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

Ladies and gentlemen, good day, and welcome to the Basilic Fly Studio Limited Q1 FY 2027 Earnings Conference Call hosted by Valorem Advisors. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Ms. Purvangi Jain from Valorem Advisors. Thank you, and over to you.

Thank you. Good afternoon, everyone, and a very warm welcome to you all. My name is Purvangi Jain from Valorem Advisors. We represent the Investor Relations of Basilic Fly Studio Limited. On behalf of the company and Valorem Advisors, I would like to thank you all for participating in the company's earnings conference call for the first quarter of the financial year 2027. Before we begin, let me mention a short cautionary statement. Some of the statements made in today's earnings conference call may be forward-looking in nature. Such forward-looking statements are subject to risks and uncertainties, which could cause actual results to differ from those anticipated. Such statements are based on management's belief as well as assumptions made by and information currently available to the management. Audiences are cautioned not to place any undue reliance on these forward-looking statements in making any investment decisions. The purpose of today's earnings call is purely to educate and bring awareness about the company's fundamental business and financial quarter under review. Let me now introduce you to the management participating with us in today's earnings call and hand it over to them for their opening remarks. We have with us Mr. Balakrishnan, Managing Director and CEO of the company; Mrs. Yoga Lakshmi, President, Business Strategy and Whole-Time Director; Mr. Zameer Hussain, Chief Operating Officer and Global EVP; and Mr. Gaurav Mehra, Chief Financial Officer of the company. Without any delay, I request Mr. Balakrishnan to start with his opening remarks. Thank you, and over to you, sir.

