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

Good evening, ladies and gentlemen. A very warm welcome to the Hinduja Global Solutions Limited Q4 and FY '22 Earnings Conference Call. From the senior management, we have with us today, Mr. Partha DeSarkar, Executive Director and Group CEO, and Mr. Srinivas Palakodeti, Global CFO. [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. Good evening, everyone, and a warm welcome to the Q4 and 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 Q4 and 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 strategy, 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 today's conference call, please bear with the management. Thank you, and over to you, Partha, sir.

Good afternoon, Snighter, and a warm welcome to all of you on behalf of Hinduja Global Solutions for joining us for the conference call. I'm sure all of you got the earnings deck that we have posted on our website, and I am going to refer to that as I take you through my take away from this quarter's performance. So going to Slide 3, you will see that the retained business, so we've made one segregation. So the healthcare business being divested, we are now showing you the performance of the remaining business as well. And since most of the year has been a combination of key businesses, and even quarter 4 had about 5 days of the healthcare business, so after the divestment of Jan 6. So some of these numbers will be a little difficult to interpret, but bear with us, we will try to see how best we can provide you more clarity on those numbers. So just on quarterly revenue performance, you will see that the Retained business has actually grown very handsomely from INR 7,620 million to INR 8,655 million, a growth of about 13.6%. Whereas on an overall basis, the numbers pertaining to our business is INR 15,636 million coming down to INR 9,144 million. And this is where I think you will be able to figure out that quarter 4 compared -- the consolidated business quarter 4 is showing a lesser number than the number last year. That is because it only has 5 days of our healthcare revenue in the right-hand side of that particular graph. If you were to look at the March revenue for -- if you were to look at the Y-o-Y revenue performance, then the Retained business has actually grown even better. It's grown from INR 26,018 million to INR 32,637 million, a growth of about 25.4%, which is a very, very handsome growth. Whereas the growth numbers are more muted on a consolidated basis for the full year, INR 55,889 million to INR 57,959 million, that consists -- that contributes a 3.7% growth and the explanation for the muted growth is the fact that the healthcare business in quarter 4 contributed only 5 days of revenue. We'll move to the Slide 4, which talks about the quarter 4 in a little different perspective. In rupees, it's showing a 13.6% growth in revenues, slight dip in EBITDA, about 69.5% dip in EBITDA and here I want to explain what exactly has happened, why the numbers are looking like this. A large part of the transaction costs and pertaining to the healthcare divestment have actually been absorbed in this quarter, and that is what shows up in these set of numbers. PBT has grown actually from minus INR 176 million to INR 473 million, and profit after tax is marginally negative from minus INR 106 million to minus INR 8 million. So overall improvement in quarter 4 numbers for the rest of the business. If you were to look at it from a full year perspective, you will see that the numbers are actually quite good, 25.4% growth in revenue, 46.1% growth in EBITDA, 133.1% growth in PBT, and 105.2% growth in profit after tax. This is for the full year. You will see that the profitability numbers on a full year basis have actually shown a good improvement. More details on these numbers will be covered by the financial section by Pala, so I am going to move on and give you an overall view of the business in my presentation. This slide which is Slide 6 talks about the overall business for the full year including the divested healthcare business, 3.7% growth on revenues, 15% degrowth in EBITDA, 1511.6% growth that's because of the large amount of sale proceeds money that has come in towards the sale proceeds of the business. That reflects in the PBT line and 1716.3% growth in profit after tax. That again, the numbers are so spectacularly better just because of the sale proceeds for the healthcare business that are expected in the quarter 4 number. Moving on to Slide 7, the healthcare business. This is the last time that we are going to talk about the healthcare, because the business has been divested. It was divested to unlock significant shareholder value, enterprise value of $1.2 billion, subject to closing adjustments effective 6 Jan 2022. 