ROX Hi-Tech Limited (ROXHITECH) Earnings Call Transcript & Summary

Ladies and gentlemen, good day, and welcome to H2 and FY '26 Results Conference Call of ROX Hi-Tech Limited. This conference call may contain forward-looking statements about the company, which are based on the beliefs, opinions and expectations of the company as on date of this call. These statements are not the guarantee of future performance and involve risks and uncertainties that are difficult to predict. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Mr. Gautam Nagar from EquiBridgex Advisors Private Limited. Thank you, and over to you, sir.

Thank you, Danish, and a very good evening to everyone. Welcome to the H2 FY '26 Earnings Call of ROX Hi-Tech Limited. From management team, we have with Mr. Jim Rakesh, Managing Director; Ms. Sukanya Rakesh, Whole-Time Director; and Ms. Agna Daicy, AVP, Digital Transformation; Ms. Semoszi, Company Secretary; and Ms. Aarti Manoj, Assistant Manager, Legal and Compliance. The call will begin with opening remarks from the management, after which we will open the floor for the Q&A. With that, I would like to now hand over the call to management for opening remarks. Thank you, and over to you.

Good evening, everyone. And thank you for joining the ROX Hi-Tech Limited H2 FY '26 Earnings Call. A warm welcome to all our investors, analysts and stakeholders joining us today. We sincerely thank our shareholders, customers, team members, technology partners and business associates for their continued trust and support. ROX Hi-Tech Limited is a leading end-to-end IT solutions and digital transformation company with over 2 decades of experience in enabling technology-led business transformation. Since its inception in 2002, the company has evolved into globally profited IT services and consulting organization with a strong presence across India and international markets, including North America, Denmark, Singapore and U.K. Our comprehensive portfolio spans, digital transformation solution, application consulting, automation, AI, network, collaboration, cybersecurity, data center solutions, AI computing and IoT. Through our integrated H2AI approach, we provide end-to-end technology solutions that help enterprise enhance operational efficiency, strengthen security and accelerate digital adoption. One of our key strength is a strategic time-tested partnerships with technology leaders like SAP, Blue Prism, Cisco, IBM, Lenovo and Google. These partnerships enable us to deliver advanced technology solution across cloud, enterprise application, cybersecurity, infrastructure modernization and AI-driven transformation initiative. During FY '26, we continue to strengthen our capabilities in emerging technology areas, including agentic AI, intelligent automation cybersecurity and multi-cloud workload management. We witnessed sustained demand for digital transformation projects across industries and maintain strong execution across both domestic and international markets. This year also marked significant progress in our global expansion strategy. Our international subsidiaries across Singapore, Denmark, the United States and U.K. continue to strengthen our global presence and enhance our ability to serve customers across geographies. We further expanded our operational footprint with the new 50-seater office in Tiruchurapally, Navel Pete SEC and successfully operationalized our network and security operation center, NOC and SoC with the clients already onboarded. A key milestone during this year was establishment of our strategic agentic AI practice built around SAP June and SSLC Blue Prism, reinforcing our commitment to next-generation enterprise automation and intelligent business process. We further strengthened our collaboration with Google through initiatives focused on Vertex AI and Google Workspace, while expanding our partnership with IBM across Power VS cloud solution and the Whatsnext platform to support mission-critical enterprise workloads. During this year, we successfully onboarded 7 new clients for digital transformation initiative and delivered several key infrastructure modernization projects across leading enterprises. These achievements reflect our continued focus on innovation, customer success and technology-led business transformation. Collectively, these strategic investments and partnerships position us to strongly capitalize on the accelerating adoption of AI-driven enterprise transformation and emerging digital opportunities across industries. Our customer base remains diversified across key sectors, including manufacturing, healthcare, IT, education and public sector. We continue to maintain long-standing relationship with marquee clients while expanding our engagement with enterprises, undertaking large-scale digital modernization initiatives. Coming to our financial performance. FY '26 was a year of healthy revenue growth and operational resilience. For FY '26, the total incomes to the rupee INR 210.63 crores, registering a growth of 11.33 percentage year-on-year. EBITDA stood at INR 30.51 crores, while profit after tax stood at INR 17.64 crores. The performance reflects our continued focus on project execution, customer-centric delivery, technology investments and operational discipline. For H2 FY '26, the total income stood at INR 99.67 crores, EBITDA for the period was INR 13.81 crores with an EBITDA margin of 13.86 percentage, while profit after tax stood at INR 7.16 crores. Despite a dynamic microeconomic and business environment, we continue to maintain healthy profitability and a strong balance sheet while investing in future growth opportunity. Looking ahead, we remain focused on expanding our digital transformation capabilities, strengthening our AI and automation offering, deepening customer relationships and scaling our international operations. With increasing enterprise investments in cloud adoption, cybersecurity, automation and AI-driven transformation, we believe long-term opportunities for ROX Hi-Tech remain highly attractive. Our commitment remains centered on delivering innovation-led solutions, maintaining operational excellence, creating value of our customers, generating sustainable long-term returns for all our stakeholders. Before we begin the discussion, I'd like to thank our shareholders, team members, customers, technology partners and vendors for their continued support and confidence in ROX Hi-Tech. With that, I now hand over the call for further discussion and Q&A. Thank you.

