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

Good evening, ladies and gentlemen. A very warm welcome to the Q1 FY 2024 Earnings Call of Hinduja Global Solutions Limited. From the senior management, we have with us today, Mr. Partha DeSarkar, Executive Director and Group CEO; Mr. Srinivas Palakodeti, Global CFO; Mr. Vynsley Fernandes, Whole-Time Director, HGS and Head of Digital Media Business; and Mr. Lakshminarayanan, CS, Chief of Staff; NXTDIGITAL; and Chief Finance Officer; OneOTT Intertainment Limited. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Mr. Darshan Mankad from Ad Factors. Thank you, and over to you, sir.

Thank you, Suman. Good evening, everyone. We welcome you to the earnings call of Hinduja Global Solutions Limited for the first quarter ended June 30, 2023. Before we begin the earnings call, I would like to mention that some of the statements made during today's call might be forward-looking in nature, and hence, it may involve risks and uncertainties, including those related to the future financial and operating performance of the company. Please bear with us if there is a call drop during the course of the conference call, we would ensure the call is reconnected the soonest. I would now request Partha sir, to share his views and do the opening remarks. Over to you, sir.

Thank you very much. Good evening to all of you. Do a voice check. Is my voice clear?

Yes, sir, we can hear you now.

Okay. So once again, a warm welcome to our quarter 1 earnings call, and I'm really grateful that all of you have taken the time to come and attend this call pretty late in the evening. The first item that I had on mind, things to talk about was the completion of our much anticipated buyback plan. You would know that we finished the buyback process in June. It opened in May and completed in June 9, 2023. As a result of this process, 60 lakh equity shares were bought back at a price of INR 1,700 per share. And in the process, we returned INR 1,020 crores to the shareholders. You would also recall that when we sold the health care business, we did say that we are doing this to return -- unlock value for our shareholders. So over the last year, through significantly higher dividends and a very handsome buyback program, we've returned significant value back to the long-term shareholders of the company. On top of the INR 1,020 crores of buyback that we did, the taxes for buyback, which are again taxed in the hands of the equity holder, the buyback taxes of about INR 226 crores was paid by the company. So with the combination of dividend and buyback, we believe that we have kept up our promise of unlocking value for our shareholders. And in the process of buyback, we've also tried to do it in a very tax-efficient way. As I speak, I wanted to also highlight that the deck from which I'm talking or this presentation will be -- is available on our website. And therefore, if you are in front of a computer or if you're in front of your mobile phone, you can go to our site, click on the Investor section and this presentation will be accessible to you. The second thing that I wanted to talk about was TekLink integration. You would recall that we acquired a Chicago-based data analytics company called TekLink in February -- on February 28, 2023. We had one month of revenue from TekLink in the last fiscal year. This, as I explained, when we did that transaction was to build scale in our analytics practice and bring depth to our AAA strategy that is automation, analytics and artificial intelligence. So the analytics piece of AAA is complemented by the acquisition of TekLink. It will boost our services-led business. Our CX business, as you all know, is a services-led business. We are trying to move towards becoming solution accelerators and product-led business, and this is a step towards that. We strengthened our analytics team significantly with the addition of about 275 practitioners with deep demand expertise in consulting, specifically in the FMCG space. Also strong client relationship with 50-plus top brands across consumer retail, pharmaceutical, confectionary, manufacturing, et cetera. For quarter 1, TekLink's contribution to the overall revenues, which is for the full 2 months as opposed to just the 1 month that we had in quarter 4 of last year. TekLink recorded revenues of about $8.8 million, with EBITDA margins of about 22.2% and signed multiple contracts with 24 existing clients. The encouraging thing about this acquisition is that we are really seeing a lot of traction in cross-selling opportunities with our CX business. So we are referring our CX clients to the TekLink business and vice versa, we're finding the technology clients that TekLink has, interested in buying our CX business. So it's been a good synergistic approach towards the market. We haven't yet really build revenue streams from the synergies, but we expect those revenue streams to come in the later part of this year. I want to also briefly touch upon what we did in Colombia. We've talked about expanding our presence in Latin America region for a long time. It's a very interesting case for being able to service with its bilingual population. The Spanish speaking the Hispanic population of North America. As you know, the Hispanic population in North America is a very large group and the foremost Spanish that is spoken in Colombia is the purest form of Spanish that we'll find in Latin America. We have been wanting to open up in Colombia for a long time. We were exploring it in the pre-COVID times but pre-COVID came and we got delayed. So we opened up in November of last year, we inaugurated the center last month, and I'm very, very happy to say that the center that we have built has already matched its capacity. It has around 150 employees with services 3 clients from North America in the logistics and consumer industries with English, Spanish and Portuguese, so it's a multilingual CX hub, voice as well as data [indiscernible] ability. And we already sold out. So we are taking additional space in Barranquilla. Barranquilla is a city, which is about an hour fly from the Colombian capital of Bogota. So it's going to be our CX hub for our multilingual client support for North American businesses. All of you would have heard the buzz about ChatGPT, Generative AI and large language models. We have also been excited by the evolution of this new technology that first shoulder space in November of 2022. We believe that it is going to significantly transform the CX industry. And we are, as we speak, we are building our capabilities in Generative AI and large language models as well. We are making significant investments in artificial intelligence, cognitive intelligence, analytics and automation, both for clients and for internal transformation. We've talked in the past about our platform called Agent X. It's a comprehensive cloud-based cognitive engagement solution for enterprises. It helps shift to modern contact centers with automation, sentiment monitoring, unified dashboard, copilot, et cetera, and is able to give cost savings to the tune of 50% to 55%, making engagements more rewarding, making engagements shorter, more efficient, all of the things put together in one neat AI-driven package. We also have been able to automate about 114 internal applications using technology and consolidated it to 50 using AI and cloud. We are building a Generative AI lab in Bangalore and in the U.S. for our use cases are all call transcription, invoice audit, et cetera. Speech based AI using LLM has been deployed in HGS Agent X. We using a hybrid model, third-party Generative AI platforms, open-source AI and internal AI model. So we are using all the AI tools that are available in the marketplace to strengthen our capability in the AI space as well. With that, I'm going to turn it over to Pala to take you through the summary financial performance. Over to you, Pala.

