Expleo Solutions Limited (EXPLEOSOL) Earnings Call Transcript & Summary

Ladies and gentlemen, good day, and welcome to Expleo Solutions Limited Q3 FY '22 Earnings Conference Call. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Ms. Asha Gupta from Christensen Advisory. Thank you, and over to you, Ma'am.

Thank you, [indiscernible]. Good afternoon to all participants in the call. Welcome to Q3 FY '22 Earnings Call of Expleo Solutions. The results and investor presentation has been already mailed to you and they are also available on the company's website. If anyone does not have a copy of press release or presentation, please do write to us, and we will be happy to send it to you the thing. Representing the management today, we have Mr. Ralph Gillessen, Chairman and Non-Executive Director; Mr. Balaji Viswanathan, Managing Director and CEO; and Mr. Desikan Narayanan, Chief Financial Officer. Mr. Balaji will start the call with brief overview of the quarter gone by, which will be followed by Mr. Viswanathan who will be getting into detailed financials. After that, we'll open the floor for Q&A session. As usual, I would like to remind you that anything that is mentioned in this call will give any outlook for the future, all which can be concluded as forward-looking statements must be viewed in conviction with risk and uncertainties that we face. This risk and uncertainties are included but not limited to what we have mentioned [indiscernible] file with the study and subsequent annual reports, which you can find it on our website. Having said that, I now hand over the call to Mr. Balaji. Over to you, sir.

Thanks, Asha. Thanks [ Suman ]. Thank you, everybody. Once again, welcome to the investor presentation and call today. Thanks for your interest on Expleo Solutions and really appreciate you taking the time and dialing in for this call. The Q3 financial year 2022, '23 has been once again a robust demand that we have seen growth continuing for this quarter as well, similar to how all the other the technology industry as a whole is doing and we have been able to capitalize on the growth and the demand that's actually coming in from the market. We have had some good wins, renewals under reasonably robust pipeline as well. And we continue to have a sequential growth closer to double digit in this quarter, but considering that the October to December quarter normally has lesser working days, we still manage to get -- have more than 9% for this quarter, and more than 30% over the 9-month period of this particular financial year. The growth continues to be on overall tech-services space, not only focused on testing, but mostly on specialized searching and digital capabilities, which is what we have been investing over the last 3, 3.5 years. And that's what is actually helping us in capitalizing the growth for the demand in the market as well. As for similar to any other the tech industry across the globe. We still have challenges around the hiring and attrition as to what we see across everybody's industry at this particular point of time. But the investment that we did earlier in 2021 on campus hiring, training and making sure that we have skills and resources available for equal opportunity is actually helps. Of the 370-odd people who we hired last year from the campuses, all of them completed the agreement between December and Jan, all of them are actually on our roles now. And close to 30% to 40% of them have already deployed in projects and before end of term, at least 2/3 of them will be deployed on billable roles in projects. And during the course of March and April where the company complete 100% of this particular graduate hired people on billable projects as well. And we continue to do the same investment for this year as well. So we are going ahead in doing another round of graduate hiring from January on which [ syllable ] start. So it good with 20 program starting from February onwards. So primarily around the growth and the resourcing, the average quite a few new customers considering the this pipeline that we have seen during the quarter. And we also have -- have added leadership team around the digital capabilities and also rehabilitating on structure that the group has actually deployed on focusing on digital and recurring capabilities out of France, Germany and U.K. region. So quarter in, to conclude about -- or give a summary about the Q3. We continue to see strong growth, and we continue to see a good prospect for us to continue the [indiscernible] trend in the coming quarters as well. We had some challenges with the margin and EBITDA level but those are in line with the investment that we have been making to make sure that we are capitalizing on the market demand. And also in this specific quarter, based on the partnerships that we signed with some of our products parters that we actually sold the licenses of our partners directly to our customers, which actually comes at a much lower margin than what our services margins are because it was mostly pass-through. And that's the reason why there is a slight drag in the -- margins that we basically let it stuck. We don't see any challenges with maintaining the profitable fee levels of 18% to 19% is the fee level that we talked about in the past as well. So that's quickly from me. I'll pass it on to Desikan now to go through numbers.

