TVS Supply Chain Solutions Limited (TVSSCS) Earnings Call Transcript & Summary

Ladies and gentlemen, we welcome you all to the Q1 FY '25 Earnings Conference Call of TVS Supply Chain Solutions 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 the date of this call. These statements do not guarantee the future performance of the company and may involve risks and uncertainties that are difficult to predict. [Operator Instructions] Please note that this conference is being recorded. I now hand over the conference to Mr. J. Sivakumar, Head Investor Relations for TVS Supply Chain Solutions. Thank you, and over to you, sir.

Thank you, moderator. Good afternoon, and welcome all to the TVS Supply Chain earnings call for Q1 FY '25. We have with us today Mr. Ravi Viswanathan, our Managing Director; and Mr. Ravi Prakash, Global CFO. Our financial results and the investor presentation have been already posted in the company's website and also reported to the stock exchange. We'll commence the call now with the opening remarks from our management team, followed by the open forum for question and answer. Before we begin a customary remarks, I would like to point out that some of the statements made during today's call may be forward-looking in nature, and must be reviewed in conjunction with the risk that the company faces. A disclaimer to this effect has been included in the earnings deck that has been shared. I now request and hand it over to Mr. Ravi Viswanathan, Managing Director of the company, to make the opening remarks.

Thank you, J., and good evening to all of you. I would firstly like to welcome all of you once again to our earnings call to discuss the performance in the first quarter of this fiscal year, 2024-'25. I'll share with you the highlights of our performance and my colleague, Ravi Prakash will then take you through the analysis of our numbers. We look forward to interacting with you as part of the question and answer session. Before I begin, it's customary that I provide a brief background to our company, the benefit of those participants who might be joining our analyst call for the first time. TVS Supply Chain Solutions is a tech-led and asset-light supply chain solutions provider with capabilities across the value chain, integrated supply chain solutions or ISCS segment and Network Solutions or NS segment are the two business segments of the company. Our presence spans four continents, Asia, Europe, North America and Oceania with a diversified customer base spread across multiple sectors. We offer bespoke and tailor-made solutions to our customers. So our customer contracts are generally long term and our customer services are predominantly in the 3PL space and in evolved overseas markets, we also offer 4PL service. To summarize, TVS Supply Chain Solutions is a company with a strong Indian base and the global presence offering best-in-class supply chain solutions across the globe. With this short introduction, I shall now move to the performance highlights for quarter 1 of fiscal year 2024-'25. At the outset, I would like to state that we continue the momentum of quarter-on-quarter profit-led growth in both ISCS and Network revenue segments. The ISCS segment delivered quarter-on-quarter growth of 3.4% linearly and a growth of 8.1% on a year-on-year basis and grew both in India and the Rest of World operations. The Network Solutions segment grew handsomely and delivered quarter-on-quarter revenue growth of 6.4% and 14.8% on a year-on-year basis. Business development continues to be robust across the segments and contributed 10.7% of total revenue. At a consolidated level, the company achieved a revenue growth of 10.9% on a year-on-year basis and 4.7% on a Q-on-Q basis. The company reported a PBT of INR 13.7 crores to reflect our resilience and quarter-on-quarter profit enhancement measures. With this brief background, let me hand it over to Ravi Prakash, our Global CFO, who will then take you through a detailed analysis of the numbers.

