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

Ladies and gentlemen, good day, and welcome to the Xelpmoc Design and Tech Limited Q4 and FY '21 Earnings Conference Call. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Mr. Ravi Udeshi from Christensen IR.

Thank you, and over to you, sir. Thank you, Margaret. Good evening, friends, and thank you for joining the Q4 and FY '21 earnings conference call for Xelpmoc Design and Tech limited. It is a great pleasure to host all of you in this call today. The results and the investor presentation have been e-mailed to you and is also present in the BSE website as well as our website. In case anyone has not received the press release, please do write to us, and we'll be happy to send the press release and the presentation to you. To take us through the results and to answer your questions, we have with us the management of Xelpmoc represented by Mr. Sandipan Chattopadhyay, MD and CEO; and Mr. Srinivas Koora, the CFO of Xelpmoc. Mr. Srinivas Koora will start the call with a brief overview of the quarter gone past. And after that, we will throw open the floor for Q&A. The standard safe harbor clause applies. And with that said, I now hand over the call to Mr. Srinivas Koora.

Thank you, Ravi. Good evening, everyone. Welcome to Xelpmoc's earnings call for the fourth quarter and the year-end of fiscal 2021. I hope you and your family are doing well and staying safe at home. I'm happy to report that we kept our business trajectory emphasis on sustainable operations. We continue to move forward with our execution plan, which is focused on finding targets in the sector that align with our HEAL strategy. Our operating revenue for the quarter was INR 35.4 million compared to INR 35.3 million in Q3 FY '21. On year-on-year basis, we grew by 8.6% as compared to INR 32.6 million over the corresponding period last year. Operating EBITDA margins adjusted for ESOP for the quarter was INR 5.5 million as compared to INR 11.5 million in Q3 FY '21 and it was INR 5.4 million in Q4 FY '20. Adjusted EBITDA margin was 15.4% as compared to [indiscernible] in Q4 FY '20. Due to lockdown, we had a significant fixed cost nonoccurrence, which has resulted in [indiscernible] high EBITDA margin in the past 3 quarters and is now gradually returning to projected yield and as we stated in our previous calls as well. The net profit for the quarter was a negative INR 1.5 million due to INR 7.3 million in ESOP expenditure and a provision for a doubtful debt of INR 2.8 million compared to INR 10 million in Q3 FY '21 and [indiscernible] million in Q4 [indiscernible] On a full year basis, our revenue increased by [indiscernible] EBITDA excluding ESOP turned to a positive [indiscernible] as compared to negative INR 27.3 million compared to the prior year.

Sorry. I'm sorry to interrupt you, Mr. Koora. This is Margaret here. Your audio is slightly breaking up, sir. We are not able to hear you very clearly.

Now is it audible?

It is audible.

I think it is fine now. I think it is fine now.

But I would request you if you can repeat yourself, I'm sorry, we couldn't hear you clearly earlier. Thank you.

Okay. On a fiscal year basis, our revenue increased by 73.2% to INR 140.5 million. Our operating EBITDA, excluding ESOP turned around to a positive [Audio Gap] as compared to a negative INR 27.3 million in the prior year. Our adjusted EBITDA margins were 32.7% for FY '21. We also recorded a net profit of INR 40.8 million after taking into account ESOP charge of INR 10.4 million compared to a net loss of INR 21.7 million in the corresponding period. We expect to build on this performance in the first [indiscernible]. Our team size is 93, including employees, interns, consultants as compared to 104 in previous year. Mainly the reduction is in the number of interns. Till date, we have served 47 clients and our sustained interaction with our clients is the foundation of our good performance. The sale value of our investment portfolio companies stood at approximately INR 476.7 million as of 31st March 2021 as compared to INR 349.4 million as on 31st March 2020. Our portfolio companies did well by investing new opportunities [indiscernible] pre lockdown margins on the back of strong engagement with leading FMCG firms. It's expected to record a greater highs in the coming future led by entry into mines and minerals verticals and the launch of SaaS solution for the larger corporate transportation requirement. This is despite a temporary decrease seen in driver trips on account of pandemic so far. Mihup continues to build on its previous wins by adding additional 6 new customers in the immediate quarter for a virtual interactive analyst and automated virtual agent. We are pleased state that Mihup will be starting a solution for ICICI Securities. [indiscernible] the group for women professional, [indiscernible]

Ladies and gentlemen, we lost the line of Mr. Koora. We would request you to please hold the lines while we reconnect him. Ladies and gentlemen, thank you for patiently waiting. We have Mr. Koora reconnected. Over to you, sir.

Yes. So for the benefit of all the audience, I'm starting once again. Our operating revenue for the quarter was INR 35.4 million as compared to INR 34.3 million in Q3 FY '21. On a year-on-year basis, we grew by 8.6% as compared to INR 32.6 million over the corresponding period last year. Operating EBITDA after adjusting for ESOP for the quarter was INR 5.5 million as compared to [Technical Difficulty]

Ladies and gentlemen, request you to please hold the line while we check the line from Mr. Koora. Thank you. Ladies and gentlemen, thank you for patiently waiting. We have Mr. Koora back in the call. You may go ahead, sir.

