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

Welcome to the Q2 FY 2022 Earnings Call of Xelpmoc Design and Tech Limited. We have sent you the press release and the presentation, and they have also been uploaded on the website as well as the stock exchanges. In case any one doesn't have a copy of the same, please do write to us. To discuss the results and the future outlook going forward, we have with us today, the top management of Xelpmoc, Mr. Sandipan Chattopadhyay, Managing Director and CEO; and Mr. Srinivas Koora, CFO. Before we start the call, I would just like to remind you that the safe harbor clause applies. And with that said, I would like to hand over the call to Mr. Srinivas Koora. Over to you, sir.

Thank you, Ravi. Good evening, everyone. Welcome to Xelpmoc's earnings call for Q2 FY '22. I hope you and your family are doing well and staying safe at home. The key highlights, I would like to bring to your kind attention is that, Madhu has joined Xelpmoc as a Group President-Strategy. Madhu has over 3 decades of experience in the finance and IT industry and has held senior leadership and board position with several blue-chip multinational corporations. He will be working on the expansion of Xelpmoc's business both nationally and globally. Moving on to financial highlights. I'm pleased to inform that we have maintained our business momentum while focusing on sustainability of operations. We continue to move ahead with our execution plan, which is centered on identifying target sectors that correspond with our HEAL approach. Our operating revenue for the quarter was INR 11.2 million as compared to INR 34.7 million in Q2 FY '21 and INR 32.5 million in Q1 FY '22. I'd like to give you a context to this change in revenue. Xelpmoc is largely start-up focused rather than a service contract based. We had certain service contracts giving us a recurring revenue, which have now been completed, and that's why you see the revenue change. We expect that Q3, with the economy opening up and face-to-face interaction increasing, the revenue run rate should see an uptrend. We have also started our office in Hyderabad, which will provide further impetus to the company's operations. Operating EBITDA adjusted for ESOP for the quarter was negative INR 12.9 million as compared to positive INR 14.9 million in Q2 FY '21 and a positive INR 5.3 million in Q1 FY '22. The net loss for the quarter was INR 33.7 million, partially due to INR 23.2 million of ESOP expenditure and also for the reasons I just mentioned. This is in comparison to a net loss of INR 15.3 million in Q1 FY '22 and the net profit of INR 15.6 million in Q2 FY '21. As stated, we expect to build on this performance in the current fiscal. Our team size is 68, including employees, interns, consultants as compared to 86 in Q1 FY '22. And mainly the reduction is on account of resource optimization. Till date, we have served 48 clients and our sustained interaction with our clients is the foundation for good performance. The fair value of our investment in portfolio company stood at approximately INR 611 million as on September 30, 2021 as compared to INR 439.1 million as on September 30, 2020. Our portfolio companies did well by getting new opportunities. Fortigo's Q2 revenue and EBITDA rose by 3% on a year-on-year basis on account of rising shipments for the upcoming festive season. However, its operations saw some impact on account of longer duration of monsoon, higher COVID cases in Maharashtra and Kerala, rising fuel prices and the follow-on effect of new mining laws. The easing of the pandemic situation across the country, combined with the stability in the metals and mineral industry segment after the enactment of mining law in 2021 has contributed to the rising volumes in October and first half of November. This looks to be promising for Fortigo in the post-festive opening upward and onwards into Q4 of '21-'22, reopenings on growth phase and is focusing on exploiting opportunities in auto sector, contact center segment. It is also exploring international opportunities. Woovly enables its 5.5 million users to shop socially with the help of 19,000 content creators, around 13,000 influencers create 60,000 short video content per month, resulting in 210 million video views per month. It has gained increased followers on social media platform. It has clocked GMV ARR of $2.5 million, which has grown by 70% in Q2 FY '22 on a sequential quarter-on-quarter basis. A substantial portion of this has translated into revenue and is seeing a good traction in the coming quarters. Woovly is looking at expanding reach by adding vernacular language and tap into international markets in the future. The other portfolio company, The Star In Me, is a global career advancement platform for women and a diversity partner for organizations, has seen an increased traction with the leading corporate clients being on-boarded recently. These corporate clients use [ DSM ] as a facilitator for their employee learning. The company's revenue will be contributed from enterprise as well as the B2C business. Signal Analytics Private Limited, a wholly owned subsidiary of the company has raised INR 52.4 million by way of preferential allotment of Pre-Series A Cumulative Compulsorily Convertible Preference shares to new investors, whereby Xelpmoc shareholding in Signal has changed to 91.95% on a fully diluted basis and it's now become a majority-owned subsidiary of Xelpmoc. The Board has also approved setting up a 100% subsidiary in Hyderabad. This wholly-owned subsidiary will focus on design work for machine interfaces. The company is now geared up to set up the U.K. subsidiary, which was earlier approved by Board and put on hold due to the pandemic. Now, let me come to the outlook for the remaining fiscal of 2022. We see a promising growth in our portfolio companies, given that they are concentrating on hitherto unaddressed areas of the economy. We expect our investment, including Fortigo Network logistics, Mihup, Woovly, Signal to expand their access and reach the -- enter the next-generation of growth. We continue to maintain our cautiously optimistic outlook given the underlying economic volatility. With this, now I request Ravi to open the floor for question and answers.

Thank you, Srinivas sir. [Operator Instructions] The first question is from the line of Mr. [ Sriram Rajan ].