Thank you, Ravi. Good afternoon, everybody, and thank you for joining the Q1 FY '25 earnings call. Let me walk you through the highlights of our financial performance for the quarter ended 30th June 2024. In the last earnings call, we had called out that the company had reached an important milestone on its revenue and margin journey by growing consolidated revenue and delivering positive PBT. This is with reference to the earnings call in Q4. This quarter's results provide further evidence that we are continuing on this journey and further building on the growth momentum. With that, let me walk you through an analysis of the key line items in the financials. Q1 FY '25 revenue was INR 2,539.4 crores compared to INR 2,426.3 crores in the previous quarter and INR 2,288.9 crores in Q1 FY '24. This translates to a year-on-year growth of 10.9% and quarter-on-quarter growth of 4.7%. The drivers of this revenue performance, first, both our segments, Integrated Supply Chain Solutions and Network Solutions have delivered strong growth. The ISCS segment grew 8.1% and the Network segment grew 14.8%. In the Network segment, revenue growth was driven by healthy volume growth in the forwarding business. Revenues from business development maintained their momentum with INR 246 crores being clocked in this quarter, which is about 10.7% of the base revenue. The pipeline of orders continues to be healthy. So these are the three components which kind of helped deliver the strong revenue performance. Other income for the quarter was INR 5.6 crores compared to INR 6.8 crores in the last quarter and INR 18.2 crores in Q1 of last year. Other income in the quarter was mostly interest from bank deposits and a little bit of ForEx gain. With this, total income for the quarter was INR 2,545 crores, which was a growth of 10.3% year-on-year and 4.6% sequentially. I now move to a brief explanation of how the major expense line items have evolved and have resulted in the margin performance. Material costs for Q1 FY '25 were INR 488.7 crores, which increased 17.3% on a year-on-year basis and 4.6% on a quarter-on-quarter basis. Incremental material cost is on account of change in business mix in the Rest of the World operations. And this is due to the nature of the contracts that we have entered to in some of the geographies. The company can manage these fluctuations within its gross margin and offset any variations through it through operating leverage. Freight, clearing, forwarding and handling expenses being variable in nature, increased due to higher volume of trade handled in the GFS business and due to additional costs charged by ocean carriers on account of the Red Sea situation. This expense line was up for the quarter by 29.2% year-on-year and 15% on a quarter-on-quarter basis due to the reasons that I've already described. Employee benefit expense for the quarter was INR 576.8 crores, up 4.9% year-on-year and 1.5% on a quarter-on-quarter basis. The year-on-year increase in employee benefit expenses is on account of ramp-up in customer engagements in the ISCS segments. And these costs are absorbed in the gross margin of the respective contracts. In fact, the rest of the employee expense, which is mostly overhead in nature, came in pretty flat. With these numbers, the ISCS segment reported an adjusted EBITDA of 9.7%, which is pretty much in the range that we had already always talked about between of 9.5% to 10%, right? The -- I would like to spend a little bit of time on the EBIT performance of this quarter. We have added about 30 basis points of EBIT margin versus the same period last year. That is a result of an increase in the absolute gross margin and the fixed cost leverage. This is in line with our midterm plan. EBIT improvement has been further supported by drop in interest, and we have managed the gross debt very tightly. In fact, you will notice that the gross debt is actually slightly lower than March numbers. And we have funded the entire revenue growth through internal cash accruals. As a result, PBT margins have improved 100 basis points versus the same period last year, leading to a INR 13.7 crores PBT. We expect to build on this momentum in the ensuing quarters. This concludes a quick summary of our financials. I now hand it back to Mr. Ravi Viswanathan.

