Digikore Studios Limited (DIGIKORE) Earnings Call Transcript & Summary

Ladies and gentlemen, good day and welcome to H1 FY '25 Earnings Conference Call of Digikore Studios Limited, hosted by Kirin Advisors. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Ms. Chandni Chande from Kirin Advisors. Thank you and go ahead, please.

Thank you. On the behalf of Kirin Advisors, I welcome you all to the conference call of Digikore Studios Limited. From management team, we have Mr. Abhishek More, Managing Director; Ms. Surekha, CFO; Mr. Sanjay, Group CFO; Mrs. Heny, Company Secretary and Compliance Officer. Now I hand over the call to Mr. Abhishek More.

Thank you, Chandni. Good afternoon, everyone and welcome to the earnings call for Digikore Studios Limited. So as you all know, Digikore is into visual effects for film and television and very recently, last year, we started off our branded content division which is also contributing now to our revenues already. The new platforms that we've launched in AI and which we -- some of them we've launched and some which we are launching very, very soon, is what we're really, really excited about because these are all B2C platforms. In fact, we have the launch and demo of one of our music platforms, which is the first of its kind in India on Friday. And it is a platform where we anticipate lakhs of users globally to be able to generate songs for their loved ones and at the click of a button, everything under 5 minutes. We are already getting excellent response even before we launched the platform. We've got an almost 25 dealer/franchise inquiries for the platform. And we anticipate our AI platforms to generate not only the top line but also contribute significantly to our bottom lines, not from next year but as early as the last quarter of this financial year. So this is a brief on where we stand. The visual effects industry is slowly creeping back to normalcy, which is a great sign for us. We have started work on several projects. We have tons of projects in the horizon where we've received [indiscernible] confirmation from our clients. Some of them starting in December, some of them starting in January, some of them starting in February. Cumulatively, if I were to look at it, which I have the numbers right in front of me, we have a business pipeline of approximately INR 56 crores in visual effects to be delivered over the next 7 to 8 months' time. And out of this, we are anticipating somewhere between INR 25 crores to INR 28 crores to be invoiced by March because obviously, invoicing happens on milestone-based and certain invoicing happens only when the project gets over. So that is on the visual effects side, we're looking at it on a very conservative level, INR 25 crores to INR 26 crores worth of invoicing by March. On the branded content side, on a very conservative side, we're looking at around INR 20 crores of invoicing by March. And on our AI platform, we are looking at an invoicing of around INR 5 crores by March. Keeping all this in mind and looking at what we've done in H1. Obviously, H1 was, I would say, weak. I wouldn't say flat. I would say weak because of the visual effects industry strikes, the work is just picking up now. And as you can see from the numbers I just told you, based on the orders that we have ongoing, which is around INR 8 crores worth of visual effects work in progress and the new business that we anticipate, which is already -- or production is over or filming is towards it's last stage, that's a great sign for us. When the filming is in the last stage and we know that the only thing left is editing before it moves on to the visual effects. So all these projects are projects where the filming is either just got over and it's in editing or the filming is in the last stage and will go into editing maybe in December and then the visual effects starts in January. So things are looking bright. It has been the last -- it has been a slow 6 to 8 months, unfortunately, beyond our control because that was that external factors, which was the strike in Los Angeles, Hollywood last year. But the good sign is that things are getting back. That's all from my side for the time being and yes, open to any Q&A.

[Operator Instructions] We'll take a first question from the line of Jishan Singhi from Krijuna Research and Analytics.

Sir, first of all, I would like to ask on the branded content platform that -- how it is contributing today in your revenue? And second, my question is with respect to that virtual production sets?

Sorry, the?

First question, I would like to ask on the branded content platform. That how much it is contributing to our revenue?