Thanks, Balaji. Good afternoon to all. I will -- that is coming about the quarter-on-quarter and the 9-month period comparison still assuming that we'll cover to start with. On the quarter-on-quarter revenue growth, the revenue growth is around 9.0% in about INR 105 crores. This quarter, we crossed the INR 100 crore quarter with at one good thing and we expect it to maintain. And our EBITDA, we did at 17.7% as compared to 19.6%. In the profit and tax values were almost flat with INR 11.6 crores. And one thing to talk about is the collection front, we did value in the quarter, we had some receivables coming in from the customer in Middle East, India, APAC, which has contributed to a lower DSO of 60 days has come back to the 71 days. And major reason for getting dropped in the EBITDA is, one is that Balaji was mentioning that we had some project some software that we purchased during the quarter. That has contributed to a drop and also, of course, we had some increase in the salary as we also converted the training into the billable resource has impacted the overall increase in the cost. Moving on to the 9 month comparison. The growth was almost 31.3% growth come back to the 9 months of [indiscernible] the 9 months to this 9 month ending with a revenue of around INR 293 crores. EBITDA was 18% compared to 22.9% in the same period, last 9 months. And Profit after tax was 12.3% as compared to 17.2%. Of course, the EBITDA is due to certainties like we have in the invested in training and recruitment and also we had a higher third-party consultant cost coming in this year, which we did for the reason of making sure that we get the revenue with this on the table. And also, we had some foreign Forex fee for last year, the same period, we had exchange profit of almost INR 65 crores now with this time the return is INR 1.6 crores -- INR 0.6 crores pass-through. That fee also contributed there. Last but not the least, that some merger expenses, it also added during the 9 months period, which has been incurred. So all we've posted in the [ hacks ] being a -- a little bit of increase in the cost that created the original drop. And going forward, we keep at some of cost will go into a regular order by one-time will go up and we'll have some [indiscernible] coming from the [indiscernible] which we will be doing well in the coming quarters. So those are brief about the results now -- one more talk about the merger, just wanted to give a brief update about the -- where we are, it's currently, we hired a -- got a code from SEBI now it is pending with CMD. Considering the fact we are going through the survey. So we are yet to get a hearing from the courts. So that is kind of delaying but we are expecting it to happen soon. So we are waiting for the court to give a fee that's the update about the merger. With this, I open up you to the Q&A session.

[Operator Instructions] The first question is from the line of [ Manik Pareja ] from JM Financial.

I just had a couple of questions. Number 1 thing is if you could talk about the pro-forma revenue and EBITDA performance for the combined business, which includes the -- which would include the company being merged. That's question number one. The second thing is if you could talk about the -- brief behind acquisition that was pending. If you could give us some sense as to what's the what traction that you're getting from the parent side in terms of new customer acquisition?

Sorry, I didn't get the -- what is the traction that we're getting from the parent side for what?

In terms of new customer acquisition, especially on the [ R&D ] side.

Okay. So just to give a quick summary on how the other unlisted companies businesses have been over the last 9 months. If we continue to grow and actually the [ BR&D ] side of the business has grown much more than what was expected as well. So in calendar year 2021, the engineering business grew by almost 80%, while the expectation was to grow by around 50%. And thanks to primarily the automotive business and to some extent, some of the businesses that were one would be aerospace area even though that was marginally higher than what was expected. So similar to what we were talking about on the hiring and attrition to later challenges because of which the costs are higher. That continues to be a challenge there as well. We have -- the profitability has been lower than what was expected. But that was primarily because of the investments that we had to make to meet the demand from the customers. So similar to what we talked about when we made the first presentation of the merger in July, August time frame. We continue to trend in the direction that we mentioned at that particular point in time of the revenue number which we are expecting for the financial year for both -- the Pune or the Expleo ecosystem from the issue of technology as well. So put together we expect that the financial year will close around 27 [indiscernible] INR 250 crores to INR 250 crores.

For those 2 entities?

For both the entities put together.

Okay. If I recall correctly, last time during the presentation, you had called out that at a composite level is the existing listing business plus the business that was being merged, we had seen a tough line over INR 345 crores. Just wanted to confirm that.

So we were expecting that we will be at around INR 347 crores to INR 360 crores and the under serendipity around INR 250-odd crores. So we were expecting around INR 600 crores -- a little over INR 600 crores. Right now, we are expecting that it will probably be INR 635 crores to INR 640 crores...

I think [indiscernible] plus another INR 250 crores or INR 260 crores.

So because we did well in this quarter, we crossed the INR 100 crores mark for the listed entity and because of that is, it will be closer to the INR 700 crores, while we project at INR 634 crores -- INR 620 crores to INR 634 crores when we talked about it in July, August.

Sure. And in the past, you've given some direction about sequential growth rates that you see in the near term. That kind of a confidence still goes through some of the next 2, 3 quarters?

