MPS Limited (MPSLTD) Earnings Call Transcript & Summary

A very good evening to respected shareholders, directors, auditors and others. It is indeed a pleasure to welcome all of you to the 54th Annual General Meeting of MPS Limited. Before our esteemed Chairman delivers his formal address, allow me to highlight certain key points regarding participation in the AGM. The AGM has been convened through video conferencing or other audio/visual means in compliance with the provisions of companies 2013, read with circulars issued by the MCA and SEBI from time to time. The participation in this AGM was opened 60 minutes prior to the scheduled time of commencement, and will remain opened for another 15 minutes after the conclusion of the AGM broadcasting boards. As stated in the notice, the company has engaged CTSL to provide BC facility, enabling the shareholders to attend the AGM with participation on a first come, first serve basis for the first 1,000 shareholders. Our key speakers such as promoters, institution investors, directors, KMP and auditors will have unrestricted access to participate in the AGM. Since the AGM is being held through video conferencing, where physical attendance of members in any case has been dispensed with. Our member entitled to attend and vote at the meeting will not be eligible to appoint proxies to attend the meeting. Other body corporates are entitled to appoint authorized representative to participate in the AGM and cast their vote through e-voting. The registered office of the company situated at Chennai shall be deemed to be the venue for this AGM, and the proceedings of the AGM should also be deemed to be made there at. Furthermore, to transit the businesses, as mentioned in the notice, the shareholders are provided with an opportunity to inspect all documents referred to in the notice and an explanatory statement until the date of AGM. In addition, we have received request from 5 shareholders for enrollment as speaker shareholders in the meeting to express their views and ask questions. With this, I now request Chairman, sir, to welcome and address shareholders. Thank you, and over to you, sir.

