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

Good evening, ladies and gentlemen. A very warm welcome to the Q1 FY 2025 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. Vynsley Fernandes, Whole-Time Director, HGS and CEO, NXTDIGITAL; and Mr. Srinivas Palakodeti, Global CFO. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Mr. Darshan Mankad from Adfactors. Thank you, and over to you, sir.

Thank you, Rico. Good afternoon, everyone. We welcome you to the earnings call of Hinduja Global Solutions Limited for the first quarter ended June 30, 2024. 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 hand over the call to Partha sir for opening remarks. Over to you, sir.

Thank you. [Technical Difficulty]

Partha, sir, may...

Partha, we lost you.

May we request you to unmute your line, sir. Ladies and gentlemen, the line for the management is disconnected. Please stay connected, while we reconnect them. One moment, please. Ladies and gentlemen, we have the line for the management reconnected. Sir, go ahead.

Thank you, and a very good afternoon to all of you who joined the call today. And I am assuming that my audio is clear. Just doing an audio check. Am I clear?

Yes, sir, loud and clear.

Okay. Perfect. Thank you so much. So I also -- I am assuming that many of you who are attending the call also have our investor deck in front of you. We posted that on the website, and the first page of that gives the company at a glance. Some high-level numbers worldwide. We have about 18,000 employees in 9 countries. We have about 4,500 PIN codes that are Digital Media business covers across India and about 1.2 million of broadband subscribers, 4.43 million of DTV subscribers and about INR 5,100 (sic) INR 5,100 crores of net cash and treasury surplus. Four lines of businesses, out of which the business process management service would be broadly classified into pure digital services, cloud, cybersecurity, data engineering, et cetera. And CX, which is business process, contact center, generative AI, so that's the business process management part of the business. Then we have the Media business, which Vynsley represents, and he will come on to the call later. There is a broadband business there where we have network as a solution, home, wire, broadband, OTT and IPTV. And we also have digital cable television, DTV, as the second arm of the media division of the company. With that, we'll move to the second -- fifth slide out here, snapshot of the financial performance. A slight dip in consolidated revenues, about 3.7%, and Pala will cover that in more detail in his presentation. However, other income and total profit after tax has shown a very handsome increase from 11% to 870.9%, respectively. Without getting into the numbers in detail which Pala will cover, we'll move into the Slide 8, where I would try to tell you the key highlights of the business as we see it. There continues to be challenges in the macro economy with the volatility and delayed decision making in key clients. As you know, the war is not helping, an election year and uncertainties around policies with a government change in U.K. With an impending election in U.S., I think people are in a holding mode as to which way some key decisions, policy decisions will go based on the results of this election. So we are seeing delayed decision-making in our clients. I would say that data analytics, social care, CCaaS and cybersecurity have strong traction, and our U.K. business is doing better than expected due to revenues from key public sector clients. I'm also happy to announce that we've just made a small start in selling our digital services to U.K. and Australia. And as I had mentioned earlier, we planned to start off in South Africa. I'm happy to report that the South Africa office is now set up completely, ready to go, and we are expecting to start operations in the next couple of months. We have been spending money and investments in organic buildup of technology solutions to fast-growing sectors like technology, media, telecom, banking, financial services, retail and consumer, hi-tech. And we have also now hired some vertical-specific sales leaders, continuing our efforts to strengthening the sales team, particularly in the Americas. You know that