Absolutely. Yes. And do we think, seen it in the number, so we don't see any reason for us to not feel confident about those growth rates.

Sure. So about 7% to 8% sequential growth?

That's right. So we have -- in the last 3 quarters, if you were to look at it in the first 2 quarters has been more than 10%. And this last quarter has been around 9%. So we expect it continue [indiscernible]

Okay. And if you could give us some sense of the proportion of revenue that we are getting from the premium currently? And how should we see that number move over the next 18, 24 months?

See as we are merging like what we mentioned earlier as well, so as we are merging, we are not looking at the business from as to what is coming from the parent directly to us or what is coming from parent indirectly for us. Because most of the engineering engagement that we are running at this particular point in time at least -- there is automotive or aerospace. The customers, the global customers, that we are engaging with them locally in India and these relationships are actually being merged up only because of the relationships that we have. So it all been. If you were to look at it traditionally, how we were presenting as part of the listed entity where we were only talking about the group's business which we run as a capital unit that continues to be in the same 20% range. But that's not the yardstick primarily you need to use to measure because the question of what are the global customers and how we are acquiring those customers.

The next question is from the line of Saurabh Shah from AUM Fund Advisors.

First, regarding...

Saurabh Shah, the audio is not clear from your line, please [indiscernible]

Can you hear me now?

No sir. There is a lot of static.

There is a lot of static but yes, can still manage to understand what you're asking.

Okay. Question was where there was margins. You mentioned that you invest a lot in people this time and given the challenges in the industry, how do you see that going forward? Do you think you'll be able to pass that onto the customers to kind of maintain your margins around the 20% line? Or now with 1,700 people and do you think it could get worse?

No, we -- so see there is always a lag between when we hire and when we change the engagement -- the billing rates. And considering that most of the projects that we run, even so the customer engagements are running for a long time, the profits are actually anywhere between 12 months to 24 months. As and when we get into a renewal happen and we go from 1 particular project to another particular project in the same customer, we are going ahead with rate changes. But many of these investments that we're talking about is not the core billing rate challenges it's around the investment of what we did for hiring and training and keeping the future workforce ready not just the question of people who're deployed in the projects. So we think that we'll still be able to maintain the cost of the same kind of pricing on the cost rate so marginal increase because of inflation with these model that we have adopted while we are hiring and training as per the customer requirements. So yes, it's a combination of both.

Okay. Sir, next question was new growths. Where do you see it coming from? [indiscernible] discussions and your predictions. But from 9 months data, how do you see this carrying forward test in the U.S.? Any other large places that we should expect growth in the next 2 or 3 years?

So like what I mentioned, it's not -- so earlier, we were trying to look at it only from a testing perspective, but we are not looking at it now in the testing alone because -- the customers have moved from the standard cycle of doing 1 [indiscernible]. So we have specialized I think on those automation combined along with custom [indiscernible] in testing. So that's the area -- that a new generation for assurance, from amount of software development and the automation led proper engagement is what that we are seeing those and that's what is driving our growth engine as well. And it's actually across all regions. India is probably growing slower than other markets because of pricing challenges and the rate pressure, but all the market whether it's Middle East or whether it's the other relation markets or whether it's Europe or U.K., all the markets have seen attraction right now. So Europe has grown, India has grown, oh sorry -- Middle East has grown, Asia-Pac has grown. U.S., we -- like what I mentioned in the last 3, 4 calls as well, Europe as of now is more practical rather than strategic because we are not making the big investment with that except that we have a sales team and a engagement team, which is working on existing customers and really smaller opportunities so that we stay present within the particular market. Ralph, do you want to add anything more?

No, I think as you said it connects all the industries and there's a possibility for different segment. It is not that we have identified 1 specific growth area. I think we see the global demand is increasing across all the territories, across all the regions. And we will definitely focus on the industries among the reasons we are already today as we see that we can even accelerate our growth there before we even exploring new territories, new regions as we strongly believe that we can accelerate the growth even with our existing footprint. [indiscernible] I think there was a previous question on the margin. I think we see a general trend. The cost accruing up at the same time that we can reach our growing up. And I think we believe in them to participate in the development given the margin and the question there was, I think it was a little bit more about [indiscernible] I definitely can see, we are even with new engagement even participate in the -- in an increase in rates or even in an increase in margin, especially due to a different mix of capabilities and services we provide besides the traditional testing activities.

[Operator Instructions ] Our next question is from the line of [indiscernible] from Monarch Networth Capital.

