R Systems International Limited (RSYSTEMS) Earnings Call Transcript & Summary

Ladies and gentlemen, good day, and welcome to the R Systems' Q2 FY '23 Earnings Conference Call. [Operator Instructions] Please note that this conference is being recorded. I would now like to hand the conference over to Mr. Kumar. Thank you, and over to you, sir.

Thank you, Gabe. I welcome all participants to R Systems Quarter 2 2023 Earnings Conference Call. We have seen -- we have today with us Mr. Nitesh Bansal, Managing Director and CEO; Mr. Nand Sardana, CFO, R Systems; Mr. Nitesh has recently joined R Systems as Managing Director and CEO. We have shared the presentation with the investor earlier today. Hope all of you have received that. We will start this call with opening remarks on the performance of the company by Mr. Nitesh followed by financial overview by Mr. Nand. Thereafter we'll have a closure statement by Mr. Nitesh. Subsequently, we will open up for a Q&A session. Before I hand over, let me read out the customary disclaimer statement on behalf of the company. Investors are cautioned that this presentation contains certain forward-looking statements that involve risks and uncertainties. The company undertakes no public obligation to update or revise any such statements. These statements may undertake revision because of new and future information or otherwise. Actual results, performance, achievement could differ from those expressed or implied in such forward-looking statements. With this, I'm handing over to Mr. Nitesh for his opening comment. Thank you. Over to you, sir.

Thank you, Kumar, and good morning, everyone. Thank you for joining the call. Like Kumar said, I've recently joined as CEO and Managing Director for R Systems. And I wanted to start the call with doing a little bit of context setting of the space in which R System plays. And assuming that all of you received the presentation that was sent out, if you are referring to it, this is part of Slide #3. The Internet Services Market roughly is divided into 4 sectors. The mechanical engineering, which involves the design of physical products, including aircrafts, medical devices and those kind of things. There's embedded engineering, which is related to the design and development of embedded systems, which are like different systems inside our mobile devices and wearables, et cetera. Software product engineering, which is really doing the design and development of software products that we use like software that sits on our desktops and other things. And digital engineering which relates to the world of IoT and AR/VR and artificial intelligence or the industry 4.0 kind of things. And R Systems actually works in that -- in the last 3 -- or 3 out of the 4 segments, except for mechanical engineering, we work in embedded, software product engineering and digital engineering spaces. And if you look at the general outlook of how the industry is shaping up and this is based on third-party reports, the overall industry, global outsourcing spend in the engineering services market, it's slated to cross almost $450 billion to $500 billion by 2025. And of this, the 3 segments that we play in, which is the embedded, software products and digital engineering will probably have close to 50% of that market share. And the good news is that, that 50% is actually growing at double-digit CAGR as compared to the mechanical engineering piece which is going at a low single digit CAGR. So all in all, we're playing in a very large segment of the overall engineering services market, and we are in the space, which is slated to grow at a high pace. If we move