Basilic Fly Studio Limited (BASILIC) Earnings Call Transcript & Summary

Ladies and gentlemen, good day, and welcome to Q2 and H1 FY '26 Results Conference Call of Basilic Fly Studio Limited. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Ms. Sakhi Panjiyara. Thank you, and over to you.

Thank you. On behalf of Kirin Advisors, I welcome you all to the conference call of Basilic Fly Studio Limited. From management team we have Mr. Balakrishnan, Managing Director and CEO; Ms. Yogalakshmi, President, Business Strategy and Whole Time Director; Mr. Gaurav Mehra, Chief Financial Officer. Now I hand over the call to Mr. Balakrishnan for opening remarks. Over to you, sir.

Thank you ma'am. Good afternoon, everyone, and thank you for joining us today. It is a privilege to welcome you on to Basilic Fly Studio's Q2 and H1 FY '26 earnings call. On behalf of our leadership team and our 700-plus talented artists across Chennai, Pune, London, Paris and Vancouver, I extend our gratitude for their continued confidence in our journey. I am delighted to report that Basilic Fly have delivered a strong performance in H1 FY '26 with revenue of over INR 190.5 crores, up 146% year-on-year and PAT of INR 26.8 crores, up 117% year-on-year, reflecting both the consolidation of overseas acquisitions and robust growth across domestic and international markets. Our EBITDA margin stood at 20.3%, and we have strengthened our liquidity position with a net cash surplus of INR 48.3 crores, following our successful QIP of INR 85 crores. We are pleased to share another strong half-year performance, one marked by disciplined execution, technology-led transformation and global expansion. We began FY '26 with the premium strategy to strengthen our delivery network, accelerate technology integration and prepare for the next phase of scale. I am pleased to share that we have made significant progress on each of these fronts. Our integration with One of Us is now fully complete and is yielding visible synergies. The subsidiary secured INR 265 crores in new wins and delivered projects worth INR 37 crores during H1 from these new wins, supported by deep creative collaboration and cross-studio workflow alignment. The Bengaluru team started deliveries effective October 2025, enhancing our offshore capacity and positioning us strongly to deliver the India cost advantage in global production. From the India side, apart from our consistent pipeline of international projects, we have also expanded into premium Indian content. We are actively engaging with Netflix and Amazon on key Indian originals that demand sophisticated visual storytelling. I'm delighted to share that we have recently partnered with Netflix on one of their projects as their initial initiative to produce South Indian originals as a VFX partner. This collaboration stands as a true testament to the reputation, trust and creative confidence we have built within the industry. We are also in active discussions on other premium Indian projects as well, further strengthening our domestic footprint in high-end content space. On the innovation front, we have also advanced our modular USD pipeline. initiative. Phase 1 was successfully completed in March 2025, while Phase II focused on real-time multisite asset interoperations is on track for completion by end of FY '26/Q1 FY '27. This milestone will redefine however, international and Indian teams collaborate making our production network more seamless, scalable and efficient for larger and complex projects. Our leadership bandwidth continues to expand with the onboarding of senior global business development and operational leaders across key markets, especially the appointment of Adrian De Wet, and industry veteran with credits in Harry Potter, Matrix, and Hunger Games as VFX Supervisor and creative director is based out of Los Angeles, marks a major leap in our North American footprint. We are also delighted to welcome Audrey Ferrara to our London team as an art director. Audrey comes from a highly reputed background with strong credentials and experience as a favorite creative partner for Disney on the tentpole project. Her addition strategically strengthens our creative leadership