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Edited Transcript of HGS.NSE earnings conference call or presentation 6-Aug-19 10:30am GMT

Q1 2020 Hinduja Global Solutions Ltd Earnings Call

Aug 13, 2019 (Thomson StreetEvents) -- Edited Transcript of Hinduja Global Solutions Ltd earnings conference call or presentation Tuesday, August 6, 2019 at 10:30:00am GMT

TEXT version of Transcript

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Corporate Participants

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* Partha DeSarkar

Hinduja Global Solutions Limited - Global CEO & Manager

* Ramalingam Ravi

Hinduja Global Solutions Limited - Head of IR

* Srinivas Palakodeti

Hinduja Global Solutions Limited - Global CFO

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Conference Call Participants

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* Akshay Ramnani

HDFC Securities Limited, Research Division - Analyst

* Princy Bhansali

Anand Rathi Financial Services Limited, Research Division - Research Associate

* Subhankar Ojha

SKS Capital & Research Private Limited - Senior Analyst of Equity Research

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Presentation

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Operator [1]

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Ladies and gentlemen, good day, and welcome to the Hinduja Global Solutions Q1 FY '20 Post-Results Earnings Conference Call. (Operator Instructions) Please note, this conference is being recorded. I now hand over the call to Mr. R. Ravi, Vice President, Head of Investor Relations. Thank you. And over to you, sir.

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Ramalingam Ravi, Hinduja Global Solutions Limited - Head of IR [2]

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Thank you, Lisa. Thank you, ladies and gentlemen. I, R. Ravi, Head of Investor Relations, Hinduja Global Solutions, wishing all a very good evening and a warm welcome to the First Quarter of FY 2020 Post-Results Conference Call. To discuss the Q1 quarterly results, I'm joined by Mr. Partha DeSarkar, the CEO; and Mr. Srinivas Palakodeti, the CFO. Before we begin the conference call, I would like to mention that some of the statements made in today's conference call may be forward-looking in nature, including those related to the future financials and operating performances, benefits and synergies of the company's strategies, future opportunities and the growth of market of the company's service and solutions.

Further, I would like to mention that some of the statements made in today's conference call may be forward-looking in nature and may involve risks and uncertainties. Now I'd like to invite Mr. Partha DeSarkar to provide his perspective on the performance for this quarter.

Over to Mr. Partha.

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Partha DeSarkar, Hinduja Global Solutions Limited - Global CEO & Manager [3]

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Thank you, Ravi. Good afternoon, and thank you all for joining us on the call today to discuss our first quarter FY 2020 financials and business performance. I hope that you have had an opportunity to review our earnings press release and the attendant fact sheets of the reported financials, which are available under the Investors section of our website, www.teamhgs.com as well as uploaded in DSC and NSC. I would like to start the conference call with a broad overview of the financials for the quarter under review, followed by strategic initiatives and operational outcomes. After that, I will hand over our call to our CFO, Mr. Srinivas Palakodeti, to discuss the financial performance in greater detail.

We will then open the conference call for the Q&A session. To start with, I'm pleased with how the fiscal [year] has begun. We've done very well in expanding the business, while our efforts to control costs are showing improvement as per management expectations. To share some of our numbers, our top line in quarter 1 FY '20 grew by 17.2% year-on-year to INR 12,905 million. Organic growth contributed to 17.2% [was] ForEx gain of 1.9%, it was offset by a drop of [1.9%] decline in revenues from the sale of GuidePoint contracts in December 2012 -- 2018.

Revenue growth in constant currency terms was 15.3%. Sequentially, we grew by 0.5%. The robust growth was led by organic expansion and new client ramp-ups, especially in the U.S., verticals such as health care, logistics and consumer, along with our recent digital solutions acquisition, Element Solutions, are seeing good traction. You are aware that we have been posting strong double-digit growth in the past few quarters. It reiterates a steady growing demand by clients for our BPM services, traditional call center and back office segments as well as newer transformative and digital solutions. We will continue to pursue aggressive growth like this.

Our EBITDA stood at INR 1,496 million, up by 104.6% on a year-on-year basis and 0.6% sequentially. EBITDA margin stood at 11.6%. This is a significant improvement from where we were at the same time last year. We have promised that we would start seeing the results of measures and cost synergies taken up in the last few quarters in this fiscal. We believe that we are beginning to see sustained [reinsurance] in this regard. Most of these EBITDA improvements actually fall in 5 broad categories. The categories are AxisPoint Health, where most of our synergy initiatives are all in place. The India domestic business has turned around significantly. Most of our site closures are complete, and we have also been able to reduce our telecom concentration on the India domestic business.