Our operating revenue for the quarter was INR 35.4 million as compared to INR 34.3 million in Q3 FY '21. On a year-on-year basis, we grew by 8.6% as compared to INR 32.6 million over the corresponding period. Operating EBITDA after adjusting for ESOP for the quarter was INR 5.5 million as compared to INR 11.5 million in Q3 FY '21 and INR 5.4 million in Q4 FY '20. Adjusted EBITDA margin was 15.4% as compared to 16.7% in Q4 FY '20. Due to lockdown, we had a significant fixed cost nonoccurrence, which has resulted in abnormal high EBITDA margins in the past few quarters and is now gradually returning to the projected mean. And this was -- we already stated in the previous calls. The net profit for the quarter was negative INR 1.5 million due to -- INR 1.5 million due to INR 7.3 million in ESOP expenditure and a provision for doubtful debt of INR 2.8 million compared to INR 10 million in Q3 FY '21 and INR 4.7 million in Q4 FY '20. On a full year basis, our revenue increased by 73.2% to INR 140.5 million. Our operating EBITDA excluding ESOP turned around to positive INR 46 million as compared to negative INR 27.3 million in the prior year. Our adjusted EBITDA margins were 32.7% for FY '21. We also recorded a net profit of INR 40.8 million after taking ESOP charge of INR 10.4 million compared to a net loss of INR 21.7 million in the corresponding previous year. We expect to build on this performance in the current fiscal. Our team size is 93, including employees, interns, consultants as compared to 104 in the previous year, and mainly the reduction is in the number of interns. Till date, we have served 47 clients and our sustained interaction with our clients is the foundation for good performance. The fair value of our investment in portfolio companies stood at approximately INR 476.7 million as on March 31, 2021, as compared to INR 349.4 million as on March 31, 2020. Our portfolio companies did well [indiscernible] new opportunities. Forteo recorded higher than pre lockdown margins on the back of strong engagement with leading FMCG brands. It expects to record greater highs in the coming fiscal by entry into mines and minerals verticals and the launch of SaaS solution for larger corporate transportation requirements. This is despite a temporary decrease seen in the drivers' trips on account of pandemic so far. The other portfolio company, Mihup continues to build on its previous wins by adding additional 6 customers in the immediate quarter for a virtual interactive analyst and automated virtual agent. We are pleased to state that Mihup will be starting its solutions for ICICI Securities. All these successes have made it among the winners of the MG Developer Program and Grant 2.0. The other portfolio companies, the Star in me DSM, a global career advancement platform for women professionals has garnered 6,500 plus members still date, who are availing coaching from 75-plus lady experts. It has also tied up with 19 MNC clients in IT, pharma, BFSI and consumer sectors as a facilitator for their employee learning. Woovly onboarded leading B2C brands including [indiscernible] Ustraa, Juicy Chemistry and [indiscernible] McCafe. It launched an order management system, which partnership with top delivery partners to easy day-to-day operations for its hosted brands. The Board has approved 2 new investments, one is into Firstsense Technology and Graposs EduTech. Firstsense is into video [indiscernible] area of student teacher interaction and automating education test monitoring. And Graposs EduTech is into content creation, tutor capacity building and other online test preparation platform through its website, sarkaripariksha.com. It aims to connect students from primary schools to postgraduate via various tools including olympiad, [indiscernible] test, private college admissions. Further it has also launched the software for students, parents and teachers to connect with each other. We are excited to partner with these 2 companies. Now I'll go on the outlook for the fiscal. Given that our portfolio company focused previously on untapped area of the economy, we expect them to have a greater traction. Our main investments, such as Fortigo Network Logistics, Mihup, Slate are expected to ramp up into the next phase of development. We are also positive about our recent investments in technology solution for education, we expect to pay off in the long run. We still maintain our cautiously positive outlook due to the current difficult times that temporarily limits our ability to get clients on board. With this, now I request moderator to open the floor for question and answer.

[Operator Instructions] The first question is from the line of Raghav from Ace Capital Services.

So my question is related with the assets that we have, because for me, Xelpmoc is not about quarterly number, though we have achieved very good yearly numbers this year and congratulations for that. But for me, it is about the assets, the investments we are doing in start-ups, the knowledge sharing that we are doing with the start ups, which is main driver for me. And I'm glad to see it has increased from INR 35 crores to INR 47 crores now, around 33%. So I see that we are trying to take some stakes in the company [indiscernible] which is very recent and has not commenced its operation yet. So is there something specific that you see in this company, and that's why you're willing to take a bet even before that company has started any operations? That is my only question.

Thank you for the question. And actually, you are seeing things in retrospective. That's why some of these things look matured after we came in the public eye. But most of our involvement in our big start-ups have been at this blueprint stage onwards itself. And [indiscernible] is one of those parts where we are entering at, you may say, the blueprint stage, where we have been actually scoping and working in stealth for 5, 6 months prior to starting it. It was an area that we already had earmarked for growth, and we were waiting for the right partners and entrepreneurs. I think we have got a very impressive team who have had experience. And with them, we are starting it up. So yes, it is a new start-up, but most of our start-ups have always started engaging with us from backstage. So it's nothing new in that perspective. On the other hand, Graposs, of course, is something that is something which has been existing for some time. Their reach is tremendous, and the area of focus is in these exam preparation parts, mainly for government exams and government-led discoveries for talent pool in parts of the country. A huge part of it is going to be focused on vernacular. That's our interest. And though it is existing company with huge stand all, I think what we are going to start with them is something almost like a reboot on certain sectors and strengthening of the existing ones.

The next question is from the line of Sudip Dugar, an individual investor.

I have a couple of questions. The first is if you could explain the nature and the reason for such high provision for doubtful debt and the increase in trade receivables.

Increase in?

Trade receivables.

See, basically, doubtful debts, we have a policy after a certain period of time, in case if we feel that we are not able to receive, even though the efforts will go on, as a prudent practice, we go and then create a provision. Now as far as your second question is concerned, the reason for increasing the trade receivables, basically, you should look at this with -- in line with the revenue -- unbilled revenue. If you look at unbilled revenue, which is appearing in other assets, unbilled revenue has reduced close to about INR 1 crore and receivables have increased proportionately. And it also depends on the project completion. Let's suppose if the project has completed, we have to go ahead and invoice. So there were a couple of projects which got executed and completed in the last week of March. That's the reason why where you see that the receivable has gone up. And accordingly, the unbilled revenue has come down.