in Europe, positions us more favorably for premium feature projects and bring deep insight into expectations of major studios, further differentiating Basilic Fly and One of Us in the global market. The recently completed INR 85 crores QIP has fortified our balance sheet and will be strategically deploying towards technology innovation, delivery expansion and selective inorganic growth. Our transition to main-board compliance reflects our maturity as an organization ready for its next orbit. I'm also thrilled to share that our short film called Shutter Bird, for which the Basilic Fly Studio served as a sole VFX partner, has qualified for the Oscars this year. Our team worked closely with the filmmakers throughout this process, shaping the film's visual identity through a deep collaborative process. This achievement is not just a creative milestone, but also part of our ongoing effort to identify, support and build relationships with next generation of visionary filmmakers who could become tomorrow's leading voices in global cinema. The Oscar qualification stands as a testament to our commitment to facilitate creative storytelling for upcoming talent in this direction. As the VFX and content industry rapidly evolves, our focus is not simply to follow trends but to future-proof our business. Our strategic initiatives and investments built on the foundation of the Basilic Fly and One of Us, are helping us to stay at the very high end of the creative spectrum. This enables us to differentiate meaningfully in the crowded market, offering capabilities, scale and artistic excellence that many others cannot match. Our current engagements, including a major Disney feature and potentially one of Warner Bros.'s all-time big project at a larger scale and higher pedigree, which we are currently working on than what could be in previous years of our work, it reflect both our creative and technical capabilities and the gap in the market that we are uniquely positioned to fill. These projects are tangible evidence of where we fit in the high-end segment and the confidence to be placed in our teams globally. The global visual effects market size of USD 10.60 billion in 2024, estimated at USD 11.19 billion in 2025, and is anticipated to reach around USD 20.29 billion by 2034, expanding at a CAGR of 6.83% from 2025 to 2034. High quality visual effects are in greater demand in several industries, including virtual reality, gaming, advertising, cinema and television based on the research report on the industry. Across India, in the last 2 years, many states such as Tamil Nadu, Maharashtra, Karnataka, Telangana, Uttar Pradesh, Madhya Pradesh and Rajasthan have been actively promoting film and VFX production through a range of qualities to promote the respective states as AVGCXR hubs in the country. These initiatives complement our India delivery network, allowing us to efficiently scale high-end production, while benefiting from policy-driven advantages. The broader industry landscape is showing increasing kinds of revival with major streaming platforms, resuming content investment and tax incentives in the U.K. and France, spurring production volumes. Coupled with rapid advances in AI, virtual production and real-time rendering, the global VFX system entering a new era, whereas art and technology converge like never before. Basilic Fly is uniquely positioned to lead in this environment, our hybrid model, varying creative excellence in global studios with the scale and efficiency of our Indian backbone, has created a differentiated value proposition that clients increasingly prefer. Looking ahead, our focus under vision 2026 remains clear. To scale offshore capacity, deepen technology integration, nurture leadership and talent and expand our global reach for diversified markets. Our ambition is to build a multi-location AI-enabled creative powerhouse that defines the future of digital storytelling. This is an exciting and transformative chapter for Basilic Fly Studio, I thank our investors, clients and partners for the trust and our teams for their relentless, creativity and commitment in this journey. And I would like to pass it on to Gaurav for his further comments.

