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

Good evening, ladies and gentlemen. A very warm welcome to the Hinduja Global Solutions Limited Q3 and 9 Months FY '22 Earnings Conference Call. From the senior management, we have with us today, Mr. Partha DeSarkar, Executive Director and Group Chief Executive Officer; and Mr. Srinivas Palakodeti, Global Chief Financial Officer. [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.

Thank you, Mike. Good evening, everyone, and a warm welcome to the Q3 and 9-month FY '22 Results Conference Call of Hinduja Global Solutions Limited. We are joined by Mr. Partha DeSarkar, Executive Director and Group CEO, and Mr. Srinivas Palakodeti, Global CFO, to discuss the Q3 and 9 months FY '22 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 may be forward-looking in nature and may involve risks and uncertainties. I'd 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. A very good afternoon to all of you who've assembled to hear our quarter 3 earnings conference call. I will begin this conference call by introducing our new logo, which many would have seen. This was launched in quarter 3. It is a digital logo and its focus is on technology, which is going to be the prime mover of our business going forward. We have spent the last 20 years, 2 decades, in the customer experience space, where labor arbitrage was the principal value-add. We're not going to add technology arbitrage and domain knowledge-based arbitrage to our offerings. And that is what the new logo symbolizes. The third decade of our existence, which we call the [ tech aid ]. By 2025, the percentage of revenues and margins coming from our technology services will be much higher than what it is today. I want you to take -- I want you to go over to slide -- I hope all of you have the presentation that we put up on the website. Please look at the graph, which is on Slide 5, which basically talks about the fact that for a change, the Non-Healthcare business has actually grown faster than the Healthcare business. And that is a very welcome change. If you were to look at it both from a quarterly revenue performance perspective, the Non-healthcare business has grown at 22.1% as compared to 18.3%. And if you were to look at on a year-on-year basis, the Non-healthcare business has actually grown by 30.4% as compared to 13.6%. Overall growth is a healthy 20% from a quarterly revenue perspective on a year-on-year basis and on a YTD perspective, it is 21.3%. I want to move to Slide 6, which talks about the strong growth of our -- this is our financial dashboard. The obvious 4 numbers that all of you track and we track as well We show you a very healthy growth in revenues, EBITDA, but an absolutely superlative growth in profit before tax and profit after tax. If you look at the numbers, on a quarter-to-quarter comparison, PBT has grown by 94.4% and profit after tax has grown by 117.8%. Obviously, numbers that I'm sure all of you are happy to notice. Moving to Slide 7. I want to touch upon a bit about the drivers for growth. Healthcare, obviously, all of you know, grows because of open enrollment during this time of the year. But the other part of the business, as I mentioned, has also grown, especially the U.K. public sector, which continues its spectacular performance. Quarter 3 revenue growth for the U.K. public sector has been 61% on a year-on-year basis. The digital business has grown strongly as well. We've signed up 16 engagements with new and existing clients for digital services. And the most exciting news for our digital business has been a multimillion-dollar deal to provide consulting and managed services for a very reputed global tech company. We are not able to share the names because of confidentiality reasons. But this is one of our largest wins in the digital space. And because this comes so early in the year, I think the full effect of this is going to be visible next year. And it sets us well on the path in becoming a digital company by 2025. We've added a good number of new logos in the core BPM services and HRO/ Payroll services. Our headcount, which was 48,753 as of December 31, 2021 will come down to 19,100 across 34 delivery centers Post Healthcare divestment, which happened in January 6, 2022, which all of you are aware of. Slide 8 talks about our financial dash board. For the 9 months of FY 2022 and compare that with 2021, again, very impressive set of numbers. Revenue growth has been strong, 21.3%, obviously, is a very strong growth in revenues. But I want you to spend again some time looking at the profit before tax numbers and the profit after tax numbers that have grown 98.8% in PBT terms and 102.8% in profit after tax terms. I'm sure all of you are very encouraged by the growth in our profitability numbers. Looking ahead, how this quarter 4 FY '22 look like? Obviously, the most important thing that you will see in quarter 4, 2022, is the fact that we will have only 5 days of our Healthcare revenues. The business moved over on 6th of Jan, but it tells you that our growth in U.K. and our growth in our digital business will give you a good quarter 4 as well. The sales pipeline is pretty healthy, again, especially in the digital and the public sector. We are going through significant ramp-ups in both these 2 businesses. Our focus going ahead, especially in the Digital and the CES businesses, would be revenue, profitability and margins. Because of the very healthy cash flows and because of the sale proceeds coming into the company, we have continued to reduce debt every quarter. As of now, you will be pleased to know that we have approximately INR 16 million of debt outstanding. We are currently negotiating paying back this debt with a bank with minimal penalties. Hopefully, we will become a debt-free company pretty soon. Healthcare divestment closed on 6th of Jan. We sold this to wholly-owned subsidiaries of Betaine BV, funds affiliated with Baring Private Equity Asia on 6th of Jan. The transaction was on an enterprise value of INR 1.2 billion, subject to some closing adjustments. These adjustments resulted in inflows of INR 1.088 billion, of which about 40% was received in India, and the balance overseas. Provision for tax, investment banking fees, lawyers fees and accounting fees will go out from these proceeds. We've transferred all client contracts, assets, including infrastructure related to the healthcare services to the buyer. Over 29,000 employees from HGS have moved over to the Healthcare