relationships that we have and the dominant market position that we have achieved over the last decade or so. We are also seeing very strong interest from global customers for some of our HRMS and HCM solutions, primarily leave time attendance. We have signed 2 global deals over the first half of this financial year. We have also strengthened our global payroll platform capabilities through partnerships to strengthen our -- to be able to better serve our global customers. I will move on to the DBS business now. The DBS business was the one most affected by the COVID pandemic in FY '21 and also had a moderate impact in the first quarter of FY '22. The business has since rebounded back very smartly, and we closed the quarter with revenues of INR 48.7 crores, a 7% growth over Q1 and 13% growth over Q2 last year. Our headcount increased by 20% over Q1, reflecting the strong momentum that we have built in this business. We also upgraded our technology. We had a significant upgrade of our communication systems moving to the latest version of Avaya, which provides us with much greater flexibility in serving omnichannel requirements from customers. We have had some strong sales wins in this space, as I mentioned earlier. And our sales pipeline in North America is also at historic highs. I thank all of you for your support for being here today, and I would like to take questions at this point. Thank you.

[Operator Instructions] First question is from the line of Sugandhi from InCred AMC.

Yes. Am I audible?

Yes, please go ahead.

Congratulations on the great results. I have 2 questions. You have mentioned ACV wins to the tune of INR 38 crores in the first half. And if I remember correctly, in the first quarter, you had mentioned a number of close to INR 23 crores. So can we assume this INR 15 crore is incremental gains in the second quarter?

Yes, yes. You can, that's correct.

And in terms of your COVID costs, I noticed that there are around INR 1.5 crores. Could you just make us understand the nature of these costs? And how should we be forecasting these costs in the coming quarters?

Sugandhi, this is Raghu here. So the COVID costs are primarily 2: one, in Manila, we still have a general quarantine in place. So we have our employees boarded in hotels to our office. So we incur expense on that. In India, we also incur expense where we still have some people working on work-from-home mode to maintain social distancing norm. So we have some rental desktops and laptops. We think the India cost will go down in [indiscernible] Manila, we still don't have visibility on when the general quarantine is going to be lifted. So until that is lifted, we'll continue to incur this cost. As you can see, this COVID cost has kind of flattened over the last couple of quarters. We think that is how this will play out in probably the rest of this year.

Sure. And it's encouraging to hear that you have made significant appointments on the sales side, both in HRO and DBS. In terms of the impact on your SG&A, how much of that has already come through? And how much of that will come over the coming -- in the second half of the year?

Yes. So because we've added people during the course of the last 6 months, obviously, there will be some incremental costs if we compare like-to-like, but that is not going to be very material to change the overall SG&A cost. Yes.

[Operator Instructions] The next question is from the line of Jatin K. from Alpha Capital.

Congrats for a very good set of numbers. And sir, you have talked very good details about -- in terms of new additions and all. So what kind of growth can we expect going forward?

Jatin, so we have a strong pipeline, both in our DBS and HRO businesses, both in North America and in India. We have done extremely well over the last 6 months in North America, especially we've added more logos in North America as -- versus what we've done over the last 5 years. So this has been historic first half. I would -- while our pipeline continues to be growth, and I remain very optimistic. But that said, the environment is difficult regardless. There is a holiday season we are approaching in North America. So I'm optimistic, but also mindful of the external environment. That said, we will not be issuing any forward-looking guidances on what we should expect in terms of the sales momentum. But that said, we are all here to build that momentum above and beyond what we've achieved.

Sure, sir. And sir, we are giving very high, very good dividend and we have the very good cash on balance sheet also. So can we expect this kind of high dividends to continue? Or how should we think about the dividend policy [indiscernible]

Yes. So the dividend that we paid for this quarter or whatever interim dividend is a special dividend. As you have seen, Allsec has been accumulating cash over the last few years. And therefore, the management felt that this was the right time to reward the shareholders who have been with us for a long time. We've also kind of paid to the maximum extent possible from a India stand-alone financial perspective. Because the dividend is paid out of India stand-alone. While I may have retained earnings in Manila, but we cannot use that fund. So going forward, we will take a call at the end of period on what is it we are from a retail earnings perspective in India stand-alone and do it. But we need to be aware that this was a special dividend that we've declared to reward the shareholder who've been with us. Yes.

[Operator Instructions] The next question is from the line of Ashish Kesari [indiscernible] from Ashish [indiscernible]

Congratulations for the excellent results. My question is that in last quarter, you declared that we received a dividend from Manila. So this dividend, it was from the operation from 1 year or it was -- been accumulated from the period of time?

