Allied Digital Services Limited ($ADSL)

Ladies and gentlemen, good day, and welcome to Allied Digital Services Limited Q4 and FY '26 Earnings Conference Call. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Mr. Mayank Vaswani from CDR India. Thank you, and over to you.

Thank you, Yashashri. Good afternoon, everyone, and thank you for joining us on Allied Digital Services Limited's Earnings Call for the Fourth Quarter of FY '25-'26. We have with us on the call today, Mr. Nitin Shah, Founder and CMD; Mr. Ramanan Ramanathan, the Global Head of Strategy for Growth, Innovation and Partnerships; Mr. Nehal Shah, Whole-Time Director; Mr. Paresh Shah, Global CEO; Mr. Sunil Bhatt, Board Member and Chief Technical Officer; and Mr. Gopal Tiwari, Chief Financial Officer. We will begin with comments from Mr. Nehal Shah, who will cover recent developments across the business, followed by Mr. Gopal Tiwari, who will walk us through the financial highlights. Mr. Paresh Shah will then discuss the operational performance and order wins. Thereafter, we will open the call for the Q&A session. Before we begin, I would like to point out that some of the statements made in today's call may be forward-looking in nature, and a disclaimer to this effect has been included in the earnings documents that have been shared with all of you earlier. I would now like to hand over the call to Mr. Nehal Shah for his opening remarks. Over to you, Nehal.

Thank you, Mayank. Good afternoon, everyone, and thank you for joining us today. I trust you have had the opportunity to review the earnings materials shared earlier. We are pleased to report a strong closure of FY '26, delivering the highest quarterly results revenue in Allied Digital history in the fourth quarter. For the full year, consolidated revenue stood at INR 968 crores, growing 20% on a year-on-year basis and making the highest annual revenues achieved by the company to date. This performance reflects the increasing revenue -- relevance of our digital transformation capabilities, deeper customer engagement and consistent execution across markets. This performance was delivered amid a challenging operating environment marked by uncertainty and volatility, cautious views towards IT spends and cost pressures. Despite these headwinds, we continue to execute steadily, deepen customer relationships and expand our engagement across markets, reinforcing the resilience of our business model. Our growth during the year was supported by strong momentum in both domestic and international businesses. In India, we won a large order from the Pune City Surveillance along with several other enterprise orders. In the international business, we won a large order from a premier pharmaceutical customer, supported by several other wins. These large orders where both government and enterprise customers have indicated intent to accelerate investments in infrastructure modernization, digital platforms and operational transformation have contributed meaningfully to our top line growth. Having built a strong customer through -- customer trust through reliable execution and integrated service capabilities, we continue to pursue larger, more complex and multiyear transformation engagements such as this, which will enable us to scale our businesses further. At the same time, FY '26 marks a defining phase in enterprise AI adoption. With artificial intelligence rapidly becoming central to business strategy and technology decision-making, customers are increasingly aligning towards technology investments around AI-led transformation priorities, and we have continued to evolve our offerings and capabilities in line with these emerging trends. Now let me take you through some of the key highlights of our performance. For the full year, we reported consolidated revenues of INR 968 crores in FY '26, higher by 20% over FY '25 revenues of INR 807 crores. Those of you who have been tracking our journey closely will recall that during our quarter 1 '24 earnings call in August '23, we had articulated our aspiration of achieving INR 1,000 crores plus top line milestone. We are pleased to share that we have now come very close to the milestone in FY '26, and based on the quarter 4 revenue run rate, has surpassed it on an annualized basis. For the full year, profit after tax stood at INR 36 crores as compared to INR 32 crores in FY '25, reflecting year-on-year growth of 10%. Profitability during the year was impacted by certain onetime charges and provisions. However, the underlying operating performance of the business remains strong, and we remain confident that we will progressively reflect in the company's financial performance over the coming quarters. Recognizing the resilient performance, the Board of Directors has mentioned the dividend at 30% equivalent to INR 1.50 per equity share with a INR 5 face value. From a geography standpoint, both our domestic and international business delivered healthy double-digit growth during FY '26. Revenues from India grew 17% year-on-year and the fourth quarter domestic revenues were significantly higher by 37% year-on-year, driven by strong execution momentum and completion of key milestones across major engagements. International revenues grew 22% year-on-year during FY '23, reflecting improving traction across the global markets and deeper customer engagement. From a segmented perspective, our services business continued to perform strongly, reporting a 21% year-on-year growth in FY '26, while solutions revenue increased by 17%. As we have highlighted earlier, our solutions business often acts as a strategic entry point, enabling larger annuity-led managed services engagements over time. This integrated operating model strengthens customer relationships, enhances revenue visibility and supports long-term margin sustain. In terms of customer mix, revenues from enterprise customers grew strongly by 31% year-on-year during FY '26, while government revenues were lower by 6% during the year. This clearly demonstrates that our growth is increasingly being driven by the enterprise segment and that the business is not overly dependent on government-led opportunities. At the same time, government business continues to remain an important and strategic component of our revenue mix, and we anticipate a meaningful rebound in this segment during FY '27, '28. Before I conclude, I would like to touch upon governance, which remains a key focus -- key area of focus for us as we prepare Allied Digital for its next phase of growth. As the scale of complexity of the business continues to evolve, we are equally focused on strengthening the underlying processes, systems and governance framework and support sustainable growth. Alongside investments in leadership -- alongside investments in leadership, global delivery capabilities and larger transformation engagements, we have remained committed to continuously enhance governance standards across the organization. In line with this approach, following the completion of the previous auditor's tenure, we appointed a larger and more [indiscernible] audit firm to strengthen our financial oversight and reporting framework. Upon coming on board, they undertook a comprehensive review of our financial statements, internal controls and accounting process and had raised certain observation qualifications in the quarter 4 of '25 audit report. I'm pleased to share that over the past 12 months, we have worked extensively to address each of these observations through the necessary corrective actions, process improvements and policy refinements. As a result of this effort, the qualification has now been withdrawn and the auditors have acknowledged the company's proactive approach and commitment towards strengthening governance, compliance and financial reporting standards. I will request Gopal, our CFO, to elaborate further on the specifics during the remarks, but I would like to emphasize that this exercise has significantly strengthened our financial reporting, the framework and the governance standards as well. Our accounting policies, asset valuations, internal controls and reporting practices have all undergone detailed review and validation resulting in stronger and more resilient institutional foundation for the company. I would like to sincerely thank our shareholders for their continued trust, patience and support throughout the process. While we have remained committed to transparency and integrity, we believe the successful completion of this exercise further enhances confidence in the quality, reliability and robustness of Allied Digital's financial reporting and governance framework going forward. Over to Gopal Tiwari, our CFO, to take you through the financial highlights for the quarter. Thank you.