Thank you, Ravi Prakash, for the analysis. Let me touch upon business development and the key engagements. We have been able to grow revenue in both the ISCS and the NS segments for the quarter and also result in higher net profit for the quarter, demonstrating turnaround of the business. Our BD continues to contribute 10.7% of the revenue across both ISCS and NS segments. And for Q1, the BD contribution was INR 246 crores. And for those details, please refer to our investor presentations, Pages 12 to 15. We had significant new customer wins in both the segments. In ISCS, we had a global IT service provider in India, a metal forgings manufacturer in India, a passenger and commercial vehicle manufacturer in India, water management utility services provider in the U.K., and industrial machinery manufacturer in Europe and the passenger car manufacturer in the U.S. are some of the customer wins that I wish to call out. Some of the new customer wins in the Network Solutions segment were a global electronic component manufacturer in Asia Pacific. a 2-wheeler manufacturer in India, a furniture manufacturer in Asia Pacific, a material handling equipment manufacturer in the U.K. and a system integrator or an IT services company in Europe. What is exciting for us is that our pipeline of new opportunities continues to be strong, and we are building on that strength quarter-on-quarter, and it currently presents a revenue opportunity annualized in excess of INR 4,000 crores. While on the subject, I would probably like to call out two key developments. Firstly, our contract in the U.K. with a leading energy major company, which we announced last year, where we offer best-in-class inventory optimization and final mile delivery solutions at a very large scale and complexity. This unique solution offered has now opened the doors for TVS SCS in Europe to participate in large deals in the U.K. region. And what is worthwhile mentioning is that the average deal size since we signed that contract has more than tripled to GBP 9 million from GBP 2.7 million before we engaged with this utility company. By the same token, our farm equipment manufacturer in the U.S., we have an engagement of a 4PL solution involving inventory and aftermarket warehouse solutions, again, of large scale and complexity in the U.S.A. and offered by TVS SCS in North America. Thanks to the fulfillment of this prestigious contract, we are now seeing actively engaged in similar sized opportunities, which otherwise we were not invited to. Now the average new opportunity size in the U.S. has more than doubled in the last 12 months, if I look at my pipeline. We are motivated by these wins. And given the large deals in the pipeline, we are confident on continuing the revenue growth and BD-driven revenue growth momentum. In terms of deliverance, meaning engagements we have delivered of significance in the last quarter, I would add the following. We announced a 5-year strategic supply chain contract with a global auto major, which amongst key deliverables include handling 8,000 SKUs and 65,000 order lines. This signifies the trust placed on the company to handle critical supply chains for the global auto major company. We achieved a milestone of handling 500,000 completely knocked down kits for a domestic auto major company for its EOU plant through our offer of world-class subassembly and kitting services, which are unique and state-of-the-art solutions. We had earlier mentioned about our global account management and on the way forward, with our presence across four continents and a bouquet of service offerings in marquee customers that we have, we are uniquely placed to grow the widespread captive customer base. The company has embarked on a global account management program for about 10 customers with three key objectives, namely cross-sell more of its capability, cross-sell across geographies and tap the economies of scale. Today, we have over 60 active proposals across these global accounts, which we are pursuing. And all of this comes because of a growth enabler, which is the IT platform, IT systems. And IT is the backbone of the supply chain service offering of the company and IT-based applications provide the impetus for reaching new customers and enhancing the wallet share with our existing customers. During the quarter that just concluded, we implemented several key tech initiatives across our businesses. And what we would like to call out is predominantly the area where we are deploying AI at scale. We have an Alpha [indiscernible] platform in India, which uses AI to validate proof of delivery, and this is in the India transportation platform. We have implemented a vision inspection using AI/ML in the sub-assembly processes, allowing for real-time quality checks for one of our large customers in TVS SCS North America. An AI-based polarized light damage detection deployed for our beverage clients in Europe. And finally, working closely with academia, we have a partnership with a leading U.K.-based university focusing on AI governance and how to implement it as a core structure throughout our businesses globally. In summary, in Q1 FY '25, we continued with our revenue growth, and we had revenue growth across both our segments, and we are back to a quarter-on-quarter profit-led growth. With that, let me open the floor for questions. Thank you.

[Operator Instructions] The first question is from the line of Sanjay Shah from KSA Securities Private Limited.

First of all, congratulations on good numbers and nice presentation with explanation, sir. So I appreciate the way you explained and make us understand the company. The question which was coming to my mind was regarding the growth and the complexity of the solutions what we provide and the third-party logistics that is 3PL, which is growing at a very rampant speed world over and in India. So can you highlight upon it, how we stand because we are now going global. So how do you see the difference between what you do the customer in India as well as outside India? Is there any change in the requirement and what we offer to them? And what is our future offerings to them?

