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

Ladies and gentlemen, good day, and welcome to Q4 and FY '22 Earnings Conference Call of Kellton Tech Solutions Limited. [Operator Instructions] I would like to thank you all for participating in the company's earnings call for the fourth 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 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 decisions. The purpose of today's earnings conference call is purely to educate and bring awareness about the company's fundamental business and the financial quarter and the 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, everyone or good afternoon or good morning, wherever you are. Thank you for joining our Q4 earnings call. Want to start off with the yearly financial numbers update, and then we'll go to the quarterly. So the financial year ending FY '22, revenue was about INR 844 crores with an EBITDA of INR 105 crores. The EBITDA margin stood at 12.6%. That's a reflection of the increase in costs because of labor. There is a slight dip there in EBITDA margins to what we were hoping to and what we achieved there. Net profit is about INR 70 crores. The PAT margin was about 8.3%, again, that is in line with the reduction in EBITDA, so there is a dip in the PAT margin, too. While the EPS stood at INR 7.39 per share. Now coming to the financial performance for Q4 March 2022. We had a revenue of INR 210 crores and EBITDA of INR 26 crores. EBITDA margin is like 12.3% that we talked about earlier. This is a reflection of the increase in input cost, which is the labor cost for us. There is a slight dip in EBITDA numbers there. Net profit is about INR [ 18 ] crores for this quarter. And the PAT stood at about 8.9% and the EPS was about INR 2.1, which is a significant jump over the last quarter's EPS. Now a little bit of the operational highlights, and I'll just talk clearly about what is happening with the Russia-Ukraine war and the impact on the global financial markets, the economy, all that stuff. As you have all experienced, and inflation have gone up, every input cost all the way from consumer goods to diesel, petrol. So that -- whatever is affecting you is also affecting us as a company because our input costs have gone up in line with the inflation rates going up. Travel costs have gone up, labor costs have gone up, and that is affecting some of our bottom line. But there's also another angle that we sometimes miss, which is a human angle. There are a lot of Ukraine refugees that are coming into the neighboring countries. And since we are present in Poland, we have hired a number of Ukrainians to work with us and be part of the Kellton story, so that we can provide some kind of support, if you want to call it, some kind of a way for them to go on and living. So that has helped both them and us. There's a lot of good talent coming out of Ukraine. We also have been featured in the top AI firm for 2022. We have launched the One Kellton, and that is going on very well, although I'll let Srini answer any questions related to that and as we go on into the earnings questions. Now new client wins. We have about 10 new client wins. This is from different industries across all the different sectors. Karanjit, can you briefly talk about the new clients that we have won this quarter?

Sure. Thank you, Niranjan. Hello, everyone. So as Niranjan said, we have continued acquiring clients. And I'll just briefly give you a little bit color on some of them. So one, we acquired a leading multi-brand retail company who have signed up with us to actually drive seamless, immersive buying experience. We are going to be working with this client to completely revamp the buying experience for their customers. The other one that we signed up is a global leader in the beverage industry, in energy drinks, and they are a very well-known brand. And we have engaged with them to modernize their core ERP and the legacy supply chain into an intelligent network to help with their operational efficiencies as well as experience like transformation. Another customer that we have partnered with is a leading home care service provider, and we are working with them to transform a critical user-facing process using RPA solutions. So this will again help them kind of redefine their overall user experience to their clients. We have -- also the one that I'd like to mention is -- we have also signed up with a international gaming and e-sports company where they're trying to provide a new edge gaming arcade solution, and we will actually be working with them -- working. We'll be using metaverse as part of this. That's one that's going to stand out from a Web 3 perspective. And I could go on and on for the other customers, but I think that kind of gives you a little bit of color to the kind of clients that we have acquired over this year. Niranjan?

Thank you, Karanjit. Srini, can you talk about One Kellton launch and where we are in that process?