So the branded content in H1, we did around INR 5 crores and H2 like I mentioned, that we are targeting around INR 20 crores, anywhere between INR 20 crores to INR 25 crores in H2 for branded content. See, branded content, actually, we would have done much more in H1 also but our agreement with Jio because we cannot go ahead and sign up partners for that unless we have our back-end agreement with Jio, which was supposed to get signed in June of this year but because of their merger with Hotstar, which we all know, they have put all agreements on hold. We could only sign the agreement with Jio mid-September. And then in the last 15 days whatever quick agreements we could sign clients -- with the clients who get confirmed, we could manage. So we did around INR 5 crores in H1 and H2 on a very conservative level, anywhere between INR 20 crores to [ INR 25 crores ] worth of agreements will get signed with our clients on that side. I also heard the virtual production. When I say VFX, I mean combination of VFX and virtual production. So as an example, one of the projects in this entire pipeline of INR 56 crores that we have is a large Amazon project, which is going to be approximately INR 10 crores worth of virtual production work in that. The whole movie is filmed on a virtual stage and all the assets for that are being developed by us. So when I say VFX, please assume that it's VP and VFX together. If you want me to break it up, I can, that's not a problem.

Okay. Okay. So in the branded content, what would be the number of episodes that you're currently looking for?

So we've signed up a deal for 58 episodes with JioCinema for up to March '24. So that is what that -- and the total value of that is approximately INR 30 crores.

Okay. And on the VP Sets, does any big studio have contacted for that virtual production?

For VP Sets, we have already installed and are already getting, not revenue from all but our VP Sets platform is already installed at over 65 virtual production stages in the U.S., Canada, Singapore, Thailand, Korea and UK. So we've already got 65 stages. So VP Sets is a B2B2C platform. It's not a B2C platform for us. For us, our partner is on virtual production stage. So for us, it's technically because of B2B, then they go and give it to their partners. So our job is to increase our footprint in as many virtual production stages as we can. And yes, like I just said, we've got almost 65 places, we've been able to install it in the last 3 months, which is a huge number by itself. Our goal is to have -- cross 100 before the end of this year.

Okay. So how much is the target for that by March?

So on VP Sets, I keep saying that we don't -- we've not kept any revenue targets because it's a very new concept. It's never been done before. We're going to take it as it comes. We're going to analyze what we are doing till March. We haven't even added that in our revenue numbers for this financial year. We don't have any historical data or we don't have any data that we can say, okay, we are going to do so much. So we want to wait and watch for the next 3 to 4 months before we give any projections for that for next year.

Next question is from the line of [ Dhiraj Kumar ], an individual investor.

I would like to -- so basically, the projections for March 2025 were INR 25 crores in the VFX, INR 20 crores in branded content and INR 5 crores for AI, so which combined comes to INR 50 crores. And if you combine H1, H2, it is plus INR 27 crores, which is INR 77 crores and it goes well beyond the projection of INR 70 crores that the company had mentioned earlier in the last presentation. So I think that we are going -- we are really going in a good way. I would like to know if the other projections that the company has mentioned for FY '26, which is INR 125 crores and FY '27, which is INR 200 crores, do we still stick to those projections? Or do they look a bit difficult?

Right, [ Dhiraj ]. Thank you for your questions. As of now, we don't see any challenges in our projections for FY '25, '26, '27 or beyond. If our AI platform, which we are very confident -- like I said, we are launching our platform on Friday and I urge all of you on this call to definitely attend that, because I can only tell you one thing, if there is something that's going to blow your mind, it's this platform. This platform, we are very, very confident and this could make all these numbers look like -- could blowup all these numbers, our AI platforms. They are B2C. We have full control on it. We have full marketing and publicity control. We have a full marketing funnel that we've set up, which is with the best of the best marketing teams and digital marketing teams in India. So we -- like I said in the last -- we just launched -- soft launched a partner program for this, where people invest INR 10 lakhs to become a partner with us for this platform and they can create a white-label platform for themselves. We are sitting on almost 25 inquiries in the last 2 days for that. Our goal in the next 3 months is to have around 50 such partners. [indiscernible] AI, why AI? I'll then get into why AI? I keep talking about a term which I like, pivot or perish. Whether we like it or not AI -- forget the VFX industry, AI is going to more or less disrupt every service industry, whether you're a lawyer, whether you're a accountant, whether you're into visual effects, whether you're into film in making because we are the ones doing it. We are the ones who've created one of the best AI teams in India. And every day, we get scared after some of the possibilities of AI. If we do not pivot into creating platforms, which are in AI and we remain purely as of VFX service provider, I honestly don't see the company going beyond 3 years' time. A company that has been built with sweat and blood over 24 years, the idea from a promoter has to be that the company has to deliver long-term returns to its promoters and investors always. And we see our AI platforms that we are generating -- creating. So as an example, iPod is the reason why Apple is here today. If Apple did not beyond their Macs and created the iPod, they wouldn't be there today. Today, the Macs contributes to less than 8% of Apple's revenues. It is all your new-age technologies and the new-age devices that has made Apple into what it is today. So we want to stay ahead of the curve. We are looking at creating all these platforms. And honestly, once these platforms take off, all these numbers, we would have to just rechange and these numbers will be dropped to a very large extent.