Thank you, Raman. Ladies and gentlemen, distinguished shareholders, esteemed directors, auditors and all present at the meeting, a warm welcome to each of you at our 54th AGM of your company. I'm informed that the requisite quorum for this Annual General Meeting is present. I now call the meeting to order. Before we start the main proceedings, I would like to introduce the directors, senior management officials, statutory auditors and secretarial auditors present through video conferencing and visible on your screens. Mr. Ajay Mankotia, an Independent Director and Chairman of the Audit Committee, brings over 25 years of distinguished experience in the Indian revenue service, combined with more than a decade of experience in a prominent media company. He is an expert in taxation, accounting, law and media. Mr. Mankotia joined us form New Delhi. Ms. Achal Khanna, an Independent Director of the company, brings over 30 years of leadership experience across diverse industries. With extensive expertise in human resources management, she advocates for women's empowerment and inclusive workplaces. She is joining us from Gurugram. Ms. Jayantika Dave, an Independent Director and Chairperson of the Nomination and Remuneration Committee, brings 35 years of HR leadership experience. She has been the Vice President - HR for Ingersoll Rand, Agilent Technologies and Hewlett Packard, focusing on executive coaching and HR strategy. She joins us from Uttarakhand. Mr. Karthik Bhat, who has recently joined as an additional Director of the company, under the category of Independent Nonexecutive, is the Founder and Managing Partner of Force Ventures, specializing in early-stage investments. With over 20 years of experience in both investment and business operations, his advice, built and investing in over 75 start-ups. He is attending from Bengaluru. Ms. Ruvina Singh, who has also recently joined us as an additional Director of the company, under the category of Independent Nonexecutive, over 35 years of experience in leadership, development and executive coaching. She joins us from Gurugram. Mr. Suhas Khullar, an Independent Director of the company, has over 20 years of experience in consumer tech startups, private equity and consulting. He possesses experience of finance, legal matters, resource allocation, Investor Relations and Compliance. He is attending from Abu Dhabi. Ms. Yamini Tandon, a Nonexecutive Director and Chairperson of the Stakeholders Relationship Committee, brings valuable expertise in marketing, strategy, post-merger integration and turnaround management. She joins us from Gurugram. Mr. Sunit Malhotra, CFO; and Mr. Raman Sapra, Company secretary, both are participating in this meeting from Noida. Mr. Rohit Arora, Partner; M/s. Walker Chandiok & Co, Statutory Auditors; and Mr. R. Sridharan of R. Sridharan & Associates, the Secretarial Auditor and the scrutinizer, are also attending the meeting from their respective locations. Thank you, and let's proceed with the agenda for this meeting. I will begin with some opening remarks. FY '24 was an excellent year for executing a growth strategy toward Vision 2027. The final scorecard, which showed a total revenue and EPS growth of approximately 9.5%, did not do justice to what we achieved in FY '24, and the phenomenal follow-through we expect in FY '25. Our 5-pronged approach going [ gestalt ] towards growth is simple in design. At its core, we relentlessly ensure that the whole of MPS is greater than some of its various parts. In FY '24, our mission was to supercharge this proven strategy, and we did serve with much success. We unlocked the market-based approach in the best way possible in the research business, where we place customer problems as a core focus and leverage our capabilities as a toolkit to address the challenges. As a result, we saw a lift in revenue and profitability. Our emphasis on STAR accounts continued in FY '24. We saw several strategic benefits, including improvement in quality of revenue, expansion in volumes and a steady increase in the lines of business with STAR accounts. With respect to investment and launch of new capabilities in FY '24, we officially launched THINK365, a concept for DigiCore and acquired the Curie platform for transferring the nature. Each of these initiatives pick much interest from our customer base and the marketplace in general, and several explorations are already underway. Additionally, MPS Labs made significant progress in enabling AI in our workflows. We expect a healthy portion of our organics growth story towards Vision 2027 to be attached directly and indirectly to results stream. Our tailored growth strategies for corporate, education and research markets allowed us to trust 750 customers in FY '24. Our focus on corporates have spent heavily on learning and development, a step-up in partnerships with industry associations and geographic expansion, led the growth agenda in the corporate marketplace. In education, we unlock synergies to deliver higher-end digital learn experiences and stepped up our efforts to move towards -- move forward in the B2B value chain to work with universities and learning companies and at tech companies. Our price, warriorship and product bundling allowed us to secure new logos in this research marketplace. We completed 2 acquisitions in FY '24, our first in 1 year for our new playbook. We completed the acquisition of Liberate Learning, back in August 2023, which shaped our entry into Australia. Liberate was our second acquisition of a growing business and the experience has been a refreshing change in our modus operandi. Since the acquisition, we've learned much about what it takes to operate and drive a corporate learning business, and these earnings will result in massive gains for the overall business as we march towards Vision 2027. In February, early this year, we completed the acquisition of AJE. We have much confidence that AJE will significantly contribute towards Vision 2027 as we unlock it strategic levers, including more -- moving more upstream in the value chain closer to the funders and working directly with authors, entering new markets, including China, Brazil and South Korea and scaling up our partnership with Springer Nature, who are one of our more premier STAR accounts in terms of scale but also in terms of potential. To wrap up FY '24, all businesses and lines of business are developing a growth momentum. The positive developments and operating cash flow allowed our Board to recommend generous distribution even in the year when we completed 2 acquisitions to internal accruals. Looking into FY '25, we will build on the success achieved with a market-based approach in our research business and apply those lessons to the education and corporate marketplace. Our goal is to increase our STAR accounts to 100 by the end of FY '25, which will bring significant progress in terms of our organic growth and margins. We anticipate seeing returns from our investments in new capabilities in '22 and '23. Additionally, we plan to launch an enhanced version of DigiCorePro, AI powered solutions for accessibility and translation and a SaaS platform for immersive learning. We remain committed to our updated acquisition strategy, and we'll continue to prudently aggregate capital that would further our growth agenda in FY '25 beyond what you see today. FY '25 will be an inflection year. By the end of FY '25, we aspire to reach the halfway mark on Vision 2027. In conclusion, as the Chairman and CEO of MPS, I'm honored and privileged to lead the team that shares my vision and drive. Together, we will continue to forge ahead, pioneering innovations that make learning smarter and accessible to all. With your support and trust, we are poised to build a legacy that democratizes learning around the world. As we reflect another year of substantial growth, I express my heartfelt gratitude to all our stakeholders for their continued support and respect. We look forward to your ongoing partnership, feedback and collaboration. The notice convening this Annual General Meeting, along with a copy of the annual report for the financial year ended 31 March 2024 has already been circulated for the members of the company. Therefore, kindly take the same as well. The Board of Directors of the company in the meeting held on 21 May 2024 recommend to declare the final dividend of INR 45 per equity share of the face value of INR 10 each for the financial year 2023/2024 in addition to the interim dividend of INR 30 per equity share of INR 10, each already paid during the year to the shareholders. The secretarial auditors report and the statutory auditors report on the financial statements, standalone and consolidated of the company for the financial year ended 31 March 2024, does not contain any qualifications, observations or comments on financial transactions or matters that could adversely affect the function of the company. Accordingly, there is no requirement to read out the auditor's report during this meeting as provided the Companies Act 2013. Therefore, kindly take the same as well. Thank you, and over to you, Raman.

