EI Design Pvt. Ltd. (MPSLTD) Earnings Call Transcript & Summary

Ladies and gentlemen, good day, and welcome to the investors' conference call for an update on the acquisition EI Design Pvt. Ltd. [Operator Instructions] Please note that this conference is being recorded. I'll now hand the conference over to Mr. Rahul Arora. Thank you, and over to you, sir.

Good evening, a warm welcome to our investor call that is focused on our eLearning business with a strong emphasis on the acquisition of EI Design. I am currently in Bengaluru at the EI offices, and I'm spending all of this week with our teams here to jump-start our coming-together. As you are aware, FY '22 was a transformative year for our eLearning business. While our revenue grew by 13.36% in FY '22 compared to the previous year, our PBT for our eLearning business grew from a loss of INR 3.74 crores to a profit INR 13.10 crores. The eLearning business has recovered for us and is now expected to contribute to revenue and profit growth significantly. On the revenue side, our revenue quality has improved with an increasing trend in the proportion of recurring revenue, premium solutions and deeper client relationships. Our customer diversity is much healthier across all parameters, including geography, industry and customer concentration. Apart from revenue growth, the drivers of this margin expansion include: cost arbitrage benefits from migration to lower-cost city centers, focused controls on productivity management and a tighter discipline on expenses. At MPS Interactive India, the business exited FY '22 with an EBITDA margin higher than 35%. The margin expansion was no mean achievement and resulted from an excellent strategy, great execution and super collaboration and teamwork. The acquisition of EI Design further strengthens the inherent momentum in our eLearning business. We expect the current momentum of annual growth of 16% to 18% revenue growth to be lifted even further, and that grew quite significantly. Also, we now have even more levers for margin expansion. So why EI Design? First, operational efficiency; second, geographic diversity; and third, the inherent financial strength. The pandemic has redefined the path for the eLearning industry, all the previously headwinds have now transformed to tailwinds. Both EI and MPSi redefined themselves and used global events that affected all equally to differentiate themselves from the competition. The result was healthier business parameters across the board, diversity of customers, revenue growth, margin expansion, all powered by award-winning programs on both sides, MPSi and EI. EI brings operational efficiency. MPSi brings access to large opportunities. The combination will enable development of scale with efficiency. So what are we expecting in the short term? First, EI Design will offer the much-needed burst capacity for MPS Interactive to unlock its unprecedented order book and pipeline. We will leverage the EI operating model, including eBridge for such projects. And this phase will help develop the framework for the future of our eLearning operating model. Second, MPS Interactive will offer EI Design customers onshore support, closer to them locally and help further develop and scale strategic customer partnerships. Third, you will see consolidation of shared services in finance, legal, HR and admin at the corporate level. Fourth, we will formulate a brand and marketing strategy for our entire eLearning business. And fifth, we'll identify growth levers, particularly in an upcoming recessionary environment. Innovative businesses tend to outperform the market in a downturn. And we will lead this to capture the positioning. So what can we expect in early 2023? We can expect a new scale for our eLearning business, upwards of USD 20 million in revenue, which will further grow at an organic CAGR of 20% to 25%. We can expect the rollout of the brand positioning and marketing strategy that would have been developed in 2022 through a comprehensive communication marketing plan. All of this will be supported by an operating model that's scaled with efficiency and with a continuous improvement mindset. So what can we expect by 2027? We can expect a new scale for our eLearning business, upwards of $50 million in revenue at expanded margins. We can expect a new revenue stream and business model that supports end-to-end learning and development outsourcing through a managed services model. This new model will be developed through a blend of organic and inorganic investments. And finally, we can expect a well-articulated plan and strategy to scale our eLearning business into learning and development advisory and performance solutions business, upward of $100 million in revenue. We can now open the call to questions.

[Operator Instructions] The first question is from the line of Himanshu Upadhyay from o3 Capital.

Congrats on this M&A. See, I wanted to know one thing. In the press release, you have stated that the rationale for them selling out is that they want to grow in Europe and North America, okay, and feet on street. But when we see their revenue, they're already 1/3 from U.S. and Europe, okay? So can you elaborate, so what was the thing they wanted when already 1/3 is from U.S. and 1/3 is from Europe? How would they be selling earlier? Because they said that they want the feet on street, but -- so how did they get this 1/3, 1/3 revenue if they don't have feet on street?