Yes. So totally agree with you. That was my next question because AI is disrupting all the industries. And VFX being an outsourced industry, if AI could do the job that we are doing, there's no reason for the clients to outsource their job to us in India. So I really like your approach of going forward with innovation and following the future trend. And that has led me to keep or in fact, increase the confidence in the company and the management.

You will be surprised to know one thing. I think Digikore today is probably the only or among the just 2 or 3 VFX studios in the world who have a full-fledged AI team in-house. We are creating the tools to disrupt VFX. We are creating tools that will automate visual effects processes, not only for us but for other VFX studios as well because if we don't do it, somebody else will. So rather than be a follower, we want to be a leader in that.

Indeed, indeed. What is the revenue share that we are looking -- it shouldn't be precise revenue share, we're looking through these AI tools in maybe, let's say, 2 years or 3 years from now?

I'm going to tell you a statement right now, which may offend some people out here but may not. In 3 years' time, if somebody asks me what is Digikore, I might just tell you it's a technology company because we'll be going technology first. Like I said, I just give you a figure of Apple. In the 1990s, when you asked Apple, what is your product, they would have said we are a iMac. We make iMacs. Today, they don't even talk iMacs because iMacs contributes to less than 8% of their revenue. Time will tell, our AI products, are extremely positive. We are doing some groundbreaking research and creating some future forward technologies. Time will say what this will contribute to our revenues.

We'll take our next question from the line of Ronil Dalal from Ficom Family Office.

So my first question is that the receivable days have increased quite a bit around 70% or so half yearly to around INR 41 crores. And we were expecting this number to normalize somewhat but no, it has moved up. So any kind of comment on this and any concrete steps which are taking place right now to recover the receivables?

Oh, yes, absolutely. Thank you for joining the call. So I'll tell you what it is. I'll give you a little background to this whole story. So if you are in the IT industry or any other industry, you have a set of probably 5,000, 10,000 or 20,000 clients that you can reach out to. So if 1 client doesn't pay, you just say, I don't want to work with this client in long term. The unfortunate growth of the VFX industry for companies based in India and depend a lot of outsourced work, which we are changing now because as digital progress is, we are climbing up the value chain with our Canadian operations. And most of the future revenue that I've shown you, majority of that is direct work and not outsourced. But the minute you talk outsourced work, our entire universe revolves around maybe 100 to 150 clients, out of which 15 or 20 are the really big fish who give INR 3 crores to INR 10 crores worth of work to VFX studios in India. And obviously, we have excellent relationships with these 15 or 20 of the big fish that have been there. When the strike just got over, that was in September last year, there were lots of projects which were in various stages of production. Some had just about started which shutdown, some were in mid -- the shooting shutdown midway. Some, 8 episodes, let's say 1 episode or 2 episodes were left but they had to shut down. So as the strikes opened in January, the work that came in, it came up with a rider that, hey, you know what, Abhishek, let's say, I have booked a client, let's call them Mr. A, or Mr. A hypothetically, who gives us INR 5 crores, INR 7 crores worth of business. And every VFX studio in India is after them to get work from them. You know what, Abhishek, we've been through 8 months of torture. We have not -- we have unpaid salaries over the last 8 months because there was a strike. We did not pay salaries. COVID situation similarly. We have bank loans that have piled up. We have all our expenses that have piled up. This is a project that's come in. We are going to get our monies over a period of time because the project has just started. If you want to take this, it's going to take a while for payments. So either you can say no or take it. At that point, if you told them no, trust me, we would have lost that INR 5 crore-client forever because they would have gone to some other person and then that person takes that client literally forever. And we don't have the luxury of 200 or 300 or 500 such clients [Foreign Language] I have somebody else. We did take up this project at that time. And with the -- and knowing very well that the payments are going to take time. Obviously, because we needed, we couldn't get the client go away. We started receiving payments but to be very, very honest, most of these people have just sort of semi normalizing their cash flows. We do anticipate a majority of these collections to happen over the next 4 to 6 months' time. This is something which we have been through once already post-COVID, when COVID also filming was shut for almost 7 to 8 months. So this cycle is not new to us. We have been through this the cycle. These are the trusted clients of ours who we've been working with for 5 years, 7 years, some of them 10 years. So we don't have an issue with their payments. So it's not that we've taken a business risk. It was a strategic decision that we had to take.

