MPS Limited (MPSLTD) Earnings Call Transcript & Summary

Ladies and gentlemen, good day, and welcome to Q4 FY '24 Earnings Call of MPS Limited. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Mr. Rahul Arora, Chairman and CEO. Thank you, and over to you, Mr. Arora.

Thank you, Angel. Good morning from New York, and a warm welcome to our Q4 and FY '24 earnings call. Today on the call I have with me Sunit Malhotra, CFO of MPS Limited; Sukhwant Singh, Chief Operating Officer, India of our scholarly practice; Tony Alves, SVP and Head of Product Management at HighWire, which is our Platforms business; Kelly Lake, Chief Strategy and Innovation Officer at EI; Sukhwant has joined us on our corporate office in [ Noida ], and Kelly and Tony joined us from the Greater Boston area. So let's kick things off in our opening segment today by discussing our financial performance. Then Sukhwant will update us on our Content Solutions business. Kelly will then update everyone on the developments in our eLearning business. Tony will then follow up on the progress made in our platform. Finally, I will provide an update on our progress on AI ML, acquisitions, capital allocation and summarize the outcomes of the Board meetings. Let's get going. Over to you, Sunit.

Thanks, Raul. On a quarterly basis, Q4 FY '24 showed solid revenue growth. We recorded revenue of INR 150 crores on an FX-adjusted basis in Q4 FY '24, which represented 17.5% Y-o-Y growth. While there was an EBITDA decline in this last quarter, that is expected to change quickly. On a full year basis, MPS achieved a new milestone with FX-adjusted revenue of INR 546 crores in FY '24. We broadly maintained our margins despite acquiring a loss-making business in AJE. Looking back at FY '24, I would like to highlight 3 key strategic achievements. Number one, our top 15 customers now contribute to less than 60% of our revenue, a much lower core concentration than what we started this journey in 2012. All business segments and lines of business are developing growth momentum as we head into FY '25 and positive development in operating cash flow allowed our Board to recommend a generous distribution even in a year when we completed 2 acquisitions through internal accruals. I want to hand it over to Sukhwant to discuss the development in our CS business.

Thank you, Sunit. So revenue in our Content Solutions business grew by almost 7.5% in financial year '24 compared to the last year. Given the business operating leverage, margins expanded on a stand-alone basis to 40% and were only lower on a consolidated basis due to the acquisition of AJE. This scholarly lines of the Content Solutions business continued to lead the charge towards revenue growth and margin expansion. Volumes and revenues from our [ Star ] customer base grew because our service delivery has been among the best in the supply chain as it has consolidated. In the scholarly marketplace we have launched new capabilities linked to journal editorial office that are placed in a more strategic position in the value chain, which has not only resulted in a new business from net new customers but also improved the stickiness and quality of our revenue with existing customers. Together with the HighWire suite of products and the newly acquired capabilities at AJE, this new [ AJO ] service compounds our capabilities and positions us as the only techno service provider with a global market presence at the front end of the scholarly publishing value chain. Overall, the content solution momentum was held back only by a temporary blip in the education side of our Content Solutions business, which is expected to correct in FY '25. I continue to remain bullish about our content solution over the next 3 years, particularly in FY '25 where we expect to level up. I want to hand it over now to Kelly to discuss the eLearning solutions performance in FY '24. Over to you, Kelly.

Thank you, Sukhwant. eLearning continued as the second largest business segment. FX adjusted revenues grew by 6% in FY '24. And while we're behind our expectations in the scale-up of this business in FY '24, I'm confident about the profitable growth in FY '25. This business has 4 operating entities: India, Germany, Switzerland and Australia. All international subsidiaries succeeded in Q4 and FY '24, scaling revenues at healthy margins. Our [ eLearning ] entity had a bumpy period because of the deferment of a large project Rahul described in the last call that impacted us in Q4 FY '24, and we leave the bumpy period behind us as we enter into FY '25 with a strong Q1. [ This gives me ] confidence about expanding our corporate learning business is a combination of newly developed internal momentum and the general pickup in the marketplace. Concerning the [ Internet of ] the internal momentum, the subsidiaries in the eLearning business outside of India have gathered even further momentum in calendar year 2024. Our order book has expanded in the Indian entity and the pipeline looks far more robust. Concerning the marketplace, we're seeing a lot more activity and EI is giving much more attention. Our qualified leads and opportunities has picked up for an example, and all the investments in the business seem to have had a compounding impact. Another example, just yesterday, a leading industry association called the e-learning industry recognized EI as the #1 global company in the market for leveraging our solutions to drive and maximize training ROI for our customers. I would now like to hand it over to Tony to discuss the Platform Solutions performance in FY '24.

