Krystal Integrated Services Limited (KRYSTAL) Earnings Call Transcript & Summary

Ladies and gentlemen, good day, and welcome to the Q4 and FY '24 Conference Call of Krystal Integrated Services Limited. This conference call may contain forward-looking statements about the company, which are based on the beliefs, opinions and expectations of the company as on date of this call. The statements are not the guarantee of future performance and involve risks and uncertainties that are difficult to predict. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Mr. Sanjay Dighe, Chief Executive Officer and Whole Time Director of Krystal Integrated Services Limited for opening remarks. Thank you, and over to you, sir.

Thank you so much. Good afternoon, everyone. I'm very happy to do this call, which is our first call post our first full year results of 31st March 2024. So I would like to begin by expressing my graduate to all for taking the time out to join us today. And we on the call also have with us Mr. Barun Dey, who is our Chief Financial Officer and the team of Adfactors who are our Investor Relations team. It gives me immense pleasure to address you all today for the first time. After having become public listed company, as we stand on the cusp of a spectacular growth journey. Since this is our maiden earnings conference call, I would like to share a brief overview of our company and some recent developments too before we get into the business and financial performance. So just to give you a background, I'm sure there are people who have read the documents, but I take this opportunity. Our journey began in the year 2000. In 2000 predominantly, we started our services with a single security services as our single product offering in the Mumbai market. If you all remember, this is the time when real estate was up coming here and security services were on demand, the promoter started this. We started off services to real estate sites and so on and so forth. And then we just kept on progressing. Then the airports came up, the real estate came up, the BKC came up, and we from a single service security services company, we became a full-fledged integrated facilities management company. Over the subsequent years, we built a strong team of skilled workforce and a robust clientele, and we are very happy to say that last year we had almost 100% customer retention. We, over the period of time, expanded into various domains but predominantly, these domains were integrated facility management, encompassing housekeeping, sanitization, gardening, MEP services, waste management, pest control, et cetera. We kept on moving ahead with our security services and private security and man guarding. So we have kept focus independently on that as well. The third service that we are offering is our staffing solutions and payroll management. So these are payroll management and HR services that we are offering to some of our customers on a national level. Catering services is also one of our service offerings, wherein we have a central kitchen and through which we manage corporate cafeterias and so on and so forth. So today through this range of services, we cater to almost all the major industries, whether it is pharma, manufacturing, manufacturing the entire range, airports, railway stations, metro infrastructure, metro rail, public administration, retail, BFSI and these are the segments. So name the industry and we are present with our services there. It could be either a stand-alone service or it could be a bundling of multiple services. It is very important for all of you to know the diverse nature of our customers. The diverse nature of our services. These 2 are exceptionally well thought out and also a great risk mitigation because the customer base is very diverse. So we get -- we are not subjected to only IT or a mall or a retail. It is entirely spread out. I can probably say that Krystal's brand value is backed by the most valuable asset, which is our 41,000-plus on-site people. They are actually our brand ambassadors and over 369 customers, we have today a pan-India footprint in a true essence with 30 branches. And we service more than 2,487 locations all across the country. I would also want to bring to your notice a very unique competency that we have. We've been extremely good in rolling out large projects, whether they are stand-alone or multi-locational. So a couple of -- we have our customers, which are spread out all across the single state and we manage their, for example, district hospitals for Tamil Nadu, we manage all 98 districts, we manage more than 120 hospitals. So these are all large trade services, large trade geographies where we are now very competent to offer our services. Also, going forward, the year gone by has been very, very eventful. We have crossed several key milestones and many initiatives have come to fruition. One of the most important milestone is our IPO listing process. Actually, the milestone started from filing our DRHP, then RHP and then going to listing and having a successful IPO, which was subscribed over 13 times. The stock with -- the Krystal through this listing, we raised INR 300 crores, about INR 125 was OFS and 175 was our fresh issue. Our object is also very simple of the utilization of this INR 175 crores because our business also has a very simplicity about it, there is nothing complex. So it is a business which is very easy to understand. And also, INR 175 crores also, we had the objects, which were very, very clear, some small repayment of borrowings, funding towards working capital requirement, CapEx and towards new machinery and general corporate purposes. So it is heartening to say that we have received overwhelming support from our investors also, and of course, analysts which play a very important role in this entire process. And we are proud to be all these prestigious stock exchanges of BSE and NSE. These platforms will give us more exposure to the financial market and set the stage for future growth. In terms of business development, we have -- our -- it's a cyclical business. Business development activity goes on every day, month-on-month, year-on-year. So whatever we have been working on say, maybe in the last 3 years, 4 years, 5 years, continues with us or new things come up from new business development initiatives. Our revenue split is also very good with 70-30, 70 with government and 30 with corporate. So even this year, we have achieved 100% renewals. We have in the corporate side almost 17% of our customers in -- who give us 80% of our revenue. They are all with us since the last 15 years, 18 years like HDFC Bank, Phoenix Mills, Mumbai Airport, Hinduja Hospital, DMart and they have renewed even this year. And all those renewals are there for you to view on the sites. Some of our recent contracts were Rainbow schools, Indian Oil, SK Hospitals and 3 to 4 very critical ones were the Jipmer Hospital that we acquired in Pondicherry. Also the -- in our foray into temple tourism, the Mahakal Temple services that we got. And we've already made our inroads into the Ayodhya through our First Orchid Hotel, we are providing security services there. So our focus on business development is very clear. We are very aggressive in our business development. The idea this year and going forward also is to get good quality business where we can better our margin profiles. We have excellent in-house team in terms of training, service delivery, recruitment, all this is going to be very useful to bring in efficiency in our services because we believe firmly in a services company, we are going to be efficient in delivering services. We are going to add to our margins and our revenues. The ultimate aim is to give value to build value to our valuable stakeholders. And we are very vigilant in those terms, and we are always very conscious in all the strategies that we make on business acquisition, it is the prime most thing on our mind is how we can do better and better in terms of whether it is our top line or EBITDA or our PAT margins. And at the end of the day [indiscernible]. So this I'm just nearing to summarize my -- this opening speech. Overall, our aim is to be a partner of choice in the integrated facility management or staffing and payroll management or security or catering in the domain. We want to be good partners. We want to be a partner. We want to forge partnerships with our customers, where customers are confident that we will make lives convenient for them, and now that we've gone to the market, it's the prime most thing, as I told you, is to ensure that our stakeholders are all -- their interest at all times are kept in focus, and we will work towards adding value to them. With this, now I would like to hand over to Mr. Barun Dey, our CFO, and he will just quickly take you through our financials.