40% of the purchase consideration was received in India, rest of it received overseas. The profit after -- the profit before tax is INR 65,543 million. Out of which taxes were INR 801 million, giving a profit after tax of INR 64,742 million. We are in Slide 7. What we are left with is now the rest of the business, which is all the Consumer Engagement Solutions business, that has shown strong growth. The growth has been principally led by U.K. and U.S. geos, both onshore and offshore. Of the 2 businesses, the U.K. business has seen a spectacular performance in revenue and profitability. Year-on-year revenue growth was about 36.5%. EBITDA was about 3.8x the EBITDA for last year. One of the largest wins for the HGS public sector team, potentially a total contract value of GBP 211 million, INR 2,100 crores, employing over 2,000 work at home positions across the U.K., principally around vaccination support, track -- test, track and trace support for COVID. I also want to mention another significant activity that happened in quarter 4, which is acquiring Diversify Offshore, Australia business that happened effective February 25. Integration has been processed as we speak. It is going on well. We've got a healthy sales pipeline. Since acquisition, we signed 6 new clients across retail, power and utilities and banking and financial services, et cetera. Moving to Slide 9, the digital business, this is rest of the U.S. Its revenues grew by about 28.2% year-on-year. Multiple clients were signed up in the year. The biggest client that we won was in quarter 3, offering cloud-related services to a large multinational. We are -- because of confidentiality, we're not able to share their name. We see a great demand for digital solutions led by cloud and the 3As of analytics, automation and artificial intelligence. Two internally developed solutions were delivered to the market for the digital business. One is the Cloud Accelerator and another one is HGS Agent X. These are platforms built by HGS and our proprietary platform, which is prebuilt -- because they give us a great competitive advantage in the digital consumer engagement solution space. Moving to Slide 10, captures what is the business that is left. We operate now in 7 countries with 38 delivery centers, $439 million in revenue, about 750 digital transformation consultants, 22,000 employees, the number of clients on the BPM side is 200 plus, and HRO and payroll services, which is the India business actually, that has got 730 clients. We have given a total dividend in FY 2022 of INR 245 per share on a prebonus basis. We support 17 languages globally. Moving to Slide 11. A peek into the future of this business. I wanted show you some data that we have presented out here from Everest. We are talking about servicing the digital customer experience market. That is what CXM means. The outsourced market size and its growth potential from 2017 to 2022. Those have been shown out there. You will see that the market is large. It is a range of about $96 billion to $98 billion, and of which the digital customer experience management, which is the target of our -- of HGS has been growing steadily from 3.5% CAGR to 4.6% CAGR, as we keep our talk about the estimates for 2022. Despite the effects of the pandemic, the market is expected to really grow fast, 4.6%, of $96 billion is a large part. Digital demand is driving, led by aggressive client activity. The deals are getting better, bigger and there is a lot of work in digital customer experience transformation projects, more about personalization and end-to-end managed services. HGS has been recognized by Gartner. Happy to say that this happened in quarter 4. If you look at it, both on completeness, ambition and ability to execute, we rank in the leaders quadrant in Gartner Magic Quadrant. We're very proud. This is the second consecutive year that HGS has featured in the leaders category in Gartner Magic Quadrant. Very, very proud of this achievement. This is where we are today. Going forward, what do we want to do. Become a digitally led customer experience transformation company, significant part of our work today is labor arbitrage delivery, but we want to more -- we want to drive towards technology architects and to do that we have to be able to scale our digital capabilities in artificial intelligence, analytics and automation. Cloud, mixed reality for Metaverse, leveraging our base book of the Retained business. More -- to make strategic and tuck-in acquisitions to create a comprehensive digital capability and expand markets, and focus on specific industry verticals, micro-verticals, determine where to play and how to play. Three pillars for the future, generating significant growth, achieving operational efficiencies to improve profitability, and focusing on successful M&A. So these are the 3 pillars on which we are going to build the company for the coming years. Slide 15, slightly more detailed of the strategy we want to -- the domains that we want to capture are marketing, payments, technologies, data and analytics and process management. So this we would claim to be full digital customer experience transformation services partner for our client. Our chosen verticals to play in would be banking and financial services, direct to consumer and retail and scale, technology, media, telecom, born digital of fast-growing tech companies and the public sector. And we will operate across strategy and design, technology implementation, managed services, analytics and insights. With the service offerings being digital customer engagement, digital experience management, cloud and security, analytics and insights, and intelligent automation. A large part of our growth in the future will be driven by technology partners. We have deep partnerships with Microsoft, Adobe, UiPath, AWS, Twilio, Automation Anywhere and Sprinklr. This is going to be -- this is going to be the basic platform on which we are going to build HGS further. With that, I'm going to hand over this presentation to Pala. Over to you, Pala.

