Ksolves India Limited ($KSOLVES)

Ladies and gentlemen, good day, and welcome to the Ksolves India Limited Q4 FY '26 Earnings Conference Call. [Operator Instructions] I now hand the conference over to Mr. Pratik Jagtap from E&Y Investor Relations. Thank you, and over to you, sir.

Thank you, Seema. Welcome, everyone, and thanks for joining Ksolves India Limited Q4 FY '26 Earnings Call. The results have been mailed to you along with the investor presentation, and it is also available at www.ksolves.com. In case anyone does not have the copy of investor presentation, please do write to us, and we will be happy to share it with you. Joining us today from the management team is: Ratan Srivastava, Chairman and Managing Director; Umang Soni, Chief Financial Officer; Manish Gurnani, Chief Technology Officer; Darpan Audichya, Head, Business Transformation and Consulting; Mayank Shukla, Technical Project Manager, AI. We will begin with management's remarks covering the business update and quarterly performance highlights and then move on to the Q&A session. Before we start, I would like to remind you that anything that is said on this call that reflects any outlook for the future or which can be construed as a forward-looking statement must be viewed in conjunction with the risks and uncertainties that we face. These risks and uncertainties are included, but not limited to what we have mentioned in the prospectus filed with SEBI and subsequent annual report that you can find it -- on our website. Having said that, I will now hand over the call to Ratan, sir. Over to you, sir.

Thank you, Pratik. Welcome, and thank you, everyone, for joining our Q4 financial year '26 earnings call. FY '26 marked an important milestone as we crossed INR 150 crores in annual revenues, reflecting the strengthening scale and resilience of our business. We closed the year with revenue of INR 162.7 crores. It is up 18.5% (sic) [ 18.4% ] year-on-year with an EBITDA of INR 48.3 crores at a margin of 29.7% and PAT of INR 34.3 crores. This was alongside continued investment in our capabilities, talent and long-term positioning. In terms of quarterly performance, Q4 was a strong quarter with revenue of INR 43.03 crores, growing 29.1% year-on-year and 1.7% sequentially. In fact, what gives us confidence is that Q4 also saw conversion of some of our strategic wins across large enterprise clients and marquee global brands, including: First, a full SAP to Odoo migration for a listed Indian infrastructure company in power transmission and green energy. Displacing SAP at a listed client signals our Odoo practice is now enterprise grade. Second, a specialist data science talent deployed with a New York-based risk and financial crime advisory firm working on financial crime detection. Third, an ERP implementation for a member firm of a top 6 global accounting network in East Africa. These wins reinforce our positioning, delivery quality and brand credibility even in an uncertain environment. Our growth continues to be driven by a diversified services mix across ERP, cloud, data, AI, Salesforce and enterprise transformation, with 82% of revenue being recurring, providing strong visibility and resilience. FY '26 marked a structural shift in how Ksolves operate. We have repositioned ourselves as an AI-first organization, where AI is not an overlay, but embedded into delivery, execution and client engagement. What the shift reflects is a genuine capability we have built to enable client through AI, bringing frameworks, agentic thinking and technical depth that translate into real business outcome for them. At Ksolves, our conviction is simple. Every task, whether it is coding, testing, operations or communication is executed by AI agents. Our engineers review, enhance and raise the bar, not execute. We have stabilized ourselves as a 360-degree AI transformation partner. Whether a client needs software build or operation transform, we bring agents -- AI agents to both, agent that code, agent that test, agent that deploy, agent that automate workflows, monitor communication and fly risk. We know that future is agentic. At Ksolves, that future is already our operating model. We are an AI transformation partner, and that is -- distinction shapes everything about how we engage, deliver and grow. Enterprise AI has moved from experimentation to execution globally. Ksolves is already on the right side of the shift, not by responding to it, but by enabling it alongside our clients. Now coming to guidance for FY '26. (sic) [ FY '27 ] We expect annual revenue growth to be around 18% to 20% and EBITDA margin to be in the range of 25% to 30% Demand remains intact and our execution momentum is strong. We remain confident of delivering sustainable growth while continuing to invest for scale. Overall, we believe the business has delivered strong growth in a challenging environment and the building blocks created in FY '26 position us well for the next phase of growth. Thank you. With this, I now hand over the floor to Umang to share financial highlights. Thank you.