Thank you very much, Kelly. For the first time since the acquisition of HighWire in 2020, the platform business did not decline. Revenues grew modestly in FY '24, margins continued to improve due to a healthier customer profile, smarter cloud spending and improved operational activity. On an FY basis, profits grew by as much as 30% in our platform business on a consolidated basis, including AJE and the profitability position was even better on a stand-alone basis without AJE. Execution of product road maps was on schedule for the entire platform suite in FY '24. The marketplace has received new features and functionalities, and there will be several monetization opportunities soon through the implementation projects and migration programs. We launched 2 new SaaS products, DigiCorePro and THINK365 in FY '24. We expect short-term revenue growth in H1 FY '25 via customer migrations from older platforms and more remarkable growth from new customers from H2 FY '25 onward. Please note that based on new information, I've advanced this growth time line in the platform business by several months. I can confidently state that our platform business is now performing well in its newly achieved phase of healthy growth for the following reasons: one, we're actively investing in product development. This includes new product launches, active product road maps and resolution of technical debt. Two, our customers' acquisition strategy that involves product service bundling and price warriorship is gaining traction in helping us develop a new customer base and expand our share of wallet with existing customers. And third, the feedback from the industry and scholar community is highly encouraging. HighWire and MPS offer the only serious independent choice since 2 of our larger competitors has been acquired by publishers. I'd now like to hand this over to Rahul to conclude this opening section.

Thanks, Tony. I'll begin by discussing the progress on the 2 acquisitions. We completed the acquisition of Liberate Learning in September of last year. The acquisition shaped our entry into Australia and New Zealand. Our second acquisition of a growing business was a refreshing change in how we operate. We had an opportunity to learn much about what it takes to operate and drive a corporate learning business, which largely differs from the other business interests. An alternate approach to investing, majority instead of 100% acquisition also meant changing how we unlock value. The [ how ] concerning Liberate is more about helping connect the dots for them across the business e-learning capabilities MPS has and supporting the management team from the corporate office on things such as shared services, including finance and legal. After robust 2023, Liberate had a rolling start in 2024 and is expected to close its FI, which ends on June 30 with a 25% growth in order book. To echo Kelly's comments earlier, the market opportunity in corporate learning is expanding, and we are uniquely positioned to acquire market share during this compelling point in time. In contrast, the acquisition of AJE, which was done in March 2024, has [ helped ] our leadership team more directly during the business with proactive support from the [ AJE ] teams. We have already eliminated $12 million in annual operating expenses for [ AJE ]. AJE allows us to make a meaningful AI play, expand our reach into China and most importantly, to step up our strategic partnership with [indiscernible]. The benefits significantly outweigh the near-term costs associated with temporary margin contraction from a strategic lens. And we also expect in solid financial indicators, including a high ROE. So AJE is an excellent segue into our progress on AIML. The advances in AIML has had a proportionate impact on the entire ecosystem, affecting our customers, competitors, the industry at large as well as the macroeconomic environment. To spearhead this transformative opportunity, we launched a new initiative called MPS Labs in 2022, a pioneering initiative headquartered out of Bengaluru under our CTO. MPS Labs is our R&D division that powers innovation for the company and is also the incubator of new products, some of which were described by Tony in his remarks. MPS Labs is working on scaling and executing bleeding edge tech. Key features include modern architecture, API-based integration, a micro services approach and leveraging AIML on the cloud to design and develop innovative solutions. This 200-plus team, including developers, ML engineers and data scientists have made substantive progress in FY '24. The scope of projects that have gone live include content profiling, automated and guided editing, content structuring, automated generation of supplementary content including abstracts, summaries investment, image for MVX and ML-powered accessibility solutions and AI-powered transformation services. The acquisition of AJE has further elevated our progress in EI, capacity as well as our market positioning. All these initiatives are now resulting in new revenue for MPS. On capital allocation, our priority is always to redistribute surplus funds to the shareholders of MPS provided there is no imminent use for those funds over the next 6 to 12 months. This approach allows us to stay focused, disciplined and responsible. I'm pleased to share that based on the unprecedented earnings and operating cash flows in FY '25, the Board of Directors recommends a final dividend of INR 45 per equity share of INR 10 for each -- for the company. The final distribution takes total distribution to INR 75 for equity share of INR 10 each of the company. Our Board has taken a balanced view on return to shareholders. Overall, our newfound open listed debt allows us to keep up the consistent distributions, go ahead and acquire healthy and growing assets, albeit at compelling valuations and significantly enhance shareholder value. Looking back at FY '24, we experienced some mix of successes as well as challenges. And the scorecard does not reveal the excellent momentum we've achieved at the end of the year. In our first -- this was our first year where we completed 2 acquisitions, yet our final dividend equates to a distribution in the FI are not higher than the pack that we achieved. Given our momentum and the yet to be unlocked value from the 2 acquisitions we completed in FY '24, we are optimistic about FY '25. There's so much growth potential, and we're comfortable forecasting at least a 25% year-on-year growth impact earnings in FY '25. Let's now open the call to questions.