Sir, I had 1 question regarding the fact that we expect direct sales to grow as I said, combination from the group. So how we gearing up from direct sales? And what would be that strategy be as the [indiscernible]. You know what kind of projects would we look at if you could provide some perspective on that.

Yes. So we have been adding sales team in our directs markets. We have added people -- team India, focusing on APAC, primarily to do lead generation and customer engagement and calling our part. And we have also hired people in the Middle East. The objective is that as of now. The focus is on making sure that we sell all our services, not only focused on banking and financial services alone. But having said that, banking and financial services is actually our -- that's where our strength is. So [indiscernible] the other segments are not going to grow immediately, but therefore -- to focus on other segments like health care, life sciences, energy and utilities and also APAC as a segment and so. So the progress there will be slightly slower compared to what the banking and financial services is and we have now 2 people who are focusing on selling those services in the Middle East and APAC market. So we are confident that we should be able to show some progress during the course of the calendar year 2022, which will actually help us in making more investment on the other segments in ' 23 onwards.

Understood sir. And sir, the added question on the in the engineering business side in FY '21, is it contributing 25% -- around 25% to 30% of the total revenue for the merged entity. Where do we see that panning out less in the next 3 to 5 years?

So like what I mentioned, the engineering services in 2021, the calendar year 2021 went up to almost INR 150 crores -- INR 155 crores. From around INR 85 crores to almost INR 85 crores, INR 90 crores. INR 85 crores, INR 90 crores in calendar year 2020 to almost INR 140 crores in 2021. And we expect that it will continue to grow, but not at 80% because the base has now grown so we are expecting that this is probably be in the range of 25% to 30% going forward as well. So as per now from a headcount perspective, engineering is almost 1/4 of the head count. And we expect that this year that is in 2022 to become 1/3 of the head count.

[Operator Instructions] The next question is from the line of Ashish [ Dash ] from Sharekhan by BNP Paribas.

Sir, just want to understand your view on the margin. So you mentioned that employee cost was impacted due to the addition of employees now you have added around 600 to 700 FTEs in 9 months? And what kind of employee addition you are planning in Q4 and in FY '23 because you also mentioned that [indiscernible] hiring will be starting one. So [indiscernible] back in position. And also other expenses including the product expense I believe and so that would be continuing in Q4 and the subsequent quarters?

So Ashish, we have actually added more than the 700 that you referring to -- post of the year, the net addition will probably be the 700 range, but overall, addition is much more than that primary because of the industry-related challenges. In the current quarter alone, we have added almost 300 people out of it, 200 [indiscernible] yes so that includes a training through whom we were actually moved into our roles in December of 2022. We think but from a margin profile, we are actually confident that one push that leads on, which should happen probably either through the current quarter or the next quarter. We will still be back in the 18% to 19% EBITDA is what we've always talked about 17.5% to 19% or 17.5% to 18.5%. That is something which we are quite confident that we should be able to maintain on an ongoing basis. So I don't see that to be a challenge. And once the integration happens because the engineering business is slightly at a lower margin level for the integrated company that will probably have another 1% or 1.5% drop in the EBITDA level, which goes to close to the 17% because we will be a tech platform engineering company not just a [indiscernible] company. Now we don't see that to be challenge. These are temporary ones from this quarter, like what I mentioned, apart from the increase in the fee costs and hiring costs. We also have some of the software that we sold to our customers to our partner. It was a software plus service so we sold it to our customers. The software element of the particular piece, is all build in -- in a one-stop. There is really not much of margin per se because mostly it pass-through with our very marginal route, markup for [ practice ] purposes. Beyond that, we don't really have much of the market. And that's the reason that particular segment of the business have a lower margin, and that's why that is one of the other factors, which improved on the margin system. Once it becomes a DAU, it should not really -- once it becomes business as usual we should not have [indiscernible].

Got it, sir. Sir, softwares purchasing continuing in coming quarters or do you think it's a 1 year thing under the digital...

Actually, it normally happens in third quarter where the renewal happens for the software that we bought. So renewal happens to the customers. So this normally happens in 1 quarter when the services are actually spread out throughout the year.

My second question is on -- if you look at your number of 1 million-plus revenue client declined by 2%. And what is the reason? And also your top 5 revenue also moderated, due to that one?

Okay we're not looking at the increase in the -- increase in the revenue kind of million [indiscernible]. We have a revenue which is more of a flat, right. If you look at the last quarter, the current quarter. The revenue of 1 million is almost [indiscernible] and also between 0.5 million to 1 million [indiscernible] to 1 client. So I don't see any that will decrease you are looking at.