Okay. And the second question is, in your investments, can you provide some information of -- on Rype Fintech and Taxitop Media? I don't see the particulars.

You're talking about Slate?

No, no, Rype Fintech and Taxitop.

Yes, Rype Fintech, the brand name is Slate. That Sandipan will brief you. And yes. As far as Taxitop Media is concerned, because of the COVID, that could not take off. So if you look at it, already we have impaired in our balance sheet.

Rype Fintech, it is essentially something we had talked on the branding of Slate. It essentially heads the MSME segment to organize the finances and also to sort of modernize their outlook, get some financial inputs in terms of business decision taking, which is corroborated by financial data. That has shown good signs of growth. And as Srini explained in his opening comments, we expect the next surge to happen on the current or coming quarters. One of the reason is the target audience being MSME, it was not an approved time to go all out. Despite that, the kind of growth and the kind of user feedback we have got has been very encouraging. We are now going to step on the accelerator to take it forward for actual propagation into a larger scale.

Okay. And Sandipan sir, last question, now we have Learning Hats, and we have also acquired Graposs and Firstsense. So what's your view on the FX space and few people are also quite [indiscernible] and we have a lot of deals happening in this space, particularly. So if you could give your views on the same?

Yes. I think the FX space is very exciting. And broadly, we look at it in 3 main buckets or 4 main buckets to be very frank. One is the purely formal education, which is what Learning Hands is in terms of incorporating it in -- we don't believe schools and colleges will go away. But we do believe that post COVID, some things are irreversible, and they have to be modernized, and they will use more of a very accentuated hybrid model using the best online/off-line and a whole paradigm shift would happen there. That's the first sector. The second sector, of course, is formal, but ancillary. It is not part of your day-to-day routine, but all the contests, preparations, the competitive exams that people take, that is surely one market. The third one is informal -- I mean supportive education, like your, let's say, your skill building exercises, interest building exercises, going into more depth, educational software, educational games, subscription systems for magazines and all. So content, but with an educative intent is surely the ancillary peripheral space, which is important. And the fourth, of course, because of all these things going very gungho, you would need monitoring data processing and data accessibility systems, which are the new breadth. So if you look at it, as we had said 2, 3 quarters back, edtech is a key focus for us for the next coming parts. And we are also looking at our second batch of possible winners. We are still now sort of feasting on the first batch that we did. But it was imperative that in this last 2 quarters, we had picked up winners for our next 2-, 3-year time frame. I think we are in a good position there. And in the next quarter and -- in the next 2 quarters, you will see more consolidation and more entries, hopefully, which we'll be able to discuss with you. We are still working on a couple of them. And together, you will see it's a comprehensive foray into EduTech in a big way that Xelp will go. I think it's one of the right combinations for us of tech, data, design, information, all of this together, which we think is our sweet spot for showing our skills off.

Next question is from the line of Rudresh Kalyani, an individual investor.

I have got a couple of questions. I see a substantial decrease in other income. What is the reason behind that?

Yes. Other income is purely driven by the market. Now, for example, the interest rates have come down. That's the reason why even the other incomes have come down. It's purely NAV driven.

Okay. And I do see a substantial increase in other expenses as well. So what is the reason behind that?

Other expenses, in my opening remarks, I have given you like, we have written off close to about INR 27.8 crores as a doubtful debt. That's one. And in employee cost, there is an ESOP expense. That's one of the reasons why the costs have gone up.

Okay. And why I see a 50% drop in fixed asset?

50% drop in?

Fixed asset. The property plant and equipment stuff has been reduced by somewhere 50% I see.

Yes. So basically, what happened was a couple of companies we have impaired, right? For example, TaxiTop Media and [indiscernible] So those could be the ones which you are seeing in the balance sheet.

Any other questions, sir?

I will come back.

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

My question is about the Firstsense. We have bought about 89% of the capital of the Firstsense. What -- I mean what is the kind of motivation the promoter will have if they are actually left with 11% of their own company?

Okay. So basically, as of today, you are looking at 89%, okay, the promoters, the company, as we rightly said, that it is very formed and before the results enters, like there would be substantial percentage of holdings that which they are going to hold. Once the promoters have stepped in, Xelpmoc would be holding 35% and the balance would be held by the promoters.

You said 35%?

35%, 35%. That's correct. I think what you are getting is that OCPS is a future derivation. And depending on the entry point of the entrepreneurs who are coming in and their roles and responsibilities, that will get to 65% or once the formalities and everything is finished.

The next question is from the line of Renu [indiscernible] an individual investor.

Hello. Am I audible?

Yes. Please go ahead.

Sir, in the last call we had, you had mentioned about foraying into foreign opportunities. So is there any progress on that front?

No, I am afraid not. To be very frank, that's a good question, and let me also illustrate that. We thought that a big imperative that we don't -- we hold on to our horses until the situation stabilizes and travel and other modes of communication and the economies there itself get to some state of stability. And to be frank, we don't see things changing for us to go ahead and do anything for that matter. Any progress, we will not -- we will either go full head or we'll not do hearted. I don't think we will be doing anything substantial before mid-July or end of July.

Okay, sir. So are there any other opportunities that you are looking out?

We are focused on the London office and the London setup because we think it's a good place to start off with our set of specialties in our focus areas. That's a good area and from there to service a part of Europe, which is there. And also to do some sort of a collaborative engagement with some other things and look at other parts of the world, which are better service to London. Apart from that, probably somewhere down the line, we will -- once we have some more initial successes with the POCs and all, we would surely have Africa in mind. Further than that, I don't think we are looking at anything in the near-term time frame for any expansion.

[Operator Instructions] Next question is from the line of Rajendra Kumar, an individual investor.