generative AI and large language models have created a lot of hype. It was unveiled in November 2022. And a large part of 2023 and 2024, the market continues to be very excited by its potential. We are also really enthusiastic about what it has as an ability to service and transform the CX industry. To be able to leverage that, we are investing heavily in building capabilities in artificial intelligence. We're setting up AI labs and are building models that leverage the existing generative AI tools and embellish them with the domain knowledge of our clients' businesses, particularly trying to redesign the customer journeys for our clients by trying to get into hyperpersonalization, trying to develop conversational bots that learn based on call transcripts and also building intelligent automation tools that use image and video processing. Happy to report that many of these developments are happening in house, and we are also trying to build capabilities like other players. The good thing is that because this technology is new, nobody really has an edge over others. Everybody is trying to mine the same opportunities that have just evolved in the last 1.5 years. Our people, we have been able to hire a lot of very bright in software engineers to embellish our team in digital talent, and that remains our focus going forward also. At the same time, we are also reskilling our existing 18,000-odd people that are there in our conventional CX business and trying to get them educated on digital tools. Slide 10 talks our vision to be the preferred digital transformation partner for the world's most admired brand. The light blue circle, which is bigger, talks about the entire customer journey and the customer experience, whereas the deep blue smaller circle represents what we have done for the past 20 years. We have always been in the customer service reactive space. And now we are expanding our horizon to cover web and mobile experience, e-commerce, generative AI, LLM powered chatbot, CRM and customer insights as well as digital marketing. Some of these newer capabilities have come through acquisitions, particularly the Element acquisition that we did in 2018 and the TekLink acquisition that we did in February 2023. So our digital capabilities are much broader than they used to be in the first 2 decades of our existence, and that's how we hope to leverage the opportunity that has been thrown open by the developments in generative AI and large language models. The future state has been briefly pictorially presented in Page 11. You will see, again, a light blue circle, which is the traditional CX. Today, that's about $330 million of our revenues. And the digital circle is the bright blue, which is about $92 million of our revenues. Going forward, the convergence of the 2 in the Venn diagram that we show is what we are calling digital operations. And that's where we will have AI-driven process management, AI-driven supported -- AI-supported unattended customers service using conversational chatbots or interactive voice response units, attended customer service and AIOps, which is around creating models for data tagging and labeling. So that's the future, the convergence of our digital capabilities, which are newly acquired and the traditional business that we have -- CX business that we have done for the last 2.5 decades. What we are trying to do in the new plans that we are building for us is to change our revenue mix by lead through verticalized solutions. You would recall that we had a health care business earlier, and that was an extremely successful business. We are now trying to convert the rest of the similar verticals. The focus verticals are banking, financial services, technology, media, telecom, consumer packaged goods as well as hi-tech. Our pipeline is there is an effort to increase our pipeline aggressively. And that's why you will see that our expenses towards sales and business development has actually increased year-on-year. Our operating models are getting transformed. We're trying to go more offshore and build nonlinear revenue models. And eventually, we would like to be a thought leader for AI-enabled conversations in our chosen domains. I will now hand over to Vyns for a Digital Media business update. Vyns, over to you.

