MPS Limited (MPSLTD) Earnings Call Transcript & Summary

Ladies and gentlemen, good day, and welcome to the Q4 FY '20 Earnings Conference Call of MPS Limited. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Mr. Rahul Arora, CEO and Managing Director, for opening remarks. Thank you, and over to you, sir.

Thank you. A very good morning to everyone from here in New Delhi. Welcome to the MPS Q4 and FY '20 Earnings Call. Trust you are safe, healthy and staying positive. I have been in Delhi since early March and plan to be here for the foreseeable future. Given that bulk of our operations are in India, I'm supporting our wonderful teams in taking the best decisions in adapting to the current environment and in staying resilient. In our opening segment, I will discuss our performance in Q4 and FY '20 across business segments and how we have adapted to this unprecedented environment. Look forward to interacting with all of you over the next hour. FY '20 tested our mettle and was a challenging year. On a consolidated basis, FX-adjusted revenues for FY '20 were recorded at INR 334 crores, which is a decline of 7.8% against the previous year. While EBITDA margins were maintained at 24.8% in FY '20 at a consolidated level, there was an absolute decline of INR 11 crores at an EBITDA level, and the current level of profitability is far from previous and expected MPS levels. On average, FY '20 was not impacted by COVID-19, though we witnessed some impact in March at a consolidated level and on our eLearning Business in Q4 that typically has shorter duration and fast-moving projects. We continue to remain debt-free through the year with a fund balance of INR 180 crores on our balance sheet at the close of the FY. We are putting Mission 2020 before Vision 2023. Stargazing into 2023 is no longer useful and is impractical. The COVID-19 pandemic is a global humanitarian challenge that has unlocked an avalanche of economic complexity. While our overarching vision to make learning smarter will guide us, all of us at MPS are now focused on Mission 2020 that is based on 4 core principles: adapt, resilience, reimagine and now. Our first principle is adapt, and we've migrated 99% of the workforce to a work-from-home environment. We moved more than 1,500 desktop machines to work-from-home environments. Additionally, we have more than 700 users working from home on laptops. This included movement of in-premises equipment, leasing equipment from employees and sparingly renting equipment. Each machine had to be configured for VPN connectivity and other IT protocols for work-from-home use. The next bottleneck to be addressed was connectivity that we addressed through data cards. Given the supply chain constraints, our young leaders from the Indian School of Business tapped into the idle networks for priority delivery and support of data cards as well as for quicker delivery. Team leaders conducted periodic virtual stand-ups every few hours instead of the in-person daily format, and managers did the same with their team leads. Daily business continuity calls with representations are being held from all business units and locations. Attendance is similar to 50 people daily, and the agenda covered includes client delivery hotspots, employee safety, equipment requirements, connectivity issues and IT solutions. We have stepped up security and IT procedures to safeguard facilities and limit downtime for users connecting to the office network. We scale our work-from-home VPN security solutions. Safety has been our top priority in this adaptation to the new normal. The second principle has been staying resilient and managing customer deliveries with business as usual quality and delivery and schedule. As on May 15, employees have started returning to offices. Stringent guidelines have been published -- I mean, are being implemented for post lockdown work-from-office setup. Volumes for specific customers in the journals and books business units have grown due to more research content being published, and our teams have been resilient in managing the seasonally high volume at similar headcounts. Few customers have changed their business models for research related to COVID-19 that has required changes in our platforms, and our team has adapted and led this change in aggressive time line despite the lockdown. Our third principle is reimagining life after COVID-19. We are examining a reduction in office usage in specific locations and there space is being rented and where we are present in congested cities. We are looking at more permanent work-from-home solutions for specific functions, such as copy editing and project management. We're developing a scale-up strategy of orchestrating content production on the cloud for a new normal and setting up new customers on -- in this new normal. Travel is planned to be reduced to essential-only in the new normal. We have pivoted our marketing strategy and expenses from event-led to digital-led. And finally, the now principle is about getting things done and living in the present. We're actively managing our cash. We've moved investments into fixed deposits and overnight funds. We are tightly monitoring work in progress and receivables, and annual budgets have been scrapped in favor of quarterly budgets with cost rationalization. We can now open the call for questions.