Yes. So let me explain that. So firstly, I think what's happening in the eLearning industry is there's a consolidation taking place on the vendor side. Many, many stalwarts in the industry believe that this is a "big 4, big 5" way. And the next 3 to 4 years, this market, which is highly fragmented today, will be consolidated. Players like MPS, of course, will play the role of the consolidator. And finally, what you will see is a big 4 or big 5 that, instead of working on eLearning projects, will completely be working on managed services model, where the entire L&D function is essentially outsourced to these companies. So that's the macro. I think Asha and her management team, of course, understood that they had reached a certain scale as a business. And for them to finally scale further, they would have to be part of an organization like MPS that is an active consolidator. And therefore, this transaction took place and was envisioned. Furthermore, I think the one big difference between EI's customer base and the MPS customer base is, firstly, it's highly complementary. There is, with the exception of one or two customers, 0 overlap between the EI customer base and the MPS Interactive customer base. But the second piece, of course, is that while they have been able to grow at 16% to 18% very predictably, their average ticket size per customer has been much lower than ours. To give you a comparison, our largest customer is about $1.5 million to $1.7 million revenue. Their largest customer is between $400,000 and $500,000. What the feet on street does is it allows you to scale partnerships. So if you -- they finally made a very good entry point. Our local operations in the U.S. as well as in Germany and Switzerland will enable us to scale these partnerships further, so really get to the level of a strategic level, where outsourcing can be superior and also at its most significant scale. So that's one piece where the -- is giving them sort of a method and a way to scale the customer base. Another factor to keep in mind is that while 40% of the revenue is North America, what's more standard in our space is that 60% to 70% typically tends to be North America revenue. We've seen on the MPS side of the business, for example, that we're about 65%. So there's a definite play here on the North America side to increase business more at a macro level than at a micro level. And secondly, for all the existing European business that they have, through our two European subsidiaries, one in Germany, the other in Switzerland, we expect to then get these partnerships also at the most significant scale and also have them be more strategic. Asha, of course, is also retiring through this exercise. So the management team of EI will continue under my leadership. And Asha will be transitioning her role to me over the next 60 days. So there's also that playing out, although that was not the core motivation here. There was also that factor, where Asha was looking to retire. I hope that answers your question.

So the team, what -- that EI had, okay, so that [indiscernible] then the promoter or, let's say, Asha Pande, everybody else will be there with us, okay?

Correct.

So when she was selling, we are getting a company at 5, 5.5x price-to-earning ratio if I look at FY '21. So do we get any swaps or something like that? And is there something which is still pending in...

No, there is nothing -- there is nothing pending. Like I mentioned, we have transitioned from acquiring distressed assets at distressed prices to acquiring growing assets at attractive valuations. So just because we're acquiring growing assets doesn't mean we will overpay. MPS has always been known for its capital allocation skills. So we will acquire growth assets, but we don't have to overpay for them. So we will be efficient in our approach. So this is just our first small case study through which to demonstrate to ourselves that this is something that we can do proactively. And we believe that, given the growth momentum in the EI Design business, the fact that they're growing at an average CAGR of 17% to 18% and the fact that they are -- also their EBITDA margins are running north of 25%, we believe this to be a fairly competitive purchase price. So just because our acquisition strategy has changed from acquiring distressed assets to growing assets does not mean that we will not be efficient allocators of capital.

Okay. And then one last, see, in one of the slides or last slides, EI Design's go-to-market strategy, okay, so there is this high-quality digital marketing content, okay? So they are into preparing the VR, AR and all that stuff and making training possible for the customers, okay? So what does this last slide means? Because what we understand is that they preparing material for -- or not material but augmented reality and virtual reality training for corporates, okay? So what does this last thing mean? I am confused.