business effective 6 Jan, 2022. Slide 11, we did mention that one of the reasons why we were bonding to do this year was unlocking of value that had happened because of that. On 6 Jan, we announced our third interim dividend of INR 150 per share. This was paid out in January. Most of you would have already received it in your account. On January 14, we announced a buyback of Equity Shares. The allowable limit is 25% of paid-up capital and free reserves of the company for the purpose of the buyback. It's likely to be in the range of about INR 1,000 crores, subject to the audited financial statements of the company for the year, March 31, 2022. On February 12, 2022, we also announced the fourth interim dividend of INR 28 per share. So if you look at it, in the first 3 quarters, our total dividend per -- till date has been INR 195 per share. And we paid out approximately INR 407 crores as dividends to shareholders. You would have also seen quick on the heels of the divesture, we announced the signing of our deal to acquire Diversify Offshore Australia. We've been working on this deal on the sideline of our Healthcare divestment for quite some time. It will be completed in the March -- completed in the first week of March 2022. It is an EPS credit accretion. It's an Australian enterprise, providing value-added VPN services, with delivery operations in Philippines. It's entirely offshore, but sources all its business -- sorry, a major chunk of its business from Australia and New Zealand. It has some U.S. clients as well. It strengthens our presence in the Asia Pacific region, adds 4 new delivery centers in Philippines and 1,100-plus seasoned professionals. It also goes up the value chain of being able to give us very good backroom capabilities as well. We are exploring India offshore for ANZ clients. It's a big opportunity also to sell our digital solutions to a new region. Australia, as a market, is underserved so far as new technologies in the digital space are concerned, especially in the CX space. We believe that this acquisition opens up a big opportunity for us to bring our digital customer experience technologies to our Australian clients. Now I also have mentioned, there are strong cost synergies because we already have the Philippines operation, therefore, there will be synergies in reduced overhead costs and infrastructure sharing and because of the complementarity of time zones within Australia and U.S. When we combine these 2 operations together, it's going to give us very good cost synergies. You would have also seen the in-principal approval for the acquisition of NXTDIGITAL business announced on January 14. We have appointed independent valuers to arrive at the share swap issue because it's going to be a share deal. It will not entail cash flow from HGS and earnings-accretive. Digital shareholders will receive shares of HGS per the swap valuation. It will be a division of HGL -- HGSL and its operations will be merged into core operations of HGS. What are our complementary synergies? Our strategy is to deliver value through deep B2B and B2C domain-specific industry verticals. Technology Media Telecom is one of our largest verticals globally. We've clients in this vertical from Canada, U.S., U.K. and now India. The Technology Media Telecom vertical accounts for about 27% of our revenues for the retained business. The 2 entities can leverage each other's experience, talent and expertise to grow faster and expand further. With work from home and gig economy becoming a big part of this new decade, our deal with NXTDIGITAL will allow us access to India's interline which is going to open up significant labor markets, as you all know. We expect work from home to continue to be a large part of global delivery of many IT firms. Consumption of OTT platforms has increased significantly. All of these things bring in great synergies for this particular transaction for our TMT vertical. It will give us a really dominant position in the TMT space. And to top it off, we expect there to be significant cost synergies, and it's truly significant cost synergies, that will come in, which will help -- which will be of interest to shareholders. Moving to Slide 15. Sharing the future -- here is the outlook of the future of HGS. We are going to focus on the digital customer experience transformation [ field ]. And this is across Marketing, Commerce, Data and Analytics, Technology and process Management. Putting it all together is what we want to bring to the marketplace, what we call frictionless customer journeys. How will we get there? We'll focus on a few industry verticals. We've seen the success of verticalizing Healthcare. Going forward, we are planning on verticalizing Technology Media Telecom as a vertical, public sector as a vertical to replicate the Healthcare success. We'll have to completely sustain the growth momentum in U.K. AI-based digital CX solutions that give us competitive advantage in the market, some new technologies that are being incubated in HGS are going to come out in the marketplace. And we are going to use the cash generated from the sale of the business to fund our acquisition strategy to fill up some capability gap that exists today in our digital business. It would also fund our growth into geographical in new markets like Australia and New Zealand and even South America, which is now of great interest because it is in the same time zone as North America and in a short lighter way. So over the next 3, 4 years, we'll become a full-service digital CX services partner, working on domains, as I said, of marketing, commerce, technology, data analytics and process management. Our chosen verticals will be Technology Media Telecom, direct-to-consumer retail, e-commerce, which is also a fairly significant part of our portfolio businesses. Public sector Born Digital companies which don't have any services footprint across. Our pure services of product companies, we want to make that our next big marketplace. We will offer strategy and design, technology implementation, managed services, analytics and insights through these verticals in the 5 domains mentioned above. Our partners, Amazon Web Services, Microsoft, Twilio, Sprinklr, Automation Anywhere, Adobe and UI Path. These are partners who we work with today. We are going to further ramp up our service offering and our partnership with these technology partners. I am now going to hand over the presentation to Pala for the financial update. Pala, over to you.

