Kellton Tech Solutions Limited (519602) Earnings Call Transcript & Summary

Ladies and gentlemen, good day, and welcome to the Q3 FY '22 Earnings Conference Call of Kellton Tech Solutions Limited. [Operator Instructions] Please note that this conference is being recorded. I would like to thank you all for participating in the company's earnings call for the third quarter of the financial year 2022. Before we begin, I would like to mention a short cautionary statement. Some of the statements made in today's conference call may be forward-looking in nature and such forward-looking statements are subject to risks and uncertainties, which could cause actual results to the differ from those anticipated. Such statements are based on management's beliefs as well as assumptions made from the information currently available to the management. Audiences are cautioned not to place any undue reliance on these forward-looking statements in making any investment decision. The topic of today's earnings call is purely to educate and bring awareness about the company's fundamental business and our financial quarter under review. Now I would like to introduce you to the management participating with us in today's earnings call. We have with us Mr. Niranjan Chintam, Chairman and Whole-Time Director; Mr. Karanjit Singh, Chief Executive Officer, India; and Mr. Srinivas Potluri, Chief Executive Officer, U.S. I now hand the conference over to Mr. Niranjan Chintam. Thank you, and over to you, sir.

Thank you, Margaret. Good evening or good morning, wherever you are. Want to welcome all of you for our Q3 earnings results and call. Just want to give you a few highlights of the quarter, on the numbers first and then we talk about the qualitative part of our Q3 performance. First, the financial results. We have achieved close to INR 219 crores or INR 220 crores of revenue this quarter. This is in comparison to last quarter, a 5.2% growth and comparison to the year-on-year growth of 11.1%. EBITDA, while there is a slight dip in EBITDA, which is firmly due to aggressive hiring that we've been doing on building up our employee base for the next level of growth. As you have heard, in the previous quarter, recently we have added clients and in order to support those clients you have to staff up and that's the reason why there's a slight dip in EBITDA numbers. EBITDA while there was a slight dip, the profitability when it comes to the PAT, there was an increase of 2.1% year-on-year -- I'm sorry, quarter-on-quarter growth. So the margins as -- because of the aggressive hiring, the EBITDA numbers are again a slight dip, whereas when it comes to the EPS, remain almost the same as last quarter. Our -- the number of customers that we have acquired, the new customers and new logos this quarter is around 6, I will let Srini and Karanjit give you some -- little bit qualitative once as we go on with the qualitative part of it once I'm done with the numbers. On the EPS for the 9 months, we are at INR 5.29, which is slightly higher than the previous year 9 months. Revenue also is about INR 633 crores compared to INR 571 crores for the previous year's 9 months. The EBITDA numbers and the PAT numbers are almost in line with what it was for the previous 9 months or last year's 9 months and that will continue to be I guess looked at and we are expecting that till the end of the year, our numbers would be much better than what it is for this quarter. Also, we have -- I have made some statements related to restructuring the organization, and we have completed the structure of the organization starting January 1, we are going with what we call a mission of One Kellton. I will ask Karanjit to briefly talk about what this One Kellton is meant for in a few minutes. But primarily, the reason for the restructuring was, we have hired an external consultant to look at our structure, our strategy in detail, as he has done almost a 9-month analysis of how we are structured, interacting with both our customers as well as our employees and has proposed certain changes and he has made an observation that because of sectoral limitations, we are limited in growth. And that's the reason why we restructured the organization and from January 1 like I said earlier, we are working as One Kellton. Karanjit, can you please briefly talk about what the One Kellton is and what it means to us?

Yes. Thank you, Niranjan and hello, everybody. So as Niranjan said, we have a growth adviser who advised us and we've been in discussions for a few months now. And we've been planning the change to how better organize ourselves over the last 6 months. It has been through thorough discussions. And the idea was to bring better alignment and bring all the capabilities that exist within Kellton and amplify it in our go-to-market strategy as well as value to our customers. This change became effective beginning of this year on 1st January. And it has been very well received internally by all our employees. Everybody now understands it very well, is aligned with the change that we're going through. And in fact, a lot of employees are very excited about the new possibilities. We have also, over the last -- since January, we have been operating in the new mode and have gone to our customers and we've been able to talk about it. And our customers also see the benefits of this and how they can derive more value. Because one of the big things about One Kellton is to take all the pockets of excellence and better align ourselves and take this whole capabilities to the market and for our customers to derive that value. And this has been very well received. And we've had -- it also means there were different thought process, a different way of operating and engaging both internally and externally. And also employees are also very happy about the fact that this also gives them within One Kellton, more opportunities, global opportunities and a view across the organization. Yes. That's all I had to -- Niranjan that's kind of a brief on One Kellton.

Thank you. Should we open the floor for Q&A session? Members of the management, please confirm if we should open the floor for Q&A session?

One second, Margaret. Yes, hold on, follow on for a few more minutes.

Sure.

Thank you, Karanjit. We will be happy to answer any questions related to One Kellton as we go on with the call and the questions and answer session. But before that, I wanted Srini to talk us through of the new logos and new customers that we acquired in the last 1 quarter. Srini, go ahead.