Sure. Niranjan, thank you. Karanjit, thank you as well. So from One Kellton integration perspective, the customer-facing activities are about 95% complete at this point. All of our major customers, we have reached out to inform them about our integrated One Kellton global approach and showcase our combined portfolio of services. I must say, it has been very well received by our customers. A lot of excitement, what it means to them and how can they leverage Kellton's new initiatives, how can they leverage the combined portfolio of services. And we also explained to them about the reorganization internally to make sure that the customers are able to grow along with us and take advantage of all the services that we have been offering. So that's one great achievement. That is pretty much complete from an external facing perspective. Internally, the top management is all aligned at this point. We have done a lot of town hall meetings, global meetings, et cetera, to showcase and talk to our internal employees about the One Kellton initiative and drilling it down. So at this time, we are in the process of -- it's work in progress to inform our base level of employees, what it means to them and how advantage is the whole One Kellton approach is going to be. So those are the 2 key stakeholders that we have been addressing with the One Kellton approach. It has been -- it's almost done at this point, and we are now aggressively looking at our marketing collaterals and so on that will reflect the whole change in Kellton by bringing in the One Kellton initiative. I'm happy to take any questions at a later time regarding the One Kellton initiative. Thank you, Niranjan. Back to you.

Thank you, Srini. So a little bit more color to that. I think a number of people asked last time. So I just want to restate what I said earlier regarding the One Kellton. When would the real impact on the revenues on the bottom line start showing up? So I ask for 2 to 3 quarters for it to start reflecting. So we are just now one quarter completed into that. This is the second quarter that we're doing. Like Srini was talking about, there are a few other steps that we are doing to make sure that we fully leverage that. So the revenue numbers, the bottom line numbers will start reflecting from next quarter onwards. And this quarter, we will see some slight improvement, but the true effect will start showing from next quarter onwards where we are able to leverage. And there's also a lot of costs that are baked in into the subsequent quarters of this launch, which is almost like a complete rebranding. So there'll be a brand refresh that is going to go on. So there are a lot of activities that are going on simultaneously to make sure that the customers as well as the internal teams are aligned to the One Kellton story. So just wanted to give that color too. With that, Margaret, I want to open up for questions. I would be happy to answer further details of One Kellton, any other customer numbers, all that stuff in the Q&A part of it. Margaret, over to you.

[Operator Instructions] The first question is from the line of [ Arvind Kumar ] from [ Redemption India ].

I have been an investor for 5 years. But your net profit is same from 2018 onwards. From 2019 onwards, the net profit is all flat. Why is this happening? Before that I know it's growing the numbers significantly. But last 4 years, it is not at all growing. Why is that?

Thank you for being an investor on us [ Arvind ]. As you know, 2019 and -- 2020 and 2021 because of the pandemic, right, there was a flat line. And we have -- we told -- like I said earlier, now we have launched the One Kellton initiative. Also, you -- we have hived off a few of our divisions. We sold out the low-margin business. So all that is now going to be completed by this quarter. And probably one more quarter, right, is when some of this low-margin business that we are saying no to. So all of that will be done by this quarter to some part of next quarter. And then you should start seeing the growth both from a revenue as well as the margin point of view. Yes, it did take us a little bit of time to get to where we are from 2020 or 2019 to now, but we will start seeing the growth starting next quarter onwards.

[Operator Instructions] The next question is from the line of [ Chenna Vas ], a retail investor.

My question is, do you have anything to write off in balance sheet, like anything you foresee in future like say, FY '22 and '23? Do you feel like...

Write-off? The question was more of a write-off?

Yes, yes. Question number one, in the balance sheet, do you feel like any asset or a specific asset that you feel you're going to write off in future? Question number one is this. Question number 2, I'm really happy seeing the growth in the top line always. But the reflection in bottom line somehow is not there. I mean it's quite -- you don't have much of borrowing in your balance sheet. But still the bottom line improvement has not been seen. So I mean what kind of -- any kind of margin issues you're facing in your operations?

