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

Ladies and gentlemen, good day, and welcome to the Kellton Tech Solutions Q2 and FY '23 Earnings Conference Call. [Operator Instructions]. I would like to thank you all for participating in the company's earnings call for the second quarter of the financial year 2023. 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 the management's beliefs as well as assumptions made from information currently available to the management. The audience is cautioned not to place any undue reliance on these forward-looking statements in making any investment decisions. The purpose of today's earnings call is purely to educate and doing awareness about the company's fundamental business and financial quarter under review. Now I would like to introduce you to the management team participating with us in the earnings call today. 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, Rachel. Good evening, everyone. Thank you for joining our Q2 earnings call. I want to start off with financial highlights. During the last quarter, this is the Q2 FY '23, our revenues were around INR 228 crores, which is about 9.1% increase year-on-year with EBITDA of INR 26 crores and a net profit of INR 16 crores. So the EBITDA margin, it was a slightly [ diff ]. It was 11.4% and the PAT of 7.4%. The earnings per share for this quarter has come down to INR 181, which is an increase over last quarter. Coming to the 6 months numbers, the revenue is around INR 445 crores, which is about 1.5% year-on-year increase. EBITDA of about INR 51 crores, net profit of INR 33 crores. The EBITDA margin is around 1.6% and the PAT margin of 7.4%. The earnings per share was around 3.6% for the 6 months for this financial year. Looking at some of the operational highlights. Last quarter, we added around 10 new customers. And the last quarter, we also were selected by the outlook of [ Magazine ] as a top 10 offer development companies in India. We have started our brand research into the one [ Kellton initiative ] that we've been talking about during the last 6 to 7 months. So right now, our website has migrated from kelltontech.com to kellton.com. And there is a relook by an external agency on how to refresh our brand, how to get more brand recognition because agency-based revenue is looking at it and also has come up with some preliminary analysis that we will be looking at to improve over the next few quarters. We have also participated in a few of SAP events. So these are some of the highlights that we have from an operational side for the last quarter. Karanjit, can you talk about the customer wins we had in the last quarter?

Sure. Thanks, [ sir ]. So as Niranjan said, we've had 10 new customers, and this has been a very interesting mix of customers. A lot of our customers this quarter have been on the new technology, which is what 3 MFT marketplaces and data engineering some of them in the renewable emerging carbon credits space and new learning platforms. So this is very interesting. I will just give a highlight about a couple of one for you to get a sense. So we are helping one of the next-generation technology to build a next-generation technology ecosystem for a U.S.-based financial technology company. They are trying to build a platform that has enabled them to make purchases by acquiring loans. If you remember in the past, we have done a lot of work in that and built platforms, but this is interesting that they are building a platform where they can actually be enabling [indiscernible] by acquiring loans using a buy now pay later a paradigm. Similarly, we are another working marketplace that we are that have been driven for by a U.S.-based company. That encourages selling to live stream. So we are building this platform where the sellers and retailers, they can share their products, how they look and work to their potential customers. So these are some of those things where what is really coming alive. Similarly, we are working with a U.S.-based renewable energy consulting, which is again trying to build our smart CRM and extension platform which is basically a research service marketplace that will help our customers purchase carbon and energy credits, so power value and energy trading and help them offset their footprints. Again, we have had -- we are also working with the Middle East company, where we are helping with our data engineering expertise. There is another area, good signal of traction, where we'll help them basically come up with a robust decision support system by looking at the in through the data. We're also hunting, we work some work in the health care space where we are working with the assumption for this company, which will have a single window system for their patients where they can access all their records like HR, now emergency rooms and hospital reports anytime. And of course, this complies with [ the ] standards. So this – it's not a standard way of looking at stuff, which is more like the new ad platform for having their customers look at things at one place and not go all over. We're also helping a nonprofit agency to ensure that refugee education are not or access for refugees education to e-learning platform. So these are some of the things. I don't want to deliver an overall the others, but these are some of the very interesting companies and the work that we have used in really build the new digital things, especially and go, [ beginning ].

See, I know there's a lot of commentary around the economy in the U.S. being back or a global recession happening. Can you just give some color as to what's happening in the U.S.?

