Updater Services Limited (UDS) Earnings Call Transcript & Summary

Sir, we are now live.

Dear shareholders, good afternoon to all of you. I extend a warm welcome to all of you for the 23rd Annual General Meeting of the company. I hope all members can hear us clearly and the audio and video connectivity is clear and uninterrupted. I am Raghunandana Tangirala, Chairman and Managing Director of Updater Services Limited. And by virtue of articles association of the company, I am the Chairman for this meeting. I've joined this AGM from our office in Chennai. Before we start the main proceedings of the meeting, I would like to introduce the Board members and the key managerial personnel. Mr. Sunil Chandiramani, Independent Director and Chairman of the Audit Committee and Risk Management Committee; Mr. Amit Choudhary, Independent Director and Chairman of the Nomination and Remuneration Committee; Dr. Sangeeta Sumesh, Independent Director and the Chairman of Stakeholders Relationship Committee; Mr. Amitabh Jaipuria, Senior Executive Director; Ms. Jigyasa Sharma, Executive Director; Ram Praveen Radhakrishnan, Group Chief Financial Officer; Sanjay Saravanan, Company Secretary and Compliance Officer. Also, we have with us statutory auditors, BSR & Company represented by Mr. Sudhakar Partner. Secretarial Auditor, Mr. Balu Sridhar, partner of A.K. Jain & Associates; and our internal auditors, R.G.N Price represented by Mr. Saravanan. We have 40 shareholders have now joined the meeting through video conference, and we have the requested quorum present through video conference to conduct the proceedings of this meeting. Participation of members through video conference being recorded for the purpose of quorum as per circular issued by MCA and Section 103 of the Companies Act 2013. The quorum being present, I call this meeting to order. I now request Ms. Sandhya Saravanan, Company Secretary and Compliance Officer of the company, to provide general instructions to the members regarding participation in this meeting.

Good afternoon to the directors and shareholders [indiscernible] 23rd Annual General Meeting is held through video conference in accordance with the provisions of the Companies Act and circular issued by the [indiscernible]. Press release for joining this meeting through video conference or other audio visual means is made available to the members on a first come first serve basis. The register of directors and [indiscernible], register of contracts or arrangements and certificate obtained from the secretary auditors of the company confirming that the company's ESOP schemes have been implemented in accordance with the SEBI regulations have been made available electronically for inspection by members during the AGM. Members seeking to inspect such documents can send their request to compliance officer at UDS. As the AGM is being held through video conference, the facility for appointment of proxies by the members was not applicable, and hence, the proxy register for inspection is not available. The company has received requests from a few members to register them as speakers at the meeting. Accordingly, the floor will be open for these members to ask questions or express their views. The moderator will facilitate the session once the Chairman opens the floor for questions and answers. The company has provided the facility to cast the votes electronically on all resolutions set forth in the notice. Members who have not cast their votes yet electronically and who are participating in this meeting can cast their votes during the meeting and until 15 minutes after the meeting through e-voting system provided by LSPL. Members are requested to refer to the instructions provided in the notice or appearing on the video conference page for a seamless participation through video conference. In case members face difficulty, they may reach out to us on the helpline numbers of NSDL mentioned in the notice to the AGM. Thank you.