Thank you, Purvangi, and good afternoon, everyone. Before sharing our Q1 FY '27 business highlights, let me briefly introduce the company. For those who may be new to us, the Basilic Fly Studio was founded in the year 2013, incorporated as a private limited company in the year 2016 and listed on the NSE SME in September '23 with a record 287x core subscription. We provide an end-to-end visual effect service across films, series, web content and commercials, and over the past decade, have become a trusted creative partner to leading production houses such as Netflix, Amazon, Disney, Apple TV, Warner Bros. and other major networks. We operate through an integrated delivery model with studios in Chennai, Pune, U.K., France and also in Canada, backed by a workforce of over 800 talented professionals, enabling seamless global project execution and close alignment across geographies. Our services span the full VFX value chain right from previsualization to asset creation, animation, simulation, lighting, rendering and compositing, positioning us as a reliable partner for complex high-quality production. A key milestone was our July 2024 acquisition of a 70% stake in U.K.-based [indiscernible], a 2-decade old [indiscernible] and Amy Award-winning studio with 300 professionals and credits, including DAMSIL, T Nippollean Crown and the Academy Award Mission Impossible project. This acquisition strengthened our creative capabilities and access to premium clients like Netflix, Amazon, Disney, Sony and Warner Bros. globally, expanding our international presence in line with our vision of a globally integrated VFX platform. We continued serving leading global studios and streamlined platforms through long-standing relationships that reflects our clients' trust in our creative capability, execution and delivery consistency. Now let me share the business updates for Q1 2027. Delivered projects updates. During the quarter, we delivered 89 projects, 28 movies, 53 series and 8 commercials for 60 clients globally, including 10 new clients. This includes Netflix productions, Glory and Lupin, where we delivered complex CG environments and water splash simulations. We also worked on AMC's upcoming The Walking Dead Season 4, creating a detailed zombie decapitation sequence and a complex CG creature. Building on this momentum, our business development efforts continued gaining traction, focused on high-value high-ticket opportunities. We have also won new international orders worth INR 105 crores FY '27 year-to-date from leading streaming platforms, 25% of those FY '26 reported revenue, giving strong FY '27 revenue visibility. Our active bid pipeline stands at INR 700 crores with 40% at an advanced stage of conversion. We also achieved a breakthrough in the domestic streaming market as well, onboarding both Netflix and Amazon for full length domestic OTT mandates, which is going through and domestic OTT sales revenue has already crossed 2x of our full year FY '26 revenue from this segment. Updates. As we scale globally, we are also investing on our technology foundation. Our unified data center strategy will connect all studio locations through centralized infrastructure, improving collaboration, data management and operational efficiency. We have also established a dedicated future technology and AI excellence team to research and implement next-generation and AI-driven initiatives, strengthening our long-term competitive advantage. We are also evolving from a VFX vendor competing on bids to a creative partner collaborating directly with film makers from early production stages. Last quarter, we developed IA creative presentation for an upcoming Apple show with VFX production starting in October. A strategic opportunity beyond its immediate monetary value will also earn some recognition back to us. Now let me share updates for an evolving industry landscape shaping VFX future. India's animation and VFX industry is projected to reach USD 2.2 billion by 2026, 6% of the country's overall [indiscernible]. M&E sector is driven by growth in film, OTT, content, gaming, advertising and outsourcing based on an industry report. Netflix renewed commitment to India. We are all aware that Netflix co-CEO [indiscernible] meeting with the Honorable Prime Minister Modi, which signals strong confidence in India's creative and VFX industry with notable investment in VFX and creative technology. Globally, the film industry is recovering post the Hollywood strikes with 2026 box office forecast at USD 35 billion, the strongest since 2019. Spider-Man, Brand New Day has surpassed USD 2 billion worldwide, only the eighth film to do so, while the OTC has crossed USD 1.2 billion with IMAX revenue of USD 289 million, which shows 26% of its box office came from large-format experience, showing audiences continued appetite for premium cinema. U.S. production is also stabilizing with the Los Angeles feature film shoot takes up 52.3% year-on-year in Q1 2026. Likewise, the global trend continues. The Middle East is emerging as a strategic hub for global entertainment with Saudi Arabia, Abu Dhabi and Qatar investing directly in entertainment assets and creative technology companies, notably Abu Dhabi's USD 200 million investment in [indiscernible], valuing it at more than USD 2 billion. This is alongside Saudi Arabia's $55 billion acquisition of Electronic Arts very recently and Qatar's new 40% to 50% production incentive, a deliberate gulf strategy to own IP, invest in leading entertainment companies and build regional VFX infrastructure. This signals the Middle East ambition to become a meaningful hub for VFX animation and creative technology and an important new growth market for us. Our honorable Prime Minister Modi's Independence Day address on 15th August 2026 highlighted VFX animation, gaming and digital content as key to India's soft power, a strong policy endorsement that reinforces the sector's strategic importance and supports Indian companies moving up the value chain from execution debt services to creative partnerships. In a nutshell, we see the sector to be more vibrant than ever and also see our contribution increasing gradually as reflected in the total order book Q1 winnings and also in our bidding pipeline. With that, I will hand over to Mr. Zameer Hussain, our COO, for the operations and technology updates. Over to you.

Thank you, Bala. On the operations and technology, maintaining a competitive cost structure remains the key as always. Our India-led delivery model gives us a structural cost advantage of 30% to 40% over the traditional delivery locations abroad. This quarter, we continued migrating select roles from the U.K. and Europe to India while expanding our Bengaluru presence, which we expect to drive durable margin expansion. Technology remains central to our strategy. This quarter, we integrated the Compu and UI into the new pipeline for our proprietary tool sets like the deaging, age conditioning, asset creation and also the 4K texture creations as well. We also completed our transition to owned NetApp infrastructure, replacing the cloud dependence while improving scalability and control. The Project Hybrid, as we call it, and the USD pipeline integration are both in the pre-rollout testing phase with Project Hybrid on track to be rolled out at the end of August and the USD pipeline integration by September, enabling seamless interoperability across the global studios. We also continued strengthening our security infrastructure. Our annual red team assessment remains on track for September completion and the newly initiated Paramount security assessment is progressing as planned, expected to be at the first week of October. Our Chennai and Pune facilities helped Basilic Fly become only the sixth studio globally to receive the prestigious TPN Stella award, reflecting our robust security framework and our IT team's efforts in maintaining world-class standards. We also continue investing in talent and leadership. This quarter, we ran talent development boot camps in Chennai and Pune for Matchmove, Bodimation and Rtorprep and strengthened our leadership with Ajit Nair as a CD supervisor; Venu Gopal as the 2D supervisor and the Pune Studio Head; and Stuart Lashley and Sebastian Gordel as the VFX supervisors. Both of them bring a deep experience in the industry and technology specifically, and they have been key drivers of technology and AI workflow expertise. We've also got in Amaya Samant as the Senior Business Development Manager, leading strategic sales and market expansion domestically. With that, I'll hand over to Mr. Gaurav Mehra, our CFO, for the financial performance.