Because I saw at least 9, more than 1 million clients are 9 [indiscernible]

Last year Ashish actually -- the last quarter we had higher level, and this quarter also we still had [ 11 ] [indiscernible] customer contribution is at 59% right now.

The next question is from the line of Rohan Advant from Multi-Act.

So first question is on the [Technical Difficulty]

Sir please use the handset mode. You sound distant.

Is it better?

Yes, please go ahead.

So my first question is on the revenue number and you gave for the unused [indiscernible]. In the presentation that you had given at the time of announcing the merger. The unlisted staff we said have INR [ 260 ] crores of revenues. And last thing this year, we are likely go at 27% to 28%. So it should do INR 330 crores, INR 340 crores kind of revenues for FY '22. Is that understanding correct?

Yes. FY '22 listen are talking about April to March ending year -- that is in March '22?

Yes April to March '22.

[indiscernible] March '22 we are expecting INR 250 crores to INR 270 crores. So what is that your question is? Can you come again?

So we had 2 segments of the business that I mentioned, the engineering side of the business is what I have talked about as an 80% growth. But there is another opponent entity as well. So we both put together is what we are talking about is INR 250 crores.

Yes. But sir, even last year, we did INR 260 crores, right, ending FY '21?

Last year, if I look at both -- last year, we did around INR 250 crores, right, both in sales right, for 2021 that we'll be above that.

Yes. So if we are growing 27%, 28%, about INR 260 crores. That should be like INR 350 crores, right?

So we don't have actually we don't want to mention the actual because we don't really have an audited result. But yes, it should be in the line.

But I won't hold you for INR 330 crores, what I'm saying is if at the time of merger, you announced INR 260 crores, and we are growing at, whatever, 25%, 30% -- it should be 25%, 30% over INR 260 crores?

Yes. Perfect.

And sir, secondly if you could quantify the premium licensing that we made, that has lagged the margins you said. You also said that the material number, sir?

It is in the range of around INR 2.1 crores.

Okay. Okay. And sir, this client wins that we've had very strong, 10 new clients we've added. So this 10% kind of sequential growth that you are seeing. What is the visibility you have or how many quarters do you think this can last? That's all.

So we don't make any forward-looking statements, but we don't see the trend changing at least for the next 2 to 3 quarters, for sure. Beyond that, obviously, we need to still see how because the market is quite dynamic. So we can't really predict how we want to be. But during the course of this calendar year, we don't -- we think that this trend will still continue.

Just 1 last question on you said...

It will be different because the 9%, 10% sequencing growth is on a lower number of 2020. So for 2021 we have already seen the growth so obviously during the course of this quarter, it still can't be 9% to 10% it will probably slightly be lower. But we continue to see a strong growth.

[Operator Instructions] The next question is from the line of Aman Vij from Astute Investment Management.

My first question, if can talk about the total employee count as of now in all the entities combined? And if you can roughly give the breakup? And what is the target for FY '23, the addition next year?

We have a little over 4,000 employees across all entities as of December 31st. I think 4,027 or 4,020 something of that sort. What was your next question?

The breakup as well as target for next year? Or where do you see this number?

We expect that we will be at least 5,000 employees by end -- before end of the calendar year 2022. And the breakup like what I mentioned, we are around -- the [indiscernible] entity is a little over 2,100 employees. The Bangalore entity has around 900 employees local and the Pune entity has another close to 1,100 employees.

Sir, I'm continuing this in the last con call, Rajive has talked about -- sir Rajesh sir, sorry the long-term target of even 10,000 employees in the Indian entity. So when do you see that number you can achieve?

We expect that it will be '25 -- 2025 when we think that we should be in the 10,000 mark.

So you are saying -- 3 years from, say, next from today, I think, right?

That's right [indiscernible]

Sure. Sure. And my second question is we saw a good growth in the number of customers above 1 million. So if you can talk about what visibility are you seeing among the 315-odd customer we have less than 1 million, which can move above this one -- which will move to the next category, which is above 1 million as well as the visibility, which we see where customers can start contributing to this 5 million [indiscernible] number also.

So we are expecting -- we are actually focusing on larger customers or customers who have the potential of becoming a larger customer. And that's how the traction from 9 customers has grown to 11 now. We expect that we'll at least add another 2 or 3 more during the course of this quarter -- this particular -- and get to a 13 or 14 million-plus customers [ Vikas ] And -- so the focus was on looking at key account management as a key -- as one of our strategic elements that we've identified close to around 17 to 18 accounts, which we think have the potential, and that's where the focus is on the account management.