Sir, our stake in Fortigo is quite low. I think it will further reduce on next round of funding. Will it create value to our investment anywhere when the final funding is happening?

I mean, see, the thing is the basic math is that 1% of a billion is more -- less than 100% of a million. That's the philosophy I keep on harping on. So yes, we will be diluting when new funding coming in, that's pure mathematics. And as of now, for at least for some time to go until we consolidate, we don't think that we will be making further investments just to keep our dilution protected. I don't think we are in a state to do that because these are large fundings we are talking of. So we will not really go for that aspect.

Sir, it will not provide more benefit because it is a growing company and one of the best companies in our portfolio.

Yes. But the thing is the room for getting more stake is only by pumping in more money at par with whatever existing investors have, correct?

Yes, sir.

I don't think we are not -- I don't think we're in a position to do that. And frankly speaking, it has also reached a level of maturity. Even if you ask me today with our kind of a ticket size possible, just for a token presentation, I don't think it will make substantial part. I think we are better off in trying to catch potential things we believe in, invest the money there and see that grow at a much faster rate.

Sir, any other great R&D we are doing that is completely other, not from our portfolio, something?

We -- as I told you, we are looking at the edtech space in more detail and the peripheral education, as you can see, we did make an announcement last quarter about our 100% subsidiary Signal. We have plans to aggregate the peripheral part there. I think there are some interesting ideas on all we have. Hopefully, next quarter will be the big talk.

Okay. Sir, it's a quite weird question, but what is the real moat of Xelpmoc, you think? Because everybody says that Mr. Sandipan Chattopadhyay is the face of Xelpmoc. Nobody knows better than anything other as such. Means, everybody thinks only Sandipan is there. Nobody else is doing something. What is Srini sir point of sale? And I mean, what is the main thing that they have?

Hello. Apart from Mr. Sandipan Chattopadhyay and myself, Jason is also there. And down the line, like in case, if you look on the technology front, even the CTO Ajay Pandey and even Naushad, is all our solvers, experienced person coming up from the start-up ecosystem only and most of the people whom we know who has worked with us for the last 10 to 20 years.

Sorry, I just got dropped off in back. I was saying that, hopefully, next quarter, we'll have some more interesting announcements to make around those parts.

Yes. So Sandipan, now the question is like Sandipan is the face of the company and down the line, they would like to know what is the R&D going on.

The R&D is mostly focused on 2 aspects. We are doing some R&D on data analysis part of it. We -- as I said that we will be looking at propagating our products and things in the -- those fields, which we have made and some new product ideas that we have in pipeline, earnestly, from third quarter of this year, financial year, I mean. And I think we are on track for some good admin wins there. And the other part that we have been doing research on is on analytics part of it using multimedia. Mihup, of course, is their invoice. But beyond Mihup, also there's a huge amount of scope in looking at expressions and reporting as to how the -- as video conferences and all become more normative, having feedback loops for them and all is becoming imperative, having proctoring solutions is becoming imperative. So we are looking at those video added parts very seriously. The third phalange of what we are doing, a little bit of economic R&D, exactly technology is trying to find out new models for some propagation on micro entrepreneur kind of networking setups for different -- those are things that you will hear from us in the next 2, 3 quarters.

The next question is from the line of Kunal Dinesh Bihani, an individual investor.

Am I audible?

Yes, Kunal. Go ahead.

Hope everyone is doing well in this pandemic. Sir, I have more than 2 questions. So if you can just take between yourself. One, I want to understand on the ESOP front. I understand there is a net reduction in the number of employees, right, versus the last year.

Right.

So the ESOP which we are giving, is it to the existing employees or for retention? Or is it for getting specialized talent, which is totally new to the company?

Okay. I think I have to answer it in a slightly larger framework. ESOP to us is the best way to remunerate our employees. One of the reasons we have been asked is how do we pay so low and all. The reason is we do have a very inclusive ESOP policy, which we would see as a philosophy going forward. And the key aspect of that is all the aspects that you said, yes, it's for existing employees. It's also to attract new talent, but everyone is given after a certain tenure or after a certain achievement. We are not in the habit of giving ESOPs to get talent on as an exchange protocol. That is not the norm that we're following as of now. But yes, a talented person knows that if he enters, he achieves XYZ and stays for ABC amount of time, then that's the kind of growth rate that he sees on to that part. In fact, personally, I prefer my senior guys to be allured to us or sort of get attracted to us because of the ESOP factors. I don't think the kind of company we are, we are going to do very well in getting high paid executives coming in. I would rather have co-owners and co-entrepreneurs who come in with a spirit of ownership. And that becomes their main holy grail for why they come to us. So it's a philosophy that we want to execute through this sort of an allotment.

Got it. Got it, sir. Fair enough. Sir, my next question is basically on the Xelp products. Any flavor? Or I'm assuming the Xelp products are one, which we market directly, either to a B2C or a B2B or a corporate customer. So I haven't heard anything much around the Xelp products, and how does it contribute to the revenue. And how do we plan to take this ahead, considering this basically hits our bottom line?

Yes. As I have said, that I think I'm consistent in saying that we will really be able to push it from this year, third quarter onwards -- second quarter onwards, but some of the parts have been slightly delayed because of not being able to go out and market as we hoped to. But that said, some of the products are -- we are pursuing with pretty big names to do POCs to make it happen as a practical business use case in some of the places. 2 projects have been executed, for example, using our X DOX kind of architecture, which looks at and sort of analyzes human written documents for better perception. The data analytics components that we have, like extract and stuff, that we are in talks, and probably we will have a POC going forward in this quarter.

Got it. Got it. Fair enough. Sir, one last question to you.