So I can -- I'm not sure what you're referring to, but I can take a stab at what the EI business is about. So the MPS eLearning business has various facets. There is one facet where we provide learning consulting to help customers understand what are the gaps in the learning ecosystem and what needs to be done to address those gaps. The second thing that we do is that once those gaps have been identified, we give them a proactive plan of how to address those gaps. And often, we end up being executors of that solution map. Where we would begin is we would provide an end-to-end service, where we would provide custom content. We would also help deliver some of the training. We will also provide the technology, the tools and the platform to not only deliver the training but monitor the training and also share analytics and insights on what's the ROI on the training. And then we also have lots of different things that go in between this end-to-end type of project scenario. On the EI side, EI is super strong on the learning consulting phase, which jump-starts this process. And the second, what is super strong is on the content development side, on the custom content development side, where like our publishing business, which uses our systems delivery model as well as the highly efficient operating model, EI also offers the same efficiency. So we are expecting -- I think what we shared on previous calls and previous presentations is that we've been trying to unlock the synergies between our content business and our eLearning business, which was basically trying to bring the efficiencies from our content business into our eLearning business. I think what the acquisition of EI does is it allows us to bring in those type of efficiencies that have already been customized through eLearning use case. So instead of us trying to configure and customize the content solutions use case in terms of automation and system-based delivery to eLearning, here, we already have a platform through which we can unlock the efficiency and the system-based delivery that we require. In terms of the type of content they're delivering, they're fairly agnostic across industries. In terms of the types of platforms they deliver to as well, they're fairly agnostic that they deliver to not just learning platforms but also proprietary platforms as well as some of the platforms that you described, such as AR and VR.

The next question is from the line of Vaibhav Badjatya from HNI Investment.

And congratulations all for this great acquisition. So just a point related to the previous discussion, so I mean, this whole acquisition, what was the process? Is it like there were multiple people in the line and we ultimately ended having that settled? Or was it just exclusive one-on-one discussion and we successfully completed that? How was the process driven in this case?

So in fact, as I said previously, we tend to have many acquisition targets in the pipeline at any given time, around 30 even and at least a dozen that are sort of active and at least half a dozen that are super active. And so the conversation with Asha and our team actually started back in 2017, when MPS was looking to diversify from the publishing business into the corporate business. So at that point in time, I had reached out to the various promoters and entrepreneurs that were running eLearning businesses across the globe, in the U.S., Europe and India. And that was the first time we connected with Asha back in 2017. There was a definite meeting of minds, where we felt that this could be an interesting 1 plus 1 is greater than 2. Having said that, the challenge at the time was the scale of the business. I think, at that time, this business was around $2.5 million revenue, if my memory serves me right. And for us, it was too small a size for us to enter a new adjacent market of corporate eLearning through an acquisition. We felt that in order to make a serious, definitive entry, we needed something more [ momentum ]. We then pursued a number of other options. And then suddenly, out of nowhere, Avendus Capital presented us the opportunity of Tata Interactive Systems, which we subsequently completed in 2018. Since then, Asha and I have been in touch. Even during the transformation and turnaround of Tata Interactive, we've exchanged notes. And sometime back in 2000 -- like sometime last year, we were talking again. And we felt that this could now be more meaningful because we had kind of scaled the mountain. We think we've come along way and our eLearning business was looking profitable, looking also very, very attractive in terms of growth potential. And from Asha's perspective, she was looking for a good home for her people. So while there was a small investment bank that was involved in the process, it was a fairly tight process, where there was definite meeting of minds between Asha and me and we got along. And she felt that MPS will be a great home for her employees and also a great home for her customers. She was very comfortable with us. And so it's been -- we've been in touch for almost 5 years, a little over 5 years maybe, but really got serious sometime in September. Then we had to kind of put the brakes on it because we're pursuing something again more significant. And then between February and March, it picked up again this year. And I think overall process timeline, if we start mid-Feb, took us about 3 to 4 months to close out the transaction. So depending on what lens you're wearing, you could call this a 5-year timeline, you could call this a 1-year timeline or you could call it a 4-month timeline but fairly tight process.

Asha and team had any competing offers or they just don't had any? That's what I just wanted to understand.

I'm sure -- yes, I'm sure they had competing offers. But again, I think to note here, this is -- for them, this is not about price. This was more about legacy and which -- and who would protect their legacy. And I think they felt more comfortable with MPS protecting their legacy.

Okay. Got it. I understand. And secondly, you've indicated fairly strong growth. Even last year, they have grown quite significantly. So any project-specific thing that is driving this growth or it is...