Yes. Sure. Niranjan, thanks for the opportunity to speak. Like you said, there are 3 indicators, whether it be inflation, whether it be recession, unemployment, et cetera. A lot of speculation going on around all 3 of those and are in possession or not. But if we look at the inflation rate, it's been consistently coming down from June of this year, from 9.1% in June to about 7.7% in October of 2022. That as in the earlier part of the year, it went up from about 7% to 9.1%. So obviously, supply chains have rationalized coming up to speed, the Fed is in for a larger part of this year, there have been increasing gains of scale. It's expected that they will increase then through the early 2023. So I'm trying to control the information and it's seen in the numbers. So they're obviously not trying to trigger a recession but only wanted to slow down the economy. And if you look at the unemployment rate, it's been solidly below 4% for the entire year, it's about 3.8% to 3.7% in October. Obviously, we saw a lot of high-tech releasing their engineers about maybe 120,000 over the last 1 month or so. And this is not attributed to either a versus recessionary economy or anything, but more with respect to oversubscribing to the workforce during the pandemic, looking at the growth that they were seeing. Right now, we are not seeing any of our customers, [ Northsea ], and so on, and they are continuing to show that they will grow their planning for the growth. They have moved some of them from the last quarter of 2022 to the first quarter of 2023. Rightfully so, from a budgeting perspective and so on. So overall, we see from our customers' perspective that they're planning for growth. We expect the growth to be there in 2023 as well as in this last quarter of 2022. Of course, Christmas, Thanksgiving and all of these holidays, et cetera, will have a small impact, but that's not the economy, but it's more the seasonal change that you're going to see. So in short, I think it's not as bleak as everybody is making it sound indicators from our customers, indicators on any of the inflation of the discussion and unemployment are showing that this is not going to be a recession, this will probably be a slower growth, but growth definitely a growth as on those.

That's it. Thank you, [ Srinivas ]. So with that, we want to open up for questions. Rachel, can you start acting up for questions, please?

[Operator Instructions]. Our first question is from the line of [ Niranjan Sira ], Individual Investor.

Can you hear me, sir?

Yes, I can hear you.

Yes. So I have this of questions for you and your team. And if I'll add more color based on what you are seeing in the – what's happening in the industry, plus where our companies hitting and then where we see in terms in the coming quarters and coming towards. So I'll go one by one quickly. So the first question is, it's operating. And if you see it the industries, its competitors, they're having an operating margin of 25% to 30% frames. So you can need any of these midsized [ artistic ] company. What's there why Kellton is having 12% operating margin, where we clearly see that there's a trend going on in the industry, having operating margin -- do you think that it's an opportunity for us to at least aim for opposed to 18% to 20% because it is far, far lower than the industry. That's number one. And yes, then [ bio ] matures. So sir, I got one question at the time.

Let me answer that so that it becomes easier, to do an interaction there versus having a list of questions and in the all once and then becomes a part. So let me answer that. The first thing is we have noticed that this was a discussion that we've had for last few years on how to improve the operating margin. One of the things of efforts towards one Kellton [ was ]. I'm not sure if you are aware of the one Kellton Tech where at one point... So that is one of the initiatives that we launched to get larger synergies within the organization. While we are still in that journey of getting that one Kellton going, we have made significant improvements within the last 6 to 9 months of this calendar year. There were a number of meetings that happened all over the world to do this reconciliation, if you want to call it or look at redundancies, how do we get economies of scale going with while we were operating in [ silos ]. And that exercise side is almost complete, so we should start noticing to see increase in margins, operating margins starting next year and to the fiscal year. We are going to see some increase. But while we are doing this exercise, this year was a bad -- I guess, a benchmark you want to call it, because of the increased labor costs. There is about close to 2 – between 2% and 3% drop in the margins because of the increased labor cost. While we can always say that dollar is appreciated, but that's not fully baked in yet. At the same time, our increase in labor cost is outpaced even any dollar appreciation that we have seen in the last probably 1 way. The second thing is, we have a significant presence in the U.S. because we were -- we are on the cutting edge industry, about close to 300 of our employees are in the U.S. and about 100 are in Europe, where the cost factors are higher, so the margins are lower. So just to give you a different number when we do margins in the U.S. if we are servicing from the U.S. is 30%, whereas if we bring that same work we do it in India, the margins are over 50%. I'm running by gross margins there. So the next question of this question is, can we migrate them over. We are on that work of migrating, but we need to build up the scale. So we don't have the scale yet to get to that level. Okay, this year, we have scaled up by about 300 employees once we publish our employee numbers, you'll see that we went from a little over 1,500 to 1,800 plus employees is what we have today. And that is growing. So the pace in India is increasing. The increase in employees from a significant is higher in India. We're talking about 80-20, 80% of the growth in employee base is coming from India and 20% in the U.S. As this goes -- this trend goes on, we will see a lot more margin improvement when it comes to the operating margin, we also to start off with gross margins when it comes to operating margin.