Good afternoon, everyone. Now first, I will narrate our fourth quarter Q4 financial year '24 performance. We reported INR 292.2 crores in revenue during quarter 4 financial year '24 with 52% year-on-year rise. The growth was primarily driven by several new client additions. Our EBITDA, excluding the other income for the quarter stands at INR 18.8 crores, while EBITDA margin is 6.4% higher by 149 bps. A change in the mix of contracts undertaking this quarter helped to improve the margin. Our PAT during the quarter is INR 15.7 crores as against INR 9.2 crores in the fourth quarter financial year '23. PAT margin stood at 5.4%. EPS for the quarter is INR 13.58. Coming to the full year financial year '24 numbers, our revenue for this fiscal year crossed INR 1000 crores mark for the first time, coming in INR 1,026.8 crores in revenue during financial year '24 at 45.1% year-on-year rise. The growth was driven by addition of new clients as well as more sites across India. Our EBITDA excluding other income for the year stands at INR 68.7 crores, while EBITDA margin is 6.7%, a marginal decline of 35 bps. Higher raw material expenses incurred for 2 projects has a bearing on the margin. We are making strategic initiatives to improve operational efficiency such as investments in technology, robotics to curtail cost. Our PAT during this year is INR 49 crores as against INR 33.8 crores in financial year '23. PAT margin stood at 4.8%. EPS for this period is INR 42.3. The Board has recommended a dividend of INR 1.50 per equity share, that is 15% of the face value of INR 10 each for the financial year '24 subject to shareholders approval. This is all from my side. We can now open the floor for questions.

[Operator Instructions] the first question is from the line of Shriram who is a an Investor.

I just have one question. What is the proportion of nongovernment revenue for your IFM and staffing segment?

Our revenue split, as I told, is almost 70-30, and 70 has been government and 30 has been corporate. So if you say that our nongovernment will be 30% of INR 1,026 crores, which is around INR 307.8 crores. And again, I think you had another question that what is the profile in staffing services, right, and payroll services? Yes. So almost -- in this almost 30% would come from staffing and payrolls. With that profile, if you see earlier also while we went to the market, the profile of the configuration of staffing services, IFMS, security and catering has not changed a bit -- changed more. Only in December, while we disclosed that result, we added a little more business on our staffing side because one of our customers, which is MP Electrical Board gave us more business. So it was organic growth. So you may say, for in all purposes, between 30% to 32% would be from the corporate side, specifically into the staffing and payroll management.

So for both staffing and IFM, the corporate would be 30% and the government would be 70%, right?

Yes. overall.