[Operator Instructions] The first question is from the line of Ravi Naredi from Naredi Investment.

Just a little bit of -- there will be more digitization in future. So how you think it is an opportunity for us?

Yes, absolutely. So a couple of points here. One, of course, we're seeing an increased push towards digitization and learning online and on the mobile. So that part of our business, anything related to educational content, whether it is for the corporate side or whether it is for the publishing side, we do see medium-term development of business. Additionally, we've seen from previous economic downturns that people in such situations tend to go back to school and higher education and professional education picks up. So both, things going digital and a bigger focus on education in general, so both these tailwinds, we expect, at some point, the business will start to look very different on the education side of our business. Having said that, as a management team, we are planning things quarter-by-quarter rather than getting ahead of ourselves and looking at how things will shape up 6 months down the line.

Okay, nice. And are you received any inquiry about same or more content will be required or anything is going on the ground level? Is it so?

We've seen a few inquiries where there are customers who have not digitized completely. We've seen one large inquiry on the academic side where while most other people have digitized, this 1 customer has gotten left behind. Similarly, on the corporate side of our business, we've seen similar inquiries. Of course, because they have been left behind, they have large volumes that need to be digitized. So yes, we're starting to see increased inquiries on digitization. Also, this is coming more from customers that have not been active in digitization. On average, people have converted whatever they had to convert. But we are seeing certain customers who were not proactive and now are looking to make up for that backlog that they have.

Okay. And any new acquisition in the plan right now or it is in pipeline, if you want to say something about that?

So I can't share any forward-looking statements, but I can confirm our strategy on acquisition has not changed. And we, as always, are always actively looking at deals, and we always have deals in the pipeline.

[Technical Difficulty] from [indiscernible].

I have 2 questions. One, are the margins under pressure or the customers are asking for any haircut in the margins? Second question is, do we have investments in Franklin Templeton, where our money has been stuck up?

So I'll answer the second question very quickly, no, we don't. And then I'll go back to the first question. So at a consolidated level, one of the reasons you're seeing suppression of margins is because the acquired business, the recently acquired business of the Interactive Group which includes Tata Interactive India, Germany and Switzerland, that business, obviously, is a lower-margin business compared to our core business. And the proportion of that business has gone up compared to our proportion in the previous year. And the reason for that is we've seen a decline in 2 of our larger business units, journals and books. And that's why the margins have gone down. The margins have not gone down because of any operating issue, it's more because of revenue decline.

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

So my first question is with respect to considering this scenario, once the new normal is established post-COVID-19, so what will be our look as a management in terms of preservation of capital? Like we have INR 180 crore as on date on our balance sheet. So what will be the going forward strategy on that front?

Okay. So I'll answer your question in 2 parts. So with respect to -- for outlook, really, we are really not looking beyond -- we're planning things quarter-by-quarter. And in fact, as a management team, we are planning -- we've planned things out for the first 6 months. At the Board level, we've only provided a quarterly forecast for Q1. What we're seeing -- what we're anticipating in the first couple of quarters that we've had headwinds on the revenue side in the past and we had a very tough financial year. What we are planning for is that we will be able to hold our revenue position, and through reduction in expenses that we've been -- we've always been very good at cost management. We've been relentless on that front for the past few months. Through a combination of cost reduction as well as some currency tailwinds that we are seeing, we are hoping, the operating world is hoping, we are hoping that we will be able to hold our revenue position and we might see some earnings growth because of the reduction in expenses as well as the currency tailwinds. So that's the first piece. On allocation of capital, this was discussed at the Board meeting held yesterday. Unfortunately, it's too premature for me to share any updates on this as of now. But we will share updates soon on allocation of capital when it becomes more appropriate for me to share. Hopefully, by next call, we should be able to share an update. But at this point, I'm not able to share any update, but it was discussed in this -- yesterday's Board meeting.

Okay, okay. Sir, my second question will be like we are expecting that we will be able to hold our revenue and somewhere, we will be -- we are hoping to improve margins as well while we will be targeting some kind of a cost reduction from various heads. So what is our expectation on a gross margin? Though we are targeting quarter-by-quarter, but if you want to see that 1 year, 2 year down the line, what we can expect as a management that what will be our margins going forward?