Right. My second question is that earlier -- so earlier, we had kind of -- and also at the beginning of the call, you said that INR 150 crores and INR 200 crores, '26 and '27. However, the presentation, which was released on 24th October, the number was revised down to INR 125 crores. So I just want to clarify, sorry, any [indiscernible] -- so one is the revenue part. And the second is the EBITDA margin. Similarly, the guidance of 30% to 35% in the VFX EBITDA margin and branded content, 40%. But on a blended basis, we are right now somewhere near 21%. So both these things together the revenue as well as the margins. So what do you have to say about this? Any kind of commentary on this? Or what is your expectation? And is the number INR 125 crores or is it INR 150 crores, which you said earlier in this call?

No, no. It is INR 125 crores. That is why we released that revised projections 1 month ago maybe. The revised projections for FY '26 is INR 125 crores. Obviously, we are best, we take every endeavor, situation, to beat that as far as possible. Talking about the margins right now, we -- like I said, we set up our teams in North America now. We started setting up our site here, that is December, January, February. Most of the projects that you've heard about these numbers up INR 25 crores and INR 30 crores and almost a pipeline of INR 56 crores worth of projects, which have been gotten by them because of -- we put offices at Amazon and Netflix and CBS and all of that. But these projects, majority of them went into filming in January, February, March, with majority finishing filming November, coming on to the board in between December, January. Our margins in the last 6 months have taken a hit because of this added cost in North America and these people don't come cheap. We are spending close to a little over a INR1.5 crores in salaries in North America currently, with a little more revenue out there. So that is affecting our current margins. But as these projects begin, we normalize to our regular PAT margins, which we've always anticipated of between 18% to 20%.

Right. And is there any reason that the guidance from -- like this from around August, we have moved from INR 150 crores 0 back to around INR 125 crores, it's been revised downwards?

Yes. I will tell you. We have seen trends which we've been learning as we progress, that Netflix, Amazon, Disney, CBS, they are all cutting down on their projects a little. It's not the same way it was in 2022 or early 2023 when average Netflix was spending $15 billion a year on content. As for the latest news figures that we've got and after speaking to some senior people at Netflix, they are all cutting down on their content spend slightly for 2025, the calendar year 2025. So keeping all that in mind, so today if my end client is only going to reduce their spend, either I go really aggressive and take a bigger piece of the pie. If I was -- had X market share, I'd get more market share, which is also great, which is also what we are trying, to be on a conservative level, because of their spend reducing, we anticipate that the volume of VFX will also reduce. So that is why we have realigned our numbers. But I'm pretty confident now that the new AI technologies and the new platforms we are launching. So AI platforms will actually more than the top line, they will contribute more to the bottom line because in all our AI platforms we work with margin -- no, margins of anywhere between 60% to 80% because it's finally just a digital product and there's only a digital cost of delivery. There is -- it's not a physical product or manpower required to deliver that product. So all our digital products will contribute substantially to our PAT margins rather than top line.

Right. Right. And the other thing is that on the employee, so 2 things. One is that the expansion around August around that time, we were expecting the recovery to take place in the next 3 to 4 months, so maybe somewhere around December. We had also mentioned that we might have to expand our workforce from 350 to 500 in December. So I'm assuming that has been pushed out a few months. So could you please just clarify on the same?

The 350 to 500, it will happen somewhere between December and January. It depends on how many projects of these, which I've spoken about come together at the same time. If they are spread -- if the December projects are -- it's not that when VFX shots comes, you get suddenly 1,000 shots together. They will start sending shots in batches. If I have 2 or 3 or 4 projects starting in December, then yes, we have to increase our workforce in December itself. But yes, between December and February, we will definitely see our workforce going up to at least 500 people, based on the projects that we have in hand.

Right. And the other part, which was the recovery. How do you expect the second half of the year to go?

So yes, like I mentioned just sometime back also, we expect most of the recovery, majority of the recoveries to happen over the next 4 to 6 months' time.