Overall. But if I were to break it up, what would be for each of those segments? Overall...

Yes. So broadly, it will fall into that government category and corporate category.

Okay. And sir, in the initial opening remarks, you mentioned that you started out as a security service operator and then migrated to IFM business. So what was the thought process behind the shift of business from security to IFM? I mean just trying to understand like is it more lucrative than security or what was the trajectory?

No. Actually, Mr. Shriram, this is a very good question, which nobody has asked me now. But because the thought process was the fundamental for us to reach here. And I will explain the thought process, what happened in the year 2000 also in a flashback, if you go security service, we just transitioning from a watchman era to a security service. There were watchmen earlier. And then there were more uniform security, much more training happened, grooming happened, there was a little more structure which happened in the security services training. And while we were guarding and providing security services to predominantly infra sites, when these infrastructures actually came in and became buildings and commercial complex and offices, there was a big requirement to maintain them. And how to maintain that facility in a -- again, a structured way with some kind of SOP, some kind of process, some kind of monitoring mechanism was a big question mark. Because our USP through the security services was that we were able to source people. We were able to groom them in a way. We were supposed to train them in a way. For us, it was only a different kind of training because sourcing, we were already good at. So it was a different type of soft skills that we had to give them, and it was a different kind of uniform. We had to get them through a different kind of training. And we also evolved through this entire process. It is easy the way that I'm explaining. But for us also, it was an evolution. But the thought process that if we were able to source people right at the right time in the right quantity from the right sector, we are able to train them very fast, properly and deploy them and maintain the absenteeism level, then it was just a soft skill that we had to train them in a different way. And when all these infrastructure was coming up and developing Pan-India, these services were going to be very, very essential because at the end of the day, these were very valuable assets of the developers or the owners. So in that way, we -- that was the main thought process that it gave us scalability. It added a service to our bouquet at that time, which was a single service. And I think that decision at that time has brought us here to the listing and even this call. So I'm happy that you asked me this question.

Yes. But going further, do you think security services can become a large proportion of your business? I'm not asking now maybe 5 years down the line, do you see that or IFM would continue to be the mainstay for the core service for your company?

We have independent focus on all our sectors. But even if you see the F&S study report, and they have also said that security services has grown by about 7%, 7.5% from FY '21 to '23. And it is supposed to grow by more than 12% to 13% from FY '23 to '28. So security services, the market is also huge and it is a growing market. I'm very happy that as an organization, we have an independent focus. We have an independent team handling the security services. So coming back to your question in all these 4 services, our focus is going to remain constant. It is going to be independent and it has independent strategies so that we continue to grow as the sector grows. The demand is going to just grow.

The next question is from the line of Milan Wadkar from Nuvama.

Congratulations on good set of numbers. My question is pertaining to the existing projects and the existing relationship we have. So are these all the existing projects profitable, earning decent margin? Or there are some loss-making projects where we need to exit them and try to add up the new high-margin projects?

Being on the call. This is Sanjay here, and thanks for giving me the opportunity to answer you also. All the projects, you see, whether it is government or corporate, we have a certain process where we go and acquire business. And there are 3, 4 departments, which are involved in it. And I just want to touch up all the process of business acquisition, so that I am able to answer your question in a very nice way. And as I was saying, it is a continuous process. So every -- whether it is corporate or government business, there is a basic evaluation happens even before the proposal is being sent even at the time of a survey. And when we send this proposal, there is a lot of working that happens before. There is the service delivery team, which comes into picture. Whether -- what is the geography of the site where we have to deploy. What are the dynamics in that state that geography, the service delivery team has to be very, very sure in terms of their costing, then the supply chain logistics department comes into play. So whether there are machines, materials and what are the dynamics, finance accounts, the taxation angles, so on and so forth and at the end of the day, the training and recruitment. So it is a consolidated effort. It is not a decision of one single person to go ahead and acquire a business in any pressure. So therefore, these are all thought out business and therefore, fortunately, while I'm doing this call, we have no business here, which is our -- which is a loss-making business, which we have to do away with, and we have to replace with another. So it is very clear that our acquisition is very, very thought out and strategic, so therefore, we avoid landing in a situation which you just explained.

Sure, sir. So I'll just add a question to this on the same line that in case we are looking to improve our margins, so what is the strategy we would like to go ahead which we have not done in the past?