Thank you. Thank you, Ratan. Just one correction, the guidance was for FY '27. Okay. So -- and good evening, everyone, and thank you for joining our Q4 FY '26 earnings call. Let me quickly walk you through the financial performance for Q4 and full year of financial year '26. So as Ratan mentioned, FY '26 has been a year of strong growth and combined with deliberate investment for us. Our revenue stood at INR 162.7 crores, up by 18.4% year-on-year. Our EBITDA was at INR 48.3 crores and EBITDA margin stood at 29.7% in FY '26 versus 34.8% in FY '25. This was a conscious and planned investment phase as we communicated in earlier calls. This was primarily driven by ESOP-related cost, investment in senior leadership and compensation costs, higher travel and event spend to strengthen our global presence, and onetime impact for the new labor regulations amounting to INR 1.1 crores. Importantly, these are strategic and largely nonrecurring investments. We exited FY '26 at the upper end of the range guided, that is, 29.7% EBITDA margin, which ensures that we reinforce the stability. Profit after tax for FY '26 stood at INR 34.3 crores in line with FY '25 despite the investments made in capability build-out. PAT margin was at 21.1%. Our continued efforts have resulted into a strong 5-year revenue CAGR of 42% and a healthy 5-year net profit CAGR of 31%. We continue to deliver exceptional return ratios with ROCE at 152% and ROE at 137% for the financial year '25-'26. For Q4 FY '26, we reported a revenue of INR 43.03 crores, a growth of 1.7% sequentially and 29.1% year-on-year. The top line growth was driven by consistent execution across ongoing client and core business momentum remained healthy. Our EBITDA margin for the quarter stood at 29.3%. PAT for the quarter stood at INR 9.7 crores, translating into a PAT margin of 22.5%. Earnings per share for the quarter was INR 4.09 per share. We continue to generate strong cash flows and our balance sheet remains healthy with cash balance of INR 6.9 crores with a net debt-free status. From a client concentration standpoint, our top 5 and top 10 clients contributed 40% and 54% of our revenues, respectively, in FY '26. Overseas market contributed approximately 77% of our revenues, underscoring the increasing contribution of global markets. As highlighted earlier, IT services remains the core driver of our revenue and profitability. Product segment, which is a small contributor, continues to be developed in a disciplined manner. As we move into FY '27, our focus remains clear, deepening the relationship with our existing clients, increasing the share of fixed price and outcome-based engagements, leveraging our 360-degree AI transformation partner positioning, using the AI-led productivity to scale delivery, deepen client engagement and move from technology vendor to end-to-end reinvention partner, continued investment in talent capabilities and maintaining margin discipline with operating leverage. With this, I will now hand over the floor to operator to open this session for Q&A. Thank you, everyone.

[Operator Instructions] We'll take the first question from the line of [ Apurv ] from Whitestone Financial Advisors.

My question is, as we have mentioned that we use AI agents to code, [ test in ] operations, right? So how much efficiency do we see in our employee expense like going forward, maybe in the financial year FY '27? [Technical Difficulty]

Hello? Can you speak again, please?

Sure. Sir, my question is regarding that we are using AI agents to code, test in our operations, right? So then do we expect the efficiency in the employee expense going forward?

See, basically, we have not exactly measured, okay, that what will be the result. But what we are observing right now is that when we are using the agent, it is reducing the time and it is increasing the output, okay? And we are trying to create agents for every repetitive task. So at this moment, I cannot -- I do not have an exact answer for your question that how much it will affect the costing in terms of [indiscernible]

Sure, sir. And sir, can you please share some examples where we have used AI in our day-to-day operations?

Definitely. For example, today, we have even one person from the sales team. They have -- that person has created an agent on Claude. What he has done, he has created an agent, that agent is getting data from the Excel sheet. And then that agent is -- because that agent is tuned and then agent is deciding that which e-mail ID agent should select to send e-mail for cold e-mail, okay? So we have -- that salesperson has uploaded the Excel sheet and then agent is deciding that which agent -- sorry, which e-mail ID that agent should select to send as a cold e-mail. This is a small agent, okay? Apart from this, let me give you another example. For example, how many events are going to be organized in New York in next 3 months, okay? Now we have created an agent and that agent is searching every day at a specific time that how many new events are added all around the world. And that agent is sending us e-mail. So this is a small example that how we are trying to create agents for repetitive task.

Got it, sir. Sir, also that we have mentioned. Yes, sir.

Sorry, I can give you a very highly technical example, but that I don't think that it is the right time, okay? I think, yes I have given you answer.

Okay. Okay, sir. Sir, I have one more question. Sir that you have mentioned in our key wins that we have onboarded a specialist data scientist. So I didn't get it like, have we onboard that person as an employee or we have given that as an outsourced person to another company? If you can just throw some light on that, please.