forward, again, turning forward the context, there are certain demand and supply side trends, which are shaping the -- shaping the market. And some of them include stuff like embedded software platforms and digital engineering. This will cause -- it will become a key growth driver. And we are already working in that space. Some good example would be we're working with a media broadcasting software provider, are helping them create the mixing of live feeds from video and audio sources, but there you see live television details or live broadcasters of sports programming with commentators from our side. There is industry 4.0, the 5G, the customer experience and the privatization side of ecosystem because, again, a demand-side driver in PRL plays to take advantage of it. For example, we are already working with an affordable hotel chain in North America, revamping their customer experience through their mobile plant. Also, 1 of the demand side trends is that APAC and Europe will continue to grow in demand with APAC probably growing slightly higher or faster than Europe. And given our revenue in Europe and APAC, we are well poised to take advantage of that trend over there. We had -- we recently started working with a large utility provider in Central Europe, helping them digitize their entire customer experience and customer onboarding process. So all in all, the demand/supply trend shaping the industry are also helping us take advantage of those and kind of move forward. So given that context, quickly jumping on to Slide #5 with the key highlights of our financial performance. We reported a revenue of INR 4,067.8 million or $49.51 million for the quarter ended of Q2 in this June '23. This was a year-on-year revenue growth of 8.48% and an EBITDA growth of 22.2%. This translates to a net profit of INR 144.25 million or $1.76 million. The earnings per share translates to INR 1.22, this is before month recurring at INR 1.56. So net-net, the company is growing well, and I'm sure Nandji will cover a little more where he goes into the details of the financial highlights. If you look at it from an H1 perspective, the reported revenue of INR 8,108.51 million which translates to $98.67 million, which is a reported revenue growth of 12.92% and a net profit of INR 502.6 million or $6.12 million. The EPS translates to INR 4.25 per share. Moving forward, if I look at the key highlights that these results are present, we have had a resilient revenue growth despite some macroeconomic environment changes where we are seeing customers go through and the spend proportion or delay new initiatives. But despite that trend, we have seen a good pipeline, a good traction in the pipeline, good conversion with 14 key new accounts opened during H1 of 2023. We served 50 customers with revenues of over $1 million on a run rate basis. H1 EBITDA margins obviously have shown improvement, which is a result of efficient operations. And we have continued to build deeper capabilities and new technology including Cloud, AI and DevOps will continue to be in high demand across our customer set. We've also invested in -- or rather carried out a strategic acquisition of the Velotio, which is a product engineering company and digital solutions provider, working with enterprises across the globe in the areas of Cloud, DevOps, Data Engineering and Generative AI. And this has also helped us expand our India delivery drivers to Pune, which is a hub of product engineering talent. So now -- we are now that we also have a great hub in Pune. I think with this, I will hand it over to Nandji to maybe give a deep dive on some of the financial performance and B&R.