Our realization rates for this quarter was also much better than the similar quarter last year. Onshore, Canada and health care profitability has also significantly improved in quarter 1. The profit after tax for the quarter was flat, growing by 0.3% year-on-year to INR 40.4 million. Do note that the growth in EBITDA and the flat PAT had an element of impact from the adoption of the new accounting standard Ind AS 116. Had there been no adoption of Ind AS 116, the EBITDA growth would have been 54%, [again] the reported 105% year-on-year, while margins would have stood at 8.7% instead of 11.6%.

So on a like-to-like basis, EBITDA margins have increased by 210 basis points [of our] quarter 1 FY '19. Due to the adoption of the new standard with effect from Q1 '20, the depreciation increased by INR 301 million and the finance charges by INR 156 million over quarter 4 FY '19. So overall, while the adoption of Ind AS 116 resulted in an increase of EBITDA of about INR 368 million, it was more than offset by the increase in depreciation and the interest costs of INR 456 million overall, a negative impact of INR 89 million at a PBT level. This, coupled with a drop of other income due to foreign exchange impact led to a marginal drop in PAT over quarter 1 FY 2019.

From a vertical perspective, both health care and CES consumer businesses, which basically are all non-health care retail businesses, are seeing strong traction. The health care revenues grew by 9.2%, while year-on-year in terms of quarter 1 FY '20, led by growth across payer and provider businesses. We continue to win new clients as well as expand these markets. Our USP [has been] domain expertise [gained] of over 20 years of supporting the industry. We support some of the world's largest payers and providers in areas of administrative spend from sales and enrollment to financial recovery across both back office and handling provider and member interactions.

Last couple of years, we've taken steps to move up the value chain and become a full services [strong] in health care. We have forayed into medical spend segment, focusing on areas such as clinical services, nurse [advise], coding, et cetera. Last fiscal, we acquired AxisPoint Health. We gained new capabilities right from the ability to provide onshore nurse advice services to high-end analytics. These capabilities are helping us break into the higher value-added [mind] space in the health care industry.

In the sales vertical, which comprises sectors such as retail, consumer, technology, banking and financial services, government and logistics, we are also seeing good traction in the last few quarters. Quarter 1 FY '22 -- '20 continuing that trend with several new end-client expansions, led by ramp-ups with BFSI and the media entertainment sector posting a 23% year-on-year and a 38% year-on-year growth, respectively, in the quarter.

Pipeline for both the verticals, health care and CES, look encouraging. We would be ramping up through the year for some of our new wins. We may also look at expanding our presence in a couple of geos to cater to this demand. In terms of our geographies and businesses, all of them are performing as per expectations. In North America, there is U.S. and Canada. Clients that we won in the quarter 3 and quarter 4 of last year are ramping up. This includes the logistic clients being supported from our Jacksonville center in Florida. HGS has won a couple of key clients in the government sector, and we expect these to go live in the next few months. Jamaica [finishes] their international are going well. In Philippines, we have begun operations in a facility in [Richtown], Manila, in June. We will be consolidating all our delivery operations across Manila to this facility by the end of the year or early FY 2021 for supporting further expansion.

India domestic market has witnessed a turnaround, exiting many of the unprofitable telecom related processes and focusing on fast-growing BFSI sector is helping us grow and manage margins better. As part of the continuing consolidation in India, we closed 2 centers, 1 each in Durgapur and Bangalore in quarter 1. Our headcount stood at INR 42,371 as on June 30, 2019. We made additions in Jamaica, U.K., India for international businesses and Philippines. I want to share some thoughts on client wins and how market dynamics are changing demand. In FY '20 quarter 1, we added 8 new clients across health care, consumer electronics and retail.

We also expanded engagements with 18 existing clients. [Being] healthy numbers, what makes it more interesting is that 8 of these wins are in the space of business transformation, leveraging our technology solutions in AI-led automation, analytics and digital. Several of the straightforward deals in BPM today also include analytics and high-end insights as an embedded component. It's a trend we are increasingly seeing with clients looking for partners who can enable them to win in an ever-changing marketplace. They want someone who can combine new technologies [and] the domain expertise to deliver enhanced customer experience.