Actually, we have onboarded not one. We have onboarded many one, okay, first thing. But not as an employee, we have given them our people to research on a specific topic, okay? So, that is not one person, okay?

Let me add to that. Let me add also to that [indiscernible] So this is for some clients who are very strictly regulated because they are into, you can say, financial, let's say, fraud detection, security, right, all of those areas. Okay? Which is an area where this team has been set up, and this has been doing good because it's a very, you can say, a niche and high revenue area.

And not only one, we have added multiple resources for that customer.

We take the next question from the line of [ Darshil Jhaveri ] from Crown Capital.

Firstly, congratulations on a great Q4, sir. Sir just wanted to our -- with regards to our margin, right, your -- so the trajectory actually what we've been seeing is that our revenue has been steadily growing, but our margins have been declined due to which our PAT has been near identical in the last 3 years, sir. So in terms of bottom line growth, how do we see it, sir?

Okay. Umang you can answer this. Yes, you can answer this.

So basically, if you see, we have made quite a few investments this year, which we already communicated and we have been communicated from the Q1 of FY '26, okay, because earlier there were no ESOPs, there were no events being attended. There was no any expenses done on branding. And we have also invested a few amounts in DFM as well. So all this -- in spite of all this, we have ended on the upper range of the guided margin, okay? So if you compare from last year Q4, this year Q4 has been quite significant. And we expect it to be in the same range going forward as well.

Okay. So basically, sir, I wanted to know that like even though the guidance is given of 25% to 30%, we should ideally have it on the higher base, right, because of AI also we get some efficiencies. I'm assuming that some marketing costs that we had done this year, it would be more of a onetime in nature? Or is it more recurring? Because I just wanted to understand because we've performed really well in a very difficult condition, but our margins have been eaten up. So is that like -- is it also because of a threat of AI coming in, we have to also do some price cutting? How do you see that, sir?

So it's not recurring, I would say. A few expenses would be there, but at not a great scale that we have done in FY '26. So there would be some benefits from the investments as well. On the AI side, we are seeing efficiency internally. And due to the current situation, global situation, there are a few delays you can say, but the conversions are going strong and demand is healthy.

Okay, okay. And sir, with regards to like when you are saying deals getting delayed, so like do we have like a rough order pipeline that we have? And like what kind of order booking can we expect like deal wins we can expect in FY '27, sir?

We have already given the margins -- I think, guidance range for revenues.

We take the next question from the line of Kaustav Bubna from BMSPL Capital.

This is [ Shriya ] on behalf of Kaustav. How much percentage of your total business or your total revenue is currently AI first?

So first of all, AI is not a stand-alone revenue factor. It's embedded in all the technologies, okay? So all the services we are delivering, they are AI embedded.

Okay. And how is the DFM business scaling? And where are we at currently versus where would we like to be?

On DFM, we would like to discuss it more on a later stage when the products revenue become a marginal revenue. As earlier communicated, we are more focusing on IT services because that's the main bread and butter of our business. So we are scaling product business in a very disciplined manner, but our main focus is completely on IT services.

[Operator Instructions] We take the next question from the line of [ Jatin Sharma, ] individual investor.

Ratan, I just have one question, right, because we have been talking in the past few meetings with regards to the DFM. So I just want to understand that product -- that what was overall expenses that the company has done for the product development of DFM in the last year? And what it is planned in the current year '27?

All right. So Jatin, on DFM development, if you say approx. -- if you want to quantify it, then you can consider approx. INR 2 crores was expensed in FY '26, and we expect no further big investments on DFM development in FY '27.

Umang, can you hear me now?

Yes.

One thing I would like to add here that we are not going to spend money on DFM, okay? DFM development is done. We will wait for the customers. And on the event side, the expenses we have done last year, it will reduce up -- by 60% at least, okay, this year. We have attended many events last year for the DFM, and we have spent huge money for the DFM on the development side as well as on the marketing side. This year, we will focus only and only on the services, okay? And for the DFM, we will wait for the customers. And if we will get the customer, if we will convert, then we will think about the next step. But for now, for now and for the next few quarters, we will focus only on the services. We will not spend money on the product side because last year, we have spent money on the product side. But unfortunately, we could not generate revenue for that, okay? So you can say that from the services, we have we have taken the money from the services and we have spent money for the product. And that's why you can see the growth -- PAT growth is -- you can see there's a very low PAT growth as compared to last year. But this year, we will focus only on the services, not on the product and not for the expenses related to product like events and all. I hope I have given the answer.