[Operator Instructions] The first question comes from the line of Karan, an individual investor. Mr. Karan, please go ahead with the question.

Okay. Okay. So I have one question. So we have basically a new strategy like we are planning to make acquisitions, 2 every year, right? So I have one question to ask regarding this strategy. So how do you make sure like the companies which you are acquiring. So they not lose the clients and the employees, right? And so basically, there is a cultural shift when the company got acquired by a parent company, right? So how do you see like we are solving these challenges?

Sure. Thank you for your question. Yes, I don't think we have changed the strategy to do 2 acquisitions every year. We did 2 acquisitions in FY '24. Having said that, we do have a modified acquisition playbook as you rightly pointed out, Karan. So -- and the change in approach is we're looking at larger bites. So like with AJE north of $20 million in revenue. We're also looking at companies that come with some inherent strength, even if they are not super high on margins upfront. Our goal is that we should have solid line of visibility that we can get them to the NPS level very quickly, rather than later. And in terms of your question on how do we make sure that these acquisitions don't implode. I think the biggest change has been that we're looking at different type of assets -- a different type of assets now. So historically, we've been an acquirer of distressed assets. We're now looking at healthy assets, businesses that have momentum already before we acquire them. Additionally, it is a small community. We operate in key markets, scholarly education and corporate. So we tend to acquire businesses that we already know -- somewhat know. Also during the diligence process, we tend to not only do financial tax and legal divisions, but also HR divisions from a perspective of culture alignment and value alignment. We have walked away from some very attractive opportunities in FY '24, simply because the last piece of it, the value alignment was not there. So from -- so obviously, you can never get it perfect. We've had a decent track record and the large reason for that has been how disciplined we've been in our approach. So the parameters that we look at are -- the company should have momentum in terms of growth and profitability. It should be a premium asset. So #1, #2 in its space, even if it's in a niche space, it should be operating as a premium company. The third piece of it is customers should be sticky. So revenue should be sticky. The fourth, of course, is limited churn in the employee base. And the fifth, which is the most important element is cultural and value alignment with MPS. So like I said, Obviously, you can't have a full group approach, but the way we attack it is to make sure that it's super disciplined, responsible in making sure that we don't deviate on any other parameters that is [ guide ].

I have one more question. So we are like giving a guidance of tripling our top line by '27, right? And in your earlier presentations, you have mentioned there is a scope of margin expansion as well. So what do you think -- can you give some guidance about the margin expansion also by '27 or '28 like you are giving in terms of the top line?

Yes. So this year, FY '25, like I pointed out earlier, we are projecting a 25% year-on-year earnings, and that kind of brings us, as you rightly pointed out, back on track towards Vision 2027, which is an FY '28 goal. On earnings, I think on margins, the only part of our business that currently is underperforming in margins is the eLearning business. Our goal is to get that business in the short term to a 25% margin and more in a 2-year term to a 30% margin. In fact, FY '25, we're expecting a pretty big catch-up on the eLearning margin. So broadly, I think you can expect abrupt that change, given that's a smaller proportion of the business now, you can expect a 2% to 3% improvement in margins. And of course, depending on how the content and the platform business scales and quickly you scale, there will be some margin appreciation there. But overall, I would say from a margin profile perspective on a consolidated level, we should look at 2% to 3% and really focus on the CAGR on the revenue.

Next question comes from the line of Rahul Jain from Dolat Capital. Mr. Jain. Please go ahead with your question. [Operator Instructions] Since there's no reply from the line of Ms. Jain, we'll promote the next in line. That is Mr. Mahesh, an individual investor.

Rahul, my question is on the impact of AI on the ecosystem. What is the impact of development in the AI ecosystem on [ new ] customers in each of the verticals that you operate. To what extent it is disrupting their own business model? And what is the impact of all this on your order book?