I thank you all members, colleagues on the Board and auditors joining this meeting through video conference. Dear shareholders, before presenting the annual report for FY '25, '26, I'd like to briefly reflect on the evolution of the company. From its modest beginning in Chennai to its emergence as a pan-India diversified services platform, today, we are well positioned to address the changing needs of business across -- changing needs of businesses across sectors and to capture the opportunities emerging in the services landscape. Here's a brief look at our journey. Founded in 1990 as a facilities management services enterprise, the company steadily evolved into a diversified services platform through a series of strategic acquisitions and business expansion. Over the years, it has strengthened its presence across integrated facilities management and business support services, entering segments such as mail room management, institutional catering, airport ground handling, hygiene solutions, background verification, audit and assurance and sales enablement services. After our successful IPO in FY '24 and continued -- we have continued investments in talent acquisition, technology and leadership, further accelerating our growth, enabling the company to scale consolidated revenue of nearly INR 2,940 crores in FY '26, and establishing a strong foundation for sustainable long-term value creation. At UDS, our focus remains on delivering measurable value through end-to-end integrated facilities management and business support services. Large corporates are increasingly moving towards integrated solutions-based IFM models to drive efficiency, agility and scalability while accessing specialized expertise and technology. This allows them to focus on their core strategic priorities while we manage operational complexities and deliver value across the enterprise. Now let me give you a quick summary of both the verticals. The IFM, the Integrated Facilities Management segment at UDS spans a comprehensive suite of services, including soft services like housekeeping, pest control, production support like material handling, inventory control and equipment, engineering solutions like HVAC, fire safety, MCC. Hygiene services in our washroom, feminine and hygiene care, warehouse management, institutional catering, general staffing and technology and procurement solution delivered through our specialized subsidiaries. Our catering vertical operates through Fusion Foods, while our tech-driven procurement and service platform is powered by Wynwy. Growth in A-grade offices, industrial real estate and global capability centers is driving strong demand for integrated, compliant and pan-India facility management. At the same time, clients are increasingly shifting from input-based contract to outcome-driven engagements focused on uptime, energy efficiency and asset performance. These trends align closely with UDS compliance-first approach, national delivery footprint and integrated service capabilities, positioning the company well to capture the opportunities arising from this evolving market landscape. In FY '26, the IFM business delivered healthy growth, supported by strong commercial real estate activities, rising outsourcing trends and continued investments in industrial and manufacturing sectors. The company added over 30 new logos during the year and saw increased business from existing customers while growing demand for integrated technically intensive FM solutions. Our continued focus on portfolio quality and contract level profitability is also beginning to deliver improved margins and sustainable growth. Our business support services vertical, BSS, is strategically diversified arm of UDS delivered through a portfolio of specialized subsidiaries, each excelling in its domain. Sales enablement is driven by Denave and Athena. Denave continued to deliver strong growth in FY '26, driven by addition of 49 new logos and increased business from existing enterprise customers, resulting in a 21% year-on-year growth. Encouragingly, new engagements were secured at higher margins, while the continued adoption of its proprietary AI-led sales intelligence platform, Intellibank, is supporting a favorable shift in the service mix and enhancing long-term value creation. Athena continued to strengthen its position in high-volume B2C sales -- telesales while advancing customer diversification beyond BFSI into healthcare, retail and real estate. During FY '26, the business added 4 significant new clients, reduced BFSI concentration from 86% to 81% and accelerated its technology-led transformation with growing demand for AI-enabled services, including recent win of 2 agentic AI contracts. Matrix Business Services continued to strengthen its position in employee background verification and audit and assurance services, adding 12 large clients across FMCG, retail, quick commerce and manufacturing sectors during FY '26. The business remained focused on profitable growth through operational efficiency, technology-led transformation via Matrix 2 and higher -- and increased focus on higher-margin enterprise and GCC opportunities. Avon Solutions and Logistics continued to demonstrate resilience and growth in FY '26 with its core mailroom and integrated support services business recording 9% year-on-year growth. The company remains focused on expanding higher-margin value-added service offerings, including workplace support solutions while strengthening its position in the specialized segment. I'd like to highlight here that this legacy business is showing resilience and remains on a growth path even as the transport business has been completely shut down. Further financial level details will be given by our group CFO later in the meeting. Global Flight Handling Services delivered a strong improvement in FY '26, supported by higher passenger traffic, expanding airline partnerships and improved operating efficiencies. With EBITDA margins improving to 6% from 3% in the previous year, with operations now active across all 23 airports and growing traction in aviation training initiatives, the business is well positioned to benefit from emerging opportunities in aviation services. Collectively, these capabilities reflect our commitment to delivering high-impact integrated and scalable business support solutions that drive efficiency, compliance and customer satisfaction across industries. We have also continued to strengthen our senior leadership bench during this year. During FY '26, we redesignated Mr. Amitabh Jaipuria from nonexecutive non-independent Director to Senior Executive Director for a 3-year term. We also appointed Mr. Ram Praveen Radhakrishnan as our Group CFO. The company has also undertaken an organizational restructuring to keep pace with evolving business environment and transformation taking place across the industry, while strengthening its organization capabilities and creating new opportunities for growth. As part of this restructuring, there is a change in the role of designation of Mr. C.R. Saravanan from Chief Operating Officer to Chief Growth Officer effective August 26, with a greater focus on driving company's growth and strategic initiatives. Further, Mr. Rajeev Bharadwaj has joined, has been appointed as the Chief Operating Officer of the company with a focus on strengthening operational efficiency and execution. The next 2, 3 quarters will be a structured transition period, enabling Rajeev to progressively understand the UDS business, build relationships and take responsibilities. He has extensive experience in leading large-scale pan-India operations, driving operational excellence, business growth, profitability and customer satisfaction. Overall, he has 30 years experience and over a decade's experience in the industry. These measures are taken to ensure that we have the right team in place to execute the company's next phase of growth. On behalf of the Board, I would like to thank our entire leadership team and every employee of UDS for their continued hard work and commitment throughout the year. To summarize, FY '26 has been a year of strengthening operational foundations, improving business quality, building long-term capabilities across both our IFM and BSS segment. We have navigated a set of challenges, some internal and some external with transparency and discipline. We have entered FY '27 in a strong organizational position. We continue to see strong structural opportunity across our 4 sectors, driven by increasing outsourcing, workforce formalization, compliance requirement under the new labor codes. GCC expansion, manufacturing sector growth and rising demand for integrated service delivery partners. These are multiyear tailwinds, and we believe UDS is well positioned to capture a rightful share in this opportunity. As we move forward, our focus remains on strengthening our capabilities, creating sustainable long-term value for our stakeholders and building a resilient and future-ready organization. We look forward ahead to FY '26, '27 and beyond. Our priorities remain clear to deepen our presence across existing verticals to continue investing in technology and scaling to differentiate our service offering and to pursue disciplined value-accretive growth, both organic and inorganic. 3 years since our listing on the exchange, we remain grateful and continued -- grateful for the continued trust and confidence requested in us by our shareholders. And I look forward to your continued support as we build UDS into an even stronger, more resilient organization in the years ahead. On behalf of the Board of Directors, I extend my sincere gratitude to our shareholders, employees, clients, business partners and all other stakeholders for their unwavering support throughout the year. Now Mr. Ram Praveen, Group CFO, will take you through the financial update for the year. Over to you, Ram.