Thank you, Bala and Zameer. Good afternoon, everyone. Let me take you through the financial updates for the period under review. India's stand-alone financial updates. For India business, on a stand-alone basis, revenue from the operation for the quarter stood at INR 26 crores, reflecting an increase of 28% year-over-year. EBITDA for the quarter stood at INR 11 crores, an increase of 29% year-on-year. EBITDA margin for the quarter stood at 42%, remained stable compared to the same quarter last year. Profit after tax stood at approximately INR 6 crores, an increase of 17% year-over-year, with PAT margins of 20%, a decline of 271 bps on year-on-year basis due to the depreciation and tech investment. Moving to consolidated financial updates. Revenue from the operation for the quarter stood at INR 104 crores, reflecting a growth of 10% year-over-year. EBITDA for the quarter stood at INR 14 crores, down 23% year-on-year. EBITDA margins at 13.9%, a decline of 584 basis year-on-year. Decline in EBITDA and EBITDA margins are primarily due to the unrealized ForEx loss, higher management travels, overlapping work migration costs and increased IT expenses. Profit after tax for the quarter stood at INR 7 crores, a decrease of 44% year-on-year. PAT margins for the quarter stood at 6.3%, a decline of 637 basis year-on-year. Further, the decline in the PAT was primarily a cascading impact of EBITDA pressure, further impacted by the higher exceptional severance cost and increased depreciation from the tech investments. With this, now I open the floor for questions-and-answer session. Thank you, and over to you, [indiscernible].

[Operator Instructions] Our first question comes from the line of Viraj Mahadevia with Moneygrow.

So as highlighted by Bala, the sector prospects remain very bright. How does the management feel about the tangible profitability and delivery against these bright prospects of the sector?

Good afternoon, Mr. Viraj. And yes, we've been looking towards this year from now on towards the end of the year. We've been looking at projects which have been already been awarded to us where we would start primarily between -- the larger chunk of work would be between September and March and April and beyond that as well. And we've been -- if you take this quarter where we have worked towards making sure how we will position those work between the European location as well as an India location. And when we look at that, we look at a huge prospect of the work between these months. And if you have any specific questions, I would be happy to answer.

I think, Bala, my bigger point is something for you and the management team and the promoter group to think about. Your stock price is halved since the IPO 3 years ago. Your EBITDA margins have halved since your IPO EBITDA 3 years ago. I think building a business is a fine balancing act between growth, investments, employee hires, but also delivering profitability. I think while we are laser-focused on the former, I think we've gotten our eye off the latter a bit. Would you tend to agree?

