MPS Limited (MPSLTD) Earnings Call Transcript & Summary

Ladies and gentlemen, good day, and welcome to the Q2 and H1 FY '23 Earnings Conference Call of MPS Limited. [Operator Instructions] I now hand the conference over to Mr. Rahul Arora, Chairman and Managing Director. Thank you, and over to you, sir.

Thanks, Mike. Good afternoon, and welcome to our Q2 FY '23 earnings call. Today, I have with me Sunit Malhotra, who you all know is the CFO of MPS Limited; Sukhwant Singh, Chief Delivery Officer, India. Today, Sunit will kick things off in our opening segment by discussing our Q2 FY '23 performance. Then Sukhwant will update us on the content GRE business. Finally, I will discuss how the current financial year is shaping up and also provide an update on the recent acquisition of E.I. Design. Let's get going. Over to you, Sunit.

Thanks, Rahul. We developed impressive momentum in Q2 that also drove significant margin expansion at INR 125.60 crores, FX-adjusted revenues were up by 13.77% against previous year, primarily driven by 3 factors: growth in the content business, particularly in our scholarly customers, including journals and books. Growth in the e-learning business stand-alone and in E.I. Design and both stability in the platform business. I would like to now hand it over to Sukhwant, to discuss the content and e-learning solution performance in Q2 FY '23 and overall prospects for the business in FY '23.

Thank you, Sunit, and hi, everyone. So I'll start with an update on the Content Solutions business. So our revenues in the Content Solutions business grew by almost 10% in the quarter 2 FY '23 over the same period last year. And the profit increased by almost 30% during the same period. So a growth of 10% in revenue and 30% in profit. The Journals led growth in the Content Solutions business in quarter 2 of FY '23. And given the highly profitable nature of this business, the scale up also meant that margins also improved for the Content Solutions business as a whole. So the expansion was led by phenomenal growth in business with both are established as well as the new customers. The other part of our Content Solutions business, the books vertical also did well in quarter 2 of FY '23. The trend towards offshoring continued in our education business, which sort of further helps our margins. Coming on to our e-learning business. The e-learning business significantly grew in quarter 2 of FY '23 due to addition of E.I. Design and impressive double-digit growth in MPS Interactive and TOPSIM, which is our German-based entity. The revenue grew from a consistent flow of projects from both our Star accounts and also the new customers. The highlight of the growth at TOPSIM was that it was primarily driven by product revenue enabled via the new TOPSIM Cloud, which is a high quality of revenue from a financial as well as strategic lens. While our revenues grow, our order book also expanded by over 20% as it booked significant and sizable orders. Our pipeline is robust across different types of work, different geographies and varied across training strategies. So while margins significantly expanded in e-learning, they have yet to reach their true potential, and we strive to expand this further in quarter 3 and balance of FY '23. Thank you, and back to you, Rahul.

Thank you, Sukhwant. The muted start in Q1 was left behind the revenue mirror and we gained significant new momentum in Q2. We are well on track to beat our guidance of INR 100 crores in PAT in FY '23 despite the looming recession. As a learning and Platform Solutions business, various factors give us confidence, including our content business is doing exceptionally well with our scholarly customer base. We were at the early innings of the growth story for the customer base and growth will continue to unfold the rest of the year. After a steady pickup in Q2, performance will be even more impressive in the content business in the second half of the year. While we reported growth and rich margin expansion in Q2 in the e-learning business, our ambitions are higher and will begin to be unlocked truly in the second half of this financial year. In our third year of ownership, the platform business is finally stabilizing, given the distressed nature of the high-wire asset and the fact that we acquired had a competitive purchase price, we saw massive ROE during an impressive payback period of less than 3 years. Though true growth will only unfold in the fourth partly the fifth year of ownership. To conclude my comments, I'm delighted with our continued progress in the integration of E.I. Design into MPS. The experience of acquiring a growth asset at a competitive purchase price is remarkably different from distressed acquisition strategy that [indiscernible] will have. In fact, the ER operating model has allowed us to scale our most significant learning business and direct our super creative teams to focus on higher lining pursuits and projects. During the week of October 24, we launched a new brand called E.I., powered by MPS, which will represent our combined e-learning business. The brand is positioned as an emotionally intelligent experience design company. Our new logo is inspired by Daniel Goleman's 5 pillars of emotional intelligence. We want to leverage the power of human connection and empathy to build resilience, high-performing individuals and teams with more profound engagement with the organization. Understanding the intent and large of the scope is part of our DNA, which helps our connect with learners over and above and beyond trading. Our ability to create impact on the life enables performance helps drive career growth and create belonging that transcend beyond data and analytics, assisting organizations to reinvest the workplace experience. We look forward to your continued support in this exciting new growth phase of MPS of building scale. I would now like to open the call to questions.

