Hinduja Global Solutions Limited (HGS) Earnings Call Transcript & Summary

Ladies and gentlemen, good day, and welcome to Hinduja Global Solutions Limited Q2 and H1 FY '22 Earnings Conference Call. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Mr. Snighter Albuquerque from Adfactors. Thank you, and over to you, sir.

Thank you, Nirav. Good evening, everyone, and a warm welcome to the Q2 and H1 FY '22 Results Conference Call of Hinduja Global Solutions Limited. We are joined by Mr. Partha DeSarkar, Executive Director and Global CEO; and Mr. Srinivas Palakodeti, Global CFO, to discuss the Q2 and H1 results and the key developments during the period. Before we begin the conference call, I would like to mention that some of the statements made during the course of today's call may be forward-looking in nature, including those related to the future financials and operating performances, benefits and synergies of the company's strategies, future opportunities and growth of the market of the company's services and solutions. Further, I would like to mention that some of the statements made in today's conference call may be forward-looking in nature and may involve risks and uncertainties. I would further like to mention that if there is a call drop during the course of the conference call, please bear with the management, because of COVID-19, all of us are taking calls on mobiles from different locations, hence, call drops may be a recurring problem. Thank you, and over to you, Partha sir.

Thank you, and good evening, good morning to everybody who's taken the time to join us. I really appreciate all of you coming here and listening to us. And our earnings presentation has been uploaded on both the stock exchanges and it's also there on the website. So while I'm speaking, I'm going to refer to the slides that are there on the earnings deck. And for the ease of understanding, I would encourage all of you who are on the call to also refer to the same deck as we speak. With that, I would like to give you highlights of our quarter. It has been an extraordinarily strong quarter, as you all have seen, based on the numbers that have been published. Our revenues for quarter 2 are INR 15,826 million and that is about an 18.8% growth in our revenues, if you compare to it the previous quarter -- previous year's same quarter. EBITDA has grown up by INR 2,269 crores -- sorry, INR 2,269 million, and that is a 21.2% growth over the same quarter of last year. Profit before tax, INR 1,705 million, 88.6% growth over the same quarter last year, and profit after tax, INR 1,365 million, a 67.9% growth over the similar quarter last year. So you obviously see that these numbers are rather spectacular numbers and is a good growth everywhere in revenue, profitability and especially in profit after tax. Being able to declare 67.9% growth in profitability is obviously something that we are very pleased about. So those are the headline numbers for the quarter. And I will now compare the first half of this year with the first half of last year. So here, some of the numbers are even better, and that has to be put in the context of the fact that the first half of last year was impacted significantly by COVID. And this year, COVID has become business as usual for us. We've learned to thrive in COVID. We've learned to do business in COVID. We've learned to work from home and still do business. So our revenues are INR 31,331 million, which is a 22% growth for the half year of last year. And our EBITDA is INR 4,590 million, a 37.9% growth. Again, very impressive growth numbers. But the spectacular group numbers really come in the profit before tax and the profit after tax. The profit before tax number is INR 3,347 million, a 101.7% growth over the similar half year last year. And the profit after tax as well is INR 2,535 million, that is 94.2% growth over last year. So these numbers clearly look impressive. And as said, the context of this comparison clearly has to be understood that we had COVID impact strongly in quarter 1 of last year, therefore, when you compare even the half year numbers, the numbers are going to be much, much better this year. If you move to the next slide, I will talk about our growth momentum. We've seen really good growth momentum in our health care and the public sector business, leading to significant growth and ramp-ups. Our public sector business in the U.K. has had a spectacular performance, a revenue growth of 102% year-on-year. And I'm also pleased to tell you that a large part of this growth, we've always had a good growth coming from health care business, but this is the first quarter that we are seeing that the rest of the business, the non-health care business has actually grown faster than the health care business. So if you look at the health care business, it is grown by 13.5% for the first half of the year. And if you look at the non-health care part of the business, it's grown by 35.3% for the first half of this year compared to the last year. So this is, in fact, unique in this year that our growth momentum has come from the CES business as compared to what traditionally has always been driven by the health care business. In rupee