Thank you, Partha. Good afternoon, good evening, everyone. Thank you for joining this call. Before I start covering the financial section, I wanted to check, are you able to hear me clearly? Hello, can you hear me?

Yes, I think we can hear you.

Okay, thank you. So I will now move to the next slide, which is Slide 17. This is the new quarterly view of the Retained business. As Partha mentioned earlier, on a sequential basis, revenue growth has been 7.8%. And year-on-year growth has been 13.6%. In dollar terms, of course, it's about 10.4% given the depreciation of the rupee against the dollar. EBITDA margins for the quarter are neutral. As Partha mentioned, there are several one-off costs during the quarter, including the cost related to the transaction of both the sale of the healthcare business as well as acquiring Diversify, which happened during the quarter. So the margins for the quarter of the Retained business do look muted. The only other thing to call out is on the exceptional items. This -- there was a query last quarter as well. This pertained to the healthcare business, which the buyer has not taken over. So from an accounting point of view, this is more a issue being shown as part of the Retained business, but actually belongs to the healthcare business. Anyway, as you can see, there is a big drop compared to quarter ending December and March '21. So going forward, we don't expect this cost to continue. On a PBT basis, there has been an increase of about 368% on a year-on-year basis. And on at a PAT level, the tax, the growth has been roughly about 93% on a year-on-year basis. Moving to Slide 18. This is a view of the Retained business. Again, if you see very strong growth, about 25% in dollar terms, and 25.4% in rupee terms. The variation primarily because of the rupee depreciation in firstly, in the -- in third -- the fourth quarter of FY '22. EBITDA margins, while distinct, they may look pure. This is to be noted, which has come on the growth of 25.4%. And in rupee terms, EBITDA has actually expanded about 46% over FY '21 for the Retained business. As we mentioned earlier, there are certain one-off costs, which are there during the course of the year, relating to the transactions mentioned and some one-off items. At the PBT level, revenue -- profit before tax has changed significantly from minus INR 1,129 million to profit of INR 373 million. And at the PAT level as well, from a huge loss of INR 586 million, it has now turned positive at INR 31 million for the Retained business. Going on to the next slide, Slide 19. This is a view of our balance sheet. We are a company with a net worth of about INR 78,084 million. Book value per share is at INR 1,868. We have issued effectively INR 245 per share as dividend on a prebonus basis. Because of the bonus, it would come to INR 220 per share. The other thing to call out is that we have -- we are virtually a zero debt company. Total debt is INR 35 million. That means about half of the debt has gone away after 31st March. And the balance amount technically shows up as a debt that we actually borrowed against fixed deposits of the company. Again, as you see, the amount is not material. It's not very big. And so in a manner of speaking, we are truly a zero debt company as of 31st March. We have INR 35,209 million of cash and cash equivalents, and we have net debt -- sorry, we are a net cash company of INR 35,175 million. Moving on to the next slide. We have, as of 31st March, as I said earlier, INR 35 million as debt. We have ICDs to related parties of INR 11,245 million. We have cash of INR 35,209 million. And there are additional debt investments in debt of roughly about INR 24,668 million. Moving on to Slide 21. This is the variation on some -- I mean this is some of the other key parameters. CapEx for the year was INR 2,371 million as compared to INR 1,581 million in the previous year. That is primarily because of extra CapEx required as we have grown, as we said, over 25% on the Retained business. Also due to the sale of business, there were some extra CapEx required to be incurred on a go-forward basis to help sort out -- to segregate the facilities, the IT infrastructure. In terms of DSO days, there is a substantial reduction. For FY '21, which is -- it stood at 72 days as compared to -- so that is for the total business, healthcare and the CES business. For FY '22, we have taken the revenues, DSO days as of 31st of March that primarily pertain to the CES business, because the healthcare business receivables were sold when we completed the transaction. And so the DSO days for the CES business as of March '22 is substantially lower at 65 days compared to 72 days, so roughly about 10% lower in terms of number of days. In terms of EBITDA to free cash flow conversion, this is for the company as a whole, including the healthcare business as well as the Retained business. We have continued to operate well. As you see the EBITDA to free cash flow conversion, it was about 43% for FY '21. On an overall basis, as it has gone up to 48%, so obviously, the EBITDA has come down in absolute terms, because of the sale of the healthcare business during the course of the year. And these cash flows are purely from operations after working capital and changes and CapEx and do not take into account any cash flows from the sale of the business -- sale of the healthcare business. Moving on to Slide 22. And you will recall in the month of January -- on January 14 or so, the Board has indicated to do a buyback of roughly about INR 1,000 crores. So I'm just -- based on the audited balance sheet of the year, the actual number comes to INR 975 crores or INR 9,750 million. If you look at