Thank you, Niteshji. Good morning to all. Thank you, everybody, for attending the call. The presentation gives you detail of both quarter 2 as well as H1 2023. Revenue for the quarter was INR 406.7 crores or $49.5 million with quarter-on-quarter increase of 0.7% and year-on-year increase of 8.5%. Revenue for H1 was INR 810.8 crores or $98.7 million as against INR 218 crores in H1 last year. This is a growth of 12.9%. To some extent, our performance has been impacted by global headwinds, we have some of the customers witnessing the stock softness in their businesses. The company added 14 new logos plus good potential performing through cross-sell to upsell. Just want to highlight that these numbers do not include Velotio number, which was acquired on 3 July 2023 and will be consolidated effective 1st July that is in quarter 3. Getting down to Q2 gross margins, it was 34.8% compared to 33.6% last quarter. The margins have improved on the back of better price evaluation and efficient operation. Getting down to SG&A expense line, SG&A expenses have increased marginally by INR 18 lakhs quarter-on-quarter. In percentage on the SG&A were 20.1% this quarter compared to 20.2% last quarter. We have been able to set the SG&A to improve margins. EBITDA in this quarter was INR 60 crores or $7.3 million compared to INR 54.3 crores or $6.6 million last quarter and INR 49.1 crores or $6.4 million in the same quarter last year. As a percentage of revenue, EBITDA was 14.7% in this quarter compared to 13.5% last quarter and 13.1% in the same quarter last year. EBITDA for H1 was INR 114.3 crores or $13.9 million compared to INR 90.7 crores or $11.9 million last year. As a percentage of revenue, EBITDA was 14.1% in H1 compared to 12.6% in H1 last year. R Systems has expanded EBITDA margin about 150 basis points from 12.61% in H1 2022, 14.1% in H1 '23 despite the challenging business environment through efficient operation. We continue to focus on technology and digital services. During quarter 2, the company has incurred certain non-recurring expenses relating to recruitment fee for hiring of new CEO, along with onetime joining fee. Other income in this quarter were INR 4.4 crores compared to INR 5.2 crores last quarter. Other income mainly consists of interest income and net exchange gains and losses. Interest income for the quarter was INR 2.7 crores. The exchange gains during the quarter was INR 1.4 crores, mainly due to mark-to-market on outstanding forward cover. Last quarter interest income was INR 2.3 crores and exchange gain was INR 2.6 crores. Since the company has now replied significant quarter to our acquisition of the Velotio, it will impact our interest income from Q3 onwards. At the end of quarter, we had outstanding forward cover of $33.1 million with average rate of 33.4% and zero cover of 2.2 million with average rate of INR 91.4 crore. This has already been mark-to-market as on 30th June. Now moving to tax expenses. Our quarter 2 tax expense was INR 31.1 crores as against INR 12 crores last quarter. This quarter taxes spend includes INR 20 crores for provision for tax on dividend received on U.S. subsidiary. Out of INR 20 crores, the company shall be able to reverse INR 12 crores based on dividend declared to shareholders in next 1 year. Our effective tax rate during the quarter, excluding this onetime expense of INR 20 crores is 24.2% coming to -- compared to 25% last quarter. Net profit after tax for the quarter was INR 14.4 crores or $1.8 million compared to INR 35.8 crores or $4.4 million last quarter. Net profit after tax for H1 '23 was INR 50.3 crores or $6.1 million compared to INR 61.5 crores or $8.1 million last H1. This is after considering non-recurring expense of INR 7 crores and provision for tax of INR 20 crores dividend received from U.S. subsidy. Adjusted EPS for the quarter is 1.22 and for H1 is 4.25%. Adjusted EPS before non-recurring and onetime expense is INR 3.30 for quarter 2 and INR 6.33 for H1 2023. Getting down to asset side on the balance sheet. DSO for the quarter was 66 days compared to 54 days for quarter 4 2022. We are seeing some challenges with a few personnel who are dependent on funding last few quarters and have made conservative provision. Our cash balance were INR 381 crores at the end of the quarter compared to INR 271 crores at the end of December quarter. We have been constantly generating cash from the business to support growth and expansion. Subsequent to the quarter end, the company has cared to INR 264 crores for the acquisition of Velotio, which will impact our cash balances going forward. However we have sufficient cash to manage muting operation. Our shareholder funds were INR 595 crores at the end of the quarter compared to INR 545 crores at the end of December quarter. On the basis of geographical distribution based on customer operation, North America contributed 72.7%, Europe 10.8%; Southeast Asia 13.3% and the Rest of the World, 2.2%. Our client concentration, top 10 compliance contributed 24.7% with the largest brand contributing 7.1%. I'd tried to cover highlights of the financial numbers. With that, let me hand over to Niteshji for closing and summing up. Niteshji?

