Xelpmoc Design and Tech Limited (XELPMOC) Earnings Call Transcript & Summary

I think I'll take this question, Sandipan, here. We will consolidate the start-ups now, and we do see some kind of exists, if you may call it, or monetary events happening for some of the initial start-ups because they'll be maturing to a 4, 5-year period, where we expect some returns to start coming in. And in other aspects, we are looking at the services industries for our skill sets in the overseas market strongly. So we expect some tailwinds and some growth from that asset. So overall, we are looking at, obviously, as Srini has said, next quarter is -- this quarter rather that we are running on now is the previous quarter's result. This quarter onwards, we want to be operationally profitable onwards and then we want to build on that profit and start looking at more avenues to increase the growth of the revenue and the overall growth of the company on that part. But added to it will be this cocktail of getting some returns from our past investments, which are still sitting on the portfolio and not really giving any financial part. I would like to highlight that, remember that when we do the valuation, the methodology and all that can be done, it is done at norm with whatever the legal structures are. They may be slightly lesser than what the market would give us at a point of time. So there may be jumps in some of the portfolio aspects. At the same time, as with start-ups, some of them may not see the fruition or the day of light in a way bigger and they may actually wind down. So those are the parts that are there. But our entire profit and growth of the company is kept aside from those vagaries of our investment patterns, but more towards the services part of it and the revenue generation part of it. So that part of the growth will be constant. Anything extra would be top-up on that part. That is the strategy for growth for the next 3, 4 years for us.

Our next question is from the line of [ Lata Kothari ] an individual investor.

Sir, I just wanted to understand that, do we see any seasonality impact on our business?

Not really. I mean, seasonality? Well, each business may have a seasonal impact. Each of them individually go through the phases, but as we are pretty well spread across several categories and several projects, that is not risk we anticipate at least at this stage. As we go for growth, we may see seasonal patterns emerging because maybe when you go to services you tend to cluster around a particular service area. And if that particular service area or sector has a seasonal element, we would obviously be sort of affected by it. But as of now, given the diversity and the kind of frequency of each sector, it's more or less well mitigated and spread out.

Okay. And second question is, what is your employee count and attrition rate?

Our attrition rates are fairly low and employee count, as Srini mentioned, that overall the staff plus contractual employees together we have a headcount of about 122.

Okay. And in which quarter do we have wages hiked?

Sorry? I beg your pardon.

In which quarter do we have wages hike?

Wages hike comes usually in the first quarter of the month, reflected in the second quarter.

[Operator Instructions] The next question is from the line of [ Ravi Khaitan ] an individual investor.

I just wanted to understand what's the key criteria that you might have in mind that helps you take a call while investing in potential start-ups which might be profitable going forward. So I want to just understand those -- the criteria that you might be following.

That's actually a good question, and it is a bit of a strategic question also. So we had originally predefined sectors that we would stick to and then developed our technical capabilities and skill on those sectors. That's the requirement in terms of team building. As a policy, because we sort of co-create with the start-ups, their parts, we try to -- and we not only try to, we ensure that there is no conflict of interest that ensures in our choice of future start-ups. So when a start-up comes to us, the first thing we check is that it's in our areas of competency and areas of focus, firstly. Secondly, obviously, if there's an existing portfolio company in the same problem space, we don't look at it. After this qualifying criteria is met, then we look at the typical criteria of how the entrepreneur sets are, what are the complementary sets, are we able to have the right chemistry with them, are they conducive to our way of working and are willing to -- are seeing the value that we bring in because these all factors do affect the relationship, and that's very critical for companies in our kind of space who are co-creating pure IPR for those businesses to be. Again, what happens also is there are certain kind of projects which we have started looking at in the second phase onwards, wherein we are looking at creating technology together while they handle the marketing, but we also get a part of the revenue flowing through to us. So there, we look at what is the marketability and all. And based on all these choices and the bandwidth available to us, we choose the best contenders.

Fair enough. So is it fair to assume that there is no particular inclination to any specific sector as such? And it is more towards whether the business is more scalable...

No, no, we have inclination towards problem spaces. I think we have articulated this in our document as well as in the exchange notifications and all. And I know for a fact that we did in the red herring and all. But our theme is called HEEAL, which is H-E-E-A-L, which is the first theme, which is Health, Education, Environment, Agriculture and Livelihood. These are the areas we focus on. And in core technology, we look at multilingual, omnipresence and multi-model. Multi-model meaning that you use it over a phone, you use it over an application, you use it from a call center, you should get the same experience. And what we do as a focus area of the solutions space is called TIPS, Transaction, Identity, Payment, and a little bit of Serendipity, which is a vague thing, which is basically data science. These are the areas we stick to, and each and every project that you look at satisfies one of these parameters at least in each 3 segments. Mostly in TIPS, the whole stack is what we deliver in most of our projects. But at the same time, we look for the fact that these products are mostly directly or indirectly targeted towards the next 700 million Indians, which is the unserved part of it, and hence, has a potential of exponential growth.