[Operator Instructions] We have the first question from the line of Vaibhav Badjatya from Honest and Integrity.

This is Vaibhav Badjatya here. So on the -- last quarter, you said about the ESOP program that you were exploring for the talent retention. So just wanted an update on that. Have you finalized something in what is the update on that?

Yes, it's in progress, and we're expecting to close that out in this financial year. Of course, it has to go through the nomination regulation Committee and then also approved by the Board of Directors. So we're following the process.

So it should be in place by the end of the year is what you say?

Yes, fingers crossed.

Okay. Got it. And secondly, does this merger of Penguin Random House and Simon, which is now getting delayed. So are we in any way associated with these companies? Or will we be impacted either positively or negatively due to this development if this merger doesn't go through?

Yes. So we are not in the trade segment. Both of these publishers that you have mentioned are in trade publishing. Our focus is in learning and education. So we work with -- within publishing, we work with scholarly publishers and education publishers includes college and [indiscernible]. We do not work with trade publisher at least not in a significant way. So for us, this has no impact at all.

[Operator Instructions] We have the next question from the line of Arjun Balakrishnan, an individual investor.

Congratulations on the great set of numbers. My question is on the update on acquisitions because you've been talking about big ticket acquisitions. So is there anything in the pipeline of this financial year?

Thank you for your question and for your time support. We -- as I shared previously, we're always actively pursuing acquisitions. We have a growth office that is focused on this strategy. At any one point of time, we are examining 10 to 15 different opportunities. Currently, we have about 4 that are active and warm. In terms of when we will close one, that is more forward-looking information and guidance that we do not provide. But yes, acquisitions continue to be very much part of our growth strategy. And out of the 10 to 15 that we're pursuing 4 are what I would call warm and things that we think will be closed in the foreseeable future. What is the foreseeable future time will tell.

Okay. And one final question as last quarter, I think there was some kind of delay in one of the projects, if I recollect correctly, the e-learning business. Is that now back on track, if I remember correctly [indiscernible]. Yes. It was more in the education business. It's back on track, but still we have not recognized as revenue in Q2.

[Operator Instructions] We have the next question from the line of Arjun Goel, an individual investor.

Congratulations on a very strong set of numbers. So can you tell me either on a year-on-year basis or on a quarter-on-quarter basis?

We typically track and report the FX-adjusted revenue, which is pretty close to the constant currencies, and that is 13.77%. -- as reported, we had 14.8%.

Okay. So the number to focus on is this FX adjusted revenue?

Yes, focus on the FX because the reported, we're obviously getting – fortune favors the brave, we're getting benefits of the depreciation of the rupee. So that's 14.87 to look at Q2 growth is 13.7%.

Okay. So -- and on the same subject, that EBITDA has gone from INR 30 crores to INR 40 crores over the last year. So how much of this INR 10 crores would be because of foreign exchange benefit and how much would be internal efficiencies or things like that? Can you break it down further?

So I'll let the finance folks capture that really quick. But again, I would encourage you to look at our investor presentation that we upload on our website. Yes. But you will see the EBITDA that you're reporting is EBITDA -- that EBITDA is an FX adjusted basis, not on reported revenue. So that's true to EBITDA. And the reasons for that growth in EBITDA, they're coming primarily from our content business. You see our margins have significantly expanded. Part of that is journals and a scale content business as a proportion of our overall content business has grown, and this is a higher-margin business. So whenever journals or commonly content grows, it tends to outperform all the other aspects of content. And because this is now increasing on the proportion, it's a healthy sign for the margin from a model perspective. Additionally, we have also seen an improvement in our e-learning margins. As Sukhwant described on the call, while we are satisfied with the performance, we are still not unlock our true potential in e-learning, which we will start to see from quarter 3 onwards. So what you're seeing on our investor presentation on the EBITDA margin front is on an FX-adjusted revenue.