Slide 22, it shows the -- how this number has been arrived. As per SEBI guidelines and Companies Act, it's the lower of the consolidated net worth and stand-alone net worth. In our case, the stand-alone comes lower than the consolidated. So looking at the total free reserves and if we apply 25% of the net worth, which is the maximum amount permissible as per Company's Act and SEBI guidelines, the amount comes to INR 9,750 million or INR 975 crores, as compared to the earlier estimate of INR 1,000 crores in estimates done in January. One thing to bear in mind, after the indication given by the Board and the announcement made in January, we've actually declared INR 28 interim dividend in February, along with our Q3 results. So there was an outgo of about roughly INR 56 crores during Q4. If that had not been done, about 25% of that, so roughly about INR 14 crores would have got added. Just to be the bridge between INR 975 crores and INR 1,000 crores, so the INR 14 crores is the impact of the dividends which made, which were paid out in the year, during the course of quarter 4. Moving on to next slide. This is a quick -- I'm on Slide 23. This is a quick recap in terms of what's being done for the shareholders. We have announced roughly about INR 195 dividend per share, INR 195 per share of dividend in the form of interim dividend. And then we have announced based on the Board meeting last -- on Sunday, a final dividend of INR 25, which is of course, subject to normal shareholder approval. So INR 25 is -- we noted is on post the 1:1 bonus. So on the per 1:1 bonus basis, the dividend for quarter 4 should be seen at INR 50 per share. And the total dividend paid out by the year is about INR 245 per share on a pre -- pre 1:1 bonus basis. So rightfully, roughly about INR 512 crores or INR 5,120 million is the outgo on the dividend, taking into account the final dividend, which will be done around end September, subject to shareholders' approval. As I mentioned earlier, the amount of buyback based on the FY '22 audited financials, comes to INR 9,750 million. The detailed buyback process announcement will come at a later stage. Moving to Slide 24. This is again for the Retained business for the full year. In terms of revenue by delivery, with the sale of the healthcare business, U.S. accounts for about 34%. You see U.K. which has grown as Partha mentioned significantly during FY '22 now accounts for about 26%, followed by Canada, which is about 17.7%. The India business is now fairly small, this is about 13%, comprising of our HRO business and some of the digital business and some business which we do to service the offshore clients. From an origination perspective, the largest share is -- continues to be U.S. at 38.4. U.K. comes next at 31.5%, followed by the Canadian business as well as the India business stands at 10%. This is revenue by origination. Moving on to Slide 25. Revenue from vertical. This is -- it is for FY '22, excludes the healthcare business. As you have seen, the largest is what has come primary from U.K., but we do have some other countries as well. So basically there's public sector and some other verticals. After that, it is telecom and technology, which accounts for about 20%, followed by about 19%, which is consumer and retail. And we have banking and financial services, which accounts for about 18%. Moving on to Slide 26. This is the slide on client concentration. The Healthcare business had significant client concentration, with the largest client accounting for close to about 40%. But the sale of the Healthcare business for the Retained business, the key clients account for about 10%, top 5 over 39%, and top 10 customers account for about 52%. On the Retained business, we talk about the strong growth on the digital business. So now digital accounts for about 11.6%. About 11% comes from nonvoice back-office business. And the balance, 77%, 78% comes from the retained business. Coming to -- as an update on Slide 27, an update on the transaction with NXTDIGITAL. This is a transaction by which the Board of HGS and NXTDIGITAL has approved. From a structure point of view, it's the demerger of the NXTDIGITAL media and digital business into HGS. The consideration will be through issue of shares through the shareholders of NXTDIGITAL that when every -- for every 53 shares held of NXTDIGITAL, the shareholders of NXTDIGITAL will get 20 shares of HGS. Post the approval from the Board, filings have been done with the stock exchanges. This requires approval from SEBI. Thereafter, we'll provide approval, I have to go through the NCLT process. So we are right now in the process where the approvals are awaited. As and when we get the approvals from regulatory authorities, shareholders, et cetera, and the transaction goes through, the share capital of HGS shares will increase from 41.97 million shares. It will go up to 52.48 million shares. So there is about a dilution -- increase of share capital by about 20.4% through issue of additional shares to the shareholders of NXTDIGITAL. And based on the last available information on the promoter shareholding, there will be a small drop in the promoter's holding from 67% -- 67.1% to about 64.7%. Moving on to Slide 28. This is the share price movement compared to CNXIT as well as NIFTY. This takes into account and it normalizes for the 1:1 and the issue of the new share price and ex-bonus on 22nd February '22. So this is relative to CNXIT as well as NIFTY price. The share price, as we -- at the end of today was roughly about INR 950 at close of business today. That's all from my side. Now I'll hand it back to the moderator, and we will take up the Q&A session. Back to you, Snighter.