Thank you, Nandji. In summing up, all I would like to say is that H1 '23 performance has been in line with the industry. We've delivered revenue growth and margin improvement in a challenging global environment. And I think that speaks of the efficient management being driven as a company. We have been compensating on building deeper partnerships with customers while rapidly going out our competencies in growth areas. So we are using competencies and relevance of our core differentiators, which is resonating well with the market. And we are continuing to develop new success stories during H1 '23 and continuing to H2 '23. So sharing a few of the success stories we are developing are as follows: AWS have selected us as a partner. So their upcoming generative AI platform release because they want small set of partners that they're working with. For a client in APAC, we are implementing Microsoft Business Central, helping them become more responsive to their customers. For a customer in association membership space we've built an AI model to help them map buying patterns and help them upsell and cross-sell products and services for a management health care providers in mental health space, because our customer in Europe, we are building a patient management system to help improve patient and physician interaction. And then, of course, the integration of the Velotio and -- which is going to further accelerate our growth with added capabilities and great potential to cross-sell will obviously be a developing [indiscernible]. So with that, I would end the presentation and open for Q&A.

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

I just wanted to know was the 5-year vision of the company going forward? So if you could just please help us understand in terms of like what would be your top line and margins going forward? That is my first question.

So Rahul, thanks for answer the question. So our 5-year vision as a company is to compensate and get deeper with our customers in the space of engineering services to become one of the respected engineering service provider in all the vertical segments that we operate. To be able to provide a 5-year view of revenue and margin is honestly very difficult. And we normally don't provide a forward guidance. And even if we did, 5 year would be extremely difficult. But clearly, we will continue to grow with the industry trend at the rate better than the industry average, and that is probably something that any of us can calculate.

Okay. just 1 more follow-up question. As recently, we have just completed the acquisition of Velotio, so is there any further inorganic plans will the company have in the future?

Rahul, as a company, we would be open to both organic -- we are obviously focusing on organic growth, but also earn opportunities as they come back. We will be looking at inorganic opportunities wherever they are in line with our strategy and allows us to deepen our capability either in a vertical or in a competency space.

Okay. So sir, just that look, how do we then fund inorganic growth? How will we calculate liquidity?

I would defer that to Nandji. I think that question about how would we fund our investment.

Sure. So Rahul, the funding will happen through various means. It could be equity participation in the form of rights issue, differential issue and some kind of a loan. I think let the target be fund up. And I think, as Niteshji said, we want to grow. So I think funding and all that should not be a problem, with Blackstone vetting, funding should not be a problem.

[Operator Instructions] The next question is from the line of Abhishek Nagraj from [indiscernible].

Just want to check, I understand -- can you just throw some light on the SG&A rationalization that you were talking about? Like what are the steps taken? Was it renewal of exits? Or -- just want to understand what is the operational things that happened there.

Nandji, do you want it take that?

Sure. Abhishek, this is a matter of growth. You see, the company has grown in the last 2, 3 years. If you see in the last 3 years almost grown from 115 million to now close to 200 million. SG&A do not increase in that proportion. Our SG&A, we used to be like 25% of our revenue has now gone down to 20.2%, 21%. I mean in the range of 20% to 21%. All the rationality is happening. Having said that, having said that, as Niteshji said, we have to grow. We have to invest in day marketing, but some kind of natural setting and rationalization headcounts when you grow. So all these things will help us [indiscernible].

Sure. The other question I had was, can you -- is that a waterfall that you can provide from the stand-alone numbers to the consolidated numbers and what entities are going into the sales -- where are we seeing the reduction in margins, et cetera, from a standalone basis to the consolidated basis?

So, Abhishek, at a high level, our stand-alone business consists of the deliveries from Noida, that is for digital product engineering and KPO business. At a high level for understanding point of view, I can tell you that this is close to 50% of our business. So 50% of business comes from stand-alone and the balance 50% comes from overseas subsidiaries. At a high level, close to 30 million comes from Europe, close to 40 million comes from GS and close to 30 million from Southeast Asia. So margins at stand-alone level are much better because your offshore revenues margin comparatively are lesser at on-site as well as in APAC. So that's a broad break up, if you have any specific questions, you can write an email to me, and I'll respond to you.

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

As you can see that the company has recently concluded the transaction with Blackstone and acquisition of the Velotio. Also, I saw that the company has retrieved a dividend from subsidiary. So do company here has any plan to pass this benefit or reward to shareholders through dividend or buyback or bonuses recently?

Nandji, do you want to take that?

Sure. Sure. Thank you, Mr. Rahul. So let me explain to you. For the purpose of the acquisition of the Velotio, our subsidiary at U.S. had surplus cash. So we transferred $7 million from U.S. to holding company in the form of dividend. And that is we have to get some tax on that, and that's the non-recurring items and the tax expenditure I explained in my note. So if we give dividend from India company to our shareholders, the tax expense will reduce like the -- normally India tax at 35%. The tax expense will reduce to 15% if we do that. So that's a technical part of it. To your question, the plan for dividend or buyback, the company keeps on evaluating these options. The last dividend was given in June 2022. So it's almost a year. So I think that will be evaluated at appropriate time in the Board meeting. But as of now, we have to balance between growth and shareholder rewards, but [indiscernible] do discuss in the Board meeting and the decision is taken. We do consider that.

The next question is from the line of Abdulkadir from Ratnabali.