Sure. Those are excellent questions. So I'll divide this into short term and medium term. I think in terms of customer profile, we have 3 types of customers in terms of how they are thinking about AI. We have customers that are cautiously optimistic. We have customers that are saying we don't want to be the first. So we want to do something, but we don't want to be the first. And then we have a third category of customers, which is the smallest category, which are saying we just going to ignore this whole thing. That's a very small part of the customer base, but yes, there is that customer base too. Short term, we're actually seeing a positive opportunity in terms of revenue growth. I think a large part of our customer base is trying to basically enable AI in their workflows. They need strong partners in order to do that for them. So areas where we have seen that is translation, for example, where -- which has been a soft area for revenue for us, but in transition services, AI powered workflows are becoming very common. Similarly on accessibility, how you're making content more accessible, where you're generating some of the alternative text, very fairly seamlessly through machine learning. As well as generating some supplementary content through existing products. So short term, we've actually seen significant opportunities on the revenue side. We expect that to continue into FY '25 as well. This will, of course, be accretive to both the content business as well as the eLearning business in terms of short term. Medium term, I think what we anticipate is once these AI workflows are enabled. And the second piece, Mahesh, is more opinion, it's not data-driven, it's an opinion, is that we will probably see a final consolidation of the supply chain. And the reason for that is when you're -- in some of these AI workflows, a large part of what you're doing, the value is unlocked through iterations and time. And for a customer to -- for example, if you're opening up -- if you're building a proprietary LLM for them, they obviously can't build that LLM out with 4, 5 suppliers, right? Ideally, they want to build that with 1, worst case, they want to build that with 2 to make sure that they have some diversity. So I think more longer term, what we're going to see is a consolidation of supply chain where customers that today work with 5, 6 vendors on the content side. And on the eLearning side with 10, 12 vendors they will kind of be forced to work with 1 or 2. I mean, time will tell how that affects MPS. Of course, we're going to try our best to make sure that we are one of those 1 or 2 vendors that work with our core customer base. But I think we're going to see a sea change in how customers engage with the vendors because there will be this mutual codependence. We are very confident based on the approach and as well as the strategy that we've seen so far from our customers that they want to codevelop this, and not do it in isolation because a lot of the capabilities actually sit on the vendor side. So yes, I think scale players like MPS should see an opportunity. But of course, where -- we'll probably see that with our core customer base. And it's possible that we may lose some revenue in the long term with customers that are transactional because they'll want to go deeper with their core customers. So yes, I think short-term good revenue growth because everyone is piloting a bunch of things. They need partners to implement these projects. Medium term, 2 to 3 years, I think there will be a final consolidation of the supply chain, which -- it's high time it does happen. Our total TAM is [ $300 billion -- over $300 billion ] and the largest company in our space is $300 million. So this supply chain is ripe for consolidation and if AI can do that, I think we're all for it at MPS. So we're looking at it as a positive. Yes, there'll be -- how we do business will change, who our customers are might change. We may not be servicing 750 customers 2 years from now? But overall, we're optimistic and we're making a lot of investments to make sure that when those customers do take that call that we're only going to work with one of the providers. MPS is in a short list as well as the next 2 or 3 years, as they're piloting things with us, we are doing our best to make sure that we are ahead of our competition on whatever we're doing.

It sounds very interesting, Rahul. So you mentioned LLM capability. So I would like to know if MPS [ is going to be ] enough to be at the forefront of providing LLM architecture to your clients, the customers?

Yes, I think the -- we were at a certain level, which was pretty impressive ahead of the market. I think overall, MPS Labs, we have -- we, of course, have developed our own -- and we [ have extract ] about 300,000 unique documents to our model. And then after AJE, it's gone to a whole new level because they also have 2 models. One is [ text AI ] by over 1 million manuscripts. Another which is the back end of Curie has been fed 250,000 documents. So we've gone from a place where we were doing very well, and we thought that we were ahead of the marketplace. But with AJE now, we are at a more new level. And that's where we're seeing a lot of opportunity in the near term for AJE because a large part of AJE today -- in fact, almost all of it is B2C, which is working with authors directly. But we are seeing a tremendous opportunity for AJE in the B2B side to service the MPS core customer base, which, of course, we have strong relationships with. We've done some excellent demos. We've talked about pilots and projects as well.

Next question comes from the line of [ Vikas Mistry ] from Moonshot Ventures.

Okay. I have a couple of questions. The first is on -- again, on AI part. There are very large language models run by these companies like [ Inflection AI ]. They are investing and going through some [indiscernible] manuscript, what really gives you confidence that you will be in pole position and these people will not fine-tune their models on this large market or you enumerated of $300 billion. So what gives you confidence to be in pole position and these large language models will not disrupt your stay?

