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Edited Transcript of TAKE.NSE earnings conference call or presentation 8-Aug-19 10:30am GMT

Q1 2020 Take Solutions Ltd Earnings Call

Chennai Aug 20, 2019 (Thomson StreetEvents) -- Edited Transcript of Take Solutions Ltd earnings conference call or presentation Thursday, August 8, 2019 at 10:30:00am GMT

TEXT version of Transcript

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Corporate Participants

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* Harikesavanallur Ramani Srinivasan

TAKE Solutions Limited - Co-Founder, Vice Chairman & MD

* Subhasri Sriram

TAKE Solutions Limited - CFO & Executive Director

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Conference Call Participants

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* Devansh Nigotia

Securities Investment Management Pvt Ltd - Research Analyst

* Dharmik Patel

Activealpha Capital - Associate

* Harsh Jhanwar;Centrum;Analyst

* Kumar Nihal

Axis Securities Limited, Research Division - Research Associate

* Pankaj Bobade

Axis Securities Limited, Research Division - Assistant General Manager of Research & Research Analyst

* Tushar Bohra;MK Ventures;Analyst

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Presentation

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Operator [1]

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Good day, ladies and gentlemen, and welcome to the Quarter 1 FY '20 Earnings Call of TAKE Solutions Limited hosted by ICICI Securities Limited. (Operator Instructions) Please note that this conference is being recorded.

I now hand the conference over to (inaudible) of ICICI Securities Limited. Thank you. And over to you, sir.

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Unidentified Analyst, [2]

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Good evening, ladies and gentlemen. On behalf of ICICI Securities, a warm welcome to the Q1 FY '20 Conference Call of TAKE Solutions Limited. We have from the management team Mr. H.R. Srinivasan, Vice Chairman and Managing Director; Mr. Ram Yeleswarapu, President and CEO; and Mrs. Subhasri Sriram, Executive Director and CFO.

I shall hand over the call to Mr. Srinivasan to give a brief overview of the quarter, post which we will open the floor for question and answers. Thank you, and over to you, sir.

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Harikesavanallur Ramani Srinivasan, TAKE Solutions Limited - Co-Founder, Vice Chairman & MD [3]

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Thank you. Good afternoon, ladies and gentlemen, and thank you for joining our Q1 earnings call for FY '20. Let me begin by saying that at the outset we have now both in BSE and NSE been reclassified in the pharmaceutical domain. Earlier, we were shown as the computer and software. So now we've been given the right classification, which is in the pharmaceutical domain.

In terms of the quarter itself, I think it's been largely in line with our expectation, perhaps a little better. The revenue stood at $84 million or INR 582 crores, and this was 9.14% up Q-on-Q and 25% up year-on-year. This is the first quarter where both the acquisitions, KAI Research and DataCeutics, were included. They brought in revenues of $6.7 million for the quarter. Without them, the growth is 1.4% in dollar terms Q-on-Q and 10.5% Y-on-Y in dollar terms. The EBITDA for the quarter was $15.7 million or INR 109 crores, which was 10% up Q-on-Q and 17.5% up year-on-year. Of this EBITDA, $1 million came from the DataCeutics and the KAI Research, Inc. The EBITDA margins of DataCeutics and KAI Research were 14.9%. The organic EBITDA margin was 19.2%, and the blended EBITDA margin therefore stood at 18.8%. We expect this to be the trend as we move forward during this year.

The quarter produced a very satisfactory level of net new awards. The addition to the order book for the quarter was $24.5 million. Of this, $20 million is attributable to the acquisitions. The Life Sciences order book stood at $269.5 million, which is 10% Q-on-Q and 42% Y-on-Y. Overall, the business environment for the CRO business remains very stable. We've had a steady RFP flow as the new business awards continue to be very well diversified. The concentration of the top 10 clients was 24.4%. This quarter saw 2 over-$10 million deals being awarded to us by 2 of the top 5 pharma. One was a renewal and one was a fresh one, both going into 2022.

The post-merger integration of both KAI Research and DataCeutics is proceeding as planned. In the case of KAI Research, we are seeing increasing strength of RFP activity, which I believe will be leading to a very strong order book for FY '21. Just to refresh, KAI Research -- the sales cycle times are a little long for Phase II, III trials. So as we begin the activity now, there will be very few that will be converted during the current financial year. In the case of DataCeutics, we have seen very strong conversions, and there have been a few fresh orders that have come in. The offshoring is on track. We have got some of the team in place, and by Q3 we will start offshoring a good chunk of the business, which will help us improve the margins.

I have to call out that during the quarter, there was a very favorable mention by an industry research agency called Everest. Everest Consulting Group (sic) [Everest Group] is based in Dallas, Texas, and their PEAK Matrix Assessment provides the analysis and insight to enterprises to make critical selection decisions about global service providers. And in that, being the clinical service provider, we have been classified as a major contender. Just to recall, we started our strength in our clinical practice only in 2016 with the acquisition of Ecron Acunova, and since then we've made tremendous strides. And it is very heartening for the management to note that a reputed organization like Everest has classified us as a major contender, along with the likes of IQVIA, PAREXEL, et cetera.