Thank you, Partha. Thank you very much, and I hope everyone can hear me lost clear. Can you hear me, please?

Yes, Vyns.

Great. Thank you. I'm going straight on to Slide 14. This is interesting in terms of the industry that we operate in, the Media business. As you know, just for a quick summary, the Media business comprises 4 verticals actually, the digital television business, which is the mainstay and the flagship. There is the wired broadband business, which continues -- it's part of the sunrise industry and looks to continue to grow. It's barely crossed 38 million homes today. Of course, the third in the -- the third vertical is our teleshopping and corporate sales business. And we also have a technology arm. So all these 4 have been positively impacted by the new business environment on Page 14, where the regulator, the Telecom Regulatory Authority of India has announced sweeping changes for broadcasting and cable. And I won't spend too much time on this. But just to highlight what are the critical aspects that kind of benefit us. I think if you look at the second block on the left-hand side, we are able to start with saying in a bit to offer more attractive deals to consumers. DPOs, like us, like NXTDIGITAL, we are now permitted to offer discounts while forming channel bouquets. So I'll explain the significance of this is pretty much important when you look at regional content. A simple example is why would the Northeast of the country want to watch necessarily South Indian languages, and they'd rather prefer languages in their own local language. And therefore, we can look at forming channel bouquets that are of benefit to them. And similarly, vice versa, for those in the South, we can create bouquets and offer discounts for predominantly Southern-based language channels. And that is one. If you look on the right-hand side, this is a very good initiative for customers that the duration of all prepaid subscriptions is specified in terms of number of days. You'll be happy to know that your company has been following this process for a long time. We believe in a very high level of transparency and governance, and we've been able to make sure that we follow this to the T. The other important thing, I think, is the last block, which talks about TRAI issuing recommendations. There's -- everyone is concerned about DD Free Dish platform, which continues to kind of eat into the customer base at the low end of the spectrum. With it becoming addressable, it obviously helps in terms of a level playing field as far as DPOs are concerned, besides obviously ensuring enhanced viewing experience and security. So it becomes -- overall, the industry stands to benefit from these initiatives of the regulator that have been announced just last month in July. That's on Slide 14. On Slide 15, as I've mentioned in several calls, our entire approach to business has been to leverage the investments that we have made over the last several -- not just years, but over the last several decades. And this is yet another initiative that we've taken to leverage our capabilities. We have significant amount of infrastructure in cities like Mumbai, Delhi, Bengaluru. And while we launched CelerityX, as you know, last year to cater to the enterprise segment or the large-scale companies, this is a new model of providing services to the medium -- the micro, small and medium enterprises as well as small office, home offices. We're talking about lawyers' offices, chartered accountants. We're talking about pretty much every single business that needs to work from home, is a small office or a home office operation, artists, everyone else that works from home, teachers, all of them. And this model called OneBusiness, part of the ONE Broadband business, is mainly the main product is ensuring that we provide a strong Internet lease line. And this is a dedicated, obviously, connection because what's different from it in broadband, this is a dedicated connection to a company, to an MSME or a SOHO and has much higher levels of service levels or SLAs, right, service level agreements, as we call. And there's a dedicated customer care team. So we've launched 2 products. One is Business Connect. If you look on Slide 15, as the visuals on the right-hand side, we've launched one is Business Connect and there's a Business Connect Pro. And we've already rolled this out. But as you know, we're always very cautious of our approach because we like to make sure our product is solid and robust when it hits the commercial market. So we're currently running a proof of concept in very high density markets of Mumbai, which has been, by the way, just to let you know, quite successful. And once it achieves success for which we set the measurables, we look to roll out this product to the rest of Mumbai, of course, Delhi and Bengaluru. So that's on Slide 15, the launch of our commercial broadband service. I'll take you to Slide 16 now. Good strong performance again. There was a marginal dip in terms of Q1 over the preceding quarter. But year-on-year, the growth has continued to be robust. If you look at it, we've grown about 15% as against Q1 of last year and nearly 6% in terms of Digital Television, right? So our broad -- so the sunrise industry continues to make significant inroads in terms of growth. And even this marginal dip of 4.9% on broadband and 2% on DTV is really not a concern. We see this trend every year. And there are 2 reasons for it, which I mentioned there on Slide 16. One is that renewals in Q1, which is April, May and June, are generally slow because of a lot of people going out on vacation, right? It's the summer vacation period in India and people -- and renewals happen mainly in Q2. So we see June, towards June, middle of June, end of June renewals coming in. So that is why Digital Television and broadband would show that. And we continue to ensure that the low-yield customers with a business that is looking to ensure profitability and on a path to profitability continues to show strength by ensuring the low-yield customers are churned. If you look at the 2 blocks of graphs below, which is broadband churn and DTV churn, this is very, very good. DTV churn, the average in the market is over 2%, 2.5%. In the first quarter itself of this year, we brought it down to below 2%. It's a strong trend. And again, broadband, like I said, is more a question of renewals that we keep on seeing in Q2. So overall, the broadband and digital television subscriber base, we've continued to grow -- just to summarize. We've continued to grow year-on-year. More importantly, if you all have referred to the earnings data as well published, our revenues have continued to grow, and that is a very healthy sign. Our broadband base remains stable and robust. And Q2, obviously, we'll see even a stronger performance as well as DTV churn is well under control. Our new product rollout includes OneBusiness, as I mentioned to you, which is focused on SOHOs and MSMEs. And CelerityX continues to grow catering to enterprises. This is a quick summary. And of course, at the end, when we wrap up, we'll be happy to take questions. So with that, I'm going to hand over to our Global CFO, Srinivas Palakodeti. Srini, over to you. Pala, over to you. Thank you very much.