Thank you, Partha. [Technical Difficulty] hearing me clearly?

Pala, there's a little bit of static in your line.

Is this better?

Slightly.

Okay. Let me see if this works. So I'm moving to Slide 18. This is the quarterly performance. We've seen very strong growth. Revenues grew by about 20%, out of which about 2.2% is the impact of exchange rate and about 17.8% is organic volume growth. EBITDA has grown faster at about 22%, resulting in a 20 basis points margin expansion from 15.9% to 16.1%. The other thing to call out are the increase in the other income, that is coming for 2 or 3 reasons: interest income. Also, we got some income tax refund, so there is interest on that. Plus coming from the FX gain as well as some deal cancellation of forward contracts. On the exceptional items, this actually pertains to the Healthcare business. There is a vendor contract, which has been retained. And hence, it has been since the -- going forward, the revenues of the cost of the Healthcare business would not be there, but we would still have this vendor contract. It is being shown and treated as an exceptional item. We would have some impact of this in Q4. But from FY '23 onwards, we do not expect this item to continue. So that's the explanation on the exceptional item. On the PBT side, there is a growth of about 94%. And on the PAT side, there is a growth of about 118% on a year-on-year basis. Moving to next slide. This is the view for the year-to-date. Revenue growth, even through the year, has been stronger; in fact, it's slightly higher than the growth in Q3. Growth of about 21.3% and out of which 1.5% is the impact of FX and about 19.8% is the impact of the volume growth. So very strong volume growth, organic growth of 19.8%. EBITDA has grown faster at 29.6%. And on a year-on-year basis, for the first 9 months of the year, the EBITDA margins have increased by about 110 basis points. Other income, I have covered it earlier, so I won't repeat that. And exceptional items, I have covered earlier. The only reason for the drop between YTD FY '21, FY '22, in FY '21 YTD, there was an extra provision made for the additional consideration payable for the acquisition of Element or HGS [indiscernible]. Hence, that is not there in YTD December '21. So the -- it is a drop. But bulk of it is for the vendor contract I've explained relating to the Healthcare business. PBT has grown close to 98.8%, and PAT has grown by about 103% between first 9 months of FY '21 and FY '22. We talked about debt. We continues to -- sorry, we continued to reduce debt during the quarter. As things stand, our debt position as of 31st December is INR 2,080 million. And we are a net cash company of INR 463 crores or INR 4,632 million as of 31st of December. And during the first 9 months of the year, we have reduced about INR 1,856 million of debt between March '21 and December '21. Going to the next slide. We talked -- we mentioned this earlier. We have reduced debt from the proceeds on as of -- during -- from the proceeds. And right now, we have a small amount of debt of INR 1,220 million. We are in negotiations with the bank to prepay this amount without any penalties. And we hope to become a debt-free company by the end of March '22. On the ICDs to related parties, they stood at INR 3,893 million as of 31st December. That amount stands at INR 4,995 million as on day of 14 February '22. Coming to other key parameters. The CapEx for the first 9 months of the year stood at INR 1,653 million. This is higher than what we've had in FY '21. As part of the sale of the Healthcare business, there was a need to create -- incur additional CapEx to complete the separation of facilities. Also, we opened a new center in Jamaica. So there is CapEx relating to Jamaica as well in the CapEx for the first 9 months of the year. Our DSO days stand at 73. So there's no significant change between March '21 and December '21. And this needs to be seen in the context of 20%-plus growth which we have reported. Free cash flow to EBITDA remained strong at 65% for the first 9 months of the year and higher than what we had in FY '21. And with the strong performance, growth in revenues as well as profitability, our business return on capital employed, which excludes the treasury income, that has increased from about 18% to about 27.3% on an annualized basis. Moving to the next slide. This is the 31st December balance sheet view with, of course, where applicable current market price of about INR 2,500 factored in. So we have a strong balance sheet. Book value of about INR 1,133 per share. Total cash of about INR 671 crores. Debt of INR 208 crores, and net cash of about INR 463 crores. Coming to Slide 24. This is the revenue composition. Since we have sold off the Healthcare business, we are focusing only on the retail business. As you would see about 1/3 of our revenues come from -- are being delivered in U.S. and about 26% coming from U.K. The next large geography is Canada. And Jamaica, India and Philippines is relatively small. India includes -- bulk of the India revenues are also from the HRO business. In terms of the graph on the right-hand side, revenue by origination, U.S.A. is about 37% and U.K. is 31% and Canada is about 19%, with India, Philippines, Jamaica accounting for the rest of it. Moving to revenue by vertical. The Technology and Media and Telecom, this would be the largest vertical of the retail business at about 27%, followed by banking and financial services at about 18%. Consumer, which is retail, consumer products, FMCG, consumer durables, those would account for about 16%. The 1 large chunk 35%, which is under others, is primarily from U.K. and from the public sector clients, and where we are seeing very strong growth in the current financial year. In terms of client concentration, not too much of a change. The top client accounting for about 12%. Retail -- 5 customers -- top 5 accounting for 43% and the top 10 customers accounting for 57%. In terms of the channel mix, about 80% would be voice, about 10% would be nonvoice and digital accounting for the balance 9.5%. In terms of the stock market performance over the last 12 months, HGS share price has gone up by more than 100%, stands at 120% compared to the growth of about 32% CNX IT and 50% for the NIFTY. All right. So last slide [Technical Difficulty]