terms, also the numbers are reasonably similar. You would say that the growth in the rest of the business has grown with specific numbers I'm going to tell you. It's grown from INR 11,844 million last half of the year -- or the first half of the last year to INR 15,812 million in the first half of this year. That is a 33.5% growth on the CES business. Compared to that, the health care business last year was -- last half of the year was INR 13,852 million. That has grown to INR 15,590 million. That growth constitutes about 12%. So you would see that the CES business have actually grown more than double of that of the health care business, giving us an overall growth number of 21.9% in rupee terms and 23.5% impact in dollar terms. Our digital business has also done well. We've signed up 14 engagements with new and existing clients. Client wins are impressive as well, 10 new logos across verticals for core BPM services and 7 for HRO and payroll processing in quarter 2. We continue to significantly work from home and we haven't really gone back to offices. And as of now, I can only tell you that there are no plans, no concrete plans to bring people back to work, because there is no requirement to do that. Even the vaccination rates have improved and I think in most countries, the numbers are more under control. We still are being very, very cautious and taking each day at a time and not really looking at coming back to work and increasing risk for our workforce. Given the fact that it actually has not resulted in any different productivity, where we see no reason why we should be concerned with that. Added factor is that while we use work-from-home as our principal mode for delivery, our operating expenses go down, and that's another strong reason why we believe that work-from-home is going to be a big chunk of our delivery going forward. Our headcount as on September 30, 2021 is 46,698, an increase of 3,929 from the last quarter. Moving ahead to the rest of the year outlook, I would say that with global travel improving, and in fact, both me and Pala are in North America. We came here as soon as North America opened up for travel. And with global travel improving and the sentiments for business also improving globally, that only bodes well for our industry, and we see demand coming back from some of the sectors, which were under pressure, like travel and hospitality. We don't have much exposure to that. We have a few clients there in that, so those clients will obviously foster some improvement in global travel. So going forward, healthy -- the sales pipeline is healthy as well. I shared with you the core respective growth numbers of CES and the health care business. I am encouraged to see that the CES business has continued to grow from strength to strength and that the growth momentum is going to continue in the second half of the year as well. While we speak to be able to handle this additional growth, we are actually setting up 2 new centers in Jamaica and Northern Ireland. This, you may believe is actually contrary to what I've said that most of our growth -- most of our production will be on a work from home basis. So why are we building up centers then? The reason we are doing that is that our delivery footprint, work from home far exceeds a situation where if we were to all come back to work, then the seats that we have will not be sufficient. So we have to build the right balance where how much is work on home and how much seats do you have as capacity, if you need to come back to work. So you can't be in a situation where you don't invest in brick-and-mortar way at all. And then as and when people declare that they can come back to work and people want to start going back to work, you don't have seats to be able to bring people back to work. So we don't want to be in that situation. That is the whole rationale behind why we are still investing in a few centers, while we are divesting in some other centers, which we believe we don't need for the future. So it's a balancing act that we are doing. Cash generation is very good. Pala is going to cover that in his section. We continue to reduce debt. And we have also increased the dividend this quarter, and that will be our continued focus to explore, continue to reward our shareholders. Before I hand over to Pala, I'm going to give you status on the divestment of the health care services business. The divestment is on track. By and large, most of the regulatory approvals that are required in the 4 geographies that this deal is actually getting done are in the process of getting approved. We don't see any concerns out there. You will recall that the transaction was based on an enterprise value of $1.2 billion, and it's subject to closing adjustments, shareholder and other regulatory approvals. The divestment has been approved by the shareholders in the AGM held on 23rd of September 2021. And as I said, we are on track to get most of the approvals, and we see no concerns as to get to the final closure. With that, I'm going to hand this over to Pala for the details of the financials. So Pala, over to you.

Thank you, Partha. Before we start, I just want to check, is my audio clear?

Yes, sir.