Thank you, Vyns. Good afternoon, everyone. Thank you for joining us on this call. I just want to check. Is my audio clear?

Loud and clear, sir.

So I'm on Slide 18 of the deck. This is the summary financial performance. As you would see, revenues have come in at about INR 1,092 crores for the quarter ended June of this year. On a year-on-year basis compared to the quarter ended June of '23, revenues are lower by about 3.7%. And on a sequential basis, that is compared to the quarter ended March of 2024, revenues have come in lower by about 0.6%. So fairly flattish in terms of revenues. Small dip in rupee terms. Out of the INR 1,092 crores, around 72% of the revenues have come in from the BPM and technology business, customer care, and the balance 28% have come in from the Media business. At the EBITDA level, margins definitely do look low at 1.5%. As we have mentioned, there were certain adverse -- sorry, certain one-off costs, which were incurred in Q1 of this year, relating -- which resulted in the EBITDA margins coming down for the quarter. As I said, the onetime costs will not be there going forward. So we do expect margins to be definitely better as we go through rest of the year. On a sequential basis, depreciation is fairly flat, and there is a slight increase in the interest expense of about INR 56.4 crores compared to INR 50.6 crores. And bulk of the increase in depreciation is coming from Ind AS. There is also an impact on the interest cost. As I've mentioned subsequently, there has actually been a reduction in the borrowings between March and June. At the other income level, there is a drop of about INR 23 crores between quarter ended March '24 and the quarter ended June, though it is higher by about 11% compared to the quarter ended June '23. On a sequential basis, there is a drop primarily because in the quarter ended March '24, there were profits from paid of fiber related and fiber optics by the Media business. This is something which was called out when we came up with the results for the quarter ended March. And that was a one-off transaction. So the net result, other income is lower by about INR 23 crores between quarter ended March '24 and the quarter ended June. Coming back -- sorry, coming to the PAT from discontinued operations, we have made necessary disclosures in the publication page. You may recall that we had sold our health care business in January of '22. And we had to classify the health care business as discontinued operations. There was one final installment of funds, which was to be received. So we have received that funds during this quarter, and this has resulted into net profits after tax of INR 218.5 crores. So for the quarter as a whole, total PAT came in at about INR 161.5 crores as compared to INR 16.6 crores for the quarter ended June of '23. So that's a growth of almost close to 10x. And there was almost close to double compared to the PAT for the quarter ended March '24, which came in at close to INR 88 crores. Moving on to Slide 19. This is the summary balance sheet. There is no change in the share capital. The buyback was completed in the previous financial year. The good part is our DSO days are down. So it has come down from about 62 days for quarter ended March '24 to about 60 days for the quarter ended June '24. And while it is coming up separately, there is reduction in borrowings of about INR 198 crores between March and June. And as you will see, the balance sheet continues to be strong, and we have total net worth of about INR 7,819 crores as of June of '24. Moving on to Slide 20. This is the summary cash flow. Our cash flows continue to be strong. And from operations after taxes, we have generated about INR 348 crores during the quarter. On the investment side, as we have mentioned in our earlier calls, TekLink business continues to do well. And as a result of the performance, there were -- the sellers of TekLink were eligible for certain payments linked to earn-out. So we did have that payment happening during the quarter. So that led to an outgo of about INR 127 crores. As I mentioned, there is reduction in our borrowings between -- during the quarter. And if you see the total cash and cash equivalents, that stands at about INR 605 crores. This is excluding surplus funds in the form of investments and loans. I will come to that separately. If I move to the next slide. On the next slide, Slide 21, this is the total financial position. As I said, shareholder funds of INR 7,820 crores, a book value of about INR 1,681. We have gross debt of INR 1,107 crores, and this was about INR 1,306 crores for the quarter in -- as of March '24. So there is a reduction of about INR 198 crores between March and June at a total net cash and treasury surplus, that is total cash net of debt. Again, we are in a strong position. We have about INR 5,177 crores of net cash and treasury surplus as of 30th of June. And this has increased by about INR 164 crores compared to the position as of March of '24. Moving on to Slide 22. This is the operating revenue split. Out of the INR 1,092 crores, CX services accounted for about 57%. Digital and media services accounted for about 43%. Our 28% of the total revenues have come in from the Media business and about 15% of the total revenues have come in from our digital and technology services. Moving on to Slide 23. If you see the pie chart on the left-hand side, this is revenue by delivery. India continues to be at 42%. And within that 42%, 28% of total revenue is coming from the Media business, and balance 14% comes from our HRO business and what we do from service international plants from India. U.S. is at 20%. U.K. and Canada are in the range of 12% to 13% and Philippines at 11%. If you look at the graph on the right-hand side, India accounts for about 36% of total revenues. That includes the Media business and the HRO business. In terms of origination, U.S.A. is at 30%, followed by U.K. at 15% and Canada at 12%. Australia, which comes from the Diversify acquisition, that continues to do well and now accounts for about 6% of total revenues. Moving on to Slide 24. This is revenue by vertical. The technology, media and telecom account for about 55%. Public sector, which is primarily U.K. and some from Canada, account for 11%, followed by BFSI at 15% and consumer and retail at about 12%. Moving on to Slide 25. The client concentration, as we have said earlier, the Media business has multiple clients. So they don't really come in from impact at a client concentration because it's primarily a B2C business. But with the broadband business picking up, we would see more than B2B business. The top client accounts for about 10%, clients from the technology, media and tech sector. Top 5 accounts for about 25% and top 10 accounts for about 34%. So as you would see, the client concentration is fairly less with top 10 accounting for only 34% of the total revenues of HGS. And we talked about it earlier, the DSO days have come down from about 62 days at March '24 to 60 days as of June '24. That's my last slide. We would now like to open the session for Q&A. And I would hand it back to the moderator to moderate the Q&A session. Back to you, Darshan.