So good question. I am happy to answer this also. And over the period of time, we realize the importance of enhancing margin and as a prudent business house and more so now that we've listed, margins are of paramount importance. There are 2 elements to increase service efficiency. The processes that we have here is to deliver a service, how to make it more and more efficient so that our service delivery costs are rationalized or are lesser. But the very important thing is if we are able to deploy trained people from the day 1 at this side, 2 to 3 things happen here. One is the trained personnel is able to understand the training methodology, and he is able to implement it very, very fast at the customer side wherein you get a result very fast. And second thing is the profiling when we are recruiting. When we are recruiting, say 100 people, if we are able to profile them very nicely in the services that they are going to be deployed. For example, if you are in your office today also sitting somebody will get you tea coffee, somebody will be guarding, somebody will be cleaning. So if those profile don't match then there is a lot of clash while delivering service, and mostly, it adds to your cost of service delivery. So we are taking these 3 precautions that we are sourcing the right people. We are ensuring that they are well trained. And also, we are trying to ensure efficiencies in our processes so that in effective our service delivery margins are kept under a particular threshold level and they don't grow. The fourth and the most important thing is our -- the attrition percentage. Our attrition percentage is the best in the industry. The industry percentage is about 60, when we went to market, we were about 30.36. And as of last week, it is 17%. It says volumes hat we -- our people who we trained they don't leave us and go, so therefore our service just gets better and better. And over the period of time, you will definitely see its reflection in reduced service delivery costs and enhanced margins.

Sure, sir. So one last question, if I may add on to it. There is a -- I see your business into 2 structures. One is the organized market, one is the unorganized market. So on the unorganized segment, I believe there will be a lot of bunch of people who would be trying to service this huge bouquet of opportunity available. So is there a possibility which is happening now that these unorganized bunch of people, and there will be many try to undercut your segment, which is where there is a limited players in the organized segment.

Again, all 3 questions make a lot of sense. If I was answering this question in maybe 2010, then yes, that would have been perceived as a threat. But today, as we have grown and now and this decision, we had taken in 2010 to acquire business most in the -- with corporates and not to do business with any customers who shy away from compliance and that decision has really made a lot of difference today even in government, so it doesn't matter because there is pre-communication and so many criteria. But even in corporate, if you see our business acquisition is with our prospects or clients for whom paramount importance is compliance, whether it is all sort of compliance, they would like to deal with companies which are fully compliant. And also, if you are considering the overall governance in our country, which has become very, very stringent, the corporate and the kind of sector that we are doing business with, they shy with the companies which are not organized because there are certain risks that come along with them. So it is actually a very good scenario for us that the segment, the market that is our target audience need well governed and compliance partners or vendors. That is also one of the reason that we went ahead and got ourselves listed, because now with the activity that is coming up in the manufacturing, the Make in India and all that, there are so many foreign companies doing JVs, coming here, they would like to deal with the company which is listed which gives them a huge amount of comfort level in terms of compliance. And we are very, very bullish that our listing also will add tremendous value to the acquisition of business that we are doing on the corporate side. So not at all, I mean we are not going to be worried on that particular issue.

The next question is from the line of Narendra from RoboCapital.

Congratulations on a good listing and a strong set of numbers this quarter. So my first question is that I heard your interview and you were mentioning that you are planning to grow 30% for the next 2 to 3 years, right? So what would be the levers to that growth? And what would be the risk towards that of not achieving that 30% growth rate?