Thank you. So good evening, everyone. Welcome once again, and thank you for joining us on this call. I shall cover the financial section, and I shall move to Slide 9. As Partha mentioned, it's been a quarter of very strong growth. Our revenues have grown by about 18.8% over the same period last year. And within this, both sectors have contributed to the growth. The health care business has grown 11.3% on a year-on-year basis, while the non-health care business coming primarily from U.K. has grown at a phenomenal 28%, delivering overall growth on year-on-year basis of 18.8%. The EBITDA growth is 21.2%. We've had some benefits of exchange rates, so you would see an increase in the other income between quarter ending September '21 and quarter ending September '20, relating -- resulting PBT growth of about 88.6%. The -- coming to the PAT part, the growth on a year-on-year basis has been 68% and about 16.6% is on a sequential basis. Just to recap, the tax provision for the quarter ending September '20, which is Q2 of last financial, is lower because we had some reversal on the -- we created some deferred tax assets, because of some internal restructuring, and hence, the tax line -- tax provision for Q1 of -- Q2 of FY '21 was low. Now it is at a more normative level. And the PAT growth, after factoring the other component, has grown by about 68% on a year-on-year basis. And on a sequential basis, the growth rate has been 16.6% for FY -- for Q2 of FY '22. And keeping in line with the performance of the company, the interim dividend, which was -- which stood at INR 6 -- sorry, INR 7 for the quarter ending June '21 has been increased to INR 10 per share as second interim dividend for the quarter ending September '21. Moving to the next slide. Again, our performance, which is very strong. Growth in revenue terms, in rupee terms, has been 22%. Again, the growth on the CES side, the non-health care has been faster than the growth on the health care side. Significant increase in EBITDA, it's grown by about 38%, and the margins have also increased by about 160 basis points to 14.6%. At the PBT level, profits are up by about 102%. And at the PAT level, our profits are up by about 94%. So overall, a very strong performance in the second half of the year -- sorry, in the first half of FY '22 compared to the same period of FY '21. As Partha mentioned, first half of FY '21, we did have some costs relating to COVID rolling out work from home. But as he mentioned, work from home has now become the norm, and these reflect the performance of our company for the first half of the year. Moving on to, from an origination perspective, the revenue by vertical, health care is about 51%. We have done some tweaks because there are some parts of the business, which were originally from the health care vector, but which would continue to be with HGS, these pertain to health care clients of our digital business or the HRO business. So there have been some re-class there. So health care now accounts for about 51% -- sorry, a little over 51% and the rest of the business accounts for about 49% of the total revenue. From an origination perspective, revenues from U.S. continue to be the largest at about 69.2%. The call-out item is really the U.K. business, which is 15.5%. And as this was roughly in the 7%, 8% about a year ago. And as Partha mentioned earlier, this has grown by more than 100%, our U.K. originated business. So the share of U.K. also is showing up at a high 15.5%, and you can see now it's even higher than what our revenue is from Canada. Next, moving on to the next slide. We have debt of about INR 3,445 million, which is about 47%. There has been a reduction between 31st March and 30th June as well as coming up to 30th September. So the reduction in the first half of the year is INR 491 million or INR 49 crores. Within the existing debt, about 47% are term loans, and the balance are coming in the form of working capital. And as Partha mentioned, our endeavor would be to continue to reduce debt. Moving on to the next slide, Slide 30. This talks about the increase in levels of cash as well as in terms of the reduction of debt. Both have shown movements with reduction in debt and increase in cash, leaving HGS as of 30th September as a net cash company of INR 500.8 crores or INR 5,008 million. Our cash flow