Sure. Okay. Let me answer the first question, the balance sheet item. To answer your question on the write-off part of it, we do not plan to do any write-offs. That is not something that we have any plans for. But with that said, right, there is always a revaluation of goodwill that happens every year at the end of the year by the independent financial consultants. They come back and say, "Hey, maybe you should take a write-off of this from a goodwill point of view." That's the only thing that we might do if that is something that our consultants recommend that. These are some of the questions that have been asked multiple times and why don't we just write-off the whole goodwill, take a hit at one time. That is something that we have been always constantly discussing when it comes to the balance sheet every 6 months. So far, we have taken some write-off of it in -- during the pandemic time when there was a revaluation of the goodwill. But today, we did the revaluation before we published this, and our consultants recommended not to do it this time. So we went with that. But if there is a recommendation on the write-off or if we feel that, hey, might as well just take a onetime hit of the whole goodwill and take it off the balance sheet because that is creating a little bit of imbalance in the balance sheet, that we may consider. But at this time, it's just a consideration. We have not decided on that. That will reflect on the P&L. So we just want to make sure that we don't jeopardize the P&L part of it. So we'll have to make -- calculated this number. Now to answer your question on the margins, right, like I was answering the earlier question from [ Arvind ], so we had some low-margin business that we have hived off. We still continue to have some of it that we are now selling now to the customers. That is something that earlier we used to sell off -- package them and sell off the company. Now we're just saying no to the customers because we have so much business. Right now, we are -- in some cases, we are unable to fulfill that business because we don't have the resources because of the shortage, you are aware of that. So that is one reason. The second reason is, like I said earlier, our input costs have gone up, which is the labor costs have gone up dramatically. And you are aware of what's happening in the industry. And we have a low base or what we call the low pyramid, right? We don't have the big pyramids that the large companies have. We have smaller pyramids. So our costs are slightly higher when it comes to that. So that is something -- there is a strategy for that where Karanjit is working on hiring a lot more fresher talent. We have doubled the hiring of freshers from last year to this year. So there is going to be an effect of that coming soon. In addition to that, we have also talked to our customers, given that our costs have gone up, we have approached our customers and we have requested for an increase in rate from them. And most of our customers have agreed to it. And that also will start reflecting over the next quarter -- next few quarters, we'll start seeing that because as the contract get renewed, right, that's when typically rate revision happens. People -- our customers don't like to -- when we have these large customers, especially, they don't want to bring -- negotiate in the middle of it. So we are working through multiple different strategies to improve the margins. That is the reason why I said, "Hey, give us one more quarter, and then you'll start seeing improvement of these margins."

The next question is from the line of [ Shrikant Reddy ], an individual investor.

So my question is the market has been quite tough these days. Hiring and retention, if I talk about -- has been more tough, more -- the attrition has been [indiscernible]. So what challenges and issues you are facing and how you are dealing with that?

Okay. So I'll let Karanjit answer that question. But just like everybody in the industry, right, we are facing similar pressures. Would I want to let Karanjit because he does this day in and day out. I'll let him answer what strategies they are doing and how we are facing or how we are mitigating all these challenges that we have. Karanjit, go ahead.

Yes. Yes. So as Niranjan said, all of us are facing the challenges and we are all continuing to kind of refine and fine-tune the processes. But yes, today, all of us face -- first of all, there is -- the challenge is being pursued by multiple companies. So there's a challenge there, how do you differentiate. So we're working on strategies on how we can differentiate ourselves. But [ time ] is not a challenge for us because we do a lot of cutting-edge digital works. So we are able to sort of have them prefer us over others. But then also, we're all faced with this whole challenge with joinings because, at this point, there is a surplus of offers, and it's a good time for being IT -- to be in the IT industry. So they have multiple offers, and we also have a lot of significant declines. Again, we're working that process every day just to keep in touch and see how best we can keep improving it. We've also increased our -- as Niranjan mentioned, we have increased our intake of freshers to almost double of what we did last year. And this is just one batch we have done. We'll continue to do other batches as we absorb these people on to projects very soon. So yes, that's kind of what it is. And it's a challenge every day, but we continue to work to refine that.

The next question is from the line of [ Arpita Gauk ] an individual investor.

I have 2 questions. The first question is how is the Europe expansion progressing? Are we on track to achieve the revenue diversification, the targets that were set? And my second question is, how is the One Kellton initiative progressing?