No, that's the part that gives us the most comfort that while our eLearning business, 65% of our revenue or maybe north of that comes from top 10, Asha's business is less than 50%. So the diversity is super high. Of course, there is a core customer base that has been working with Asha for over 10 years. But there's a very strong customer diversity and very low customer concentration. Their big challenge has been how do you take a $300,000 customer to $3 million? I think that's the piece that's been missing. And I think it's not for lack of intent or lack of effort. It's also some of it is structural. Very often, when you have a corporate -- a large corporate, you also are spending -- your spend typically tends to be -- tends to have serious qualifiers to it. So given MPS's scale, our listed nature, high corporate governance standards, we show up to a vendor empanelment with a lot more objective data that gives comfort to the company, to the customer. And I think given the structural strength that MPS will bring, we definitely believe that between our structural orientation and the feet on the street that Asha mentioned, we should be able to scale many of our customers over the next year or so.

Got it. And last question from my side, if you can throw some more light in terms of -- so Asha, as you said, I mean, she's going to retire. So in terms of what's the next plan for -- because they will not be working in this in EI Design. So are you aware of what is the next plan? And I just know...

So she fully retired, there's no plans to start anything new. That's also been protected through noncompetes, which are pretty extensive and also long-standing. So the noncompete is going for quite a bit. So I'm not too concerned about that. Again, like I said, this was sort of a very unique situation where the promoters were looking to exit. Also remember, the pandemic has made each of us think very differently in terms of how we want to lead our lives and our journeys. I think that's now what's played in here. So from my perspective, I don't think this was about price or what's next for Asha, I think this is more about, "I have decided to retire. This is a great business that I've built. I need someone to take this business to a different level and I need someone to protect my legacy." We have a strong track record of doing that through our various acquisitions, whether it be the MPS acquisition itself from Macmillan, the current acquisition from Tata Interactive Group or HighWire Press from Stanford University and A-KKR. We've done a good job of making sure that all of these businesses have scaled and grown. So our plan, of course, would be to continue to grow the EI business, to continue to invest and also enhance and increase the employee base over a period of time. So the theme here is very different, unlike our previous acquisitions, where we're chopping, changing, trying to convert a distressed asset into a performing asset. Here, we are trying to take a performing asset to basically towards scale, which is higher than anybody else. So the challenges will be different. Of course, purchase price tends to be a huge differentiator for us. Because even in some of the distressed assets, because we acquired them at a competitive price, it puts less pressure on the management team. And in this case as well, even though we've acquired a growing asset that's usually profitable, the pressure for the management team is reduced because of the lower comparative purchase price. So from our perspective, we have a clear line of sight. And my job here is to basically -- people make smiling -- or faces smile wider versus previous challenges where I had to transform drooping shoulders into smiling faces. So it's a very different challenge. I'm sure there will be a lot of long hours and long weeks and long months. But it will definitely be more rewarding and more fun because we're moving forward instead of trying to fix something completely. So there's a lot of opportunity at play here. There's lots of vectors for growth. There's lots of new margin levers that we've acquired, levers that we did not possess. We kept it for 4 years now. We've been talking about how we want to unlock this and to be the content of the eLearning business. We've made ground, but nothing close to what we will achieve in the next year or so now that we have an operating system, an operating model that is efficient, is scalable and is also super configurable to an eLearning business.

Okay. Got it. I must congratulate you, Rahul, for this acquisition and particularly the price at which you acquired. I mean, repeatedly, you have shown a great skill set acquiring good companies and integrating it well. So congratulations for that.

The next question is from the line of [ Arjun Balakrishnan ], an individual investor.

Sorry, my question has already been answered. But I would like to congratulate Rahul and the team for a great acquisition, and thanks for all the hard work.

Thank you so much, and we look forward to all your support going forward as well. EI is our first acquisition where we've acquired a growing company. We've acquired a company that is more profitable than our eLearning business. This is the first time we acquired a business that's more profitable than us. So in the eLearning business, they're more profitable than us and they're growing. So there's a lot of reverse learning that we will learn from them. So I'm super excited about that. And of course, this is not our only acquisition. We continue to have a very active pipeline of acquisitions. In fact, I would go as far out to say that this is not our only acquisition of FY '23. And the reason I say that is because when you're acquiring growth assets, it gives you a more sort of bandwidth to do more as well as this is, of course, much smaller in size. We have redefined our strategy to acquire nothing less than $10 million in revenue. That was our redefined acquisition strategy. Having said that, this was, despite being less than $10 million, it was too good an opportunity to pass. Because it gave us -- first, it gave us a good case study to test our new acquisition strategy. And second, we saw a lot of synergies, not just in the business itself but in the spillover effect it would have on our other businesses.