I'm sorry, Mr. Pala, we were unable to hear you very clearly.

I said that was my last slide, so I now hand it over back to the moderator for the question-and-answer session.

[Operator Instructions] We have the first question from the line of Shipra Singh who's a growth advisor.

Just 2 questions from my side. In our last Q2 call, you have mentioned that the ICD limit of INR 500 crores that will be distributed in the group -- more than that would not be distributed in the group. So why this incremental of INR 3,500 crores enhancement has been approved? Can you give a clarification on this, sir?

Yes. Thank you, Shipra. So as I mentioned in the debt, as of 31st of -- sorry, as of 31st of December, the ICDs to related parties were INR 389.5 crores, whereas as on date, it is about INR 499.5 crores. Now I think the proposal, which was placed before the shareholders of increasing the amounts to INR 3,500 crores -- has not been [Technical Difficulty] See, that is a generic limit in terms of being what is permitted. And that is -- it includes a number of things. It could be investment in shares, it could be investment in debenture, it could be investment in mutual fund. That's the overall limit, and it's not [Technical Difficulty] ICD limit. As you can see, as on 14 February, we are at INR 499.5 crores of ICD.

Our dividend payout now will be on the quarterly basis?

Shipra, we've always been paying dividend on a quarterly basis. So if you go back...

So we can consider this run rate?

No, that's a function of the profitability, et cetera. But if you go back, we've always been giving quarterly dividends.

[Operator Instructions] We have the next question from the line of from [ Sartik ] from Casper Solutions.

Congratulations on a good set of numbers. Just 2 questions that I had. The first one is like basically what is the overall rationale behind our acquisition of NXTDIGITAL, like how are we going to go ahead with it?

Okay. That's a great question. Look, TMT today, even without NXTDIGITAL, is close to 26 to 27 -- TMT is Technology, Media, Telecom, okay? We call it TMT,is about 26% of our global revenues without NXTDIGITAL. If you look at Digital India and the future of India, 5G rollout, if you look at gig economy, if you look at work from home, the combination of all of this makes this decade a very, very exciting decade for access to broadband and access to Internet. And our workforce spreads out from large cities like Bangalore, Hyderabad, Bombay, Delhi, the hinterlands of India, most of our work today is being done not from these big cities. They are being done by Tier 2, Tier 3 towns, even Tier 4 towns because the workforce have all gone back home and that's where they are working from. If you look at consumption of content, OTT media: Amazon Prime, Netflix, SonyLiv, et cetera, it's all digital technologies driving it. And therefore, we feel that India being a very exciting market for digital technologies and the fact that we have a sister company who is on this digital business. It gives us right play into our Technology, Media, Telecom vertical. Today, it's 26% of our revenues without NXTDIGITAL, we believe that once NXTDIGITAL gets done, it's going to be a significant part of our footprint. It's also going to be -- as and when the transaction happens, it's going to be earnings a credit transaction. And there are also significant cost synergies available, which is going to be a big plus for investors in this business. Hope I'm able to explain to you why we have gone into this business. It's a pure digital triple-play, and that's where future lies.