Srinivas and Sandipan, wonderful interacting with you. I think it's a quarter that's seeing advancements. You hired some senior professionals. What was even more heartening is to see Vishal Chaddha and few more people join. I think it's not easy to attract talents in a start-up environment. So congratulations for that.

Vishal has been there from the beginning. We have just reallocated him for specialized work, and that has come out. Madhu and Srinivas Kollipara have joined.

Yes, Srinivas Kollipara. So those were the -- so wonderful and very heartening to see the portfolio scaling. A few questions from my standpoint, not on the financials. I think this has to be viewed as something quarter-on-quarter, it's going to be very difficult to justify numbers in Xelpmoc. So I won't ask those questions. From your deck that you just uploaded, the 3 lines of businesses that you're focusing on are outside of your portfolio companies, which is one is DocuX, other one is ERP, the other one is on the EduTech. So DocuX is an intelligent data platform, you kind of scan workflows, you put an intelligence on it. That market is fairly crowded. You have people like [ Hapi ] and [ Pega ], so many of these guys with very deep pockets. So perhaps there's some differentiation that you’re bringing in, which I would like to understand. The second question is on ERP. ERP is another supercrowded market with some -- so many guys there and Zoho -- to starting with Zoho and right up to all the big guys. And we find people like Odoo, who do very, very niche app-based services. So what's our differentiation in this. So 2 questions from my standpoint.

Okay. So firstly, these are not lines of business exactly and not at par with the EduTech's part of it. These are all components and products that we are making. And the "X" is more for extension of an existing part. For example, in DocuX, it's not a document management system actually, basically it's a document analysis system. And any document management system can use these SDKs case, to use our elements of AI NLP that we have done and some are unique according to our belief. Apart from external users, which is very limited, we often use these components and keep on extending it, depending on some of the projects we work on, where the market demand comes, and we see that these sort of solutions don't exist. Now for example, in DocuX, we have been able to build a protocol, which can read a human readable rule set and apply it to another human readable document without having to program the rules for analyzing the document. And those are the kind of tools, tackles that we put in the DocuX suite. Similarly for xERP, which is extension on the ERP, or a new kind of ERP, there are certain elements in certain industries where we are building and helping them build-out of that part. But mostly, what we are doing is building observation systems, which get in the aspects of data science, which get in aspects of communication, which most ERP systems don't have based on data triggers and you can essentially add this on to existing ERP systems to give additional features to that part. So that's a part. If Xelpmoc, just a hypothesis, were to completely implement an ERP system, the part would be consisting of xERP components and probably one of the open source ERP system, which we are not developing, but using to give an end-to-end solution to a customer, but that has not been the case yet. Though, the case of what I told about using that to extend the existing ERP that we have had some of these cases.

Just if I could use this opportunity, one last question. I think many people will be in the queue. EduTech again is all those big, big guys buying companies every day and exact routine, but it’s massive pockets, and we have gone into the same space and, in fact, expanded investments as well so the rational for that?

So I think in the last con call, I had explained. We have sort of segmented education into 3 parts: one we call the NTL, which is need-to-learn, then there is a need-to-succeed, and then there is a need-to-know. We are mainly expanding on the need-to-know segment, which is not exactly in the formal edu segment. In the NTS part, we are working with the phygital model, wherein we look at our process, which we believe would be the future. We are enabling the schools and making sure that we are able to leverage the best of technology with human interface through establishments. Again, not trying to set up our own channel, but empowering and sort of augmenting the existing infrastructure existing by modernizing them. That is our approach in the NTL segment. NTS, there’ll always be a differentiator depending on the subject matter. We do believe that content is a big differentiator. The pedagogy, the way you approach the problem is the big differentiator. So we try to make sure that we are working with enterprising, slightly what we believe is disruptive kind of approach to that part. The need-to-know space, we thought is pretty open. We are not that great in explaining why we are educating something on that. Everything is like a formula driven. That, I think, will grow as a market as we try to establish ourselves as thought leaders and not clerks. So if India tries to shift, need-to-know market would grow, and we are as good as anybody is our belief. You are on mute, Ravi.

Yes. The next question is from the line of Mr. [ Rudresh Kalyani ], individual investor.

I just wanted to know, is it possible for investors like us to invest in the portfolio companies of Xelp in any ways.

Not at this stage. We really hope we can get a model properly, otherwise, the paper work and the legal jamboree is too much at the moment. So we do think that we will have a avenue once it reaches a level of maturity, which is less risky to open it up for retail investors also. That is my dream also. And hopefully, one day Xelp will be investing more along with co-investors, and you will be able to partake through that part. But as of now, we are slightly handicapped in terms of scalability of that model to really reach out to that microscopic level. That's one of the problems that we have seen. We don't want to change a domicile or we want to bypass the law anyway. So that constraint on us is what we are trying to make sure that we are doing it.

And my second question is in this hypercompetitive hiring space, how do you -- how are you able to attract the talent from the industry.

Well, you're seeing a part of the -- try coming in there, and hitting our balance sheet in terms of ESOP. We do believe in people who believe in the story of Xelpmoc, and hence, we were never really in competition with that market. That said, there are a lot of avenues and all. The competition is higher. It is more difficult. But till now, touch wood, we have been able to hold our fort.

[Operator Instructions] We have a question from Mr. [ Krishnakumar Srinivasan ].