Thank you, Nehal, and good afternoon, everyone. FY '26 has been a milestone year for Allied Digital with the company reporting the highest annual revenue in its history. Revenues for the year stood at INR 968 crores, representing a strong year-on-year growth of 20%. On the profitability front, adjusted EBITDA increased by 14% year-on-year basis to INR 112 crores, while EBITDA margins were resilient at 11%. PBT before exceptional items for FY '26 improved by 33% year-on-year to INR 81 crores, reflecting stronger operational performance, improved scale and better operating leverage across the business. For improved comparability and transparency, EBITDA and PBT have been presented after adjusting for the impact of onetime additional ECL provision undertaken during the year. Our reported PBT is lower on a year-on-year basis. Impact of onetime provision was partially offset by the recognition of deferred tax asset. As a result, profit after tax for FY '26 was higher by 10% year-on-year basis from INR 32 crores to INR 36 crores. Excluding these nonrecurring items, the underlying profitability of the business remained healthy and reflective of the continued improvement in operational performance and earnings quality. Coming to the observations raised by our auditors in earlier reports, I'm pleased to share that all key matters have now been addressed during the course of the year. The first matter pertains to noncompliance with Section 186(7) of the Companies Act, 2013, relating to certain noninterest-bearing loans extended to subsidiaries. I'm pleased to share that the majority of these loans amounting to INR 112 crores out of total INR 117 crores had already been converted into equity by end of the financial year. The balance amount has either been squared off or interest has subsequently been charged, thereby aligning the treatment with regulatory requirements. We believe the conversion into equity more appropriately reflects the underlying intent and economic substance of these transactions as the funds were always intended to support long-term business growth and expansion. The other matters related to differences between GST input tax credit reflected in the books and on the GST portal, nonconduct of physical verification of property, plant and equipment, intangible assets, inventories and investment property as well as nonrecognition of expected credit losses on certain trade receivables and unbilled revenues. I'm pleased to share that the auditors have acknowledged that all these matters have been addressed during the year. We completed the reconciliation of input tax credit differences, carried out comprehensive physical verification exercises and made the necessary adjustments required in this regard, resulting in a onetime additional provision during the year. With these actions now completed, all the observations raised by our auditors have been resolved. As committed by me in one of our earlier con calls, all observations by our new auditors have been dealt with successfully by the end of this current financial year itself. With a healthy opportunity pipeline, improving execution visibility and increasing participation in larger transformation-led engagements, we remain confident of sustaining growth momentum while progressively improving operational leverage over the medium term. I will now hand over to Paresh Shah, our Global CEO, to take you through the order book strategic initiatives and outlook in greater details.