The next question is from the line of Ayush Bansal from Emkay Global.

Sir, one question from my side. Sir, how have been the margins been historically for EI Design? And do you see the current levels of margin to be sustainable in the future? Also, do you expect the acquisition to be margin and EPS-accretive from the year 1 onwards?

Thank you for the question, Ayush. So yes, my understanding is that at least the last 3 to 5 years, the business has never performed at lower than 25% EBITDA margin. So that's the lowest the business has been at. In terms of margins, in terms of expansion, I think our goal really is to get MPS back to the margins that we achieved several years ago. This is definitely a step in that direction. I think north of 30% is definitely achievable in the next couple of quarters on our entire eLearning business, which is a significant margin expansion. And my expectation then is that EI will lead that drive. And absolutely, I think this business will be -- definitely be margin and EPS-accretive this year, given their profile of business.

The next question is from the line of Keshav Garg from CCIPL.

Sir, many congratulations for this acquisition done at extremely attractive prices. But the price is so low and looks so attractive that the thought that comes to mind is that there must be some catch, like -- but you clarified that there's no client concentration. So the risk of client attrition is also low. Sir, but since it's a IT company, so I'm assuming that predominantly the workforce must be the only admin assets of the company. Sir, so in that case, sir, what are we doing to retain the team at EI Design?

Yes. So absolutely, so there is no -- actually, there's really no catch here. Sometimes in life, when you get a full dose, [indiscernible] can be defensive. So from my perspective, growth comes with optimism. And I think it's important that we move forward with optimism. In terms of the cost structure, absolutely, very similar to MPS, it's mostly the people costs. I think the fundamental value that an MPS brings to an EI is, at the end of the day, why does someone leave a job or someone leaves a job because they hate the manager or they don't see a path for growth in the company. I think what MPS has done overnight for all the employees at EI is, number one, is given them a very strong path towards growth. Because suddenly, they've gone -- overnight, they've gone to become a $20 million eLearning company. So I think that in itself is a huge accomplishment. So think about this when you're working in a company that's in the INR 40 crore to INR 45 crore revenue range. And suddenly, overnight, you almost more than triple in size the: a, the support infrastructure that would bring in play; and b, just from a satisfaction standpoint, it probably alleviates all the concerns you may have had working for a smaller company. Second, I think the perspective here is very clear, and that's the message -- my messaging this entire week that, in this particular context, there's probably more of reverse learning that we will learn from EI versus EI learning from us, which again is very powerful when, a, you're in a growing company, in a larger company but not only are you entering as someone that is helping build scale, but you're also entering as a change agent that will help the larger group be better at what they're doing. And of course, third, there's always financial incentives, which will not compromise the margin profile of the business. But again, I see the final -- the financial piece more of a responsibility that the company is delivering on versus an active reason for someone to think of a long-term career in the company. So I think we addressed a lot of things for the various employees of EI Design. And we look -- we really look forward to learning from them and also having them add significant value to the company.

Sir, and also since it's a tiny top line company, so it's very much possible that it might have been a one-man show, like the promoter must be playing an outsized role. And now with the promoter retiring, so you think that can that be some kind of an issue for us?

So I think that's -- in any acquisition, there's a level of risk. I think the customer diversity gives us a lot of comfort. The other thing is, of course, this is not a first such moment, right? Almost every acquisition that we've done, so when we acquired Element, all the partners moved on. When we acquired EPS, the founder retired. When we acquired TSI, the owner retired. mag+ and THINK were part of larger corporate structures and wanted to divest and the CEO did not continue. In Tata Interactive as well, their CEO had retired 2 years prior to us acquiring them. And HighWire as well, the CEO did not continue. So yes, in -- if I were to just look at this in a very isolated way, is there risk? Absolutely. Every acquisition brings a level of risk. But I think our experience over the past decade working with all these various acquisitions has given us the training and experience that we need to navigate this. We feel very comfortable navigating this. And to be completely candid, I share a very special relationship with Asha. And she also showed me that she's retiring. She's not moving from Bangalore to here. And anytime I need access to her, I have it. So I also have that gentleman promise as well. So I feel very comfortable currently.

Great. And sir, our shareholders wish that you can continue to do such attractive acquisitions, and best of luck for the future.