You really see it significantly coming into the top line from 2022 first quarter. That is when the growth swing will happen for that as well as for our services. [indiscernible] sorry?

So basically from next April, if I should be seeing the revenue on this.

Yes. Because this year, we decided to consolidate and focus more on the start-ups on the value part. The revenue and the margin, we will focus when the market is ready, and we have that. It is something that you must realize that we have just started it. It's not the best time to start something. If you had a team, leveraging that and doing it is easier. And at the same time, it is also true that a lot of the standard work, quota and all those things, that has increased significantly in terms of software projects and all. But that is not what we want to start off with and get sort of embedded into at the beginning. We want to go with our own value-added kind of a service that we want to keep focus on. And that I think will come into fruition from next quarter -- next year, financially.

Fair enough, sir. Just I'm extending myself to 1 last question. This is around the QFX or basically our LMS Solutions. I know we have not disclosed directly, but basis what I have read around, there was a school which we were collaborating with. And on the last con call, there were updates of approaching more school organizations or networks. So any progress on that front, given that student...

See, we have worked very hard to make sure that this goes live in the first set of schools with a sizable amount of students. When I say sizeable, I mean, 20,000-plus students being using it on that part. And that, I think, with the schools opening up now with COVID delay and all happening, schools are also delayed on that part. But as they're opening up, we will be seeing that going into action. That's the first part. And of course, the ancillary deals, projects and all, we have started prospecting.

Got it, sir. And this is our direct solution, right? It is not by any start up.

No, it is. It is. QFX is something that we are doing through Learning Hats.

The next question is from the line of Abhishek Chaturvedi from RK Securities.

You just mentioned that we are going to put up offices in London. So we are...

We are going to, we are going to. We have not done anything as yet, but it's in the plan, yes.

Right. Okay. So is the strategy to replicate the business model there in London, similar to that of India? I mean, venturing into new startups in the form of technology support, and also taking projects, service projects?

Yes, you're right. It encompasses a strategic intent for both the aspects. But that said, do remember that unlike India, we are not really anybody significant in London at the moment because we don't have a portfolio of companies to show off our significant nature. So I think services would be our first foray. And the whole strategy -- services we do for margin. And I think it's not a rocket science to understand the margins are better there. So if we are going to focus on margins, we will focus mostly on the overseas market. We don't plan to do too many services projects in India. We do plan to engage deeply with the start-ups in India at a much lesser, much higher intent. I think once we have established ourselves, we have done our body of work, our start-ups in India have scaled to a certain level. We will be taken more seriously, and we will have a real chance of being able to execute the Indian model of startup encouragement and startup cofounder thing in a profound way, but that will take at least a year post our commencement of service in London. Any magic can happen. There are people overseas who also know us who have reached out to us, those can happen. But those would be accidental in nature, not really part of our focus plan.

Right, sir. So 1 question on the projects that we choose for services and the services the thing. So we choose them, for example, let's say, your managed projects on the data analytics team. So do you also choose a service project on the data analytics front or how do you choose...

Data analytics is the foundation. The kind of projects we would choose are not going to be sort of fixed scope or a kind of a body shopping kind of a work. We are going for projects which are end-to-end and which are solution projects. That is the core focus we are doing it. And yes, they do rely on data science a lot. We will play to our strengths. But data science, the way you understand is not just about number crunching. It's about being able to effectively use data science for a variety of uses, including process automation, including analysis and scoping or simply automated response. Like many of you may think we did PWA in Tata CLiQ, but that had a huge amount of background in data science just to make sure I'm showing you the right aspects depending on who you are.

Next question is from the line of Keval Ashar, an individual investor.

I have 2 questions. So first is what's our plan for venturing into London? And where do we see our London business scale up in the coming 3 to 5 years?

Sorry, [indiscernible], you got cut off a bit. What's our plan for London, I'll answer that, but what is the second question, please?

Yes, Sir. So what's our plan for venturing into London? And where do we see our London business scale up in 3 to 5 years?

And that's a very forward-looking thing. I can tell you what the purpose of setting up London offices, but putting numbers to it are not something I will do. I have said though that we will see growth coming from [ 2020 first quarter ] onwards. And I do think a large part of that growth because that's mostly going to be service led in terms of revenue growth, is going to be driven by the London strategy. So in London, what we plan to do is we don't want to have just a front office for the Indian back office. We want to actually have a setup there with local people who understand business requirements there, but a smaller team. And then being able to manage solutions. Solutions is not something like working towards spec and can be done by anywhere because the spec ship is being developed somewhere. When you're looking at solutions, you need to have a team there, along -- augmented by our team of experience here, but bulk of the work will get done out of India.

Okay. Perfect. And the second thing, what I wanted to know is, Sandipan sir, as we are a very unique company compared to all the other IT companies listed in India, so where do we see Xelpmoc as a company and also market investments in the long term? I don't want to answer in number terms, but as a work solution for Xelpmoc in long term.

So, vision remains absolutely focused. We want to make sure that we [indiscernible] technology for the next 500 million Indians, which we transfer the next 5 billion worldwide citizens. Now the fact that we have been touted as unique is because I think we went from a very ideological plane to solve that problem, and we chose a strategy to do it. And we did whatever it took to make sure that vision is fruitioned. We didn't want to say that we have people like X or Y or Z, we said this is problem A. We have to solve it. How [indiscernible]. We do hope that the impact that our start-up ecosystem support creates will be huge. And I think we do feel pride in what we have achieved in 5 years now since existent in terms of that at least. And once you do impact and once you are able to imprint yourselves into millions and billions of people, I don't think revenue becomes a factor ever.

Any other questions, Mr. Ashar?

I guess I didn't get the other half of the answer because there's was some lag.

Which one, tell me, which part?

On the vision you were seeing regarding Xelpmoc [indiscernible].