Like I said, we are not looking 1 year, 2 year, down the line. We're planning quarter-by-quarter. In the immediate future, we are expecting and we are hopeful, based on what we've seen in April, we have those -- of course, April has been closed. Based on what we are seeing in April, we are expecting and hoping for earnings growth because of currency tailwinds as well as a cost rationalization drive that has been well underway for the past 6 months. It's not something we just started.

The next question is from the line of [Technical Difficulty].

First, a little clarification on this statement that you made that you're hoping for a stable revenue and some improvement in margin from cost. That is with reference to the June quarter or that is your -- with reference to the financial year '21?

It's quarter. Again, we're not planning financial year '21. We're planning quarter-by-quarter. So we're talking about the quarter here.

Sure. Second question is regarding the last couple of calls, I think it was meant in the Q3 call, you had indicated that you had lost certain bids because of the pricing and that, going forward, the management intends to become a little more aggressive on pricing.

Right. You're right.

So can you give us an update on that? Actually, how did the quarter transpire? By now, how are things going to change? Or how do you look on this bidding aspect in financial year '21?

So if we look at -- just to -- I know you're up to date, but just for everyone's knowledge, just to set some context, if you look at FY '20, we had 3 -- the profits were down for 3 reasons. And the impact was also divided 1/3, 1/3, 1/3. The first reason was a decline in our journals business, which was responsible for 30% of the -- 33% of the decline of the overall business. The second was the books business. And there again, the same thing happened. And third was, of course, a decline in other income as well because a lot of the capital has been deployed. Now the journals and the books business, we've -- as it was mentioned in the Q3 call, as you described, we had lost some business because of pricing. Now the way the business works, journals RFPs come up every 2 to 3 years, whereas in books, you can recover very quickly. So what we are seeing as of today, so for journal, it will take time to revive some of the lost business. But having said that, we've put in the necessary automation in place. We've created a 100% Dehradun operating model. And we -- when we get the next round of RFPs, we will be playing the role of a very aggressive price warrior to get -- to win back the business and run it at good margins. On the book side, if you look at our books business, it's broadly divided into educational publishing and academic publishing. Academic publishing tends to form a similar cycle as journals. You'd get recovery every 2 to 3 years, whereas educational publishing, you can actually get recovery in months or weeks even. What we are seeing is that in the educational publishing business, we have already started to see recovery. When I say already, I mean, in Q1 of FY '21, we've already started to see recovery. On the academic side of the business, while we expect a long-term -- a medium-term recovery, we have been successfully landed a customer in the academic publishing space where we are going to be producing a volume that is 4 to 5x the volume of our largest books customer on the academic side. So that customer was -- we got the news in March, planning started in April. Volume has started to trickle in last week. So we expect that volume will -- it takes time for the volume to pick up. But we expect that the books business through a combination of the educational business reviving and on the academic side, through the land -- through landing this new which is 4 to 5x the volume of our largest customer in academic publishing, we expect the books business, hopefully, should recover soon. Of course, to note that on -- this customer that I'm describing, while the volume is 4x, 5x, the revenue is not going to be 4x, 5x because we've done aggressive, aggressive pricing. But we plan to execute the entire operations through Dehradun and we are using DigiCore as a platform. So margin should be good. But from a revenue standpoint, it may not be as a multiple of some of the other customers because we played a price warrior role. I hope that answers your question.

Yes, sure. So just a follow-up on this. So 2 things. You said that here, you have gone for a very aggressive pricing not with existing customers. So does it mean that as and when some of the existing customers get aware of this development, they also start to ask of price increase -- price reductions and in turn, overall our margins come under pressure? And secondly, just a read up on how big is the book business for us as of now?

So the last one, I will not be able to share with you for competitive reasons. This is a very, very tough and competitive market. Any information I provide can be advantageous for my competitors. I cannot share that information with you, and as a well-wisher, I hope you respect that. On the first question, please recognize that the discounts are being given in exchange for volume. So if my existing customer tells me that they're going to increase my volume by 4x or 5x, of course, you will give them a price advantage. And margins will only improve, not reduce if we get that type of volume.