HGS's transformative solutions are helping connect the dots between the front office, middle office and the back office for clients. These through intelligent automation, digital, machine learning, and associated care. And we are continuously investing in building more capabilities, including through acquisitions like Element Solutions our digital services firm, and health care analytics company, AxisPoint Health acquisition. We made good progress in getting clients onto the transformation [guidance], especially with existing clients in the last few quarters. This penetration gives us a big opportunity to expand in the addressable market as well as work on newer commercial gain share models.

The current contribution by the segment to overall revenue is in high single digits, however, it is growing fast. We expect business transformation to help drive [by] a higher value-added growth in the future. To sum up, we posted a very strong top line growth and business achievements in quarter 1, with a strong start of the year. Looking ahead, HGS continues to be well positioned in the market. All our geographies have been doing well and winning new engagements. With the pipeline looking good and our continued focus on driving cost synergies within our core business and the acquired entities, we expect to post higher growth in the coming quarters. I will now hand over the call to [Pala] to walk us through quarter 1 FY '20 financials in greater detail. Thank you all once again for being with us on the call today.

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Srinivas Palakodeti, Hinduja Global Solutions Limited - Global CFO [4]

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Good afternoon. Are you able to hear me?

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Partha DeSarkar, Hinduja Global Solutions Limited - Global CEO & Manager [5]

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Yes.

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Srinivas Palakodeti, Hinduja Global Solutions Limited - Global CFO [6]

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Thank you, Partha. A very good afternoon to everyone on the call, and thank you for joining us on our Q1 FY '20 earnings discussion. As in the past, we would like to start by repeating that for the purpose of this discussion, EBITDA and EBITDA margins have been computed, excluding the ForEx [losses gains], which have been taken as part of other income.

Now coming to the financials for the quarter under review. On a Y-o-Y basis, revenues for the quarter grew 17.2%, comprising 15.3% of organic growth and 1.9% coming from ForEx variation. The strong organic growth must be seen in the context of 19% year-on-year drop in revenues of the India domestic CRM business. It may also be noted that in Q1 of FY '19, we had revenues from GuidePoint [business of AxisPoint,] post the sale of a substantial portion of GuidePoint contracts in December 2018. Revenues from those contracts no longer accrued to HGS.

The negative impact of the sale of GuidePoint contracts in Q1 of FY '20 on an overall revenue growth basis is 1.9%. During Q4 fiscal year earnings call in FY '19 in May '19, we had mentioned that our new vertical of logistics support business would have pass-through revenues. The quantum of pass-through revenues, which was around INR 274 million in Q4 of FY '19 has risen to INR 726 million in Q1 of FY '20. So overall, excluding the India domestic business, the impact of the sale of GuidePoint contracts as well as pass-through revenues, our revenue growth is around 15.5%.

Like always, revenues from health care and insurance vertical continued to show strong momentum, growing by about 9.2% in Q1 FY '20 over first quarter of FY '19. However, on a sequential quarterly basis, health care vertical reported modest decline as a result of base effect of Q4 FY '19 as well as the seasonality linked to open enrollment which takes place every year. In Q1 FY '20, revenues from telecom and technology verticals grew by 9.6% on a Y-o-Y basis, though there was a decline of 9.2% on a sequential basis.

This growth has been achieved despite decline in India domestic business and despite telecom vertical accounting for about 50% of India domestic business. The strong performance of telecom and technology verticals can be attributed to the growth we have achieved in Canada, U.S. and U.K., which has significant telecom and media revenues.

In Q1 FY '20, revenues from consumer and retail grew by about 4.5% on a Y-o-Y basis. Part of the strong growth is due to revenues from one of the largest retailers in the world. The strong growth from this vertical has ensured that this vertical consistently delivers around 11% to 12% of revenues. In Q1 FY '20, revenues originating in USD continued to perform well and grew by about 25.5% in Rupee terms over Q1 FY '19 and 4.4% sequentially. USD originated revenue accounts for around 76% of total revenues as compared to 73% in the previous quarter.

In Canada, post the revisions in pricing from clients, coupled with the increase in wages has led to HGS to be better positioned to address labor shortages and meet client requirements adequately. Consequently, revenues from Canada have grown about 17% Y-o-Y and now account for 10% of total revenue.