All right. Yes. Thanks Niranjan. So from a perspective of Q3 FY '22, we have had some major wins and I will generally brief about 6 of those wins. I'm happy to say that 3 of them are in the fintech area, one is in health care, one is one of the largest equipment rental companies in the world. And the last one is an emerging technology company. From a perspective of fintech, we have been selected as a preferred technology partner by one of the leading fintech companies in the U.S. And what we are doing for them is we are enabling advanced digital identity verification in line with the Web 3 framework or the Web 3 ethos. This is really cutting edge at this point. Under this collaboration, we will be helping our client to upscale their data bridging capabilities across the Web 2 and Web 3 layers, right? And we actually, in this project, are going to leverage the blockchain technology to help our client optimize their dynamic know-your-customer or the KYC process. So that is really exciting. Another one of the fintech companies that we are working with is in the GCC region, and we are collaborating with them to build an innovative digital gold hedging and storage platform. Leveraging gold as a nonfundable token or an NFT. These ERC-20 compliant tokens will enable the client's users to buy and redeem digital gold for hedging and investment purposes. The third fintech company is interestingly in the education lending space, and they have partnered with us to digitalize their end-to-end customer journey. We are basically helping them to achieve an agile customer experience transformation across all of their users, touch points through a mission-critical mobile application. What this app will do will enable students to evaluate different financing options, okay? Then from a perspective of another emerging tech company, we have been chosen as a strategic technology enabler, right, in trying to disrupt the next-generation QR technology. And this is basically so that their customers can achieve a holistic experience. And we are focusing on redefining their entire user experience by building a digital platform to create custom, dynamic QR codes with advanced embedded real-time analytics. Then we spoke about 3 of the fintech companies and the high tech or the emerging tech company. One interesting going back to an enterprise, which is the largest equipment rental company in the U.S., globally, actually, it's one of the largest equipment rental company has selected us, Kellton Tech, to modernize its core critical IT applications and infrastructure. Under this particular opportunity/engagement, we are helping our clients to define and execute the transformation roadmap for their current technology ecosystem by making it future-ready, secure, resilient and scalable. The health care company that I alluded for one of the leading companies in the U.S., we have been building an intelligent BI platform, business intelligence platform, by integrating disparate data sources to enable single-window tracking of workforce performance and analytics, creating a dashboard of sorts for a -- and this is a global workforce management company in the health care space. That's all I have. Niranjan, those are 6 of the major wins that we have had in the last quarter.

Thank you, Srini. In addition to this last quarter, we have launched HUMBL, which is an NFT marketplace. I think [ there was a press release that was there at the time ]. Just to add to what Srini was talking about, NFT is an interesting area. There's a lot of investment, a lot of interest going on in that NFT space. And we have successfully launched multiple different projects on our platform solutions for our customers in the NFT space. As we all know, NFT space underline technology of blockchain, hence that's an exciting space that we have expertise in, and we are working with our customers to launch solutions for them. With that, Margaret, can we open up the call for questions?

[Operator Instructions] The first question is from the line of [ Nikhil ], an individual investor.

Yes. My question is [ to the director, as I have been listening very closely ]...

Sorry, to interrupt you [ Nikhil ], your voice is not very clear. I would request you to come on the handset mode and speak, please.

Is it okay now? I think it's okay.

Yes. This is better.

Yes, yes. So I have been listening to your presentation. My question is what percentage of your business covers for B2B? And how much percentage is covered for B2C? Because the add-on customers that you have quoted, this is more on [ when were the ] solutions from the client? If I can know something for the B2B.

Okay. Yes. So the question is a little bit difficult to answer because here's why I say that, right? What -- when we build solutions to our customers, it could be internal customers or it could be external customers, right? Primarily, our e-commerce kind of thing or fintech kind of a thing that we provide our platforms and our solution to our customers are B2C. But with that said, right, there's a lot of enterprise-related customers where it becomes B2B. I don't have a breakdown as such, but ultimately, what I would say is that we are -- the customers are either could be internal or external. Maybe Karanjit, do you have any idea to talk about a breakup on a percentage basis, what would be a B2B kind of a solution that we're building for customers?

Okay. Thanks a lot. Now I was just wondering, like, let's say, you are focusing on the education line, where in a set of clients, like one you mentioned that is students, the kind of students approaching you that's more of a consumer-driven business. Now I was referring, like, if I'm not mistaken, there is some pharmaceutical company from U.S., which had given an order to you. So in that case, B2B means segmenting us into pharmaceutical or maybe power industry or maybe engineering industry, and I think from the marketing team of yours to this set of customers, that's B2B I meant basically segmenting and then focusing on these customers.

Okay. So you are asking that [indiscernible] -- [ Nikhil ] if I'm right then you're asking from industry vertical point of view?

Yes, that's right. That's right. That's right.

Because we are industry agnostic, right, but that said, there's a lot of these high-tech companies, now what Karanjit just talked about, the fintech, the health care in these kinds of situations, there's a blur, the line is blurred. What exactly is high-tech? What exactly is consumer-facing, what exactly is internal-facing. It's always a blur lag, right? End of the day, there are customers. Yes. When it comes to fintech industry, it is a B2B because the customers are coming online, trying to do something like the health care, there's a B2C. In a pharma-related company, we may be restructuring the way they do their business internally. But there is an ultimate effect on the customers, too, right? So let me -- that's why I said, Karanjit, is there -- do we have an internal breakup of what exactly is a consumer-facing versus what is internal-facing?

NO. Unfortunately, no. We don't really look at it or split it. No, we don't split it that way or look at it that way.

Okay, got it. So [ Nikhil ] let me get back to you on that, and we'll be happy to reach out to you separately and get you the breakup of that. Today, I don't have -- we don't have it top of our head but would be glad to go back and check and come back.

The next question is from the line of [ Meet Kadha ], a retail investor.

Am I audible?

Yes, you are. Go ahead.

Yes, you are.