Okay. So Srini has an answer to some of the One Kellton one. I'll let him again give you a little bit more clarity on that. Coming to the Europe one, yes, the strategy is still there. As you are aware, right, because of what's happening with Ukraine. There is an effect on the economy-wide in Europe specifically. So while we have ambitions to grow there, this probably -- we has the setback of probably, I would say, 2 quarters to what we wanted to do and what -- where we are today. So we are still focused on that. We want to get to the 10% to 15% target that we want to achieve. But it's become a moving target for now for various reasons plus COVID. Now it is the Ukraine-Russia war that is affecting some of the initiatives and launches that companies wanted to earlier, delaying or differing it. While there is a lot of activity going on in the digital transformation space, we have the right people now in Europe to take us to the next level. But unfortunately, it's just that the pipeline, right, is not getting as aggressively filled up as what we wanted it to be. . We are working with it. But like I said, it's probably -- we are 2 quarters behind on where we want to be, but we will be aggressively pushing to make sure that we make up at least 1-quarter of the 2-quarter delay that we have and achieve these numbers sooner than what, I guess, it's showing up now. So let's make sure that -- what my point is that we will achieve this number, it's just that probably we will be delayed by one quarter by end of this financial year in achieving the numbers that we targeted for this year. Srini, can you give a little bit more color on One Kellton because the question has come up again?

Absolutely. Like I said earlier, right, I mean there are 2 aspects to the whole One Kellton integration and rollout, right? One is the customer-facing side and one is internally within the organization to our employees. Both of these exercises have gone on very well. Right now, all of our major customers, 100% of our major customers, we have reached out to and informed them and -- about One Kellton, the broader portfolio of services, the global nature of One Kellton and the integrated approach to customers' challenge or problems and the solutions that are being built out. All of those have been explained. There is a lot of excitement from our customer side. They do want to understand how they can take advantage of One Kellton and so on. So you will see a lot of changes happening within our large customer base where they want to leverage the combined portfolio of services of Kellton. So you will see that there will be a growth within the large customer base. From an employee perspective, the top management or even the middle management is completely onboarded. They understand the benefits of One Kellton from an employee perspective, the base level of employees, what it means to them. We are doing global town halls, meetings even at a local level where necessary. Going to our client sites where a lot of our employees are working, taking them out for lunches and dinners and explaining to them the whole concept of One Kellton. So very -- a lot of good progress has been made. Very happy with how it has been received. And we are seeing the results, and that is definitely a big boost in the arm for everyone. From a perspective of collateral, website, realignment, tools, integration, et cetera, that's an ongoing process. Those kinds of changes are a little difficult for employees as well as customers to accept and realign. So those are going on within the next couple of months. We expect that, that realignment will happen. The processes which were at a very localized level are now being rolled out at the global level, obviously, all of these processes will have to be nuanced from a local perspective. But then it's One Kellton, so all employees, all customers will have -- will go through the same process. So we are -- we don't want to lose the agility of Kellton by bringing in all of this One Kellton initiative. We are being very careful to make sure that the processes don't hinder any. So this will take a little bit of time, and we are working on those. Any specific questions on One Kellton that I've missed, please feel free to ask again. I'll be able to answer, but that's the update I have with respect to One Kellton.

The next question is from the line of [ Vijay Lakhani ], an individual investor.

Sir, I just wanted to ask about the profit margin because you said that your employee cost is going up. And so I want to know what is the industry average for profit margins. And in the future, if there is a high cost of employees, will the profit margin or PAT margin go down? And what is your target for the PAT margins in the future?

Okay. So the employee costs have gone significantly in line with what the industry has faced. I think in some as high as 30%, right? So that is something that is a reflection. But if you look at it from our pure numbers point of view, right, as overall cost of this March, we were around probably in the low teens is what it went up on an average when you take the whole global employee cost. So that's the number. And that is a hit that is going directly into the EBITDA numbers. While we were able to get some increase in the customer bill rates, we have fully not got all of it baked into the numbers yet. That's the reason why I said give us a quarter or maybe 2 quarters for the complete reflection of the increase in customer rates to come into play as well as the new pyramid way of providing some increase in the base of the pyramid that they're trying to do to liberate some of our cost benefits out of that. So that is going to take these 2 quarters that I asked for. Our target is to get into the high teens when it comes to the EBITDA numbers closer to the 20%. And the PAT margin, we want to be around 11%, 12%. That is -- we have achieved it in, I think, last year. It's easily achievable. It's just that because of the increased cost and the inflation effect that is happening, we have faced some headwinds to what we targeted for. And this quarter, there was a significant hit when it comes to these profit margins because of the increase in cost of labor and also yearly appraisals that have happened in the first quarter of this calendar year, which is the fourth quarter for us for the financial year. So to answer your question, again, just repeating, we want to be in the high teens when it comes to EBITDA numbers and probably 11, 12 points when it comes to the PAT numbers is what our target is.