It's a good question, and the follow-up question is also very important. There are -- it is basically India growth story, which is there. I firmly believe that we are in the right country, in the right sector and in the right time. All 3 are in favor of us because so many things are happening in our country, which is going to fuel our growth. One is the Make in India, where SEZs are coming, manufacturing units are getting set up. Now we have the Make in India actually work wonderfully, there is a huge supply chain mechanism, which is your railways, airports and roadways. You see kilometers and kilometers of roads which are built, there is an infrastructure which is going to come there, which is going to need companies like us to manage facilities. The fast trains like Vande Bharat, the other multiple, they are demanding additional railway stations, if existing railway stations then additional platforms, we already are qualified, we are managing the Chennai railway station for now many years, now more than 8 years. So our qualification is there. The second thing is revamping and redevelopment of current railway station wherein the ministry wants to give a railway passenger the same experience as an economic airline passenger. So when that is their focus and it is there, there is a budget which is allocated by this. And thanks to our prequalification, that is a sector where we are expecting our growth. Airports also, there are A category, B category airports, air terminals are getting developed, revamped. We have already qualified there, we've been working with airports for almost last 12 to 13 years. Even currently, we are offering our services. So these 3 areas where the growth is going to come. The other couple of areas which are also important, the manufacturing units, which are coming, our growth is -- we are expecting growth coming from there. The supply chain in logistics wherein warehousing, warehouse management and other supply chain requirements are going to need staffing, payroll management and hard and soft services both. After that, the healthcare and the education which we are there for many years, additional hospitals, which are coming, the government's initiative to outsource services in schools and hospitals, private schools, private hospitals, you have new malls coming in, new infrastructure happening, the metro railway networks, which is happening. Also, the solid waste, we've always been there in the solid waste management as well. So the waste is a very important issue that is nationally there. So we are also working with various municipal corporations to leverage our competency there and forging ahead in this waste management also. So multiple services, Narendra that we are going to lead and there are multiple avenues where we are going to acquire business. So as per the F&S study also while we went and filed our RHP, we had the largest service bouquet offering. So if you say the number of services that we can push standalone or integrate and the number of sectors that we are present in with the experience that we have and the number of sectors that is going to offer opportunity. I'm not being very aggressive, but there's a huge opportunity Narendra for companies like us, for a decade and more. And you have asked about the risk, right, I'll answer that also. The only risk which would prevent getting into and taking all these opportunities, your timely recruitment of people and timely training of people and deployment because all our services are offered through people, man, machine and materials. So machine and material is definitely you can get them at the right time at the right place. But what about the people. So we have 2 very brilliant people heading these 2 verticals. We also having independent focus on training and recruitment. We have 2 decorated Army veterans who head the training and recruitment. So we are very, very cautious, mindful how we recruit people, how we do the right profiling and with what speed, in what geography we recruit. And also, we have a very, very good plan on our training. We have a Krystal Integrated Training Academy which is there one at Vashi. We are going to replicate that in the geographies where we are aspiring to have business. So recruiting in right time, training properly, grooming properly and deploying with a lot of speed. We are already taking care of that risk in these 3 things. So I think holistically, I have answered your question.

Yes, yes, great to know all that stuff. And regarding the margins, I understand in the long run that it is only going to improve, but as you said that you are trying to enter into new segments like waste management and all that, so would that be some kind of short-term pressure on the margins? Or are we comfortable at the 7.5%, 8% of margins?

So we will continue to grow our margins also in a similar zone. I don't see any particular domain or business adding pressures on our margins because on the sides that I explained on the call, we are trying to very, very methodically ramp up our service delivery capabilities. So in fact, it will be a blessing itself like we are able to -- we are expecting to acquire business which have a good margin profile. And on this side, we are having our methodology and strategy to develop a better, more efficient, effective service delivery model. So net-net, if you see, I am very optimistic while talking to you right now that we will continue to maintain our margin profile similarly as we grow.

Okay. Great. Just one last question, accounting side. So why is our tax rate so fluctuating? Is there something going on? Or I just want to understand what's happening there?

This is -- the tax rate, what you are referring is due to our [ 80JJ ] benefits. So that is the reason why you see our tax components are fluctuating year-on-year.

So that benefit will continue ahead also right?

Yes, yes. 100%. Absolutely, absolutely.

The next question is from the line of Chirag Jain from Yogya Capital.

Sir, I have one question on the training center that we have. So we have only one training center pan-India. So don't you think it's on the lower side given the presence you have pan-India side, so how do you think on that?

So I was expecting somebody to ask me this question because this training is very, very close to my heart, and I will just take this opportunity to tell you what we did. And like we have to -- we have like industrial corridor, new industrial corridor focus especially in the Telangana and the Tamil Nadu region, in Tukkuguda also, we have our industrial office which is there. And we knew that if we want to have a good training mechanism nationally that we need to have, like I just explained on the previous call, good training facilities in the geographies that we are aspiring. So very, very happy to know happy to tell you that last month, we signed up an agreement with ITI at Tukkuguda MIDC Industrial Technical Institute. And it is a brilliant partnership that we have done there, wherein we will train the ITI students in batches at our Tukkuguda office in grooming, soft skills, interview skills and so on and so forth, CPR, firefighting and all that. So we are getting people, students to train also, and we are getting facilities to train also. So solves a lot of -- it solves our national issue of training. We are going to replicate this model wherein we get students to train also, we make them employable, we give them choice to work with us or anywhere else. And at the same time, with the colleges, schools and all those things, which have grounds and classrooms, we also have their tie-up wherein we train their students and we get their facilities to use as a training facility. So that solves this training. That is -- it doesn't solve, that is our strategy of trading on a national basis. Because yes, only one academy actually will never ever suffice the way that we are growing. And therefore, this is our national plan. So whether it is upon North, whether down South, now we already have these tie-ups done. Up North is going to be similar. On the West also, we are doing it and on the East side also, but the model is very, very similar, Chirag bhai.