In Q1 FY '20, if I look at revenue by delivery centers, U.S. and Jamaica grew by about 8.3% sequentially and around 40.7% over the first quarter of last year.

India domestic revenues within the last quarter made its market recovery, declined by about 12.5% on Y-o-Y basis. The shift in vertical mix in the India domestic revenues is expected to continue from telecom to non-telecom. In Q1 FY '20, the onshore revenues, which include India domestic revenues stood at 57.2% of the total revenues, which is about 230 basis points higher than what it was in Q1 of FY '19. This increase coming primarily out of acquisitions and growth in business in USA and Canada.

Elements, an acquisition made in early FY '19 continues to perform well and leads our cloud, digital and consulting offerings. In Q1 FY '20, its revenue grew over 60% from INR 3.1 million to INR 4.9 million. AxisPoint revenues for Q1 were INR 3.8 million. AxisPoint has substantially improved its performance through exit of loss-making contracts and by implementing cost reduction and cost synergies. As disclosed in our published results, the company has adopted Ind AS 116. Consequent to this adoption has been a reduction of INR 381.3 million in operating expenses. Our EBITDA margins have improved from 6.6% in Q1 FY '19 to 8.6% in Q1 FY '20, an increase of 200 basis points before the impact of Ind AS 116. After taking into account the impact of Ind AS 116, the reported EBITDA margin is 11.6%.

Along with the reduction in operating costs, the adoption of Ind AS 116 has resulted in increase in depreciation and interest costs. Our depreciation costs have increased from INR 354.5 million in Q1 FY '19 to INR 446.9 million in Q1 FY '20. After factoring into account the impact of Ind AS 116, the depreciation number as per published financials [with] INR 748.1 million. Our gross debt has reduced from INR 5,848 million as of June 30, 2018, to INR 564 million (sic) [INR 5,624] as at June 30, a reduction of INR 224 million. Interest cost for the quarter has fallen from INR 94.5 million in Q1 FY '19 to INR 90.7 million in Q1 FY '20. However, factoring the impact of Ind AS 116, the interest costs as per published financials come to INR 246.7 million.

To sum up, the overall impact of Ind AS 116 at PBT level, excluding other income, is adverse. Other income for Q1 FY '20 was INR 66.8 million, substantially lower than INR 314.9 million in Q1 FY '19, i.e., a drop of around INR 248 million. This is primarily on account of adverse exchange rate fluctuations and appreciation of the Rupee between 31st of March 2019 and 30th of June 2019.

To sum up, despite this drop in other income of INR 248.1 million, adverse impact of Ind AS 116, a strong operating income has helped overcome the adverse impacts and the PAT of INR 404.5 million has remained at near Q1 FY '19 levels, showing a small growth of 0.3%. If the impact of Ind AS 116 was excluded, PAT for the quarter would have been about 19% higher than Q1 of FY '19.

As of March 31, 2019, DSO days stood at 83, which has dropped to 80 days as of 30th of June 2019. During the fourth Q4 FY '19 earnings call of May '19, we had mentioned that the Canada and the India domestic business were in the process of renegotiating [commercials] with clients and timing of fresh clients had [spilled] over to April and March. This was the main driver for EBITDA to free cash flow conversion for Q4 being negative.

We are pleased to share that the contracting terms have been finalized, invoices raised and overdues have been collected. This can be seen by the fact that the EBITDA, which is before Ind AS 116 impact for Q1 FY '20, stood at about 111%. On a more normalized basis, if you look at EBITDA to free cash flow conversion for the 6 months for the period Jan '19 to June '19, the EBITDA to free cash flow conversion stand at about 27%. CapEx for the quarter was INR 130 million. Our gross debt levels have reduced by INR 224 million over 30th June 2018 and around INR 371 million over the period -- over 31st of March 2019. Gross debt as at 30th June stood at INR 5,624 million and net debt stood at INR 533 million, which reflects the collections which happened between April and June.

During Q1 FY '20, ROCE stood at 13.8%, excluding the impact of Ind AS 116 and around 13% post the impact of Ind AS 116. Our endeavor to take more [seats on OpEx basis] continue. At the end of Q1 FY '19, OpEx seats accounted for 22.3%, up from 19.8% in Q1 FY '19. Our endeavor to increase revenue productivity continues. At the end of Q4 '19, our average monthly revenue was INR 101,738 up from INR 98,711 in Q4 FY '19. At the end of Q1 FY '20, the total headcounts totaled 42,371 as compared to 44,854 in Q1 FY '19. If we compare the headcount of India operations, it has seen a reduction of a little over 3,500 over Q1 FY '19. During the last 12 months, headcount has increased across all geographies except India domestic and the U.K. -- and in U.K. While the headcount of India domestic business has declined in the last 12 months, headcount for India offshore business, India payroll business has increased.

