DC Infotech and Communication Limited (DCI) Earnings Call Transcript & Summary

Ladies and gentlemen, good day, and welcome to the DC Infotech and Communication Limited Q4 and FY '25 Earnings Conference Call. [Operator Instructions]. Please note, this conference call may contain forward-looking statements about the company, which are based on beliefs, opinions and expectations of the company as on the date of this call. These statements are not the guarantees of future performance and involve risks and uncertainties that are difficult to predict. Today from the management side, we have with us Mr. Chetankumar Timbadia, Managing Director; Mr. Devendra Sayani, Whole-Time Director; and Mr. Piyush Shah, Chief Financial Officer. I would now like to hand the conference over to Mr. Chetankumar Timbadia, Managing Director from DC Infotech and Communication Limited. Thank you, and over to you, sir.

Thank you. Good afternoon, everyone. Thank you for joining us today. It's a pleasure to connect with you all for our Q4 and full year FY '25 earnings update. Let me begin by taking a moment to reflect. When we started DC Infotech back in 1998, Internet speeds were painfully slow and IT was still a luxury for many businesses. Fast forward to today, we are playing a key role in powering India's digital economy. For (sic) [ From ] smarter networks to secure collaboration platforms to robust cybersecurity, our solutions now touch almost every corner of enterprise technology. Our journey from a box seller to a trusted IT solution partner, we have come a long way from being just a hardware distributor. Today, we are a full-fledged IT solutions partner. We consult, we design, we implement and we support end-to-end. Networking remains our backbone and contributes nearly 50% of the revenue. Unified Communication and Collaboration or UCC and cybersecurity each makes up to 25% each. Together, these 3 areas gives us a balanced, resilient and a future-ready business model. Milestone and recognitions. This year, we have received 2 important recognitions that reflect on our continued momentum. First, we were ranked 267th on Financial Times Hong Kong - Statista as a list of high-growth companies in Asia-Pac for 2025. This is the third consecutive year we are on this list. Second, we earned Zscaler's data security and sales specialization. This certification places us amongst the allied group of partners capable of delivering advanced cloud-based security. These milestones do more than just looking good on paper. They help us attract right talent, win trust faster and build stronger relationships with global technology leaders. Now industry trends that are in our favor. We are lucky to be operative in a sector with strong tailwinds. Cybersecurity is growing at a fast and it's expected to reach nearly USD 700 billion by 2032. 5G, AI and cloud technologies are no longer future concepts. They are here, and they are driving real demand for advanced IT infrastructure. More companies are shifting from hardware to service-based and subscription models, and that's exactly where we are headed to. Our financial performance for the financial year '25 and overview. Let's take a quick look at the numbers. Q4 FY '25 revenue was INR 172.72 crores, which was up 11.7%. EBITDA stands at INR 6.96 crores, up 3.3%, and net profit stands at INR 3.72 crores, down 11.6% due to a few one-time costs. For the full year FY '25, revenue stands at INR 555.75 crores, up 20.9%. EBITDA stands at INR 26.07 crores, up 30.1%. Net profit stands at INR 14.50 crores, up 24.9%, and EPS stands at INR 10.72. So while Q4 saw some pressure on profits, the overall year was strong with both revenue and profitability growing in double digits. Our growth was led by our key brand partnerships with Samsung, Netgear, D-Link, Arbor, and Zscaler. So now what's next? Our focus for FY '26 to FY '28. Looking ahead, we are clear about what we are going to. We want to double our share of services in the revenue of our business within next 2 to 3 years. We aim to cross INR 1,000 crores in revenue with strong focus in quality and margin, not just scale. We are open to acquiring niche capabilities, especially in AI analytics and managed detection services. And we plan also to expand both across India and GCC markets where our enterprise clients are growing. Why do customers choose us? There are other also companies in this space, but here's what's that makes us different. We just don't sell, we consult, we listen and design solutions tailored to each of our customer. We work only with top-tier global vendors, so quality is always assured. And our customer retention is over 95% because of our round-the-clock support and strong service commitments. In closing, India's digital momentum isn't going to slow down, it's only going to get faster. Whether it's a pharmaceutical company building a secure SD-WAN network or a media firm protecting its massive digital content, what businesses need is a dependable partner, one who can design, deploy and defend. At DC Infotech, we are proud to be that partner. With an order book of approximately INR 38 crores to INR 40 crores, a sharper services mix and a passionate team by our side, I truly believe our best days are ahead. Thank you all for our continued trust and support. I would now welcome any questions you may have.

[Operator Instructions] We have our first question from the line of Rohan Mehta, an individual investor.

Just had a few questions around what the current order book is. And in terms of services, we've mentioned in the past that we are very bullish on the services share of revenue. So if you could give some color on that over the next 1 or 2 years, what kind of revenue can we expect from services and the overall order book?