So this will be in line with the industry?

This would be -- industry probably maybe is a little bit higher. It probably is in the low 20s is what will be the EBITDA, and we will get there. But then our target for this year is we're going back to get to that in the high teens, 11% to 12%. So yes, we'll come back to the industry very soon. Yes.

[Operator Instructions] The next question is from the line of [ Hima Kapasi ], an individual investor.

Sir, my question is that we got recently order from Hyderabad Metropolitan. So I just wanted to know that how much time it will take to exit the order? What would be the size of the order? And what margins we are looking at? And whether we are having any such other deals in progress?

So to answer a question there, I'll let Karanjit answer the question. But I think -- I think I know the numbers. Right now, it is a very -- it's a first phase of the thing that we won, which is probably -- it's very low and probably a few crores is what I was told. To answer your question on the margin side of it, the margins are going to be typical government margins is what we will have in there. But what we are going to gain out of that is, I think we talked about it last year -- last quarter, where we said we won this, and this is going to have a bearing on us in winning future and even related -- but unfortunately, what has happened is that the governments have been a little bit slow when it comes to releasing up tenders. While there are a lot of excitement around the tenders are going to come out imminently, but there is a delay in tender process. I don't know if it's end of the year, financial year. There were other priorities that the people were trying to meet. But what we have recently found out is that now everything is back on. And over the next quarter or 2 quarters is when the new tenders will be released. It is including even the Hyderabad Metropolitan Water Board. There are a few other tenders that will be released. And we would be -- we would stand a good chance of winning, if not all of it, most of it because we have a track record of proving that we are successful and able to deliver. And we will be getting a lot more of these kinds of things pretty soon, but it's just not because of lack of effort, it's just that the governments have been slow when it comes to releasing the tenders.

[Operator Instructions] The next question is a follow-up from the line of [ Chenna Vas ], a retail Investor.

Yes, sir. Sorry. Last time we have spoken -- just one thing is that like IT, the big fish, as you said, you have a big pyramid, and it is very difficult to retain the manpower, employee basically. So I was just having this, is there -- one of the nice thing is looking like -- ESOP you can provide to the manager level or some other lead, project lead, whatever, I mean, so that they should not move on because of the ESOP scheme, much organized will give. I mean is that kind of -- because I don't think companies like -- big companies, big pyramids should be [indiscernible] ESOPs, maybe they are moving at the managerial level. So if that kind of something kind of scheme can broaden the intake, so it might improve on reducing the level of that kind of a resignation. And second, like it can -- cost of employee, which we are seeing, that also marginally can be reduced because they will be having a package through the stocks. I mean that is my opinion. Is there kind of any thought process or [ think tank ] very organized?

Okay. So just to answer, yes, absolutely, you're right. We do have ESOP schemes. We do provide ESOP schemes but very selectively for key employees. It's not just managers, we just go all the way down to the individual employee level based on their performance and the criticality of their needs. Now we do provide that and the loyalty, too, to the company, right? So these are the 3 main factors that we weigh and we provide ESOPs. While we are not -- we cannot be as generous as probably a lot of start-ups are, but we are pretty generous when it comes to giving out these ESOPs. And that is one strategy we have been using. So I hope I answered your question there [ Chenna ]. I'm not sure if there's a second part of the question that I may have missed out.