Sure, sure. Next question is regarding the acquisitions. So how do you see -- we had done some acquisitions for the last 2 years. Based on that, how did we close at FY '20? Are you happy with whatever we have progressed on the acquisition front? Or you think they have not played out to the way you would have desired? And what do you think, if not, are the areas? And how do you plan to improve it?

So it was an interesting year. We had a very strong performance in the acquired Interactive business for the first 3 quarters. In fact, we were adding about $100,000 of revenue every quarter over the past sequential quarter. If you look at the overall business in FY '20 -- FY '19, the eLearning business had an EBITDA of about 4.4%. And this year, we ran at an EBITDA of 16.5%. Now in the acquired eLearning business, our -- of course, our goal was much higher. And for the first 3 quarters, we were well ahead of our profitability goals. We were slightly behind our revenue goals, but we were well ahead of our profitability goals. We had a bit of a bump in Q4 because some of the projects in eLearning are fast-paced. So while COVID-19 hasn't impacted the core publishing business, we've seen some impact in terms of open deals slowing down in terms of decision-making and existing work also slowing down. So that really gave us a bit of a bump in Q4. Overall, very satisfied with the acquisition. It's given us an entry into an adjacent market. It's also giving us a good return. Of course, the return would have been far more significant if we had continued the momentum from Q1, Q2, Q3 into Q4. Having said that, we believe that the business should recover in a few months. We don't expect it to be -- so it slowed down. It hasn't been adversely affected. It slowed down, and we expect it to pick up in the coming months. And we're already seeing signs of improvement. For example, I think one of the previous questions was on digital, and we were talking about how some customers, especially on the corporate side, who have not been proactive, are now having to clear their backlog. So we've had some of type of inquiries. So we're hopeful that this eLearning business, which has hit a bit of a bump in Q4, will also bounce back soon.

Sure. And my last question is regarding the capital allocation, and you mentioned that you had dwelled upon it. But just briefly from what I can understand, I think we have 4 options as of now. One would be to just conserve the cash, considering the uncertain scenario. Second could be deploying it for some very attractive M&A opportunities. And the other 2 would be in terms of distribution to the shareholders either via dividends or via a buyback. So how do you see, without getting to specifics, because see, while there maybe some very exciting opportunities on M&A, considering that right now, our stock is extremely undervalued, so it's a very tough call between trying to drive growth and improve the valuation or just trying to return the cash to the shareholders and then trying to -- how do you see that?

Like I said, it's too premature. We will share an update. Please be patient. There will be an update on this front soon.

Sure. And on M&A, have you started to see some correction in valuations post this COVID? Any sense on that?

Yes.

The next question is from the line of Rahul Jain from Dolat Capital.

Rahul, I hope things are fine in your business. So first question is on the platform business, we have seen 15% decline. Is it more related to the demand side factor? Or it was only the supply side factor in the month of March has led to this fall?

More demand side. We had 1 customer, of course, I can't name them, but we had 1 customer who has -- who took the decision to move things in-house. And we've known -- at MPS, we knew for this. We knew this for a while, so it's not news to us. We were well aware. So it was movement of 1 customer and all other customers are growing. So it was more a demand side with 1 customer moving.

Okay. And was this customer part of the quarter or he was already done with?

So the customer has been reducing for the past 2 or 3 years, and most part of the -- was not part of the quarter.

So he's out there [indiscernible].

Yes. What I said was that the account revenue has been reducing for the past few years. And in Q4, this customer was not there at all.

Right. And so otherwise, this publishing business, both on the platform as well as the content side, should not see a material impact. This is what you are seeing as of now.

I can speak that and we are hopeful that we should not see a material impact in the coming quarter. Like I said, stargazing into the future is something at least I'm not equipped to share those type of forecasts because we don't know what is going to be the impact on publishing, say, 6 months from now. In the immediate future, we don't see an impact. In fact, in certain parts of publishing such as research publishing, we're seeing on average a 10% volume increase because people are publishing more research content related to COVID-19.

Right. And you are also seeing a better April than March, right? That's what you said.

I can't -- we'll talk about that in July.

And on the eLearning side, what is your thoughts both on near-term as well as medium-term, given the discretionary nature?