Thank you, Gopal. Good afternoon, everyone, and thank you for joining us. Let me briefly take you through some of the operational highlights for this quarter. We secured around INR 166 crores in new orders and renewals during this period, reflecting continued demand for our capabilities across digital transformation, infrastructure modernization, managed services and AI-led solutions. The momentum remained broad-based across both domestic and international markets, supporting strong client engagements and consistent execution across our delivery network. During the quarter, we strengthened our position in large and complex transformation programs with clients increasingly engaging us for integrated offerings across infrastructure, workplace transformation, managed services and digital platforms. At the same time, we saw healthy traction in multiyear renewals, enhancing revenue visibility and reinforcing the depth of our customer relationships. Some of the key engagements secured during the quarter were across smart governance, energy sector and global workplace services. In the Smart City segment, we secured a citywide integrated command-and-control center engagement involving the end-to-end deployment of command-and-control software, field infrastructure, integration, commissioning and support services. The engagement reflects our growing presence in large-scale smart governance and mission-critical digital infrastructure programs. We also expanded our footprint in the deep sea drilling, oil drilling sector through managed services and annual support maintenance engagements with leading enterprise while further strengthening our global workplace services portfolio through multi-region support engagements across North America, Latin America and Africa. These projects include multilingual service desk operations, on-site support and remote infrastructure management, highlighting scalability and breadth of our global delivery model. In addition, we continue to witness strong renewal momentum across sectors, including BFSI, manufacturing, mining and metals, health care and real estate, reflecting sustained customer confidence in our delivery quality and long-term partnership approach. Several key order wins also progressed into the execution place during this year, reflecting healthy conversion of our order pipeline into active delivery. This not only improves revenue visibility going forward, but also reinforces Allied Digital's positioning as a trusted partner for managing complex and mission-critical IT environments through an integrated portfolio of cloud, cybersecurity, infrastructure, workplace and digital transformation services. With that, I will now hand over the call back to the moderator for questions.

[Operator Instructions] We'll take our first question from the line of Kunal Bajaj from Choice Institutional Equities.

So mostly what -- mainly 2 questions from my side. Firstly, how do we see the client interaction going on? Because what we see that most of the large companies have been saying that most of the clients are deferring their investments. That is one. Further, they have also mentioned that they see very strong competition from their peers. They are seeing that other peers are giving the same amount of work at a very lower price as compared to what they can offer. So how the mix between your revenue growth and margins would be? So this is one. And secondly, why I have been seeing that the India business growing, but the government projects declining? So any color on that as well?

Kunal, I'll take both the questions. So the client interactions are going pretty decent with us. There are, of course, margin pressures that are happening across the industry, and they are also facing the same. But we look at that as an opportunity because a lot of our service delivery, we have started using AI. And with AI getting implemented, AIOps getting implemented, we are seeing that there is a cost reduction that is happening across the line. So while that is happening, every CIO today or every CTO today is talking about using AI to reduce their cost overall. And that's exactly what we have done. If you would have gone through our presentation, we have specifically given case studies where we have done a lot of AI implementation at our different client sites, which is helping us to better the margins after getting a customer onboard. And yes, coming to your second question, the India business is growing. Government last quarter, if you would have realized, due to the ongoing war between Iran and Israel, a lot of these government tenders had to be put on the back burner. Typically, we also had certain customers that we bidded for and we were about to win, but the equipment cost due to the war absolutely went haywire and went up. And eventually, we had to go out of those deals. And that is one of the reasons I feel this quarter the government business has become a little slow. However, we are very confident that in the future quarters, it will be better. The other challenge with government tender is that generally when -- so if there is a tender which has been built in December or that we bid for in December, they eventually, with their internal process and all of it, open up the financials only in the month of Feb or March. So this 2 or 3 months of delay in opening and awarding the contract to anyone sometimes creates a delay, which in this case, in this scenario, in that quarter, typically raise the equipment cost, and we have to go out of certain customers. But now we see that most of the prices have come back to stable. We are seeing a lot of government traction happening. We are having some very large contracts we are going to be bidding in the second and the third quarter of this year, for which we have already started a lot of preparations. Very soon, you will be hearing that we did a pretty decent contract in Mumbai, which we'll be announcing once the whole paperwork is done, and which is a government contract which we have won. So things are coming back to shape. The whole quarter which went behind us was pretty slow in the government due to the fluctuation in the pricing. And that is the only reason that you see this time of -- this time, our quarterly numbers where the new announcement, recent announcements are also to the tune of only INR 166 crores. So hopefully, we should be able to work this up in the next second or the third quarter.