Right, right. I have one final suggestion actually.

We are in a very precarious time of the year, unfortunately, which is a business truth that you have to live with. Thanksgiving, I don't know if any of you been to the U.S. market or European market. After Thanksgiving, it's like a vacation period for the American markets. The Thanksgiving is now literally next week. Once Thanksgiving is done and then they get into Christmas, New Year mode and [indiscernible] production gets low, people are -- communication goes slow and all of that. So yes, the next -- maybe till December end, it's going to be a little challenging on the recovery but I do anticipate a fast-paced recovery from January onwards.

Sure. I have one final suggestion, actually. So like a lot of -- there has been some delays in the entire VFX industry because of the recovery, I know we report numbers only half yearly. So I would just request that in case there is any major change in either the economic environment, the order environment or any changes which are major changes according to you, if investors could be updated about those as and when they happen or maybe with like as an update on the BSE or NSE, then that would be quite well appreciated, like a profit warning [indiscernible] orders win.

I think that's a great suggestion. I'm requesting our Heny -- I'm requesting our CS Heny to please make a note of that. And I think it's really nice. Everybody should be informed on a monthly basis, I believe, on what's happening and we'll try to make this a practice of giving an update on a -- if possible on a monthly basis on the happenings in Digikore and also what has happened and what we foresee, if there are any changes, growth, degrowth focus, whatever, I think it's a great suggestion, Ronil. Thank you so much.

We'll take our next question from the line of [ Yashwanti from Kojin Finvest ].

My first question is, we have taken onboard a couple of -- like [ Mr. David, Ms. Jensen, Mr. Scott and now Ms. Tara ]. So how it has helped us grow post Tara -- Ms. Tara is a recent addition to the Board, coming with a great experience. But our past experience with [ Mr. David, Ms. Jensen and Mr. Scott ], how it has helped us to develop a new business and new market along with getting new contracts from them?

Absolutely, Yashwanti. Today, we are sitting on approximately, like I said, again, INR 56 crore worth of work in hand. Out of this, if I am just going to break this, I'm going to break this up into INR 14 crores -- maybe around INR 16 crores worth of this INR 56 crores is from our existing clients, which are our outsourced partners, who outsource work to us. And the remaining INR 41 crores-odd work that is going to be starting is all the efforts of [ Jason, David and Marina ]. Because these are all direct projects from Amazon, from Hulu. One Piece is Netflix's star show, which we already signed the NDAs and started the paperwork on One Piece. One Piece is one of Netflix's biggest shows. Marina is right now working on one of The Duffer Brothers' shows, which is -- Duffer Brothers' is the one who produced Stranger Things. So we loaned out Marina into that show as a VFX producer. That show, by itself, has a VFX budget of close to $50 million. Obviously, we won't get a lot of that but yes, it's our person, with permission from Netflix, in fact, it's a very amazing situation, that with permission from Netflix, Marina, who yet works for Digikore has been loaned out to Duffer Brothers as VFX producer on a Netflix show. So that gives us a great front-door entry because our person is the VFX producer on that show.

That's a good way of branding also.

Exactly, so we have taken all these strategic steps. Scott is really a consultant who adds tremendous value. So I'll give you a background of Scott. Scott is the grandfather of the visual effects industry worldwide. He was a founder of Digital Domain, which is one of the largest VFX studios in the world today. His partner was James Cameron. So Scott and James started Digital Domain in the early '90s. Scott is like having Sachin Tendulkar coach your cricket team, yes, in simple words. Scott brings in tremendous value. Scott brings in tremendous connects into Digikore and he adds great value to what we do. Tara has been Managing Director of a VFX studio in Montreal She ran the studio as the Managing Director for 4 years. And now she comes in as Vice President of Americas for us. Again, extremely well networked in the industry. So we are building up a rock solid team in North America. And we do believe that this team has the capability to take this company to becoming a $100 million company in the next 3 to 4 years' time.

Any further acquisition on, like industry veteran on the Board? Are you planning for that? Or you wanted to first run the show with this veteran on the Board and how the things going -- your strategies, of course, going for the future?