This is Abhinav here and not Abdul. So my question is on this Velotio acquisition. I wanted to understand what kind of traction you have seen there? What kind of sustainable EBITDA margin you see there? Because the EBITDA margin reported on the exchanges for the Velotio is northwards of 34$. So can you just highlight what would be the sustainable EBITDA margin? And post integration of Velotio, where do you see R Systems' consolidated margins to reach over the next couple of years?

I think again, Nandji, it's in your area.

So Abhinavji, Velotio is having a revenue run rate of $15 million, with close to 30% EBITDA. And as I said that the transaction is completed on 3 July. So at a high level, we will be consolidating, I mean, assuming the stable state of mind we'll be having $7.5 million of revenue in the H2 that is between July to December with close to $2.3 million of EBITDA. So their EBITDA margin is close to 13% as against 14.5% or around 14.1% for R Systems. But please note that Velotio is purely doing offshore work, whereas R Systems business is spread across the geographies, having on-site component as well. So to answer your question, at a high level, I feel that Velotio acquisition will be accretive in EBITDA percentages from 0.6% to 0.8% depending upon final number, which comes to. So that will be accretive. And so that -- I think I mean $7.5 million for the next 6 months on a run rate basis, the $2.3 million should be added to R Systems number for the H2.

Okay. Now a follow-up on the R Systems in serves. What would be the sustainable growth rate that we should factor in our models for R Systems in terms of organic growth for next couple of years in terms of top line as well as EBITDA margins?

Okay. Let me explain to you. In the last 3 years, R Systems has grown in -- 2020 was a challenging year. 2021 was after the COVID, there was a lot of growth, I mean the IT industry has boomed, as everybody knows, we grew close to 35% in 2021, and it grew close to 27% in 2022. Now as you will see that the IT companies are having a bit of challenges because of the U.S. economic situation and all that. So it is little hard to give a guidance how we will perform. But if you notice, in the first half, we have grown close to 11%, 12% year-on-year, quarterly we have grown 8% and H1 basis we have grown 12%. So we are hopeful of reasonable growth in line with the industry standard, but I do not like to give you any guidance on that. Of course, the Velotio acquisition will definitely add to our number.

The next question is from the line of Mihir Manohar from Carnelian Asset Management.

Congratulations to Mr. Nitesh Bansal on joining R Systems. I had a question on the GTM strategy. And after you're running in, do you think any changes required in the GTM strategy part of the piece? And also if you can throw some light on some of the rationalization. What are the steps that you are exactly taking on the rationalization on the SGA front, that would be helpful. Kind of impact are you expecting, let's say, from the steps both on the GTM side and even on the operational delivery side. So just wanted to understand any impact that you're expecting on that? What can you -- if you can throw some numbers around that? That will be really helpful. My second question was just on the Blackstone portfolio. I mean given the fact historically, we have seen for any IT companies whenever Blackstone is present, it gets a benefit from the Blackstone portfolios, which are there. So just wanted to get an understanding. I mean, are you looking at synergies from the Blackstone portfolio of companies. That was the second question. And just was a third question on the Velotio part of the piece. So just wanted to get an understanding around some of the identified synergies on the Velotio, any cross-sell upsell that would really helpful. So I just wanted to better understand around these 3 things?