Hi. Can you hear me?

Yes, Pala, we can.

Okay. Good. Thank you. So this is the summary financial performance. As you would see on the operating revenues, there is a sequential growth of about 6%, taking the revenues about to INR 1,133 crores. There is a small dip compared to where we were for the quarter ended June '22. This is primarily coming from U.K. As we had mentioned in our earlier calls, our U.K. business was doing a lot of work related to COVID, different aspects of COVID, track and trace, also relating to the vaccination. So we did have -- if you recall, in January '22, there was Omicron, the lot of other growth -- sorry, worries in terms of the COVID. So we did get a lot of -- we did do a lot of work related to the U.K. health care system. Obviously, that has tapered off. So while it's great, life has come back to normal. There is a dip in the revenues in U.K. coming from there. And that is obviously -- in progress to replace it with new contracts as we go forward. The other thing I wanted to call out is the revenue. We are shifting our focuses on driving revenues offshore and reduce the dependence on the onshore revenues. So as the mix changes, there's also a moderation in the revenue, but the overall direction is better margins as we do more business offshore. On the other income, as it is there in the publication page, in Q1 of FY '23, we had a significant amount in the form of FX gains That has come down. And also with passage of time, money has been used for additional dividends, buyback as well as the acquisitions. So there is also moderation in the interest income, which is part of the other income. Coming to -- you will see there is a growth on a sequential basis of about 16.1% in the other income side. Coming to the operating EBITDA, so this is the EBITDA which excludes other income, you will see there is a significant improvement in the operational performance. Our operating EBITDA actually doubled more than 100 -- by more than 100%, 112% to become INR 76.8 crores for the quarter ended June '23. And also, we are significantly better than the adjusted EBITDA -- operating EBITDA of Q1 FY '23. If you recall, our results when we published for the quarter ending June '22, we had called out there was a reversal of about INR 25 crores of excess provision pertaining to FY '22, which got reversed in Q1 FY '23. They are in the results which we had published last year. So if you exclude that, the operating EBITDA has actually gone up by almost 3x from about INR 25.5 crores to about INR 76.8 crores. And the impact of the other income drop is also visible on the PBT level. To sum up, operating EBITDA has improved. It's the other income drop between Q1 of last year and Q1 of this year that is pulling down the profit before tax. Back to you, Partha. Hello? [Technical Difficulty]