I'm new to the company, so pardon my ignorance in this question. So could you just explain a little bit about how you source business, what -- how do you access markets from the base businesses? And in terms of also investee companies that you talked about, how do you go about? Could you share a little bit of color about the ways the business is done, if it's possible?

So Krishnakumar, I have covered it in previous con calls, and for the sake of others, I would intrigue you to go and read the previous con call transcripts. But in summary, I'll just sum it up in many ways. We have a pre-done diagnose – our pre–done hypothesis on to which sectors we want to get into. And that's mostly embodied by what we call the HEAL segments, health, education, agriculture, livelihood. So we're not looking for ideas out of the blue coming to us. We have a space for 5, 6, such like. But mostly, we look at areas which we have pre-investigated and have pre-researched, and that's how we have built the team. And then we look for suitable entrepreneurs. This is more of a matchmaking in terms of the ideology and the direction in which we have to work. So we work like a tech co-founders. That's as far as the start-up space comes. For corporate innovation, I have always admitted and confessed, we didn't have a process. We are in the process of setting it up. And the corporate sales part of it, which will foster the services revenues, that, as per plan, we'll start from the next financial quarter -- first quarter. We are in the process of setting up a team and processes for that, because that will be a slight bit of a culture shift for us.

The next question we have is from the line of Mr. [ Amit Kumar ].

I have just one question. The U.K. subsidiary, it is on track?

Yes. In fact, as we speak, Madhu is on his first official trip from us, and he is now dillydallying in London and setting up all the paperwork and stuff like that. So we should be operational as planned probably from around January or so. There is someone -- some people typing questions, I think. You take it in a proper way. You can put them on to the queue of the questionnaires, right?

Yes. First one is from Mr. [ Ravindra Yellappa ]. What happened to TaxiTop? Is it still operational?

Srini, you want to take that?

Yes. TaxiTop is still in operation. As you know, like last 18 months, the number of taxis which were on roads are almost all no or negligible during the pandemic. So right now, they have focusing on a couple of other aspects as well. But TaxiTop has not moved as we expected, so that is the reason why you have seen that, we have almost all written off that investment.

The next question we have is from Mr. [ Viren Kumar ]. Signal Analytics got diluted by roughly 10% to raise INR 50 million. Does it mean that your total valuation of Signal Analytics is around roughly INR 500 million?

Srini, you want to answer that?

Our Signal investment is more or less a pre-money investment of close to about INR 60 crores. We have raised about INR 5.24 crores and diluted close to about 8.5%.

So I would like to add something here. Yes, on paper, it is Xelpmoc's holding now is richer by 60%, but these are very early days. I would not want everyone to look at it in too much of that perspective. But it's a great sign that the concepts and things that we sort of chose to put our effort into, sacrificing the revenue from services that has paid dividends, and we have extreme high hopes on the future of Signal.

We have another question in the chat.

It is more of a conversational question. So it would be better if it comes on…

Yes. The next question that we have…

Yes, I want to answer it. Can you bring him on to the chat? So I can -- because what do you mean by good number on financial statements? Are you talking of PAT? Are you talking of EBITDA, are you talking of our overall wealth that we have, which also should be factored according to me? I want to clarify and then I can answer appropriately.

Yes, Mr. [ Yashesh Ajmera ], you can go ahead.

[ Yashesh ], you're on mute, if you're trying to speak.

I think there's no response. We can go to the next question. The next question that we have is from Mr. [ Sandeep Das ].

So in the recent few months, I have seen that some interesting acquisitions has been done in terms of talent. Sreedevi Devireddy, Madhu. So I mean, these are like -- and when I see their profile they are like who's who in the industry with a lot of experience. So what you guys are up to? I mean, what's -- and like, is there any plans in the future as well to get more leaders like this.

We always look for good people. We actually were very encouraged when one of the PEs came in specifically for this purpose to appoint management, because honestly, we were growing at a creative rate of growth at faster than what the founders and decision making level itself could handle. And we are grateful that we have been able to create a body of work, which has made people like them interested to joining us, the privilege is all ours. Anytime anyone who believes in the ideology and can add value, will always be added to Xelpmoc. The idea of Xelpmoc is to become the kind of the talent pool part or -- the aggregation of people, the Amul of technology, if so be it. And what we are up to is not different, by anyway. We just think we will do it better, and we do at a larger scale.

We have a follow-on question from Mr. [ Sriram Rajan ].

He dropped off?

Mr. Rajan?

So I'm just clarifying, I'm an individual investor. So just I think from your portfolio, Ideal Insurance Brokers and Madworks, I didn't see it in this quarter's deck, it was there in the previous quarter. You kind of exited those investments or something like that?

Yes. Srini can you explain?

Yes. We have exited both the investments. We were, in fact, Ideal Insurance. We were holding less than 1%. We thought that as you know, that in case if we invest in any one particular sector, any one particular company, we don't invest in a similar company in the similar sector. So that's where we have taken an exit from the Ideal Insurance. And as far as Madworks is concerned, again, we have almost all written it off. That's the reason why you are not seeing both of those in our portfolio.

So instead of Ideal, you invested in a similar reinsurance company or something like that?

No, no, no. We haven't invested.

No. We have not invested. But we have kept the options open and because we were not getting much value. Also, it had -- it was almost for our sake, not really. It's not the kind of interaction we believe. We are heavily involved with our portfolio of companies. That was not the case here. Plus it was blocking our sector, so we have kept all options open.