Okay. Thank you, Rohan. So answering the first part of the question about the order book. Currently, we are working on a couple of projects which are under starting phase or going to start. It ranges from cloud security products to orders which are of audio-video solutions also. That mix of that is what we are projecting as an order book of INR 38 crores to INR 40 crores what we have on hand, which will be rolled out in -- start executing maybe early next or mid-June until -- it will go up to end of July type of time line. Second portion of the question which you were asking in the services part. Services, we are trying to -- whatever products we have been selling or advising to our customers, we are trying to build more and more services around that according to the need of the product and the customer, how we would like to use it and how we can maximum optimize that product what he has purchased in terms of the application which they have or the problems they are facing. Looking ahead, as we are keeping a sharp focus on what services we can build, I think I also mentioned it in my opening remarks, we want or we aspire to double the revenue of services from where we are today. So I think we should be looking at what -- we are around today, if I prudently remember, segmental thing, product to services 81% to 19% is what we are doing it. And hopefully, with 19%, it turns to approximately INR 100 crores in revenue. We should be looking to double that also as we increase our top line also in the times to come.

Understood, sir. And sir, in terms of geographical split of revenue, I believe majority right now is domestic. So do you have any views on our plans to export and expand into international territory? And if we are going to go directly or go through a partnership. What are your views on that?

So currently, yes, most of the revenues are coming from the domestic customers. And we are also supporting a couple of domestic customers globally also for their operations, which are Indian MNCs spread across the globe. That we have been doing it. And as far as ourselves spreading directly, yes, we plan to spread ourselves to Middle East and African markets, which is the need according to service our existing customers and as far as the faster-growing market, both ways. So that is on the drawing board, which we are actively considering. Once we are finalized and the Board approves it, we may come with the final news when and how we are going to go about it.

Okay. That is helpful. Just couple of last things if you could shed some light on. Since we have already a lot of products that are used in security, and I believe cybersecurity is quite a huge target market. So if we could get your views on what kind of target addressable market we are looking at with our cybersecurity products? And also touch upon a little bit of AI-related technologies, if we'll be looking into that area in the near future?

Okay. Answering to the first part, cybersecurity, what kind of market we are addressing? We are addressing markets where the solutions or the product or the technology or the offering, whatever you call it, we are looking at to serve the top corporates or enterprise customers who have large networks across the nation or across the globe. The network is big and complex. So that's the addressable market which we have been focusing on, nothing which can be a very individual customer-based security, something which antivirus on your laptop, desktop or somebody selling antivirus or some security for an individual customer on his mobile only. That's not our audience market. Our audience market is large corporates and enterprise to be such. And the second portion of your question, just I missed it. Can you just repeat?

Sir, it was basically around AI, since...

Yes. In the AI portion also, we are actively considering certain products and solutions which are more AI-driven as an offering to our existing customer base, which can help them to make their infrastructure in terms of whatever they invested in, IT and audio-video, better. And AI per se now has penetrated every product and every technology, so whatever brands and offerings current vendors, current partners are doing, they are also integrating a lot of AI components into their product and their solutions. So independently, if you say AI, AI is a very generic thing. Yes, but with the current offerings we have, there is a lot of AI which is coming into play. And also, we are also looking and discussing a couple of AI technologies which we maybe partner and take to the market in near future. Once that happens, we will come back to you once we have firmed up on it.

Sure. Sure, sir. Sir, this Zscaler specialization that we've gotten, is it going to help in terms of revenues or margins? Or is it just a technical competence that differentiates it?

It's a mix of both. See, technical competence because we are one of the few allied partners in India who have this skill set to deploy this cutting-edge solution, which is the latest offering of Zscaler in terms of security. And since we are the selected few who have invested in this type of certification, technical, whatever the opportunity turns out, wherever a customer is looking for this kind of solution, we stand apart to be considered as a partner to deliver that kind of solution. So surely, as of now, when we have reported, it was our technical qualification, but it will convert into revenue because we may be one of the considerations set in this deployment whenever and whatever customer looking. Already, we are talking to 2 or 3 customers where they are considering this product. And in one of the customers, proof of concept or POC is already on the way. So yes, in times to come, this will surely translate into revenues also.

Right. I think it can give us a competitive advantage.

Yes. This kind of skill sets are there only with very large integrators like Tatas or the Hitachis or entities of the world or maybe a PwC or a Deloitte type of firms. The midsized partner like us, we are the only one of them who has this technical skill set to roll this out and support it.

Right. I agree, sir. I think we are doing a very good job on that front. So just to close my side of questions, from a macro view, sir, where would you see the company, say, 2 to 3 years down the line in terms of top line or scale or margin profile? Just a long-term macro, if you can give a ballpark range also, it will be helpful, sir.