I was speaking on mute, I'm sorry. So I'm really sorry about that, yes. So I would say that the financial metrics that Pala has explained in a fair amount of detail, I would call this quarter an overall good performance quarter. The CX business has shown a steady growth, very strong demand, especially in Canada. And as Pala mentioned, we're also trying to grow our offshore business faster than our onshore business. And the way that works is typically onshore revenues have come at a higher rate, but the margins offshore are better. As a result of this shift in focus from growing offshore versus going onshore, you may find that optically, our revenue growth rates are slower than it used to be, but I believe that this approach is the right approach for us to improve our profitability of the business. We had significant growth from existing clients. We're also starting to win some new clients. We started focusing on the middle market segment for new logos. And when we say mid-market, these are clients with revenues of $500 million to $3 billion. So this market, we believe, is a very attractive market for our technology-led CX services, and this will help us grow faster. Our Mysuru Center was launched sometime last fiscal -- as our offshore businesses have grown. Mysuru Center has already completed a year with the 600+ employees. I talked briefly about TekLink. Our technology business has produced good growth. Total technology revenue for quarter 1 would be to the tune of about $24.3 million. This is, again, a big chunk of our revenue composition. We are focusing on longer-term deals in areas like managed services, strong interest for contact center transformation solution, our Agent X solution. We signed a couple of engagements for that. We've also signed up with some of the large cloud-based contact center to provide cloud-based telephony services to other clients. And this is a partnership model. These are partnership-led deals. So these contact center cloud contact center providers are names like Genesys, Twilio, AWS. So we are working as implementation partners with these partners -- with these big brand names to implement the cloud-based contact center telephony solution. And we're very excited with the kind of growth that we have seen in the partnership-driven model and the hope to strengthen our relationship, particularly with Genesys and Twilio as well as AWS, because that's the future of contact center technology. We'll move to the next slide, where I'd like to summarize how Q1 went. I think it's a strong sequential growth, higher volumes and better EBITDA margin. We will continue to focus on sustained growth. Sales focus has moved from enterprising to more big market and which is where I believe we've closed more business, even though the size of the ticket will be smaller than if you were to chase only enterprise deals. Enterprise deals are obviously massive deals, but the sales cycles are very, very long at times, a year, 1.5 years. And we decided that rather than chasing only enterprise deals, we're going to focus on both because we're not going away from enterprise deal, but we are going to now also look at the mid-market segment. Our sales strategy has also changed to now sell bundled offerings across CX and technology. Earlier, we had 2 different sales teams, 2 different sales leaders leading these individual business sales, but now we have realized that there are a lot of synergies in trying to cross-sell technology services to take clients and CX is [indiscernible]. So the sales teams have been brought together the unified HGS team. We're investing significantly in technology and talent within HGS. We talked about the AI lab that we opened in New York and in Bangalore. And with all those technologies that are going to change our industry going forward is obviously need for us to scale our talent quite a bit. And therefore, we're hiring software engineers with skills in machine learning, artificial intelligence and other things. We've hired 20 of them in New York [indiscernible] and that cascading strategy as well, building new kinds of talent in a very good workforce. So that's the summary of how quarter 1 went. And now I'm going to hand over to Vyns to take you through the digital media business. Vyns, over to you, please.

Thank you, Partha, very much for that. And I hope everyone can hear me clearly.

Yes, Vyns.