Thank you so much for the question. Thank you for your wishes on our quarter. Yes, let me answer by saying we are operating across two distinct regions, India and rest of the world. What we are seeing in the rest of the world is, I would say, large-scale outsourcing, which means that organizations are outsourcing bulk of their 3PL and 4PL activities. And our solutioning, combined with our ability to bring in a lot of technology into our solutions is the key differentiator as we deploy large-scale outsourced operations for our customers. So the example I gave, whether it is the beverage industry or the farm equipment or the commercial vehicle that we spoke about or the utility company, they're all mega projects, if you want to call it, which is basically transformational in nature. So we are taking over the supply chain operations, transforming it both from a process and a technology perspective and bringing in higher levels of efficiency. So they are typically 5, 7, 9, 10-year contracts, which clearly outlines how the transformation will lay out. We had mentioned it earlier in our earnings call that India is an evolving outsourcing market. We obviously need to work very hard in ensuring that we propagate all our success stories and our capabilities and ensure that we are participating as the outsourcing market opens up. In India, it's still a 3PL and maybe more value-added services like contracts and not supply chain outsourcing per se. But the key common thread in both of this is the use of technology. We -- in both India and rest of the world, we are focused on putting technology to play and bringing in high level of automation in the processes that we are deploying across the globe. But there are different platforms, one for India and one for the different parts of the globe. I don't know if I answered that question sufficiently, but I'm happy to take more questions as we go along.

Yes, yes. It's really helpful. My second question was to -- just to understand our ISCS and Network in what we cater to and offer to solutions to our customers. How we actually do that? I'm sure it is a basic question, but we need to -- it will be helpful to us to understand that how it is managed globally. We have -- we use the outsource the third party to support our solutions or we have our in-house solutions for everything?

So most of the time, the solutioning is done by us, by our company, of course. But we do engage with a lot of third-party providers of maybe services like warehousing or transportation, but bringing in together of all of the pieces and making it -- stringing it together with technology is where the differentiation comes and where the efficiency is built. So for example, I said we are an asset-light company. So we don't own any transportation fleet nor do we have an extensive network of our own warehouses. So we will lease these facilities from third-party providers and bake it into our solution when we go in for our customer engagements.

The next question is from the line of Disha Giria from Ashika Institutional Equities.

So first, I wanted to understand there has been a degrowth in the ISCS segment in the India region. So could you give some idea on the same? The NS segment has performed exceptionally well in both India and rest of the world, but the IS segment faced a 6% decline. So could you give some flavor on the same?

Yes. Let me probably first take it and then Ravi Prakash can add to it. As you would have seen from the data, Q1 has been relatively soft in India, probably because of the elections. But what we did see was a higher push towards exports, and that explains why we had a higher NS business as compared to the ISCS business. But from an ISCS perspective, we have quite a few deals out there in the pipeline, looking very healthy. I would call it a quarter phenomena rather than anything which is trending. Ravi, do you want to add something?

Yes. Disha, I kind of build on what Ravi Viswanathan already said. I look at this more as a timing thing. If you go back to what we had put out in the Q4 earnings, we had given 3 years CAGR. And you'll find that across 3 years, all three businesses, Europe, North America and India were growing at about 17% to 18%. So over a couple of quarters, these things normalize. Sometimes because of the timing of deals or like Ravi talked about the elections or a couple of things, 1 or 2 quarters might be up or down. But over a 4- to 6-quarter period, these things normalize.

All right. So for the FY ending, I mean, what would be your outlook for the NS segment?

For the NS segment. Look, the NS segment in terms of the revenue that you've seen in this quarter, that's probably a good number to start with because we kind of see that run rate continuing. The only change and that maybe we can look at it towards the end of the calendar year is the Red Sea right now, prices are a little bit elevated. There is an impact of approximately INR 30 crores to INR 40 crores on the revenue in this quarter because of the Red Sea situation. That maybe in the next couple of quarters, we'll have to reevaluate. Other than that, the underlying trends, I would expect them to continue.