Okay. Thank you. So I was about to ask you about the employee mix. I think you've already answered that. I'll go to the next question now. Our balance sheet says that we have close to 100 crores of borrowings. And for that, to operate that or to finance that, they are paying close to INR 20 crores of interest every year. So roughly, I would say it is in a range of 11% to 12% of the total borrowing what we told. Now to say this is exactly in line with our operating profit margin. So ideally, even not this number says that this borrowing is actually not helping out because you are paying 12% in price to the banks or from wherever you have been its borrowings. And as I said, we are just entering the 12% operating margin. So in a plain match point of view, this borrowing is actually not helping us. But on the other hand, it's INR 12 crores interest what we are paying, is exactly a roughly more, INR 4 crores is 1 quarter net profit. So I just want to ask you whether do you have any pace to retire this back. And if not then, then seriously, I think we have to think about quickly how to increase the operating profit margin because otherwise, it's not adding any value to the numbers.

Yes. Fair question there. See, I think I don't have to know the history of our company, the way we grow and all the stuff. See, we have not raised any money from the market. It has been either self-funded or through debt, whatever growth that we have done so far. Yes, there's a lot of capital that is tucked in accounts receivables and related starts the one way to do is we have to finance that. We have always been growing any money left we've been either investing in the growth of the company or doing some strategic acquisitions. So the answer is, ideally, I would want to have a 0 debt. But my other option to get to 0 debt is either internal accruals to retire the debt, we do have a little bit of not payable that is still there that they need to pay out and also fund the growth. There is some R&D investments we are making. All of this cannot be done through internal accruals, while we have large companies. I don't want to name for the company is the largest, let's say, the logistical company is a customer of ours. We have an account receivable timeline of 90-plus days. Okay. When we have that a large company that is paying us in 90-plus days, somehow we have to service that. But I guess the work that we do and the invoice the time it takes. So we have to use debt for that. We are not sitting on cash today. So that's one of the reasons why we do that. But I agree with you. Ideally, I would rise the INR 12 crores with a bond to the bottom line. So that is, like you said, to divide like INR 3 crores would add it to every quarter. I'm not disagreeing on that. But unfortunately, the business that we are in the way we grew and lack of, let's say, equity infusion from outside entities is what -- where we are today.

Got it. I'll go with the next question. Although…

[ If you have one more ] question there, can you get back to the queue so that we get others also have.

Yes, sure. Sir, I'll ask the last question, and then I will [ go back again ]. Sir, because 1 year back, you mentioned that the company started in close to USD 300 million revenues. Where do we see the traction coming here by 2?

Yes. $200 million is what the target is by 2025 is what we targeted. I think we're still marching towards that. And I think we -- given where we are today, we should be able to achieve that. Unless like said, there is what we call the valuation or something else happens. So then in a fourth major. That's what we're working award. The under-report major happens somewhere, we should be able to achieve that.

[Operator Instructions] So we will move on to the next question, which is from the line of [ Shanawa ].

This is [ Shanawa ]. And first of all, congratulate providing even key customers in the effect. But yes, and I was a part of your expression Q4 proven personalized there. And so I have certain questions basically, one is I will ask for the previous conference where we have in 1 or 2 quarters we are going to see testing in the analytic mainland profitability. And second question that I had is on balance sheet. In balance sheet, I am noticing 2 things I notice -- but the one thing which I noticed is that you are mentioning other assets. It is INR 178 crores and receivable, you are minting INR 210 crores. Together, it is [ one ]. And your revenue for the 6 months is [ 400 ]. So I want to understand INR 178 crores of other assets that actually comprised, whether it is really a criteria cash fee deposit, what is that particular INR 18 crores -- because it is every quarter of time seeing every -- whenever you are saying the balance sheet is closing. And the cash realization in your balance sheet is very low. Second question...

Can we answer [ the first question first ]?

Yes.