Yes. Great. Thank you. I'm on -- good evening everyone. I'm on Slide #12 of the deck, if you're looking at it. And effectively, this is the presentation on the digital media business, the digital media division of HGS. And the last quarter has been very eventful for us in a lot of exciting ways. The first thing, as I put on Slide 12, is we launched a unique OTT aggregator app. Everyone knows our popular over-the-top content has become in India. But the big challenge for everyone is, there are so many OTT platforms, and they don't know where to watch, what to watch, just like television was a while ago when you had so many channels and you had no way to surf to look at what. So we launched this product called NXTPLAY. We partnered with over 25 OTT platforms. And customers can access this content to a single app using NXTPLAY. And if you look at the screen, it has some very interesting features in terms of allowing and enabling a subscriber to discover what content to watch, where to find it and also to assess the reviews. So there's a kind of discovery -- content discovery process that we put in. It's called the Genie, which allows any subscriber to be able to search for content that he or she may be interested in and more importantly, across -- not just across genres but also across languages. We believe there is a significant requirement and a significant demand for regional content in regional languages, and it's something that we've been pushing for very actively as part of that 300,000 content hours that we provide. So that is on Slide 12. How are we using this most effectively in Slide 13, if you go to Slide 13. We've done it -- we've been very strategic about this product called NXTPLAY. We're leveraging is, in fact, in a two-pronged strategy. One is to ensure that we use NXTPLAY as a retention tool to be able to hold digital television customers by bundling NXTPLAY, the lower end of the spectrum there, and of course, obviously upselling as we go along. But also our big driver for this fiscal, as we -- as I mentioned in the last couple of calls, is broadband. And we believe broadband penetration is going to be very important for us, and especially Tier 3 and Tier 4 markets in India. And NXTPLAY, as an OTT platform, is being used as a penetration strategy, as an add-on with the broadband business. So the entire broadband business in Tier 3 and Tier 4, we're using NXTPLAY. We're bundling it with the OTT -- the broadband connectivity that we have. So again, to touch upon what Partha was mentioning, there's a lot of synergy that we've been able to leverage in launching this product because there's a lot of technology, there's a lot of AI, there's a lot of intelligence that goes behind this content. There's a lot of discovery patterns that are there. So we've been working very closely, and we've been able to leverage significant synergies with being able to roll out a product that is not just at the top of the spectrum but starts to build in more features that requires that a customer wants. So that is something that we've been able to see very effectively. Talking about broadband growth, if I can take you to Slide #14. We had a very exciting plan. One thing that we've realized that there is significant amount of demand for us all across the locations where we have digital television today. Just to refresh everyone, we have digital television through digital cable and through Headend-In-The-Sky. Where the only hits Headend-In-The-Sky player in India with the presence now today in over [ 4,610 crores ] actually. And we see a lot of demand in those markets for broadband connectivity. And since the number of players are limited, we decided a while ago actually, that's been the strategy for FY '24 to be able to engage with companies that provide -- that have the base fiber and for us to put in the electronics and ride on it to connect all these places. So there's an 8,000-kilometer plan, if you look at Slide #14, using companies like, for example, Power Grid. When you look at the term called OPGW, OPGW is nothing, but if you looked at power transmission lines, they have -- they string fibers as well overhead. And this OPGW, optical ground wire, is part of that. So companies like Sterlite, companies like Odisha Power Transmission, Power Grid, all of them offer this service. So all we do is load on the electronics and use that huge amount of capacity, either on an OPGW technology or underground wherever capacity is available. So when you look at that Slide 14, the network that we're looking at allows us not just to grow our base -- our broadband base in markets other than just Tier 1 and Tier 2, but more importantly, to provide unlimited or huge amounts of capacity. We're talking about