Okay. So thanks for the great presentation on the One Kellton. Really excited to know that it is already in effect. So the first question goes here. You said that the main objective -- I think one of the main objectives behind the One Kellton program was to see some operations getting streamlined and also to have some significant rise in the margins going forward. However, this is not a forward-looking question. After the integration, it would be great if you can tell us as to what has been the growth and the EBITDA because that has been a line of concern on the balance sheet, if you see there's not much growth observed except for a little bit maybe. So since it's already been a month of it being in use, maybe you can throw some light, if you can on the One Kellton and the margins or the EBITDA increase observed after that? That is one. Another question -- or should I ask the question after you answer this?

No, please, go ahead with your questions, go ahead.

Yes, okay. So another question is in the last meet, I think it was being highlighted that you were trying to convince some companies in the U.S. to get some work done in India in order to increase the margins. And again, this was being done in order to increase some revenues and also to garner some more customers with the increase of the margins and lower cost. Any update on the same? And also, there was a consultant if I'm not wrong, which was hired to help you guys in advising. Any inputs that you would like to share that was given by the consultant if you can?

Sure. So I think that's something we have -- thank you for your questions. Let me start with the consultant. So like Karanjit has already stated, that we have hired a group adviser. He is the one who proposed this restructuring of the organization. So the way -- that is the One Kellton is what Karanjit and we -- I talked about. So we have implemented that. He is also advising us as to how to approach the customer as well, how to go about this to get more from each customer, that is get more revenue from each of the customers. So there is a strategy around that. We have just started to implement it. So you have to give us at least a quarter to see what is working, what is not working and then come back and say, okay, I can give you some margin projections or EBITDA projection. But our internal growth is from going from the low teens today that we are into the high teens probably in the next -- not this quarter because this quarter is just we are implementing this. There may not be significant change for this quarter. But starting from next quarter is when we believe that the margins and per-customer revenue is going to impose. So first quarter implementation will be probably a little better than where we are today, but next quarter is when we start seeing all this -- all the implementations, leveraging all the different things that we are doing today to get more. But with that said, right, so we are hiring aggressively. I want to make sure that also is a factor into this when we come to the margins. We have plans to hire about 500 people over the next 1 year. And as you -- as I stated earlier, when you hire people, it close to 5 to 6 months before we start seeing revenue coming from that particular individual. So that takes some gestation time too. So when we are on the growth trajectory, the margins are going to increase, but not as much as what we'd want to. But our target is to get to the high teens when it comes to the EBITDA numbers and get to 10% to 11% when it comes to the bottom line numbers. So those would be the targets that we are trying to achieve in the near term. And then the long term, we will come back to you probably in a couple of quarters based on how our implementation of One Kellton goes and then we can tell you, hey, what would be the long-term strategy of the EBITDA and the bottom line. But the near-term goal, again I'm repeating, is to be in the high teens when it comes to the EBITDA and get to the 10% to 11% bottom line numbers.

All right. So also, in the debt, the company, as you had already said before, was constantly trying to reduce the debt every quarter and every year. But this quarter, there is a sudden increase in the financing cost, 17%. Would you like to, I mean, throw some light on that? And the other expenses, does that have the consultant's cost included in it? Or is it something else?

Okay. So the debt is almost in line with what we had last quarter, it's not like it's gone up significantly. So just to give you an idea, right, the total debt is around INR 95 crore. The cost of finance has probably gone up because the working capital is a fluctuation in that particular quarter and what is happening there. But there is also -- what happens is the renewals that happen in every quarter because we have a limit that are set yearly all over the world, right, different quarters, different renewals happen to our existing lines. And typically, those costs come in, in that quarter that's the reason why there was a slight increase. And also, there's a foreign exchange conversion also, right? so when there's a dip in rupee, the amount might look significant, but they're almost flat is what I would say when it comes to the total debt part of it. So we want to reduce the debt. But as we stated earlier, too, right, so far, we are not taking any money into the company. All of it is either self-financing, that being promoters putting in money or it has been through debt. So we have to grow. And for that reason, there is a requirement for working capital. There is a requirement, as I said earlier also that by the time individual that we hire starts to produce revenue, it's like 5 or 6 months away. So we'll have to incur that cost so that there is a cost to pay his salary is overhead all that stuff. Hence, slightly increased working capital limit is required. And as we are growing, there may be an increase in working capital but we are watchful, right? So if you look at it, when we were in March 31, 2021, to now, yes, there is a dip, but it's not significant. I really -- we would like to bring it down, but that's the part of our business where there is a working capital cycle that happens and we require debt to finance that.

Right. And one last question. The non-U.S. business and the revenues, could you throw some light on the growth numbers for the same the non-U.S.?

So yes. So the non-U.S. Europe was a focus target for us and a focus area or geography. But unfortunately, last quarter because of the Omicron third wave, right? There was a lot of shutdowns and whatever we anticipated that it's going to take off has not done. And even today, some parts of Europe a loss -- are still in a lockdown mode, whereas U.K. has opened up. We are hoping that this quarter is when and everything gets opened up. I think the third wave of Omicron is going to pass. And hopefully, we get back to normal. If we get back to normal, and then we start seeing regional growth coming from Europe, while Asia Pacific is increasing rapidly, U.S. is growing. The new customers that Srini talked about are all U.S.-based customers today, the big wins rather. We do have wins coming in from India and East Asia is another focus target. We -- because of lockdowns, we can't even travel while we are able to sell certain things through remote, but customers like touch and feel and our employees have started to travel, not internationally yet, but domestically, they're traveling and we're able to get a lot more -- we will be able to get a lot more customers and revenue coming out from these regions. But today, a major portion of our revenue comes from U.S., like you rightly pointed out.