continue to be strong. We had DSO days of 72 as of 31st of March '21. That dropped to 68 days as of June, and that has dropped further to 66 days as of March -- so as of September '21. In terms of CapEx, there has been some increase between Q1 and Q2, primarily because of what we mentioned, we are adding capacity in Jamaica and to some extent in U.K., commensurate with the growth and to make sure that if we need to come back to work, we have enough capacity. So as Partha mentioned, that's -- there is no fixed time lines for this. From a free cash flow -- EBITDA to free cash flow conversion, that continues to be strong. Though it has been a slight -- I mean, there's a dip between Q1 and Q2 that's primarily driven by higher CapEx rather than cash flow from the operations or working capital changes. The business ROCE, which excludes the treasury income, with growth in performance, that has continued to rise, and for the quarter on an annualized basis stands at 25.8% as compared to 24.9% annualized on Q1 of FY '22. We continue to take forward covers on a rolling 12 months, 24 months, 36 months basis. You will see there are 3 buckets. Obviously, the largest coverage is for FY '22, and it comes down for '23 and '24. We have good rates compared to the spot rate, upwards of 80 for FY '23 and upwards of 83 for FY '24 and '25. A similar position in Philippines, we have forward covers of about $100 million for FY '22 and about $27 million for FY '23, with a rate of about 50.6. So summing up from a balance sheet perspective, we continue to be having a very strong balance sheet, net worth of INR 22,600 million, book value of about INR 1,082 per share. In the first half of the year, we have given INR 17 per share as dividend, INR 7 for the quarter 1 and INR 10 for quarter 2. And currently, the stock price is trading somewhere in the P/E ratio of about 12.6%. Traditionally, we have given you revenue profile for the HGS as a whole. In the subsequent slides, what we have done, going to do is cover the revenue profile of the business, showing the health care business separately and the rest of the business because the non-health care or CES business, this is obviously being done keeping in view the impending sale of the health care business. From a -- if you look at Slide 18, on the health care side, the client concentration, the largest client account for the -- was about 39% of total revenues and the top 5 goes up to 83.5%. For the rest of the business, non-health care or CES, the share client concentration shares dropped significantly. The health care, the top clients dropping down to 12% and the top 10 customers dropping down from about 92% to 59%. On an overall basis, on an aggregate basis, the client -- the top client is about 19.3% and the top 10 customers would account for 67.1%. From a channel mix perspective, the health care business is fairly split equally, about 51% is non-voice and 50 -- 49% plus 0.4% comprises voice and digital. Whereas on the non-health care, the CES business, the share of digital goes up to about 9.5%. The non-voice portion is smaller at about 10.6%, and about 80% is the overall -- is the voice business. On an overall basis, voice is about 71%, non-voice is about 22%, and we have about 6.7% coming from the digital business. If you go by revenue profile from our country of origination, health care is pretty much everything is from U.S., so it shows -- it's a single origination geography, that's 100% coming in from U.S. On the non-health care side, it's fairly diversified. U.S. continues to be the largest, but down to about 38%. Europe, U.K., that's the second largest, which is about 31%. And then Canada is the third largest at about 19%. India, which is primarily our HRO business as well as we do some digital revenues originating from India coming in at about 10%. But on an overall basis, U.S. continues to be the largest at about 69%, with U.K. at 15.5% and Canada at about 9.4%. Moving on to the next slide, this shows the stock price movement for the last 12 months. And if you look at Slide 21, HGS share price has gone up by about 278% as compared to CNX IT of about 65% and NIFTY 50 of about 40%. That's all I had in my section. We would like to open up for the Q&A. Thank you, ladies and gentlemen, once again, for joining us on this call. We look forward to your questions.