[Operator Instructions] The first question is from the line of Jyoti Singh from Arihant Capital Markets Ltd.

Congrats on the decent set of numbers for the Q4. My question, firstly, on the healthcare side. Like after divesting the healthcare service business, is the company is looking to expand any other segment?

Yes. So we are -- I think we mentioned that in our presentation, we are looking at fast-growing tech. We are looking at e-commerce and -- e-commerce and retail. We're also looking at technology media, telecom, and banking and financial services.

Okay. And sir, what are the strategy that company's opting to build the HGS 2.0 level? And how much -- we are expecting margin going forward? And what will be the revenue growth for the FY '23-'24?

Yes, we will not be able to give you forward guidance. I think in one of the presentations slides that we have shared, we did cover the strategy. If you go back to Slide 15, we have tried to cover that in a fair amount of detail, so I would request you to go through that slide. Because I did try to cover it in my presentation. In terms of margin profile, the idea would be to build it back to the level of profitability that we had before healthcare was a part of our business. And as we add more technology businesses, technology business say, in general, are supposed to be able to generate better margins. So we will try to improve our profitability going forward. So I would request you look at Slide 15, that explains our strategy in one page itself, a fair amount of details.

Yes, I got that sir. And sir, recently, the company has did the acquisition of NXTDIGITAL Limited. So any other acquisition in the pipeline?

We acquired a company called Diversify Offshore Solution in Australia. That also happened in February '22.

Okay. If you can guide...

NXTDIGITAL is a merger. It's not an acquisition. It's a merger and the scheme has still to be approved by the regulators. It is not yet complete.

Okay. So how much time it will take?

It will take some time. I don't have a specific time line. It's a function of how the regulator takes time.

Okay. And sir, you have mentioned about the buyback, but do you feel still you will announce further. So any light on the buyback?