Thanks, Mihir. Thanks for your wishes. From a retail strategy perspective, though we were early days and we are going to be firming up our strategy over the coming months. But broadly speaking, like I already said, from the market segment that we are serving, we'll continue to remain focused on that market segment, which is the embedded engineering, the software product engineering and the digital services. So from a macro perspective, there's no change. How we attack the macro as in company has been doing a great job of slowly and steadily building the domain flows across various verticals. So we are going to be deepening that where we will go more deep in certain verticals where we have seen a lot of traction and we've got good capabilities. And also, like I said, we'll continue to invest in competencies which are in high demand, which include artificial intelligence, which includes DevOps, which include a lot of Cloud technologies and stuff. So you will see the company taking a much more aggressive cost share or more outlets cost share on some of these verticals and competencies, which is the way that we will plan essentially call in the market for ourselves. This is what the CPM portion of the strategy of the sales would look like. From a SG&A rationalization perspective, I think Nandji already answered that there is really no significant reduction that we've done in fact the rationalization as a result of expansion of supplies of the company, where in percentage terms, it has rationalized, come down. As we go forward, we'll continue to invest in building those markets for us. So while there will be addition of headcount and new hiring that will take place in line with company growth. So it may not increase our expense in terms of percentages, but the net account will increase. And that increase will happen in line with our strategy. So you will see some more vertically focused as people, maybe some more capability or a particular competence base sales and contracting type of people coming into play to help us develop those markets for ourselves. From a Blackstone portfolio perspective, we have got massive to the right point. We are excited about being part of Blackstone portfolio. We are already seeing the benefits of it because we do get connected with a lot of other Blackstone portfolio companies where we are able to then cross-sell our services, where we are able to understand their needs better and be able to build some of our solutions and services for them. We had already won at least 2 accounts, which are also Blackstone portfolio companies and we are continuing to work on that angle to increase our ingrowth into Blackstone portfolio companies. From a Velotio perspective, like I mentioned, Velotio has got that includes good vertical competencies, both in tech storage and media space, which are synergetic with us because we also operate in those spaces, and it gives us more depth. Likewise, they have got good competencies in cloud and DevOps, which again are being very much in line with our strategy and provide the depth and expertise, both in the vertical and competence systems. So we will see a lot more of cross-sell and observing those areas happen across our customers. And we believe that we are as well to realize those synergies. I hope that answers all of the questions.

The next question is from the line of Anand Mundra from Soar Wealth.

Just wanted to check, this dividend, which you have paid taxes on, what was the need of calling the capital if there was no intention of giving back it to the shareholders? So there is a unnecessary tax outlook on the company.

Mr. Anand, [indiscernible] there is no intention. Okay. Let me tell you. You see at R Systems, as I said, that consists of holding company days with India and it has subsidies, overseas USA, Eastern Europe and APAC. So there was a surplus cash lined in U.S.A. So when we wanted to acquire Velotio, I mean, you keep money distributed at all that spaces. So that surplus cash was taken out and brought into India by way of dividend. Now what I'm saying is that when you get any dividend income in India, it is subject to the marginal rate of tax, which is 35%. However, if R Systems declares dividend in next 12 months or so, then it can claim exemption for 20% part of it. So that's a normal tax kind of a thing. So that is what I was explaining to you.

So if R Systems declares dividend, 20% of the tax or out of 35%, only 25%, you need to say, 15% would be reversed?

We need to pay only 15%, 20% we get exempted.

One more question, sir. Generally, EBITDA margins of IT companies are in the range of -- are slightly higher than 13%, 14%, which we operate in. Any guidance on that for whether it will come back to 20% or if it can come to industry standards?

We are conscious of this. There is a plan to improve, but it will take time. You see -- as a R Systems, we are distributed across the globe. In fact, sometimes I say that from the kind of distribution across the geography we have, our business volume can take on $400 million of revenue. But -- and that's the reason I mentioned as the setting and all that. When we grow and become a bigger company, a lot of [indiscernible] setting will happen, and that will help kind of improve upon the EBITDA margin. It will take some time. Anandji, I would just add 1 more point again. I think we should not look at it as a generic IT services company and compare with IT services margins because the engineering services do work slightly differently. And the margin, while size will help us expand our margins definitely. But if you look at our peer group, with similar type companies, I think we are fairly comparable today also.

The next question is from the line of Suresh Patel, an individual investor.

I just want to understand from the risks perspective, what are the critical major risks we are seeing in our business to give them a critical one? And what are the mitigation plans for the same?