[Operator Instructions] Nagraj Chandrasekar from Laburnum Capital.

Sir, could you please update us on the time line expected for the transaction to consummate, given you said everything is in place? And when it was originally announced a 90 to 120-day period, which implies sort of November 10th to December 10th date time line is sort of implied.

Mr. Nagraj, that kind of is still on track, I would say. Most of the regulatory approvals that we require to close this transaction across the 4 geographies, we were expecting to be met within the dates that you mentioned. After that, it's the logistics of getting the operational works done. So all of that is on track.

Understood. And just thank you for breaking out the business mix on a pro forma basis between the continuing and the divested businesses. Could you also give us some more color on the operating metrics on margin and working capital for the non-health care business? And how much operating cash you need to run this business, given I think at around a INR 3,000 crore run rate, we're already at INR 500 crores of net cash on the balance sheet?

Yes, those are very good questions. So I'm going to deflect this question to Pala. We may not have those numbers ready for this presentation, but if we can provide that subsequently, we can do that. But Pala, probably, you can give those numbers on a high level on this call.

Sure. Thank you. Good set of questions. Let me answer them to whatever extent I can. So the non-health care or the CES business, as we call it, that's about, as you would have seen from the presentation, about 50% -- close to 50% of the quarter revenue. A large chunk of this, as you would have seen from my earlier portion, the revenues are coming in from U.K., which is again predominantly public sector. And unlike maybe in other geographies or what maybe the perception, in U.K., we get paid as per contract itself. So at an overall level, I don't see any significant difference between the DSO days for the health care business as well as for the CES or the non-health care business. Potentially, it is going to -- maybe even be better than what we have for the health care business. The other aspect is in terms -- so that would take -- address the issues of DSO days. Again, from a CapEx point of view, it is more driven by the location rather than by the nature of business, whether it's health care or CES, right? So if I have to set up a seat in U.S. or in Jamaica, it is agnostic whether the nature of business is going to be from health care or from CES. I hope that addresses your questions, Mr. Nagraj.

And on margins?

Margins, we -- as we said in our AGM, we are looking -- expecting margins to be around in the low-digit -- low double-digits from an EBITDA margin perspective.

Understood. Got it. Just one last question. You've seen a very large spike in hiring this quarter. So just curious is this to replace anticipated attrition that are sort of serving out notice periods or is this because you foresee a lot of growth on the non-health care side? And just wanted some more color on why we are seeing seen such a strong bump-up in numbers.

See, we generally prepare for quarter 3 and quarter 4, so because of the seasonality in the health care business, the hiring ramps up during quarter 2 to meet the demand of quarter 3 and quarter 4. Also, you have seen that the U.K. business has actually grown significantly. So a lot of hiring is happening in U.K. as well.

[Operator Instructions] Siddharth Oberoi from Prudent Equity.

Yes. So I want to know is there any warranty or claims or any penalty clause in this health care division's sale where you don't meet the time lines, so that some amount can leak out or something?

No. There is nothing like that.

There's nothing like that. So the buyer cannot walk out of the deal right now, is it?

I think those concerns are -- there are no concerns like that. As I told you in the previous question, we are on track for getting regulatory approvals. Regulatory approvals are required in India, Philippines, Jamaica and U.S. and they're mostly expected in the next 2, 3 weeks.

Okay. And any geography -- is it all the 4 geographies are right now open, nothing has been concluded in any of them?

No, I wouldn't say that. Some approvals have come within their respective geographies, whereas some approvals are required. It's not just one approval. There are multiple approvals required from -- so the approval required from Competition Commission, there is approval required from Export Processing Zone, all of that. And some approvals need to come to HGS and some approvals need to come from theirs. So yes, so large chuck of the approvals have already come in. Some are still on track to close in the next 2 to 3 weeks.

Okay. So last time, in the last con call, you had said that there is no one single check and there'll be multiple payments that will come from each geography?

That is correct.

All right. Okay. Also, I'd like to know what is the exchange rate that will be for the calculation? It will be on the date of the agreement, the deal agreement or whenever you receive the check?

Pala, you have understood the question?

Yes, yes. It's the rate applicable effectively on closing, 1 or 2 days before closing.

Okay. Just on the closing date, right?

Yes, essentially on the closing date.

All right. And also have you put any thoughts on returning cash to the shareholders when the deal concludes, because we're just a month away?

Yes. So this is actively being deliberated with the Board. I have mentioned that very clearly in my statements as well, both to the media and into this conference call that yes, the consideration is to return value to the shareholders. That is the whole purpose why this deal was done. We want to get into the clear tax-efficient burner. So all of these things are being deliberated to the Board as we speak.

Okay. But is there any plan for de-listing, et cetera, or you're not going on that road?

No. De-listing has not been considered right now.

Okay. Also, in the presentation, you've given the breakup of the non-health care versus the health care. And there are some of these verticals like technology, consumer retail, which have actually de-grown. Technology de-grew by 21%, consumer retail by 12%. However, there's a growth in the other verticals. So can you shed some light on where exactly the portfolio of non-health care stands in terms of growth now?

So I don't know if you heard the conference call from the beginning. I shared with you that the growth on the non-health care part of the business for this quarter is double -- more than double growth for the health care business.

Okay. Overall?

Yes, yes. On an overall basis. Let me just tell you, repeat the numbers for you, hold on. Please bear with me. Yes, so the health care business for this half year compared to last year grew by 13.5%, whereas the non-health care business, it grew by 35.3%. This is in dollar terms. So as I said, the non-health care business has actually grown more than double that of the health care business.