Yes, the buyback cannot happen till the merger is over. So once the merger is completed, only then the buyback can happen. So I would say tentatively, towards the end of this calendar year is when the buyback can happen. And the details of that can also be shared only after the merger process has been completed. So that's why -- further details, we cannot give. We have given you all the details that we could, which is the quantum of the buyback, INR 975 crores have been shared with you by Mr. Palakodeti. Beyond that, any further details, you will have to wait till the merger is over.

Next question is from the line of [ Ruchika Sharma ] from Wealth First Advisors.

Congratulations for a good set of numbers. My first question was with regards to our healthcare business. So approximately, so how much time are we expecting to take to fill the gap created by divesting this healthcare business?

I would say it will take us approximately 3 to 4 years.

Okay. Right. And also sir, amongst the other segments that we have, like public sector, telecom and TMT business, where do we plan to focus more and where do we expect to receive larger revenues from?

Public sector is the one that I would say would be our focus for this year, at least.

Okay, please. Also, sir, my second question is with regards to our digital space. Which type of mandates are we targeting in this digital space and are we having any prominent names of companies that we are catering to? Because in the last quarter, the management mentioned about winning a multimillion-dollar deal from a global tech company. So could you just disclose a few details on that end, please?

So that is a problem. We can't give you the name of the particular company. It's a large deal. It's a very well-known technology company worldwide. Beyond that, we are not able to share more details.

Next question is from the line of Ruthvik, an individual investor.

Couple of questions. From the funds available for deployment, how much of that will go into organic and inorganic in value terms or the percentage terms?

Yes. Again, that's not a number that we are disclosing as of this point of time. It's something that will be a function of what opportunity comes in front of us, what makes sense from a long-term strategic perspective. But I have to say that a large part of the funds will be deployed for both organic and inorganic. And we want to make the company a technology company and therefore, the focus of our acquisitions for the future will be on acquiring technology companies.

Okay. Fair enough. The second question is, could you just elaborate on this partnership between NXTDIGITAL and Khoros?

And Khoros?

Yes.

So it's not just Khoros. Khoros is just one of the partnership. There is -- I think what we have mentioned is Sprinklr, right? I don't think we have mentioned Khoros. One minute. If you look at Slide -- did we talk about Khoros? We do have a partnership with Khoros, but we haven't mentioned Khoros. Where are you seeing Khoros? On Slide 15, we have talked about Sprinklr. It's a -- it's similar. Khoros is similar to Sprinklr. It's basically...

In the press release, sir.

[Foreign Language] Okay, okay. Got it. Yes. So Khoros and Sprinklr are similar. It basically is a tool that enables you to go through all the social media content that gets created and track reputation of firms. What are companies talking about, specific brands and other things. It's a reputation management tool. So yes, that is a new partnership that we have started this year. And these partnerships are going to enable us to provide differentiated customer experience management capabilities.

Next question is from the line of V.P. Rajesh from Banyan Capital Advisors.

My first question was regarding the transaction expenses. Could you comment on that and tell us the quantum of the fees that was booked in the Q4 quarter? And anything that will be for Q1?

So Pala, you want to take the question on transaction expenses?

Yes. So the transaction expenses totally were about INR 2,438 million, that was loyalties, et cetera. I think we don't see anything spilling over into Q1 of the cycle, because the transaction has completed. Sorry? Was there a follow-on question?

The line of the participant is disconnected. We'll go to the next participant. The next participant line is Mr. Shailendra Mundra from Veba Financial.

Hello?

Hello.

Can you hear me?

Yes, we can hear you.

Thank you, sir, for a very good explanation of your business and the financials. So what I've noticed is, on a normalized basis, it appears that your Retained business is at best about 3% EBITDA business as of now. So could you please give us any idea about how or if you would be able to improve the margins and -- substantially -- margins substantially compared to your other peers in India?