Okay. So that's actually very, very -- that's very in, that's a very good sign, right? I mean Okay. I've understood it correct, like it's because of better more value-added services versus just a tailwind of dollar appreciating, right?

Yes. So definitely there's true operational performance. But then again, there's also that aspect of the rupee depreciated, which has given us additional tailwinds, but not there was a very, very strong core already available, which is driving everything higher I would say that roughly, if you compare, again, very, very ballpark estimates roughly the difference is difference will be 2% to 3% coming from the currency. Most of it is actually coming from operations.

Okay. Wonderful. And sir, you mentioned about relearning what do you estimate is a higher target margins are? I mean we're saying it's still not up to the mark. So what is the mark?

Our goal, of course, is to get to the industry standard, which is 25%. That's just an average number. So the first milestone is 25%. But of course, NPS normally does better than competitors. So until we get to 30%, we will not settle and we continue to pursue margin expansion. So I'm hopeful that we'll get very close to the number this year itself.

[Operator Instructions] We have the next question from the line of [ Jyoti Singh from Orion Capital Markets Limited. ]

A good set of number. Sir, my question on the segment side, you did mention that we have not reached that potential we have. So what is the growth strategy that we are targeting that will help to drive more revenue and growth in our business?

So across the business or specifically in e-learning?

Across the business.

Yes. So overall, I think we have a multipronged approach. We today across the business, we have almost 600 customers. And our first strategy is to go deeper into each of these customers. We are working very closely across the business. You'll notice that in the of the call, we spoke about a concept called Star accounts. Star accounts are essentially accounts that we've identified that potentially over a period of time should become extremely large customers by MPS. We currently have identified 30 customers in the Star accounts program, which have already begun to scale for this exercise again about 2 years ago. Our next phase will be to take the 30 to 100, so we will ramp up to now from 30 accounts to 100 accounts. which we will then again scale and grow. So the first leg of our growth organic or growth strategy, the first lever of growth strategy is organic, is making sure that out of the 600 accounts that we own, 100 of them become star accounts for the next few years. And we've already done -- we've executed 30 now it's going to be ramping up to the next 70. The second phase piece of our growth strategy is focused on new capabilities and new development. We are in every year, we are launching new capabilities in partnership with our customers, but also developing products that are either offshoots of existing products and solutions or are combining different parts of the business. So for example, this past year, we've launched 3 initiatives. The first one was we launched a new version of [ Magna ], which is an existing platform, which is HTML5 based—the new version is HTML5 based. Another initiative was where we combined the capabilities of our e-learning business and our content business to go after the educational institution market. So there was another go-to-market strategy. And the third is we are building another platform that combines our bench test product from HighWire and our MPS product from MPS as a new project called project [indiscernible] even. So we are just 3 examples of many of the things that we're doing to launch new products and new capabilities. The third thing that we're doing actively is going after a new logos. And the way we're doing that is we have been very thoughtful and rigorous in terms of our marketing, both off-line and online marketing to drive awareness and interest of the company. And also, we have started to scale up our sales team. So we have a account development team that's focused on the 600 customers that has tried. But now we are also investing in a entire sales team that's going after new logos based on the leads that we're generating from our various campaigns. So just 3 examples of the things that we're doing on the organic side. On the inorganic side, we have transitioned from the strategy of acquiring distressed assets at the stress prices to acquiring growing assets at competitive prices. E.I. was our first such acquisition. As I described to the gentlemen on the previous question, we are actively pursuing 10 to 15 of such type of growth assets. And currently, there are 4 transactions that we're pursuing where we feel optimistic about some power closure in coming years.

Okay. And sir, my next question on the margin side. What margin guidance You are targeting coming FY'23-'24? And how much growth we are targeting?

So content, we'll be happy with the 40% that we're reporting. We would -- beyond this, we would want to drive it through revenue growth. There's significant operating leverage available in the content business. So as revenue grows, margins will continue to expand, with platforms, we would want that to also operate closer to the content margins as well. And on the early side, like I was described earlier, we want to be at 30%. So 40-40-30 is what we would want to strike in the coming year. That's really the goal that we're trying towards.

We have the next question from the line of Rahul Jain from Dolat Capital.