[Operator Instructions] Our first question comes from the line of Yash with Sean Patel Asset Management.

Congratulations on a good set of numbers. I have a couple of questions. The first question is regarding revenue bifurcation. What is the geographical of revenue?

Good evening. I'm Jim Rakesh, Managing Director, ROX Hi-Tech Limited. First of all, thanks for the lovely opening remark. I will take this question. In detail, revenue, I think I would like to restrain in this call, maybe we can handle one-on-one. If you could drop a mail to company secretary, I think we'll be able to give that team detail to you. So I would like to talk on generic business strategies to start with. So any competitive data I would like to rephrase, maybe we would like to discuss on one-on-ones.

My second question was regarding EBITDA margin. Compared to like I can see from presentation, there were decreasing trend in EBITDA margins. So can you guide us what are the key reasons for that? And what are the EBITDA margin?

Yes. So if you just go back to the start of the year, JFM January, February, March, there was a delay in supplies, especially due to West Asia crisis, the gold price going up and also semiconductor supplies were in shortage. So there were data center products and cybersecurity solutions, supplies were delayed. So we had to, and also, there was a spike in the prices as some regard to the global macro. So we had to procure a higher cost, so to fulfill project commitments to customers. So there was a slight dip in the overall margins. But what we see is, as markets normalize going forward, I think we should be able to go back to our previous numbers. So that case, order book and the year '26, '27 looks positive for us.

So basically in the like between to 15% to 17%?

Something similar, yes.

Okay. Okay. Okay. And what kind of guidance you will call for FY '27 and FY'28?

So we're looking at 20% growth this year. So that's the guideline from our team, so Q1 looks good and H1 also looks good. So hope there's no any further to guard or any madness in the world to disrupt our growth. So I think we should be in place.

[Operator Instructions] Our next question comes from Ganesh Agrawal, an individual investor.

I have a few questions to ask. Questions regarding this NOC and SoC, as these are now operational, so how the initial response going from customers? Like what kind of opportunity do you see in this business?

So we are trying to take this network operation center and security operations center services to our existing customers, especially mid-market and SMB customers. And we have already onloaded around 25 customers in our makers. So we are seeing -- over a period of time, we would like to have 100 customers in our maintenance, and we would like to monitor, and we would like to give those predictive services and consulting services to customers. That's our plan. And yes, today, in the AI-led security world, mid-market and larger SMBs need to support to secure their network and security solutions.

So are this contract recurring in nature?

Yes. Normally, it's a 3-year contract. And -- yes, that's the kind of what we said.

And by when do you expect this business to reach a meaningful scale?

In the 3 years' time, we should have at least 100 customers, and it should contribute at least around 15% of our overall revenue.

15%. Okay. And sir, you have been talking about this AI and automation. So how are customers responding to this offering? And when do you think this AI can become a meaningful revenue contributor for you?

It has already become -- we have around 8 customers who have warned agentic AI solutions. Today, they are billable solutions, and we are billing them. So they are seeing business value. And these projects are live, and over and above 5 or other in production. So customers are now started adopting, especially in the areas where they feel that human in the loop can be eliminated, especially in voice process automation, ARAP, bank guarantee verification, and these kind of areas we are seeing customer adopting AI.

So customers are like new customer or the existing one?

It's a part and parcel as well as our existing customers as well.

Okay. So you see this top growth drivers for the next few years?

This AI will be the conversation point going forward. And IT investments are all directed towards AI-led transformations. Today entities to -- we have other choice but to adopt AI. That's the way it is. So we are seeing this will need to pick up. And a lot of CFOs are mandated today to include AI adoption in their finance process so that they can create efficiency and they can reduce dependency on human latency. So that way, this is only to grow for here.