Suresh, thanks for the question. From a risk perspective, major risk that we see is potentially the headwinds or the market sentiment, especially given that a lot of software companies who we work for, people who create software whether CRM software or accounting software or others. A lot of them are dependent on funding, whether they are being catalyst-funded, private equity funded or funded through family offices. And that funding scenario becoming a little unclear, does create challenges with their ability to spend or expand on their product roadmaps. And that translates to a demand risk for us. And that to us is the biggest risk. However, what helps us is the fact that our client concentration is fairly wide. It's not like we are heavily dependent on any single or a few number of clients in this state. So it helps us even about. The way we are mitigating that risk is we are obviously working towards deepening our position in digital and AI and those kind of things, which tend to give us larger size of revenue on the client engagement, et cetera, but also constantly positioning ourselves for longer duration contracts. So again, these are all work in progress, will take shape. But it's something that we are conscious of in working on. And we kind of see this as an ongoing thing for a bit now.

The next question is from the line of Abhishek Nagraj from [indiscernible].

Working for FTE employee count across regions and if you are tracking this, what is the revenue [indiscernible] that we're tracking as compared to our peers?

Nandji, do you want to take that?

What is the question, can you repeat?

What is the number of FTE employees we currently have across regions? And how are you tracking as compared to our peers?

Sure. As of now, we have close to 3,866 -- 3,890 something employees and close to 500 are SG&A kind of stuff. So close to 4,463 is the exact number.

Do we have a split across regions? And...

[indiscernible] across the regions, I can explain to you a high level. So we have 3 businesses. The first is the digital and product engineering business. This business comprises of Noida, where we have close to 2,000 employees, then it is Eastern Europe, where we have close to 400 employees. And then U.S., where we have close to 200 employees, U.S. and Canada put together. So digital and product engineering piece, we have close to 2,800 to 2,850 employees. Then we have a KPO business, where we have close to 850 employees. And APAC region, we do 2 businesses, one is the business solution and second is the consulting business. Put together in that business, there are close to 450 employees. In addition, there are, as I said, the SG&A staffs, so 4,460 is the approximate number across the geographies.

Understood. And in terms of revenue per seat, how are we tracking as compared to our peers?

We are well in the range of -- you see -- as I said, there are 3 businesses. So we have to look at from that well. Our BPE business is comparable to any IT company, engineering company, which Niteshji explained, the offshore margins are in comparison with the companies like Birlasoft and GlobalLogic and all, which are the peers. So that the revenue more or less in the same range. And again, then the KPO business is more technical, held as revenue cycle management. Again, the revenue of [indiscernible] is comparatively lesser, but the cost is also lesser there. And then APAC business is based on that, it is self-comparable.

The next question is from the line of Gokul Mahesh Puri from Orissa Capital.

You highlighted the risk in the business in terms of ability to get funding for your clients. Could you highlight any risk which you see to any of the business verticals on account of changes in technologies, especially in terms of AI, how -- specifically any comment on the KPO business where you see an impact because of changes in technology where we get impacted?

Thanks for the question, Gokul. The short answer is we've seen changes, but we're not seeing it impact us for a simple reason that whether it is the product engineering business or KPO business, we have always been very focused on automation and AI and a lot of work that we do even on the KPO front is actually built out of carrying out automation for the customer while managing the business process or the knowledge process system. So the fundamental value proposition that we offer to our clients is that we bring automation first. We implement the automation for them, we implement the AI wherever that is useful or needed. And then we carry out the remaining part of the process manually and hence taking care of the entire knowledge process holistically. So yes, we are seeing a lot of AI adoption. We are actively on the forefront of bringing it to our clients. And hence, since it is part of our proposition it does not [indiscernible] the process, it's actually a good thing for us.

Okay. So you're saying that this is a net add to us in terms of what the opportunity comes on account of AI?

I'm sorry, I didn't understand the question. Say that again?

So it's a net addition to us in terms of the technology, which comes under AI. This would be a net add for us in terms of more opportunities for doing more services and work for our clients?

Absolutely. Because the -- if your question was that it is not cannibalizing our business. Yes, you're right. It's not cannibalizing our business. It is either our business as usual or new business coming to us because customers see that we do so much AI or we have so much capability in automation and AI that brings us newer AI and automation-related businesses.