[Nikhil Jain] from Galaxy International.

Just a couple of points.

Nikhil, sorry to interrupt you. Your voice is not coming very clear.

Nikhil, sorry, it's very muffled.

Yes, I'm sorry. So I hope this is better?

Yes.

Yes. So sir, what I was just trying to understand was 2 points. One was, let's say, we were looking at some acquisitions or some other ways to use the cash once it is available, so has there been any progress on that aspect? And I -- and would anything be finalized closer 2 months, let's say, receiving the money or closing out the transaction? So that is point one.

So that is actually independent thing, returning money to shareholders is in an independent track and finding growth, both organically and inorganically is another track, right? So there is enough cash available to do justice to both. So mergers and acquisition is something that we've done on an ongoing basis throughout our history. And as we speak, we evaluate multiple targets every quarter. So that's where we stand today.

Right, sir. But what I actually wanted to understand was that are we looking at some kind of a big acquisition, given the money involved? Or is it like kind of smaller acquisitions that we have been doing in the past and building up on those bases? So is there any thought, any progress or any guidance on that?

So, mostly, our acquisitions that we're talking about are in the technology space. We've made it very clear that by 2025, we'll become a technology company, right. So our efforts are, therefore, to grow our digital and our technology practice. So most of our acquisitions are, therefore -- the acquisition targets, therefore, are today focused on digital and technology acquisitions.

Right. And the size or the quantum, we cannot still, let's say, we have not -- have any thoughts on…

No, I don't think I can tell you anything in specific, because there isn't anything specific that we have right now. We value this on an ongoing basis. So...

Okay. Fair enough. And thus, my second question was that, let's say, with the money that is received, so -- and from our current calculation, so is there any intent of the management to, let's say, further increase the exposure to the Group companies through ICDs or loans? Or is it like a cap of, let's say, around INR 500-odd crores that you have?

So, the current cap is INR 500 crores, and we are well within that.

And we don't expect to increase it post the closure of the deals, right, so we have more cash available?

So I did not make any comments on what's going to happen once the deal closes. Right now, it's INR 500 crores, and we're going to remain within that cap.

[Operator Instructions] Maneesh Jain from ValueFirst Digital Media.

Yes. My question is that from this deal value of $1.2 billion, is there any money which is going specifically to the promoters and not coming to the company as a no-complete deal or in any other form, money, which did not come to company that would go to promoters?

No.

All money will come to the company.

Kapil Verma from SGS India.

My question is that after signing of the BTA, what is the closing date? Is it 90 days or it's 60 days?

I think we have covered that multiple times on this Q&A today. At least, I have answered this question at least 2, 3 times.

Okay. Second question is that you -- we have [indiscernible] the acquisition of organic and inorganic things. So what is the percentage we are looking for the entire deal size for the acquisitions?

Again, I answered this question. I cannot talk about a specific deal value. We are looking at acquisitions in the technology space. So right now, there isn't any specific target that we have in mind, that says that this is the amount that we're going to spend. But funds that are available to the company, funds that are available to the company post the return of money to the shareholders are going to be used for organic and inorganic and debt reduction.

And like earlier acquisitions, we used to bleed money and losses year by year. So are there any plans that we are not acquiring any loss-making entities?

So I think that is a very good question. I think we have had many criticisms about the 2 health care businesses that we acquired, which are loss-making. And you can find from the fact that we are able to sell that business at $1.2 billion that, that criticism was actually unfounded. Some of these acquisitions bring in capabilities but are not immediately cash-accretive or earnings-accretive. You need to invest in those businesses to turn the things around and then they start gaining value. The fact that these businesses, along with some of the acquisitions that we have done, which were loss making, are actually been sold at this fantastic $1.2 billion valuation tells you just because there is some amount of cash burn to turn some of these acquisitions around, to build on these capabilities were steps in the right direction.

[Operator Instructions] [Jay Patel] from [ABA Consultants].

I just wanted to check about your rationale for exiting the health care business. Was it because you found a good opportunity, a better opportunity? Or was it because the health care business has reached its saturation?