All right. It would be great if you can give some projection of the Asia region because the NFT business is for, I think, a majority of the companies witnessing some exponential growth from the Asia sector. So any specific huge exponential growth that we expect from the Asian region?

So Asian, let me ask Karanjit to answer that. But in our experience that we have gained in the U.S. is going to help us grow in the rest of the world. Karanjit are we seeing any traction when it comes to NFT in the Asia Pacific?

Yes. We actually are, in fact, we've been invited to participate in an RFP in a recent RFP. But then again, see our focus has been mostly on the U.S. only from we're able to engage better and also the realizations are better.

So what Karanjit is saying is that the margins are much better when it comes to U.S. purchase is very specific. So we would like to focus on the high-margin side of the geography versus low margin side.

All right, sir. And just one last thing. Any update on the operations is being shifted to India and what percentage if would that be?

We -- okay, sir, see operations are in India, right, majority of our employee base is in India. We have now over 1,000 plus now in India. And we -- the hiring that I talked about in -- just to give you a ratio, right? It's going to be 400 people in India versus 100 people in the rest of the world. So that is a way of us to move some of these, I guess, on-site deliverables now to offsite deliverables. We are working with our customers. And like I said earlier, there was a resistance. But now there's acceptance because I think COVID has opened up every of our customers to say that, hey, these guys can produce quality deliverables out of India and we have made significant investments in coming to hiring also in India, going with a little bit of high-end kind of deliverable employees. We have hired a Head of HR from major organizations are coming and helping us as a part of this journey that we -- I talked to you earlier, to break that structural limitation, to give us that global delivery while we had global delivery, a higher capable global delivery team, and that is something that there's a huge focus on that. That's the reason why probably some of these margin pressures that we have seen is primarily due to all these hires that we've been doing. And their expensive resources as you are aware, bringing people onboard to deliver this high quality deliverables that we want to do to our customers.

The next question is from the line of [ Kapil Dakh from GE and IPL ].

Just one clarification before I start. Actually, I don't represent a company. I'm an individual investor. And I have been following Kellton Tech management's commentary since almost more than a year. It's really heartening to see a lot of progress being made in terms of One Kellton and some of the other wins that the management team actually graciously discussed beginning of the call. Before I jump into more qualitative aspects of it, I just have a couple of very high-level bookkeeping questions. I think one of this was also asked by one of the previous participants. About the other expenses increasing by about 17% in the last quarter. And also, there is a bucket called unallocable expenses of about INR 42 crores, which is approximately 20% of the revenue. Can you please throw some light on these 2 numbers before we jump into the more qualitative question?

Yes, sure, So I guess, and I probably missed that question. I did not -- missed answering the question rather, so yes, there is a growth in other expenses. This is a combination of the consultant that we have hired to help us with the restructuring through subcontracting. Yes, since hiring has become a challenge world over, right, we have, I guess, aware the deliverables have to be met. The target, the deadlines have to be met, we have hired some external subcontractor consultants to help us do the delivery, hence, that has gone up. Just to give you a perspective, and just in December, we hired about 80 people. So this hiring process will take time so while we are planning for this year, sometimes the hiring may not meet the requirement -- day-to-day requirements and then we get some external subcontractor to help us with the delivery. Hence, you see the jumps in the numbers. Now I think you asked one other question. I missed that question. Can you ask the second question?

Yes, sure. There is actually...

Common expenses, I'm sorry, yes, you told me about unallocable expenses. So we are trying to do segmental, right? When we do segmental kind of revenues, segmental kind of expenses. Sometimes, we have what we call the shared services people. And those are not easily broken into, hey, this is for digital, this is for enterprise or this is for the personal services here obviously. That is what we call by unallocable expenses. There are corporate expenses, how do you allocate that? Yes, we can go and say, okay, by revenue, we can allocate, but that's really not the way it is supposed to be. We are getting better at our reporting, but this is purely to do with anything that's a shared services, which we are not able to allocate. We are just putting in that bucket. While we are refining that as we go on and our auditor is helping us with some of these unbreakable, we, again, have got some external consultants to help us with better reporting, better breakup. So there is a lot of stuff going around that behind the scenes, but you may not see that might reflect in some of our balance sheet items. But we are making progress towards being able to allocate to the granular level of these expenses and leverage from the consultants, external consultants who have been there and done it to help us do better reporting.

Great, sir great.

I hope that answered your question.

Yes, yes, yes. Really, fair enough. One more question, sir. I see that the stand-alone results when we look at it, the numbers are almost 1/6, 1/7 of the overall consolidated results. So do I read it right that the stand-alone entity that is the earlier Kellton Tech. Actually, when compared to the subsidiaries overall, is it really that size in terms of revenue and other allocations? Generally, actually one of the key reason is...

I think...

Yes, sorry please go ahead. Yes.

No, please go ahead.

No, no, basically...

So let me answer that and then you can ask your follow-on questions, right?

Okay.

I think not just stand-alone -- I guess probably the way you're reading with stand-alone is probably a little bit misleading is what I would say. Here's why I say that, right. When we do billing to our customers, anything that we bill from India is called the stand-alone revenue. Anything that is billed in our entity subsidiaries in the U.S., Europe or Asia Pacific, wherever that is. Customers prefer to bill from the local companies versus billing from India. So that's the reason why the huge skewness comes in. The delivery may be happening from India, but the revenue is coming through the subsidiary to India. So it becomes a transfer price in turn of a scheme. So in that scenario, what happens is we book the revenue in U.S., Europe, Asia Pacific versus in India. So stand-alone is nothing but a parent company, where we have some revenue that is India-based business that goes there but consol is what we should look at. It's not because of, I think, the traditional, let's say, the large IT companies where they have branch offices. We have structured it slightly differently, where we have entities in U.S., Europe and Asia Pacific that are doing both delivery as well as being the customer bill companies. And in many cases, what is happening is because of the size of the company if big, right? They preferred the local billing versus billing from India because they can reach out and touch us if something goes wrong or legal reasons, they prefer billing in the local company versus being company in these areas.