So our eyes are all fixed on crossing the first milestone of INR 1,000 crores in terms of revenue. That's, as a company, a joint dream or aspiration, we are looking to that. How fast we reach there 2 years, 3 years, 4 years, that's a matter of how we are able to roll out all our plans. But the first milestone or the near-term milestone is INR 1,000 crores of revenue that we are looking at. And in terms of the profitability is that as we go on, we'll try to keep on refining and redesigning our revenues in terms of expenditure, cost optimization and how we can maximize our services arm, and see that our bottom line also grows in equal and a better fashion.

We have our next question from the line of Aditya Shah from Meteor Wealth Management.

So just a couple of questions. One, I see a decline in your gross margins to 7.8%. Can you just highlight what is the reason for this decline?

So gross margin decline primarily in Q4 is for a onetime provision which we had made. So that would have an impact on the decline.

Okay.

And also the cost has been -- so with the dollar cost, a lot of factors which played into that. So that also played into this. So it's not a single pointer, but a couple of factors which has looked into this.

All right. Sir, how do you see the demand shifting due to AI and 5G technology? Are you seeing any specific industry verticals accelerating this adoption?

Due to AI?

Yes. How is the demand shifting? Due to AI and the 5G technologies, do you see any acceleration, adoption of such things in the industry vertical?

Yes. With 5G and AI, the solutions and offerings are getting more, I would call it, more focused or more exactly to the point which a customer needs addressing that problem or the need of that and also getting more and more complex in the nature. The delivery, the expectancy is higher. And it also comes with a lot of risk which opens up, and the need to defend that is also opening up. So it's been very exciting times which 5G and AI has brought in. AI is still the new kid on the block. We as a company and our peers and everybody is looking at it very keenly how it will shape up. Everybody is excited with what is happening, except the ChatGPTs of the world, how it can be integrated into workflow and how it will improve the overall organization, that's a very keen interest which everybody is watching into. So not doing a crystal gazing into future, but yes, we are looking at very interesting times to come. Every day is something new which is happening. And obviously, that will bring a lot of opportunities on the table.

Okay. And sir, just a last question. Sir, what are your company's expansion plans? Like have you lined up something in the coming years, or what it is like? Can you shed some light?

It is in reference to products, technologies, or general?

General. From technologies to your products, like what is the plan? How is the strategy in place to expand your businesses?

So strategy in place is whatever we are doing, we are always two-pronged. Whatever we are doing, first, we try to see that what is the latest which we can bring to the customer in terms of offering and the services which we can build around that. That's the first or the short-term vision what we do. And long-term vision which we keep always on the horizon is what's next which is coming, which is going to be the market leader tomorrow or be a disruptor in the current scenario. So keeping an eye on that and see that how it can impact what we are doing currently or can we bring that into our fold and see that our offerings become more and more complete.

[Operator Instructions] We have our next question from the line of Akash Sharma, an individual investor.

I have a couple of questions. My first one is, can you highlight what is our current order book?

Current order book, I think I answered Rahul also. Currently, our current order book is around INR 38 crores to INR 40 crores. It consists of a couple of cases where we have something in UCC, which is Unified Communication and Collaboration. We are doing certain projects for large educational institutions, which is approximately INR 10 crores to INR 15 crores type, which is Phase 2 of what we had done earlier in Q4. So that's on hand which is on the verge of getting executed and everything is in place. And another INR 15 crores to INR 20 crores, we are working on a couple of security projects which we have and the prerequisites are being met by the customer and getting the infrastructure ready to roll out that solution, which I think should start by mid-June or late June and run to July, August. So these are 3 to 4 cases which we have put together, which is the high big ones. There are a couple of small ones, INR 50 lakh to INR 1 crore, which I will not get into detail, but this is the big ones comprising of that order book which we are looking at of INR 38 crores to INR 40 crores.

Okay. And sir, I guess you are planning to double the share of services revenue in the next 2 to 3 years. Can you tell me like what is our current service contribution? And what are the plans to drive this growth?

So current contribution, segmental, 81% is our product and approximately 19% is software and services as of today.

And if we have the plans to increase the share of services revenue, so what are the plans that we are taking to do the same?

The plan is whatever the products which we are having, we are seeing and trying to build the model where we can add services to the customer in such a fashion, he is able to use the product or the solution to the optimum. So whatever each -- because this is not something which is ready off-the-shelf, it is customized according to the product and the requirement of the customer. Accordingly, we are building the services capability to fulfill and see that the deployment of the technology is to the optimum and customer is able to use it to the max.

My last question is, sir, we have a good 90%, 95% retention rate, which is very impressive. So can you tell me like what KPIs or SLAs do you track to maintain this level?