And question on Rype. I think you increased your investment quarter-on-quarter into Rype Finance. So just maybe something wrong with me. I tried to research this company, but their website doesn't load up. So…

You have to -- look for the product. It's called Slate, slate.ac.

I do see it now.

Slate.ac is pretty popular actually. [ Yashesh ], I think, is not able to speak. So I will take his questions and answer it here itself, it's popping up. Well, I have clearly said that till next -- first quarter of the next financial year, we are not focusing on the services part of it. We do believe our core business is not services, but innovation. Services is a great money-spinner, and we will be focusing it from Q1. From Q1, you would look at us on the uptrend of the EBITDA. But as and when we see growth and wealth making opportunities, we will still take a little bit of risk on that. But we'll try to balance it from next financial year. We are completing 3 years of listing. We need to act little more mature. We will get into some regularity, and hopefully, we will see some results on to that accordingly.

We have a question here from Mr. [ Ayush Gupta ].

There is another question from [ Ravindra ]. [ Ayush ], can you hold on, I'll just answer this? It's a complicated question. You are seeing a gradual decrease in our headcount, but it is also true that many of our people, not only leave us and go, we don't know where, but some of them also go into our portfolio companies. And some of our other subsidiaries are also augmented by those people in some cases. So there will be some adjustment. That said, we are looking at -- we don't want to keep people on the bench till we get our strategy in place for the services. And as of now, we are not absolutely focusing on that in the real sense. By March, you will see a very different picture. You can expect that part of the headcount going up from, let's say, Jan-Feb onwards.

And again, the drop in headcount is mainly on the interns, not at the middle level or the senior level.

Mr. [ Ayush ] was there, right? Yes. Not that we are aware of, [ Sobhik ]. We are not aware of any portfolio companies planning to list separately. As and when we get official knowledge of it, we will share with you.

Mr. [ Mahesh Gupta ]?

[ Ayush ], please go ahead. I'll tackle those questions later on. Yes.

So in the second -- last con call, you said that you were working on some new model related to micro entrepreneurship. So if you can give some update on that?

It's in stealth mode. We are working on it. I don't see you will see the light of day for that project before, again, Q1 next year. Yes. I think there's some wrong idea. It takes 6 to 7 months of research, R&D, some prototype development, some model testing for us to go ahead and get into a new segment, okay? Now the main aspect is that it's not just that part, what we call nano entrepreneurship that we are talking of. You may see something happening earlier if opportunities arise. But as a planned intake into it, that and some other stealth sectors, you will see some exposure from first. But these are, again, more the Signal type, where we are the primary movers, not exactly entrepreneur driven, but we will work with an entrepreneur in those segments.

And one more question. Like right now, our portfolio value is around INR 61 crore, right? So if we include the -- yes, if we include the Signal funding, then I guess our portfolio value would cross like INR 100 crores. Is that right?

Mathematical, yes is my answer. You should also look at the maturity and age of the investments also. That's my advice to you guys. Srini, am I right if it is...?

That's right. That's right.

So technically, I think you will see portfolio value -- technically doubling. It will be INR 120 crores by max. All right. There's a question from [ Niraj ], also plus one by [ Rudresh ]. I'll read it out for people who cannot see the thing. If we see some interesting start-ups, would like to connect you to the start-ups, is there option to connect? Of course, we have, [email protected] for that purpose. Every day, we get close to 40, 50 start-ups reaching out to us every day, and I'm not joking. Everyone wants to have a start-up these days, and it's pretty interesting how it's moving. Please do connect, but at the same time, understand the philosophy on which Xelpmoc stands. Understand we're not a financer. Our way of working is like a tech cofounder. So we don't invest to invest. So people are not expecting to have a cheque and having the great idea, that's not the people we are looking for. Just wanted to be clear on that part.

[Operator Instructions]

There are 3 people, right?

Yes. We have a question from Mr. [ Dhwanil Desai ].

Sorry, if my question is very primitive and naive. So please pardon me for that. I'm just kind of putting it upfront.

No question like that can happen.

Sandipan, I'm very new to this business model. And I'm still grappling with this challenge.

[ Dhwanil ], so are we, so don't worry.

So the point I'm trying to understand is that where does the value creation lie in terms of what is the core of this business model in terms of value creation for the entity or the company and shareholders? And secondly, any parallels to which what we are trying to do, anything that we can look up for? If you can throw some light on that.

I think we have -- the second question is easier to understand. We have had these discussions. I'm aware that some of these discussions happen on Twitter and all those things. I'm not aware of any parallels. Now coming to the value creation. Of course, we are working in certain sectors we believe in. And the model of working is we work like the tech cofounder. So you can say that we are earning almost something akin to a value addition, stock option from start-ups in that part. And the second part of our revenues is slated to come from the corporates, where we are more or less kind of like a service industry, the only difference being we are acting like enablers for start-ups and working on an end-to-end innovation project, not on body shopping. That parallel does exist. I mean, a part of Happiest Minds business or a part of Mu Sigma's business, a large part of it, are modeled on those things in specifics, but we are on the innovation space for business that's a difference, I think.

But the service part is always going to remain a smaller part of the value --?