Yes. So let me answer the first question related to where you asked about the growth in P&L. So yes, I did say that the growth in P&L, we're going to start seeing it. Yes, there is some improvement, not to the extent that we wanted to. We still are working on the OneKellton initiative. While we are working on that, we are making investments like I just told you earlier, where there's a brand refresh going on, we are using some agencies for the brand refresh where we'll start seeing changes probably not this year, I'm talking about calendar year, you'll start seeing brand refresh activity coming into play from January on one of the things, like I said earlier, from account intake plan, we went to a Kellton brand. That's a small change, but there are a lot of improvements that we are making so that there's a stickiness to the customer of the Kellton brand. While in India, Kellton is known very well, it is not known in the U.S. and our Europe. Europe for us has not been that way of what we anticipated when we talked about 6 months ago. We had huge hopes for Europe, but unfortunately, because of Ukraine and associated inflation and the cost of living increases that have happened, people and companies have scaled back their investments. We have not grown to the extent that we wanted to grow, while the revenue has gone up, but in a single-digit number. So that's one of the setbacks that we have. Coming to the balance sheet items, your right, money is stuck in accounts receivables and also accrued revenue. So when I say crude revenue, this is the unbilled revenue. Typically, what happens is we raised our bills around the 10th of the following month. So there's always 1 month worth of revenue that is going to be unbilled, plus any fixed price contract milestone billing that we have not achieved that milestone billing. So effectively, that number is going to be, like I said, 1 month, if you look at it, [ 2.7 ]. So at least about INR 90 crores to INR 100 crores is going to be the core revenue roughly not going without adding that milestone-based fixed price revenues. So that is where the money is stuck. So that is the cap stock. That is why we use the debt to come up our working capital needs. The earlier question that [ Niranjan ] was asking. That is where the need for that cash in cash [ flow ].

So we enter this INR 178 crores there is no write-off year going to do. This is -- we are going to achieve that.

Oh, yes, there's 0 write-off on that. No. It's that there are, in some cases, it...

I'm not in your cash flow statement, you have mentioned other assets, minus INR 44 crores in 2022 in March. So I don't know what is that purchase an asset or it is a write-off you have done quite tender. Cash flow statement happens is comparative to the previous year -- 3 years period.

So the previous time, we gave your balance sheet, if there is an increase, it becomes positive, if there is a decrease, where it becomes negative. That is all it is. There is a pure -- what we call accounting way of doing it, it is not a write-off. There was a decrease in that line item. That's why you...

Financial year of March 22, you have been rated highly INR [ 1 ]crore is operating cash. So that is what I'm saying. I mean, how...

Yes. Can we set up a call separately to walk you through the cash flow because I want to ask the question because this is purely the way the cash flow statement is created to weigh what is from the previous period to this current period, any increase or decrease is what shows up there. If there is a…. Cash flow. Sorry about...

Yes. And just taking your point. Then just why I'm saying is consistently, you see I was looking, you have a profit of INR 80 crore, last 5 years, that the net cash, which in your balance sheet are INR 250 crores, not more than that. So that is a difference. So that's why I was...

Yes, you're right. So the number that we are paying term loans, we are paying earnouts. We are investing in assets for the company. So those are all the adjustments that happen in cash flow. So the money is not a write-off. It's just that where it is going or where increase or decrease from the previous time. That's why I said that please the way the cash flow should be read is different from -- we are talking from a pure cash, in cash out, that is not what this is. This cash flow is adjustments to the previous period to current period, what it is. That said, I would be happy to have a separate call with you to walk you through the cash flow. This is an accounting way of treatment.

Okay. So are we going to see a future like from Q3 onwards, how is going to be the number per going to be on sale like whether it is the tractor on the revenue?

Yes, future is uncertain [ around Kellton ].

Thank you for our concurrent orders, like you said, 11 customers is being acquired in this quarter. So with that reference, I trying to get the knowledge of how the profit is like?