Thank you, Chairman. Let me now briefly talk about the company's performance during the year. On a consolidated basis, revenue from operations grew 7.4% to INR 2,940 crores in FY '25, '26 compared to INR 2,736 crores in the previous year. With our stand-alone revenue growing at a faster pace of 10.7% to INR 1,762 crores. This growth was broad-based with our IFM vertical, which grew 12% to INR 2,028 crores, supported by continued demand from the sectors like manufacturing, healthcare and logistics. Our BSS vertical grew 1% to INR 959 crores, led by sustained momentum in our sales. The consolidated PAT for the year stood at INR 83 crores compared to INR 119 crores in the earlier year. Profitability for the year was impacted by onetime provisions of INR 23 crores leading to logistics receivables at Avon Solutions and Logistics, the wage impact and fair value changes in some of the investments. We continue to make investments to strengthen our capabilities for future. During FY '26, certain transactions in Avon logistics vertical were subject to further review, following which an independent external expert was appointed. The matter was confined to the logistics business, which has been discontinued while the core mailroom management and solutions business remains stable. The company has initiated appropriate legal and recovery actions and taken steps to further strengthen governance, oversight controls while remaining committed to a disciplined approach. The underlying operating momentum of our business remains healthy. Our balance sheet remains robust with an overall cash position of INR 374 crores as of March 2026. In FY '26, the Board revisited the capital allocation policy and has decided to reward the shareholders through an interim dividend in FY '27. Our focus remains on strengthening governance and compliance, improving profitability and enabling sharper capital allocation through tighter controls, better business insights, process efficiencies and targeted investments in technology and AI. Thank you. I'll now hand over to Sandhya.