Thank you so much.

The next question is from the line of Rahul Jain from Dolat Capital.

And congratulations to the management for excellent transaction. Just wanted to understand a little bit in terms of how one should see these numbers playing out in this acquisition in the near term as well as medium term. What kind of growth are sustainable? What are the synergy, as you were highlighting, in terms of how the client scale-up can happen with MPS joining hand now? And are there any potential revenue leakages just like it happens in some of the acquisitions? So any color on these things would be helpful.

So good question, Rahul. So I think overall, like we prepare a conservative annual operating budget, so does EI Design. And they believe that FY '23, their line of sight is about $6.7 million in revenue. Having said that, there are levers available that this could be north of $7 million. But again, in the annual operating budget, we don't put that in place. Of course, 2 months have gone. So April and May, EI Design was not under MPS ownership. So they only have 10 months of revenue. And you can expect a fairly similar, sort of very less seasonality in the business. So we expect annualized revenue to be at a clip of $6.7 million, which represents growth north of 18%. I think standalone, both businesses are now growing at that 18% type of CAGR on a sales revenue basis. I think them coming together, once all the numbers are baked in after a 1-year period, we're expecting synergies to unlock and be definitely north of 20%, more closer to 25% in terms of revenue guidance. On the margin side, I think the eLearning business should definitely operate north of 30%. That is our goal, and potentially next year even look at 35%. But again, I want to first spend the next several months understanding what those levers are and how quickly they can be unlocked. Because we want to make sure that we don't lose momentum as we try to unlock some of these levers. In terms of customer leakage, several rounds of communications between us and the customers on both sides, EI and MPS Interactive, have already gone out. We've only received congratulatory messages and some request for information that we followed through with and again have got a received confirmation as well as positive affirmation. So we do not expect any revenue leakage on either side. Like I said, there are very minimal customer overlaps as well. In each of the cases where we do have overlaps, we are working in different geographies with the customer. So we don't have any sponsor overlap while we might have a customer overlap. So unlike some of the distressed assets that we've acquired previously, where we already know during [ list ] phase that we're going to lose some customers and discover over the next 90-day period that this could be potentially even worse, we have not discovered anything in diligence in terms of customer leakage. And the experience in the first round of communications is, of course, continued [indiscernible] has so far been very positive.

Right. And on the cost side, you said 30% margins, which you said for the combined eLearning practice or only for this business because -- yes, and my back of the envelope suggests they are currently around 35% EBITDA margin. Is that the right number?

So like I would say, I would feel more comfortable sharing that they've never performed lower than 25% and they've consistently been north of 30%. So I'm more comfortable giving ranges rather than giving exact numbers.

Sure. And just for our modeling purpose, if you could give some of these data, like duration for the amortization of this transaction value that we will be paying them. Is it going to be amortized over 5 years, 7 years, any time frame?

That's something that is still working out. We don't have those details yet. But subsequently, we can definitely share that with you.

And there's any meaningful as -- sure. And any meaningful asset that we are going to carry our cash balances, if any, in the transaction?

No, this is an acquisition that we always do on a cash-free, debt-free basis. So it's based on normal working capital. And as someone earlier commented that this tends to be an asset-light business as well, so fairly standard for the IT/ITeS space.

Sure. And just last one, if I may, which is on the strategy side, I think you articulated in your Q4 earnings about this growth-led acquisition. And we did a very fantastic announcement just a few days from that time. And you're saying there are half a dozen in your pipeline as well. So can we say that since there's a great change in thought process and we have a good pipeline, there is a new way we should overall project our growth rate for 3- to 5-year perspective for the consolidated MPS business? Because the mix itself is now much better with a much larger TAM for the organic growth perspective and with this kind of acquisition, which can add very incremental strong growth as well as earnings. So is there a new way to look at the potential growth rate for the business?

Absolutely. We will definitely quantify that in the next earnings call. And like I said, I've already disclosed a very small sneak preview of that, which is on the eLearning side of our business, we expect to be north of $50 million by 2027.

Fair enough. And congratulations once again.

Thank you so much.

The next question is from the line of Jyoti Singh from Arihant Capital Markets.

Yes, thank you for the opportunity.

Sorry to interrupt you, Ms. Singh. May I request you to come on the handset mode? I think you're on speaker, so the audio is not very clear.