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

My question is along the lines of rupee depreciation that we are seeing. So considering 60% of our revenue comes from North America region. So in the Q4 FY '26, do we see the benefit of rupee depreciation in the PAT margin? Or do we expect that to see that in coming quarters?

No, we have, in fact, seen a tailwind of this FX tailwind. So we have benefited not in a larger scale, but yes, somewhere -- to quantify it, I would say this somewhere lies in between, you can say, approx. INR 20 lakhs. So that was FX gain you can consider from the rupee tailwind thing.

And sir, do we expect any further margin improvement from this level on account of any FX?

No, I think it will remain because now the billings will happen at a higher rate. This is a continuous process. But yes, we are focusing on margins as well.

[Operator Instructions] The next question is from the line of Kaustav Bubna from BMSPL Capital.

So again, I just wanted to further ask on the DFM product because in a lot of calls before, you always spoke about it and now you don't. So I really wanted to understand did go -- was our expectations for this product much more than the current reality of customer acceptance? Or do we still have hope for this product in the future?

See, you are correct. Expectation was more, okay, and that we could not achieve till now. Being an entrepreneur, it is my job to try multiple things, multiple approach to increase the business, and that was you can see my try to develop a product, apart of the regular services. I sold it to 2 customers also. 2, 3 customers are in pipeline, but due to geographical problems, they have shifted it to June, July. But still, I do not see a lot of -- honestly speaking, I do not see a lot of opportunity with -- in DFM. So that's why I have decided whatever happened, it happened. Now let's focus on services, which is our bread, butter. If you will see separately services and product, then you will see that our data is amazing, okay? We have taken money from the services. We have spent money on the DFM. But now we will focus only on the services, we are doing good. We have a good pipeline. We have already given you the guidelines, and we have adopted the AI. Everyone is Claude-certified now in the Ksolves. I do not see that any other company has everyone certified by the Claude. And we are heavily using AI and all those things. So I'm hoping a -- I'm seeing that a good future of Ksolves.

Okay. And just lastly, on the margin front, Ratan, I mean, why -- as a company policy, right, why -- as in when you all give guidance, I want to understand the logic why you are guiding for such a broad range of margin, 25% to 30% because I mean, the reality of your bottom line will be very different if you have 25% EBITDA or 30% EBITDA. So why such a broad range?

See, as you can see in the past, we have been always around 30% plus/minus something. But you can see that every day, you are getting new news on the Internet, okay? So we don't know that what will be the news tomorrow, okay? So considering those geopolitical things, okay? I'm trying to be conservative, and that's why I have given you the bracket. But if everything goes well all around the world, then it will be a good number.

Okay. Great. And you have some cash on your books. So will you continue paying dividend? Or are you looking at some acquisitions?

We will continue giving the dividend. We tried for acquisition, but unfortunately, we could not find good companies. So we dropped that idea. And now I'm focusing completely on the business, okay, because that -- if you will go for acquisition, then you will have to spend a lot of time also. So I found that I should spend time right now on the services. And for the next year, I have a good plan. We are focusing on multiple advanced technologies with the help of AI. We are offering our customers complete 360-degree AI transformation, we -- as a partner, AI transformation partner, till now, we were doing just development, but now we are saying that we will do the development with the help of AI, and then we will help you to cut your operation cost by creating developing agents for you. So complete AI, AI for development, then AI for operations.

The next question is from the line of [ Rajesh ] from RK Capital.

Sir, I saw in your investor presentation that you have become a SAP-certified partner, the ERPNext partner, right? So how good is the opportunity in ERPNext compared to Odoo?

See, Manish, would you like to answer or I should answer.

Sir, I can answer. Darpan, this side. I can answer.

Okay. Darpan, you can answer. Okay, fine.

Yes. So see, the situation is not around comparing these 2 ERPs. We wanted to initiate our ERP practice. So earlier, what was happening whenever any customer was coming to us, we were only ready with our Odoo offering. And we wanted to diversify in a manner that, okay, if any specific person is coming, they both have their own differentiations. They both have their own features. Odoo is an open-source thing, which is driven by a specific framework. ERPNext is a Frappe partnered management system, having its own 17, 18 connected apps. So both have their own market, both have their own costing aspects also. To initiate our own ERP business, our own ERP dimension, we added ERP or Frappe partnership also. So that if any specific customer is getting onboarded, we can offer 2 ranges of ERPs instead of specifically focusing on Odoo. That was the intent.

Sir, what is the installed customer base of -- at least can you give some metrics at the product level, like the installed customer base of ERPNext versus Odoo in India and globally?

To specifically or to go with a very detailed thought, we'll share it with you because that is right now may not be available. But like to be very figurative or very clear, we'll share this information with you.