Yes. I think -- so some of the ones that you described are more marked -- our -- what we are developing is very specific and niche to our industry. Clearly now within MPS, we have -- we are the oldest provider in terms of -- on the publishing side. We are the oldest provider, as we're over 50 years. We are the oldest provider on the corporate. So that was from MPS McMillan. We are the oldest provider on the eLearning through Tata Interactive, and we are the oldest provider on the platform side through HighWire Press. So the amount of expertise as well as legacy data that we possess is unparalleled. And of course, I'm only talking about our use case of the 3 markets that we operate in, which is scholarly education and proper learning. But of course, we're not trying to compete with the mass model that have been developed. Our models are more focused on each of these markets. And at a customer level, we're also building them at a customer level because in our industry, there's a massive concern around data and IP. In order to protect that concern, we're having to discuss and develop that at a customer level.

Yes. Okay. My next question is on acquisition. What white spaces do you see still now on those 3 verticals we operate? And where we're trying to get more acquisitions? Because I think we -- the full [ book year ] products. Now the only thing is that we have to scale up and you are contradicting to that. You are saying that we still can go for more acquisitions or whether they will be bolt-on acquisitions or whether there will be -- in same area just to ramp up the scale?

Again, excellent question. So yes, I would not say from a capability standpoint, yes, we do possess quite a bit. Having said that, there is still opportunities for capability expansion that allow us to move up and down the value chain. So we're looking at those types of opportunities. We're looking at opportunities that expand our geographic reach as well. So for example, in the last year -- last financial FY '24, we expanded into Australia, New Zealand as well as in China. There are still regions like the Middle East as well as Latin America that we're not currently very strong in. Also certain parts of Europe where we're not very strong in, so there's a geographic play that we're looking at as well. And finally, the piece that we are, again, looking to actively accelerate is the education space. Today, in the education space, we -- a bulk of our revenue comes from K through 12 as well as to publishing. And our goal then is to scale that into higher ed and specifically within higher ed with adult learning and educational institutes. So there's still much juice left for us to acquire in terms of capability expansion, geographic expansion as well as adjacent market expansion. So we're looking at all 3 vectors. And there's still a lot of juice left on the acquisition side.

Next question comes from the line of [ Darshan Jhaveri ] with Crown Capital.

Sir, just wanted to understand now, so we are in terms of our growth projection that we are seeing maybe for next year, so we are planning around a 25% earnings growth. So our revenue would be growing a bit less than 20% as you having a margin expansion. So what kind of a revenue guidance do we see for next year?

I feel slightly uncomfortable giving the revenue guidance, we'd like to report one number. So that number is going to be 25% [ PAT ]. I think short term -- we'll -- probably our revenue growth will be higher than our profitability growth simply because we acquired a loss-making AJE. A bunch of that has already been culled in terms of expenses. But still it's not -- every quarter, we'll see margin improvement in AJE. So as a result, in the short term, there will -- we will be out of sync on revenue growth and profit growth and revenue growth will be higher than profit growth in the short term. But overall guidance for the year is 25% PAT growth.

Okay. That -- and EBITDA, we are seeing that we will have a 200, 300 basis points improvement. That is something that we are confident on, sir?

Yes. I think largely PAT, EBITDA they all tend to flow in the same proportions. I like to look at PAT because that's kind of the bottom line and it [ culls ] all the noise. So I like to look at that. That's more a personal thing. Otherwise, they all flow in the same proportion.

Next question comes from the line of [ Krushi Parekh ] from Pentacle Family Office.

I think some of the questions on the strategy side have been answered. Just one question. What are the challenges that we are facing, especially in the North America and maybe even in the European market these days?

No, I don't think we're facing any challenges. I think that this is the big challenge. At least we are not anticipating -- we have not seen anything in FY '24. First couple of quarters [indiscernible] Look into the next 6 months? FY '25 as well, we're not seeing any challenges now. [ Now if ] that changes in the later half of the second half of the calendar year, then definitely didn't watch, but no noise as of now. The only challenge that we face is as a more FY '24 focus was very unique to us, which was we had this massive order for building an experience center, which would have meant that our eLearning business would have grown at around 15%. Additionally, profit growth would have been slightly higher for that business. Of course, that didn't happen. So therefore, it's been -- it was a disappointing quarter and a disappointing year for the eLearning business. But again, like as Kelly pointed out, FY '25 looks super strong, and we're very excited about the eLearning business making a comeback. So not seeing any challenges. Maybe I'll just bring Kelly in to talk a little bit about how the market is developing in North America as well as Europe because I know she's spearheading that effort for us on the corporate side. So maybe if you can give some commentary on how she's seen both those markets for corporate learning in the next year or so. Kelly?