Yes. So we don't have any acquisition plans in the immediate horizon. I believe that acquisitions, when you acquire something, there should be intrinsic value in that, in terms of either captive clients or even technology. We don't foresee any VFX studio right now who is worth acquiring, who brings an intrinsic value. See otherwise, if I have to pay, let's say, $5 million, $10 million, $15 million, $20 million to a owner of a company just to take your brand name, there is no point. I can just pick up their top 3 marketing people and I [indiscernible]. So there is no intrinsic value that we see currently. There could be, there could be an opportunity that comes but currently, we don't foresee an acquisition at Digikore for sure.

And actually -- currently, from our 3 business verticals, that is the visual effects, virtual production and the branded content, currently, I believe the visual effects is the highest contributor but going forward, what are your plans for these 3 verticals? Where do you want to focus and how are the margin for each of these segments?

See, going forward, obviously, the cash cow for us will be branded content and our AI platforms. Why? Because they are products that are owned by us. When you own IP, when you own copyright, when you create your own products, they keep giving you revenue again and again on the same investment. VFX is service. So a service is you get a onetime revenue and that's about it. So on VFX, as far as nothing changes crazy in the industry, we do plan to stick around those margins of anywhere between 30% to 40% EBITDA levels. Because I'll tell you the situation right now, what happened in the last 6 months, people were high and dry, people did not have work. So earlier, we used to get, let's say, $100 for something, somebody went in and quoted $90. So the client comes in, I'm getting this at $90, do you want to do it or no? So then we had to say yes. So the margins shrunk a little in the last 6 months to 8 months because there was a completely dry spell for everyone for the last 12 months. So VFX is something which is not majorly in our control, the margins. It is very market-driven, very external factors driven. In branded content, in our AI platform, in VP sets, the margins are completely in our control. So we will always enjoy much better margins in these divisions compared to visual effects, so.

And what kind of a margin we enjoy, sir, in the branded and AI content?

See, branded content, we typically start off the show with approximately like a 35% to 40% EBITDA margin. But since we own the content and after it goes on JioCinema, then the content goes on our YouTube platform. And now we've just tied up with in-flight entertainment. We are speaking to Vodafone to put it on their platform. So all these things are giving us recurring revenue. Now on our YouTube channel, over the next 5 years is, let's say, another 100 million or 10 million people have seen the same episode, I get advertising revenue out of that. So that is why I say that content gives us revenue in perpetuity. So today, if I'm getting a 35% or 40% EBITDA on a branded content show that I produced in this financial, after the fifth year, if you will see have probably earned on 300% or 400% margin on the same content.

And sir, right now we are hiring the people, we are adding them to the board but then as you have just mentioned, because of the strike and whatever the international issue which has happened, which has increased the receivable days, lowered the pressure on the margin. So are we also planning to add this senior people who are there but not at the Board level or not at the industry veteran level but at senior level, who are [indiscernible] they have to agree upon the lesser pace. So are we also having strategies to get them in the company to capitalize on their experience, their contacts?

Oh, yes. Let's say -- let me take a example of this Hulu project that I spoke to. That project has to be done in Canada because of the tax credit reasons. That project will be executed in Montreal, at our studio there. So at that point, once the project starts, we will be hiring of not only a production team, a mid-management team as well in Canada for this project and other projects that are going on out there. The idea of having a Canadian entity was, a lot of projects of Netflix and Amazon and Disney, they are made on the principle of tax credits from the regions and they have to -- the work has to happen there. So the Hulu project is approximately a INR 15 crores project by itself. So technically, why INR 15 crores because if it was done in India, it would really be a [Foreign Language] but just because it has to be done in Canada, the value increases substantially on our books.

Sir, in that case now, are we talking about subsidies or the tax benefits which we get, if we create this content in Canada, even though some months back, even the Indian government has given a lot of tax benefit, lots of incentives for the VFX industry to grow up at the India level. So how are we capitalizing on this and how can we bag any contracts, can we see this differential where you can compete with international while having a base in India?

Absolutely, we are already doing that. So the thing out here is that every project does not qualify for the tax rebate from India. So the Indian government has kept a rider out here that the project has to be a minimum value of INR 1.5 crores and only then you can apply for the tax rebate. In our outsourced work that we've been doing so far, it's rare that one project is of this value. It does not work per client. This works per project. Now, when we start working directly on a One Piece or The Last of Us or the Star Trek series that we are starting on, that is when we make use of this rebate from the Indian government. Then again, there are certain projects like the Hulu project, which I just again mentioned, its filming was done in Canada and then Netflix has certain commitments to certain governments which they have given in terms of the spend that they have to do out there. So while they know that if they actually do this project in India, they will actually do it at less than half the cost but they have to do it in Canada for certain commitment reasons of theirs. And that is why we are sitting there in Montreal to help them execute it there.