Thank you, Bala. Good afternoon, everyone. Thanks for joining us today for our earnings call. It's my pleasure to connect with you all to talk about the business and financial performance for H1 '26 for Basilic Fly Studio. Before I dive into the numbers, I'd like to take your attention towards emerging landscape for the VFX and the key steps taken by Basilic to capitalize emerging opportunity and sustain industry challenges. While on the one side, we do foresee the production going unprecedented level. The other side, we do foresee on the overseas studio pressure on the pricing and on the margins. As the management briefly talked about in earlier discussions as well, there is a good volume and high momentum in the production across all production houses and production houses are going big bang for their spend for FY '26 in overall. We are taking few major steps to capitalize such emerging opportunities. To call out the major ones, we have strengthened our business development team significantly for our primary U.K. market as well as our targeted new geographies of North America. Over the last 1 quarter, four well-renowned industry leaders got associated with us for the business development role. Adrian De Wet and Teresa joined us in Los Angeles for North America market. Audrey and Marianne joined us for the London market. Adrian Credentials, in his three decades of the experience, he was associated with mega projects such as the Harry Potter, Matrix Reloaded, Hellboy Second, Goblet of Fire. Teresa joined us as Business Development Director for North America. Audrey's signature projects are Mufasa: The Lion King, The Jungle Book, Alien, The Covenant. Marianne joined us for the U.K. and Europe market as Business Development Director. Moving on to the next point. We shared in our bidding -- we shared that our bidding volume reached to the level of GBP 40 million in our 8th October press release. We won INR 265 crores new winning in H1 '26, and delivered 15% already by now, rest is phased out for FY '26 and FY '27. Likewise, as Bala also mentioned, we have strengthened our upstream also, onboarding 5 industrial leaders across India and overseas. Second major steps, we are driving capabilities, enhancement, efficiency and productivity by investment in technology. Phase 1 was successfully completed way back in March 2025. Phase 2 covering the development of the modular USD, that is, universal scheme description for scalable, efficient and multi-asset interoperability is underway and on the track for completion by June 2026. As we talk, we are unfolding the next phase of offshoring transition by building the Bengaluru branch, team already started the delivery with effect from last October onwards. And we brief the financial updates now. I will share the stand-alone performance first, followed by the consol result in detail. India's standalone results brief. India's standalone reported very strong results for H1 in terms of Y-o-Y comparison. India's standalone clocked the total income of INR 55.5 crores Y-o-Y growth of 1.6x, last year was INR 35.1 crores. And this covers 2/3 of last full year of the revenue in the H1 as well. India's stand-alone reported PAT of INR 17.2 crores, which is Y-o-Y 1.6x, and it covers 94% of the last full year PAT. Increased revenue and volumes are supported -- increased revenue and volumes are supported better employee utilization and overhead recovery, driving increased PAT margins, percentage of 31% for H1 '26. Revenue growth for India was driven by the new wins and better volumes from increased production by the global production houses. Consol results brief. For the first half FY '26, the total income stood at INR 190.5 crores, making it 146% year-on-year growth. EBITDA rose by 107% Y-o-Y to INR 38.7 crores, representing a margin of 20.3%, while PAT grew by 170% Y-o-Y to the level of INR 26.8 crores, translating a margin of 14%. Balance sheet key numbers brief. Surplus fund position, QIP, unutilized funds reflects strong bank balance and surplus positions on September 2025, positioning Basilic Fly Studio to unlock next phase of the growth by inorganic and organic expansion. Subsidiary collections are on target. India also received approximately 16% of March '25 aged receivables. Old receivable recovery is slower to the target level as not all the foreign studios are backed to the pre-strike levels, but we are making the gradual progress, and we collected 16% in the current financial year on the aged receivables. Consolidated DSO increased by 19 days in H1 '26, better -- DSO is better in H1 year-over-year, but increased in HOH because of the revenue gap, which is because of the seasonality impact. Now I will read out the financial results. H1 '26 consol financial results are: revenue, INR 109.5 crores versus INR 77.4 crores last year H1, growth of 146.3% Y-o-Y. EBITDA INR 38.7 crores versus INR 18.7 crores last year H1, growth of 107% Y-o-Y. PAT, INR 26.8 crores versus INR 12.3 crores last year H1, growth of 117.1% Y-o-Y. PAT margin percentage, 14% versus 15.9% last year H1, dip of 189 bps. Earnings per share, INR 10.2 per share versus INR 5 per share last year H1, growth of 104.5% Y-o-Y. DSO, 92 days versus 190 days last year H1, reduced by 98 days. OCF, negative for the H1 '26 INR 17.1 crores versus positive INR 3 crores last year H1, gap of INR 20.1 crores, primarily due to the peak revenue towards the end of the H1 results -- resulting increase of INR 23 crores of no due receivables. Overall, our financial trajectory is reflecting robust revenue growth and gradual margin improvement. As we enter the second half, our focus remains threefold: restoring and improving subsidiary margin, maintaining cash discipline and liquidity strength, and driving operational excellence through automation and technology integration. Basilic Fly Studio stands on solid ground financially and operationally to sustain growth, enhance profitability and create enduring shareholder value. Thank you for your continued support and confidence in our journey. We now look forward to engaging discussions with all of you. Over to Kirin team for Q&A.