Thank you, Rahul. So we are actually in a very clinical part of the market right now with a very positive upswing for profitabilities within North America and Europe. We are focusing on our global footprint expansion. We're seeing growth rates being produced from North America substantially this year and as well as the European countries as well due to organizations looking for strategic partners such as ourselves to help them drive performance improvements across the board. So it's -- those opportunities are tying -- learning initiatives back to the business and ensuring that the company is being [ prepared ] from a productivity and a profitability perspective. So we're seeing growth substantially in those core areas over the last year, and we will continue to see that move forward as the economic situations improve. Also, they're looking for introducing new verticals, and we're able to provide strategic solutions because we are a strategic partner providing a unique set of solutions that our competitors are not. So that market is opening greatly for us, and we will definitely see substantial growth within those core areas.

So if I can...

What Kelly said -- sorry about that. Just a supplement on what Kelly said. I think, yes, we understand where you might be coming from in terms of looking at the global IT/ITS market, and maybe that's why you're asking that question. So 2 things there. One, we're not exactly IT/ITS. That's a different space altogether. And second, happy to -- humbly say that they're not that big. So there's a small base effect. Last year, we did about INR 540 crore, INR 550 crores in revenue. So I don't think that they're yet in terms of size and scale to have the kind of headwinds some of the larger companies are facing probably. So again, that's my opinion.

Right. That's good to hear. If I can just ask one more follow-up question on this. So when we are looking at the market. I mean, the expansion of our business, is it more to do with us consolidating the market and capturing the existing market or even the overall market is growing?

Yes. So again, we operate in 3 markets: scholarly, education and corporate. The scholarly market basically grows at 6% every year. It doesn't grow higher. It doesn't grow lower, even during the session at close. So in that market, it's more share of wallet expansion and we're doing that through being an end-to-end provider in the value chain? And then on the education side, the market itself is expanding, and we're also trying to capture market share. And on the corporate side as well, the market itself is growing and is expanding out to capture market share. So with the -- scholarly is probably the only exception to that rule. But for education and corporate, it's both. It's market share expansion as well as the market expanding at over 10%. I'd like to bring Tony in for a minute because he can talk a little bit about what's so different and compelling about MPS as a company? That even in a scholarly market that's not growing at more than 5%, 6%, we are actually growing in at 15%, 16%. So what is different about us as being able to capture more market share in this market? So Tony, if you could just help everyone understand that even in a slow growth market, we tend to -- we seem to be outperforming anybody else. Why is that?

Sure thing. Thanks, Rahul. MPS and HighWire, we're the only independent organization that really offers the full end-to-end solution for scholarly publishers. And with the acquisition of AJE, we have solutions for manuscript preparation. We have, of course, workflow management tools, content hosting, business analytics. And so MPS really provides a really -- we provide really robust modern software. And that is also complemented by what is really a very highly skilled staff that understands the domain and it understands the unique way that scholarly content needs to be managed, how scholarly content needs to be edited and presented. Our major competitors in this space. As has been mentioned, they are owned by large commercial publishers. That means that really, MPS is a true publisher independent provider. So that's a really important differentiator. Many of the society publishers, large and small as well as university presses and other commercial publishers, they want platforms and services from an independent source, not from their competition. Also, MPS -- we're not weighed down by legacy systems that are built on old 25-year-old technology. We are actively building and delivering new systems. Those are based on modern modular architecture, the utilized AI natural language processing, micro services, and that means that these solutions are easy to enhance and upgrade. So within the scholarly marketplace, we really have an advantage and a lot of opportunity to grow our business in a slow growing -- in the slow-growing sector. [ Transmit ] to you or I'm happy to comment on anything else that you think would be helpful.

Next question comes from the line of Rahul Jain from Dolat Capital.

Yes. Thanks for giving me an opportunity again. So essentially, in my questions. I have two. Firstly, just around 2 months, we are into this transaction. So any [ extra things miss ] if you if we identify in terms of your experience versus at the time of the transaction that you might have noticed, any positive or negative [ surprise ]? Secondly, on the organic business, it would be great if you could explain what's your view from me on [indiscernible] and especially on the eLearning side where probably organically, the scalability has not happened while the industry continues to offer tremendous opportunity. Do we need to expand our offerings in that space?