So what type of a sales mix are we trying to achieve from this, like, down the line in the next 3 to 4 years?

Sorry, could you repeat what type of what?

Sales, sales mix, like what type of revenue generation that we are looking on? Like right now, you said that it is at around 20% to 25%. So going forward, like what -- that percentage will go up to what level in the next 3 to 4 years, that is what I was trying to...

Once the transaction happens, the entire revenues of NXTDIGITAL will be a part of our revenues, right? So if you look at it...

On the consolidated basis...

Yes.

Okay. Okay. Okay. And the second question is, typically, Q4 tends to be a better growth quarter for us versus Q3, so should we be expecting the same kind of trend playing out in this financial [indiscernible] ?

Yes. So typically -- what you will have is you will have to adjust this for the fact that Q4 will have only 5 days of Healthcare revenues, right? So you have to adjust that because Healthcare revenues are not going to be a part of our Q4 revenues. But the remaining part of the business will go through a significant ramp-up in Q4. We talked about the U.K. business. I think what was the number? 60 percentage growth, right? Let me just quickly go back, where is that number? We shared that number in our presentation. Yes. If you look at the public sector growth, our revenue growth in U.K. public sector was quarter -- in quarter 3 was 61% on a year-on-year basis. So we expect this momentum to continue. I talked about a big, big digital win - for largest digital client today. It's a very exciting client, and we are unable to name the client, but that also will ramp up through quarter 4. So those are the 2 ramp-ups that are going to impact our quarter 4 numbers, but you have to obviously take out whatever Healthcare growth that used to happen in the past. So that's what you're going to see in quarter 4.

Okay. Have a great quarter ahead. Congratulations on these numbers as well.

Thank you.

Thank you,

[Operator Instructions] We have the next question from the line of [ Nidhi Lata ] from NM Financial Services.

Congratulations on the great set of numbers. So firstly, I would like to ask that as you had stated in the last quarter, that HGS would focus on acquiring automation, analytics and artificial intelligence. So what is the rationale for acquiring on the Australian BPO company, if you could take that?

[ Nidhi ], I think I tried to answer this question. So it gives us an access to a new market, okay, which plays to our strength. Their largest clients are in the retail e-commerce space all of that. Clearly, as a market is [Technical Difficulty] [ Nidhi ] are you there?

Yes. Yes.

Okay. Australia and New Zealand today is a significantly underpenetrated digital market. So we are going to bring the full force of our digital capabilities into these clients and that is a big growth area for us. So today, because it is underserved, because digital customer experience, digital technologies of AAA is underserved in the Australian market, we will be able to sell or cross-sell or upsell to our existing Australian clients, the digital capabilities that we have been developing over the last 3, 4 years. So that is the rationale.

Okay. And so do we expect any more M&A deals or any -- in this quarter as well or in the coming quarters?

Yes, I don't think there's anything lined up right now for this quarter, but you see acquisitions, we talked about it in the presentation as well. Acquisitions is the only way that we can quickly bring new capabilities inside the companies and build scale in our digital business. You will recall in 2018, we bought a small company called Element Solutions. It was a small company then. The company has already scaled quite a bit. But in terms of overall revenue mix, as Pala shared it, it's still small because our BPO revenues are still quite big in comparison. But as I said, by 2025, revenues coming from our digital services and margin coming from our digital services will be a much larger percentage. This -- obviously, when I'm saying sitting out here in February 2022, that gives us a runway of only 3 years. We will not be able to achieve that kind of growth only through organic means. So a large part of the Healthcare divestment money will go towards funding the acquisitions to bring scale in our digital and technology businesses.

Okay. So are we expecting that the further acquisitions will be in the segment only or any other business segment as well?

So the acquisition will be in the area of digital technologies. It could also open up new markets for us. Another market that we have been working on for quite some time, and I've talked about it even in previous years, is that we see a lot of interest in North American clients for South American delivery. And South American delivery is interesting for North American clients because of the proximity. It's about 2, 3 hours flight away, it's on the same time zone and that is why we find that near shore -- it is called nearshore as opposed to offshore, South American countries like Colombia, Guatemala, Panama, these are for nearshore operations. We already have a footprint in Jamaica, and we will further look at expanding our footprint. So some of the acquisition could also be geographical expansion in the South America countries, like Colombia, Guatemala, Panama, Ecuador, these areas as well.