Yes. Okay. So what would be the scale of the order which you mentioned about [indiscernible]?

It should be to the tune of about anywhere between INR 150 crores to INR 200 crores. We're still figuring out and the final signing on is going on. We should be able to come up with a number very soon. Apart from that, there are a lot of large projects. So if I look at Maharashtra as a state, we are close to about INR 2,000 crore plus worth of pipeline coming up only in the state of Maharashtra, for which we are very keen on bidding and getting major contracts out of this. So I'm not worried about the government contracts and the pipeline that is coming up. It is just a matter of closure when the RFP comes in, we bid for it, we win and we get awarded. So maybe 1 quarter here and there, but we are sure to have those kind of contracts coming our way.

Okay. And any guidance on the revenue? Because we have achieved INR 250 crores on a quarterly run rate. So any guidance going forward for FY '27?

So we would want to try and -- so from a guidance perspective, I would try to give anywhere between 20% to 25% growth. But internally, we have a more aggressive growth. But for the outside world, it is anywhere between 20% to 25% kind of a growth that we're looking at year-over-year, because our long-term target is to do 10x in 10 years, is what we are trying to achieve.

With the margin profile of?

So margins currently, due to all these one-offs, our margins were in the tune of about 11% EBITDA. We want to target it to anywhere between 13% to 15% on the long term. So short term, we should be able to do 12.5%, 13%. And on the longer term, we should be able to do 13% to 15%.

Okay. One very last question. So as we continue expanding our high-growth areas such as cloud, cybersecurity and digital infrastructure, along with managed services, so how do we see the solutions versus services mix evolving going forward?

So I -- from a strategy perspective, we as a company would want to have a services revenue tower going up always because that gives us a lot of consistency in the numbers and the reporting. But solutions are also important because they give us the X factor of our top line growth, and eventually, the solution business also converting into services business. So having said that, whenever we have large projects coming in, the solutions bucket for that period when the implementation is going on is going to go up. And once the implementation is over and we go in the go-live phase, the O&M phase is going to start where our services business consistently will keep on growing. But if you ask me personally, I would want our services business to keep on growing and take about 75% to 80% of our top line revenue because that gives a lot of consistency from a growth perspective because most of the services contracts are signed for 5 years. So that helps us to not get desperate to look out for projects or business every quarter and try to cut down on our margins to onboard customers.

[Operator Instructions] next question is from the line of [ Jay Advani ] from [ Alokeh ].

Nehal, I just wanted to ask, so the management has mentioned the part of the Section 186 and the [ FEMA ] compliance issues that have been rectified through loan conversion into equity and charging interest on remaining loans. Could you help us -- help me understand exactly the time line by which the company expects to fully resolve this audit qualification and receive a clean audit opinion?

Yes. Thank you for asking this question, [ Jay ]. We typically have actually cleared 50% of the work that we're supposed to...

Sorry to interrupt. Sir, I'm hearing some disturbance from your connection.

Is it better?

Yes. Can you speak now, please?

Is this better? Are you able to hear me?

Yes. Please go ahead.

Sorry, guys. So I was trying to tell you that the 50% of the work which was to be done is done where we have to convert the equity to -- the loan to equity, which has already been done in the U.S. There are certain procedures that we have to get done through the RBI and get the approval of the RBI. The process for that has started. We are pretty sure generally it takes about a quarter or 2. So in next 2 quarters, we should be able to get a clean sheet coming in from everywhere. And typically, this loan which was given was also given to a subsidiary to acquire a company in the U.S. So typically, it was later on considered as a loan, but it was always given to acquiring equity of the U.S. company. So from our side, it was never a loan. It was just that I had kept a holding company in the U.S., which was trying to acquire a company -- a subsidiary of another company in the U.S. So having said that, all of that is sorted now. We are pretty confident that once we get all the clearance coming in from RBI, we should be able to do away with the disqualification as well. All the process for that which is dependent from our side has been done. Now it is the time line that will be required by the RBI to give us the approvals to get it sorted. And there are certain other small loans about INR 5 crores, INR 6 crores that we have given to our subsidiaries to make sure that they are able to sustain themselves. We have started charging interest on them. But the tune of that loan is about INR 5 crores, INR 6 crores, across about 4 or 5 of our subsidiaries.