Yes. So this has been accumulation over a period of time. We've never got money from Manila in the past. We did that in Q1, and the idea was to get the cash into India, which then gives the management the flexibility to decide the future course of action in terms of utilization of the cash. So that is what has helped us in declaring dividend in the current quarter.

[Operator Instructions] Next question is from the line of Shrey Loonker from Motilal Oswal Asset Management.

Just a couple of questions. One was that on a DBS front, our incremental ACV is incrementally far more toward -- 7% of the ACV is just coming from international. What does this imply for the margin of the DBS business? That is question number one. Question number 2 is, you alluded that some portion of the COVID expenses is towards India, there is a way we can demarcate that, that would helpful.

Sorry. What was the second question, Shrey?

The COVID expense of INR 1.5 crores per quarter. If you can demarcate it how much is for India, how much is from Manila? Probably that would help.

Okay. So I'll take the first one, which is on the margin. So typically, international business margins are better than the domestic business. And obviously, the more we do in terms of the mix, these margins will improve. But having said that, our aim is to grow both together. We've seen in the past, except in the quarter when we had COVID-related drop in volumes, our -- [indiscernible] been in 60%-65% versus 35%-40%. We expect that to continue in the long run. Because domestic, we also have volume growth coming from our current customers. So we think this margin will improve as the revenue goes up, which is obviously going to be -- which is a fact. But the mix is unlikely to change in the near term. The second one on the COVID-related cost, out of INR 1.4 crores, we'll spend around INR 1 crore in Manila, the remaining is in India.

Okay. That's helpful. And on the HRO business, 2 things: one is, I think in the slide -- one of the slides you mentioned that the headcounts are up 50%, whereas your payslips are up 30% Y-o-Y. And we -- to the best of my memory, this is a huge employee expansion that we've embarked upon. Could you just detail it out a little bit more? I understand it's for the new HR SaaS product sales build out. But if there is a way you can help us understand that what would be that we will need to be at when the product is launched? And why are we being 6 months early? I mean how does this business work? If you could just help us a bit of that -- find a dynamic, that will be helpful.

Okay. So in HRO, the payslip count has increased. The employee headcount has not increased much. The employee headcount has actually increased in the DBS side of the business. We've still not added a lot of people for the SaaS platform that you talked about. That's something that will come up as we go along. But the current increase in HRO payslip, obviously, they've grown around 31% year-on-year. So that is coming from the growth in both the existing employees -- existing customers employee headcount with the new customers that we've added. But the employee headcount at Allsec for HRO has not grown significantly. That is not a measure that we also look at from a performance perspective because this business is more scalable compared to the DBS business.

Sure.

Shrey, also just to add on the question on the SME product. So we continue to be in beta with few friendly customers where we are building the product out. That process of building the product out is not complete yet. I don't think we've reached a point where we can say we have a competitive product. So that process will continue. And we also understand that this is a tough market. So we are very, very cautious about our expansion plans for the sales, as and when that happens. But I don't see that happening this calendar year or this quarter for sure.

Very clear, Ashish. Ashish, one more thing in the opening remarks, you did mention that from an HRO standpoint and international arena standpoint, you're trying to toggle up the capability through partnership to increase the value proposition. Could you just elucidate a little bit more on that?

Yes. So there are 3 kinds of partnerships that we are going after in the HRO business. There is the sales channel partnerships and referral partnerships. So that is one kind of partnership. That effort has already started, and we have almost 5-odd channel partners signed up and leads, et cetera, have started coming in over the last quarter. That is one. Second is for the Indian market, we have signed up with a lot of niche solution providers, for instance in learning, development, et cetera, to complete our offering for customers. These are white labeled solutions that we take to our customers. So that is the second nature of partnerships. The third nature of partnerships is global payroll, where we have existing customers asking us for payroll where we don't have capabilities. And on a case-to-case basis, we are making decisions either on building the platform ourselves, where scale justifies it or going through local partnerships that we are forming. So all 3 are very active and for all 3 partnerships on the solution side, both kinds of partnerships we have a pipeline that's beginning to build up.