Thank you, Chairman. We will now begin with a question-and-answer session with the shareholders who have registered with the company as a speaker shareholder. [Operator Instructions] And share rest of their questions in case if there are any by writing to us at investors@mpslimited.com, and we shall reply to the same promptly. [Operator Instructions] We take first question from Sri Ramesh S. Damani.

I first want to congratulate Rahul Arora and the Board for an exceptional set of numbers in the leadership that they have shown in this company. Particularly, I want to congratulate the Board and the management team for the payout ratio that they paid. They paid INR 75 dividend, which is extraordinary. I follow companies for a living. And to have that kind of confidence to pay more than 100% of your earnings as payout is truly remarkable in corporate analysts, and I'd really like to commend the Board and the MD for doing that. I think it sends a message of confidence in yourselves, confidence in the future, and we are very grateful as shareholders for your contribution in that. So thank you very much to the Board for that. Mr. Arora spoke in his speech about integrating AJE, the acquisition in China. I was just wondering if you would share some color into that, given that he said FY '25 is shaping up to be a benchmark year halfway through your strategy. Could you give us a progress report and what kind of turnover we would expect from the AJE acquisition? And how is the outlook for this year and the next year? I would appreciate that. And again, I'd like to conclude by thanking for an excellent set of numbers and stewarding this company so well over the last few years.

Thank you, sir, for your kind words and encouragement. Yes, it's been quite the journey. And we've always been good to have support from shareholders like yourself, that gives us the confidence to do what we need to do. With respect to AJE, I think there are various aspects that make the acquisition kind of an inflection point for the company. Firstly, as you pointed out, China as a market is important for us. As we look to build global scale, it's increasingly becoming important for us to get into not just new geographies, but to also be able to support our customers in global agreements. It's not uncommon for customers to decide upon vendor partners that actually operate in multiple geographies and can support them in geographies such as China where typically you would have to partner with someone that's not on your preferred vendor strategy because of the unique risks of the markets. So having a foothold in the market is a very unique differentiator for us. There are not too many competitors in our space with that position. So we are using that as a compelling differentiator to increase the B2B side of the AJE business. The second piece of the AJE acquisition, of course, is that we are now finally getting closest to the most important stakeholder in the research value chain, which is the funder, the funder who funds the research. Previously, we were working directly with the publisher. On behalf of the publisher, we worked with the authors. And yes, today, we are working more directly with the authors. But indirectly we're actually working with the funders who are funding the research as we engage with the authors because they are really funding the author to engage with us. So it's more B2B2C. So strategically, again, being closer to the ultimate stakeholder, it also allows us to then climb in a more strategic spot in the value chain, possibly dealing a couple of links in the chain as well. The third piece, which makes it also interesting is the association with Springer Nature. Springer Nature today has almost $100 million spend in the type of work that we do. Of that spend, our share of wallet today is less than 10%. So we are seeing a massive upside potential as they rightsize their supply chain and consolidate their supply chain. And we already started to see effects of that within the first 3, 4 months as our business with them is rapidly expanding. The fourth piece of this is, of course, the AI capabilities that we get through AJE, both for the Curie platform, which is an AI-enabled writing system as well as the LUIS platform, which is an LLM that they have created, which allows us then to not just unlock value through the AJE customer base but use all of that IP towards our customer base as well. And finally, in terms of the progress, yes, what was given to us was a loss-making asset. We have successfully earned that loss-making asset around. Revenues are stable. Previously, MPS has been a require of loss-making assets. And typically, what happens is that we reduce costs and the revenue drops. I'm happy to report that has not happened in the case of AJE. So we expect a similar run rate that they have achieved in previous years, north of $20 million in revenue. With respect to margins, we'll start -- we will start Q1 soft because we've acquired a loss-making asset, but we will basically end -- by the end of Q4, we will be in a very good position because half -- I'm now ballparking here, I'm not giving you exact numbers. Half of AJE is a content business, half of AJE is a platform business. So we will look to bring the AJE margins similar to our content business and platform business. So overall, unlike some of the acquisitions that we've done on the corporate side, which have diluted our margins, AJE will actually be margin accretive and will help improve the margin. So the lot of strategic elements here, Financially, I think we've done well in terms of what we paid for this asset. We're expecting strong ROCE numbers for the next 3 years as well as to add to that strong organic growth as we unlock the B2B element. That's the piece where MPS adds value. AJE historically has worked mostly with partners. They call it B2C, but actually, it's B2B2C because the funders are paying for the service or the platform. And what we bring now is bringing a suite of customers on the B2B side that we are unlocking for AJE. And again, we're already starting to see -- even in 3, 4 months, we are seeing more revenue, more customers and so on.