Okay. Let me answer that. Profit. I don't know the numbers and in the broad [ intimate ]... Every time we have a new customer, it takes 1 quarter to 2 quarters for the revenue to start flowing in. So initially, the revenue is going to be less compared to what it's going to be in the following next 2 quarters. So that is the trend that has happened and that's across every company, that's the way it is. Now coming to our business is in the same boat as everybody else. Now to answer your question on what the future is looking like, like I said, unless there's a force majeure something happens. Things are looking good. We want to achieve the $200 million by 2025. So there is going to be growth. Now to achieve that, we have to do a CAGR of close to 25% to 24%. I'm just going to the number is 29% from what. So there is going to be growth. But I won't give you the caveat of what the resection effect, how long is the Russia, Ukraine was if somebody has some train sense of seeing how it's affecting the whole world on the war what is going to dictate some of these growth plans? While [ things ] has given in his earlier commentary, things are not as bad as what it is coming out in the news. Yes, we have a few customers that have entered our projects, but there are other projects that we have in pipe that have come on board. While 80% of our revenue is repeat business, 80% of our customers are giving us revenue year on year-on-year. There are about 20% goes away, but adding at a greater rate than what the loss is. So there is going to be growth. It's just that today, I don't want to tell you, okay, next quarter, is this going to be -- this much revenue growth or things like that.

[Operator Instructions] We have [ Niranjan Shira ].

I'm sorry. I didn't want to please -- please [ question, please ].

Yes, I think we still have a lot of time.

So I'll now start with the other questions. Sir, I just want to ask you, I'd be clear, this company is very, very highly undervalued. It has a book value of INR 52. -- [ parastock price ] tailing into '16, 2064. Frequency also have seen the competitors has the same book value. And let me give some examples. It's already the public. So I think that in groups. If you the happiest mind having a book value of trading at 1,000 to take our lightened, book value of 5 trading at 400. And all these companies, they have come after 2018. Now basically, whenever I see those reports, whenever I went in those calls as well. And the team is very, very similar in the nature of a quarter digital revenues, 90% is coming from the revenues, net 1% from consulting. But some of the other ways it's very similar because the employee which is very different. Like you said, for Kellton, the employee mix is like most of them are sitting in high location, high-cost precision, then the competitors where they are having the same mix, same geographies, U.S. and other things. But their employment is very different. They are having low-cost position for a lot of in -- another thing is since they are, I would say, very high-valued companies, stock of us. So do you think is it the right time for that on appoint somebody, the PR where whatever words we are doing it, the way Karanjit mentioned, we are doing [ FTs ], we are doing LFTs, Gateway, something on the carbon side? You also mentioned that for the start of the call that we are doing so many sense. Like you mentioned that it became in outlook somewhere top 10 companies, the start of the call you mentioned. But some of this doesn't understand this, are not reopen. And somehow I believe it's a time where we really want a strong PR or marketing set. Whatever worth it's been done has to come on twitter or YouTube to whatever this the scales have to spend like any fill in this area. What are your views on this?

So I give it to origin or talk that is undervalued. I guess we were a little bit jaded. I'd be very honest there when I said jaded, we have tried all the things that you have pointed out earlier, that was 3 Coutu. We have had analyst conferences. I've attended many conferences have been in Bombay multiple times to meet analysts, farmhouses, all of the above that you listed out. So we were not successful. So we got a little bit geared there. Now with that said, we have not [ levothope ]. We are reinitiating the engagement. One of the things that we first wanted to do was do a brand refresh and then go meet all the analysts. So the brand refresh has begun. As I was saying earlier, we have hired an external agency that is looking at our brand complex all the way down to how we present ourselves to what our marketing rate should look like, how should be our sales pitches, everything is being relooked at. And we have revamped our marketing team. So all of those things we are doing. And we are also talking to a few of these, I guess, analysts, not analyst forms, I would say, industry analysts like the Gartners of the world. So they're not going -- targeting Gartners, but we are looking at a second level of that to start off with to get our name in that magic quadrant, if you want to call it. So we are on those lines. we are making investments, and that is also -- is going to show up in the cost factor for doing all this. We have decided we want to make the investment now is the time, and we're doing it. We will be ready with the new pitch by January of next year. And then we would be launching a complete PRs class analyst sessions going on from January onwards. So probably 2024 financial year is when you start seeing it. But the activity is going to begin January of 2023 calendar year. So we are doing we have done this before. Somehow we were not successful. Now we are revamped. We have a new marketing team that has come on board. Everything is being relooked at fresh, and then we're going to be coming up.

Okay. Yes, I got it, sir. Yes. Can I still continue or…

So a long question so that we don't monetize. We'll see it the tax. Next one.