Interesting. And Ashish, one last question from a very long-term perspective, if you can give us some sense because there are a lot of things that are changing. One is the domestic competitive pressures, I'm sure will keep dialing up as they always have. Plus, this incremental partnership-led model would require you to share more incrementally with -- for all the global business you get. On top of it, the SME HR SaaS product that will come through, which will be a tough one and a hard one. How should one really think from the margin perspective on the HRO business, say, over the next 3 to 4 years? If you can just give us some ballpark idea of how would this -- how each of these 3 businesses are very different in the margin profile at a unit level? That will be probably a little better. And then label mix, give out a number.

Sure, sure. Shrey, while I won't issue any forward-looking guidance in terms of growth rates, et cetera, to expect. But I'll just give a few general comments on the business outlook and the strategy. Over the midterm, next 3 years, I don't see too much erosion of margins coming from any of this. We continue to expand globally. Our global footprint in Manila and rest of the world, primarily Middle East, is growing faster than India, and that's a higher margin business. Also, the incremental deals that we are adding in India, while they are larger deals than what historically Allsec has done and hence, priced slightly lower, but they're higher margin and EBITDA deals. So because of all of that, I expect margins to remain flattish. Yes, I'll leave it at that. I don't expect too much change in margin profile.

Sure. Actually, the question, Ashish, was specifically for the HRO business.

Yes. Yes. My comments were specific to HRO.

The next question is from the line of [ Raghuram NS ] from [indiscernible] India Fund Managers.

Yes. Just a couple of questions. See, obviously, as you mentioned, there have been very, very strong customer additions over the last 6 months. It would be very useful if you could just run us through a theme of -- for example, in HRO, there are obviously new customers coming in that is what you call a new logo, and there are existing customers who are expanding their -- maybe their services, which they require from Allsec. If can you just run us through some kind of a broad theme of where the new -- how -- which parts of the HRO offering that Allsec has, where are they stepping into the line? And then existing customers, if they are expanding, where they are expanding? That would help us maybe understand how this whole thing is panning out, the whole service profile of Allsec is panning out? Maybe you can -- if you can do that for both the HRO and the DBS businesses, that would be very, very useful.

Sure, sure. Raghu, we -- the current profile of the HRO business is -- there are a few components to it. By and large, it's an India payroll business, followed by the international, Manila and Mid East, followed by almost equal to the global footprint is our HRMS offering, especially leave time attendance. So that's the current profile of the business. On the payroll side, I find that we are beginning to win -- so that's -- even in the future and the pipeline, the mix continues to be very, very similar to existing profile, but there are a few shifts happening. Shift number one is we are -- our pipeline and our win on larger deals is looking good at this point. What we have on our books right now in terms of pipeline is focused towards larger deals. Like I mentioned, these could be -- and these are payroll-centric by and large, managed service, payroll-centric. These tend to be better EBITDA deals, lower pricing, but better EBITDA deals. And this will continue to fuel our growth in payroll, especially India payroll. Second is our growth rates for managed service payrolls in Philippines and rest of the world continues to be -- Q1 was slightly off for us in terms of growth rate for international, but it has started picking up again. On the third, there is again an interesting shift happening where our leave time attendance solutions, which, coupled with our payroll, we are beginning to get some interest from international customers. International meaning APAC and Middle East regions, both with existing customers, largely with existing customers, global customers who are now taking us into these regions. So that's an interesting development. It's early days for -- to know where it will go. But we are excited with that. We'll see how it shapes up in the next 6 months. So these are -- this is the nature of the beast. But by and large, I don't see our business mix between these 3 components changing too much over the next 1 year, 1.5 years.

Yes. If you can help us to -- in the same way on the DBS side, please?

DBS side, Raghu, the CFO, also answered this question. See, we obviously have had a very, very good international first half with growth coming in on the international side from North America, and pipeline continues to look strong in North America. Domestic as well, we have -- while we don't actively sell in this market, but we continue to have reference customers coming in, and we're happy to onboard them. I don't expect the business mix between domestic and international to change too much, given that in domestic, our existing customers also are expanding. So in the near term, I don't see the business mix changing over the next 6 months to 1 year. We obviously continue to remain bullish on our international prospects, given the kind of period we've had the last 6 months. So our focus, obviously, is to keep expanding the internationals. But next 6 months, I don't expect the business mix to change too much between international and domestic.

Ashish, I was more coming from a perspective of the offerings. I was not really focused on the international or domestic. Obviously, you guys have said AML investigation has been added, introduced Bot Monitoring. So I think I was more focused on you guys expanding on that kind of a theme today.