So to add on that, Mr. Viraj, so I think we should read the number from this perspective that while, as I mentioned, that EBITDA and EBITDA percentage looks to be down on year-over-year comparison, we should look into the reasons. So the primary reason driving that, so if I can call out the number, yes, so our consol EBITDA stand at INR 14.4 crores for the quarter versus the last year corresponding number, INR 18.6 crores. So we have a gap of about INR 4.2 crores. Now a large part of this INR 4.2 crores is coming from the unrealized ForEx because we have the debtors and some outstanding, as you know. And the rates were particularly higher by the March versus compared to this quarter, particularly the Canadian currency. So it's not a real loss, it's a notional loss because we need to reinstate the financials as per that, as per the accounting standard, also followed with that some extent with the management travel, which is -- should be taken off as a one-off expenses related to the merger and acquisitions related to that the strategies what we are doing. That's what it is driving into the EBITDA primarily. Now the next component is coming that if I say that the severance cost. Now the severance cost incurred for the quarter is almost equal to that what been incurred into the last year. So we have incurred INR 2.9 crores, which is reflecting in financial as an exceptional item versus INR 3.2 crores for the full year. We can take this slowly, but in that case, the profit comes -- in that case, the profit comes gradually. We have taken that entire hit in a quarter so that the profitability can be delivered in a more faster way. Always, our H1 revenue will be lower compared to the H2 revenue. So as the upcoming quarters looks like, I think we are set with the order book, Mr. Bala called out with the bid pipeline what we called out and the hits taking larger part in the Q1. So I think that set the platform for the upcoming quarter.

And to add up to what Gaurav mentioned, I would like to add. And also when we transition work between Europe and India, we plan this quarter mainly because where we anticipate between September and March, where we will have a larger chunk of work, which is highlighted. And for that, we need to do transition reduction in employees over there in a timely manner in the sense, timing is also very important. When we have those deliveries in cluster, we wouldn't be able to do this. We need to choose a time line where we would be lighter compared to other period of the year, and that is why we did. And to replace this, we are also planning up a physical facility to be in Bangalore from operationally from October, where we are looking at 150 feet of India suite in Bangalore for more high-end work. Apart from the service work which we do in Chennai and Pune for one office collaboratively, we are also looking to increase the capacity in Bangalore, which will start from October. So due to which we have to do this expense in this particular quarter.

I understand, but I would say that any new company that comes for a listing has a long rope. And I think investors have been patient with the long rope and the explanations and the integration and the outsourcing and everything that's going on. And I appreciate you have a lot going on and you're taking the right steps to create value. But I would urge the management team, number one, if you can put out a slide, Mr. Mehra to the exchange, explaining what these one-offs are in terms of an EBITDA bridge on a normalized basis with these various one-offs coming out. Number two, it would be helpful to understand from the management team when the sales engine actually starts firing because currently, we've loaded in P&L with a lot of wonderful international experts on the BD side and the VFX side, but we are unable to see any tangible translation into revenue. So what is the management team's view on this? Because you need to help take us along and help us see what you are seeing in terms of the future growth journey of the company? Because the last -- frankly, the last 2, 3 years has been quite uninspiring.

No, thanks for mentioning -- that was the last point, Mr. Viraj. As you said, that management has taken there are 2, 3 onetime initiatives, including that doing the offshoring work in parallel investing into the business development role. I'm very happy to share our -- those investments already is starting firming up the return. If I can share that we got -- as Bala mentioned that we got a huge new winning of INR 105 crores in the -- by now for the financial year. And we also won one order of a quite sizable number, which is almost a 500% return on that what we have invested on that person. There is the pipeline Mr. Bala mentioned INR 700 crores. We were navel to that huge pipeline that itself is reflecting what's building in that. So it's a combination of the both. It's not completely pipeline. We got a great winning as well. We are awaiting for a few more bidding to be confirmed in a month or so. If that also come up, then the number goes too high. I mean we still have a quite healthy pipeline as we talk, which we also shared in the earlier press release. So I think we should look at both. I completely buy your point that probably they need to call out that all this one-off more precisely. We have mentioned that into the investor presentations as [indiscernible] to all the deltas to call out clearly, but happy to do a separate slide for more clarity. But definitely...

Yes, I think very helpful, Mr. Mehra, point taken. I think like I said, one is some kind of a sales funnel, right, in whichever way you want to protect client confidentiality, but something that depicts really what is going in the business. I think you have to get beyond just showing logos and this kind of stuff in our deck, but I think it gets down to the nuts and bolts of really what's going on in the business and your sales funnel. Number two, what is the cost on a no-name basis of these individual hires? And what sales or pipeline of one or pipeline business are they generating against that? So we can see is this BD engine of yours actually starting to fire and extrapolate as investors what this means for future years? And thirdly, what is the normalized profitability after all these various one-offs coming in? I think 3 of those things coming into the main deck will frankly give a lot more understanding than everything else in the deck put together.