You never know. We are not focused on it. Once it becomes an independent, being by itself, it will have its own life. And who knows? I mean, I hope you are right. I would always hope that, that grows at a normal rate, but our start-up ecosystem growing at a faster rate, and we still keep your words true. But that said, it has a life of its own, the skills we have are pretty rare. So we do expect a huge absorption of that also. But may your words come true is my hope.

The next question that we have is from [ Amit Kumar ].

Sandipan, can you give an overview of Signal Analytics, please?

Okay. So I'll carry on -- it is complicated, [ Amit ]. So in our 6 years, we have gathered some experience. One of the key experiences was that even if start-ups can collaborate a divergent set of stakeholders of what makes it very difficult. And we, being the common element are not that significant to do it. Now when we started looking at EduTech, which is a need-to-know basis, we realized that there could be distinctive components to it like content, gaming, a subscription management system, smart toys, but they all are catering to the same target audience. There are bundling effects can really unravel the market and market access and all our common costs. So that general purpose stack is what we are building in Signal and Signal, in turn, would sort of invest into these 4 companies and create an ecosystem for tackling that need-to-know space completely. That's the overview of Signal. I think we have to make -- this is something we have already disclosed. I'm just elaborating on that. Probably, if it warrants and it's possible, we will give out a public document or kind of explainer for Signal. But I think this is the limit to which I can explain at the moment.

The next question that we have is from [ Amuthan Iyer ].

It was very heartening to see institutional investor entering Xelpmoc where we, I think, diluted about 5% stake. My question here is, do such investors stay? From whatever I could gather, these are long-term investors and kind of work with the management with respect to their vision. Do these kind of deals have a fixed tenure? Do they kind of look at an exit at a pre-decided? So this is one question. And second question is on the -- like as a retail investor, we have clearly understood that your products and services is for sustenance to nurture the start-ups. This is what we have understood from your previous con calls.

Yes and no. It's also to champion them, and products surely is not to sustain the start-ups. Products are a different line of business altogether.

Right. So with respect to ESOPs, my question is like, I think, last time you shared that it was kind of -- the expenditure part of it or the vesting part of it would go for a few quarters more. So again, with new talent -- very senior talent coming in, whether this would kind of continue? And would there be an arrangement where the investee companies also share the expenditure part, given that our product service portfolio is yet to take off.

So coming to your first question, we are in the public market. No such rules exist, except for the statutory one. Because we have gone with preferential allocation, there is a fixed lock in on one year. Everything else is given and driven by the ethos of the PEs that we do. So it's not just about getting institutional money. It's about the quality of institutional money. We are extremely lucky. And let me tell you one thing. Sitting on this chair, we do get offers from a lot of institutional persons. And the modes and the different -- there are different parts. But we engage what we think can add value to, not only us company, but the existing shareholders as well. And then we curate and choose. This was one such person because they are historically known to be exactly like you said, extremely influential, long holders. They take a lot of time deliberating on which companies to invest in. They do a lot of research. Getting money from them is also an authentication and validation of your model. So all those positives were the and that's what we took the money. And plus, let me tell you, it was almost like an incoming request and incoming discussion. I would not say request -- we are too small for them to request us, but it did come as an initiative, which was initiated from the outside. And once the quality was visible, we really, really fell for it. Coming to your second question, the second part is a clear no. Investee companies would never ever bear the cost of our ESOP costs. Would there be an extension of those things? Yes. But we will make sure that it is not of that kind of a percentage of what it is now because by that time, hopefully, the reason we are growing for will start accumulating, and there will be offset on that part. But, yes, to retain talent and to get sure that we are looking for growth, if you really want good people to come, they will not come for salaries. They will come when they know that the company's growth and their growth are aligned to each other, and we want those sort of risk takers to come and join us. Only they are the right type of people to join us.

So would it be kind of an ongoing Q-on-Q process?

It will be an ongoing question, but we hope that our revenues will overrun that, and there will be profit left even after looking at all these necessary things.

And one more question on SnapHunt. If you can throw some color on its activities and how do you foresee its future?

I think Srini would be better for that. I'm only mostly connected to the active ones where we are developing on all. Other parts, Srini and Vishal handle. Srini?

Yes. SnapHunt is exactly a Singapore-based company. It has job seekers, receive job proposal from the world top employers by letting their -- match candidate with the global jobs. And they're aligned with their experience, goals, preference, et cetera. What we did was we built an AI, which will help them to shortlist the candidates, QA, which will reduce what I'd say that time and effort that is required to recruit people.

Yes. I can add one more thing because I was part of the development on that part. We essentially look at something as big as the culture fit, whether the guy would fit into the culture of the company because these are top level recruitments that they are doing. Hence, a lot of the soft factors are there. The algorithm is proprietary to that part, but we developed that algorithm by -- with the culture in this calculation.

The next question we have is from Mr. [ Nitin Juvekar ].

Yes. My name is [ Nitin ]. I am an individual investor. Just a comment, sir. Just looking through all your financials and disclosures on the investor section on your website. And I'm very impressed by the kind of information that you have shared. Just one point, sir, you have mentioned this already. But request you to share the deck on Signal that will help us.

I'll share whenever it's possible because, as you know, there are strategic intents and stuff like that. But surely, we would make something more public that much I can promise you.

Yes. Because I tried to look for the website, but…

The website doesn't exist as of now. I just saw the question from someone else also -- maybe it was you only. It's not -- doesn't exist as of now. It's a stealth product. We will build it, and we'll go public.