delivering about 1 terabit of capacity using dark fiber or using fiber that is provided by the third parties where we load our electronics on top of that, and we're able to kind of optimize our connectivity all across the country. So there are 5 phases to this business -- to this rollout, if you look at that slide. The first phase, which is from Mumbai to Pune and back, I'm very happy to inform you that Pune and Nashik, which are part of Phase 1, are already completed well on schedule. The schedule was actually end of June in Phase 1, and it's already been done in quarter 1. And the others are well in progress. And we will not just connect 150 cities and towns through this, but there are also smaller towns. I'll give you an example just for those -- probably, you have a good sense of Mumbai and its surroundings. So a Mumbai Nashik fiber, for instance, Nashik may be our final destination, but on the way to Nashik, we have places like Kasara, we have got Igatpuri. All these places fall on to our connectivity map. So we connect customers in all those locations and continue to grow our broadband subscriber base. So that is our strategy for growing our base cost effectively, and at the same time, being able to cater to the growing demand that we're seeing in Tier 3 and Tier 4 markets, where not too many national players really are there. We have the leverage and the benefit of leveraging our digital television connectivity and our relationships with our last-mile owner knows markets to be able to optimize our broadband growth. That was on Slide 14. Slide 15 is our KPIs that we report every quarter. And again, I'm sure a lot of you or nearly all of you will know that the Telecom Regulatory Authority of India announced the new tariff order or what we refer to as NTO 3.0 across all digital platforms in February of this year. And the implementation started a bit later than that. So what we did was we realized that there was significant people didn't want to, there wasn't that kind of growth, and you had to -- we didn't want growth at the cost of profitability. So what we focus on is actually improving the ARPUs, the average revenue per user. And if you look at the block in the center, the digital television ARPUs have gone up to INR 122 per customer. That is very significant because it talks about growing revenues, right? And growth, we've been able to maintain our base. But we will look in quarter 2 -- well, not we will look, we are already looking at growing and pushing growth in the DTV space in quarter 2, quarter 3 and quarter 4 and bringing down the churn, which was clearly a result of the increase in pricing that was announced earlier in this year. That's on the DTV side. If I look at the 3 blocks below, the broadband business, as I again mentioned to you in the last call that we had, we focused on growing the ARPUs. And you'll be pleased to know that the ARPUs have not shown any dip. We grew them from 200 -- an average of about INR 266 last year at the same time to INR 291 in this quarter. So that shows that it's far from being commoditized as a result of us going to Tier 2, 3 and 4 markets. Not only that, we've been able to bring down the churn, the 90-day churn, which is the barometer of the quality of service to about 1.18%. And at the same time, we've been able to marginally grow our broadband subscriber base. So all in all, it's been a strong quarter for us where we set the ground rules and set the groundwork, most importantly, for pushing our broadband growth, not just in terms of ensuring strong ARPUs but also building out a network -- or rather digitally enhancing an existing network to be able to go into markets where connectivity or barriers to entry are low at this point in time. And on the other side, we focus on improving the ARPUs on the DTV side of the business, which now serves as the trigger or as we term it, the launchpad, we have this project called Project Launchpad to take it from here and now grow the business over the next quarters while maintaining the ARPUs. So that's in terms of the business. There's a lot of synergistic aspects that are there, as I shared with you on the CX side of things, on the artificial intelligence side of things. There's also the enterprise business unit, which is working very closely. Our back-end HGS teams and the enterprise business unit teams are working on leveraging synergies on broadband over satellite and other aspects. We thought it would be nice to share it once there's a little more shape and size given to it to share it in the next quarter, but there's a lot happening on that front as well. With that, I'll end my piece and hand over to Pala, the Global CFO for the financial update. Thank you, everyone. Pala, over to you.