I got it, but -- I got the answer, but you're providing -- I mean, that -- what I'm saying is that -- will going to help? And in that pyramid of big organization, actually, my question was like if a pyramid -- yes, my question was like what I wanted to tell you is like, as you said, you need to compete with the large IT companies where they have a big -- they own like power to attract employment. So if, say, X level, they are giving ESOP and that X quantity, if your area, if you take X minus 1 level, it becomes that same kind of quantity. So what I'm saying is the concept of retaining an employee in small IT companies, can we change that? And interestingly, that will change the entire concept of investors also. Many of investors will have -- I mean this is my -- because mostly people does not invest -- not investing in small companies because of the resignations which they are looking -- I mean this is my opinion -- as a personal opinion. So that was my first -- basically question was like this, if there is a think tank, is there like if not that this way, I will try to -- I mean, retain...

Yes. So there are various strategies. Yes, you are right. And yes, we are using ESOPs to retain people. But we are selective when we give them. That's the thing that I want to say. But I think there is a limit to the number of ESOPs too. We only had a certain percentage approval from the shareholders. We may have to relook at that if we want to increase that. That is something we'll definitely consider as a part of this AGM for this year to see if we need to increase that availability of ESOP numbers. I think we may have come to a ceiling of that. I just need to relook at those numbers and see where we are. But happy to take your input into consideration and take it to the Board to see what they feel is on that, okay. Appreciate your input.

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

My question was -- yes, my question is regarding the new client wins. And going through the list of new client wins, in terms of customer profile as well as the kind of work in digital engagements and enterprise platform work, it looks really quite impressive. And I think if I recall, even during the previous quarter, I think that there was a similar list of wins. I just wanted to get a little more better feel of it because I mean -- are these kind -- are there initiatives and which should be continuing year-on-year? Or are there some kind of small, short-term initiatives? Just wanted to get a feel of this. And what would be the typical ticket size of each of these deals in terms of [indiscernible]? Because if these things accumulate and these are ongoing -- are going to be ongoing contracts, then I think these things indicate a kind of a very, very big kind of incoming revenue in India down the line. So I just wanted to get an idea of, say, for example, in the new clients, I mean do we foresee that there would be -- I mean, would we be doing work for the entire enterprise in multiple areas? Or is it just limited to one or small, a couple of initiatives for these companies?

So to answer your question there, [ Rajesh ], so there are various strategies that we follow, I'll let Karanjit answer your question on how we choose one customer or the other 2, I'll let Karanjit answer that. But there are various strategies we follow. See, one, what we call a land-and-expand strategy, where we want to first get in the doors. I said there are many companies, like Accenture. We sometimes compete with Accenture. I'm just speaking the name for this discussion, right? So -- but they're an entrant player and they have bigger muscle than what we have. So what we try to do is we try to stay under the radar for these big [ companies ], right? We don't want to be in their radar. If we are in their radar, they'll beat us up. They don't even let us get into the customer. . So in that scenario, what we do is we try to get a small initiative from one business unit, not go from the corporate side, but go from the business unit side and then expand them. Once you're in there, once they start seeing how successful you are able to deliver, we are fine on that, and go on to bigger numbers, right? So to answer your question, initially, the order, the size, maybe a few hundred thousand dollars, so probably about $0.5 million. And then it goes to a whole million. But we look at the whole, I guess, customer life cycle, if you want to call it. Our customer -- Karanjit, maybe you should take this question there where -- how we pick one customer or the other and why we choose and what's the measure we use to go after a customer.

Yes. Sure, Niranjan. So as Niranjan said, see, most of the digital initiatives typically start off as projects because they are already -- possibly our internal IT teams are there, other vendors as well. So our first entry point typically tends to be a particular initiative that we would go and sign up, like I mentioned some of those. But then what happens is that once we are in there working with the customer and we have significant body of work, a lot of capability in delivering these digital solutions, we then are able to engage and expand those initiatives to whatever you said. The idea is always to start from where we started and then how we kind of [ end to end ] ourselves and get follow-on projects or own a particular piece of the customer's business. So that's always -- that is always the strategy as we go. And there is dedicated teams. There's the sales team who are the hunters, but then we also have dedicated account managers and program managers whose only job is to work with the customer and then see how they can derive more value and how we can actually also provide more value. And in fact, One Kellton is also a significant step to bring all the corporate assets together by providing one view for the customers. So this will further actually elevate our conversations with the customers. And we've also now started what we call a key account management program where the customers which have a lot of potential, we're running special tracks there on how we can engage them at the highest level. So Srini engage with these customers. I engage with those customers in my geography. And similarly in Europe, Europe had engages with them on how we can work with them and help them derive much larger value. So that's kind of the typical journey. That's essentially what we're working towards, and we're continuing to refine and -- and the new into strategy.