Yes. It's miniscule in comparison to total loans.

Go ahead. Just another question, when do you expect to announce the project that you have won in Mumbai?

So the paperwork is going on, we should be able to announce probably in 2 to 3 weeks.

Okay. Got it. And so moving forward, once all the issues have been resolved, can we see like the profitability going higher in the next financial year?

Yes. So basically, if you see, we've been trying to grow our EBITDA as much as we can. So we've been able to consistently, from a rupee perspective, we have been able to grow the EBITDA margins, and we've got it down to -- the EBITDA was INR 112 crores this year, if you remove the exceptional items. And without -- so we are pretty confident that once all this cleaning is done, everything is sorted, we've got a [ FEMA ] report coming in from the auditor as well, we don't see any new hiccups coming up in the future quarters. And I'm pretty sure with the same kind of momentum that we are having, our margins and our bottom line will keep on improving going forward.

Got it. Okay. Just one last question. So going through the results, so the purchases and expenses have grown quite a bit. So that's one of the reasons the profit has been affected. Can you just elaborate as to why that has happened? Because I think last year, it was around INR 467 crores for the financial year, the operating expense, like the purchases and direct expenses. But this year, it's gone up to INR 585 crores.

Sir, I'm sorry, I'm getting the disturbance again. Okay, now it is fine. Please go ahead.

Yes. I think you are referring to the total direct expenses, right, [indiscernible] direct expenses. So see, I'll tell you the total direct expenses generally are in the range of 60% on a year-over-year basis. Quarterly, you will find that 2%, 3% here and there. Every quarter, there is up and down. That is mainly because of suppose in any quarter where multiple projects are under CapEx phase. So our direct expenses, supply of equipment increases and our direct expenses are higher to that extent. So in this quarter, our multiple projects were on. Because of that, our direct expenses, supply of equipments increased by around 3%, 4% in comparison to the standard or direct expenses level. So that impacted. And secondly, other expenses also you'll find in this quarter is higher because that onetime provision is also taken under that, the INR 36-odd crores that -- and ECL provision, that is also part of this quarter's expenses. So if you take out that amount from these expenses, our bottom line, our EBITDA, our PBT, everything gets improved to that extent. So these are all -- this is only onetime expense which has been booked. And that is also not an expense. It's actually provision. We have taken extra additional provision towards ECL as per the advice of the auditors and change in our ECL policy [indiscernible].

So this is -- onwards, we will get -- the other amount will be greater than [indiscernible].

I'm sorry, sir, we're getting the disturbance again.

Yes. It must not be from our side.

It is coming from disconnection only, sir. Okay, now it is gone. Yes, it is gone now.

I hope you are clear now.

Yes. Also about -- so the last earnings call, you said that you were working on the Western Railways project by the government. Do you have any update on that?

Yes. So that Western Railway project, unfortunately, we had to let it go because by the time the pricing was about to open, the equipment procurement cost went up by 25%, 30%. And our margin that we are sitting on was all getting wiped off. So we conveyed our message to Western Railway and asked them to do a retender since they were not able to increase the price in the tender itself. So we'll have a retender of it coming up in July second week. So that is one of the places that we are very confident because there were always 2 bidders and we had a very high chance of getting. It was close to about -- there were 2 orders, INR 165 crores and INR 85 crores. Both of it unfortunately went for a rebid, and we are expecting the tender to be out by mid-July, where we should be able to bid again.

We'll take our next question from the line of [ Nitin Gandhi ] from [ Inesworth ] Advisors.

Can you share tax percentage? Because I'm finding it comparatively low.

See, good question. I mean this quarter, you'll find that our tax implication is pretty low. I mean rather, we have gain in that. So that is because of deferred tax asset. Current quarter and for whole year, you'll see the tax computation, tax liability is there. But because of this deferred tax asset, we have got benefit of INR 21 crores, which is getting credited to tax liability. Hence, the PAT amount has improved. Against INR 32 crores of last year, it is now INR 36 crores almost, because of tax benefit -- sorry, deferred tax asset benefit. And that is mainly on account of our extra provision earlier in this year to [ a GSIL ]. So that has impacted our tax impact.

So going forward, you'll remain 25% next year, right?

Yes, yes, yes. But we have got our deferred tax asset, I mean, sufficient, substantial amount lying in credit. So that benefit will keep on -- will always be there in coming future for some time. So not to this extent, but it will be there by and large, more or less, yes.