Thank you, Vyns. I just want to make sure my voice is clear.

Yes. loud and clear, Pala.

Thank you, Vyns. So I'm now on Slide 17 of the deck. I covered some of it before. So to sum up, on a sequential basis, the operating revenue is up by about 6%. Other income is up by about 16%. Primarily, if you go back to quarter ending March, there was an FX loss in Q4 of FY '23. And in Q1 of FY '24, there has been an FX gain. So that's the reason for the increase in the other income. Operating EBITDA, so this is excluding the impact of operating income, there is a significant jump. So it's gone up from about INR 36 crores to INR 76.8 crores. And the adjusted EBITDA -- so sorry, before that, clearly, from an operating performance point of view, the business is doing well. If you look at the adjusted EBITDA, this includes the impact of the other income. Again, there is a growth of EBITDA of about 42%, taking it to INR 191 crores. On the PBT side, Q4 of FY '23, there was a small loss of INR 2.8 crores. That has become INR 28.3 crores. This is being driven by improvement in other income as well as improvement in the operational performance as shown in operational EBITDA. On the PAT side, there is a drop compared to Q4 of FY '23. Given that a loss of INR 2.8 crores of Q4 FY '23 has come -- become overall PAT of INR 25.7 crores. This is primarily coming from deferred tax asset creation. So it's a negative tax item. We didn't have the benefit of that to that extent. So PAT is more muted at INR 16.6 crores for the quarter ending June '23. To sum up, good revenue growth on a sequential basis and a significant improvement in operating EBITDA. Moving to the next slide. I'll only focus on the -- and I have covered already, the adjustment in EBITDA from a reference point of view earlier. There is an increase in depreciation. That is primarily coming from some amortization relating to the TekLink acquisition. And also on a sequential basis, while there is an increase in interest cost, some of it is also coming because of interest on deferred compensation linked to the TekLink acquisition. To sum up, taking into account the depreciation, interest, PAT for the quarter was INR 16.6 crores. Moving on to Slide 19. This is a snapshot on the finance -- on the balance sheet side. As of 31st March, we had reported net cash and treasury surplus of about INR 6,370 crores. That has come down to INR 4,962 crores. So that's roughly a drop of about INR 1,408 crores. This is primarily being driven by the buyback. So in addition to the INR 1,020 crores of buyback which got completed in June of '23. There's also taxes relating to buyback owned by the company of about INR 226 crores and about INR 6 crores relating to transaction costs. So 14 -- out of the drop in INR 1,408 crores, about 90%-plus is coming from the cash flows relating to the buyback, the rest has gone into the business. And if you see the table on the left-hand side, I mean the balance sheet is very strong. Shareholder funds, after taking into account the buyback and the taxes, stand at about INR 7,480 crores. So the book value per share is about INR 1,462 crores. We have gross debt of about INR 1,030 crores. But net cash and credit surplus land at INR 4,962 crores. Going to Slide 20. This is reflected by revenue. The BPM business accounts were about 57%, the digital -- media digital were about 34%, and other income is about 9%. Moving to Slide 21. The left-hand table is revenue by delivery. India, including the BPM part accounts for about 33%. Canada is at 13% and U.S. is about 25%. And we also hope to add a new color for Colombia as that is ramping up going forward. On the originating side, U.S. continues to be the largest market at 34%. India, which includes the media business, is at 28%, followed by U.K. and Canada at 18% and 13%; others basically, Philippines, Jamaica and Australia. If you go to the next slide, this is revenue by vertical. The media accounts were about 30%. This includes the media business in India as well as the media clients we have in North America. The next big section is, of course, Consumer & Retail at 21% followed by the Banking & Financial Services at 15%. Not too much change on the client concentration, if I look to the next slide, where it is the largest client accounts for 8.5% and the top 10 customers account for about 39%. Cash flows remain strong via DSOs under control. While there is a small increase of 6 days. This is only a timing difference given the extra efforts always booking for the year in terms of collections. But overall, everything is in good set as far as the quality of revenue consistency. Going to the next slide, this is the stock price movement over the last 12 months. With this, I bring my section to an end, and I hand it back to the moderator, and we will now open up the floor for Q&A. Thank you, everyone.

[Operator Instructions] We take the first question from the line of Rohit from Entrust Family Office.

First question is, I think our gross debt has moved sequentially from about INR 320 crores at the end of March quarter to about INR 1,030 crores. Could you explain the reason for that, please?

Yes. This is part of the overall treasury management in the sense that you may have funds locked in terms of different maturities on the -- in terms of loans or in terms of deposits with banks. The times you borrow if we have released an immediate requirement. So that's the 30th June position. But some of it is already decreased because as the fund becomes mature, the funds are taken out from treasury, and [indiscernible]

Understood. And out of the INR 4,900 crores of cash, which we've reported in net cash and treasury surplus, I believe last quarter, you have carved out -- you had carved out how much were short-term loans and how much were other investments? So how much would those to be out of this figure? And basically, what I'm trying to get at is, what are really the funds which have been given to our group entities out of this INR 5,000 crores?

So as -- okay. So as I mentioned earlier, the company had surplus funds. And these were parked in different avenues, including in terms of loans to group companies. And you would notice with the buyback, there has been -- funds have been returned and used for the buyback. So we were able to earn better interest rate than what banks may be offering. And we are also withdrawn funds as and when required and paid down the -- used it for the business or for things like buyback.

Fair enough, sir. But it would be helpful if you could give me the...

The number is about INR 863 crores as of 30th of June.

INR 863 crores is, what has been lend to group entities. Is that correct?

Yes, related party entities, yes.

Understood. And what -- if you could kind of articulate, out of the other sort of INR 4,000-odd crore, INR 4,100 crore, over the next, say, 2, 3 years, what exactly do we intend to do with so much cash? Would it be all going into M&A?

So it will be used to grow the business I mean it could be organic, it could be M&A. For instance, if you look the way we have -- what has happened in FY '23 and subsequently, we started operations in Colombia. That's organic. We have done the TekLink acquisition. That was clearly an inorganic growth, right? So depending on the opportunity coming up, it could be a combination of both. And we have been expanding. We added a center in Mysuru in India. We have added Colombia. So we are always looking for -- as we said, the focus is growing the offshore business. And we will add capacity based on where the demand is coming and where the client wants the delivery.