Understood. So sir, investors expect this revenue by '27 or have to wait by FY '28.

We already started booking revenues on year. Maybe it must be around 3% to 4% of our overall revenue. But to become a very substantial number, market will grow because today, we need data center capabilities. We need good network capabilities. All those things are required to make AI reality. So this is parallelly getting built in this country. So I'm seeing an option will definitely pick momentum as compute capabilities also built.

And sir, 1 last question. Like you have set up subsidiaries in multiple like international market. So like what was the thinking line in this move? And what opportunities are you seeing here?

It is the same. It's the same. The world is in the same, I would say, position in terms of AI adoption. And the customers are having conversation, and they want vendors at a shift or work to turn around, and they are having problems dealing with large enterprises, large IT companies because of the legacy issues. So they are looking at people who could immediately address the business problem and start delivering solutions. We are seeing those kind of attractions with customers. And we have also won a couple of contracts globally. Yes.

Okay. And I know our and how large it is?

One contract was around $1 million spread across 3 years.

[Operator Instructions] Our next question comes from the line of Aditya Boothra from Agora Advisors.

So one of my questions is about the new partnership that was mentioned in the presentation that Security and Cisco, right? Could you provide some details about what this is about and what we expect from this partnership?

So Shavetta -- fantastic question. Chalet Group is really based security company built by folks from IDEF, ex folks from IDEF. This is predominantly into enterprise-level security, especially in the area of how do we secure enterprises or VVIPs from drone . So this is -- we have gone into a definitive agreement with them, and we are going to set up a center of excellence to showcase these technologies so that this can be absorbed and adopted in large institutions, VIP movement and those kind of areas. And Samit is a well-known name, especially in the areas of enterprise security, predictive analytics, plus also futuristic cyber, those kind of areas. So we will have a better position to give in detailed, I would say, brief. Once we have the press release, which we are planning to have it next month, and then by September, I think we should be able to give you a complete 360-degree view on our COEs, but is on the Group. And yes, Splunk, again, we are putting up practice within our rocks, so then we can take the solution to our existing customers, especially in the areas of enterprise service facility, monitoring solutions, prevention on the vulnerability aspects like that. So this is the track what we are going forward in the cybersecurity practice.

All right. My second question is about the working capital cycle. So as per the presentation, I see there has been an improvement this year from 170 days down to 151 days, which is good. But I see that the inventory deals have increased as well substantially from 137 days up to 164 days. So is this like a structural change in our business model? Or is it a one-off related to some of the hardware related issues that you mentioned earlier?

Yes. This is -- if you could recollect, there was a delay in supplies in the month of JFM. So that got into a cascade effect of our ongoing projects. So there were projects where we had already supplied around 60%, 70% of the products not built, but we were expecting additional supplies to come before March, which did not happen. So that way overall holding position had to increase. But we are seeing that getting improved from June, June onwards. So you will see a better inventory position by September.

All right. That's good to hear. My last question is about the strategy overall. So it's good to see that you're coming up with these new partnerships and have expanded the footprint internationally. So could you give us some sort of a soft guidance regarding, say, 2030, which is 4 years from now? Where can we see ROX? And which kind of revenue growth CAGR as well as sustainable margins going forward?

Yes. If all goes well in the next 4 years seems to be a golden path for this country. I'm sure ROX should be the main boat. That is for sure. And even at 20% growth, we should rationally be around INR 500 crore company, which is a modest kind of expectations. But with international expansion and further merger acquisition in place, I think we should be easily around INR 700 crores, INR 750 crores kind of a revenue just doable with similar PAT markets and EBITDAs.

Our next question comes from the line of Maitri with Sapphire Capital.

Firstly, on the inorganic growth opportunities, what sort of vertical are we looking at this? Is it from the AI? Are we looking at on the cybersecurity side, any sort of color on that? And also how far away are you from kind of getting or getting these onboarded?

So we are evaluating a couple of companies. I think we have gone into a soft an agreement with 1 company on, I would say, pure services, manpower services on technology space. So that once that comes in, I think we can easily add around 200, 250 people on the company's list with an additional revenue of around $5 million, $6 million coming in. That's 1 different area of adding volume to the number of people in the organization. Also, we're looking at organizations in data center side who are around the -- size of around $8 million to $10 million kind of size, where we would like to acquire 50% of stakes in these companies to add volume to our overall revenues. So these 2 areas, we would like to expand and invest and acquire. Yes.