Absolutely. Yes, just to give you the number at the outset, while we will try to give this more informative. If I take out all the one-offs, as I said the severance costs, either we call out the increase in the depreciation because of the reset tech investment or we call out the FX, if we take out this all, our number -- our PAT percentage is still at the same percentage of the 14% or the 15% range what we had it earlier. So it's a timing gap, more -- so the 2 parts now, we need to look out more into the EBITDA than the PAT because it is inevitable with the investment, the depreciation to not to come in. So we need to look out from the EBITDA perspective, and that's what contributes to the cash profit. And we only need to take FX and all, which is uncontrollable to any organization.

Absolutely. Absolutely. So I think just an EBITDA bridge on clean EBITDA versus reported EBITDA is incredibly helpful. And you can do it over 6 quarters for all. I mean, just as an example because every time there's some exceptional, there's some severance costs, there's something. But I think more importantly, over the current period. And then something on the sales funnel bridge, which gives us a little more clarity into understanding that are these BD heads really translating into a pipeline or tangible wins?

Sure. In terms of the KIS whom we hired in the last September to -- between last September and February last year, this year. And we have seen some very good movements from these progress and also awards based upon these KIS.

But, Bala, [indiscernible]. Why don't you put it in the deck. And we don't need names. I don't need to know what X has done versus Y. We can call them A, B, C, D, E as key employees. We don't need to know the names per se, but something that gives us visibility into really what is going on behind the scenes and are these hires translating into something? Or are they going into a -- sorry, forgive my English, a little bit of a black box and weighing down profitability?

No, absolutely, Mr. Viraj, I'm not sure if a few of our per missed your attention. As I said, it's not completely black box. So in investor presentation, we have called out the outcome from these investments. We have called out these all exceptional. So it can be elaborated more definitely, but it's being called out in the investor presentation as well.

The next question comes from the line of Kaushal Agarwal with [indiscernible].

I just wanted to understand, in the previous con call, there was a mention about shifting of high cost from U.K. to [indiscernible] to Bangalore and Pune.

Your voice is not very clear.

Am I audible now?

Better. Maybe if you can repeat your question, please. I hope...

Sorry. I just wanted to understand that one thing that you have mentioned in the earlier presentation as well that structural changes will impact of a 30% to 40% cost when you shift your basis to Pune and Bangalore. So I just want to -- what is -- is there any update on the same? What is the time line we can expect the impact in the P&L?

Sure. I will take up that question. That 30% to 40% is the saving happening into the employee-related cost for those. To give you the sense of the comparative, the average cost of a resource in India versus average cost of resource in London or France, the delta is as high as 7% to 8%. We are taking the multiple initiatives. One initiative, as I said, that building more offshore capabilities and transitioning those role to the offshore as soon as possible. To be honest, it wasn't at this momentum earlier, as you can see the more severance cost coming into the financials. So it has picked up the great momentum in last 2 to 3 quarters specifically. Beyond that the offshoring, we are also doing the savings into the tech front. So if you recollect that what Mr. Bala, Mr. Zameer mentioned earlier, we are building the USD pipelines. We are building the AI, which is reducing the manual efforts, which is increasing the volume, which is reducing the cost of operation. So when we say the 30% to 40%, it's relating to that tech-related cost. And this to answer you from when it will start coming, I think large part, so our tech part is getting capitalized into the Q2 or early in the Q3. So that will start from the running quarter partially and coming quarter. As far as the employee offshoring is concerned, it's partially already inbuilt. So if we talk about last 2 quarters, we have already migrated close to 30 to 40 high-end roles, and we have the huge expansion plan in the Bengaluru. So all to materialize, it should be all done by the end of the FY '27, by the March '27.

So to understand it, it will take an impact for the whole year post financial year '27, we will see the positive impact on the financials, right?