Understood. And in terms of lending to group entities, I believe the internal limits are about -- what is that number? Is it about INR 3,000 crores is what you can go to? Or is it come off after the buyback?

No, no, no. So there are multiple things, right? So we have an overall limit that could go up to INR 3,500 crores. But clearly, with the buyback completed, the amount of funds deployed have also come up.

The next question from the line of Mr. Yash, an individual investor.

Am I audible?

Yes.

Yes, sir.

So my first question is that you have mentioned that Generative AI is the new area of focus. So how do you plan to expand your footprint in this segment? So the industry is dominated by bigger peers like Google, Amazon AWS, Microsoft and also OpenAI. Can you please talk a bit -- a little bit on that?

So that is a brilliant question, I would say. That they have their own models, okay? And we build our own models as well. So frankly, if you ask me, sir, you always have big players, and we always have small players. The industry is extremely fragmented despite the presence of such massive players like Microsoft and Google. Small players have also flourished. So that is the nature of the industry. We are not into building platforms unlike a Google or a Microsoft. We use technology, so we partner with Google, we partner with Microsoft to implement their technology. So there could be cases where we partner with Microsoft and implement Azure, we partner with Amazon and we implement AWS solution for contact center solution. So it is an ecosystem, sir. It is not always a competition with the client because you can't win that game, right? You clearly cannot win a game against such massive players. So that's how software industry works, sir. There are large players, there are large platform players, and there are small players also. But there is enough for everybody. The world runs on software. They have enough for everybody. And I don't feel that can because there are big guys who are spending big money in Generative AI that we will be covered out of the space. It just creates more opportunities to transform this space. So we are very excited with what the technology allows -- would allow us to do for the future. And the more money that they put in, the better the products are going to be. But they are not going to be able to do everything. We will partner with them. They will probably go for the enterprise deal. And we will use that for our mid-market target segments. That is what happened. So when we partner with Google or Microsoft and all of that, we partnered with them to implement their technology for the clients that they find too small to deal with, might be a good for us. So Microsoft doesn't go and do implement everything on their own. They have system integration partners. We are their partners. We are partners for Google, we are partners for Microsoft, we are partners for AWS, we are partners of Genesys, we are partners with Twilio, we are partners for Automation Anywhere, we are partners with [indiscernible]. We implement the technology. That's how we work, sir.

I also have -- sir, I also have another question. So is it possible to share the investment that you're doing in Generative AI? Like by when do you think we can expect to see a contribution from Generative AI in...

Sir, it is already contributing, sir. We have developed our own platform. I talked about it, Agent X. Every year, we have been spending little bit [indiscernible], and maybe you could probably talk about it. I won't be able to give you the exact number because we've not closed that number, so could be on it in the future. And once it is public information, I can share it. But yes, over the last 2 years, we have been building Agent X with their platform. That is for contact center transformation. It is built on AI technologies. And let's please give you a ballpark number, okay? I can't give you an accurate number because we don't report the numbers. We spent the amount of $5 million on building this platform.

Okay, okay. Just one last question from my side. You've mentioned about U.K. business and there is some dip in revenue and margins. Do you think this is likely to turn around next -- in the next few quarters? Or how is the overall demand scenario in terms of U.K.?

Sir, if you track our business, you would have seen that U.K. saw an explosive growth in the year during Brexit and COVID, okay? Since 2020, Brexit was announced, we won a big contract to support the U.K. government for trader support services for Ireland, okay? That was one big contract. The second big contract was the NHS contract or the U.K. health services agency contracts, which was to support the U.K. government initiative to tackle COVID. Now while I talked about the fact, and you will recall from memory that January 2022 was when first Omicron came out. Before that, it was Delta, right? So Omicron came and it was found to be a lot more less severe, but a lot more effective -- a lot more infective as compared to Delta. So it spread like wildfire in Europe, particularly in U.K. It was completely covered with Omicron in the first quarter and the second quarter of 2022. Since we were supporting the health services client, a lot of our volumes came from that. And the tip that you are seeing in quarter 1 is on account of the fact that thankfully and thank God that we've been able to -- COVID under control, right?

Yes.