So the synergies will come from the customers that the companies will bring in or mostly from the cost line that will happen there? Just some color on that.

Can you please rephrase the question, please?

So the synergies from the inorganic acquisitions will come from the customers that these companies are bringing in or from kind of first selling and heated to our existing customer base?

Absolutely. It is both ways. Ones so definitely the synergies which come from the customers, but these companies are servicing. Yes, also, we would like to take the footprint on the geographies that they are present. So it will be easy for us to access those markets.

Acquisition would be -- are you looking at intentional servicing...

Maitri, your voice is breaking.

These acquisitions on the international side, any geography you would like to mention them? Or...

Not now. I think this is under NDA right now. We will have the respective announcements whenever the time is right.

Got it. Got it. And on the order book, do we maintain an order book for the company? Or...

We are currently at INR 75 crores of order book, which needs execution by September.

Got it. And...

Current participant has left the queue. Our next question comes from the line of Rupesh with Share Recovery Experts.

Actually, I have a couple of questions. So sir, my first question is your FY '26 revenue has declined marginally if you compare from FY '25. So I just want to confirm that in that what has been factored behind this decline? And how do you see this -- the growth planning in FY '27?

This is predominantly because of supply-side delays, we were not able to pull large orders by March. So they got spilled over this quarter for this financial year. But once the supply is stabilized, I think we should be able to be back on the same growth path.

Okay. Mainly because of the supply issues.

Correct. Yes, macro.

Okay. And sir, despite lower revenue, your EBITDA has increased nearly by 29% year-on-year basis. So what aspect of operational improvements on project mix changes grow this margin expansion?

See, today, we have enough capacity and capability built on executing these complex products. We have talent pool, which have been trained, which have hands-on experience now, so we are able to execute cost effectively, which we were not able to initiate because we had to have our high cost sources to support us and do the knowledge transfer and stuff like that. Today, we have built a young talent team which is able to deliver these solutions effectively and cost effectively and also faster to the time lines of what the customer setting us up for.

Okay. And sir, okay. So because of technology improvement perfect as well?

Absolutely. We are also using AI assistance to execute projects. Our consultants are trained on these areas so that they use man and the machine combination to execute these projects perfectively and efficiently.

Okay. Okay. So sir, and the management you deployed contribution breakup across your digital transformation and cybersecurity if we talk about and data centers on the network and...

So I request you to just drop a mail on this data points to our company secretary, and we will respond to you separately.

Okay. Okay. Yes. So I will. And sir, which business verticals are currently witnessing the strong demand pipeline actually? And actually, which are the among those expected to be the primary growth drivers over the upcoming 3 to 4 years depreciation?

The primary good driver in these markets are, I would say, IT infrastructure modernization because today, everybody wants to participate in the AI wave, and AI is a reality, and we cannot shy away from that. Today, even if you look at the basic several infrastructure, which needs to be upgraded in a data center is pushed by application demand to implement AI. And same way our cybersecurity, network requirements to upgrade and refresh to digitally transform the infrastructure AI ready infrastructure is because the teams want to harness AI capabilities at the application level. So this is today, I would say, a reality. And if an enterprise needs to keep up with their competition and keep up with their global peers, they need to adopt and transform. And this is where the capital investments are going. And I have seen this a very positive move for especially Indian IT companies as well as the -- because we are in a most of the enterprises are going to transform to latest technologies.

Okay. Have any large enterprise clients in the company's Al and automation offerings? Or are there any opportunity for cross-selling as well amongst new solutions?

Of course, most of the large implementations are large enterprises only. And that's where we are able to automate their process able to implement agent and agent AI solutions today able to showcase and demonstrate clear value proposition to the customers on how AI can benefit their overall ecosystem. So that's the reality. And today, these are all revenue-making practices for us. So yes, and especially in the area of data center operation, workload management, movement of critical workload in a cloud environment. This all is today led by AI solutions.

Yes. Okay. And last question only. See, actually, this war between U.S. and Iran.So any impact of that company or we would like to mention something -- any impact of this war?

I would not say that's a direct impact. But of course, the cost of the imported goods have gone up because of the rupee-dollar kind of depreciation. So the impact is separately there on people who are buying imported goods in India because it's depreciated.

Yes. Okay. So that has been like, okay, and actually, as we see just today only the President of U.S. has announced peace deal with between U.S. and Iran. So definitely, the positive impact will also come, correct?

Absolutely. Yes. May God give wisdom to all the leaders because life is very short. And in this short life, we keep having so much of problems.