Thank you, sir. The statutory auditor's report on stand-alone financial statements and consolidated financial statements are available in Page 150 and 233 of the annual report, respectively. [indiscernible] audit report is enclosed in Annexure 3 to reports report on Page 74 of the [indiscernible] Statutory Auditors BSR & Co and Secretarial Auditors A.K. Jain & Associates have expressed unqualified opinion in their respective audit reports for the financial year FY '23. There are no qualification, reservation, adverse remark or disclaimer on financial statements. The shareholders are requested to kindly take note of the same. Thank you. As the notice is being circulated to all the members, the notice convening the meeting be taken as read. Before we proceed, I'm pleased to bring to your notice that as required under the Companies Act, the company has provided you all the facility to cast your vote electronically on all the resolutions set forth in the notice. The period for remote e-voting has concluded by 5 p.m. yesterday. The members who have not cast their vote electronically and who are participating in this meeting will have the opportunity to cast the vote through the e-voting system provided by NSDL. Members may please note that there will be no voting by show of hands. There are 4 resolutions set forth in the notice. The floor is open for any questions by members after the resolution has favored. Item 1 of the notice [indiscernible] approve and adopt the audited financial statements of the company for the financial year ended FY '26 together with the report of the Board of Directors and auditor's report thereon. The audited consolidated financial statements of the company for the financial year ended FY '26, together with the report of the auditors thereon. These resolutions are ordinary resolutions. Item 2 of the notice. Reappointment of Mrs. Jigyasa Sharma, Executive Director of the company liable to retire by rotation as an ordinary resolution. Item 3 of the notice reappointment of Mr. Raghunandana Tangirala as Chairman and Managing Director of the company for a period of 5 years commencing from January 1, 2027 to December 31, 2031 as a special resolution. [indiscernible] shareholders. [indiscernible] shareholders are requested to [indiscernible] to the accounts for the financial year FY '25, '26 and confine their observations and comments to preferably about 2 to 3 minutes, request your cooperation. Speaker shareholders are requested to ask all their questions, which will be responded collectively by the Chairman, Senior Executive Director and CFO at the end. Queries and answers. The floor is now open for queries and answers.

Speaker shareholder 1. I request [ Mr. Sarvjit Singh ], to unmute and proceed with his question.

We would like to inform you that the first 3 speaker shareholders naming them Mr. Sarvjit Singh, Mr. Manjit Singh and Mr. Ankur Chanda, the first 3 haven't joined the meeting. Thank you.

Okay. I will proceed with the floor for speaker shareholder. I request Mr. Himanshu to unmute himself and kindly proceed with this question.

Mr. Himanshu, thank you so much for joining us. We can have your questions now.

Am I audible, sir? Can you hear me?

Yes.

Respected Chairman, Raghunandana, other Board of Directors, myself Himanshu [indiscernible] Gujarat, Vadodara. First, thankful to our Company Secretary Sandhya Madam, who sent soft and even the hard copy of the AGM notice well in advance, which is pool of information which is easy to follow easy to understand. So I'm thankful to you and your entire secretary. Report is nicely prepared. All corporate parameters of the AGM notice. So I don't have much because I have full faith on board and they're working. I support all agenda items. I already sent my question through the e-mail [indiscernible] AGM give the opportunity to speak my rest speaker shareholder. And Chairman, sir, and MD sir and CEO, sir, is given the pool of information -- informative speech and very excellent performance given by the current year financial. So I don't have much concern. I support all agenda items. I as a speaker, only one question, sir. What would be the profit sharing coming financial year? And let me know our company business played out in the rest of other state of Chennai. During the festivals, please remember speakers shareholders [indiscernible]...

Thank you. Thank you, Himanshu, for your comments and for your encouragement.

Speaker, shareholder 5, I request Mr. K. Bharath Raj to unmute himself and kindly proceed with his question.