Yes. So I have a couple of questions. Firstly, on the new branding that we have done on and more any more input that you could give in terms of how the clients are seeing this and also in terms of how -- what exactly you want to position this new branding. That is question number one. Second thing, from a profitability point of view, we have seen that from last year compared last year, we are doing more revenue with lesser employee headcount. How sustainable is this? And thirdly, also a related question could be sustainability or profitably because that is driving a much faster earning growth versus revenue growth. So if you could give your thoughts on these 3 aspects?

Sure. So the first aspect on the rebranding, we have -- we possibly have the widest capability set in the e-learning space. We do everything from learning consulting to learning design, to simulations, game, AR, VR, we have a bunch of learning platforms. And so because we had the Tata Interactive acquisition in year, so many capabilities and then we had E.I. Design earlier this year. The thought process really behind this rebranding was to help the customers understand that the value that we provide is not these -- or not the products and services, but our ability to solve problems for our customers and then focus on growing that customer relationship. And then the products and solutions are simply tools that a means to solving those pressing development challenges that our customers are facing. So we're not trying to individually sell product, individually sell services. We instead are using -- instead of solving learning and development challenges that our customers are facing. And these tools and that services are all the ammunition that we need to enable that problem somewhere. Why emotional intelligence, we must respect that when a learner goes through a leaner journey when the joint organization or the upskilling or reskilling within an organization, there's immense has an immense change process, the lean is going through. Very often the -- an organization or a vendor partner in MPS focuses on the product, the service or the solution without -- and this is the learner context. -- what our emotional intelligence value proposition is doing here is saying that we will design the learner solutions for you keeping the context of the learner in mind as well as keeping the context of the learner environment. So if I have a new employee and I've joined an organization in the tech space, which has high churn, my context is very different from someone who is in a manufacturing plant, has been with the company for 20 years and is now trying to learn a new technology. So we optimize for the learner context, both in terms of the individual context and the environment context, which ensures that as our customers outsource to us, they know that we are coming at this from a humanist approach versus just trying to sell a product or a service. So focusing more on the value -- we launched this at DevLearn, which is one of the biggest learning event in the world a couple of weeks ago, and we received a great response. This rebranding was not done in isolation. We in fact had an advisory council of our customers that helps us think through the process after the acquisition of E.I. Design to customers from both sides. And it was co-branded and not co-branded, but it was inspired through some of our customers. So we believe it represents 2 things. One that when learning and development is thinking about outsourcing, they have a partner that they can trust, who will be consultative, creative and also create magic through the learning. But also, the second piece of this is that we will not just think about our organization, our customers' organization, but really about the end learner in mind. So that's on the rebranding piece. In terms of margin expansion, we've always spoken that this business has significant operating leverage where MPS is different from some of our other competitors in the marketplace in general is that we invest significantly in developing new workflows, new processes as well as new technologies to make sure that we continue to be efficient. We are always looking for ways to automate, to do system-based delivery. We have a team based out of Bangalore, headed by our CTO, -- the -- we have a unit called MPS lab that focuses entirely on speed and efficiency. There's almost 100 engineers across various roles that are focused on efficiency. These engineers are focused on our internal headcount, not on external platforms. So some of -- and we've been investing in this now for almost a decade. Some of the returns are compounded now, and they've seen now the sector returns as customers have also because of the pandemic accepted a lot of the innovation -- automation that we wanted to introduce. So there's one lever that's coming from doing more smart work rather than grunt work. And of course, the second lever is we tend to operate in Tier 2 cities as much as we can. And of course, post-pandemic's even been further expanded as we onboarded talent across India through remote working, even in our e-learning business. So from a sustainability standpoint, as I advised, I think content business late 30s, early 40s, is very sustainable platform business. We want to get towards the content business margins and e-learning. We see a PAT towards 30% over the near term. And of course, once we get there, we have other plans that will require more effort, but 30% in e-learning is optimum.

Yes. And if I can fill in one more. If you could share your thoughts in terms of having a very long tail of customers with very, very low revenue pipeline revenue net rate. How we plan to optimize on this front either from a mining perspective or eventual improvement if you intend to do that? And in general thoughts on growth prospects with the macro taking the shape the way it is? Any view on that?