So I'll go with this last question for the day. And basically lines to the current and streaming us. So I think they can add best perspective on this. So I'll start with current and then a similar question to [ reals ] as well. So currently, in a couple of quarters back, you mentioned about this fall. I just call you mentioned about the Indian economy and you are targeting some customers in India, having a caring with government and editing. Would you like to just tell us for what's the status there and by when you think that you would be able to close it? Likewise, one question, just we as well. you mentioned recently that U.S. is going with the is as storage. I just wanted to know, in distal companies of [ Safilo platform Amazon ] to any of the tech companies have started doing office. Do you foresee anything happening for your points or for Kellton in the U.S.? And what are the new upcoming projects that you're working with or any new technologies, companies you're working there? Or anything which you think that would be helpful for us to know what's really happening there in Kellton?

Thank you, [ Niranjan ], for the question. We'll start off with Kellton. Let me ask the government one because can doesn't mean with the government side of it. It's only purely focused on the commercial side of it. From the government perspective, things have been slow ranging. So we don't know why new contracts while there are things that ensure that people are awarding everywhere that we have socialized or have had some, I guess, building sales building activities there, they have been deferred. It's not because of cash flow. For some reason, we know all the others are getting deferred. We are unable to shake loose the contracts out. While once the contracts come up, we are first in line because we understand that space is very well. But unfortunately, nothing has been what we call a contract state at this point. Now, Karanjit, can you answer to the Indian economy, the commercial side, all the new wins and what activity is happening and then we'll have Srini answer the same.

Yes. So your question was even very general, but let me do my best. So as Niranjan said, we have -- we have hired a good brand, and we kept on building on it. So we do have some good traction on the India side, and we are continuing to -- even the previously acquired customers, we have been working with a lot of them and deepen our relationship that's been one of the programs that we have run, especially focusing on key growth accounts. We've been doing a lot of that work to ensure that they grow. Apart from that, obviously, we continue to grow in the market and also try to get newer customers. So that's also work that's ongoing. And that's been going at the same pace as it has been in the past as of now. So [indiscernible] what is going on well as far as on the U.S. side as of now. I don’t know if it answers your question, but -- this is the broad reaction...

So I think the question was all the new technologies and the new customers right in the activity currently. So let me answer about also, we have seen a lot of multimillion contracts that we have won over the last 1 year in India. That we have not -- that was not the case earlier year. So there are a few customers who are getting million plus in business and 0.5 million plus a multiple of them in India itself, which typically we used to hear from outside India. But like Karanjit said earlier, in the other regions, our in India and Asia Pac of the territory, we have made significant progress in the Middle East where we have a few multimillion customers there also. So there is a lot of activity going on and a lot of cool fun stuff happening in the web space. That is probably the next cutting-edge technology where there's a lot of hype in there while we're free because of the crypto side of it, there is a bad wide going on, but the underlying technology of the blockchain and the web is not going to go anywhere. While the copper might have a short-term or a long-term downturn, we don't anticipate the underlying technology will have any effect. And we are seeing many, many customers asking us to do work in the water space. We are probably one of the handful of global companies that have successfully deployed solution in that 3 space well as others have not. Srini, can you talk about the U.S. playout? I know you did touch upon it, but a little bit more color, please.

[indiscernible].

Sir, let me reconnect Mr. Potluri.

So while we are reconnecting, let me answer that. So Niranjan, the other thing that you asked about is what's happening in the U.S., the layoffs. So while yes, China pointed out, a little over 100,000 -- 120,000 employees got laid off in the tackiness space. That is primarily due to overhiring and not because of any reduction in requirement. Yes, there is some bits in revenue when it comes to that. But people are looking at the growth rate that what was during COVID time is not there anymore for these tech companies. I'm talking about Amazon, the [ mega ] of the world. So that is the reason why enough people where the companies are starting to reduce the employee base. Answering your question about the customers, we have talked to our customers for the 2023 budget because our 2020 -- this is calendar year, we do calendar year budgets. For the calendar year budgets that we have recently started to exercise what we have been informed is that there is no reduction in budget and also as an industry trend, whenever there is a recession or cutbacks and there is going to be greater outsourcing. So India is going to win. So we will probably may have to move some of that contract or our customers will be willing or readily willing to move toward to India, where they were [ holstaging ] earlier. So that would be the answer. Karanjit, if you're back, do you want to add any color to that?