So just to add a little bit more, [ Rajesh ], there. So typically, for us, 80% of our revenue comes from our existing customers, right? 20% is what we get from new customers. So there's a lot of repeat business that happens. Even though as I said, when we start off with -- we may start off with a few hundred thousand dollars. But when you look at the whole life of a customer, right, the value that we get is multimillion dollars. So we are not too concerned about the initial size of the order because we look at the potential of what is it that we can get from the customer from the whole life of the -- journey. So we have customers for 15, 20 years, we are still servicing them. So we have a lot of longevity, right? And there are new customers that come in, right? They sometimes come in, we may just do a project. Either we feel that, hey, it may not work out for us in the long term. But there's a lot of analysis that happens before we start taking the first projects to see if there is a potential. If there's no potential there, we will just not do this few hundred thousand dollars orders. We just say, hey, this is not wanted because that's a onetime order we're going to get. We're not going to get a multiyear order after this. So there's a lot of [ finances ] that happens there. There's a huge -- I guess there's an art and a science to that.

Okay. And I just have one quick question. So when you say -- for example, there are 10 new clients. So does it mean this is the first-ever engagement with these clients? Or are these clients who have been -- worked with in the past and then resuming now?

So these are new clients, right? We don't this -- once we start a project with the customer, if they're already in the system, right, they're not considered to be new customers. If they're not in the system, this is the first project we are starting off with the customer, that becomes the new customer wins.

Okay. But okay, then within this number sounds actually even more interesting. I had [ followings ] for a year. So it looks like we have entry into about -- I mean, maybe 30, 40, 50 new clients a year and of quite a good profile. So okay, so I mean it looks like actually, there are...

So typically, it takes a year to fully gestate a customer, right? Once we win, then we start staffing up when we launched the project. We are almost like, what, 2 quarters into it before we start seeing revenue coming from a customer. So over a period of a year is when you start seeing the real reflection of the numbers coming from these new customers.

Okay. And then I just have one final one point on this. So the -- now the -- when we have these new clients, so does it mean that we are on the list of final vendors, or is...

No, no, no. The projects are signed deal. This has gone into the backlog, what we call it, right? It's already a signed contract. That's an MSA contract, right? So we don't treat that to be anything. I must say it's just -- if you don't win the first -- if we're not getting a dollar number to it, right, then it's not coming to...

Okay. So MSA is already there and then there is an additional project on top of it?

Yes, correct.

And one last thing. So they -- do some of these, do this include these professional services type of projects also or is it all like services or managed services?

It's mostly digital transformation. As you have seen, right, 81% of our revenue comes from digital transformation, 14% from enterprise. And there is some professional services that we do, do, right? The reason why we do it is sometimes we have to do what we call the need to services. We don't want others to come into a customer of ours, okay? So we say, okay, we'll do this for you because we want this. And otherwise, let's say, I'm a big provider -- I'm just picking name for discussion, right? Wipro might enter or Infosys might enter or whoever or a small vendor might enter and then start doing the same strategy that we are doing of landing and expand. So to protect the territory, we might offer some professional service because the customer wanted it, clear? But not by choice, right?

[Operator Instructions] As there are no further questions from the participants, I now hand the conference over to Mr. Niranjan Chintam for closing comments.

Thank you, Margaret. Thank you, everyone, for joining our Q4 and year-end earnings call. Really appreciate you taking the time to joining us and also being a valued member of our shareholders. So if you are in Hyderabad and or in Gurgaon, please look us up. We'd be happy to sit down and talk to you in more detail. Just reach out to our listed number, and we'll be happy to come talk to you and give you a little bit more. Thank you again for joining the call. Looking forward to talking to you soon.

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.