To sum up, we exited FY '19 on a high note and have started Q1 FY '20 well. Our endeavors to improve the margins across geographies, operations and of acquired entities will continue. I now conclude my portion, and now open the floor for question and answers. Thank you.

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Questions and Answers

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Operator [1]

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(Operator Instructions) The first question is from the line of Subhankar Ojha from SKS Capital.

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Subhankar Ojha, SKS Capital & Research Private Limited - Senior Analyst of Equity Research [2]

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A couple of numbers, which I missed. One, this AxisPoint, can you say the revenue and profitability of this entity?

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Srinivas Palakodeti, Hinduja Global Solutions Limited - Global CFO [3]

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Yes. I think -- Pala here. For the quarter ended 30th of June, revenues from AxisPoint came in at about INR 3.8 million.

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Subhankar Ojha, SKS Capital & Research Private Limited - Senior Analyst of Equity Research [4]

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Versus what was the last year number?

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Srinivas Palakodeti, Hinduja Global Solutions Limited - Global CFO [5]

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Last year number was higher, primarily because we also had contracts of the GuidePoint business, which we have sold. So it's not compatible. So I think if you just look at it at -- in absolute terms of INR 3.8 million.

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Subhankar Ojha, SKS Capital & Research Private Limited - Senior Analyst of Equity Research [6]

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And how has the profitability been last quarter and this quarter?

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Srinivas Palakodeti, Hinduja Global Solutions Limited - Global CFO [7]

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So once we sold off the contracts -- of loss-making contracts, obviously the [lead] has reduced. Also, we've also putting a lot of cost implementation measures, cost synergy measures. Those have also been completed. So broadly speaking, EBITDA losses are 50% lower. So there is improvement in the overall performance compared to where it was same period last year.

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Subhankar Ojha, SKS Capital & Research Private Limited - Senior Analyst of Equity Research [8]

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Are we on track for breakeven in H2, as we guided earlier?

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Srinivas Palakodeti, Hinduja Global Solutions Limited - Global CFO [9]

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Yes. So it's now, obviously, synergy measures are already in place, as I said, on the cost side. So it's a matter of adding more revenues. Because now it's at a level where it can support far more revenues. The cost structure is optimum. The pipeline is healthy. It's a question of when the contract is signed. But we do expect profitability to improve as we go through the financial year.

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Subhankar Ojha, SKS Capital & Research Private Limited - Senior Analyst of Equity Research [10]

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Okay. So earlier, we had some stated guidance of 15% revenue growth for AxisPoint, and I expected a breakeven in H2. So I'll confirm that number with you.

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Srinivas Palakodeti, Hinduja Global Solutions Limited - Global CFO [11]

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I won't give us specific Q2 or H1 or those kind of numbers. But we definitely expect improvement to happen as we go through the year.

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Subhankar Ojha, SKS Capital & Research Private Limited - Senior Analyst of Equity Research [12]

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Okay. Right. And sir, what was the CapEx number of quarter 1 and what is your FY '20 guidance?

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Srinivas Palakodeti, Hinduja Global Solutions Limited - Global CFO [13]

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We had a spike in CapEx in Q4 because we've set up a new site, especially in U.S. So this quarter as it's in the range of about INR 13 crores, we -- I'm not saying that's the run rate. We expect that number to go up. But as I said, we are taking more and more [seats on an] OpEx basis to reduce the CapEx intensity of the business. So we expect on a run rate to improve, but I can't [put] to give a specific number on CapEx right now.

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Operator [14]

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The next question is from the line of Princy Bhansali from Anand Rathi.

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Princy Bhansali, Anand Rathi Financial Services Limited, Research Division - Research Associate [15]

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I saw that [difference interest] in the billing rates of U.S. dollars and the Canada region, like, what is the reason for that?

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Srinivas Palakodeti, Hinduja Global Solutions Limited - Global CFO [16]

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I'm sorry?