Okay. Can you guide what is the likely tax rate going to be for at least '27?

Sorry, come again?

What is likely to be effective tax rate for next year?

Next year would be not -- I mean...

It should be 25%, maybe 2% or 3% depending upon the deferred tax that we get.

[Operator Instructions] we'll take our next question from the line of [ Mitri Shah ] from Sapphire Capital.

Firstly, on the deferred tax assets. So do you see that kind of happening for this year as well, for FY '28 -- or '27, sorry?

Yes, there would be a deferred tax asset, but it will not be to that extent. Because this year, because of this extra provision, we have got this benefit. But definitely, it will be there because we have got some credits lying in our books. So that impact will be there in current year also.

Okay. And we won the Mumbai project you said close to INR 150 crores, INR 200 crores. What sort of time line on completion do we have once we finally get this awarded?

So it's going to be the implementation will take about 9 months. And then we have O&M, which will go on for 5 years. It's the track that we kind of do for all other projects.

Okay. That's great. You also mentioned we are adding a lot of AI capabilities to our projects going forward. And since we're seeing now the increase in profitability coming, how do you see the margins growing from here on now on a short-term and a long-term basis? What drivers do you see helping these margin improvements? And what investments are you putting in on the AI side?

Yes. This is Paresh Shah. I'm just answering that. So we already did good proof of concepts last quarter also. We have our own agentic AI architecture. Today, the industry is moving into AI wholesome in the sense, especially large customers are significantly adopting AI as their front end for all services. So that we see as a big traction. We are moving into AI-first strategy. That's what we had adopted to make sure, for large volume, we use AI agent architectures. So this is one of the very key transformation that is happening across the industry as the services is getting moved more in -- especially IT services, into AI-based approaches. So we see the traction also and we see a lot of momentum coming ahead in coming years.

Any quantification on the margins? How do you see the improvement happening over a 1 or 2 years' time?

Yes. So we definitely see that there will be an improvement in the margins because labor would be reduced, and that would definitely impact the margins. And mainly apart from AI, what is important is automation because, finally, the customers want to see how they can also bring in savings, which will impact them and also able to give that justification for those contracts that they award to us. And Allied Digital is constantly investing into AI more and more in terms of resources, in terms of technology and in terms of training. So all these 3 are our key aspects of our journey this year also.

If I can add to that, Ramanan here. There are -- we have sort of a 3-pronged strategy for AI. One is most of the Smart City solutions that you're going to be seeing going forward is going to have an element of AI -- a significant element of AI in not only our solutions, but also in the technologies that are being used. You're going to have more sensor technologies, which are going to have an incorporation of Edge AI, which means that the sensors themselves are very intelligent and AI processing by nature. But then you will need a larger umbrella AI solution which will gather all the data, collect it and be able to make meaningful decisions. So that is one. The second is there is a tremendous opportunity for managed services to incorporate AI in every element of its operation, which Paresh already described. And so we have our digital desk, which is quite advanced, which is competing with the industry in terms of its ability to be a global service desk. But now we have an AI-plus feature integrated into it, which is going to reduce the time required to resolve tickets, which is going to improve the automation that is possible and which is also going to improve the workflows that are possible. So that's the second part. The third, which we see in Allied Digital is that agentic AI is in its infancy in terms of its implementations across the world. So we are not at a disadvantage to have our own agentic AI-based solutions and systems starting to get deployed in an area which is -- it's a level playing field for the rest of the world. No technology company or IT company is too advanced in that. And therefore, we are also putting our strategies to how we can provide agentic AI solutions and services for customers whom we already have and new customers we can acquire. So that's the 3-prong strategy that we are looking at. And that's going to be significant for Allied Digital because, as you can see, AI is going to affect coding. We have not been in general in coding, but we have been in the deployment of managed services. And more and more AI, the flavor of AI is going to be managed services in applications development as well as in infrastructure management.

That was very informative. Secondly, I think in the previous comment, you mentioned somewhere that -- or maybe I've heard that wrong, but are we looking at a 12.5%, 13% margin for this year? Did I hear that correct?

So that's a target that we would want to try and achieve, you are right. Closely try to slowly go to 12% and then try to improve from there on. We would try to do that as soon as we can. And with the kind of contracts coming in, we are confident that we should be able to reach 12%, 12.5%, 13% pretty soon.

Great. Any bid pipeline do we have currently, orders that we are kind of awaiting for the like [ LOI to come forward ]?