Got it. Got it. Fair point. Now just coming to some of the qualitative aspects, sir. So you mentioned about the One Kellton initiative being implemented positively. Can you share just a few examples? I mean I understand the commentary, but in terms of, let's say, talking about a few examples if you can share how it really impacts on the ground, the growth momentum, let's say, the top line and the bottom line, what really changes prior to 1st of Jan versus now, that will enable us to attract more customers and get more growth and bottom line?

I'll let Karanjit answer that, and I'll add more commentary after Karanjit finishes, Karanjit can you take that Karanjit?

Yes. So as I said, it helps us or it kind of aligns us better. We take all the capabilities of Kellton and take them together in our go-to-market and have been having much more involved discussions with our customers, where we are talking about larger being a higher or a more strategic partner with them, delivering a lot more value, which could be I may be working on a certain area within digital or also enterprise, having more holistic conversations where we can actually get a larger share of the wallet as well as increasing the deal sizes, becoming strategic. That is one major change for One Kellton from a go-to-market perspective. And the other thing is also as -- within One Kellton, though we have always been global delivery, but now it is much more seamless with shared teams where we cross-leverage a lot of capabilities, both from a technical capability perspective, what we call practice as well as on the delivery side. So these are the 2 things that sort of really bring value to the customers and helps us elevate our work with them and have larger deal sizes or engagements with them.

Got it, sir, got it.

So let me add a little bit more to that, right? Just to give you -- see earlier we had -- we were broken down by business units based on expertise. Just pick this discussion sake, right, let's say, a customer x where we were doing pure play as that kind of stuff. That is all we were doing earlier. So that the salesperson is aware of only that, he's only telling that. He's goaled only to that. Whereas today, he's goaled to okay, taking that customer X and saying the customer x has this kind of IT budget. Now why can't we get a larger piece of that. Okay. So he is not goaled for -- he is goaled while the revenue number, but we have to do other stuff too. So that means that we have to sell digital, we have to sell professional services we're required while we try to resist from professional services. Those are the things that are changing and like Karanjit was saying, right? Now we are saying, okay, hey, we have this global delivery that can deliver end-to-end for all of your IT needs. While you were saying that earlier, and the salespeople are not goaled for that. So now we've changed that whole structure there and saying, okay, you have to sell the other pieces of the business, too, and get more value from the customer. The customer will get more value from us now. We see that hey, we Kellton Tech we want to be their strategic partner versus just doing this one piece and going away. So those are the structural changes. And this may be -- may not sometimes still tangible, but we are seeing the tangibility of that by walking and doing what we were talking earlier, now we are saying everybody's goal, everybody has to do this. And that structural change has come about. Everybody has accepted it. We are going with individual customer and saying targeting them and saying, okay, this is a customer that we are targeting and we're going to cobalt trucks, what we call the on-base mining kind of stuff and saying, all are different, I guess, pieces of the company come into play and going and trying to get more business from that customer. Sorry, it's a long winding answer because it's qualitative right I just can't give you a one liner answer there.

No, no. It was very helpful, sir. That's very helpful, and thanks for that. It really threw a lot of clarity around it. Just a quick comment actually in addition to what you just said first perhaps as may be already be taking care of it. But you are speaking around a lot of training and orientation of your team around the One Kellton approach because ultimately, it's a cultural change, and hopefully, you're already taking care of it within your organization but within that....

Yes. Sure. You're right. So that's why it took us probably 6 months to implement this while we tried to start working from 1 quarter prior only. But we said, okay, January 1 is a part of the everybody is falling in line. Everybody is going through that and that training, the socializing with the teams, the buy-in from the teams, all that has been done. And from January 1, it's like we are working towards -- we are working on that One Kellton structure.

Sure, sir. Sir, one last question around attrition. So you mentioned a remember around hiring, I think you have mentioned 500 heads target for this year. But any color on the attrition rate that we've been seeing in the organization?

Yes. I mean, just like everybody else, we have been affected by the great resignation, right? Yes, we are in line with what the industry is. I don't want to say that I can give you a rosy picture and say they're much better. But with that said, right, we have a little bit of a golden handcuffs that we started giving to our employees with employee stock options, restructuring their pay scales. And all that has happened, that also has reflected in the margin pressure, if you call it, because we had to increase the pay scales in line with what people are getting in the industry. So existing employees have started getting the appraisals and they have got huge raises in many cases. And that has been done. So we -- are we going to say that we are not going to -- we're going to do better than before, absolutely. But is it going to be the new normal? We expect that because we are part of this [indiscernible] and all the stuff, it's going to take probably 1 quarter maybe before everything gets stabilized or maybe worse case 2 quarters. So everybody is on the same level as -- I'm talking about I mean everybody talking from the industry wise, they're all going to be in one, I guess, happy medium, happy equilibrium all going to get to and the resignations would reduce. With that said, right, the obvious question is, what does this mean to the delivery. So we have been talking to our customers and telling them that, hey, we cannot sustain this. And many, many of our customers have realized that, and they say, yes, they're working with us to increase the bill weight -- there are going to be stagers or lagers if you want to call it, there's some people that are going to come a little bit later, but many of our customers all accepted the increase in those. And we'll start seeing better margins because of that again.