The next question is from the line of Mithun Aswath from Kivah Advisers.

Yes. Congratulate on a good quarter. I just again maybe a little bit of a repetition. In the presentation you made, I think, in July last year, you mentioned the unlisted company had about revenues of about INR 258 crores and profit of INR 37 crores. I just wanted to get an understanding from maybe Desikan would know. In terms of the current year, any targets on those revenue because you mentioned INR 260 million crores, INR 270 million crores. That would actually mean a flattish year for the unlisted business. So just wanted to get a sense on that. And just looking at what Expleo globally does, a lot of work on the automotive and engineering side. And whatever we hear from a lot of the other -- your peers in the distant market, we are looking at a lot of growth in the auto and engineering businesses. So just wanted to understand from your side. At the global level, are you seeing those businesses ramp up quite quickly? And you mentioned the unlisted business has lower margin. What is the reason for that, especially if they are doing high-end work on the auto and engineering side? And do you see a large opportunity there for the merged entity?

Yes. Of course, the overall, last time when we presented on the other [indiscernible] we were around INR 260 crores on which we you have seen and we expect that to grow almost around the INR 300-plus crores. See one thing is that why we are more extra tenders that we are anyway going to publish the -- up bridge prospectus when we are going to issue the notice for shareholders meeting for the merger. That you will have the latest financials, which you can look at it and different banks so. That way we can also -- decision -- is just getting -- it's not audited but we don't want to commit any number on that and come back with it. So that's the reason we wanted to be very -- not to tell anything on the unlisted company. That is the one reason. But as we mentioned that INR 260 crores [indiscernible] we see it trending around INR 300 crores plus in the revenue side of it. Of course, the EBITDA side, we were -- the combined was around -- 14% to 15% was a combined entity of both the unlisted companies. It would be slightly the same range what it would be ending in this financial year, almost the expectation, in engineering it has a lower kind of a margin and we expect that to continue. And current situation, Balaji can add to that?

On the engineering business, there is a combination of engineering business as well. So there is a mechanical engineering business which has actually done the lower margin and there is a digital and product engineering deals was actually in front of a higher margin, as of now the India business, is more on the mechanical -- objective of the time, move what -- so as we move into that, we probably start attracting better margins, the combination is right now is close to 60% to 70% on the mechanical engineering. .

[Operator Instructions] The next question is from the line of Rohit Balakrishnan from ithought PMS.

Am I audible?

Yes sir.

Congrats on good numbers again. So Balaji wanted to understand now I think FY '22 will clarify that probably in [indiscernible] INR 750 crores to INR 740 crores. Is that right? I mean -- I want to take the out first. [indiscernible]

It should be INR 720 crores [indiscernible].

So Balaji, I think in the merger call also and also in the last call, I think it was also shared that as we combine, there would be a lot of scale I understand the margins in the last couple of quarter has been under pressure. But as we get to -- we are now almost at the touching mission of $100 million crores as a combined entity. Do you think that -- I mean, can we probably even grow and get some scale benefits and get a higher margin than what we have done even in the past, given that we would not having those scale benefits and the kind of scale that we have now. That was my first question.

Yes. Absolutely. There is a synergy and gain benefits that we expect once the merger happens. It's unfortunate, that we are not able to get those done quickly -- beyond our control at this particular point in time trending with [indiscernible]. But once that happens, and there are significant amount of synergies. From a business perspective, we are already synergizing -- going to customers, jointly and offering to existing customers. But from a financial perspective -- as soon as the merger happens, we are confident that the synergy and the scale benefits will be in [indiscernible]

Okay. And just 1 request which could possibly -- I understand you said that this might delay. But if you can buy the next voyage, if you can probably give a pro forma number for the merged entity and for the unlisted entity, that really help just to sense, I think by then also will have a positive number...

We hope we wouldn't have to wait in the next quarter because as soon as NCLT gives us an approval, which we expect during the course of the next couple of weeks. Once we're given the approval then we definitely have to publish an average prospectus. In the average prospectus will publish the -- the end of the company, not [indiscernible] result in the limited review from the [indiscernible]. So hopefully, that should happen during the course of this quarter rather than wait til the next quarter.

Got it. And that's very helpful. My second question was, so I mean you continue to be fairly confident about the growth over the next few quarters, at least. So I mean given that we have overshot the numbers of what we bought internally in terms of what you mentioned. Do you think probably we can as a combined entity FY '23, we can probably do INR 1,000-odd crores or close to that, very close to that number. Do you see that can possibly happen?