No. So there are -- the pipeline is pretty strong. We have a couple of orders that we feel will go our way. These are large contracts, government contracts, which are due for coming up as an RFP in the next 2 quarters, mostly coming in from the state of Maharashtra. There are 2 large contracts, both worth INR 600 crores individually. And we are a frontrunner there. Apart from that, there are pretty decent contracts that we have. There is a Noida Smart City, which is coming up where we are very keen of getting onboarded there as well. Apart from that, there are certain [indiscernible] contracts which are going to be coming up soon again. There is another certain [ high port ] orders that are there in the various ports that are going to be coming up. There are [indiscernible] projects. So the pipeline [indiscernible] very, very strong, not only domestically, but even internationally where we are seeing a lot of traction happening from our customers either for getting us new business in existing accounts or getting new contracts. So from a strategy perspective, I think we are bang on. The only question is that when these deals come out in the open, customer accepts the change and we start getting that. So the [indiscernible] is what we have to look after and make sure that we keep on adding more revenue to have a sustainable growth.

Okay. Great. And lastly, just a last question on the growth. So how do you see, because we've reached INR 1,000 crore run rate by the end of quarter 4, how do you see that panning out by the end of quarter 4 next year? And any sort of targets for the medium-term revenue growth [ outlook ]?

So from a long-term perspective, you're talking about 10x growth from here, so about 10x from INR 1,000 crores...

I'm sorry, I can't hear you clearly. The disturbance just started again.

Should we just hold on? Is it better now?

No, sir, still the same.

I'm surprised because I don't see any disturbance. We are in the same place. There's nothing that I can hear. Is this better?

That is I think from outside, we are able to hear the disturbance. [Technical Difficulty]

Now it is clear, sir. Yes, please go ahead.

To answer your question, I think...

Sorry, sir, it started again.

I'm actually not doing anything here.

Now it is fine. [ Mitri], you're able to here, sir, right?

Yes, I can hear you.

Yes. So [ Mitri], I actually forgot the question.

Yes. On the growth revenue targets for...

Yes, yes. So we have reached INR 1,000 crores. Next 4 quarters, the long-term target, of course, I gave you 10x. For the next short-term target, which eventually comes up to about 20% to 25% kind of a growth, is what we are looking at consistently from here year-over-year. That's the target for the outside world.

[Operator Instructions] Next question is from the line of [ Pratik Birya ], an individual investor.

So my question was on the AI side. So I think thanks for the clear picture in terms of how we are going with AI strategy. My question is, how have you seen the implementation time from now to once you scale up your AI initiative, how does it impact the implementation time? And vis-a-vis how do you see your projects bidding happening as well post you have the AI initiatives implemented?

Yes. So just to update you, last quarter, we already did 2 proof of concepts. We already have one customer right now where we are implementing automation and AI together, one of the large BFSI customers. And so our agentic AI framework is quite ready, but we have a road map for it, we have a lot of expansion plans. And what we see is to implement it, basically, it's a complete transformation strategy, which every customer picks up and they get the savings of the automation and the AI together. And it's a journey where we see that every other new project that is coming is by default looking at AI as a solution. So we are quite ready to address that. We are also adopting some new strategies to make sure we can speed up implementations in this coming year, not only with our road map, but also adopting a lot of integrated third-party tools that can speed up the AI transformation for organizations. So yes, we are using both these strategies to make sure our platform as well as third-party platforms are ready-to-use platforms for very large organizations can also be deployed.

Okay. Any quantification if you can provide in terms of time reduction that you see, if possible?

So you are mentioning time reduction to implement, right?

Yes, yes.

Yes. So every customer adopts AI in a phased manner also, okay? And it all depends on how their data quality is also. So even if we have the solution ready to make it operational as well as beneficial, it's kind of a journey. And the journey can be as short as 6 months where they can implement more automation and less AI, and over the time, implement more AI and take it forward and get the benefits faster. So usually, some rule is short term, around 6 months, they can really improve the user experience and gain benefits from automation. And over long term, probably a year, they can see more benefits of AI as they are able to handle the volume of transactions in a bigger way.

Okay. Got it. And how do you see resource or headcount utilization post the AI implementation strategy works out? Do you...

Yes. So resource and as more and more AI implementation happens, the front-ending, the Level 1 support, okay, definitely gets impacted because more and more AI agent is able to address the front ending of the issues. So a lot of filtering as well as routing happens to the AI agent, okay? And that will definitely impact the low-level resources, which are definitely addressing the issue of the customer first, okay? So we see definitely a reduction on the resource count for any customer close to 20%, 25% in a matter of 6 months or a year.