So on the eLearning side, I think if you go back to '08/'09 and you go back to the dot-com bubble, you will see something very interesting. Some of our young MBAs have done some number crunching. A lot of the eLearning companies saw growth right after -- first they saw a seasonal onetime slowdown and then they saw some growth in the market. The market -- eLearning market on average does grow at 10%. But some of the larger eLearning companies grew more than 10% post those 2 environments. Now, of course, there's an added complexity here that this is not a typical economic downturn. This is also -- you don't have -- everyone is at home. So there's a lockdown. So if this plays out like the 2 large downturns, which basically meant that there was more emphasis on learning and more emphasis on people development, we could see, 6 months down the line, this segment starting to really pick up. But again, as of now, we can only speculate. We're not seeing any data just yet on this front.

Right. But what are the existing customers talking right now? And what -- wherever they are supposed to ease off, those things are certain there, the decline are coming. Is it because staying at home is the factor or it's more about that they don't want to spend this money right now?

Yes, people are conserving cash.

Okay, okay. So till that mindset changes, it could have some pressure. And then the other factors which you said should drive the momentum back. And given that the overall incentive which the central governments are giving all over the globe, I think the spending pattern should improve faster than maybe the previous cycle.

I hope you're right, Rahul. [Technical Difficulty] I hope your projection works out because it will be very good for MPS if it does.

Right. Just last bit from my side is that, this quarter is more about staying on the revenues and cutting on cost. So where are the -- where are this confidence coming from [indiscernible] segment was declining. So where are the biggest revenue coming up to cover up for -- from other fall in the other business? And secondly, which are the cost business units?

Okay. So I'll speak about revenue. And again, Rahul, I'll give you a very high-level comment here. I would have loved to give you a very specific comment, which I have, but again, this market is very, very competitive. And I won't give away information that hurts MPS. So the -- we are seeing certain revenue addition in the core publishing business that are helping us make up for other losses, not the losses, but the decline in the eLearning business. So because -- as a result of that, one business is compensating for the other, and that's why we are saying that we should be able to hold the revenue based on what we're seeing, what's available to us and healthy April. So I'll leave it at that, Rahul, because it will -- I want to make sure that some of these wins that play out, we're celebrating about this months from now rather than regretting sharing too much information. On the cost side, I think, again, a couple of things. This lockdown, we have seen Dehradun really perform much better than the rest of the locations, both in terms of productivity and in terms of uptime, and also in terms of client quality and client deliverables, which has meant that other business units have volunteered work to move to Dehradun because at the end of the day, client satisfaction is what drives all of us. Because of which, in the short term, we've got some benefit of the work gravitating towards Dehradun. So that's one point. Second, for the past 6 months, we've been looking at our other expenses very carefully. And we've been -- we've sharpened our pencil a lot. We've been able to cut a lot of other expenses. Again, there are vendor partners as well as providers that have been very, very supportive in adjusting -- we've been able to negotiate better terms and conditions. But again, I don't want to [indiscernible] because they've been very good to us. So I would like to respect -- not telling you what -- where we got this from, but we've been able to do some heavy cost rationalization in the past 6 months.

Right. Just an extension to the same thought. Given the mix of the business and the pricing situation which we see right now in the market, what is the ideal operating margin for all our businesses or collectively at the organization?

So content, we should be -- at an EBITDA level, actually, I'd speak, content should be at -- ideal, in the perfect world, you're asking me a perfect world question, so I'll give you a perfect world answer. Content should be at 40%, platform should be at 45% to 50% and eLearning should be at 25%, but in a perfect world. We're not in a perfect word.

Sorry, platform, you said how much?

45% to 50%. Content should be 40%. EBITDA margin in eLearning should be 25%, in a perfect world.

The next question is from the line of Suraj Subramaniam from Airavat Capital.

I hope all of you are keeping safe. I wanted your comment on this news article from early May, which talked about McGraw-Hill and Cengage, the 2 textbook company mergers getting shot down by U.S. and British antitrust. How does this impact you guys?