Yes. So as you would have noticed, our customer concentration over the years has significantly reduced our top 10 now contribute to less than 50% because you [indiscernible] for a while, you knew that this number was like 80% 5 years ago. And similar to the top 50, even the top 50 are in fact 55%. Again, this number was almost 90% 5-6years ago. So there's been a significant diversification by intent to diversify the customer base. To protect ourselves from any shocks that might happen to the macroeconomic environment. We have a wide net, as I was describing earlier. We do have a star account strategy that is bearing fruit. So we will, for the last 2 or 3 years, we've been focusing on these 30 customers, and we've graduated them to star account status. We believe we have the infrastructure available and the relationships available to scale this from to the next 70 customers. And therefore, if a macroeconomic situation does present itself, I think at this point, we are quite diversified to absorb any major shocks. But of course, macro is macro. So we, as a management team, are quite aware of the environment and have -- are constantly in touch with all our customers. We have very deep relationships with our customers. So if the situation does present itself based on the cues that we will possibly get faster than anybody else because of the relationships that we have with our customers, we will adapt at some end. But as of now, we are not hearing anything except what you see on the news. Our customers are not telling us that they will be pulling back the events that we're participating in. We're not seeing -- in fact, anything this endeavor itself, we saw 2x of the participation that we saw prior to pandemic. So we're not seeing it, but we are aware and we are watching. But nothing -- we don't have any data or evidence just yet that it affects our business at least not in the next 6 months.

The client question was more the other around not from the concentration point of view, but trying to understand the cost benefit analysis in terms of a very large number of clients because if I strip out the top 10 number, the average revenue for our customer for the rest of the portfolio will be a very small.

Yes. We maintain efficiency ratios for all our customers. An efficiency ratio is nothing but total manpower cost divided by net revenue, and we ensure that an efficiency ratio with the target for everybody is 40% of the company by every customer. and the red zone is 60%. So as long as every customer engagement is between 40% to 60% of the efficiency ratio with mid-teens, and we make sure that no customer is above the 50%. So we don't have that problem because very, very disciplined, and we make sure that every customer contract that we signed is between that 40% to 60% efficiency ratio.

Sorry, I could not get this 40%-60%, what exactly is it, sir?

So what we do is we calculate for every customer, we calculate the total revenue. So revenue would be at a net revenue, revenue -- net revenue is revenue that outsourcing. So we get the net revenue for the customer. Then we look at the effort and the cost of manpower to be deployed on the customer. That number should be 40% and our ceiling is 60%. So as long as we are between 40% to 60%, we execute the project. If we are not able to execute the project to 60%, we do not take on the project. So we are highly disciplined. So every single project and MPS operates in this zone of 40% to 60%.

We have the next question from the line of Sachit Motwani from Param Capital.

My first question was in e-learning, excluding E.I. Design, how would have been a sequential growth in Q2?

So as I was inviting. So our -- in our e-learning business, we have 4 business units, if I can call them business units for that have a better word. E.I. and MPS Interactive, which are the India-based entities, both grew in double digits. Our TOPSIM entity, which is the German entity, also grew at double digits. Our Swiss entity, which does about CHF 1.5 million annually, had a decline about 30%.

Okay. But on a consolidated basis, on a -- what I'm trying to sequentially would have growth, right? Year-on-year. So Q2 of this year versus Q2 of last year. Second question is, has the full payment for E.I. Design acquisition done.

I'm sorry, can you repeat that question?

I'm saying the payment for E.I. Design for the acquisition, has that been done?

Yes. Yes. All payments have been completed – that was completed last quarter.

Last question is how many customer account is the star accounts? When you talk about the 30 star accounts.

So we look at 3 very basic factors. What is the -- so a star account can be a star around, if it checks 3 out of these – 2 out of these 3 boxes. Current size is large. Second, future potential is large or third there is a strategic element. So for example, if the account is an Apple or an Amazon, it's a blue-chip customer. As long as the customer checks 2 out of these 3 boxes, they qualify to become a star account.

And is there a plan to get into IT services also at some point in time. So are you still evaluating that?

No. I think -- so that was the -- I think the thing that we had at we had an acquisition opportunity that we are pursuing at that point in time, it was more very opportunistic. I don't think it was a strategy per se. It was more an opportunity presented itself, and we were kind of flirting with it. But I think we've learned that there's still so much low-hanging food in this business in the content learning e-learning and platforms is we want to stay focused for a bit. We're only approaching $70 million revenue right now, as I shared in Vision 2027, our goal is to 3x that. I think we can 3x to that level just by staying focused. Again, it's not that we were not do acquisitions, but they will all happen in this event. I think that was just us getting distracted for a bit, right there.