That's a very good question. Our principal -- our principal focus this year would be to, to make our real estate footprint more, to shrink our real estate footprint. As you know, a large part of our business after COVID has moved to work from home, and so therefore, we are stuck with many leases and properties, which we own or lease today, which are not required and people are not working from those places. So we are trying to see how many of those leases can we exit from, how many of the real estate can actually be sold out. That would be the course of lowering our operating expenses because these are large numbers, obviously, where you saw that we talked about 38 operating centers, right? Most of these operating centers are vacant today. And while some of these are own properties, there are some which are leased properties and there are lease rentals that we are paying today, which actually are not being used. So we are exploring options to see how we can exit some of these leases and how we can sell off some of these properties. So that's going to be a big jump of what we're trying to do to increase the margins of the business. The second thing what we will try to do is, we're trying to see how we can improve the revenue profile by improving our digital capabilities and selling technology services in larger. Today, if you see our revenue distribution is, about 11% is digital revenue. Over the next 3 years, we see that our digital revenues will grow to the extent of becoming almost 50-50 of our labor arbitrage business and our digital business. As that happens, we will see the margin profile improve.

Okay. So are you saying that post-COVID, you will not need to get those employees -- the voice employee back into offices?

Look, the outlook is -- as of now is that onshore people are still okay to work from home. There is some pressure to bring people back to work here in Philippines. In India, we are still allowed to work from home. So we are watching the stage to see whether we really need the kind of real estate footprint that we have today. The future of work is going to be a hybrid model of work from home and work from office and therefore, we need to rationalize our real estate.

And can you please give us some idea on what is the EBITDA margin in digital versus voice versus the other part you mentioned the nonvoice?

So that is a good question, sir. Unfortunately, we don't disclose that number in our published financials. That's something we can look at in the future whether we want to disclose those figures. Right now I don't think we are in a position to.

So maybe you don't disclose it for your company, but in general, in the market, what is the general observation? Since you are targeting digital, what kind of EBITDA profile it has versus voice?

Technology companies, the EBITDA profile would be in the mid-teens to high teens, okay, and some even have EBITDA of -- in excess of 20%.

Yes. There's another question I had. I was wondering, you have sold a -- the best part of your business, actually at a very good price. So that's a good thing. But the question is, would you -- since you have good experience in that business and you have scaled it up before, would you like to get into similar business, acquire small parts and scale up again or not? Or is there any noncompete agreement there?

Yes. There is a noncompete. We will not be able to get into the healthcare business.

Next question is from the line of V.P. Rajesh from Banyan Capital Advisors.

Sorry, my line dropped earlier. I was asking you about the NXTDIGITAL transaction. So in that situation, where we are issuing the shares, are we acquiring the entire company or only a portion of that company? It's not very clear from your comments in the press release.

Pala, you want to take that question?

Yes. Thank you, Rajesh. Thank you for joining back. To clarify, we are only acquiring the media and digital business of NXTDIGITAL and not the entire company.

Okay. And for that, you are -- okay, understood. All right. And then in terms of the ICDs, what is the maturity profile of that? And are you planning to do more ICDs through the related parties in this current year?

Look, these are all, which are repayable on notice, short notice. They're essentially money deployed on-demand. And the maturities are all maximum 1 year from the date of business, so everything would fall due before 31st of March. And based on -- as and when we need the funds, we can call the money back by giving those.

Right. But are you plan -- is there any plan to reissue these ICDs as they mature this year?

So look, there are -- obviously money is required for the buybacks as and when we do. There is also organic growth and money required for our solution. So right now, we are able to earn better rates, interest rates than what we get to putting in back deposits. And this is money available but then made available to related parties, and can be call back as and when funds are needed.

No, no. I got that point. I was just trying to understand if you will reissue to them. That's all I wanted to understand. Let's say they mature on 31st of December, and in that case, would they be reissued or this is just sort of onetime deal with the related parties?

Yes, it depends what is the position as on the date and what is the deal we can get. And we'd obviously use up the lowest interest cost-bearing funds first and we call back few funds as and when required from the -- on the ICD front. It's a treasury management.

Okay. Understood. And then on the business side, how much cash would you need for working capital purpose? Because obviously, you're profitable. So the only cash you may need is for...

Yes, yes. Look, if you look at it...

Working capital.

No, no. Please complete your question. Sorry, I interrupted.