I'm saying it has already started, and it is coming gradually every quarter. I'm saying that the last leg what we are looking out maybe. So not the benefit to start from March '27, but by then, we should be over with all the initiatives.

Okay. Understood. One more thing. There was a data of around INR 140 crores as on March '26. How much we had collected, like how much we have recovered till now?

[indiscernible] information, Mr. Kushal, for the quarter, we will talk that more into the half yearly results. But to give you the sense, as we spoke about into the last earnings call, we got some good collection happened. If I can give you the sense, our collection for the March to June was almost 2x of the collection used to be in the normal. So we got [indiscernible] yes. So the number we can talk in the actual, but we are getting those gradually received. In fact, some payment was scheduled for this month, which seems to be happening in the next month. So we are getting those getting collected.

Understood. Just one last thing. You have mentioned around INR 700 crores bidding pipeline is there. How much orders we have in hand? Like what exactly the orders that we have converted into orders? Like what is the number of current order book we have?

At the moment, this is all currently we've been bidding since we have also submitted to the clients. And we are having more advanced conversations in these bids out of which 30%, 40 percentage where we have advanced conversation. Maybe the contract is not signed, but we are discussing towards the fine details of those projects. And apart from that, a few others which we will be able to hear more towards September month.

So we definitely have something in our order book, right, apart from the bidding that is going on, right?

So to answer that, including the new winning of INR 105 crores called out for the current financial year, we sit around the range of INR 250 crores to INR 260 crores of the order book undelivered as we speak and to be delivered within the FY '27.

The next question comes from the line of [indiscernible], an individual investor.

So I wanted to ask how much of the proceeds from the QIP and the IPO round do we have unutilized? And where are they actually kept?

So we do have about INR 37 crores of the QIP unutilized and close to INR 21 crores of the IPO unutilized. And that remains a large part into the fixed deposits.

So for the QIP proceeds that we are eyeing for some inorganic growth, do we have any leads that -- where we can expect this acquisition or any inorganic growth to be happening?

So we are expecting that -- so to be honest with you, by now, we have evaluated a large number of the M&A deal. And in fact, the travel I mentioned that was also relating to that management travel for that, we are at an advanced stage as soon as it materialized we will be utilizing this, and we are really looking out some very good player in the market, so which can really add not only from the growth in the top line and bottom line, but also from the capability perspective and also opening the opportunity to the new geographies. So that's what it's taking time. So we are looking out into the geographies where our current presence is not that strong and to add a few more capabilities beyond our conventional VFX where we are already doing.

The next question comes from the line of Shikhar Mundra with Vivog Commercial Limited.

Yes, I want to understand. So we are at INR 70 crores employee cost quarterly. So when will this peak out? I mean, at some moment, it has to peak out for the benefits of operating leverage to kick in and for the benefits of all the investments we are doing in IT and of the offshoring, which we have been talking about for so many quarters. So when do we plan to peak out this employee cost and actually see some operating leverage in the business?

So Mr. Shikhar, I think it's not that we are speaking out this for very long to best of my memory, it is all happening largely from the December ending quarter. So technically, we are speaking it out more for the last 3 quarters. As you know, it's not a quick process. It needs to follow the legal compliances, it need to follow. And if you see the overall number, if I take out even the last year number, current year number, both put together, it's merely a cost of the INR 6 crores. So if you think from -- and you know the severance cost is not a smaller cost. So depending upon that what we can appetite, what we can do, it's a process and it's not only what the cost we can bear, it also has the legal procedure that what the time frame we need to give them the consent, what the time. So it is a time-taking process. Coming to how it reflects into the profitability and that. So as I said, if I take it out, it is already reflecting the profitability into both the reason overseas and all, but that has been overtaken with the severance cost happening at the same point of the time. When this cost is stopped, then it will reflect. We are talking about quite a huge number. We are talking about the Bengaluru going as high as 100 number to 150 number. So it's a time-taking process. It can't be start or completed within a quarter or 2 quarters.