Okay. That explains my first question. Secondly, in the annual report, if I see your total number of customers has been kind of declining that it was 10,531 in FY '22, but 6,909 in FY '24. So could you give some sense on it?

Yes. So Disha, actually, I should -- I'd like to break it up. So we have two kinds of customers. About 2,000 to 3,000 customers are what I call the core customers who've been there for a very long time. But in the freight forwarding business, we have a long tail of customers. And many of them came on board during the COVID period. And they are more tactical in nature. They might do a couple of shipments and they might fall off. So that's the reason you'll find that the number of customers has declined. But on the other hand, if you look at the business development, every year, we've been doing the same number, INR 1,200 crores to INR 1,300 crores, and the revenue has grown. So in terms of real revenue, what you call big revenue contributors, we are doing well. And the number of Fortune 500 customers is actually going up year-on-year.

The next question is from the line of Anshul Agrawal from Emkay.

Sir, could you throw some light on the difference between the Indian supply chain market versus other developed markets? I understand we are far behind in terms of evolution, but say, in terms of margins, competitive intensity or efficiency productivity levers that we would have in the Indian markets versus the developed markets?

Okay. So I think I partially addressed that first question in the first question. But the Western Hemisphere is predominantly, I would say, driven by large outsourcing opportunities. So typically, you would go and pitch for moving entire sourcing and procurement of a certain organization or managing the entire operations of a certain industrial customer or managing the entire aftermarket for motor provider or the like. So they are typically larger deals outsourcing -- position as outsourcing opportunity. And they are also typically multiyear deals with built-in efficiencies year-on-year. So if you were -- if you look at it from an IT perspective, it is multiyear, every year efficiencies being baked in so that by the end of the outsourcing period, the company has had a significant cost takeout and efficiency built in into their supply chain operation. In India, it's more evolving. And secondly, let me also say that it is highly system-driven, meaning IT. And it's easy for us to price the IT in those kind of outsourcing deals or bake it in as part of the pricing in a very transparent manner. In India, I would say it's still evolving. I don't think we are seeing the likes of such outsourced deals. We probably saw one or two early in 2021. But since then, we are not seeing very large-scale outsourcing deals. So what -- where we see our sweet spot is in taking parts of operations, which we believe are inefficient in a customer organization and go and build a tailor-made or a bespoke solution using technology components and building in that efficiency. So from a pricing perspective, it is aggressive, more competitive. From a competitive perspective, I wouldn't -- I would say the market is probably as competitive outside as it is here. And on the ISCS side, the margin profile to be not very different. It will be similar, but maybe Ravi Prakash can throw some light on those different. But largely, I would say, systems, processes, outsourcing and the maturity of outsourcing is high in the Western market. It's more evolving here in the India market. Ravi, you want to add to?

So let me build, Anshul, with a little bit of a specific number, which maybe that probably might help you. See, if you take a typical Indian supply chain contract, 3 years is probably a good number. The customer relationship itself might exist for 10, 15 years. But normally, you would probably look at a 3-year contract. In the U.K. a 5- to 7-year contract is quite normal. In the U.S. as well, you can actually look forward to 5, 7. There are contracts in the U.K., which you can go up to 10. So in general, the average length of the contracts, and I would refer you back to our Q4 earnings presentation where we have given the average length of the contract for various geographies, you'll find it longest in Europe and then India and then North America. So that's this. In terms of preparatory phase, typically, in an Indian contract, you are working for about maybe 6 months to -- before you start up from the time you know of an opportunity to actually you're starting to recognize revenue. I would -- and this is not -- I'm not doing exact math, but anecdotally, I would say about 6 months could be the lead up. In the U.K., it would typically be more around a year at least if you're talking about large contracts, which are about 5 to 7 years old. Now how does that help in the margin profile? I'll go back to what Mr. Ravi Viswanathan said, systems, processes, and that means SLA and in terms of deliverables are very, very tightly and in a great level of detail defined in the overseas market. The plus of that is you can plan your operations very well. So the degree of predictability is very high. And if you execute the plan, the predictability of margins is very high. The margin absolute percentage itself may not be very different, but the predictability of margin is very high outside of India as long as you are meeting your deliverables, right? So the ISCS business itself from an EBITDA perspective, as a portfolio, we don't look for a country versus another country because most countries are actually moving in a similar region, except that the moment you have -- when you have a much longer contract, you have a better chance to plan and you have a good period of ramp-up and you have a longer period of burnout. I hope that kind of gives you a sense.