Sir, I was trying to get a crux of it. So why ITI student would be joining us for IFS segment or the staffing segment. Would we be earning lower wages compared to what he would potentially earn after completing the ITI course that we are providing with?

Yes. So again, good questions are coming. I'm happy because we are into a -- we are a IFMS company, integrated facility management services. So janitorial or guard or pantry services is just a part of it, but as we acquire a large quantum of customers for take an example, manufacturing units, suppose we acquired a manufacturing unit. The requirement there from an IFMS company is very, very different. It is DG segment and it is HVAC maintenance, it is mechanical, electrical, plumbing. These are exactly the traits that are not in ITI. And this is exactly where the services that we are offering. Again, that is a manufacturing unit, but suppose -- I mean wherever you and me are sitting in the office today, there could be a centralized AC, there could be electrical maintenance happening, there could be a DG sale, any which way you require a trained people, whether it is an electrician or a plumber or any other technician. So because we are IFMS, we have other -- we get benefit from the kind of services that we offer, which is really not restricted only to a housekeeping or somebody who shampoos a carpet or a pest control. Our range of service is so large that we can leverage it when we go and acquire large quantum of business. And there we are going to need people who have passed and got certified from ITI only.

So we are trying to be Urban Clap type of -- urban city type of business models where we provide similar type of service to corporates?

No, no. We are not at all like urban clap or urban city. Our contracts are -- we are integrated facility management services, wherein these are a part of our overall service. For example, let me explain you, see you have a 5,000 square feet office, you will need machine, you will need materials, you will need somebody to clean it, you will need somebody to [ represent ]. So it is a consolidated service. That is the beauty of IFMS. So it is integrated facility management service.

So sir, I was trying to point out that ITI Center student passes out, joins us as my engineers, okay? So he would be fixing machines or plumbing something or that?

Yes, he would be deployed with us for a complete year of the contract with the customer.

Yes, so that's what urban company does on an individual contract basis. So you are signing upon a yearly basis. So that's what I was trying to point out on. So second question was on the segmental EBITDA margins. So could you give a breakup of that? So which segment earns how much margins?

At this moment, we will not be able to share that kind of data.

Okay. Sir, the next question was on the deposit. Do we need to keep some bank guarantee with the government customer that we tie up with?

Yes, the government tender conditions has a bank guarantee for your deposits.

So how much that amount would be?

It depends between the tender to tender, anywhere between 2% to 5% of the tender value.

[Operator Instructions] the next question is from the line of Rajat Vohra from Nuvama.

So sir, I basically had a couple of questions. One is, I have seen your presentation, and I could understand that your mix towards staffing has increased over the last 4 or 5 financial years and your IFMS overall revenues contribution is coming down, but the thing is it is not reflecting on the operating margins for the last 3 financial years, your operating margin has been in the range of around 6.7% to 6.9%. So can you explain -- I mean, if you are venturing more or your revenues are increasing from the staffing in a significant way, shouldn't the operating margins be increasing somewhere we are, I mean, either we are cutting down all the margins to get more contracts? Is it what I should derive it from this?

No. But I think your -- I understand your point. So yes, payroll and staffing business has increased and our integrated facility management was -- it has increased because we got organic growth happening there. Our margin profile, as I say, it will continue to grow in the similar zone. At times, you will see our margin taking a slight dip like maybe of some basis points, because when we are -- we also have a 70% government piece that we have, our revenue comes 70% government, 30% corporate. There are times to have to build our prequalification criteria. We may need to acquire a certain business which actually gives us a huge leverage in the next financial year or year after that. And there, it is a very conscious management and strategic decisions that we may go ahead and acquire it at a bit lesser margin. But over the period of time, our prequalifications built extremely well. So in these situations only it could take a little bit dip, but otherwise our zone in the range of margin profile is going to continue in the same way.

Understood. Another question is on the receivable days. With regards to your government projects, what are the receivable days over there as well as receivables for corporates?

Again, receivable days, generally also if you have both government and corporate, they are about 70 to 75 days.

Okay. And when it comes to your peers, even though it is not pure apples-to-apples comparison, the receivable days on the listed, other names are quite less and has come down around 30 to 40 days. Do you see your receivable days coming down to that level over the next 2 to 3 years?

Our receivable days will definitely improve over the period of time. And because that is going to be the entire endeavor. We have our credit control, which is very, very stringent. So we will only better the receivable days over the period of time.

The next question is from the line of Anant Mundra from Mytemple Capital.

Sir, just wanted to understand that given that majority of our business is coming from government contracts, which is generally an L1 kind of a business. So just wanted to understand like what over here gives us an edge over the others because what I understand is tomorrow anyone can come and a bid lower than us and will win the contract. So just wanted to understand what gives us an edge over the others in the government contract segment?