[indiscernible] Rohit, objective is to try and get closer to that. But obviously, I don't want to put a number or commitment at a particular [indiscernible] but we don't make forward-looking statement. But considering that we'll probably touch the $100 million mark this financial year at the end of the next quarter. Getting to a total...

Balaji here. I think there is a clear strategy. We are executing on the strategy, the financial KPIs were exactly in this direction. There are still some -- I'm sure there is still the global pandemic that is even making it more difficult to make any forward-looking statement. On the other hand side, we see in all our business segments, including a even a few questions on engineering. And I think there, where we talk about software-related R&D engineering services. We are -- we do see a very healthy growth rate, and we will even see that scope of this call year, we participate in this growth other than in R&D and the different software. But we even know that in the automotive and the aerospace industry, the product isn't today, not 100% software. There's a significant amount of mechanical components still in the aircraft, in the car and people in the market procedure even [indiscernible] It's an important activity, but definitely, we been coming with lower margin. And we see that we are well positioned we already mentioned that the peer group industry that is electronic and embedded. So all the software-related activities. And then we even see that we will be continuing the similar growth rates and the shift [indiscernible] even with that as Balaji said, yes we execute on the strategy before we can't really make any forward-looking commitments [indiscernible] understand it.

We'll take the next question from the line of Hiten Jain from Invesco.

I just -- my line wasn't clear earlier. So I just want to make sure I've understood the margins impact sequential this quarter. I heard you saying about the software charges pass-through element which impacted the margin? Maybe if you can quantify that. And if that happened then it would have also boosted the revenue. So then perhaps the revenue has come lower than what we would have initially expected because of that? And also, last quarter, you had said that there were a few merger-related expense, which were there in the first half of this financial year, which wouldn't be there in this quarter, third quarter. So that was a tailwind to margins. So if you can just help me understand how the margins are below your expectations despite having these tailwinds?

One thing on the software side is -- the whole software amount was around the $21 millions down - INR 2.1 crores. And it is more a pass-through kind of a thing that we don't put any margin to that and mere like a kind of a reimbursement which gets into the revenue. So that's the reason your margins go down because of this. So we don't get much margin on that. That is one reason where the [indiscernible]. Of course there is no -- in this quarter obviously, not much or almost nil amount spent on any of the merger activity. So that didn't happen this quarter, even though the previous half really we had it. The major component, what I was mentioning is this quarter, which have -- there was oil project software, which have been sold and also some of the increase in the salary cost of the 2 major reasons, which have impacted EBITDA for this quarter.

So then perhaps at this -- the supply side challenges are than you would have initially expected, from the commentary, it looks like -- so how is the attrition? And then this becomes kind of uncertain for us to maintain that kind of margin, 18% because things are only difficult right going forward? And what keeps you maintained that 18% kind of an EBITDA margin guidance?

One aspect of it, if you look at in this current quarter so, we have converted the [indiscernible] into a regular billable [indiscernible] Count. So that has also had a impact on the cost. So as what people get into the billable role in the coming, to billed role into the mix in the next 2 quarters, that will add to the top, which will have a impact on the margins. That's the way we are looking at it. The whole point, we got into the higher deploy model, which will be your margin improver in the long term,that's the idea behind it. So that's the reason we have also a little -- that's the whole purpose of this investment to get the content of maintaining the EBITDA in the future.

Okay. And also, can you help me understand the time lines that you are expecting for this merger? And what are the milestones that we have to go through to get the complete merger in terms of time lines?

See with respect to the time line, as mentioned before, we have got the SEBI approval now the NCLT. And you know NCLT support is equivalent to High Court. They take up the case based on that, they just put it on -- they asked for the hearing. They only tell the date for the hearing. And with respect to Maharashtra, we had 2 times, we had hearing coming in, but they didn't took the case, took off the case because there are other priorities came in. And adding that the surveys have also created some amount of delay. We are pushing out for this. But honestly, we cannot do much on it because it's a code which we don't have any influence on them. But we tried to see that how we can get the things done. But honestly, if I look at it, the time line was -- quarter 2 was the time line what we had in mind before may be -- I'm sorry April to June was the time line which we had initially. Now we may spill over to July with the way we look at it in the current state of things.

So July -- So once you get the NCLT approval, what will be the next step?