I think that's an interesting question. We found that the business was not able to attract the value that it deserves from the Indian stock markets. It is U.S.-centered business. All its revenues are, as Pala shared, is in the U.S. and therefore, people's ability to understand what this business is and what its inherent worth is, we're always finding that gap in understanding, and it is obviously my inability to sell this story well to the Indian stock market. You saw the unlocking of the value that happened when an investor came in and understood what this business is all about. So we couldn't have continued with the valuation that we got with the business in the India stock exchanges as opposed to its inherent worth to a possible investor. That we found that, that was not the best way to continue to keep the business in our portfolio.

Understood, sir. And next question, sir, on the same lines. Now with health care vertical gone, which vertical will actually replace when you see in terms of contribution to the revenue -- overall revenue?

We have quite a few -- quite a few good verticals. We have got technology in India telecom that is doing well. We have done -- you've got the public sector, which is doing well. And we've got the digital businesses. So these 3 verticals will continue to be our engines for growth.

Manish Parikh, Individual Investor.

Congratulations, sir, for the good set of numbers. Sir, I had this small question on the financial -- on the balance sheet side. The loans section, there is advances of INR 552 crores as on September '21. And if you look at the related party, it is around INR 389 crores. Can you help me understand the residual amount to which party the amount is given?

Pala, you'll take that question?

Yes. So it's an entity, which is not the related party, so that's why it is showing up -- that's why the difference you are talking about.

Okay. Because I was referring to the credit rating report by CRISIL, they have mentioned that to the Group and the Group entities, overall, the advances are to the tune of INR 553 crores. So I think there is a small discrepancy there in the rating report, maybe they have missed out or?

Yes. So okay, thank you for pointing this. I'll go and check that out. But clearly, if you look at our FY '21 audited balance sheet, there is -- the numbers are clear. What is the loan, which is also what we have published for 31st March, '21, the loans which are there to related parties.

Very true, sir. Very true. So I was a bit confused because in the credit rating report, they've mentioned that as on June 30th, INR 553 crores are given to the exposure to the Group entities. So...

Yes, yes. Thank you. We will take this up. I -- we thank you for pointing this out.

[ Nikhil Jain ] from Galaxy International.

Just an additional question to Pala, sir. Sir, this when the transition completes, so out of this $1.2 billion, how much…

Sorry to interrupt you. Your voice is completely muffled.

I'll just try to do better. I hope it is better now.

Yes.

Yes. Go ahead.

Yes. So what I was just asking was that out of the total transaction value of $1.2 billion, what would be the net amount that will come to the organization, let's say, post the payment of taxes and other capital gains or other statutory levies? So any idea or any working on that, which will help if you can share?

Yes. So I don't know if you've had a chance to look at the AGM notice what was published earlier. Essentially, the transaction has a business transfer component or a slump sale, as you would call it in India, for India, Philippines and Jamaica. Whereas the transaction in U.S. for the U.S. entities pertains to the sale of the -- sale of shares, right? So the tax rates for India and Philippines is roughly about 22%, given that the Philippines is a branch of the Indian entity. The -- since the U.S. portion is through sale of shares of the U.S. entities by our Mauritius subsidiary, there, the tax rates will be pretty much close to 0, negligible. So at an overall level, we're working through, but we expect somewhere in the range of 10% to 12% going towards taxes.

Right. So that means that basically out of $1.2 billion, so the net inflow to the organization would be around $1.05 billion, plus...

Somewhere in that, yes, yes. Somewhere in that -- somewhere in that range.

Right. And my second question was with respect to the comment that Partha sir made actually about the value being recognized by the stock exchanges. So today, also, if I look and I have been a shareholder for some time, so the market cap of the company actually is less than half of the -- even the cash that is coming into the organization, actually, right? And leave aside the business that we will have, which will run very well over the next couple of years. So any thoughts, anything -- what is the reason for this, is still stock markets not giving us the value that we deserve?

Yes. So that is a matter of speculation, sir. I cannot comment. I simply may answer the question that why did we sell the business. The discrepancy between the price at which this business was being quoted in the Indian stock exchanges and the value that we were able to get from an investor who understands the U.S. health care was so large. But just for the benefit of the shareholders it did not make sense for us to continue to retain the business. That's why we did that. So that is -- so hopefully, people have seen that. Hopefully, this will give people a better understanding the investors in this company and the Indian investor a better understanding of what we do. The fact that so much value could be unlocked in that particular transaction. And hopefully, therefore, you will see the performance and the results and value the company differently. This is all I can say. So it is a matter of speculation.