So as I said, that if we stick to the fact that we are looking at serving and having impact on billions of people, I don't think revenue will be a matter.

The next question is from the line of Aman Vij from Astute Investment Management.

My first question is regarding the scaling of investments in some of our companies. So you have rightly said, it is very difficult for us to put more investment in, say, Fortigo and Mihup. But what about other companies like Pencil or Woovly, who has scale have shown performance also. So instead of, yes, we will keep investing in newer companies, but why don't we increase the stake in some of the companies which are performing where we still can increase these stakes?

We will be doing that, we will be doing that, and we are doing that. It's just that it doesn't come into the limelight because they're not themselves so big, right? So that will happen. And wherever we can, whatever spare cash we have, we shouldn't suddenly don't want to sit on capital of yours and earn other income, that's for sure. But today is probably the first time because the first profitable financial year when we can think that way. And that will come. We will -- you will see some indications of that in the coming quarters, and that's a valid point. If we see a youngling who is showing promise, we will try to back it up more and try to match at least whatever others are doing, so that we don't get diluted too much, whatever, we can manage.

Sure, sir. And the second question is a little bit long term. So we have scaled our business quite well in the last 5 years. We have a set of 15 to 18 companies. But going forward, do you think in next 3, 4 years, this number will become, say, 25, 30, 40 companies? This is how you plan to continue feeling by putting less than INR 1 crore each in X number of companies? Or once we reach a scale, we will start putting either more stake right from the beginning? Or maybe how do you think this number of investment companies will change in the next 3, 4 years?

That's a tough question to answer, to be very frank. See, the quality matters more than quantity. That's the first aspect. And there is a critical mass of lag between the available team size and the number of things we can do simultaneously. So what we have seen is we are okay to initiate 5 to 6 simultaneously. That means they are actually completely with us in that form and support another 2 or 3 and remember that many of them, when they mature, they become pretty stand-alone, we just -- our support is very peripheral. Like, Mihup and Fortigo, we only do on a need basis. We don't have regular influence or regular work from those because they have also been one of the oldest portfolio parts. And we do have this method by which we make sure that a company or our portfolio becomes self-sustaining whenever it is possible to do that and do it. At the same time, we make sure it's the right mix of not making it temporal that we have to do it by this time. There's no such thing. It's as and when things get proper. What we want to do for the future is we surely want to dream bigger. We want to make sure that some of the start-ups we start off with are bigger in scale and bigger in impact, and hence, also, you may say a bigger risk return ratio for that part. But that cannot be all of our portfolio. It has to be a balance. However, until it fails or succeeds, we would not know. So deployment of resourcing, those sort of things would be adjusted and done for but at no point of time, do you want to make sure that we go below the green belt. I don't know if I have been able to make myself clear, but it is not a single focused thing in all directions. It's situational. It's a balancing act of all these factors, and making sure that we are going ahead in the right direction.

So sir, just a little bit more on this. So you said, the top 2, 3 companies don't rely much on us. But still there are like, say, 10 to 15 companies which are relying and where our interaction is needed. And if we have to -- if we keep doing this 5 to 6 companies each year, then this number might become too big for our team. So either the team has to increase...

Not really because I mean God's grace, if your words come true, that's -- there's nothing happier and that's a happy problem to solve. But from a natural modality aspect and all, it will not be prudent to expect that all of them would do great. There will be natural decay. That does leave you some space for the next versions. That is the way of progressing here.

Sure, sir. That helps. The final question is on ESOP. So could you talk about the remaining ESOPs for this year?

ESOP will be a strategy. And I think the remaining ESOP for this year, so you can handle better. But ESOP will be a continual affair from Xelpmoc's perspective because that's the way we want to have to make sure that the right talent comes to us. Srini?

Yes. So ESOPs, like for the previous quarter, in case, if you look at it, it was about INR 73 lakhs, which we have accounted as an expenditure. And going forward, that will -- because few of the ESOPs were issued only in the month of March. So even that has not reflected for the full year and for a couple of other senior guys, even the ESOPs would be issued in this current -- current year. So the ESOP expenses is going to be there, and it would be on the higher side.

For the full year, what number should we -- rough range we should assume for full year of FY '22?

See, based on the current...

I think the expense is linked to the stock price. So that's a good and bad of it. The higher the stock price, the bigger the expense. But it will always be in a proportion, which is to an extent that we administered. Probably Srini can give you a better number. But it is a ratio of the overall corpus, but the cost of it will depend on the current prevailing market value as per the norms and laws of the country.

Anyway so the ESOP excise, et cetera, has already been given in the balance sheet. So if you are asking for what it would be like in case if all the options are going to be exercised, then it would be roughly in the range of about INR 8 crores for the year.

The next question is from the line of Kishan Toshniwal from DKMS & Associates.

I have 3 questions, basically. Last year's con call also I had asked that where our margins will stabilize in the medium-term to -- short-term to medium-term? Like a -- in the last quarter, it has gone to 15%, which was 32% in a quarter ago. And -- first question is this. The second question is, how should we look at Xelpmoc? Whether we should look at Xelpmoc as a company which is investing and going to work for those companies in which they are investing. Or we are -- we should look at Xelpmoc as a company where the investment is the other -- one part and the other part is that the revenue of -- revenue from the service part or from our product part, which is not the part of the investment part, will also be there or it will be the first one? These are 2 questions.

Okay. And third one, do you have one, third one, you can club it together. Then we can answer all together.

Yes. The third question is, I'm seeing this revenue from operations is continuously in this range of INR 3.5 crores. And last phone call also I asked when you had said that it might see this after the third quarter of 2021. Are you on the path of that or the pandemic has delayed that?