Sure. Thanks for those questions. Yes, I think the acquisition of AJE, there's obviously from an outcome perspective, no surprises. So like I pointed out at the beginning of the call, during the diligence phase, we have already figured out that this is going to be -- from a cost management standpoint, it's going to be a piece. And we've done -- the team and the team has very successfully delivered on unlocking that piece. So yes, a lot of detailing and a lot more work than we expected on the cost management [ pipeline ], but we have eliminated, as I explained already, $12 million in annual operating expenses. So a lot of those will not show up in FY '24, they start to show up from Q1 of FY '25, so that there's more forward effect that we have not seen yet. AJE was loss-making in Q4 FY '24. So no change in outcomes. It was a lot more work than we expected, but it's all behind us now or most of it is behind us now. And then from a -- I think the positive that we did not expect -- so we did expect strong B2B integration on the scholarly side. So we started to see some of that. We are already pitching AJE services as well as the Curie platform to scholarly publishers. So that was an obvious, obvious integration, and we're starting to see that revenue synergies start to unlock as some of our customers start to get super interested with AJE and Curie. The positive piece that we did not anticipate was more on the education side. We've historically [ B ] and [ ATE ] have thought of themselves as kind of this company that is focused on the scholarly market. But we've seen in the last couple of weeks through road shows and demos, what we're seeing is a lot -- there's a lot of interest in Curie on the education side of our business. We're also seeing that it has elevated how people think of us in the marketplace. We've been talking about MPS Labs and AI now since 2022. But after the acquisition, is the perception and has gone to a whole new level. And finally, something that we probably should have figured out during the -- and this is again a positive, but probably something we should have figured out during diligence was we can actually use these tools in our own internal efficiency goals. So that's something that we are now starting to look at in terms of integrating with Curie and other EV offerings in our content [ management ] workflow. So that should hopefully in the medium term, help improve margins even more on the content side. So 3 big positives, not really a negative, but more that there is a lot of work, more work than we anticipated. But yes, it's all done now. So most of it is done now. So very, very happy that we went ahead and took this call. I think it was a larger bite than what we typically do in terms of an acquisition. So -- but yes, I think definitely a good decision. On the organic side, I think -- on the content side of our business, really the scholarly business has just been having some phenomenal growth. Again to what Tony was saying, it's a slow-growth market. But even in that market, we're growing in double digits. So really, what we need to now do is make sure that we're creating the same momentum in the education side of our business. So the -- I don't think it is a capability issue, it has been more an internal go-to-market strategy kind of issue. So we've corrected the GTM on education now. And we're already starting to see solid results from that. Education business should be strong within the content segment in FY '25. With respect to eLearning. Again, the market is growing. All the international subsidiaries, Top SIM, MPS, [ Europa, ] Liberate, they're all growing in double digits. They're all doing really well. I think we won a very large order back in September of 2023. And the focus was, a, on winning that order and, b, then executing that order. I think the team may have taken their foot off the pedal a little bit because it was in the bag and the focus was on that. And when once that project did not transpire, it set us back by 6 months. And I think that's just what it is. It's a 6-month setback, it's behind us. And we have just now gone back -- since January, we just hit the market hard which, as Kelly described, our pipeline has improved. Our order book has improved. All the lead indicators going into FY '25 around revenue [ evening ] are looking super strong. So yes, I think now it's more about delivering on the projects that we have won and converting the opportunities that are in the pipeline. So yes, on the organic side, change in GTM strategy for education and tightening up things a little bit on the corporate learning side. I think those have been 2 subtle changes we've made. And I think growing pains, right in any business when you're trying to grow at a 25% CAGR between organic and inorganic, every once in a while, you'll have a spill. But not -- I'm not overly concerned because overall, on a 3-year time line, we're trending the way we need to. So yes, would have been happier if we didn't have this small bump in the last 6 months. But yes, really, it's more important that if you do something wrong once, you pick up by quickly, and I think the team did an excellent job of recovering very quickly.

Next question comes from the line of Naveen Bothra, an individual investor.

Congratulations for a stable set of numbers and excellent distribution of around 5% of our overall market cap and completely giving back the earnings to the shareholders. So my questions regarding AJE been already replied by you. So I would like to [ question ] about [ the revenue ] vertical in the eLearning vertical. In the last quarter, we said that we have one of the large experience center project of a [ PSU oil ] company has been deferred. And your commentary was that we may be in a position to say something about this deferred project. So if you can throw some more light on that project. And the overall [ revenue ] studio vertical, which cognate reality, virtual reality, if you can throw more light and the road map journey ahead, it will be quite helpful, sir.