[Operator Instructions] The first question is from the line of Shikhar Mundra from Commercial LTD.

Congrats on a good set of numbers. So I want to understand why is the seasonality in this business, I mean, why should we expect the H2 to be much better than H1?

Shikhar, this is Bala. If you compare H1 and H2, particularly around H2, that is where the major features gets released around June, July, summer release. So that is why we will have much of work between, if you take January to April and mid of May, that is where we will have a bulk of these deliveries getting delivered for these movies to get released. And if you take September and August -- September and October, again, [ with occupancy where it's regularly busier ]. But by November and December, the Thanksgiving and Christmas holiday, it will not be much major feature, but there will be some level of mid-budget movies, and episodic will be released -- would come in for a streaming platform during this time. So that is the reason H2 is always better because it really is very much clustered around for the summer release.

All right. Got it. And what kind of revenues are we targeting for H2? And what is the current order book we have, which is to be executed in H2?

Currently, we do have about INR 228 crores of outstanding wins, which INR 267 crores is winning order, and out of which INR 37 crores we have already delivered in the H1. And H2, we have a remaining INR 228 crores, which would be spilling over from until June - July.

Okay. And apart from this, I mean, so INR 228 crores, entire will be built H2 itself.

No, it would be spilled over by June, July, it would be spilling over to the first quarter of next year as well.

Right. And so I mean -- so we are aiming for roughly around INR 200 crores of revenue in H2 based on [ this book ]?

Sorry, can you repeat?

So what kind of revenues are we targeting for H2 and much beyond INR 200 crores then?

H2, we're aiming at somewhere similar and better than what it would be in H1. It would be much better -- it would be better than H1.

I mean, so are you expecting new order wins as we go around which will be executed in H2? Because this current order book means we will be only matching H1. So I mean, how are we sure of, doing it -- I mean getting H2 numbers significantly better than H1? That's what I'm trying to understand.

I will take up that question, Mr. Shikhar. So we are not saying that H2 will be significantly better than the H1. What Bala was saying, generally, the VFX work across industry is higher in terms of volume in H2 versus H1. Coming to how we look forward at the H2 performance, at this point of the visibility, if we go with the current run rate, we will very comfortably reach to the INR 400 crores as we clock INR 190 crores in the H1. With the new bids going on currently and the schedule -- production scheduling is still getting finalized, we also expect H2 to be slightly better than the H1. So we expect to, we may fall into the range of close to INR 400 crores to INR 450 crores, that's the guidance, but we still strive for the original target -- higher target of up to INR 500 crores.

Got it. And one thing I want to understand, why was there not a increase in margins, PAT margins in H1 compared to the H2 last year because I believe we have started offshoring the work already. So that synergy should start reflecting somewhere in the numbers. So why are we not seeing that increase in margins yet?

I will answer it in the 2 parts. So when you see the increase in the margin, you should see the offshoring business is standalone financial. So if you see a standalone financial margin, last year, full year, PAT margin stands at 24.5% of the 25% to be approximately. H1, we stand at 31%. There is a significant improvement into the standalone margin. When you see the overall consol, it's a combination of overseas business and the India business. As we touch upon in opening remarks, in the overseas business, there is some pricing pressure as the production is coming up, but many of the studios do have the available capacity. There is some pricing pressure and we are building our business development team to come over to that winning the more niche projects, which are better price. But as we talk about in the H1, there is definitely pressure. And that's where our overseas subsidiary margin has taken some sorts of the shrinkage, which is impacting the consol margin. But it's very marginal. It's not material at all in my evaluation. So we stand at 13.7% versus 14.9% of the last year. And as I said that H2 is always better. When H2 comes, that will give the uplift in the better employee utilization, better overhead observation, and uplift the overall margin. I hope I answered your question.