[Operator Instructions] The first question is from [ Gina Pariq ], who's an investor.

I have 3 questions. First is on the other expenses. So I wanted -- could you just clarify the components that contributed to the increase in the other expenses in Q1 FY '25?

Yes. As I said, we are investing in some solutions for the subsequent growth of the business. And we've also incurred some costs relating to the -- severance cost, joining bonuses. So those are the kind of costs which are there, which have -- which we have said as onetime in nature.

Okay. Also on the other income, could you throw some light on the components including in the other income for this quarter as well as for the last quarter?

Yes. So if you look at the -- I'm looking at the consolidated numbers, we had about INR 114 crores of total other income. And out of which, there was a component coming -- which had INR 159 crores for the quarter ended March '24. Out of it, about INR 50 crores came in from the profit from the sale of the -- some fiber from the media division. And about INR 99.5 crores came in in the form of interest income. And FX gain was actually a loss of about INR 6.4 crores. If you look at the similar numbers for Q1 of FY '25, interest income has actually gone up to INR 102.3 crores, and there was an FX gain of about INR 8 crores compared to a loss of INR 6.4 crores in the quarter ended March '24. So these are the 2 big ones, which have changed. I would say the lack of profit from sale of the fiber assets, which resulted in the drop in the other income.

Okay. And just one last question. Can you please elaborate on the profit from discontinued operations for this quarter? And will such gain going to persist in future as well?

So as I mentioned, we had sold off the health care business in January of '22. There was one payment, which was -- which had been held back, and that payment came through in the month of this -- during the current quarter. So taking into account the estimated expenses, we have incurred -- we have recorded net profits of about INR 218 crores. So unless -- we are not expecting any major cost associated with this, unless it is something which would be related to the health care business, which we have to incur at a go-forward stage. For instance, if we have given some indemnities and if those indemnities get invoked, and then if you have to make some payments, then you would incur those costs. On an ongoing basis, we are not expecting any major cost relating to the discontinued operation because it's, by definition, something which we have discontinued. There, we have one-off.