And with the Bangalore expansion, what will the employee cost we are expecting from next quarter onwards with these 100 employees being added more?

No, I'm not clear. When you say that what is the employee cost, you're saying that what we are...

Because we are adding more employees in Bangalore right now, right? Is my understanding is right those employees have already been added?

We already have 39 artists working from Bangalore. And we will have -- we are planning to have a physical facility. The idea is to have further more growth in Bangalore. And when we have this physical facility, it would be much easier for teams in London and Paris to closely work with teams here. And our plan is to look out for 150 seats. By end of this financial year, we need to grow towards that number. And we are also planning to have more maybe 80 to 100 immediately and from there to grow, and that is what we've been looking at. And when we do this, we will reduce the cost in London and Paris. So that is the idea behind it. And we have this physical facility and the employee cost will be much lesser than what we would spend in London and Paris. And if you take the severance costs, which we have incurred in the last quarter as well as this quarter, the last 3 quarters primarily and also the tech investments which we have done, it will proportionately relate to what we've been doing with Bangalore as well. So this is primarily an exercise where we are moving from spending those expenses in European location and transitioning more to India...

Can you quantify the severance cost for the last 3 quarters? I missed that part.

Not handy to me, Mr. Shikhar. But as I mentioned that for the quarter, it stands at INR 2.9 crores. For the last full financial year, it stand at INR 3.2 crores.

Okay. So that's about the exceptional item. Got it. Okay.

Yes, that's a part of the exceptional item. You're right.

And -- but after this new acquisition, then whole process of -- the same process will then again start again, right? Because then we'll be again acquiring a new company and then we'll again be laying off the employees. This process will start again, right?

Yes. To keep you posted, the company which we've been looking out is a North American company. And also when we look at this company, we are not looking out for a distressed partner, but a partner who is into a complementary setup and also partner -- for example, we have this tech investment already done as part of one of our acquisition where we will have a seamless collaboration between -- which we have done for the last 1.5 years and more so in the last 6 months, which we have established already. And also the partner we've been looking at is a partner we've been making decent margins and the overseas location also will open up to a new market as well. So that is a thing which we've been working with the new acquisition. So that is why it is taking a bit more time as well for us to work closely on the negotiation deal and other things.

To answer -- to add on that, Mr. Shikhar, that whether we acquire the new company, whether this severance will start again, yes, it may start. First of all, the company what we are looking out, they do have sizable offshoring. Having said that, whether there will not be any scope, if there will not be any scope, then there will not be any leverage. No overseas company is operating at a 2-digit, 20%, 30% PAT as India business is doing. So I think that's an advantage, that's not a disadvantage if this severance start again that unlock a big value. And that is -- that always remains a part of the M&A strategy. So I won't deny that if we do, then it will not. But as I said, it's not a quick process. Apart from the legal aspects of the severance process, it has a huge dependency on the technology investment. We are done with that part because tech investment require the money, then it requires the process to be seamlessly smooth so that when we migrate that work, it can be executed as smooth as it was happening onshore. So it's a combination of both, the tech as well as the employee as well as the tech upskilling of the offshore resources. It's a lengthy process.

And so is it safe to assume that these kind of margins which we reported in this quarter, these are like rock bottom margins, things should only improve from here given the fact that there were so many one-offs and we should even see the benefits of offshoring coming in and with sales growth also, we are expecting that to become better. Sales growth should finally fire. So is it safe to assume that these are rock bottom margins and things can't be worse than this?

Absolutely. And I will not title that as a [indiscernible]. As I said, that if I'm absorbing the severance costs, it's a part of the process. But yes, to answer you whether it can go down to this, we do not expect that to happen. As you know that Q2, Q3, Q4 is better than the Q1. As I said, our H2 is always heavier than H1 because of the Christmas seasonality, because of the schedule, because of that. So the bidding as well as the order book, we think we are in a very strong position for FY '27. As the top line pickups, as the schedule -- those projects are scheduled to be delivered in the coming quarter, that should uplift the bottom line materially.