Sure. I heard the last part of what you said, Niranjan, and then now to answer [ Niranjan ]'s question. So we have these new people, that have been laid off, the high-tech people and most of them are engineers. And if you know this from a perspective of the last year or so, fulfillment was a huge light so these people [ will be one ], which has struggled to on the challenging to fulfill internally. So yes, it's quite -- these people are laid off, not because of any… [indiscernible]. Yes. I'm having some signal issues, [ Krishna ], Sorry. Can you hear me now?

Yes, I can hear you right.

Yes. So these companies have oversubscribed. They have actually hired a lot of people expecting a larger growth and seeing that there was a lull in the supply side, they started hiring a lot of people. All they're doing at this time is correction. So these people will be available in the open market, and it will be good for us to actually get some of these people from a perspective of implementing our project. I think it's a big win here.

Rachel, any other question?

We have a question from the line of [ Rajesh Monza ].

What is progress of company area of metaverse?

Okay. So Karanjit, let you take that, but the high-level thing is Meta works today, while we are making baby steps. We are doing a lot of R&D in metaworks, -- we do not, I guess, have too much activity going on there other than the [ area ]. But when it comes to organized reality, we are doing a lot of work in that. Karanjit, do you want to add anything on that?

So yes, you got the crux of it there. So metaverse, there is a lot of hype on metaverse. In fact, it was pretty high about last 2 quarters back. We have done a lot of POCs engaged with a lot of customers, especially in the retail space, the QSR space, but most of them have been in the POCs and those kinds of things. But if we see even in the customer wins, I did talk about some use cases that will emerge. So in fact, I talked about live streaming for somebody to depend pay later. It's not exactly matters, but some of these things as well as the whole 5G where speed will go up and it will all converge. So that is where we are at. A lot of excitement use cases are coming up, but they are more of what can we do with it and then some POCs. I think then it will build out to a reality in a couple of years.

Sir, another question Yes. There was -- on [ tendon ], there was -- you are specifying that very innocent what is debt?

I'm sorry, what was the question? What did you see on Kellton?

You specified debt... So only witness. What was debt?

Innovation. Okay. That's -- I guess that's a little bit vague there, Rajesh when it comes to that. So but innovation from our side, we are talking about any R&D activity, anything new that we can accomplish with existing technologies or anything new that we can do with new technologies like the [ Veltri ] and/or the metaverse question that you asked. So that is what we have been doing. Innovation is in our DNA, anything that we do, we would like to innovate not the normal way of doing things, how can we think outside the box and do it different that nobody else has talked about or somebody has an idea of how do we now innovate that idea to make it much more palatable to our customers. That is what we mean by innovation.

[Operator Instructions]. We have a question from the line of [ Ranjit Chakan ].

And so like this fast question on the conference call of other companies as well with changes that what I could see from the balance sheet is on the other expenses. If you could see from the previous years, the September quarter and last quarter, the other expenses has increased at the rate of 10%. But whereas if you compare it with -- the quarter and the June quarter, the other expenses is increasing at the rate of 20%. So I don't want to get into detail what the other expenses is. I just want to know, is there any way where we can control them or [ credit vale ].

So, you're right. Other expenses. In our case, it's nothing but the subcontractor, contractor expenses. So yes, there was an increase compared to the previous quarter because we were unable to service our customers, existing customers and the new customers that we are getting with the existing employee base that we have. We have almost 0 bench sometimes time sales in a negative banks. So we -- but we still have an obligation to service our customers. So we have out -- not outsourced. We have taken people from outside to service the existing customers. That is where the expense is grouped into the other expenses. But in relation to other provisional things that we might have, [ percentage ] as we're talking about the lawyer fees, the other consultants that are helping us with -- so also the trial is another area that travel has now opened up, as you are aware, where trial has gone up, the cost of travel has almost doubled than what it was, let's say, 2 years back. So all these things are grouped into the other expenses. So the increase is due to subcontractors and travel-related expenses.

[Operator Instructions] So there are no further questions right now.

Okay. Thank you, everybody, for joining the Q3 earnings call. Looking forward to talking to you either one-on-one, if you have any question ply reach out to the numbers that we have online as a rage, I think is where finally it is at a question on an e-mail and ask for a one-on-one call, we would be happy to talk to you. Otherwise, we'll talk to you during our next earnings call, which is going to be sometime in February. Thank you very much to everybody. Looking forward to talking to you soon.

Thank you, Mr. Chintam and members of the management team. Ladies and gentlemen, with that, we conclude this conference call. Thank you for joining us, and you may now disconnect your lines.