We have the next question from the line of [ Shekhar ], an individual investor. This participant is not connected. [Operator Instructions] We have the next question from the line of [ Manoj S. ] from Kiva Advisors.

I wanted to ask, as you said...

Mr. [ Manoj ], we'd request you to kindly come a little closer to the mic. You are not audible very clearly on the line.

Is it okay now?

Yes, it is much better now.

Sir, I wanted to ask how much were the fees, the investment banking fees and the legal fees? What was the total [Technical Difficulty] amount that is going out?

That's a great question. And we have not disclosed that yet. So at an appropriate time, we'll make the disclosure. So the fees have gone into paying the investment banker, the lawyers, the accounting firms. It's a massive deal you understand across 4 countries. So it is a significant in number. As and when appropriate, we'll make that disclosure. Right now, we've not made the disclosure, so I'm hesitating to make the disclosure right now on this call. But yes, it will be -- all those details will be provided by quarter 3 numbers -- sorry, quarter 4.

Sir, in your business standard, article, I think the number was mentioned, I think, INR 1,000 crores or around USD 200 million or something [Technical Difficulty] say USD 100 million, would that be the number? I think in the business standard article, you -- it's probably mentioned I think INR 1,000 crores was spent on that. Is that right, sir?

INR 2,000 crores?

No, no. INR 1,000 crores.

For fees?

Yes.

No, I'm not -- what business standard article are we talking about. Sorry, I'm not able to understand which...

So I think just to draw line for us investors, I mean, can you just maybe say like is it about a couple of hundred crore or something or it's much low, I mean just...

Yes. I think that's a good question. That's a valid question. As I said, once our quarter 4 numbers -- we've not made payments yet, right? The deal just closed in quarter 3 -- in January 6, right? So if you -- bear with us when we do the quarter 4 numbers, we will disclose those numbers.

[ Manoj ], Pala here. I think this INR 1,000 crore number if the only thing I can relate to is we said we are looking at a buyback of about INR 1,000 crores, subject to -- based on what we mentioned earlier, 25% of reserves and networth based on March '22 balance sheet. That's an expected number. That's the only INR 1,000 crore number which has gone out from our side. So let me -- I'm not sure what the article said, but that's totally INR 1,000 crore number I can relate to. The buyback.

Got it. Okay. Okay.

Yes, hold on. By quarter 4, you will have the full information that you ask for. So bear with us for 1 more quarter, please.

If I can just labor it in case -- because corporate governance, you all have done a great job on that. So -- and you want to enhance shareholder value in case just like a INR 200 crore number or is that a way -- is that kind of like a draw a line that, okay, the number will not be more than INR 100 crores or INR 200 crores or something like that, like this is a huge number. Whatever is there some just kind of a ballpark like INR 200 crore, INR 300 crore or something like that? Just a rough kind of number you would like to share? Because the INR 1,000 crore number just scared me a bit. So I just thought...

No, no, no. It can be no where near INR 1,000 crores. I'm sorry, I don't know where you got the INR 1,000 crore number.

Okay. Fair enough, fair enough. Okay. Okay. So anything just like a couple of hundred crores or something like that, would something like that you want to share, sir?

I don't want to give you an approximate number. This is very likely to get misquoted and all of that. Just hold on to your horses. We're not going away anywhere. We meet you every quarter. By quarter 4, you will get a sense of what these numbers are, okay? It's no where near to the INR 1,000 crores.

All right, sir. And sir, just, if I may ask, the 60% money that has come -- which has come abroad, we don't want to bring it back because of what specific income tax reason?

So it will be considered to be a dividend from a subsidiary to India. As you know, dividend of foreign subsidiaries, the tax rates have gone up in the [indiscernible] , significant change. And also most of our acquisitions will be abroad. So it will suffer exchange conversion twice. So for example, the Australian acquisition that we did right now.

Sure, sir. I get that. Get that. And any by -- sorry, if I may, what would be the dividend tax that would be there, would you know by chance?

I think the current budget has put it to at what number, Pala?

It's around 30%, I can crosscheck, but yes, there was a concessional part, but that's gone now.

Yes, the concession that was available until last year, I think the concession, it was I think capped at 15%, that concession has gone away.

[Operator Instructions] We have the next question from the line of [ Vishwanath ], who is an individual investor.