Yes. So whatever is possible to share, you can please put it on your website.

We will do. As of now, we can share the objectives and the overall plan. The details and all those things would be, if we share it, it will be insincere to our investors at this point of time. Hope you have understood. There is a question, which is, I think, more Srini domain than me domain because my comments would be slightly unparliamentary. Srini, you want to take that question, which has come in the text? When do you see the breakeven happening in terms of revenue versus expenditure, excluding sell off – selling off stakes in investments.

So, basically, we don't consider as a part of positive cash flow, especially from the operations, at least internally, as far as the profitability is concerned. But yes, Q1 was profitable. Q2, certain projects were concluded. That is the reason why you haven't seen that. Maybe from Q4 onwards, we'll be back on track with respect to positive cash flow from operations.

I would say that it will be next year Q1. If some of the things that is already in motion do get, then you will again be bashing me off because we will not have that much part of it.

Yes. But, again, what we are saying, what we are talking is that excluding the ESOP expenses. As we said, as we told earlier as well, the ESOP expenses, you will see, at least for next 8 quarters easily.

Please, just to qualify that calendar quarter -- financial quarter one. That means April, May, June of Jan 2022.

The next question that we have is from Mr. [ Ganpati Jagdish ].

Thank you for your contribution towards all the stakeholders, allowing the chance to put their money into Xelpmoc where there were no chance to put into start-ups. I have a question on, is there any companies that you are looking, which are developing software products? Now the cloud era is growing at a faster pace, where in terms of the cloud computing or the cloud security, are you looking for any companies that are developing? Or are you looking for any products in that area?

We are always looking for interesting things. And yes, our plan for the first 7 years is almost nearing completion. So we're looking for the next batch of ideas. Some of the interesting work in fintech or in mathematical deep tech, yes, we are looking at those sort of software companies, products as well as our own inclusion in them. We will be expanding the stuff of some of the -- it certainly become a buzzword, but we were looking at -- we used to call it virtual worlds. We were looking at such of those things in many fields. I think we will go deeper into those parts. Anytime, any interesting technology. We don't know everything. Things surprise us and when things surprise us, we go out, learn and we engage with those people. That will continue to happen, sir. Srini, there is a question for you about Mihup and Woovly funding, if you can.

As far as the portfolio companies' funding is concerned, whatever is available in the public domain, that's already there. We can't share more than -- because, again, you need to understand that we are also a part of the shareholders. There are other shareholders as well. So right now, we will not be in a position to share much about the funding part -- and whatever is available with us we have already shared it.

We have a question. We have a question from Mr. [ Abhishek Agarwal ].

First, I would like to congratulate on whatever you are doing with respect to qualitative aspect as of now? I know financials will come along as we go ahead. But then, sir, just one qualitative question of sorts. Anything interesting, anything unique that you've come across in this past 2, 3 months or something that you're really looking forward to in terms of global markets or domestic markets qualitatively?

Yes, we are looking at some good ideas. Unfortunately, it's under NDA and stuff. But hopefully, as I have told you 2, 3 quarters back, our -- my main focus still next quarter top management is focusing -- our main focus till first quarter of next financial year is in picking our next set of winners and making sure they are doing. I think we have done a good job in 2, 3 cases, which are already disclosed. But I hope another 2, 3 mature, and then we'll be set for the next 4 years. I can tell you the broad area, not more than that. Well, I didn't like the name, but let's say, in broad nature, something to do with the digital virtual space is something we were dabbling in for some time. I think that's reaching some traction. And some interesting work, you may also start seeing from the health tech space. One second. This is -- I didn't understand this question. This is from -- who is this? [ Manu Priya ]. [ Manu Priya ], can you come on and explain this question? [ Amit ], yes, those are areas we're looking at, not clean energy yet, but they are not EV either, but infra blockchain using into real estate and all that we are looking at, yes.

Mr. [ Manu Priya ] does not seem to be answering. In case anyone else has a question…

But that question was a bit weird. Srini, can you just read through it?

Are there any other stealth projects surprising we can expect like Signal Analytics with our director/management holding significant stakes? Disclosure, none of the projects which are in stealth mode, where directors or management are holding any stake.

Exactly.

Even the Signal also, Signal when incorporated, it was a 100% subsidiary of Xelpmoc. Similarly, in case even if any projects are on stealth mode, if we spin it off into a different entity initially, it would be Xelpmoc, who would be holding 100% stake. Maybe in case if there -- any option where any of the investors want to invest, then that's the second this thing. But any project, which is in stealth mode, it would be 100% subsidiary of Xelpmoc.

Yes. And I think he or she, I'm not very sure if it's an agenda. Well, those are mechanics by which we looked at getting -- forming a company from one company is very difficult. The easier way is to form it with 2 directors and then bide over. If you mean to back part, it is there. That was just a kind of a fast track to make sure that we have a subsidiary in the right way. [ Anurag ], we don't know. Maybe not, not till we get some value and then maybe we'll dilute. But there are certain people who have shown interest because of the timeframes and all we have not been doing. We are engaging with them, but it will be part of this existing round only, if at all.