[Operator Instructions] The next question is from the line of [ Rishab ], an Individual Investor.

So my question is, out of the total clients you have, can you give the bifurcation are in below to 5 -- sorry, INR 0.5 million to INR 1 million range, INR 1 million plus and INR 3 million plus?

I don't have it [ Rishab ] top of our head. We'll have to get back to you on that number. But I will say this the top 5% of our customers, give us about 15% of our revenue, and the top 10% of our customers give us about 26% of our revenues. So that we will look at that and we'll do that as part of better reporting, if you want to call it, we call it better reporting, more reporting. We will do that going forward. That requires some changes within the way we report internally. And we are working towards that give us probably a quarter, maybe 2 quarters to be able to come up with this kind of reporting also.

Okay. Okay. Fair enough. And sir, 1 question on PAT margins. Right now, it's 8.1% and you said you are looking at lower tens after a couple of quarters. So going forward after a couple of quarters, what's the target for PAT margin?

See, I don't want to go beyond this 2 quarters...

Industry average is somewhere around 18%, I guess.

So [ Rishab ], just like I said, right, I don't want to go beyond 2 quarters today because we have just implemented the One Kellton. So give us a couple of quarters to figure out how this is working, what is working, what is not working. Yes, we will have to still make changes along the way, dynamic changes along the way. But our target is, like I said, right, we want to get into the high teens for the next 2 quarters when it comes to EBITDA. And when it comes to PAT, we want to get to that 10%, 11% range is what I would give you for the next 2 quarters. Beyond that, we will revisit this probably next quarter, and I'll be able to give you a better answer by then because we have just implemented and we want to wait and watch on that.

The next question is from the line of [ Varun Kumar ], an individual investor.

So congratulations on the numbers. And recently, I came across article in Times of India. So it was about Hyderabad metropolitan water supply and sewage road. So congratulations on the project win. So according to my understanding, it's moreover AI and IoT based project, data analytics. So could you throw some light, what is the size of the project at the delivery timeline? Like how long is the contract signed for, some details if you can.

Okay. Yes, sure. Thank you, [ Varun ], for the question. Yes, that's an exciting project for us here is why I say that. There's a lot of money being spent by government of India when it comes to the Jal Jeevan mission. So this is the first win our first win, our first foray into that space for us. We have been working with some of the governments in the Northeast, the southern part of India, the northern part of India, trying to get more and more focused RFPs and this are going to be coming out. There is going to be from what I hear a dashboard at the national level, the state level. So we are working with the governments or entities to shape those projects because this is a new thing for them there. They know what is required, what is not required using our expertise. We're working with the different state agencies and the circle agency to come up with the requirement and we will be actually participating in many of these bids. With the expertise that we have in IoT space with the expertise that we have in the AI space, we would be able to confidently say that, hey, at least some part of that revenue is going to come to us. We are in -- I guess, in varying stages when it comes to the different entities out there. Now answering to specific to your question about what is the size of the thing. There's a Phase I, Phase II, Phase III part of this project. So I don't want to tell you what exactly the number is today because it might vary. And the expectation is it's going to be probably in the low single -- sorry, low double digits for today. I'm talking in crores of revenue. And -- but we believe that the growth on that side, this is an investment for us to get into that space, and we expect that it's probably going to significantly larger once we start going to knowing -- once we start winning different from other entities. Talking about the delivery timeline. There is -- there are milestone-based deliverables and we have 6 months deliverable. We have a 1-year deliverable in this specific project, but we should be able to wrap up this project within a year is what our internal estimates says. But beyond that, like I said, there are multiple phases for this. So we will start the Phase I, Phase II and Phase 4, where it now becomes integration into the larger IT infrastructure. That's it [ Varun ] thank you.

Next question is from the line of [ Rohan Joshi ], an Individual Investor.

Just want to ask in the previous quarter, we added 20 clients, right? Hello, am I audible?

Yes, go ahead [ Rohan ]. Yes.

Yes, yes. For the previous quarter, we added 20 clients. And this quarter, we have added 6. So how much of the revenue of those 20 clients have been reflected in the current sales -- additional sales revenue of INR 10 crores and how much is going to be in the successive quarters how much -- I mean, what is going to be spread for these additional new clients into the revenue?

See when we start off a project, right, the first quarter after the project is when we really begin the project. And typically, I will say 10% of the book revenue is what it's going to be in that. And over the next quarters is when you start seeing significant revenue I don't have the numbers when it comes to exact breakup offers, how much it came from these new customers, but we don't track it that way. That's the reason one. But as a thumb rule, 10% comes in the first quarter after we sign a contract and rest of the 9 -- probably the next of the 80% comes in over the next 1 year and then the balance 10% comes after that. So the new customers that we signed last quarter, I don't believe there are any -- revenue has not come in yet. But I'm talking about the previous quarter's revenue -- previous quarter customers of the 20 customers that you asked the question about. So I would say 10% came from that. The rest of the stuff will come in this quarter and quarter going forward.

So this HUMBL client was included in the previous quarter 20 new additional client, right? And from which certain -- or maybe a previous to that, for which the revenue has been now reflected in the current INR 10 crores value addition, right?

Yes. You are right.

Okay. And sir my second...

When we launch, right, I'll just use the example of a car just to give you a perspective, right? When we launched when we launched a humble last quarter, right, it's just the Phase 1 that gets delivered. Why don't you typically explain to people is and I use the sarcomere, hey, the first quarter, you're going to get is probably a Maruti you're able to go from one place to another using a Maruti. But whereas if you want to get the Benz cars of the world, it's going to take a few quarters to get us to the Benz cars of the world, where you have all the bells and whistles and you are now able to cruise all that stuff, right? So that kind of stuff is what happens. Yes, go ahead. You were asking some of the questions I interrupted you when you asking.