Yes. My question is with regards to the NXTDIGITAL acquisition -- merger probably. So how do you think that we would be able to compete with someone like the [ Reliance ], right, because they are also into the same business because I just read the article that they now going to start with the Internet via satellite, right? That is something which NXTDIGITAL has. So -- and based on my knowledge, right, I may be wrong, right, we are not at present, present in this domain. Only after merging with NXTDIGITAL, then we would be able to have an experience in that -- in this domain, right?

Yes.

Yes.

So what is your question?

So how do you feel that we will be able to compete with Reliance?

No, look, NXTDIGITAL has been in this market for a long time, right? It is starting to do really well. So it is competing well against the big players as well. I think the market is big enough. The Indian market is big enough for more than 1 player. And I'm sure that given the kind of technology that it has Headend-In-The-Sky, I think the HITS technologies, you're familiar with what they're doing. I believe that's a pretty cool technology, and that will give them a competitive advantage to compete with the big guys.

Okay. Do you think there will be a major investment which would be required for that division whenever it's going to be merged? Because the capital-intensive...

Major what?

Major CapEx, major investment in that because you know that the delivery happens to cable and you need to have the setup, right? There would be -- I do feel that there will be a major CapEx, which would be required once the merger happens for that?

Sir, if you would bear with us, this answer is a -- very good question. I agree with you that it's a good question. And therefore, the best way to answer this is when we are through with the deal -- right now, it's a little premature right now, even the share swap ratios are not being, right? So it's a little premature to give an answer to that question, sir. At an [indiscernible] by time, we are definitely going to answer this question.

Okay. And 1 more, just a request from my end, right? Whenever the buyback is going to happen, if please ensure that it happens to the tender route rather than the stock exchange route, just a request.

Noted. Noted.

Sorry, what was the request?

The buyback should happen via the tender route, not through the open market.

Pala, do you want to answer the question?

No, no. I've noted his request. So let the -- I've noted his request. We have got similar request. So we'll share this with the Board members as and when they take up the matter of buyback.

I understand 1 thing. Buyback amount is today an approximate amount because it will be 25% of revised balance sheet as of 31st of March, right? So if you were to do it as of last balance sheet, 31st of March 2021, the amount will be very small, right? Because of the cash inclusion that has happened because of the sale of the business, the quantum of buyback that can be done if you were to use the balance sheet of March 2022 will be much higher. That's how we've given an approximate number of INR 1,000 crores.

Do agree on that front. Do agree. Because the accounting impact will happen in the fourth quarter. It's not going to happen in the last quarter, I do understand that thing.

[Operator Instructions] We have the next question from the line of [ Vishal Shah ] from [ Vinay ] Capital.

I see that on a consolidated basis on continuing operations we have been making losses. So what's the reason for that? And by when can we expect to turn to be profitable?

Let me take that. This is Pala. A very good question, [ Vishal ]. See, the transaction closed in quarter 4 of the current financial year, but the accounting standard requires us to apply the revenues and costs all through the period for which the numbers have been reported. Now the approach which has seen is that whatever costs are there to pay back, those costs have been put under continuing operations, right? For instance, if you look at the published page, under continuing operations -- sorry, under the discontinuing operations, there is no cost of interest, right? Except for some things which are coming. So that's coming primarily because the way the transaction has happened. Debt stays with HGS, tax part stays with HGS, transaction costs stays with HGS and things like corporate overhead, et cetera, are typically not part of the allocation because it's linked to what is staying back. So it's a little -- you'll have a bit of this for Q3 and Q4 because we are in the process of separating the facilities, some costs are recurring. But from Q4 on -- Q1 of the next financial onwards, we expect a much better performance. And also, we expect the exceptional item to go away after from Q1 onwards.

If -- barring the exceptional and nondirect expenses, just considering direct expenses, so what will be approximate EPS from continuing operations?

Okay. Let me give it this way. We have said our -- what we would want endeavor to be is to -- for the retail business to deliver double-digit EBITDA margin. That's what we would like to be going forward.

So currently, are there with -- considering only the direct expenses, they are making us double margins, correct? That's what you are trying to say?

No, no. I'm saying, look, way this is there, a lot of those costs are shared and they have been split in a particular manner. Going forward, there will be some cost rationalization. So that's what we are [ saying ] from a go-forward basis.

We have the next question from the line of [ Manish Jain ] from Value First Digital Media Private Limited.