Definitely, this was useful. A follow-up question on this. Since contracts in India are slightly shorter or way shorter than probably a U.S. or Europe. Scalability in India would also be a challenge because from what I understand in this market, you need to demonstrate -- you need to first -- because these are all customized contracts, right? You need to understand the customers' business processes, then demonstrate how you'll add value and then probably you'll get that contract. Please correct me if I'm wrong.

I think what you're saying is right, but scalability is not a challenge, what you're saying is absolutely right. We have to prove the concept. We probably would run a quick pilot to ensure that the systems and processes that we are talking about are proofing the solution. But scalability per se, we can do a fair amount of lift and drop of cross-sell systems across engagements. So that's probably something which we are focusing on.

And just to build on that, see, look, there's one thing which is very similar between India and rest of the world. Contract to me is only a paper definition of a project. The relationship actually in both cases, is at least 10 to 11 years. In both countries, both India and rest of the world, a customer might in India renew the contract every 3 years and the customer in the U.K. might renew it once in 5 or 7 years. But if you look, our 20-year experience has been that the length of the customer relationship continues. So going back to your scalability questions, when we go into a customer, our intention is that our -- we are going in with, hey, listen, we are here to make a long-term difference to the customer supply chain. That's how we operate. And therefore, we can actually deliver value.

Great. Very helpful, gentlemen. Just one last question on this again. So can I say operating leverage only kicks in by founding an account?

No, let me clarify operating leverage. There are 2 parts to the operating leverage. See, there's a contract level leverage and then there is a company level leverage. And let me -- so when you are talking about a contract level leverage, at a contract, let's assume you're trying to take a contract at a gross margin of X. That leverage moves in a pretty narrow band, 50 to 100 basis points. If you have a contract which is geared for X, it is never going to become 2x, nor is it going to become 0.5x because there at a contract level, it is a pretty narrow band and our contract is a unit of nature. What we are banking on is actually not contract level operating leverage. We are banking on company level operating leverage. What do I mean by that? If today, we have -- I'm just making a few thousand contracts in the company. All these contracts are supported by a sales team, a solutions team, finance, HR management. That total cost of the company is approximately 10.5% to 11% of the company of the revenue. If I take a global benchmark, that number can come down to anywhere between 8% to 9%. So there's about 200 to 250 basis of leverage available. What we are banking on is if we can, as a portfolio, keep our gross margin percentage in a narrow band, every incremental contract at the EBITDA level and more importantly, at the EBIT level contributes higher than the existing business. And that is what I call company level leverage, which is what we've been -- again, I'll refer you back to our Q4 earnings presentation, what we call as operating leverage, that's what we refer to for long-term margin growth.

[Operator Instructions] The next question is from the line of Saumil Shah from Paras Investment.

Congrats on a good set of numbers. Sir, in your presentation, you have a medium-term outlook of 4% PBT by FY '27. So how confident are we to achieve that? And can you also guide us on your revenue front by FY '27, what revenue growth can we look at?