My last question is you've been talking about consolidation going on in the content space. Would you be willing to acquire a company in the content space? The only reason I'm asking is because if you do so, then there would be, again, a concentration because you'll be highly dependent on content business?

We would only do it if there is some new capability that we currently need, we won't do it just for the sake of revenue. Because post the pandemic, we feel that there's still juice for us, like I've seen in this [indiscernible] quarterly business today, with journals growing, there is still juice for us to grow organically. We've created significant lines of differentiation between us, the competition and our positioning in the marketplace has now been elevated post the pandemic. We were able to deliver to a much higher level than the market rates on average. So we feel organically, we should be able to grow in content. The only reason we would pursue an acquisition is -- if there's a capability set that we do not own, and that capability set would be also -- it will probably be very niche because from a more general term, we are already fairly end-to-end. So yes, if it expands capability, but just knowing the market in general, will probably be a very niche capability, very, very focused. But yes, there are still opportunities within the value chain that we do not currently own or capability that we do not currently own. So it's not that we've got all our content covered.

We have the next question from the line of Vaibhav Badjatya from Honesty and Integrity.

So nearly 1/3 of our revenue is from European or U.K. clients. And we have seen significant currency movement in that region. So which actually increases the cost for the customer because their currency is depreciated. So are you seeing that they are trying to renegotiate some of the pricing so that they can reduce the burden because it's quite a substantial [ term ] for them because all the contents are denominated in USD. Yes. So -- yes, so 34% of our revenue comes from U.K., Europe, but 84% of our billing is in USD. This has happened over a period of time. It was in the 60s, if I remember correctly. No, I think the -- even the customers there are negotiating mostly in USD, the transition to that because these are global companies, they're not really just European companies. Most of the customers that we work with in Europe, say, I'm talking about a majority, not the minority are the customers that are global. [indiscernible] for example, is that the global publisher that's of the world, [indiscernible] is this again a global publisher. So that standard is U.S. dollars. That's how they've been run. And we don't see any changes there. We're not telling anything from our customers about any changes. In terms of price, we think on the content side, we tend to be price warriors anyway. We tend to -- we don't tend to win customers on price, we definitely tend to close customers on price, if that makes sense on the content side. On the platform side as well, they're middle of the pack. And then on the e-learning side as well the mid of the pack. So we aren't sort of the most expensive vendor out there. So we don't have those kind of pricing negotiations that others would.

We have the next question from the line of Arjun Goel, an individual investor.

Just a follow-up. I have a question regarding the industry structure on the content side. And actually more on the scientific journal side. So I was reading this statistic that the -- I think Elsevier and like the top 4 or 5 global publishers accounts for like 40% or 50% of all the scientific journal or scientific papers published, right, in any given year. So I wanted to know, basically -- and I believe this number is only growing larger, right? It's consolidated. So I wanted to know like where does MPS sort of fit on the content side in this structure? Because like do we target these top 5 players and try to grow their accounts? Or are we catering more towards those smaller universities and things like that? If you can just throw some color on the.

Let me drop I always explain because our industry is very, very niche, and most people don't follow our industry. So let me draw parallels with another industry so that you and others on the call get where they're coming from. So if you look at -- let's look at video-based content. So today, you have a Netflix, Prime Video, Hotstar Disney, et cetera, driving content and we're all accessing content to subscriptions. The Elsevier and the [indiscernible] bilateral are essentially the Netflix and the Amazon Prime and Hotstar. What MPS is doing is we are producing content that gets delivered to these companies. So as long as more content is created in the world, irrespective of the channels that deliver the content NPS will be successful. Does that make sense? So what we are doing is we are kind of one step behind the value chain, we are the producers of the content. And then all of the names that you described on the scientific journal side, they are sort of the distributors of the content. So for us, the market was consolidated, the market could get even more diversified. But what it has happened about is that 5 years from now, there will be we more content in the world. And as long as there's more content world 5 years from now, we'll [indiscernible].

But in this scenario, right, don't the Elsevier's get bargaining power because we are consolidating that, do they tie -- I mean, do they try squeezing the likes of MPS?