Sir, my question relates to -- I mean very similar to question a gentleman that asked before me. I'm very confused about profitability of the remaining business. Because I've attended earlier conference calls also. I think this information was deliberately given. I'm sorry, I'm using these words. So many times we have talked of retail business is 48%, et cetera, et cetera. But no where it was mentioned that retail business EBITDA is nil, okay? It is 0-margin business or rather it's loss-making business? And even in presentation, which was just shared with us, which you are going through, again, we have talked of profitability for first 9 months, which was combined business, nowhere you've talked of profitability of the remaining business. And your last 3 slides also you talked of only of revenue, revenue, but nowhere you we have talked of profitability of this business. So I mean this is not right. If numbers open and just inform shareholders that what is the profitability. And we are, again, acquiring or merging a company NXTDIGITAL , which again is not a profit-making company. So where do we stand now on profitability of the remaining business? And where do we go forward once these business are merged? And another question is that will buyback be done after merger? So NXTDIGITAL people also get buyback advantage? So these 2 questions, if you can answer?

Okay. Good question, [ Manish ]. Look, the results, whatever we have published in the past have been for the combined entity as a whole and the results which we have covered, which there -- it shows continuing risk continuum as well as the overall business as a whole, right? So that's what it's already published and that's why -- so there's nothing to hide in terms of whatever we have said in the past. In the past, we have given you profitability of the overall business, and that's what we've also given in the [ debt ], which we have shared with you. So we are being consistent. The separation and the sale of the Healthcare business has, in effect, happened during the quarter. And as I said, there are some costs which were segregated. There's some duplicate costs, which should have CapEx because when there is separation happening, and there obviously is need to look at additional costs. There are also transaction costs to be incurred, right? So going forward, I think there is scope for cost rationalization and also growth in the business, which we talked about. And we expect the financials to be profitable going forward.

Yes. But you had talked of revenue of -- while also you have been talking about combined business, but you did talk of revenue of the retail business. But you never talked of profitability of retail business. That also should have been talked on your own. You should have conveyed that, that retail business would be 48% of revenue, but no margin, but that was completely hidden.

No, it's already shared with you in the total financial. Where is a question of hiding?

See, I -- okay, sorry, to interrupt. When on your own, you told us that what is the revenue of retail business, last quarter and prior to last quarter, why profitability could not have been shared? So that is hiding, no, not disclosing is hiding.

That's the way you are looking at it. That stage, the transaction has not happened. And hence, we are not in the position to share anything in terms of how the carve-out has happened. We have shared with you whatever is in the domain that there's a transaction. The Healthcare business is being sold off. And this is the -- this is the valuation. The transaction has happened now. And as described, we have disclosed it.

Okay. I'm not convinced. Okay. My next question was relating to buyback. So buyback happens after post merger?

So look, as we said right now, there's in-principle approval as far as the -- looking at the transaction with NXTDIGITAL. There is also the buyback, which will happen after the results are closed and the Board needs to adopt the results. So buyback will follow after that. Right now it's too premature on either side to talk about the same.

We have the next question from the line of [ Anand Shah ], who's an individua investor.

Hello? Can you hear me, please?

Yes, we can hear you now.

Yes, [ Anand ].

My question is regarding the buyback which was announced by the company. That company want to do a buyback to the tune of 25% of the equity in the region on 31st March 2022. So I just wanted to know whether the company want to do the buyback on the stand-alone basis or on the consolidated total revenue basis, actually? Because as per my understanding goes, on the consolidated basis, if you look at the equity on the reserve, it will be more than INR 4,000 crores. So 25% can be more than that?

Look, we will go by what is permitted in terms of Company's Act and SEBI guidelines. They talk about 25% of the networth of the results. So whatever is permitted, we will do -- that's the buyback amount, the Board will consider. Whatever is the maximum amount permitted.

No, but that is -- because we will be having 2 sets of [indiscernible], 1 is on the standalone basis and 1 is consolidated basis. So 25% will be taken as of consolidated basis or the stand-alone basis?

Whatever is permitted as per buyback rules.

Buyback allows you to do that on the consolidated basis also.

So look, I'm saying this is something which is we will take up once the audit is over. Whatever is permitted, that's what we will do.

Thank you. I now hand the conference over to Mr. Srinivas Palakodeti for closing comments.

Thank you. Thank you, everyone for [Technical Difficulty]

Sir, we're unable to hear you.

Can you hear me now? Hello? Can you hear me now?

Yes, sir, we can hear you.

Okay. I wanted to thank everyone for joining us on our Q3 earnings call. We look forward to interacting with you again when we come out with the full year FY '22 results later in the year. Thank you, everyone, for joining, and have a good day.

Thank you very much. On behalf of Hinduja Global Solutions Limited, that concludes this conference. Thank you for joining us, and you may now disconnect your lines.