Got it. And that -- should that be accelerated translation into your margins as well? So your guidance is for 12%, 12.5% for this year, and then probably going ahead. So how do you -- how should I correlate that to your margin expansion?

Yes. So profitability definitely will improve, there is no doubt. But it also depends on how large and how the customer is really embracing AI because that's a very important factor. Certain industries and the large volume industries like BFSI definitely embrace AI much better. And that will see a difference, okay? And more regulated industries like pharma and all, they are slow to adopt. So that can make a difference. But overall, as a margin, if you look at it, definitely, it will be much, much better because definitely the impact of AI and automation -- in fact, automation happens even first. So you can immediately see benefits there.

Got it. All right. And my next question is more from geographical perspective. So how are you seeing your business traction on the U.S. side more from the AI adoption? And what -- so I heard the first participant's question as well in terms of how the conversations are going. But if you can throw more light on how the conversations are aligning to the AI side and how the contracts are being revisited there?

So just to add, globally, AI adoption in U.S. is obviously quite high, okay? And that's why there are more opportunities. And especially large customers, if you look at it, they definitely have some or the other way adopted AI is in the center stage, okay? And that's what we see that it's a great opportunity to work with some large customers adopting industry standard platforms and building complete end-to-end AI automation journey for them together. So we see definitely more adoption at the global level, and slower adoption, but definite adoption, even in India.

If I can add to that, you see there is a lot of dynamic changes and real-time changes happening in the AI marketplace, both in terms of announcements being made, which the customers are watching a little warily, as well as actual implementations that are being done where there is an immediate advantage of leveraging AI for improving the workings of the organization based on the data that is already collected. So you have -- definitely when you go to a customer today, they want to know what are the AI capabilities that the organization is developing, what are the tools that they are familiar with, what are the tools that they have developed and what is the way we can immediately engage in leveraging all of this in whatever we are already doing. So that is evident, for example, in our managed services where we have not only just been providing field level support and network operating centers and all that, but we have developed our own digital desk. And so everybody wants to know how digital desk is now being powered by AI for leveraging advantages for reduced cost, increased reliability and better infrastructure management. The same is true in terms of business systems that are there. But that is an area that is still watchfully being looked at because you need safeguard, you need guardrails, you need cybersecurity to ensure that there is no penetration of anything illegally, as well as you need to make sure that there is an opportunity for not -- there's no opportunity for proprietary data to get accessed by others who are not supposed to have access to. So it's definitely changing. Every conversation with every customer has an AI component, and Allied Digital is working and firing on all cylinders to be able to address those opportunities.

One more point we wanted to add is, as you know, there are AI-based data centers coming up left and right. And that has given also another -- opened up new doors for Allied Digital to give managed services for those AI data centers and help customers easily migrate and adopt AI on their local data sovereignty based data centers. So that's an advantage that we feel that Allied can take as an early mover in terms of technologies.

Okay. That's good to know. And one follow-up from the thing that you mentioned. Any client that you would have lost for the client themselves picking up the AI adoption and taking the automation internal as against, say, depending upon you guys?

Not so far. We have not seen any customers taking anything in-house. In fact, rather, the requirements of outsourcing have gone up. The customers are -- opportunities are being created for vendors who have made AI adaptability very easy. CIOs today are talking and wanting vendors who can help them in their AI journey. So this, according to us, at our size, we feel this is an absolute opportunity for us for growth.

[Operator Instructions] as there are no further questions, I now hand the conference over to management for closing comments. Over to you, sir.

Thank you once again for your participating and engagement during today's call. We remain encouraged by the direction of our business and the significant opportunities emerging across the evolving global technology landscape. Having now achieved INR 1,000 crores annualized revenue milestone on a quarterly run rate basis, we believe Allied is entering a new phase of growth and evolution. Looking ahead, we aspire to scale the business 10x over the next decade, which would imply a compounded annual trajectory growth of approximately 20% to 25%. Over the past few years, we have undertaken a comprehensive transformation across multiple dimensions of the organization, including governance, transparency, leadership development, human capital delivery capabilities and our sales and go-to-market framework. We believe this initiative has significantly strengthened the foundation of the company and created a more agile, scalable and resilient platform capable of supporting sustained long-term growth. Should you require any further information or have additional questions, please feel free to reach out to our team or connect with CDR India. We sincerely appreciate your continued support and confidence in Allied Digital Services. Thank you. Thank you, everyone.

Thank you. On behalf of Allied Digital Services Limited, that concludes this conference. Thank you for joining us, and you may now disconnect your lines.