[Operator Instructions]

That's a very good question. I don't know who is asking that, [ Ashok ]? Correct. Ashok, this is about the subsidiary we have discussed about design. No, it doesn't deviate from HEAL. We are entering the services. We see a scope for a huge amount of our services coming with the aspect of design, especially as IoT, Internet of Things, electronic vehicles and all come. The kind of design caliber we have been. Somehow people are finding it attractive and reaching out to us. We see the need or an opportunity to do that. So it's not a deviation from our HEAL. And who said that HEAL doesn't need to get design. We have great design. That's why people find it usable, even if they are not literate and stuff. Designs are the base of everything. The name of the company is Design & Tech. Design leads tech. So Design has always been more important. It's just not people who understand it. They think it as tech sector, but design is one very important in stealth mode. We think there's a case in point where a focused subsidiary would do better because the culture of a design company is slightly different than a product company or a development company. Wherever there are cultural aspects and all when we need different set of people, we think it's better to have a subsidiary. That's our vehicle.

We have a question from Mr. [ Priyesh Shah ].

So I would like to elaborate on the -- a follow-on question on the last question, would we -- when do we foresee the overall expenses, including the ESOPs, breaking even in terms of revenue, when do we actually really see the revenue coming in?

[ Priyesh ], would it be okay if we answer this question after quarter one completion next year?

Yes, absolutely. Sure.

I think that's the time we'll be able to give something definitive. As of now, we are looking at this field and trying to maximize between wealth building and margin building, right, you're talking about?

Because -- yes, because you definitely have your core businesses as well. So how is the balance struck?

What do you think is Xelp's core business, by the way.

So as I foresee as much more into the 3 products, which you definitely have put on in terms of -- if I can just say that products in terms of the OCR recognition.

[indiscernible] solution is the core business, that also services. But corporate services or paid services is the part which will give us the [Foreign Language] on top, right? It's not -- no one is giving us equity for free. We are putting in some hidden -- opportunity cost to get that part, and that's where their main value is coming. If you look on [indiscernible] tendency is that in Mihup, we hold 5%; In Signal, we hold 92%. That difference is coming. Some money goes into both those things working also, right? So that is a split onto that part. So I think we are fairly balanced, and we have sort of been biased for growth. That said, cash flows and all have to be managed, and we have to reach estimate between our earnings from outside, and our expenses balanced out. I think from next year first quarter right, we'll be able to tell better looking at how we are settling in and how we're doing. But the tendency to earn money, putting a focus on service, that will come into being from first quarter next financial year. And we have been consistent about it. It should not be a surprise, but we intend to live up to that part exactly. We have shown our proficiency that when we want to earn money, we can. And that is a confidence that I will live with because on the wealth part of it, and then they will trigger that activity from first quarter of next financial year. [ Ravindra ], I will try to read out for you. It is difficult. I mean, this moves very fast, and Zoom is not the best chat interface. The question was from -- sorry. Hi, there are a few segments which seem to be promising and huge scope like blockchain technology, EV and its intra, fintech segment, is there any intention or opportunity Xelpmoc is looking for to serve these segments as well? That was one question. And the other question was, are there any stealth project surprises we can expect like Signal Analytics, with our directors/management holding significant stakes? And answer to that was no. We have very good corporate governance. We are not here to make money from the management or of the other directors.

We have a follow-on question from Mr. [ Dhwanil Desai ].

So another question, I mean as I listened to the discussion and explanations that you are giving. So one question is that the business models of the tech for equity or whatever that you want to call it, that vis-a-vis providing corporate services is very, very different. And the skillset required resources, organogram, culture, everything will be very different, right? So how will you manage that in a single organization? If you can throw light on that?

It's very nice of you to point it out. We are cognizant of it, and we are building that as a separate thing. And in a previous call, I had explained that I cannot -- my guys are innovators. They're used to telling this is a bulls*** idea. That will not be in the services segment at all. That's the reason we are building that practice, the principles, the working processes for that. And that's the reason I see that, that headcount increase you would see from January onwards. Those people don't exist in the system as of now.

But they will still be the part of the same ecosystem, right? I mean, the same organization.

It will be one of a department. And for -- we may do some abstraction like we have done for design for future, but once we want to see something. As of now, there are -- so we see the thing is, as long as I have a front-end layer, the back end can still be the same technical gigs I have, right? They can internally manage. So I don't need to go out and hire more gigs, but I do surely need a good presentation there.

And the second question is, how should we think about dilution within Xelpmoc. We have raised money. Should we think of Xelpmoc as a start-up kind of a thing which keeps on diluting as it scales up or we should not think like that. How should we think as an investor?

I frankly don't know [ Dhwanil ], I'll be honest with you. Dilutions were not planned except for the ESOP ones, ESOP so on. But once we get a great investor, which seems a fair value -- and look at it from our side, right? We went public, raising INR 27 crores for 5% -- for 25%. And then in less than 3 years, if we are getting the same INR 27 crores for 5% and despite having very honest talk with the guy looking at the market conditions and all and despite that doing it, I think at that rate, it probably makes sense. But our main thing is that we should not ever dilute to an extent where we don't have the power and the management control to follow our vision. That is first priority for us. That much we can tell you.

Okay. So basically, you are at the moment, it's like…

I can tell this much and I'll not sell my soul for money. But when that money can be used to extend my soul, I will take it.

We have a question from Mr. [ Anurag Kumar ].

Yes. Sir, I want to ask that. I also -- are you also facing challenges in recruiting? Can you please throw some light on that?