The next question is from Harshal Patil, who's an investor.

Sir, I have a few questions regarding to GenAI. One major IT servicing company management said implementing to GenAI can lead a product [indiscernible].

Sir, may I request you use your handset answer, please?

I'm using my handset only.

Sir, your audio slightly muffled, sir.

Am I audible now?

Yes, sir. Please go ahead.

On GenAI, one major IT service company mentioned that implementing GenAI could lead to a product improvement of up to 50% in some BPO services. What are your views on that? And what is the kind of ask from clients in terms of [ fast back-end ] productivity improvement today?

So I'm only able to quantify how much of productivity improvement can happen. It's very, very case specific. But yes, there will be a productivity improvement, which will end up our being able to automate more processes. So as I told you, we've been able to now develop capabilities by which we can design those automation processes using AI. Something that we are using people for will be done by technology, but will be paid for the technology services as well. So that is the way I see this thing playing out.

Okay, okay. So put some light on -- the cash and the treasury surplus have increased from INR 513 to crores to INR 5,177 crores. But could you provide clarity on these funds will be -- how this fund will be utilized?

This is Pala here. So Harshil, as I mentioned, we did receive funds from the sale of the health care business. So that obviously has added to the treasury surplus. And these funds are being used -- will be used. Primarily, we are looking at acquisitions. These would be in the space of digital analytics. We spoke about the company called TekLink, which we acquired a couple of years back. So we are -- sorry, this was in February of '23. So we are looking for acquisitions in such space. And some of -- of course, a small portion would also go for growing the South Africa business, which is all organic. So that's what we are looking for in terms of growth of the business, either organically or through acquisitions.

Okay. Can you shed some light on the decline of -- in BPM business revenue and the margins in Y-o-Y and the Q-o-Q business? And what you can see the business going further in coming quarters?

Yes. I mentioned that there is a little bit of a slowness in demand. So as election uncertainties come in, we are seeing decision-making getting deferred on, which is what is causing a slowness a little bit in demand. So we are hoping that things improve in the second half of the year. But as I said, it's something a little bit of uncertain at this point of time.

[Operator Instructions] Next question is from Nikita Shah who's an investor.

Am I audible?

Yes.

So sir, as you can see, Media business revenue has grown Q-on-Q and Y-on-Y basis. Could you please tell me what this growth was driven by?

Sure. Nikita, this is Vynsley. Can you hear me?

Yes, yes. I can hear you.

Okay. Yes. So Nikita, if you recall, if you were there in the FY '23 calls, one of the two, what we did was we paced ourselves out, and we focused last year on growth. If you, again, recall, we said we wanted to grow our subscriber base significantly. We grew broadband by over 25%. Nearly 1/4 of our business, we grew last year as well as we grew DTV, digital television, by about 8%. So the benefits of that growth are being seen now in the consecutive quarters because every growth obviously has a settling period attached to it. What do I mean by that? If you sign up tomorrow with me for broadband, what happens is that we give you a 6-month pack and probably the first 30 days are free. So the revenue gets booked obviously later. So the kind of benefit of the revenues is coming later. And our entire focus in this fiscal, in FY '25, is to focus on monetizing that growth, to focus on monetizing the customer base that we've grown and, therefore, be able to take our revenues, which is why you've seen a significant growth in revenues year-on-year close to about 35%. So I think that will -- that we're hoping to continue to push. We also are continuing to push profitability and that we are slowly beginning to see green -- not just green shoots. We're beginning to see a pretty significant improvement on that front as well, Nikita. I hope that answers your question.

Yes, it does. So is this kind of growth sustainable in coming in future, the 20%, 25% growth that you observed today?