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Princy Bhansali, Anand Rathi Financial Services Limited, Research Division - Research Associate [17]

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The billing rate in U.S. domestic and Canada has been -- [seen to] inch up. So any reason for that?

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Srinivas Palakodeti, Hinduja Global Solutions Limited - Global CFO [18]

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So yes, you're looking at revenue per employee, right?

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Princy Bhansali, Anand Rathi Financial Services Limited, Research Division - Research Associate [19]

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Correct, correct.

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Srinivas Palakodeti, Hinduja Global Solutions Limited - Global CFO [20]

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So it was about INR 128 -- INR 128,000 per employee in for Q1 FY '19, that has gone up to about INR 181,000 in Canada. So as I mentioned, we have done some renegotiation of the [commercials]. And that is -- you can see the impact of that in Q1 of FY '20. And also -- but you need to take these numbers on a full year basis because sometimes you have -- we need to hire and train people ahead of revenue. So a quarter ending number can sometimes be a little misleading. But that's one thing we've definitely achieved in Canada. And in case of U.S., we are seeing growth in revenues from U.S. originated business. So there is also some components related to the logistics business and the new sites which we added. So that is also the reason for increase in the revenue per employee in U.S.

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Princy Bhansali, Anand Rathi Financial Services Limited, Research Division - Research Associate [21]

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Okay. So I just wanted to know that in terms of your domains in others, like, what are domains are included in the others miscellaneous?

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Partha DeSarkar, Hinduja Global Solutions Limited - Global CEO & Manager [22]

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It could be logistics. It could be -- yes, logistics, chemicals. Chemicals is others -- so basically logistics [and] some of the other verticals. We do work for U.K. government, so some of those kind of work.

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Princy Bhansali, Anand Rathi Financial Services Limited, Research Division - Research Associate [23]

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Okay. And you said like around $10 million in the past 2 revenues this quarter.

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Srinivas Palakodeti, Hinduja Global Solutions Limited - Global CFO [24]

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Correct.

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Princy Bhansali, Anand Rathi Financial Services Limited, Research Division - Research Associate [25]

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So your actual revenue is $175 million.

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Srinivas Palakodeti, Hinduja Global Solutions Limited - Global CFO [26]

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Yes, that is a component which has a pass-through component in our financials. That's right.

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Princy Bhansali, Anand Rathi Financial Services Limited, Research Division - Research Associate [27]

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So how much of that is likely to reoccur?

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Srinivas Palakodeti, Hinduja Global Solutions Limited - Global CFO [28]

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I'm sorry?

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Princy Bhansali, Anand Rathi Financial Services Limited, Research Division - Research Associate [29]

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How much of that is likely to reoccur in future?

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Srinivas Palakodeti, Hinduja Global Solutions Limited - Global CFO [30]

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No, it's linked to this contract, which we have. So as long as we have the contracts in the current year, we will continue to have this [participating].

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Princy Bhansali, Anand Rathi Financial Services Limited, Research Division - Research Associate [31]

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Of the same quantum or it will -- it is likely to reduce?

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Srinivas Palakodeti, Hinduja Global Solutions Limited - Global CFO [32]

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No, so there is seasonality in the business. So I can't say at this level. And we're also looking at some of the contracting terms. But with the current state, the numbers may vary, but we expect that to continue.

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Operator [33]

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(Operator Instructions) The next question is from the line of [Madan Lal], an individual investor.

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Unidentified Participant, [34]

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Sir, are AxisPoint CAR clear figure in the area of [3.18 - 8] million (foreign language), sir? And net loss on that, sir?

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Srinivas Palakodeti, Hinduja Global Solutions Limited - Global CFO [35]

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EBITDA loss [3.18] million, yes.

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Unidentified Participant, [36]

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And then net loss?

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Srinivas Palakodeti, Hinduja Global Solutions Limited - Global CFO [37]

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We have -- we think it will be [1.8] million EBITDA level, yes.

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Unidentified Participant, [38]

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AxisPoint CAR. Sir, 3.8 million [you have brought sale down again], sir?

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Srinivas Palakodeti, Hinduja Global Solutions Limited - Global CFO [39]

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It depends on how many contracts we [base] (foreign language). It could be Q1 FY '19. GuidePoint business CAR (foreign language).