Yes. That's a good question. See, we are very focused and -- we are very focused on what contracts that we -- what tenders we bid. So if you see on a daily basis, there are thousands of tenders which are there available online. And so it doesn't mean that you go ahead and bid as many tenders. We have a dedicated tender divisions which analyzes every tender, there is a research which happens. There are very focused segments that we will bid for tender, which are predominantly healthcare, education and maybe sanitization. And now if you zoom into a certain domain, then there is a research in terms of budgetary allocations by the central or state government, et cetera. It is not as simple as it seems. It is a very complex process. And once it is -- once there is a tender bidding committee, which is there. So nobody can just go ahead and submit a bid. And also, it is very important, what is the prequalifications which are required, whether it is a CRISIL rating, which is mandatory certain amount of turnover, certain years of existence, certain type of contracts. So the tenders are -- the conditions are also very, very stringent. Once the tender committee, bidding committee has already analyzed and researched that only then we would take the step ahead and go and submit that bid. So it is a very complex process. And therefore, we are very, very mindful and conscious as to what tenders that we are bidding. And yes, this is all online now, and we have to submit, upload all documents. The evaluation happens online, and the results are disclosed online. And yes it is L1 criteria. And over the period of time, we are into this business for the last 24 years. So it is also your competency, experience and so on and so forth, which in this scenario also enables you to participate and become general.

Okay. Sir, just a follow-up. Generally, how long are these contracts for and how does the renewal happen? Like is there a rebidding that is done or the existing contractor gets the right to renew it? How does it work?

Very logical question. Anant, this is typically 3 plus 1 year contract, 3 years plus 1 year renewable. And after the renewal period then there is a rebidding for that.

Okay. So absolutely, fresh rebidding?

Yes. Yes.

So even if you match the lowest offer, there's no like right of first offer or something that...

No, no. It has to go through the entire process of rebidding.

Okay. And typically, sir, what is our renewal rate in the government segment?

Almost 70%, 60% -- 65% to 70% because we've already been there, we already worked there, we already know the entire set of activities. We've studied the entire thing. So the chances that we will bid it again in a rebid is very, very superior.

The next question is from the line of Nikhil Shetty from Nuvama Wealth.

So my question is how much of our contract is up for renewal this year in terms of revenue and what kind of new contract visibility you have for FY '25 and if any for FY '26?

Yes. We -- as I said, we are going to continue our growth by 25% to 30% year after year. So in that context, if you see the 70% contribution, so that government side will keep on having that contribution. In terms of which are exactly -- because this is a cyclical process, which exactly are contracts which are getting over because they would not get over exactly at the financial year end, they are going to be throughout the year, there are going to be some getting over, some rebidding and that process is going to go on. But overall, let me give you the confidence that even the corporate and the government side. Totally, we will continue our growth at about 25% to 30%.

And what kind of profitability you're seeing during this 2, 3 years?

We will continue to maintain the same zone. The endeavor is to better it definitely. And next year, we would -- we are making all our strategies, our plan to increase our service efficiency, our SEZ plan, the manufacturing units. Our foray into acquiring new good businesses. I'm sure it will lead to enhancing the marginal increase. But to keep it simple, we will continue all the growth points in the similar zone and the endeavor is to make it better and better only.

Okay, sir. And sir secondly, like we have witnessed a sharp increase in the staffing revenue compared to the '23. So can you give us a sense what are the factors behind this growth? And what kind of revenue growth you foresee from this particular segment because we have seen almost 30, 30-odd client addition also took place during the last 1 year in this segment. So if you can give us some sense?

Nikhil, good question. We had acquired a good staffing business of MP Electricity Board. And over the period of time, they added more units, which they wanted staffing and payroll. So under that contract only they -- our business grew organically there and that quantum is the reflection in the kind of numbers of our staffing payroll increase. So it is by -- it is organic growth of an existing customer which has increased our staffing and payroll management proportion in the overall business.

Okay, sir. And I mean, just to get a sense, we generate roughly 70% of our revenue from 2 states, Maharashtra and Tamil Nadu. And in Tamil Nadu, I think DME is the largest, if I'm not wrong. So what are our plans to reduce the dependence on these 2 states going forward?