So Nikita, I'll put it slightly differently to you. I think it also depends on the focus areas we are on. So our focus, for instance, in a particular quarter may be purely on subscription growth, another quarter maybe on revenue growth, the third quarter may be on profitability growth. So our -- we kind of -- we look at the opportunity that allows itself or that provides itself in front of us. To give you an example, broadband, wired broadband, as I mentioned at the start when I was talking, while broadband has crossed barely 38 million homes, right, we're close to 300 million homes in the country today. The Prime Minister's vision for digital inclusion is very, very clear. And we believe that that kind of growth, broadband growth, is going to continue to see significant amount of double-digit CAGR growth over the next several years as digital inclusion becomes a reality. So I think what we're doing is we are pacing ourselves. We're focusing on sustainable growth. And then we are focusing on sustainable profitability and then looking at other areas that kind of compromise -- not compromise, that kind of comprehensively allow us to stabilize ourselves and then take the next level of growth. So by and large, we've been doing that quite successfully in the last several quarters, and we hope to continue with that going forward.

Okay. That answers my question. I do have one more questions. So if you observe, we have significantly increased the media segment liabilities for the quarter-on-quarter basis. So what could be the reason for this particular rise?

You're talking about the rise in the subscriber base or the rise in the revenues, Nikita?

Rise in the liabilities of the media segment.

The liabilities, okay. Okay, I'll leave that to -- Pala, would you like to answer that?

Yes. So there are certain assets, which are on lease. And as per Ind AS 116, you will have to take assets on lease and create lease liabilities. So the increase in liability is primarily because of that.

[Operator Instructions] The next question is from [ Anuj Kohar ] from Family Office.

Could you provide an update on the current order book and the orders in the pipeline, please?

Well, I think I've answered that question. The pipeline is where is the way to put it. It's not as robust that I would like it, and I would put that on the uncertainties on the macroeconomic factors and also on the uncertainties around the election outcomes.

Okay, okay. And you had mentioned that the U.K. is performing better than expected due to the improved revenues. So which other markets are doing well? Which ones are you targeting in the future?

Australia is also starting to do very well. So [indiscernible].

[Operator Instructions] The next question is from [ Praveen Sharma ] from [ Sharma Investments ].

I'm audible, right?

Yes.

Yes. Okay. So considering your plans to incorporate AI into your system, could you explain how this might affect the attrition rate and provide an outlook for the future? That is one. The next one is, could you give a breakup of TekLink and Diversify business revenue and EBITDA?

So can you repeat your first question?

So basically, when you are -- when we take a look at your plan to incorporate AI into your system, could you give -- throw some highlight as to how this might affect the attrition rate and provide an outlook for the future on this?

So look, I believe there is enough of slack in the system for us to be able to use AI to improve customer experience. You will be surprised to know that when you call a customer care line mostly in the Americas, the typical hold time that you will find is about 15 to 30 minutes you are put on hold before somebody answers the call. So that being the situation, I believe that AI when conversational bots are actually allowed or developed will be able to cut down the wait time for consumers. So therefore, I don't see AI displacing human beings. I believe that the growth will happen together. It may slow down the growth for the -- for job growth, but it will not necessarily reduce the number of people that we have today.

Okay. Could you -- okay. So my other question was, could you just give a breakup of your TekLink and Diversify business revenue and EBITDA?

Yes, we will give you that, just one moment.

So as far as TekLink is concerned, it's in the range of about 8.3 million. And EBITDA margins are in the 20s. And in case of Diversify, it is in the similar range. Revenues would be lower. Revenues would be more about 7, 7.5, but margins are in the same range.

All right, all right. I just wanted to squeeze in one last question before I get done. Given your emphasis on attracting and retaining talent in the digital and tech domains, could we anticipate an increase in employee costs in the future?

That's a little hard to predict at this point of time.

Ladies and gentlemen, that was the last question for today. As there are no further questions, I now hand the conference over to the management for closing remarks.

Thank you very much for being with us in our earnings call today, and we look forward to having a similar session with you at the end of quarter 2, which will be sometime in the middle of November.

Yes. Thank you, everyone. This is Vynsley and also wishing everyone a Happy Raksha Bandhan. And looking forward in the next call as well. Thank you again for your time today. Much appreciated. Pala?

Thank you, everyone. Thank you for joining us on this call, and Happy Raksha Bandhan. And look forward to seeing you in discussing our Q2 results in a few months' time.

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