Sure, sure. See, from the wins -- so I'll talk from an [indiscernible] perspective, I'll give you color on what we have won and what's in the pipeline. We added AML in India again. This is for international customers, not America-based customer. And then we added a bunch of services, which are very different from the kind of offerings that we have in our -- we've had historically. So for instance, there were -- there are 2 offerings. We added -- one was the automation Bot Monitoring, almost like a command center. Another one was tech help desks. So we added help desk. And then we've added some back-office work in -- for BBB companies in North America, et cetera. So all these -- there is no pattern other than AML. Everything has been very diverse coming from the sales activities in the region, very different from our historical offerings with center around contact center, right? So that's -- I think that's good news actually. On the pipeline, I do see that the BFSI tends to be slightly heavy, banking and insurance tends to be slightly heavy in terms of pipeline. And after that, everything is, again, very broad-based and secular. There is no vertical leaning beyond banking that I see.

Okay. Anything on the insurance BPaaS and those kind of industry-led, you can say, initiatives? So obviously, you guys have been very strong on retail and e-commerce. And because of the Quess, obviously, the background of Fairfax, and there is that insurance, you can say, strength that has been passed on. So any kind of developing themes on that side from an industry perspective?

Yes. Raghu, we've added some small processes with existing customers. So we have expanded on the insurance side with existing customers, we have been able to cross-sell and upsell BP offerings and expanded their footprint a little bit. We also have a fairly reasonable pipeline with insurance customers that I'm hoping we should have some wins coming in the next 6 months out of that pipeline. But otherwise, it's slightly early to have a meaningful conclusion drawn on that offering just yet. It is -- we are just 3 to 4 months into actually figuring out how to sell, what to sell, et cetera, from the insurance BPO perspective.

Okay. Anything on the e-commerce, retail kind of side, that's -- any theme developing there?

Yes. So after banking, that would be the second largest vertical, but not by a long shot. After banking, everything is very broad-based. But if you pick out one vertical, it would be retail. And we do have some strong prospects coming in that vertical.

Okay. Okay. Just moving on, obviously, I've been one of the long-standing investors and very happy with the dividend, which Raghunath also mentioned to be a special dividend for people like us. Now going -- looking forward, like one of the other people who are asking questions, how do you see this -- is this a clear thing that M&A is more or less, you can say, is off the table? Then maybe we still have more than -- even after paying out this dividend, we still have more than INR 100 crores of cash still sitting on the balance sheet? So is that something that's going to be used for any further M&A? Or is there any other way of rewarding the shareholders, which is more maybe tax -- you can say, tax-friendly way? Obviously, dividend is something that is not so tax-friendly. But is there any other way being thought about? Or is this something now -- we are now back to business as usual?

Raghu, we are actively scouting. We continue to scout for inorganic growth opportunities. We continue to be in that space. Over the last year and even now, we have come across a fair number of opportunities where we've had management conversations, but nothing has come to fruition because either -- we didn't come across anything that was strategic to be honest that excited us. And in a few cases, the valuations were just -- it didn't make any sense. So we haven't moved on it. But that said, we continue to actively scout for opportunities.

[Operator Instructions] The next question is from the line of Nishit Rathi from CWC.

I just had one big question would love to get your thoughts on. So your HRO business has been -- is an excellent business, which is extremely sticky and has had -- is extremely stable and has great opportunities. But at the same time, we're seeing a lot of innovation coming from a lot of start-ups and a lot of SaaS companies, which is trying to look at this opportunity at the same time. So I just wanted your thoughts around it, right. How do you see this -- the challenge that comes from them? Do you see -- what kind of challenges do you coming from the increased competition? And how do you see this as an opportunity for yourself? You alluded to the fact that you're taking a partnership approach and creating a service into a more of a platform approach. So would love to get your thoughts to -- on that bet, right? And I'll follow up with that.

Sure. Thanks for the question. So look, we remain extremely bullish about the HRO business and our position in the market. We are dominant leaders in the large enterprise space. And that space is very sticky, very stable. Some of the SaaS competition that we're talking about has not broken into the segment. So our -- and then for this market, which is where our HRMS offering's built for the large enterprise is beginning to pick up traction, not just in India, but across the board. So in the large enterprise segment, we remain happy with what we have, and we continue to invest in our solutions. For this market, we are also -- we have launched -- we've announced 2 projects over the last 1 year based on the technology investments we've announced. One is we are rebuilding our payroll platform to make it more scalable, more SaaS-oriented, more global in nature with -- easier to implement, et cetera. Also to open up SaaS market for us, right? So that's the project I touched upon in my comments as well, is on track. It's a pretty significant and very ambitious investment. The other investment that we've done is in building end-to-end HRMS suite meant for small, mid enterprises. That also I touched upon in my comments. We are in -- meet up with a few customers, we have -- we continue to build a product out. We are cautious about the SME segment, but we are happy with the product that we have and an ability to take that product to other market segments, not just the SMEs. But we'll see how it shapes up. If we are at least 6 months away from having a differentiated product there. So that's investment number 2. Investment number 3 is in our existing enterprise leave time attendance, and there's more stuff beyond that. We continue to invest with our customers and co-create solutions with our large customers. That investment is BAU, and we continue to do that and continue to have wins on the back of all of those investments.