And that is good for humanity but in a perverse kind of way. Unfortunately, it hits our revenue, but I'm glad that COVID gone for good hopefully. And yes, we will build our revenues back because it's such a spectacular growth, sir, it's going to be difficult to replicate that kind of a growth. It's almost impossible, right? We will build it back, but it will be not a spectacular growth that you saw during Brexit and COVID. It will be steadier growth, but we are confident that we've got a new CEO, we built a new team in the U.K. So we will be able to build our business back.

Sure, sir. The coming quarters, we are very hopeful of it?

Yes, sir. As I said, it will not be as spectacular as it was in the last 2 years. And I explained the circumstance [indiscernible] It's going to be more reasonable, but a more sustainable growth.

[Operator Instructions] We take the next question from the line of Ms. Hina, an individual investor.

I just had a few questions. So on the DTV side, you mentioned that net churn has gone up due to the increase in prices. How do you plan to keep the ARPUs high and reduce the net churn because reducing ARPUs won't be an option, obviously, because it will reduce the revenue, right?

Sure. Thank you for that question. I think the net churn in DTV, you're absolutely right. The -- if you look at it, what we were very clear about is that we wanted to take on pricing. Now there was an option. It's a bit of a difficult one. Do we look at focusing on growth and pushing growth at a lower price? Or do we ensure that we kind of set the base for the future? So while we did see an increase in net churn and you're absolutely right because we let go of lower-cost customer -- or sorry, lower-earning customers because we couldn't obviously -- we didn't want to go that route. We focused instead on growing the ARPUs. So any growth now, Hina, will obviously be at the higher ARPU. So that's what we've already seen in Q2, which is the focus on growth. So this is a strategic decision, very strategically. And I hope that answers your question.

Yes, sir. Sure. I have a few more questions. So on the subscriber base for DTV and broadband is almost stable over last year. Can we expect NXTPLAY would help the company to grow the subscriber base? And would it affect the overall ARPU?

Sure. So you're completely right. I think you're sharing our strategy publicly, but I'm completely in with you. That's exactly the strategy. The NXTPLAY, the OTT platform will help ensure we ring-fence the customer. So the stickiness of a DTV customer or the stickiness of a broadband customer gets further enhanced through providing NXTPLAY, which is the OTT aggregator app. At the same time, our focus is on broadband growth in Tier 3 and Tier 4 markets. And those are markets where ARPUs are strong. And we hope to use NXTPLAY -- they are not hope to. We're already using NXTPLAY there as a kind of deal sweetener. So we're providing, for example, NXTPLAY as an add-on for a sort, I won't use the term discounted, but it's probably wrong, but a more competitive price in those Tier 3 and Tier 4 markets where we're pushing broadband growth. And that growth is already being seen in Q1 itself, albeit slowly, but it's definitely already started. The traction has already started. And hence, our focus on ensuring that we also provide the national long-distance connectivity, which we are working on.

Okay. And only last one question on -- are there any plans to collaborate with international partners to leverage their expertise in OTT and broadband market?

So we already -- so just to tell you, Hina, in terms of OTT, we're already working with international companies to help us develop our back-end. And a lot of that work is also being done by our own HGS technology. We have one of the easy -- one of the best back-ends in terms of software, technology and development. And we've engaged with the couples also. So there is an international team already working on that aspect. In terms of broadband, when you look at the slide that I mentioned, I think the page -- I think it was Slide 14. When I talk about DWDMs or -- which is the technology that we use, which is basically Dense wavelength-division multiplexing. It sounds very fancy, but it's not just -- basically a technology using fiber optics. So we're working with a lot of global companies already, right? Nokia being one of the key partners in the rollout. There are a couple of other partners also that we're working with. So the entire end-to-end technology is leveraging the best of international learnings but optimizing our own expertise that we have. I mean we're the only ones to provide Headend-In-The-Sky technology in India, right? I mean there's no one else. So we've got a lot of expertise in satellite delivery. We've got a lot of expertise in delivering our own proprietary technology to that model. So broadband gets the benefit of having a strong technological backbone and a team that we have in the country while optimizing other technologies that are there.

[Operator Instructions] As there are no further questions, I would now like to hand the conference over to Mr. Partha Desarkar for closing comments. Over to you, sir.

Thank you very much once again for joining us for this call, and we look forward to meeting you once again in November where our Quarter 2 results become available. With that, a very good night to all.

Thank you. Thank you, everyone.

Thank you, everyone, for joining the call.

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.