Yes. Question answered, but with offshoring coming into picture now, let's say, next year, I mean, what kind of improvement in margins we can expect for the whole company as a whole consol level?

I think in the near future we do foresee to be -- we aim to target at above 30% or around the 30% as a sustainable one. Because while we talk about in parallel, we are doing the investment for the expansion that will offset to a certain extent. So in the near future, we see 30% of PAT, which is a quite significant from the industry perspective.

Got it. So -- but not a significant jump in margins we see in the near future, I mean, results even with the offshoring?

It can be gradually. As we are opening the Bengaluru branch, that is helping to move the high-end role, which will also add a pie, but those all processes are gradual.

And how much are we planning to add in the Bengaluru, sir?

That's going to be -- so the Bengaluru expansion -- Bengaluru is already -- delivery has already been started for the -- from the Bengaluru team, and we expect it to be ramp up very fast reaching to the level of -- within the financial year, 50 plus.

Got it. And one last question. I mean with this QIP fundraise already done. So are we working on some acquisition, which is an RVP? I mean, any timeline for the same?

Yes, we are actively working on some acquisitions since we've been actively discussing with 2 to 3 players in the industry. And our main lookout is to diversify into North American market is one thing. And apart from that, not only traditional film and TV, we are also looking at immersive experience and advertisements for brands. So that is an area where we wanted to cover with this new acquisition. So these are the things which we've been working on, and we are looking forward to find a suitable player out of these 3 whom we are actively discussing.

The next question comes from the line of Viraj from MoneyGrow.

Hi, Bala, Yogalakshmi and Gaurav, congratulations on fantastic results and meaningful progress since our IPO three years ago. A couple of questions at my end. One is the Indian government has come up with incentives for VFX outsourcing into India. So do your H1 numbers reflect any of this government incentives coming? And is more expected or any expected in H2?

Viraj, this is Bala. We are exploring that. And so far in H1, there is not any incentive being included, which we haven't really explored or utilized in H1, but we've been exploring this with the core teams and trying to see and we are having some positive discussions around it where we can able to utilize this one for our future income and revenues. Particularly, we are very well positioned, because this is for overseas IP, particularly. We have a rollout based out of U.K. and we have other contracts directly coming from the overseas IP content owners. So in that case, we would be able to qualify and we would really practically be able to qualify.

To add on what Bala...

[indiscernible] in Page 2.

It's hard to quantify the amount, Mr. Viraj. But as Bala mentioned and as you know, but accounting for any incentive or the government grant is on the receipt basis, not on the accrual basis. So while we are into the advanced stage of the discussions or the big 4 who take it forward, submit our -- submit our eligibility, start the process of the evaluation, not necessarily we make better grand will get credited into the H2. Coming to the tune, it may -- with the current visibility, it may go to the size of INR 2.5 crores to INR 3 crores value on the annual basis. As we grow the offshoring, we are talking about Bengaluru expansion, we are doing the expansion in Chennai and all, the amount will grow gradually.

Understood. Secondly is, Netflix is looking to set up a new VFX delivery center in Hyderabad. Is it a threat that they are one of your key client?

Actually, we see this as an opportunity because Netflix already have an office in Mumbai, in which where we can -- and set up VFX units there to run those projects in Mumbai. So, so far, we have Netflix produced projects, original from Mumbai-based original. But now they are also focusing towards South Indian originals. As also I mentioned in my commentary note, we are currently engaged in one of the projects, which is again a VFX initiative -- an initial initiative to produce South Indian originals. So I think they are more focused towards the regional or region-wise production, content production. So that is where we will be able to participate...

This office could still technically outsource work to you, right? The Hyderabad office of South Indian production, is that right?

Yes, absolutely. That is where we set our main focus on, rerating projects, setting up the process and working with vendors.