Okay. Sir, with the current projects in hand, sorry if you had already answered and I'm repeating this question. With the current projects in hand, what kind of, I mean, where we can -- what is the expected timeline to complete them? Is it getting covered in the FY '25 itself than H2 FY '25 [indiscernible]

No, we don't compare with FY '25. We have around INR 55 crores, INR 56 crores worth of projects in hand, on the VFX side of it, which -- out of which around INR 25 crores, INR 26 crores will get invoiced in FY '25 because we will start these projects only December, January. They will go on for 6 months, 7 months some of them. We will be doing milestone-based billing, that means a certain maybe 15%, 20% on advance, some portion once certain number of shots are delivered. So we don't anticipate the entire pipeline to be of INR 56 crores to be delivered before 31st March. It's not technically possible.

Okay. Sir and anything -- any contracts we are signing with a Indian production house? Is it viable? Is it good from the profitability perspective or your focus will be always on the international projects?

No. We, as a principle, we don't work in Bollywood unless the project comes up with a 35%, 40% margin, which no Bollywood project or South project has, honestly. They all work on margins of 10% to 15%. We don't want to get into the market because once we get in there, our bottom lines will shrink tremendously, which we don't want that to happen.

Okay. And what is your current attrition rate and average salary which we pay to our specialized [indiscernible]

No, in the last 4 months, I'm proud to tell you, we had literally 0 attrition because here people are -- don't have jobs in the industry. So anybody who has a job, it's worth its weight in gold, nobody is leaving right now. But yes, once hiring starts December, January there will be attrition.

Okay. And any plans for yourself on adding the client talent pool to yourself for the second half of the current year, I mean, for the rest of the 5 months, 4 months?

Adding more clients in a constant process. So it's not something that we have plans for, that is certain roles that have been given to certain people. Business development people have targets that they have to achieve in terms of onboarding new clients or getting more revenue from existing clients. So it's a part and parcel of our business or any business to add new projects and new clients.

And sir, I'll take one more opportunity to ask the last question. How are our receivable days?

So like I just answered recently, the last 6 months, 7 months have been a little tough for everyone in the industry, including us. But now with the new projects that we signed or signing and the direct projects really, we just finished off the start rate move that we finished off the Star Trek movie that we finished off. Now, receivable days were absolutely okay because we were dealing directly with CBS on that. What really sucks is our past receivable days of outsourced work that we've received. Clients continue to give us work thankfully but don't continue to give us the payment on time because they are in trouble. And we know that. We feel that for them because they are in the same boat as them. We do anticipate, over the next 4 months to 6 months, the majority of our receivables should get realized. Yes, that's the situation currently.

In FY '26 comparatively you foresee a return as well as the receivable days [indiscernible]

200% because in FY '26, while we had initially planned that FY '26, 50% of our revenue will be outsourced and 50% direct, we anticipate more of it to be direct. The minute you go into the direct projects and direct revenue [indiscernible], your receivable days become much more comfortable compared to outsource because when you work with outsource, when the outsourced vendor first gets the money from their client, then if they have some cash flow situation they will hold it back. It's a vendor payment, right? And there they are the [indiscernible] If you want to chase them too much for money, they'll say I've got so many other vendors in India dying for my business, why should I give it to you? And they say, okay, we're stopping to work -- stopping work with you. So the minute as we progress and which we foresee, we are already doing that, the direct work that improves our cash flow substantially.

[Operator Instructions] As there are no further questions, I now hand over the call to Chandni Chande from Kirin Advisors. Over to you. Thank you, everyone, for joining the conference call of Digikore Studios Limited. If you have any queries, you can write to us at [email protected]. Once again thank you for joining the conference. Thank you, sir. Thank team.

Thank you, everyone, and we look forward to your support as we grow this company into a global VFX and technology powerhouse and look forward to our next call soon. Thank you.

Thank you. On behalf of Kirin Advisors, that concludes this conference. Thank you for joining us and you may now disconnect your lines.