So the question is, how does Netflix or Prime Video or Disney differentiate themselves. They differentiate themselves through new, fresh content that reach the competition. So the pressure is not on price. The pressure is on differentiation. So they need to work with vendor partners that can enable the differentiation. The pressure is more on the quality. The pressure is more on the speed of the product.

We have the next question on the line of Keshav Garg from CCIPL.

I wanted to congratulate you for all-time high profits this last quarter. And we hope that the company stays on a growth trajectory. So since you mentioned in the call after E.I. Design acquisition that we should be expecting on -- at least one more acquisition in this financial year. So now with the...

I didn't said that, I said that we are working on many acquisitions, 4 of them are warm/hard. We can expect an acquisition in subsequent periods. I did not say that it would happen this. I don't know. It might happen, but I'm not confirm that it will happen.

Okay. Sir, I stand corrected. So but in any case, since we are looking out for acquisition? And sir, with the recessionary trends in Western countries and the sentiment at rock bottom, so are you seeing the asking price for these acquisitions becoming more sensible and more lucrative for us?

It's definitely a buyer's market. I wouldn't say that the asking price has gone down because companies – will obviously ask for a higher price. But I think transactions are getting executed at lower. We are seeing transactions again executed at lower multiples. It seems like at least I can want to speak for our space. It seems like we're getting into a world of a buyer market. We are seeing -- and I know the reason for this is, but we are seeing a lot more volume in terms of inflow of deal possibilities. I'm not a finance expert, but I would normally think that if the market is dried you have fewer opportunities. But for some reason, we are seeing a much heavier volume of inflow of possible deals than we ever have in the last 5 years. And in terms of -- do we think it's the buyers' market, we do feel it's a buyer market because we are seeing transactions happen at a much lower multiple, given the growth of the business. India is a good example, right? We bought them at less than 3.5% of the EBITDA company north of 20% EBITDA margin and growing at 15%, 16%. So -- we have executed on this year itself.

Sure, sir. Sir, also wanted to understand that I joined this call a bit late, so I hope I'm not repeating myself, but this platform division, so you think that this financial year will be the last year of contraction and for next financial year, even this division will start growing?

Yes. So from -- this was our last acquisition of a distressed asset. We've done now 7 distressed asset acquisitions before E.I. And our experience, we've seen that it takes 5 years to, on average, across the 7 that we've done for the 6 have been done, for an attention to start to really perform. The first year for us is about stopping the bleeding and making sure that they're cash positive. The second year is more about getting the customers satisfied and the employees satisfied. The third year, the customers' employees tend to get more optimistic about the future and we start to see some growth in the fourth year. And in the fifth year, things really start to take-off. We've just started our third year in HighWire, and you have to see how the cycle performs out, but that's typically been our experience and HighWire is part of the course. In fact, perhaps slightly ahead to the rest because HighWire was profitable from the first month. But otherwise, from a growth perspective, I think it's going to follow that 4-5-year cycle that we've seen.

We have the next question from the line of [ Mahesh from RIA. ]

What would be the size of the 4 opportunities that you're pursuing in e-learning.

We are not looking at anything less than $10 million in revenue.

So would that be bigger than E.I. design?

Yes, of course. E.I. was much smaller. So we are not looking at anything less than $10 million in revenue annually. And we're not looking at anything that's declining. We're looking at profit businesses that are growing but are north of $10 million in annual revenue and businesses that are profitable.

Are they based sort of in India?

Sorry?

Are these opportunities companies based out of India?

Both, we're looking at India based and international opportunities.

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

Thank you, everyone. Like I said, Q2 was a strong recovery after muted Q1. We continue to support our guidance from the first quarter that we will beat INR 100 crores in profit after tax in FY '23. I'm told by many, many experts on the finance side that it is a magical moment when a company crosses that level, especially with a diversified customer mix, new opportunities get unlocked, newer plays open up. So we are hoping that once we achieve the level of scale, new opportunities will open up for us as well. Thank you for all your support over the years. This has been a very long journey. And I think we are starting to see that MPS is now moving from being a small, midsized company to a company that is seriously contemplating scale. So thank you for all your support and all your great questions that keep us honest and humble. And again, thank you, everyone, and catch you on the next call.

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