Okay. How will I get that information? Your team will reach out?

Yes, yes. Our IR team will reach out. Asha, we can reach out, right?

And sir, going forward, will your dividend payout continue to be in the range of 40% to 60% of your profits? Like, what is your dividend payout policy going forward?

Umang, will answer this.

It will continue in the same manner as we are not looking for any acquisitions or inorganic growth currently in the coming quarters. So it will continue in the same way.

Okay. So we can expect 40% to 60% of the profits being paid out?

Yes.

Okay. And sir, I joined a bit late. If you can just reiterate in case you have already called it out, your revenue growth which you expect for FY '27 because you are going to focus only on services is what I heard. So how much revenue growth are you expecting?

So for FY '27, we are expecting annual revenue growth of around 18% to 20%.

Okay. So this is some moderation in your growth range, is it? Because I think in the past, you've been growing at a very high pace. So do you see like -- yes, If you can just explain a bit more.

Now base is large, right? When we have started the company, when we launched the IPO, that time, the overall revenue was INR 10 crores yearly, quarterly INR 2.5 crores. So adding INR 25 lakh in a quarter was a joke you can say, at that time. Now if you compare current situation, okay? Now right now, the current base is INR 43.2 crores. (sic) [ INR 43.03 crores ] And now for 10%, suppose, we need to add INR 4.3 crores. It is not a small number. So that's why if you see the absolute number is increasing, but percent is decreasing.

We take the next question from the line of Apurv from Whitestone Financial Advisors.

Sir, I just have 2 more questions. Sir, the first question is on -- you mentioned that we have migrated a client from SAP to Odoo. So I want to understand what would have been the reason for the migration for the client to move to Odoo?

See, multiple customers are trying to reduce their cost, okay? And they are trying to move to less costly solutions. So Odoo and SAP, both are doing mostly the same, both are providing mostly same feature, okay? And you know that SAP is super costly as compared to Odoo. So that's why not only this customer, we have other customers also. 3 days before I had a call with one customer from Tanzania. They also want to move from SAP to Odoo, okay? So, I hope I had given the answer.

Yes, sir. And my second question is, sir, are we seeing any delays in order or because of this ongoing war?

Yes, definitely. Actually, but UAE, we have a good business in UAE, okay? But we had a few customers, and they were about to release the order in the -- okay, but they could not. And that's why you can see that -- I can say that if they would have done it, then for this quarter, the growth we could see that more than 1.7%. Right now, we are seeing only 1.7% quarter-on-quarter. This is because of that war, okay? But now things are good. They are releasing the order. They are releasing the PO and all, and we can see the bright future at this moment. So that's why we are very optimistic for 18% to 20% growth and margin considering the current situation. If whatever -- what will happen tomorrow, I don't know. You know what I'm trying to indicate.

[Operator Instructions] The next question is from the line of Rajesh from RK Capital.

Sir, since you mentioned you are not going to have product-related expenses and event-related expenses in FY '27. But at the same time, the margin band is a wide range of 25% to 30%. Can we expect PAT growth to be at least higher than your revenue growth? Or is it uncertain at this point?

Umang, will you answer?

Yes, definitely. So see, there are a lot of things attached to margin because we are investing heavily in AI as well. And we are investing in insurances, security, IT security. So a few expenses are attached to it as we are growing. And that's why that range has been kept to 25% to 30%. But overall, our aspiration is to end on the higher side of it.

See, one thing I would like to again explain here that 25% to 30% is something that we would be able to manage, okay, easily. If everything goes well, then you can see better number. But I -- we are trying to be conservative so that in future, if anything goes wrong, then nobody should say that, okay, we have given a high number and then this happened. So that's why we are saying that 25% to 30% is doable easily.

Thank you. [Operator Instructions] As there are no further questions, I would now like to hand the conference over to the management for closing comments.

Thank you, everyone, for joining the conference call, this con call, okay? I would like to conclude here that we are now AI-first company, and we are trying to build our image as an AI transformation partner for our customer, who is providing end-to-end means development to operation, operational cost -- it means reducing the development cost and reducing the operational cost by AI. And we -- it is not something that we have not tried it. We have tried and for multiple customers, we have already done. If you will see the commentary, we are already using AI for at least 60%, 70% customers, and we have increased their output with the same amount of -- with the same number of the resources. And once again, thank you, everyone, for joining the call. Thank you.

Thank you, sir. On behalf of Ksolves India Limited, that concludes this conference. Thank you for joining us, and you may now disconnect your lines. Thank you.