Our next question comes from the line of Aditya Bootra from Advisors.

Just 1 thing I wanted to ask and that was about the revenue per employee, right? So often for rock, the revenue implies fairly high at INR 1.4 crores. And if you compare it with some of the IT and mid-tier companies in India, it is, I mean, less than half of that. So just wanted to be your take on what's the reason behind this? And if we expect this sort of numbers to continue?

Aditya, as we are expanding -- the revenue per employee will reduce because you'll have a lot of bench strength, a lot of pressures coming in. And if you look at ROX Hi-Tech organization, it's a 24-year old company and most of the core team are with me for now. So that's how they're efficient. Their ability to translate their manhours into productivity are very high. But as we are scaling and as we're having a lot of young blood, so you will see revenue per employee will drop and maybe some less than INR 1 crore or something like that over a period of time.

Our next question comes from the line of Diya Mehta, an individual investor.

So over the years, you have won several million-dollar projects. So how does the current large deal pipeline compare with what you saw like a year ago?

Customers are bullish. Customers want to grow. Any enterprise today, the mindset, they want to grow, they want to build a competitive edge. And IT is the way to go. IT modernization is the way to go to keep their competitive edge among their peers. That is very clear. But there are some factors as gold price going up and rupee depreciating, all these factors, supply side constraints are maybe delaying those adoption slightly. But this can never deny them. So the modernization is always in the cards and maybe that's a quarter later, but we are seeing business to grow. We are seeing a lot of -- our pipeline is very good for this year. Wherever we go people are talking about opportunities for the year to grow. So we are bullish. And we are seeing that this year, I think, we should be able to meet our numbers.

I had 1 or 2, 3 more questions. So you mentioned onboarding the manufacturers of manufacturing companies for digital transformation initiatives. So what is the typical deal size revenue potential from these engagements?

INR 4 crores, INR 5 crores.

Okay. And could you share the current order book and pipeline across SAP and different cybersecurity, cloud and infrastructure...

I will refer to have a segregated conversation right now, maybe later one-on-one, you can have a conversation with the company secretary. You can drop a mail, and we'll reply to you. But as I already mentioned, the order book is around INR 75 crores as of now.

Okay. So which business vertical is expected to be the largest growth driver for FY '26 -- sorry, '27?

It will be a mix of -- we are placed well in terms of derisking our overall business. So that way, whatever we have planned, each and every vertical should deliver based on our guidance and forecast. So that way -- we don't believe in 1 large order, and we don't believe in 1 marquee deal, which is in the years growth. So we believe that all the pillars in the organization BUs, which are contributing, will grow based on their plans and based on the engagements in the pipeline what they have right now.

Okay. So as investors, we often focus on profit, so -- but the cash flow is equally important. So how should we think about cash generation over the next couple of years?

Yes. We have recurring projects. We are also now asking customers to pay some advance when we start the budget. This also we allowed maintenance coming in for various projects, but also will be on the cash generation side. So that is the way this typical business works. So yes. And once we have executed effectively digital transformation solution, we reuse those components so that way we made more money in that.

Okay. So what are the key levers for improving the cash conversion?

You are reusing your own capabilities, like once you build maybe your process or maybe you have built or what you call the migration dashboard, we would like to use the same thing again. So that we don't need to go back and start revolting. So that way we increase those positions optimality.

Okay. So just 1 last question that how are you feeling about FY '27 compared to FY '26 in terms of like the business momentum?

See, as on today, we are placed well as the other gentleman who spoke, and there's also a piece talks going on for the crisis, so we are bullish. I think the pipeline is good, right? Wherever we go, we are seeing customers are talking about growth. Customers are talking about new operations. Yes. So we are placed well. That's what my -- but I don't know if you ask me how things will be in the month of December or January. So as on September -- until September, I think we are placed well.

Okay. And are the key risks that you're watching closely?

Again, depreciation of rupee is one that's a very big risk because then input cost goes up.

Ladies and gentlemen, that was the last question for today. I now hand the conference -- thank you, and over to you, Gautam.

Thank you, Danish. On behalf of ROX Hi-Tech and EquiBridgex Adviser, I would like to thank everyone for taking time to join today's conference call. Should you have any further queries, connect with us at [email protected]. Thank you, everyone.

Thank you.

Thank you so much. Ladies and gentlemen, on behalf of EquiBridgex, that concludes this conference. Thank you for joining us, and you may now disconnect your lines.

Thank you. Thank you so much.