I am Bharath Raj attending from Hyderabad. First of all, wonderful Chairman's speech and congrats for the wonderful performance for the year, sir. I support all the resolution. I thank the secretary department for sending the link and annual report. Chairman, sir, my questions are, due to the geopolitical [indiscernible] there's a lot of impact in the country, sir. What will be the impact on financials? And there also the fuel cost has increased due to this geopolitical war. So what is the impact on our financials, sir? Chairman, sir, what is your future of the company in next 3 years? And what is your CapEx plan in this financial year? Chairman, sir, since IPO I'm speaker shareholder, every year, I'm requesting you, sir, you send your love and affection Diwali [indiscernible] never send any sweets sir. Sir, why [indiscernible] to speak shareholder sir. This is the fourth AGM of the IPO. Once again, sir, [indiscernible] physical AGM, will meet personally. I'm and Bharath Raj signing from Hyderabad. Thank you.

Speaker shareholder 5. I request Mr. Reddappa [indiscernible] unmute himself and kindly proceed with the question.

Sir. [indiscernible].

Thank you.

Sir, respected Chairman, sir, Managing Director, Board members, Company Secretary and fellow shareholders. Good morning, Namaste, myself, Reddappa [indiscernible] attending this AGM from Hyderabad. I'm very happy attending this AGM. I'm very pleased to participate in this AGM. Company Secretary, thank you for sending the physical annual report and the colorful annual report, the cover page, the team is redefining business services, driving excellence through the collaboration. Wonderful, sir. [indiscernible] speech covered a lot of the information, and thank you so much for that. And I would like to congratulate the management for the management 9% of year-on-year revenue growth and wonderful the financial Q1 also supported the addition of 30 new logos and also particularly in the manufacturing, healthcare sector. I also appreciate the Board for the interim dividend of INR 1 per share. And also turnaround the metrics [indiscernible] the EBITDA, encouraging 76% improvement in EBITDA. And thank you so much for the agentic AI engagement through Athena. And my question is SIS Limited stake in UDS. Sir, my question is concerned about the recent increase in the stakeholding in the SIS Limited to approximately 6.6%. How does the Board view this accumulation? So any financial purely as financial investment or any -- have been any discussion regarding the strategic partnership, business collaboration, other possibilities. So I would like to know this IFM and BSS industry affordability for the consolidation. Second question on the reappointment of Mr. Raghunandana ji. So the resolution 3 proposed the reappointment of Tangirala as a Chairman and Managing Director 5 years, and supporting this, sir. So the contribution beyond the age of 70, the remuneration approximately INR 1.9 crores per annum. So I respect the experience, contribution and the leadership. However, could the Board please share the 3 or 4 measurable operations, the financial milestone that will be used to further evaluate the performance during this new 5 years tenure. For example, revenue, EBITDA, margins, ROE, ROCE, cash generation or any share market targets. Third question about the cash reserves and the acquisitions. So INR 300 crores can -- reportedly over the INR 300 crores significant cash balance indicated that significant. Can you support the inorganic growth to replace -- explain the highest priority of the acquisition, sir, like IFM, BSS staffing, aviations and other technology-enabled services or international markets. Also, the discipline will be the company follow the acquisitions that create the shareholders' value for the simpling the revenue. Sir, fourth question on IFM margin pressure. The BSS business has been shown encouraging margin expansion to around 7.5%, whereas the IFM. So IFM, the pressure because of the front-ended employee onboarding and wage inflation. So what is your wage escalation clauses under periodic price revisions, I would like to know, sir. Sir, fifth question on Matrix and subsidiaries, please throw some information. Can you please explain whether the company expects the Matrix sustain the 13% plus EBITDA margin coming financial year? Are there any subsidiaries business where the management sees to similar turnaround potential, I would like to know. Sir, sixth question about the final question. Mergers and integration, the company has undertaken...

Sorry to interrupt. Can we conclude in the next 30 seconds, sir?

Sir, I'm going to conclude 30 seconds, but you're taking 30 seconds now. Final question...