So as far as the KPI and SLA, they are project-to-project, solution-to-solution, but on a generic base, as an inherent to our organization, we try to see that customer stands first. And the product or the offering which we are giving is a world-class global leader. So whatever, whomever we are associated with are the brand or the technology leader in that particular field. So obviously, the product or the solution is the best. The only, I would call, the cherry on the topping we do is we are there always to hear and listen and to support the customer whenever they need round the clock, across the globe. That helps us in terms of the flexibility, the nimbleness we are offering to the customer to retain them to a longer level. Just by the virtue of whatever product and technology we are doing, our products are not like endpoint device or a laptop or a mobile-type device, which an organization would change every couple of years. We do products which sits in the backbone or the core or the center of an organization. So whenever enterprise is deciding on what to use at the core, they look at a long-term perspective, at least 5 years down the line, they would use a product or technology when they may not change very fast, because changing at the core any solution becomes a big disruptor for the normal functioning. So since we are doing that kind of product and technology, we tend to be with the customer for a longer period of time. And hence, our retention in our all cases, our support or engagement with the customer is nearly 3 to 5 years' time.

[Operator Instructions] We have our next question from the line of Sana, an individual investor.

My first question is what initiatives are you undertaking to strengthen your ESG and sustainability commitment? And how are you positioning yourself to attract and retain top technology talent?

Sorry, I missed your first part of the question. Can you repeat it?

Yes. Sir, my question is, what initiatives are you undertaking to strengthen your ESG and sustainability commitment? And how are you positioning yourself to attract and retain top technology talent?

I'm not able to understand. ESG and?

ESG and sustainability commitment, sir.

Sorry, Sana, I'm not able to understand your question.

Sir, she is asking ESG and sustainable development.

ESG and sustainable development. What are we doing to do that, right?

Yes, sir.

In terms of environment, you are asking this question?

Yes, sir.

So Sana, we are not into that kind of product and solution, because we are more of a software and electronic, some hardware components. So ESG and sustainability doesn't affect or touch our solutions much.

Okay sir, noted. And sir, another question I have is for specialization, what enterprise solutions are you now equipped to offer like particularly in the areas like data loss prevention and cloud security?

Okay. We are equipped to service from endpoint security, to cloud security, to cybersecurity, to DDoS security, network performance management, we can be a load balancer, identity management, so complete era of products and solutions. And currently, we are also working on SD-WAN solutions also, because it becomes an integral part of this. So for an enterprise customer from endpoint to cloud, that's a complete range of offerings there, again, from a data center portion to a cloud native. Both ways, we are there to support and defend their infra in that thing.

Okay, sir. And sir, as compared to our peers, how are our plans in the next 2 to 3 years? How are we placed? Like what is -- can you give us a road map like what can we see in the upcoming 2 to 3 years?

Next 2 to 3 years, we plan to obviously grow and continue the same momentum which we have been doing over the last couple of years. We see that momentum continue with more and more strengthening of software and services and looking at some more geography. And since AI and 5G, which has arrived, I would call it, not around the corner, see what we can do or add in terms of the product and the offerings into current customers and maybe to also the new customer, which can be a part of the bouquet which we are offering and build our strength to, again, service and deploy it.

[Operator Instructions] We have our next question from the line of Parth Patel from Patel Investments.

Congratulations on the numbers. I just had a couple of questions on the Zscaler side of the business. So I have been part of a few IT audits such as CISA and SOC, and they are very stringent when it comes to give us the certification, especially in cloud-based security. So I just wanted to understand more on the sales specialization and the security services that we provide, how can we help such organizations to achieve the certifications on the easier front?

Certification, as an organization, are my team getting certified or you are talking about the customer?

No, no. For other enterprises or customers getting some sort of a certification when it comes to IT, because cloud-based service is something that when it's a customer-based company, they do a lot of stringent tests and they have a lot of check points when it comes to giving a certification, which poses challenges to the clients when they are interested in stuff like maybe a CRISIL report or a Equitas report. So in such cases, is there anything we have in place that could help such organizations?

Our team is equipped enough to handhold the customer in terms of certification if they are looking for something and train them. As it is after any project, when we deliver, we have a practice of doing some training session or handholding session for the customer, because they are the first point who are using it on a daily basis. So we generally do a walk-through to the complete solution and help them to understand what they have been implemented in that organization. So we have that normal practice. But coming back to what -- if somebody looks at from a rating or some security certification, we have our own team of engineers who can help them and train them to get to that level what they are. Because we are already certified, we can surely help them to get them trained. There is a complete in-house training module which a new employee goes through that tracker sheet and gets themselves up to that mark.

Sir, we have the participant disconnected. As there are no further questions from the participants, I now hand the conference over to Mr. Chetankumar Timbadia, Managing Director, for closing comments.

So thank you, everyone, for joining this afternoon and listening to me and our company, what we have been doing over the past year. And so with all the wishes and support you all guys have been giving us in this year, we hope that continues in the time to come. And we will try to keep and live up to the trust which everybody has put in. Thank you again for joining this call.

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

Yes. Thank you everyone.