The pandemic has delayed that, but not in the way you think. There's a lot of work that goes into spot work and do the foundation work for the start ups. So when we have to onboard so many start-ups, there's a lot of unseen work that has happened to add the distribution of [indiscernible] and income from operations has been a steady one, where we have not made forays to go and try to attract more. The reason for saying where we see that entire surge from first quarter of 2022 is because we plan to make sure that we have actionable, marketable propositions set up by that time, and we will be on a regular path. To your second question that how do you want to see Xelpmoc, I really don't have a firm answer to that. It's probably scattered across all the things that we have said. We don't have absolute fixed strategy for it. We want to make sure that we are making meaningful contributions for solutions. Start-ups will always be a core focus for making sure that there is a value growth that is happening. But that said, there will be a focus from 2022 onwards and all when a steady stream of revenue should come in from our services and products businesses.

Okay. As Sandipan rightly said that the focus for the previous financial year was more on onboarding start-ups, which you could see like we were able to onboard certain good marquee startups on the education sector. And now coming to your first question, the margins, where the margins were on 30% plus in the first quarter, second quarter and right now, 15%, where it is going to stabilize. In case, if you look at our Q4 numbers, they are close to about INR 28.99 lakhs, which we have withdrawn for the doubtful debts. That has brought the margins down, or else the margins would be in the upwards of about 22%, 23%. So that's the range, what you should be looking at even going forward. And this, we are talking adjusted EBITDA margins after -- without considering ESOP expenses.

Okay. Could I squeeze in 1 more question?

Moderator?

Sir, I would request you to rejoin the queue. There are several others waiting for their turn.

No problems.

The next question is from the line of Lohit Rodi, an individual investor.

Am I audible?

Yes. Please go ahead.

So my question is on the core tech -- core management team. So I see that Jagpreet Pablo from -- who was the VP Data Science has left the company. So was it a layoff or a voluntary move? And my...

No, see, it's not a lay off for sure. He is one of the darlings that we had, of course. But he has his eyes on having his own product definition, and he wanted to pursue that, and we encouraged him to go ahead and do his passion part of it.

Okay. So my next question is, like, how do you rate on a scale of 1 to 10, the core, not the management team, but the core tech team, like on the competence of AI, ML and data science?

I rate them very highly. That's the reason I'm working with them, right? Finally, at the end of the day, it's a huge amount of personal time and personal opportunity part that you are putting in. So you really want to work with the best. And again, the philosophy is that the one who is working with you best is more important than the paraphernalia or the CV or the bio. We have many people who have been on their first job but because they have been sort of baptized and being able to move with us, the kind of solution thinking, the kind of areas of innovation that they can focus on, if I get someone with double the experience from market, and there are always exceptions, I'm saying, generally from the market, I think most of them would outshine them without having too much of a sweat. Please remember that the 5 years has also gone in building a skill set, which we thought was missing in India. We couldn't do it very easily, at least we couldn't. So now I think 3 years is a model age for most of those people. They're coming into shape. And that is exactly the reason why you're seeing this confidence exuding from us, saying that, hey, we can now add more load. And hence, we can actually tell that with confidence and with reasonable certainty that the plans we have from 2022 onwards are going to work out. You have to have your foundation done properly.

The next question is from the line of Mahesh Kumar, an individual investor.

My question is basically related to the start-up investment. You have intention of investing in agritech companies. But I have not seen any start-up in your portfolio, which is related to agriculture technology. That is the first question. Second question is you are focusing too much on EduTech. And if you see in the past in India, many EduTech companies have failed due to receivables from the schools and colleges. So that is a big risk for EduTech companies. So how you are going to address this risk?

So firstly, the fact that there is no agriculture company, our portfolio is not fully correct, accurate. We have investment in a company called InQube through which we have a very, very propagated solution in Bengal, which is catering to about 7.6 million farming households. But obviously, it's not at the scale of what we finally want to do. You also would see that from our thematic part of what we call as HEAL, we don't have any start-ups in HealthTech also, right? The reason is we're putting on these things, which we think are much more complex for a time when we can handle that complexity and scale. It's also a question of our competence and our ability to be able to execute. There's no point doing it just for the sake of ticking -- I mean tick marking a bullet point list of what we want to do unless it means substantial part to it. So that is the first aspect to it. Coming to your second question, yes, that's exactly the reason why we have gone with the strategy of incumbents being powered by us. We have not gone and started a startup, which is trying to make relationships and trying to get revenues from schools. We have gone with something where we think there's already a captive market, which we can cater to and prove it and that itself is substantial enough to sort of make sure that at least some -- so in the 2-, 3-year time frame, some kind of amortization of loss or loss is there, and we don't see the too much risk. So we have mitigated the risk by the strategy we have taken as to who we are going with.

Okay. Just to add to what Sandipan has said for the first question, like in case if you look at Xelpmoc, the first initial couple of years, we have concentrated on the livelihood. That's where you have seen like Fortigo and Mihup coming into picture. And for last of years, we are concentrating on the education sector. So going forward now you will see on the health and agriculture as well.

[indiscernible] getting more matured, we'll then get into it because it's not just technology, hardly. It's more about being able to propagate. It's more about having the feet on the ground or going with the right partner, being able to form the right model, it's not very simple. Education is so ingrained in our habitat, that it's not very easy to change it without understanding the full impact of what social foundations that will have.

So Fortigo, that doesn't have the problem of receivables. Education, if you will see in the past, many companies have failed because of receivables of schools and colleges.

I agree with that. But that said, I do think that it's still a potential aspect if you deliver the right goods. So I think it's a matter of product, and of practice. If you are something very pivotal, if you are something important, people will pay.

Okay. And the last question is, you are already having start-up. One is on voice computing. You are also focusing on video computing. So is there any intention to venture into robotics or humanize technology?