So Ashish, is it fair to say that -- so maybe the competition has not yet woken up. And at some point of time, they will hit you. The way you are thinking about it is you are, yourself, preparing for that. And whenever that hits you, the way you're thinking about it is any kind of challenge that will come on the pricing side, will be compensated by more offerings, so wherein you will kind of protect your turf, right? You will offer more, you will get more services into the same customers and maybe lower -- might be required to lower some of the pricing, whenever it comes. Is that the way you should be thinking about it? Or that's not been a challenge in your mind as well?

My honest take is that too much is made out of the competitive pressures, and most people confuse about competitive pressures in our market, which is -- in our market segment, which is a large enterprise. The large enterprise market is very different from the SaaS player, which is medium and small enterprise market. The pricing pressures, while they are everywhere, but they are more dominant in the mid and small enterprise market, which historically Allsec has not done, but we are making an attempt at -- we're building products for that, right? So -- but that is out in the future. In the large enterprise, which is bread and butter market, we remain happy with what we have, our positioning. And we are cognizant of the competition. We respect the competition, and we -- hence, we continue to innovate and invest in our product for this market segment as well.

Got it. Fair. So if my understanding is right, you're saying that right now, you're not seeing that, that market is different, it takes time, and it needs a lot more stability which you offer. It's not -- if someone offers price, it's not like overnight, you can [indiscernible] someone, but you're aware of that. At the same time, you are one of the challengers there yourself in the SME space. So that is an opportunity. It's a tough crack, but you will try that. Is that understanding correct?

Yes.

Just the last part on it. How -- you mentioned, right? So in terms of modifying, what do you think is the biggest barrier that a SaaS company -- why is it tougher for the SaaS companies to get into large enterprises? Is that -- is it exactly the same thing that the expectation and the delivery that is required, they're not there? Or it's just -- they just like the stability of whatever you offer?

Again, it's -- I'll give you my perspective, but this is debatable. I feel that too much is made out of SaaS software capabilities and not enough is spoken about quality of service and quality of delivery. Quality of service and delivery is what prevents the upstarts and the newer companies from actually making attempt in this market.

Got it. And so just to give a sense, how much time does it take for you to break into a customer? Basically, what you're saying here, it takes a lot of time for these companies to develop trust and move from one system to another, right? And once they're into it, they don't like changing, is that understanding correct, right? That's the biggest entry barrier. So it's a very, very long sales cycle. It's not easy to do that.

That's right. That's right.

[Operator Instructions] The next question is from the line of Rahul Kayan from SMIFS.

Just wanted to understand the competitive intensity in the DBS business in North America. Who are our typical competitors? And how many people are sort of vying for the same client? And plans for future increase in the North American sales team for DBS?

Rahul, thanks for your questions. Rahul, so we play in the mid-size company market in North America, which means the giants like Infy, TCS, Wipro is not our competition by a mile. Our competition is very, very dispersed actually. There are a fair amount of players with no one having dominant position. So you run -- we run into Fusion BPOs, Visionet, et cetera. all, relatively small scale and the nature of the wins, et cetera. There isn't -- there aren't -- there isn't a dominant player. also run into a fair amount of nearshore, small footprint, local North American BPOs, but those tend to be more niche oriented. They tend to be either collections or -- they tend to be very focusing on a specific offering or industry vertical, but we do come across them. The competition is -- there are 2 things in what I said: one is no one has dominant position; and second is, that said, there are a lot of players vying for the side. Not too much differentiated positioning amongst a lot of people. But whoever -- like Quess has a full service play in that market, has an edge through are insurtech and tech offerings at MFX, it adds an edge to our offerings in North America, Allsec's offering in North America. And that stand has been vindicated with a few wins we've had in the last 5 months, which are tech-oriented wins. So for instance, the Bot Monitoring, the automation monitoring command center. Another one was tech help desk. Some of our pipeline is also helped by the fact that we have a tech behind us.