Let me answer that question. So Saumil, thank you first for your compliments. I think let's look at it as two parts. The revenue growth is driven, like I said, across what I would call 3 fundamental drivers. One is what I would call as large contracts today that we are participating in, which otherwise we were not participating in. So I told you that the average deal size in the U.K. has tripled. The average deal size in the U.S. has more than doubled. And what it basically means that today, we are into more of the multimillion, multiyear contracts than we ever were before. And that is coming because we have a very, very strong now a track record and also the ability to now win and deliver large-sized projects. So first and foremost, that is going to be a significant inflection point in terms of our revenue numbers. Our revenue should exponentiate going forward given that we are participating in quite a few large deals and winning just one, two or maybe three of them could significantly alter that graph in our favor. The second is we are today working with a lot of Fortune 500 customers. And one of the things that we have done is to spawn off a global account management program where we are saying for an account can -- I mean, not can -- we do now have one account manager who is looking at the opportunity landscape, not just within one region, which is how it used to be in the past, but the entire account and globally, and therefore, creating more opportunities both away from the home geography and also in multiple capabilities that we operate in. That has increased the throughput of opportunities and therefore, an expansion of the pipeline and the potential for us to convert them into revenue in the short to medium term. So again, another driver which gets our revenue in. The third, I would say, is a huge differentiator. I spoke about AI that we are deploying at scale. We have always showcased our technology. And today, we are showing more and more of that. We today in three main geographies that is the U.S., in Europe and in India, we are showcasing AI at scale. We have an early AI program now in Asia Pacific, too. So the entire operations of ours, we will have showcased AI programs at scale and how we are bringing that to bear when it comes to our solutioning and therefore, differentiating ourselves in the market. And our engagement with one of the leading universities in the U.K. is only going to further that or accelerate that whole progress. So three main components, large -- very large deals, global accounts; and thirdly, the way we are leveraging technology and our solution. All of that puts us on a path to exponentiate our revenue growth. And of course, with that revenue growth comes opportunity for us to scale our EBITDA and PBT numbers. And Ravi, you want to touch upon any of the margin related, the 4% margin that Saumil has spoken about.

Saumil, to me, the 4% is -- I mean, the company, we think about it as if you're about 3 years away, 12 quarters away. So every quarter -- and that's what we've been saying from our first earnings call. Every quarter has to be better than the previous quarter. So in 4 quarters, what can we demonstrate? The PBT margin in Q1 FY '25 is 100 basis points better than what it was in Q1 FY '24. And sequentially, it has been better for the last 3 quarters. That is what we are focused on. It goes back to my comment about company leverage. The three levers are very simple. have a strong pipeline, which leads to a double-digit revenue growth, step one. manage your gross margin in a very tight band, step two, keep your overhead growing at a low rate lower than the revenue, step three. Naturally, the incremental gross margin, most of it falls down to the bottom line and therefore, at a company level leverage improves your PBT margin. And we are managing our debt again in a very tight manner. So that's how we plan to build there. And at the moment, we believe we are on that track.

Okay. That was very insightful. Thanks for the detailed explanation. So at least, I mean, in terms of revenue, we can see a double-digit growth year-on-year?

No, I don't -- I didn't want to fall short of giving you a guidance, but the organization's focus is definitely towards converting all of these large deals and hopefully also get significant mileage out of the global accounts that we have identified. So yes.

So yes. And sir, what is our gross total debt position as on today?

INR 775 crores, all of it is only working capital debt. It used to be INR 795 crores in the Q4. And before the IPO, it was INR 1,700 crores. So we came down from INR 1,700 crores to INR 795 crores to INR 775. I think what we have done is the incremental revenue, the working capital required for that, we are funding internally. So we are keeping the debt in a very narrow band.

Okay. But sir, I mean, I'm unable to understand in every quarter, I think this quarter, we have paid about INR 40 crore interest. So yearly, it comes to around INR 160 crores. And the debt is around INR 800 crores. So I mean I'm not able to understand how come why so much?

Let me clarify that. The interest portion because the interest number includes the Ind AS interest, if you actually split it out, the bank interest is actually INR 17 crores. So on INR 775 crores, it is INR 17 crores per quarter. Right now, we are at about INR 17.2 crores per quarter.

And the remaining amount?

That's the Ind AS, the Ind AS interest. The lease rental interest. That's not actually -- that's just an accounting thing.