Actually, I'm on handset already. Yes, now am I audible?

You're audible. You may go ahead, ma'am.

Congratulations on the acquisition. So my question is how it will add value in the growth? And if you can quantify the growth from the acquisition [indiscernible]

Yes. So I think what -- at an aggregate level, what we've done here is we have strengthened. I always believe in growing -- further strengthening your strengths rather than always trying to manage your weaknesses. So in this instance, I think our eLearning business has had good growth momentum, both on the revenue side and the profit side. From our perspective, what this does is it further adds more gasoline to a growing piece to help us scale it. So by 2027, we want to get north of $50 million in the eLearning business. In terms of growth, I think you already articulated that our team feels on the stand-alone eLearning business, we feel comfortable in the 16% to 18% range, a total of 18%. The EI Design team is already building conservative annual operating budgets around 18%, 18.5%. So we feel very comfortable that once this baseline is completed, we could be north of 20%, potentially closer to 25% in terms of reliable organic revenue. And then of course, we will continue to pursue inorganic opportunities as well as the [indiscernible]. And obviously, it's always difficult to project out inorganic. So that's why we've been conservative and we've stated the $50 million.

The next question is from the line of Vaibhav Badjatya from HNI Investments.

So on the people side, do you think the people that we have in EI Design in terms of their background experience are significantly different than what we currently have in eLearning business? That's question number one. And secondly, in terms of pay scale, do you think that there has to be a revision in their pay scale to bring them up to our level?

Yes, I think the big difference, there is definitely a difference in terms of experience profile. EI is obviously a younger company in terms of -- while the company was established a while ago, the true momentum has only been established in the last 5 years. So from an employee base standpoint, they've only scaled in the last 3 years. So there's definitely a number of years of experience, a number of years of time in the company that is very different from our eLearning business. But what that does is it brings in a level of efficiency and fresh thinking that can sometimes go amiss when you've been kind of cruising along. So for example, the EI team has adopted the Agile way of working and some of the tested frameworks such as SAFe Agile. We -- on the interactive side, we still continue to follow the waterfall approach. So from an overall experience profile, there's definitely a pretty significant difference in the number of years. But looking at it from an operating -- from an operations perspective, this provides us an additional lever of efficiency and margin expansion. So we believe this to be a plus, not a negative. And in terms of pay scale, of course, when you have people with less experience, they tend to be, at least in the IT/ITeS space I can speak for that, the costs seem to be lower. So I think as we grow, we will obviously have a higher proportion of employees that are in the lesser work experience category simply because this space is very fast-moving. It's a rapidly moving industry. There's change happening every day. There's new technology coming every day. There's newer ways of working post the pandemic, especially with most of the employees working remote. So we expect that to happen even further. So overall, the margins will only improve. So from our perspective, there's this one lens of number of years. And of course, there's another lens of cost of living, right? So -- on the MPS Interactive side, we operate predominantly Mumbai-based, which is one of the most expensive cities in India. And on the EI side, while we have over 100, 170 employees, less than 50 are in Bangalore. A lot of them are in Chennai, in Noida, in Pune, all parts of India. So I think there's also a location aspect here, where a lot of the people are in lower-cost cities as well. So between numbers of years of experience and where people are based, I think that profile will evolve over a period of time and I think is a new lever that we suddenly unlocked through the acquisition.

Okay. And in terms of attrition, is their level of attrition pre our acquisition, is comparable to us or there's significant difference?

Yes, there's a significant difference. Their attrition is much lower than ours and the industry.

Okay. Everything seems to be positive for us. That's great.

The next question is from the line of [ Darshan Chandaria ], an individual investor.

Sir, congratulations on the acquisition. My question is on the recession talk in America. Do you see any effects on our revenue and operating profit margin for year -- from 2023 to 2024?

Yes. So I think there is a macro and micro component to this. The macro component, of course, is there is a recession coming. There is no...

In America and in Europe also.