Everything which is timed right. We don't have the luxury of being too ahead of the curve. As and when things become needed on the market, we want to be there just before the peak happens. That, I think, is something that is crucial for our survival of a company like us. We have [indiscernible] for the last 5 years, I don't think that intuitive way of looking at being there at the right thing will be different from us from that part.

Okay. And the last question is what is the cash in the...

I'm sorry to drop you, Mr. Kumar. May I request you to rejoin the queue for follow-up questions. [Operator Instructions] The next question is from the line of Balaji N., an individual investor.

Congratulations on the first profitable financial year.

Thank you.

My question is related to -- yes, my question is related to the exit strategy in start-ups. So I understand that over a period of time, on a positive note, many of these would go into big valuation. And what would be the exit strategy from these start-ups?

We don't have a fixed strategy. If that's a one line answer you want, it's that. We will play it by the year. And I think we will start worrying about the question now because our first start-up is 4.5 years old now. I think we had said predominantly that we will look at a 6 to 7-year cycle minimum. To look at exits, I think we are about at least 18 to 19 months away from it even today.

Next question is from the line of Nikhil Khilani, an individual investor.

[Foreign Language] from the shareholder point of view on [Foreign Language]

[Foreign Language] that we should break that principle that we had from the beginning.

[Foreign Language]

I don't know. I think that the start-ups and areas that they're in, they have multiplied significantly since when we did it. Probably, it's a lot of time for overnight success. Many of the companies you are seeing, [indiscernible] increasing, let's say, double or triple in every year, maybe 11 years old, maybe 17 years old, maybe 5 years old. So that history has to be looked at. There is a gestation period and a [indiscernible] level beyond which these things start happening.

[Foreign Language]

[Foreign Language] total cost INR 4.97 crores [Foreign Language] And as on today, the NAV is about INR 47.67 crores, which is like more than 10x.

The next question is from the line of Ashish Malani from Always Seek Home.

Hello, can you hear me?

Yes, we can hear you.

Yes, we can hear you.

So my question was on the line of the valuation and how do they stand right now? So from what I understand, Fortigo went through another round of CDB funding. And then given some of our other start-ups I wanted to know from you, are there any update? Are there any start-ups that we are holding into, which are going to see a [indiscernible] round of funding where either the company plans to exit and maximize on its investment or anything like that?

Whatever has been told and happened is already there on the balance sheet. I can confirm that as of now, we don't have any thought on any exit for any of the start-ups, nor do we -- have we been be present with an opportunity, which was worth thinking on that part.

Okay. And sir, what is the idea behind growing the services part of it? So how much of the resources you want to dedicate to ensure that you are holding the start-ups? At the same time, how many of the resources would be dedicated to -- for the services sector from where the cash or the revenue would actually come in?

Right. So well, think of them as 2 independent verticals within the company, which will work independently of each other. That's the structure. But there will be free flow of people from one vertical to the other to make sure experiences are shared and people get practice and then they're pulled on to where they can add maximum value. But the start-ups will still remain the primary focus for at least 2, 3 years for us. The services part is more like the revenue principles. We want to earn from there so that we can actually do better things here.

The next question is from the line of Mayur Damani, an individual investor.

Congratulations for the profitable year. And my first question is related to this Mihup and ICICI Securities, means you tying up with that. So why don't we go gung ho on advertisement and just maybe social media presence and all that because ICICI Securities is one of the top securities, and they have chosen our client, Mihup to choose their services.

I'm sure Mihup is doing that. So at the end of it, it's an independent company to which we are partakers of. We do advise them, but their independence and autonomy is of more importance to us.

Okay. On behalf of Xelpmoc, can we also do that so that our social media presence will increase and -- because...

We don't think so highly of social media. We don't think so highly of social media, especially in this sector because we are primarily business to business. We do have a lot of evangelism that we do for our portfolio companies, but that's why going to companies and talking to them about possible solutions and how we can help them capitalize on their primary business using some of our start-up. Even in Mihup, Xelpmoc has played a pivotal role in making sure that the contract is -- or the POC is started with Mihup. We work very in close -- in very close tandem with the start-ups for that.

Okay. Okay. And my second question is related to GEPL. I mean, we have taken 2% stake in that and for INR 20-odd lakhs. And do we have the EBITDA margins of the turnover, which we have mentioned in the presentation, that's INR 2.43 crores in '18, '19, INR 1.82 crores in '19, '20 and again INR 2.44 crores in 2021?

Srini would handle that better. For us, it's a -- see, they already have a good distribution, and we are very encouraged by that. We do think that with that sort of a footprint already accessible, when we work together with them, we'll be able to achieve and unlock greater value.

Yes. Basically, whatever information we have on the portfolio companies, we have already disclosed.

We'll take one last question, which is from the line of Sudip Dugar, an individual investor.

My question has been answered regarding the Mihup strategy.

Okay. Happy to know that. If you have another question, feel free to ask. You have a chance, I think there were people waiting. We would be happy to answer anything you have. Hello?

Thank you. There seems to be no response. As there are no further questions, I would now like to hand the conference over to Mr. Srinivas Koora for closing comments.

Thank you, Margaret, and thank you, everyone, for participating on the call. As I mentioned in my opening remarks, we kept our business trajectory while maintaining our emphasis on sustainable operations. All the building blocks for the transforming the company are falling in place. We continue to move forward with the execution plan, which is focused on the HEAL strategy. Please do reach out to us in case if you have any further questions and stay safe.

Thank you, everyone, and please stay safe. I think we are just getting over the eclipse that has happened over the last 1 or 2 years. Things look positive today as we stand. Let's stay safe and wishing the best of health and happiness to everyone.

Thank you. On behalf of Xelpmoc Design and Tech Limited, that concludes this conference. Thank you for joining us, and you may now disconnect your lines.