I guess uncertain. Things are tougher because of the way we used to recruit, and that's what the ESOP is so high. We were looking for a different band of people. So fundamentally, we were never in that rat race. That's said, now that the options are much better, there are many large names coming and on, it is more difficult. But touch wood till now, we are not doing bad.

And sir, as you are moving to Hyderabad and newer locations, that will be difficult.

No. On the contrary, I think it's other way around. [ Ashok ], we have not yet finalized on that part, but…

Sandipan, he wants you to read out that question and then go further…

[ Ashok’s ] question is who will head Xelp's U.K. subsidiary? And so the question is we are setting that up. But Madhu, from our side, is in charge of all international corporate operations and all. He will hit the ballgame and all. For all you know, we may actually get someone from there to help that unit or it could be someone seconded from Xelp hitting it along with, but we will have local presence there. That's for sure. There's a request for you, Srini, I believe, from [ Ayush ].

Yes. Just one request, can you please suggest change the format of quarterly results, if possible any format will do other than thousand as it gets very difficult to process the numbers.

I think we'll give it in lakhs. We can give it in lakhs.

Sure.

I think that's a very fair point, by the way. I also got confused sometimes on that part. Yes.

We have a follow-on question from Mr. [ Rudresh Kalyani ].

See, everything has its own gestation period. So couldn't we wait till we have MVP or prototype something like that for this Signal before diluting or too early to dilute it?

It is difficult to get money out of anyone without something. So of course, we have something. It's just that we are keeping stead.

We have a question from Mr. [ Ganpati Jagdish ].

I think that's a good suggestion, also from [ Elangovan ]. I'm not able to read the full name because of the limitations of thing, but [ Elangovan], can we add company name along with the brand name in investor presentation, please? Makes sense, we should do that Srini.

Sure. We'll do that.

That's a good solution. Thank you. Sometimes I get confused, which is which one. So I can understand, others will surely get confused.

I think they are referring more from the portfolio companies point of view. For example, Rype, we know it as Slate, but majority…

I think that second column in between is…

So we will also include brand in the portfolio.

Yes. I think that…

There is one more slide, in case if you can just go one slide above the -- it also gives you the brands. For example, I don't know…

We'll add it in both places.

Valuation of portfolio, Slide #23, for example, Slate, how much percentage with their brands.

Yes. But I think we will add the second column, Srini, so it makes it simpler.

Absolutely. We will do that.

Nice suggestion, we'll do it. Yes.

We have a question from Mr. [ Ganpati Jagdish ].

I have one question from [ Manu Priya ]. So I think it's her. In near future, is there a chance to see promoter holding go down below 50% by dilution, let's say, 3 to 5 years for brevity. Anything is possible in love and war. So can't say no. But even if that happens, we would like to see some management control into that part. Please remember that promoters are not how we look at it. That's the stock market term. Our ecosystem or our fundamental stakeholders hold way beyond 60%. Our employees are also there, please remember that. Our key management people who are getting ESOPs are also there. That is the quorum we have. We were the seeders. We were the starters. We should not be the light of it. But that said, I can say that we will not dilute in that sense. We may get diluted but we will not dilute ourselves. I hope that makes sense to you. Yes, Mr. [ Ganpati ].

We have a question from Mr. [ Amuthan Iyer ].

Just a quick recheck, Mr. Chattopadhyay, you said in Mihup, Xelpmoc holds 5%.

No, no, no. I have…

You guys given that as an example.

It was a mistake, I would say -- I meant to say 42, I ended up saying Mihup, please forgive me. I'm not good with numbers. Numbers, Srini is the guy, okay?

So can Srini clarify what's the right number for Mihup?

Yes, Mihup, right now, we hold about 10.4%.

No numbers I say in financial domain is to be taken unless Srini ratifies it. Any number in terms of statistics and all is to be taken from him.

Since we have crossed the earmarked time, and there are no further questions, we can close this.

No, I would like to say something. So guys, I have always been extremely -- we really think of the whole stakeholder group as family. I can tell you one thing personally. Last 4, 5 months have been rejuvenating from me. It's almost like day 0 for us. The new people who have come, I can't even begin to tell you how gratifying it is to have that sort of a vibrancy back, it's almost like rethinking things, looking at new areas with a different kind of a thing. And in many ways, you realize that in the quarters to come, this has been probably the most active 4, 5 months since we started Xelpmoc. That has been extremely gratifying. And I think Srini should end the session, but I had to tell this too just to make sure you people are in the same boat as all of us. There is one more question. Okay. Let me answer that. We don't supply bodies for sure.

Sandipan, you must read out the question.

Sorry. Interim -- in terms of service sector, how Xelpmoc is unique compared to service sector giants TCS? Everyone professes to service everything, it's a skill level and the effectiveness that is there. And of course, they are absolutely respectable and all. There are certain businesses we don't do like looking at contract of skills only. We do end-to-end part, and we do hit head-to-head with them sometimes. I believe in some cases, we are good because we do end up getting projects. We have even got projects where we were managing the whole front end and orchestrating where they were doing the backed. So it's case-to-case.

Okay. There are no further questions. Thanks a lot to Mr. Sandipan sir and Srinivas, sir.

Srini -- I think, Srini he had some closing comments, Please go ahead.

Thank you, everyone, for joining in. In case if you have any further queries, please do reach out to us. We will do our best to address that. That's it from our side. Thank you once again.

Thank you, sir.

Thank you, guys.

Have a nice day.