Understood. Why were operating cash flow weak in the first half? Was it a timing of collections issue? I think in the deck you alluded to a lot of these projects kicking off in July, August, September. So do we expect a meaningful collection in the second half of the year to reduce the receivable days, which are currently at INR 100, INR 108-odd? And meaningful operating cash flow for the entire year flows to FY '26?

I will take up that question, Mr. Viraj. And I would also like to take your attention towards the Slide #26, remarks in our Investor Presentation. So for the H1, we stand at INR 17 crores of negative operating cash flow. This is primarily because of the high volume happened towards the tail end of the H1. As we talk about the matters, we stand at INR 29 crores of the debtor, which is not due to the sale which has happened either in the start of the September or towards the end of the September. If you take out that INR 29 crores, in fact, from that increase then we will be actually positive compared to the negative number, that's what it is driving the change.

Understood. And how about your old receivables? The overdue receivables, Bala, from the prior year, which we were working on collecting, that fully collected the old overdue receivables?

We made a good progress on that, Mr. Viraj. In fact, we have collected a sizable amount. I will not say very substantial, but a sizable amount into the current H1, approximately to the tune of 15% to 16% of the old receivables. So it's coming gradually -- I will say from the timing perspective, not as fast as we expected. There are some timing, but it's coming gradually. The positive news is -- from our perspective, that it started coming, which was almost stuck earlier and they were saying that they cannot start immediately. We got a sizable amount of close to INR 8.5 crores in the current year from that.

Right. So you say INR 8.5 crores is 15%. So how much is still balanced to be collected? And will this likely be done by year end?

No, I'm talking about what we have disclosed into the March financial. So if you see the March financial, we stand at close to INR 52 crores. That's the number I was talking about -- 15%.

Understood. So you have about INR 45 crores still remaining, is that right?

From the old one, which -- as I said, that it will come over gradually as we move forward, yes.

Okay. About INR 45 crores, which you're hoping to collect in the next, I don't know, 6 to 9 months, can we assume?

It's very hard to say for the timeline, but we are really pushing it very hard to make it happen as soon as possible.

Understood, Mr. Mehra. Sorry, I have a few more questions if I can ask them, or should I get back in the queue?

The next question comes from the line of Chandra from Finavenue Growth Fund.

So I have just a few basic questions. So I wanted to understand...

Mr. Chandra, sorry to interrupt. You need to increase your volume.

Am I audible now?

Yes, you are.

Okay. So I wanted to understand, so we operate in different verticals under the whole entertainment section also, like in films or in episodic contents and like in commercials. So I wanted to understand, what's the average project size and -- like how has that evolved post the One of Us acquisition?

Yes, sure. Hi, Chandra. This is Bala. And in terms of value size for One of Us, I think for direct contract, any project size would range average size, would be between GBP 1.5 billion as a minimum range and a maximum range can go up to GBP 5 billion to GBP 7 billion at this current level per project. And if you take from India's subcontractors at much lesser level, it would be between 250,000 to 100,000 as well for projects because you would be working on multiple projects with multiple clients in India. So that is how it would be very different with India comparison. But overseas, this is how the range is between GBP 1.5 billion to, it can go up to GBP 7 billion.

So like I wanted to understand how many concurrent projects can we do across our infrastructures and like what's the utilization rate in the different geographies that you're operating, and that is India, UK and Canada?

If you take in UK, there could be at least 5 to 6 projects that can go concurrently in UK. And in India, we would be handling over 35 to 40 projects at a time, which would be for multiple different clients for subcontract work and also direct work as well in India.

All right. So since we are operating under so many geographies, do we have like, let's say in the US or somewhere else, a popular representative of sorts or someone that like can help us acquire better project?

Sorry, I couldn't get you. Can you please continue -- in the last...

Yes. So we are operating in the whole western part of the globe. So I wanted to understand if you could shed some light on the fact, you know, like, if we have some sort of a BD team, or maybe like some sort of a popular representation in the West for our studios to really stand apart.

You mean business development?