[Operator Instructions]

I think before we close, I think just 1 question from me for Sandipan. Obviously, I think when we started this process, we did talk about the company turning breakeven by Q4. 2 parts is will that happen? And question number two is, do we see this kind of -- obviously, it's a kind of a tight mix that we have between doing the services and then looking at exit some things but we've not seen any exit yet from the portfolio companies. What in your opinion, I know it's kind of crystal ball gazing here, but what in your opinion will be a good time to see an exit come out and would you ascribe any value to that? I know it's kind of very hard to answer, but I'm just thinking how do you see this situation here.

So I think I'm looking at an average life span for the first level investment to get returns is usually between 5 to 7 years in the Indian context. Most of our start-ups, obviously, are the vintage of early 2016s at the earliest, and we have kept on adding them. So like I said before, I anticipate the kind of top-ups or kind of anticipated these sort of flows to start coming in from the middle of 2021 onwards. That is the anticipation. That is in no way linked to growth that we are seeing now. That is driven by a different strategy on that part. I would like to also point out one thing is that exits are one way that we monetize from the start-ups we have invested in. Remember that as they grow and they keep on engaging with us more and more, our revenue possibility and monetizability from them increase, at least from a cash flow point of view. The margins are not something we charge very heavily. We try to monetize the steady projects for that part. But that said, it does take care of running costs and all those things much, much more handsomely.

Karuna, in case if there is anyone else, you can take them.

The next question is from the line of [ Ayush Agarwal ] an individual investor.

Sir, you mentioned about 2 clients that we acquired this quarter, right, one from the U.S. and one from the U.K. I would like to understand more about them and what kind of opportunity do we see there?

We have -- as we have specified the sectors, one is in trade financing and the specific thing we are doing is some sort of a new kind of technology for letter of credit and -- the U.K. entity. And for the U.S. entity, it's more into a pharmaceutical industry, specialized research and anticipation and research focus as such. So that's the kind of 2 areas we're looking at. But let me tell you that the management and company has been busy looking at new opportunities in other areas of the world given the headwinds we are facing in India, as everyone knows. So -- and this is a cushion of that. We expect some more flows to come in, in the next 2, 3 quarters coming forward. This was more of unanticipated immediate gains we booked. We thought the process would take at least 5, 6 months for us to get our first project. But luckily, on the first visit itself, we were able to convert some things. And the faith is that if we show good quality work and all, we believe that the market is very ready in those parts of the world on the back part. It was a choice of focus. Ideologically, we were more inclined towards India, but then we cannot give it overtly undue time because we also have a responsibility to you as a shareholder, right? So we had to balance this too, and hence, we have been doing it. These are early fruits of very limited endeavors. I think we see good opportunities on that part, and we will keep you updated in the coming quarters for those parts.

That's great to hear, sir. One more question on this. So continuing, do we see our wallet share increasing from these clients going ahead? Or is it a onetime thing?

No. Usually, our engagements have always been -- see the wallet share and wallet quantum are different. On a growing base, if the wallet share remains constant that also means that each company is growing. So typically, we have seen that the investment or the amount of monetization we're able to do from each partner has significantly increased over time. And we think that trend will continue. But remember that this also becomes reference points for us to do it. In new markets, what we have done in this market is not that relevant as to one successful project is. Creating a portfolio in a relevant situation and environment becomes imperative for future growth there. The countries you are hearing is where we have had immediate success. There are areas that we have already ventured in Africa and all while we have not yet been able to formulate any tangible return, but we see green shoots there also. Hopefully, in the coming 2, 3 quarters, you will hear more about those.

[Operator Instructions] Ladies and gentlemen, this was the last question for today. I now hand the conference over to the management for their closing comments. Over to you, sir.

Thank you everyone for joining us. In case if you have any further queries, please do reach out to us. Thanks.

I would like to say that there was a mini event that got -- that happened day before yesterday. We finished our first year on the stock markets. And I take this opportunity to thank all of you who have given faith to us, and we take it as a responsibility to make sure that your faith was not misplaced. And we would go to any ends to make sure that we happily surprise you going forward.

Thank you very much, members of the management. Ladies and gentlemen, this does conclude today's conference call. Thank you for joining us, and you may now disconnect your lines.