The next step, when we get it then after the [indiscernible] have been done. We will do the consolidated financial starting April because our date of merger, what we have taken a 1st of April, our books will be starting on 1st of April, which we'll be doing the consolidation, so...

I think the next step after is NCLT approval we will also start on the [indiscernible]

Once the NCLT hearing is more further, giving them or going ahead with the shareholders' meeting and also the secured creditors' meeting, the greatest meeting rather. So once that we get from this, and we will do a notice and we will be sending a notice to the shareholders, which will have the bridge prospectus, which will have also the other unlisted company financials. And the LLC hold the shareholders meeting and get that approval and go back to the NCLT and submit this approval from the shareholders. And from that they will give the approval for the merger. That's the process.

Okay. So after NCLT of court hearing, roughly 6 months it would be the time lines. And there, it should just flow-through, right? That should be the expectations.

The first NCLT is for the shareholder meeting, shareholders and creditors will create that meeting. Which will be around 1 day. Once they give the approval, then it will at least 12 days when we get the order. And then by 31 days, we'll have the meeting happening for the shareholders later, and we go back and give it. The will when will come back and that will take almost one month for them to finalize through the time line what they have given. So put all together, we see that around July is the time frame that we will finally complete this whole merger process that is after the issue of shares, it will happen around July.

Ladies and gentlemen, we will take 1 last question from the line of Faisal Hawa from H.G. Hawa and Company.

I think rather than anything else in more than number or anything because this is looking next your date of how soon we are able to hire people? And How soon we're able to train them and get them on to their job and this is at reflecting revenue. So my point of question is, is there any best practices that we have incorporated or we have done from the parent. And then actually in the last 3, 4 months to really [indiscernible] putting and people on to the bed on the job. And our revenues on the [indiscernible] increase [indiscernible].

Mr. Hawa, the audio is breaking from your lines sir. Please check.

Can you hear me now? Should I repeat the entire question?

No, no, we heard it, we heard it. Go ahead. So should I answer now or anything else that you would want to add?

Hello? Sir what is the growth in our digital revenue sir?

Yes. So I go ahead and answer the first part of the question on the hiring. So if you look our -- if you look at what we are trying to do from a hiring, training and demployment to hire, train and deploy people but only for the execution level is low so it's not the question of hiring people at that level because that normally 30% to 40% of your work force. You also need macro hires because you need people with experience in the development -- technology [indiscernible]. So it's not just a question of beating the supply chain of getting people trained by them, go ahead and deploy. So it's a combination of multiple factors. The best one, our focus is the [indiscernible] it has on hiring interview -- actually the hiring in general over about 6 months. So we are deploying all variables, global best practice in the terms of getting told what our global team is using both in terms of evaluation, in terms of assessment -- digital assessment. We all moved from the physical world of bearing interviews or assessment and other certain or [indiscernible] some of the growth has been doing [indiscernible] we had to do locally given the kind of a scale that we have in India which is not the case in any other geographies. So it has challenge, but it's not something that was impossible and we've done a [indiscernible] good job for all the [indiscernible] from an industry perspective we are certainly above the industry standard in terms of fulfillment. So it's not just a question of hiring and training. On the second element on physical training. That's the focus area for us over the last 3 years. All our technology leadership that we hired in 2020 and even the early part of 2021. Focusing on specialized searching automation, intelligent pop-up automation, and software development embedded as part of our offering to the customer, or the [indiscernible] investment that we have done. All those are actually contributing to be digital revenue on growth. We expect it from 9% now we have come to close around from 9% 2 year back to now we are close to 35% overall. During the course of this year once again that segment will grow much faster by the traditional searching services and we think that, that will get us closer to the 50% margin during the course of the calendar year 2022.

Ladies and gentlemen, we will take that as the last question. I now hand the conference over to the Management for closing comments.

Thank you so much. It was really good to see so much of interest and the kind of question that were asked. Thanks once again for your interest and attention towards Expleo as a business. We really appreciate the efforts at the time [indiscernible] Looking forward to your continued support. Take care, stay healthy. Ralph, do you want to add anything more?

[indiscernible] what you already said thanks and for you interest in us, for your support, for your questions. And this is always valuable input for us to reflect what we are doing. We communicated with the success that we are having had and take in to questions and just statement you can have the [indiscernible] for all that we and the consider and we can then see that we can implement this and when it comes to the execution of our strategy. Thank you, again.

Thank you. Ladies and gentlemen, on behalf of Expleo Solutions Limited, that concludes this conference call. Thank you for joining us, and you may now disconnect your lines.