I also read the article amount, we are targeting around $320 million revenue for which we are going to hire aggressively and I've been seeing on Twitter you are hiring from various colleges from West Bengal and Telangana Intel and all. So sir, I mean what will be the revenue guidance for the next year? Are we going to cross INR 1,000 crore of what is targeted up to $320 million, that's roughly around INR 2,000 crores is the target, right? So are we going to cross INR 1,000 crore by the next year? And then following -- because of these agri-sewing we would see much more higher growth for the successive years?

[ Rohan ] I guess to answering your previous caller, I am not going to speculate at this time what would be the revenue after 2 quarters. But I would say the immediate goal for us over the next 3 years is to get to $200 million so that is the goal that we have set internally. And that is what we are restructuring our company to be able to get to that. So for the next 3-year targets, we said about 200 -- I'm sorry, $200 million is what we are going after. I mean now if we achieve that and before that, that will be great, it's what we are working towards. But our goal right on a conservative estimate is $200 million in 3 years is what you want to get to.

Okay. Okay. That's a lot. Off course sir, you are going to achieve that. One more thing. There has been again a slight decrease in the promoter holding even in this quarter? I mean whenever there is a promoter holding statement out after a quarter ended it didn't go well with the stock prices so I mean, what is going to be your strategy in the future? Are we going to decrease, again, some of our holdings are going to remain intact at least for a couple of few quarters?

We have not sold anything last quarter. I think that any time we sell something we have to deploy to exchange, and we have been doing that I don't know what the decrease is probably because for employee stocks, ESOP got exercised or that's the reason why there may be a slight percentage decrease, but the quantum is the same. We have not sold anything last quarter.

Okay. And sir, one more thing, sir, are we going to pitch anything for us to take you to any FI was going right? So if we go ahead aggressively for the One Kellton sir we are -- for a -- after a couple of years, are you going to keep for a good FI buy stake in our company?

I mean, right now, are we actively picking absolutely, we are not doing any road shows at this time. But we are talking to people. When people are interested they call us, we are absolutely talking to them. So I don't have any timelines as to when somebody is going to invest in our company. We have stopped, I guess, in our roadshows, probably, I would say, about 4, 5 years ago is when we did the last roadshow. But if somebody is interested in us, we have been actively speaking to, and we will continue to speak to this. But there is no specific strategy today, I would say, that we are going after. But I would say that with that there are some people that are buying who are interested in our share, and we are seeing that in the shareholding patens that we get and -- but we do want to look at if somebody wants to invest, and we will be able to get our target of $200 million much faster and we can go with the new target based on investments. But at this time, right, we are not actively on a road show. But somebody is interested investing the company absolutely would love to talk to you because no one would say no to one.

Yes, sir, I know, of course, of course. Sir, my last question, as far as European business, so after this quarter, say, from the April onwards, we are going to see some growth, even much more faster as we anticipated because last quarter was affected micro at least we can see some growth in European business from April, right?

That's correct. That's the plan. Yes, you're right. Absolutely.

The next question is from the line of [ Amit Mishra ], an individual investor.

Hello, everyone.

Sorry to interrupt you, may I request you to come on the handset mode, sir. You're not very clear.

Okay. Hello, can you hear me now?

Yes, this is better please go on.

Yes go ahead.

Yes. Okay. Congrats on a decent set of numbers. My first question is, I'm very new to the company and is still reviewing our business and future prospects. So in this context, I was thinking it would be up to hear the management itself regarding your long-term vision for the company? And also, I understand the current line -- broadly, I understand the current line of business, what we are pursuing, which is a standard consulting and services work. But do we have any plans to develop high-margin, strong core products going forward? Or do we have aimed to develop work on technologies that are unique and could result in patent and PMs? So the thrust of my question is on margins, basically, because historically, we have been in mid-teens at best, a typical service provider margins. So if you can elaborate on long-term vision -- and how -- and what are the plans basically?

Okay. So [ Amit ], to answer your question on the long-term vision. I'll just talk on purely the premise of starting this company. When we started this company, we started with a slogan, what we call infinite possibilities with technology. When we started, we started in the new age kind of technology. And today, also, we have the same strategy where we offer cutting-edge solutions using newer technologies. With that said, right, there is always going to be customers that beach is -- may not be the new gene technology because enterprise is typically what it takes -- what it takes is up. It takes a little bit of time before they started offing new technologies I guess that line has blurred between startups and enterprises nowadays where even enterprises are investing in the Web 3.0 that we talked earlier about the NFTs. So there's a lot of exciting stuff going on. And we are ahead of the curve when it comes to many of our peers in these kinds of figures. Yes, we want to stay ahead of the curve, and that has been our strategy and the unit has worked successful to us. It will continue to be held the curve, but the margin because I guess I talked about earlier, right? We had structured limitation was there. That was structural limitation. Now we have the move. The margins should improve and it should improve over the next 2 quarters when we start showing with what we have planned perform. Now answering your question about the product side. We are not a product company. We are a services company. We do have 1 or 2 products where we use more to sell it as a platform as a service when it comes to what I mean platform, right? I'm talking about using the platform to provide solutions to our customers much faster than what it takes to implement something from scratch. So -- that is what we do, but we don't do product selling today. We have one product that we have in the oil and gas industry that we have delivered successfully to a few customers has not taken traction to the extent that we want to take that attraction to this as you are aware, product takes a lot of marketing dollars, a lot of time before an auction happens. But once you start selling that, a few licenses when everything else it goes straight to the bottom line. But we are not a private company, and we don't want to.