It's a -- so the merger has been canceled. And of course, for us, it is very positive news because both customers are 1 of our top 10 accounts. They've both featured in our top 10 accounts. And if the merger would have gone through, they would have used the volume as a lever to negotiate prices down. So at an aggregate level, for MPS, our selfish interest, this is a good development. Second, also, both companies had -- because they were expecting a merger to go through, they had cut down their product development efforts because there is significant overlap on product in both these companies, particularly on the Higher Ed side, not so much on the School side, but particularly on the Higher Ed side. And, of course, prior to the merger, they could not discuss any product plans. So they had put on hold -- each party had put on hold a lot product development. We're seeing 1 of them pickup, I don't want to name which 1, but 1 of them has -- the product development has already picked up. So for us, this is very positive news, selfishly speaking, for MPS.

So you would -- I mean, without getting into forward-looking statements, but there was some impact of this in the last year, and you should hopefully start seeing that were they [Technical Difficulty].

Yes.

The next question is from the line of Anuj Sehgal from Manas Capital.

Rahul, I have 2 questions. Based on your discussions with your customers across Content Solutions, Platform Solutions and eLearning, what is the sense you are getting? I mean, obviously, right now, it's uncertain times and people are locked down. But purely in terms of the way forward, are customers thinking of outsourcing more post this event? Or the information is to pull back business and get it in-house, given the risk that they face in outsourcing? And then second question is on the capital allocation question, I mean, you mentioned that in a few months, you will have more clarity and you will give some clarifications. What is that contingent upon? Is it purely on this COVID situation normalizing? Or is there something more to it?

Okay. So I'll answer the first question first. On the customer side, I think the 3 segments have varied customer developments. On the content side, basically, customers are trying to maintain status quo. So we also in fact -- there is very little desire to make any sweeping changes. In terms of outsourcing, these customers do not have the capabilities to be able to in-source what they've outsourced or to be able to run it at the same cost that they're currently running it at. In fact, that's not a financial argument that can go into play. On the platform side, again, on the platform side of our business, these are -- these tend to be longer agreements compared to the content side of our business. The entire focus is to -- right now, again, to maintain status quo. We are being more tightly monitored today. We're having to show share far more detail, far more reports because customers are concerned that there should be no downtime on the platforms. They've also -- previously, we would see a lot of changes, upgrades, things happen on the platform side. Barring the research, publishing customer base, these things have also slowed down in the sense that the pushback on certain things has stalled because all they want is for the platform to be stable and to not have any issue with uptime. So from a management standpoint, it's become relatively easier on the platform side of business, from an overhead standpoint. The eLearning business, like I was describing to 1 of the previous questions, we are seeing this as an attitude from a certain set of customers that are trying to conserve cash. So we've not seen any projects being canceled. We've not seen anything of that nature, but we are seeing delays. Now to say what will happen 6 months from now, if we go back, look at previous economic downturns, I don't know whether that's a right source to look at, but things tend to play out better in eLearning post economic downturn. So fingers crossed that it does happen that way. But as of now, things are soft, things are delayed. People are -- corporates are conserving cash. And hopefully, that changes at some point. On the allocation of capital, there's not much I can say because I don't have anything definitive to share because we do have items under discussion that we have not closed discussion on. And as soon as we close discussion on, I will share an update but I don't know how to share that upgrade without having closed that matter and without having any definitive news to share.

And then lastly, on the conversations with the customers, I mean, this whole work-from-home and then you mentioned about seamless transition and it being working out very effectively. But have some customers also expressed any concerns on this new way of working either with regards to data confidentially or with regards to other -- any other issues that you might have experienced?

So we have had some productivity issues. To say that everything has been seamless will be an exaggeration. We have had productivity issue, but we've managed that on average. Of course, we've had niggling issues with certain customers, and customers have also been more understanding than usual. And we've been able to deliver to them as well. So to say there had been no issues is an exaggeration. We have had issues, but we've been able to manage those issues either through putting more resources or through getting better connectivity for the people. So the biggest challenge has been -- when we talk about productivity, the biggest challenge has been related to connectivity more than anything else. It's not as though that people are less productive at home. It's been more about connectivity. And that's just an infrastructure challenge that at some point India needs to really solve for. From a customer concern, we really haven't -- this is a global challenge. This is not something that's unique to us or regional to us. So customers are very understanding. We haven't seen any concern. In fact, the concern that we've -- certain customers have been concerned about is employees coming back into office too quickly. So as on date, we have about -- we now have about maybe 150, 170 people working from offices. A large part of that is in Dehradun. Of course, we're planning -- we implemented social distancing and huge measures to make sure that there's no safety hazard. But yes, some customers have insisted that their teams do not go back into work-from-office environment just yet. So that's the only customer involvement. Of course, as we're doing this, customers are watching us, they were managing us very tightly. We were sharing status reports, off-status reports. So there was a lot of data monitoring and reporting that was being done behind the scenes. So -- but on average, I think we've done very well to be able to manage this shift. And I wouldn't say it was seamless. It requires a very, very harry transition. And I think the MPS team really stepped up to be able to deliver better than most in the industry.