Yes. So there's no shying away from that. Having said that, what we've seen historically is learning and development in corporates as well as higher education in general tends to have an inverse relationship. So in recessions and downturns, especially when the recessions and downturns are not long extended, these sectors tend to be -- do actually better. So we'll have to see whether that macro actually plays out or not this time around. We're not taking it for granted. Having said that, I also believe that with every crisis, there's an opportunity. And like we saw in the pandemic, where there was a huge challenge that presented itself to our entire industry, MPS redefined itself. In fact, our content business, which we have given up in terms of growth, which is growing at -- which is not growing. Suddenly, we're growing at 10%, 12%. So -- and suddenly, our eLearning business suddenly went from being unprofitable to profitable. The same thing happened for EI as well. During the pandemic, the business has totally been reimagined, redefined. So from our perspective, smart businesses tend to outperform markets in such cycles. We consider ourselves as a smart business, more to do with experience and humility rather than anything else. So we will definitely work harder than anybody else to make sure that we overcome any challenges ahead of us. Also, I think from a margin perspective, this type of macro environment provide an opportunity to improve margins. And finally, the best time to acquire businesses is during a recession. So this could also potentially be an environment where MPS is even more acquisitive during recession. So I think -- and I'm not saying that it's all going to be bright and rosy, but I feel very comfortable. I think more comfortable than most in the industry that we are in based on our track record, our strong balance sheet and our experience in generally navigating such challenges and having a wonderful team that has done this before, and I'm sure will do it again. So I'm not -- it's something that we all have to go through. I'm not too concerned.

Okay. Here or there, 1% or 2%, here or there, it will be, not more than that?

No, I think you have to work harder. I think as an outcome, you will be fine.

The next question is from the line of Sachit Motwani from Param Capital.

Rahul, congrats on this acquisition. My first question is on -- MPS Interactive has education publishers and also corporate in terms of their customer base. So just wanted to understand, would EI Design be more corporate-heavy relative to MPS's eLearning [indiscernible]?

So it won't be heavy. So I would say MPS Interactive doesn't work with publishers, we work with educational institutions and with corporates. We're trying to launch a new business unit that can configure the eLearning side for the publishing side as well. So that's something we're launching this year. But EI Design's entire business is corporate. There is some universities, where Duke University, for example, in the U.S., which is a customer. But it's not their core use case. So having said that, I won't say they're corporate only, they do have customers on the education side as well. But this is more corporate than education than MPS Interactive for sure.

Got it. Another was in a couple of quarters back on the call, one of the challenges on eLearning you had mentioned was the sales and marketing, the constant effort or the constant investment in sales and marketing. This acquisition, does that ease that requirement for you? And especially, when you're talking about consolidation happening in the industry, do you see that also easing out?

Yes, I think there's -- so it has -- it definitely alleviates a lot of pressure on the marketing side. EI Design, despite being smaller than us, for example, has more LinkedIn followers, has more digital content out there that positions it as a thought leader. They have a multiple of the leads, the qualified leads that we get in a week or a month. So it definitely gives us a very robust marketing engine that we did not previously possess. On the sales side, I think a lot of the sales were happening from India. So I think while we will bring in -- the MPS incumbent will bring in value is making sure that the incumbent and the core customer base were able to unlock its full potential. But also as we are qualifying leads and converting them into opportunities and then revenue, we are adapting them to the right scale and size versus just acquiring at a small project price. So I think what EI does is it gives us a very robust and mature marketing engine that will enhance interest in the company and its offerings. And I think what MPS will make sure is that, that interest is converted into serious revenue for the company.

Got it. And for EI, how long has their customers been with them?

Well, top 10 have all been above 5 years. And I think top 3, they have a couple that have been more than a decade.

Okay. Great. Congrats once again.

Thank you so much.

[Operator Instructions] As there are no further questions from the participants, I now hand the conference over to Mr. Rahul Arora for closing comments.

Thank you, everyone, for all your warm messages and also your wonderful feedback. We could not have made this possible without you. This is, of course, the beginning of our growth journey. So we're right at the start. EI is not our only acquisition of a growing business. We will continue to be acquisitive of growing businesses. In fact, we expect to close at least one acquisition in FY '23, one more in FY '23. Reflecting on the acquisition, we've also articulated our Vision 2027 and values as well. So we will be furthering our existing values. So we will be leveraging our triple E values of excellence, efficiency and empathy to power for the new vision for 2027, which is my vision to create a compelling learning company at a meaningful scale that helps the world run smarter. We aspire to be the provider of choice in our markets that powers experiential learning experiences with the latest technology innovations. Again, I look forward to all your wonderful support. And in subsequent earnings call, we will also quantify Vision 2027. Thank you so much. Bye now.

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