The next question is from Mr. Mukul Mahavir Agarwal.

So first of all, congratulations, Rahul and your team for continues to be reporting very good number and above all excellent corporate governance, and I should congratulate you on your dividend and buyback policies. I've been shareholder since last 8, 9 years. And more than 70% of my cost price has been returned by the company in way of dividend and cost price, which is amazing, and never seen such good payout by any company in India. So congratulations, and I request you guys to continue doing this. This is the best thing with investor wants, yes. My question would be our stated guidance is Vision 2027, we talk about INR 1,500 crore top line, and our FY '24 exit EBITDA margin was 31.5%, with ROCE of 36%. So are we talking like if we maintain similar EBITDA margins between 30% and 35% and we achieve INR 1,400 crores, INR 1,500 crores top line, so we are talking about INR 475 crores to INR 500 crores EBITDA with a ROCE of probably 40% and more, right? And we are currently -- the market cap is INR 3,330 crores, INR 3,400 crores. So is my math correct? I'm not asking for guidance, but this is a vision of the company, which officially you have given. So is my math correct or I'm missing something?

So again, sir, thank you for all your kind words and kind encouragement. Again, wouldn't be -- MPS will not be here without support like this because yes, we are doing well now, but in the 8, 9 years, you've also seen some downs and not just only ups. So again, thank you for being a supporter to those downs as well. So yes, except market cap, which is not under something that we can control, all your math is correct. We are looking to get to Vision 2027, which is north of INR 1,500 crores in revenue at similar margins. So your math is absolutely correct on the revenue and margins. FY '25, as I've also mentioned in the opening remarks and the annual report, is an inflection year because what the management team and I are really bending a back toward is to make sure that this is the year where we crossed the halfway mark. So that there's more conviction internally as well as externally that this is actually headed in the right direction. So this is a year where we say, that's at the 50% milestone. And again, your math on the ROCE on all the metrics around finance are absolutely correct. The market cap, the market will do what it have to do. We will work on the results.

So the next question is from Mr. Naveen Bothra.

Very warm wishes and greetings to our Chairman, Mr. Rahul and distinguished Board members and management team of MPS Limited. I'm Naveen Bothra attending this 54th AGM from Delhi. This is a very proud moment for me as shareholder. Before me, Mr. Ramesh Damani and Mukul Agarwal, market veterans also spoke, so it's very proud to be shareholder in MPS Limited. First of all, I would like to congratulate team MPS. Under your dynamic leadership and -- dynamic and agile leadership for great set of operating performance and distributing more than 100% of our earnings through dividends, and the inorganic initiatives we have taken during the year, which we fully support. Sir, I would like to also thank the finance team headed by Mr. Sunit Malhotra and secretarial team lead by Mr. Raman Sapra for the excellent information annual report, which I really relish reading and sending mainly all the documents and the smooth onboarding in this meeting. Thanks Raman and his team. Sir, I have the following point for your kind consideration. First point I would like to speak since you -- in the initial Chairman's remark, you spoke about the Vision '27/'28, whatever we call it. So I would like to esteem it. Coming to the point number two, our theme of this year's annual report is scaling in global. The scaling global, we trust on AI. Rahul, would like to have your views on GenAI and the huge option in our lines of business and the impact it will have on the people cost as well as our revenues and how these are currently panning out if you can enlighten it will be quite good, sir. And number two, regarding the MPS Labs. We have spoken about -- in the annual report we have spoken about a lot about the MPS Lab. But would like to have your views on the work stream for the -- all the benefit of the shareholders that how it is helping us in the current lines of businesses, number one, to generate new ideas, new services. And are we doing any new R&D out of our current lines of businesses after the acquisitions of AJE. And as you talked about AI capabilities and query and all these things. So how the MPS Labs' personal business in doing? And also if you can share about your views that it -- any line of our current business as well as MPS Labs on -- imagine you can become a separate vertical in the future will enlighten. Sir, I have already voted in favor of all the resolutions and I hereby purpose the vote of thanks to the esteemed Board. Also Rahul, I would request you -- with Mr. Raman and Sunit, whenever you are next in Delhi, we would like to meet you as for your convenience. And thank you very much for the opportunity. I wish team MPS all the very best.