Okay. My second question is on the -- you mentioned about the market size being quite large. But the addressable segments of what we cater to, what would be the growth rate for the industry, for the specific business segments where we are present in?

So broadly speaking, while all the 3 segments that we are presenting are growing at different rates, but they are all double-digit growth rate between 12% to 18%.

Okay. Right. And while I understand that you've not mentioned about guidance, but as a more broader trajectory, would you be aiming to be outgrowing the industry growth rates?

That would certainly be the desire. But like I said, desires will lead to our planning and our effort of what we will do. Outcomes is something that will be a combination of various factors. And that's why didn't want to provide any forward-looking guidance. But absolutely, all efforts would be to not just match but outgrow or grow faster than the industry standard.

The next question is from the line of Agam Shah, an Individual Investor.

So most of my questions are answered. Just a quick confirmation. So in the down end of a vision of making a $1 billion company by next 5 to 7 years. So are we sticking to that in terms of [indiscernible]?

Our visions are definitely -- we begun with the vision because it helps us point to [indiscernible] and draw our entire strategy and focus the energy of the company towards it. So absolutely, we will work towards that vision. We -- given that this is -- that is a call to action and this is number-based call, I would certainly caution that visions are usually [indiscernible], but we would like to achieve or get as close to them as possible.

The next question is from the line of Mihir Manohar from Carnelian Asset Management.

Just wanted to get an understanding of the OPD business, which is there what kind of [indiscernible] OPD business? I mean how much will be coming from CRM OPDs or supply chain OPDs or finance OPDs. If you can just throw some understanding what exactly space are you working in the OPD part of the piece that will be really helpful. And also just wanted to get an understanding on the end user industries. I don't know what kind of business, what percentage of business is coming from the FSI manufacturing or health care vertical. Just wanted to better understand around that.

So Mihir, the answer to both parts of your question is the same because we are an engineering services company, we're doing product engineering and digital work. Most of the work we are doing is OPD, right? So then if we are working for financial or fintech OPD, right, we are working for [indiscernible] or we are working for auto ISEs or supply chain ISEs, right. So it's mostly OPD work in that space. We -- I can give you the sectors we work at, but I don't think we calculate or split that way currently and not would we have the numbers handy to be able to provide that. What we work, where our focus is that cover fintech and [indiscernible], which are 2 large sectors. We have a bit focus on telecom and media. We have a big focus on manufacturing, supply chain IoT and also travel transportation as well as education. So those are some of the big sectors that we are presenting. And obviously, like I said earlier, we are going to deepen our focus on a few of those based on how we've seen the market traction and our capability developed and try to grow in those sectors.

Sure, sure, sure. Just 1 follow-up to this. I mean we are seeing increasing OPD trend, especially outsourcing happening from India. So I think I just wanted to get a sense what is the kind of differentiation that we are offering. I mean I understand that broadly, that would be the -- that there is data differentiation, but still just a little better understanding so is there any different age or differentiation in the OPD side of the piece versus competition?

So while most of our competition has overtime diluted focus from product engineering to generate IT services. At R Systems we have -- we maintain that focus on product engineering and basically the OPD type of work for the longest amount of time. What that has done is it has given us a deeper understanding of product engineering of the space, which -- this covers a lot of discipline into how we do the product roadmap [indiscernible] and how does [indiscernible] DevOps in a product engineering kind of thing, which clearly become a differentiator because our buyers are typically product owners or CTOs and our people actually speak their language. We don't see general language of IT, we speak the language of the product. And that becomes a differentiator when we are interacting with the buyers.

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

Thank you so much. I think I'm truly thankful for everyone to attend the conference. Your questions obviously are fairly insightful and continue to encourage us. And we hope to come back and be able to build on the success stories that we shared today and continue sharing them on a going-forward basis. So thank you again for attending and all the best for the day.

Thank you. On behalf of R Systems, that concludes this conference. Thank you all for joining. You may now disconnect your lines.