Good question. And in fact, DME also because it comes in the healthcare sector, you see a consolidation. But actually, DME is -- similar to DME also, there are contracts which are coming in the other states. So generally, what type of the governments [indiscernible] successful contracts being serviced in one state, they try to replicate. So anyway, we started that activity 3 to 4 years back. And if you can say we have fairly spread our presence and footprint. So there is -- our first is Tamil Nadu, second is Maharashtra, third is MP, fourth is Delhi and then Haryana. So we have already present here. Now we are also very actively moving in the northern states. So Delhi, we will see good progress coming in on the northern side in the Delhi government. Also, MP, we will have -- we will make progress. In Gujarat government, we have here also, in Gujarat we are very hopeful that we will expand our government businesses in Gujarat. So to answer your questions, we are already since last 5 years, having our business plan to geographically spread and not being concentrated only in 2 states. I think going forward in the next 2, 3 years, you will witness that this strategy has actually transformed into us being even government-wise pan-India [indiscernible] company.

Yes. And sir, lastly, on -- if you can help us to understand the project selection criteria because it is -- I believe it is very critical for your business?

What selection?

Project selection criteria.

Yes, so this is, I think, the third question, but all questions are good. Projects like, we don't go ahead and acquire business randomly, whether it is corporate or government, we have a business acquisition process. In the government business because the ticket size is larger, the process is robust there. We have an independent tender division led by independent people who are specialized in this. There is research on budgetary allocations during various budgets in terms of what sectors in what cities, what states. We also are very mindful of operating in government tender into 3 to 4 domains which is education, healthcare, sanitization and public infra, which impact directly the citizens and have fully funded. They have fully budgeted, fully funded projects. And also, we ensure that we go ahead and build with projects where the criteria are pretty stringent and these are projects which are not very easy for anybody to track because we have mastered this working in this process. They also land up giving us a better margin profile. Also come to the corporate, there is a committee on -- even before sending a proposal to a corporate, every proposal we -- let me take a step back and say our corporate business acquisition is divided into 3 parts. One is retail, one is key accounts and one is mega accounts. Anything which is INR 10 lakh and less billing per month is a retail, every day from business comes. INR 10 lakhs to INR 50 lakhs account per month billing I'm talking about, and INR 50 lakhs and above is major accounts per 1 billing. So we have 3 distinct teams which cater to these market segments. We ensure that we don't lose, we are focused on even corporate sales acquisition of all times because the customer, a prospective client who give you INR 1 crore of business per month will need a different kind of approach, different treatment, than a prospective customer is going to give you INR 10 lakh per month. So we are mindful about this process and then, therefore, you see going forward in the next 3 to 5 years, all this strategy and meticulous planning is going to result in giving more numbers in terms of revenue, in terms of our margins and margin profile will be better. So at the end of the day, our stakeholders are tremendously going to get -- tremendously going to draw value from what planning is happening today in our office in terms of business acquisition.

[Operator Instructions] The next question is from the line of Sanika from Sapphire Capital.

Just one question. So like we've been seeing a consistent growth in your topline on a sequential basis. So can we expect this momentum to continue in quarter 1 as well?

Yes. Absolutely, Sanika, our business, our company will -- we endeavor to keep the momentum, and we will keep on going the way that we have, and there is so much to do there in the market. So we are absolutely optimistic that we will continue to grow similarly.

So what kind of number are we looking at in quarter 1 on a sequential basis?

We cannot specifically share the number, but we are saying that we will grow by 25% to 30% every year. So we are into a cyclical business. So how that business translate into Q1, Q2, Q3, Q4, the quarter results will tell us.

The next question is from the line of Raaj from Arjav Partners.

Yes. All my questions have been answered. Thank you.

Thank you. Ladies and gentlemen, that was the last question for today. I now hand the conference over to Mr. Sanjay Dighe, Chief Executive Officer and Whole-time Director of Krystal Integrated Services Limited for closing comments.

Thank you so much for moderating this conference. I thank the entire team -- I thank everybody who was on this call and who made all the efforts to answer the questions and very good quality questions have coming from, most of it, but Nuvama also had very questions, which are very logical and I'm grateful with the Nuvama team for coming to the floor and asking me these questions. So I thank the entire -- all the people, analysts, all this the team here who asked me questions. At the same time, my entire team at Krystal for their untiring efforts, hard work, and dedication, which drive the company forward to our various market conditions. I also take this opportunity to thank my 41,000 people who are deployed at all my customer sites. It is because of them that we are able to reach here and in fact, do this call. So they may not be listing but I take it as my duty and responsibility to thank each and every 40,000 people and their families who have trusted and update to work for Krystal, hats off to them on a pan-India basis. I also thank all of you in participating on this call, and Adfactors for being here and guiding us. Thank you so much, everybody.

Thank you. On behalf of Krystal Integrated Services Limited, that concludes this conference. Thank you for joining us, and you may now disconnect your lines.