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Unidentified Participant, [40]

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Srinivas Palakodeti, Hinduja Global Solutions Limited - Global CFO [41]

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Unidentified Participant, [42]

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Srinivas Palakodeti, Hinduja Global Solutions Limited - Global CFO [43]

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Unidentified Participant, [44]

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Srinivas Palakodeti, Hinduja Global Solutions Limited - Global CFO [45]

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Unidentified Participant, [46]

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Srinivas Palakodeti, Hinduja Global Solutions Limited - Global CFO [47]

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Unidentified Participant, [48]

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Srinivas Palakodeti, Hinduja Global Solutions Limited - Global CFO [49]

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Unidentified Participant, [50]

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Srinivas Palakodeti, Hinduja Global Solutions Limited - Global CFO [51]

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Unidentified Participant, [52]

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Srinivas Palakodeti, Hinduja Global Solutions Limited - Global CFO [53]

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Unidentified Participant, [54]

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Srinivas Palakodeti, Hinduja Global Solutions Limited - Global CFO [55]

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Unidentified Participant, [56]

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Srinivas Palakodeti, Hinduja Global Solutions Limited - Global CFO [57]

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Unidentified Participant, [58]

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Partha DeSarkar, Hinduja Global Solutions Limited - Global CEO & Manager [59]

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[Madan Lal], can I interrupt?

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Unidentified Participant, [60]

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Yes, sir.

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Partha DeSarkar, Hinduja Global Solutions Limited - Global CEO & Manager [61]

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Ind AS 116 something is an accounting standard, which hasn't imposed. The company has no say in this matter. All companies who have long-term leases are impacted by that. There is nothing we can do. Please look at operating cash flows, please look at EBITDA improvement. These are the factors that we can control.

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Operator [62]

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The next question is from the line of Akshay Ramnani from HDFC Securities.

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Akshay Ramnani, HDFC Securities Limited, Research Division - Analyst [63]

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So I wanted to...

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Operator [64]

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Sorry to interrupt Mr. Ramnani, can you speak a bit louder. We're not able to hear you.

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Akshay Ramnani, HDFC Securities Limited, Research Division - Analyst [65]

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Is this better?

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Partha DeSarkar, Hinduja Global Solutions Limited - Global CEO & Manager [66]

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Yes, this is better.

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Akshay Ramnani, HDFC Securities Limited, Research Division - Analyst [67]

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So I just wanted to get some color on a potential impact of the minimum wages, which we see on our margins. Have you worked it out? Any sense on that would be helpful.

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Partha DeSarkar, Hinduja Global Solutions Limited - Global CEO & Manager [68]

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So which part are you referring to in terms of increase in minimum wage?

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Akshay Ramnani, HDFC Securities Limited, Research Division - Analyst [69]

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So the current minimum wages in Maharashtra region?

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Partha DeSarkar, Hinduja Global Solutions Limited - Global CEO & Manager [70]

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Yes. So it's a little early because there's also some legislative changes in wage code, combining of different acts which have been -- the bill has been passed, plus the consent is awaited. It's a little hard to give the exact impact. Because hopefully, there were multiple definitions of wage and hence the minimum wage, and a lot of it needs to be studied. So I would request if we get a little more -- be given a little more time to assess the impact, given there are changes in legislation also [full year, simplification] of definition.

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Akshay Ramnani, HDFC Securities Limited, Research Division - Analyst [71]

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Okay. And can you just share the EBITDA number for Element as well?

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Srinivas Palakodeti, Hinduja Global Solutions Limited - Global CFO [72]

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Yes, as I said, it had gone up by about 50% from -- it was about 400,000 last -- in Q1 of FY '19. That is about 800,000 now.

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Operator [73]

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Ladies and gentlemen, there are no further questions today. I now hand the conference over to Mr. Ravi for his closing comments. Mr. Ravi, your line is in the open mode. Please go ahead.

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Ramalingam Ravi, Hinduja Global Solutions Limited - Head of IR [74]

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Yes. So again, this is Ravi. Thank you to all the participants for joining us on the call. If there are any further questions or clarifications over the Q1 FY '20, please e-mail me or Pala. He will -- we'll be happy to get back. This is Ravi on behalf of HGS management. Thank you.

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Partha DeSarkar, Hinduja Global Solutions Limited - Global CEO & Manager [75]

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Thank you.

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Operator [76]

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Thank you. Ladies and gentlemen, on Hinduja Global Solutions, this concludes today's conference. Thank you for joining us, and you may now disconnect your lines. Thank you.