Yes. Thank you for that excellent question. Yes, overall, on the [ stall ] project, unfortunately, I have nothing new to report. Hopefully, that changes at some point. Having said that, we have already on that particular project, we already -- we've already replaced that project with an opportunity for -- in FY '25. So we're not really concerned about that -- if that project comes, great. It would be like -- it will be like Diwali for -- early in the year. But even without that project, we're feeling very confident because we've replaced that with a different opportunity. So with -- that I was trying to explain to Rahul in the previous question that the team has done an excellent job to recover. So we've replaced that with a different opportunity. And overall, we have won a series of projects on the virtual reality and the AR side with our core customer base in the last 3 to 6 months as well as we've acquired a couple of new logos because of our capabilities in immersive learning. So again, FY '25, watch this space on the eLearning side. It's looking like a very strong year for us after a modest FY '24, both in terms of the financial indicators, so revenue growth, profit growth, but also more strategic indicators. We are in the running for a couple of awards in this space. So hopefully, we'll find out in August. We already filled in the application, but August we find out if we actually won those awards as well. And these awards, if you win them, it kind of gives you strong recognition in the marketplace. So yes, we are in the running for a few, so also fingers crossed on that.

So when you talk about this housing this vertical under eLearning space. How do you see this [ eLearning ] vertical spending out in, say, 2 to 3 years? Will it become an independent this vertical out of eLearning space? Or it will be housed under the eLearning space regularly? There will be numbers [ separately ] are certain then it will be possible, sir. Because it's a very interesting vertical. It seems to be very scalable thing and all differentiating thing for MPS.

I absolutely agree with you in terms of the business opportunity, have 0 objection to what you're saying. The scale up that you see in the space -- the scale-up opportunity that we see in this place is massive. Having said that, the reason we, at this point, don't want to unlock this team from the rest of the business is simply because of the operational efficiency and the margin improvement we see by keeping these 2 business whole. Because what tends to happen is this experience center and [ imagine ] vertical, it tends to be very choppy in terms of the order inflow. So you have one quarter where you get this massive project and you have to execute it and then your team will be sitting empty for the next 6, 9 months. So we see more value in keeping them whole. For more operational reasons, one is, like I explained to you more on capacity management. The second piece, of course, is when we introduce this talent into some of the traditional eLearning side, it helps us distinguish ourselves from the competition because this team then comes in with a far more creative approach to the solution that we're proposing and that brings us a notch higher. So -- from a business standpoint, yes, from a financial standpoint, yes, at a high level, as we scale up, imagine you will only become a larger proportion of the eLearning business segment. But from an operational efficiency standpoint, there's a lot of value in keeping it whole.

Next question comes from the line of Keshav Garg with Counter Cyclical PMS.

Sir, I'm trying to understand that in our consolidated balance sheet. There is a tremendous increase in intangible assets under development from less than INR 31 crores to over INR 93 crores. So if you could help us understand that what is the increase -- total increase in intangible assets is around INR 63 crores year-on-year. So why are we firstly instead of debiting it from the P&L? Why are you capitalizing these expenses? And what are these pertaining to?

These are to be -- the acquisition of AJE.

But [ then this would be ] then as a goodwill has increased from INR 123 crores to almost INR 270 crores, which is an increase of INR 120 crore, which is what we paid to acquire both the acquisitions that we did last year. So then how come -- when it is already covered in goodwill, then how come it is again being accounted for under intangible assets?

Yes, I'll let Sunit come in and answer the question, but my understanding is it is all got to do with the AJE acquisition. But I'll ask Sunit to come in and describe what's happening.

Yes. Thanks, Rahul. So this is for both the acquisitions. This is for AJE as well as Liberate. So just to answer this question, based on purchase price allocation, certain amounts which can be identified and which can be allocated to the tangible assets and intangible assets. Those are debited there -- and it is only the balance amount, which is the goodwill. So not the entire amount that goes to the goodwill. So in this case, the goodwill, which has increased is basically because of Liberate and AJE both. Liberate is INR 43 crores. And in case of AJE, it is close to INR 100 crores, which has increased our goodwill. And when we look at the other intangibles. In fact, that has also increased. So in case of -- this increase is INR 62.5 crores and -- which is basically INR 40 crores is because of Liberate and the balance is coming from AJE. So this is for the trade -- [indiscernible].

Keshav, I think regarding your question, the answer to your question lies in -- your purchase price for what you're looking at AJE is probably lower than what you're calculating. So I think that's the variance that you're getting. But it's totally got to do with the acquisition. So maybe you're working on an incorrect purchase price. I think the effective purchase price is higher than what you're probably looking at.

Yes. Thanks, Rahul. In fact, that's [ it ].

Next question comes from the line of Gunit Singh with CCIPL. Mr. Singh, please go ahead with your question.

Yes. You have mentioned that we would be expecting about 25% growth in PAT this year. So are there any downside risks or contingencies on that? Because last year we had given a guidance, but one of our contracts were for [indiscernible] eLearning was deferred to -- deferred from last year to this year. So I mean, are there any contingencies or downward risk that we're looking at for achieving the 25% growth? And also, please update about the deferred [ total ] that would -- that would be completed this year.