Okay. And any plans to add more people in North America?

Rahul, we've just added 2 heavy weights in this last 1.5 months. So with that, we are kind -- at least for the next 6 months, we are done. We are anyway headed into the holiday season in North America. So for the next 6 months, we are done. We continue to augment our India presales, sales support capability. So that will continue to expand. We will continue to also expand on our marketing -- digital marketing campaign. But the sales team for the next 6 months, we are most likely okay.

Okay. And lastly, Ashish, on the Quess synergies, which you spoke about at the beginning of the call, how is that playing out on the DBS and HRO front? And if you could please speak about any other synergies you could think of with Quess? Besides on the marketing front, what other synergies you are seeing? That will be good to know.

Thanks, Rahul. Rahul, so on North America DBS, I briefly touched upon these synergies. It's marketing, sales synergy is one. The other is offering synergy with insurtech and being able to present our tech services along with our BPO offering, it does give us a little more leverage. So that is already there. And in North America, we also continue to run joint marketing, digital marketing campaigns. In India, for HRO especially, both on compliance offerings and on our HRMS offerings, there is a healthy list of cross-sell, upsell with Quess customers. Their customer list is obviously longer. So we have a strong -- and we've had a fair amount of large wins coming from that list as well over the last 1 year. So I remain delighted with where that pipeline is. There is also a very strong systematic and methodical cross-sell and upsell team in Quess that we leverage when we need help across larger customers or where we don't have Quess. So there is a very systematic process around that, and that engine is working extremely well in my view. The third synergy is on the operational side. A lot of our tech work, for instance, in our tech modernization is also being done by Quess group companies, in particular, Heptagon and MFX are helping us driving -- drive a lot of our tech innovation. The platform modernization, et cetera, that we're talking about is, we are being helped by some of those entities. We also leverage the deep expertise, IT expertise that sits in Quess Corporate. And then the final synergy, I would say, comes from procurement and getting better deals, et cetera, whether it is IT vendors, the likes of Salesforce, et cetera, or just commodities, the telco lines, the Internet bandwidth, et cetera. We just have access to better rates, et cetera. So that's the fourth synergy.

We'll take the last question from the line of Jatin K. from Alpha Capital.

Sir, just on the balance sheet, how much cash would be in India and how much would be in Manila?

Yes. So after this dividend is declared, we will have around INR 40 crores in India and probably -- sorry, INR 70 crores in India and around INR 40 crores is in Manila.

And sir, if INR 40 crore -- that -- which is in Manila, if we bring it into India, we'll have to pay the taxes then?

Yes, yes. But Manila will also need money to run its operation. So we will have to figure out what to do and mean to do.

Sure, sir. And sir, in the last year, we gave INR 15 dividend, which was like to -- 60%, 70% of the profit of the last year. So is this kind of thing we should continue assuming because current as you're saying, is special dividend. So 60%, 70% kind of dividend distribution plans? Or what would be that, please?

So this interim dividend that we've given now is special dividend, which, obviously, is taking into account the past cash accumulation that we've had in Manila, which we got in Q1. Going forward, we -- I -- we will look at what is the amount that is profitable and that [indiscernible] stand-alone retail earnings question and what is the requirement for business at this point of time. But just to very clearly state that this positive is a special dividend that we've declared.

I understood that, sir. I'm talking about last year, we gave INR 15 dividend, last year FY '21, which was like 50% -- 60% of last year's profit. So that kind of number should be a more sustainable number? Or what should be a more sustainable number going forward?

Yes. So at this point of time, we've not worked out on that. So we'll have to revert to you separately on that. What we did last time was also to give you a dividend based on amount that was maximum profitable and is the retail earning at that point of time [indiscernible] because we have not declared dividend in the previous year. So now that we've cleared all the past accumulated profit, we will have to now look at what is going to be the ongoing process.

As there are no further questions, I now hand the conference over to Mr. Johri for closing comments.

Thank you, everyone, for joining us. As always, it was a pleasure taking some fielding questions from you, thought-provoking questions from all of you. Closing the call. I wish all of you a very happy Diwali and a festive season coming up. Thank you so much for your time. Take care.

Thank you. Ladies and gentlemen, on behalf of IIFL Securities Limited, that concludes this conference call for today. Thank you for joining us, and you may now disconnect your lines.