No, I was just saying that, in fact, even that you may not require, because what you said about disposing of real estate, then you might have cash proceeds coming from that side also. So I'm just trying to understand if you would be using the cash that you have on your balance sheet for any purposes in the business this year?

Yes. So we would require -- I mean, if you are growing, you will require cash, because money will get locked up in working capital. So right now, the DSO days is roughly about 65, there will be CapEx and there will be any M&A which we do.

Okay. So what is your CapEx guidance for this year?

We are working through it, because the CapEx requirements change based on whether how much is going to be work from home and how much is going to be in office. We're working through that. And also the migration has been towards wherever possible on cloud-based technologies, especially on the telephony, those kinds of infrastructure, rather than the traditional servers, on-prem servers. So it's a mixed bag, but we are working through that.

The next question is from the line of Shailendra Mundra from Veba Financials LLP.

When I look at your cash, you have almost INR 7,000 crores of cash. And after dividend and buyback, you will still be left with almost INR 6,000 crores of cash. So -- and because of the limitation of buybacks that you cannot do more than about INR 1,000 crores in a year. So you will have to aggressively deploy the cash to get some reasonable return on this cash hold. So what is the plan? Is there any intention of going for some aggressive acquisitions or making some investments in other good companies, if you invest this in the fixed income securities and that too with the current interest rates, the tax rates, et cetera, there's not much you can get out of it? So could you please detail your vision, at least the high-level vision of what do you plan to do with this cash?

So you would see that just within a few weeks of selling our business, we acquired a business in Australia. So that was the first one that we did. And within a few weeks of that, we did a merger. Even though the merger is going to be a sharing profit, it is not going to be cash. So the short answer to your question is, we need to acquire digital capabilities, because this is going to be a technology company. Therefore, we are going to deploy most of the cash that we have in our book today, build that capability, either build organically or build through acquisitions in the technology space. So that is the vision for the utilization of the cash.

So if you get opportunities, you would like to invest all that INR 6,000 crores in acquiring new companies or capabilities or businesses?

That is correct. So till that time, we get a concrete opportunity, which is good, the money parks in short-term securities with ICDs.

Next question is from the line of Avinash Nahata from Parami Finance Services.

In response to the -- one of the participants' questions that you would vacate some of the current leases. So assuming -- so I have a query here. So assuming those all the employees, who are occupying those leases or those offices, our margins would be 3%. Is that correct?

So that is the current number, yes.

Yes. So now the second question is, is there a spare capacity also as far as the number of seats are concerned? Or that's not the case?

Yes, there is spare capacity. Yes.

So spare capacity could be 10%, it could be 40%. So any magnitude, because you said that the vacating of lease would lead to a substantial rise in EBITDA margin? So the idea to understand is basically 2 things. One is on -- so you spoke about one is vacating of leave and second is ramping up as far as the new clients or new businesses are considered. So from a shareholder perspective, we just want to understand that when can we see the ramp-up as far as the new business is considered, in 1 quarter, in 2 quarters and margins, at least 7% to 8% margin in 2 quarters, 3 quarters? Give us some sense directly or indirectly.

Towards the end of this year. Towards quarter 4, you will probably see a significant improvement in margin.

Okay. So you're saying another 3 quarters' time?

Yes. Approximately, yes.

And with U.K. business, which you have spoken about that is classified under the government business, right?

Correct. It's the government business.

And the ramp-up of which will start or has it begun?

Yes, it has begun.

And you spoke about INR 2,000 crores over 2 years, is it?

It is GBP 211 million.

Yes, sorry, GBP 200-plus million over a 2-year period.

Yes. It's 2 plus 1 plus 1.

Thank you. Due to time constraints, we have reached the end of question-and-answer session. I would now like to hand the conference over to Mr. Srinivas Palakodeti, for closing comments. Please go ahead.

Good evening, again. Thank you, everyone, for joining on our Q4 and FY '22 full year financial discussion. We look forward to meeting with you again in a couple of months' time to discuss our results for Q1 of FY '23. Thank you once again for joining this call. Good evening, and have a good day.

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