Next question is a follow-up question from Rahul Jain from Dolat Capital.

So my question was more in terms of this productivity factor. You spoke about Dehradun. Can you tell us more about that? The same customer are being delivered from 2 different location and they are getting better experience in Dehradun. So you will get some advantage if they move some of these loads to this center?

What's the question? You answered your own question.

Yes. Actually...

I don't know what the question is. So your comment is accurate. Your comment is accurate.

So because they have -- the same customer is being dealt from 2 location as of today.

Yes. So anyway, customers have to -- most customers require business continuity planning. So most customers will have skeleton teams in -- so if a customer work is happening in Dehradun, they'll have a skeleton team maybe in a Chennai or a Bangalore, and if work is happening in Bangalore or Chennai, they'll have a skeleton team in Dehradun. That's business as usual. Now the skeleton teams have been scaled up in this environment in the...

And what is the [indiscernible] by location for them? What are the savings in Dehradun on an average?

You mean what is the average wage arbitrage between Dehradun and other locations?

Yes.

Give me a second. Let me give you an exact number. It's usually between 30% to 40% but give me a minute.

So this is per person arbitrage or even productivity-wise...

Per person, 30% to 35%.

And similar productivity is expected in both the location per person basis?

So hopefully, Dehradun is more productive, hopefully.

Okay, okay. And is there any other cost arbitrage also maybe other rental or any other factor?

Not immediate, but over time, yes, because we do have -- Chennai is a rental facility. Kolkata is rented and Mumbai is rented.

Okay. And...

Over time, not immediate.

Right. And the new customer that you spoke about is going to scale up the volume substantially. So this customer when on full scale should come in our top 5, top 10 category?

Definitely, top 10 and hopefully, top 5, but definitely, top 10. Not -- we're hoping that based on what they basically have shared with us, we have a 3-year contract with them. They've given us a 12-month outlook. And then they will review after 12 months of how the balance 24 months will work. So based on the 12-month outlook, we should definitely be in -- they should be in the top 10, but I can't speak to the other 2 years because they haven't given us an outlook yet.

All right. And to the previous question about McGraw-Hill and Cengage, so if some of this pricing and volume-led synergies was to happen, so volume definitely would have happened only post-merger but pricing-wise, we didn't see that impact as of today in the pre-merger scenario. So it is like a no impact for us as of now since this has been canceled? Or there is some advantage that should come now?

Advantage will come in volume, not in price. So the -- we were -- and again, we were speculating that when customers, suddenly they become double in size because they merged, they have more leverage, so they would be able to negotiate better with the suppliers. And we are vendor partners to both of them. So on the pricing front, no change, but on the volume front, let's hope they've slowed down the volume because they were expecting a merger. We've already seen 1 of them pick up. Let's hope it continues.

Right. So that was a temporary curb because of the merger. So they will...

You're right. [indiscernible].

Grow volume as well as a result, which should normalize. Fair enough, fair enough.

Ladies and gentlemen, that was the last question for today. I would now like to hand the conference over to Mr. Rahul Arora for closing comments. Thank you, and over to you, sir.

Thank you, everyone, for all your insightful questions. This call is always thought-provoking and challenges us. Please keep this coming. And I'd like to sign off by saying, please stay safe, be cautious and healthy, and also positive in the current environment. Again, a big thank you to everyone for all your support, and talk to you in the next call -- earnings call. Thank you.

Thank you very much. Ladies and gentlemen, on behalf of MPS Limited, that concludes today's conference. Thank you all for joining us, and you may now disconnect your line.