[Operator Instructions] [Raghav Agarwal] from Star Securities.

Mr. Partha, in the last call, you had hinted at your tuck-ins being around $25 million. So -- and now that we're learning that I…

Sorry, what did you say? I didn't hear you properly. Can you please repeat what you said?

Yes, sure. So in the last con call, you hinted at your future tuck-ins to be around $25 million. So based on that evidence -- can you hear me? Am I audible?

Yes, yes, yes.

Yes. So based on that, is it fair to estimate that even if we are aggressive in acquisitions, that you can still reward the shareholders with about $600 million to $700 million out of the cash that's coming in?

Look, we will reward the shareholders pretty handsomely. I don't want to make a comment on the amount of that will be returned. Okay. The whole purpose of doing this exercise was to unlock value for the shareholders. And we are not going away from that requirement, from that objective. So I will not be able to give you specifics about quantum and all of that because this is currently being considered, under deliberation with the Board. We are looking at making it tax-efficient as well, not all forms of returning money to shareholders is equally tax-efficient. There are multiple ways of doing that. Some are more tax-efficient. Some are not. This is still under deliberation. I won't be able to tell you specifically what amount is coming back at this level. This is very premature.

All right. And one more thing. I mean like on the remainder portion of our business, what would you -- what according to you are value? I mean, what should be our actual value if we don't consider how the Indian market is actually valuing our business?

Well, if you look at the health care business, it's $400 million, it's been valued at $1.2 billion. That is at 3x revenues, right?

Yes, correct.

So that gives you an indication. Rest of it, as a CEO, I will always feel that I'm under-valued. So it's always a matter of protection. It's up to you to take a call, right? I can only show you profits. I can only show you cash flows. I can only show you strength of the balance sheet. And I can show you a track record of past 20 years of providing quarter-on-quarter, both in profitability and dividends, right? It's up to you to take that call as to how you value that business, which is not to me to comment on.

Maneesh Jain from ValueFirst.

Thanks for giving me a chance to ask second question. There was just now a question that the value in the stock market is not even close to what the deal value will be, right? So market capitalization is lower. So there, I want to make a comment. I am in part of various discussions and forums in which stock -- shareholders of Hinduja Global give their comments and write things. I think one of the reasons for lower stock market prices that people have this fear in their mind that a good part of the money, which will come in the company will go to some out-of-group entities. So if management makes a very clear commitment that more money will not to group companies, I can assure you that share price will go up immediately by at least 25% to 30%. So this fear has to be removed from the mind of the shareholders, if you really want to achieve your objective of giving good value to the shareholders. So this is my comment. If you can give some commitment, some answer, that would be great.

So I thought we already answered that question. I clearly said, no, that none of this money that is going to come in is going to go to the promoters. All the money is going to come to the company. I thought we already answered that question earlier in the call.

No, I'm saying as ICDs, as intercorporate loans, money will not go to promoters, but not more loans will be given to Group companies or promoter group companies.

There is a cap of 500 and we are within that INR 500 crores and we are within that cap. So we've not exceeded those caps.

So that is definitely showing the stock prices now, post this conference call.

Yes. I can't comment on that. I've already committed what the sale proceeds are going to go into. So as we have said, nothing is going to the promoters, the entire money is coming into the company. I think we're over time, right.

But the money which is coming to the company now will not be given as fresh loans to the group companies, so that commitment will be very useful.

Okay. I think you should look at how we return money to the shareholders, and then let's have a chat again. I don't believe that shareholders will have any reason to complain, given the fact that the only reason that this deal was to unlock value for shareholders.

Thank you very much. Ladies and gentlemen, we'll take that...

We have run out of time now.

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

Thank you, everyone. Thank you for your time and joining us on this Q2 earnings session and also for a lot of feedback and the questions which were asked. Thank you for joining us on this call and look forward to interacting with you when we do our Q3 earnings. Have a good day.