Okay. It's okay. So we just focus on our core areas and get strong in depth. There's no problem with that. Second question is more on promoters stake. I've noticed on the screen, the last 8 quarters, the stake got reduced by 10%. So I just want to hear you out like how it was done, was it open market or some investors took it off from you. And there is also outstanding pledge there around 12%, 13%. So why was it creating to just get some historical on it because it didn't research enough? And why -- when can we expect it to be released if you can elaborate there.

Okay. So [ Amit ] yes since you are not aware of historical, I'd be happy to answer that. So let me start with the pledge part. So [ Amit ], we are first time on...

No. I mean just to -- sorry, if it was not clear, I saw the shareholding pattern of last 8 quarters...

Yes, let me answer, I'm answering that, I'm answering that.

Yes, okay, okay, okay.

So we are a first-time entrepreneur, and our family has not been a before -- we are not, like I said, the table where we have unlimited assets that we can pledge to a bank to get a loan. So typically in India, from the action, I see that may not be -- you may have been some time outside India. In India, typically, what happens is when you take loans, they want collateral. So the collateral, we don't have any collateral or hard assets within the company. It's all the people and the country basis what is the assort company. So we have to pledge our being the promoters properties to get loans. And like I was saying earlier, we are not an arable we don't have united property supply. So we had to give out our shares as a pledged to the banks to get loans for the company. This is not loan-taken for the promoters, but loans to the company. And the banks, once they get some whole of some shares, they are very unhappy or reluctant to release the pledge despite the, let's say, the amount of loans that we have taken has come down dramatically or the share price has gone up. So we have been trying to extract the share for the banks, but they are not being deleting it. We are working with them, right? So this takes a long time to get them released -- but I want to assure everybody that these loans were taken for the company and the pledge was for the company loans and not for individual loan. Okay. So that is one part of the question now.

Okay. Yes, okay. On second question stake -- yes.

Yes, you say about shares, right? See, this as I stated earlier on this, the COVID has, I guess, opened many people's eyes as to the liquidity needs, both from an individual level as from a company level. So the same thing has reevaluated within the family. And my dad is 80 years old. He is a majority shareholder. We felt that, hey, we need to retire some of the debt that we have on our personal books. So that's the reason why the sale has happened to get more liquid and also to reduce the family be that was there. Would that continue on? I don't believe so. But like I said, that is 80-year-old. So he might come into some point that say, okay, let me look at this, but I'm just standing that we don't have any plans to sell the shares.

The next question is from the line of [ Meet Kadha ], a retail investor.

Happy to get back again. Just you saw an interesting paragraph from the statement. It is regarding the live QR code technology is scanning, which is going to come up with. I just wanted to ask you, the real-time embedded analytics, is this technology into existence by any of the companies? Or is this the industry first?

Yes, I mean this is -- see, there are a lot of, I guess, like I'm saying earlier, we are doing a lot of cutting-edge stuff. We actually think that I don't want a rig customer is, but I can talk about a few things, where we do exciting projects that nobody has done before. If you have a state analogy of bolder no one has gone before. So those are some of the projects that we do. We are working for one of, I guess, global multinational where we're doing sentiment analysis using purely what is going out there using AI ML kind of technologies to see what is the different things that are going in social media, if what is being sent out by individual employees, is it in line with the standard template or is it something different? Is the color scheme going the right way or the wrong way? Is there a breeding of colors? So this is exciting space that we keep working in and including the NFT space, right? There's NFT a lot of buzz is going on in the NFT space where people just talk about, hey, we have done a number, HUMBL, there's just one project but the way we have built the solutions for that, now we can list it across platforms. It doesn't have to be on one marketplace to the sellout your digital assets because on any platform using the standard if they start using their certain standards like in industry follows. If you have that standard built in into the digital asset, you can sell on any platform, it doesn't have to be one platform. So how do you do the cost listing? So there's a lot of things that we do that nobody has done before while probably we are not marketing ourselves the way we are supposed to. But there's a lot of exciting projects, if I talk to individual employees, we can see that the stars in the right when I say, okay, what are you doing and it goes on for them is no-brain and I'm doing this and when you start thinking back, right? And that is cutting edge stuff, being augmented reality that we are working in, in the NFT space, the Web 3 auto, there's -- just now people are talking about Web 3 auto, but we've been working on those projects here for a while. So those are the exceed stuff that we do. And for that, there's for us ahead. I see it's nothing. It's just a standard thing.

All right because I come with an IT background. And if I'm not -- I tried Googling after reading the statement, and I couldn't come across any company which is providing this so far. So I think this should have been one of the highlights of the presentation, but I think it's hidden somewhere in the detail, which is not fair, I guess.

Understood, [ Meet ]. We will try to bring it up. At this time, we are more on an execution more than in a marketing mode when it comes to probably we should do a better taste, we will definitely start doing a better job of this marketing.

As there no further questions from the participants, I now hand the conference over to Mr. Niranjan for closing comments.

Thank you, Margaret, and thank you, everyone, for participating in the earnings call. Really appreciate and looking forward to talking to you. And like I said in the call, we would be happy to talk to you one-on-one if you are any time in Gurgaon or Hyderabad please reach out to Anupam. Anupam would be happy to set up a meeting to come and interact with our employees where you will get to hear firsthand from our employees itself instead me and management doing [indiscernible] so thank you again and looking forward to talking to you in the next quarter earnings call, if not before.

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