Our capabilities in the innovative use of technology is setting us apart, and we continue to invest in robust technology in making the business operations more efficient. These were the highlights for the quarter. With this, we would like to throw open the floor to questions. My colleagues and I are here to take any questions. Thank you.

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Questions and Answers

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Operator [1]

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(Operator Instructions)

Our first question is from Devansh Nigotia of SIMPL.

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Devansh Nigotia, Securities Investment Management Pvt Ltd - Research Analyst [2]

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So my question was mainly related to KAI and DataCeutics. Sir, in earlier corporate announcements you classified that aggregate sales of both entities were $30 million, as on December 17. [And on course], is this -- that the right number? And (inaudible), a degrowth in both entities, both DataCeutics and KAI. So what would the reason be for that?

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Harikesavanallur Ramani Srinivasan, TAKE Solutions Limited - Co-Founder, Vice Chairman & MD [3]

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I don't think it can be viewed as degrowth because the -- it changes across quarters. So the number you have is for the year. And [you can't] be able to make it [to] the quarter. So I think there will not be a degrowth. And actually, the growth was about 6% if we were to compare Q-on-Q.

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Devansh Nigotia, Securities Investment Management Pvt Ltd - Research Analyst [4]

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Okay. So there is some cyclicality in the numbers last -- of December 17?

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Harikesavanallur Ramani Srinivasan, TAKE Solutions Limited - Co-Founder, Vice Chairman & MD [5]

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I wouldn't use the word cyclicality. It is based on the completion of projects. So sometimes they get to lump up, but you will -- it should overall be a growing business. There is no degrowth.

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Devansh Nigotia, Securities Investment Management Pvt Ltd - Research Analyst [6]

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Okay. And can I ask you balance sheet numbers? Or cash on balance sheet? Are there advances, unbilled receivables, trade receivables, is it possible for you to share?

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Subhasri Sriram, TAKE Solutions Limited - CFO & Executive Director [7]

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Yes, I think we have -- it's part of our presentation. The trade receivables, as I said, June ending, it's about [107] as against 94. There hasn't been significant reduction in our unbilled receivables. And -- as well as our payables, that has been increased from last quarter -- last year ending. But this is very similar because [pressure] was [in both sides], both the receivables and payables. So as much as like what you've have seen some increase spike in our receivables, our payables as well have [as per prediction] have gone up as of June ending.

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Operator [8]

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(Operator Instructions) Our next question is from [Sandeep] of [Genit Capital].

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Unidentified Analyst, [9]

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The question I have is more long term. If I have a look at your latest annual report and the consolidated cash flow statement, I find that [CV] roughly generated about 120 crores of operating cash after adjusting for working capital. Is that right?

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Harikesavanallur Ramani Srinivasan, TAKE Solutions Limited - Co-Founder, Vice Chairman & MD [10]

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Yes. Okay. Go ahead, yes.

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Unidentified Analyst, [11]

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Yes. So my question is long term, will you be able to improve this ratio of EBITDA to operating cash flow? Is it -- so I want to know if this unbilled receivable is seasonal? Or do you see -- so generally, every sector will have a ratio for the -- cash generation to EBITDA. So I want to know if -- since we are growing, is this a phase when the ratio is particularly a little low? Or how do you see it going forward? I hope I have conveyed my question.

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Harikesavanallur Ramani Srinivasan, TAKE Solutions Limited - Co-Founder, Vice Chairman & MD [12]

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Yes. So currently, we have been creating capacity because one of the fundamental issues in getting business for us, especially higher value deals, is that you need to have more sites, you need to have more facilities. So there is an investment going in creation of capacity. And at this point of time, our capacity utilization is around 55%. As the capacity utilization goes up, the cash to EBITDA ratio will improve. We expect that will -- that should happen over the next 2 years. So long term, certainly, this will be very, very cash generative.

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Unidentified Analyst, [13]

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Yes, great. Because you're because we're doing very well at an operating level, it's about 100 crores every quarter, EBITDA. But as you know, the value increases for shareholders when it translates to cash flow. So I just wanted to know -- so you're saying in another 2 years, this will improve?

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Harikesavanallur Ramani Srinivasan, TAKE Solutions Limited - Co-Founder, Vice Chairman & MD [14]

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Yes. Because -- see, we're currently investing in revenue growth, so we can either optimize for cash flow and reduce revenue growth. Then...

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Unidentified Analyst, [15]

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I understand. No, no, I understand. That's precisely my question. That's precisely my question. So in order to grow business at the moment, you are focusing on that, whereas -- so over long term, what in your assessment will be the ratio? Will it be 50% of EBITDA? Can I assume that operating cash flow will be at least 50% of EBITDA?

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Subhasri Sriram, TAKE Solutions Limited - CFO & Executive Director [16]

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Should be more or less around that.

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Harikesavanallur Ramani Srinivasan, TAKE Solutions Limited - Co-Founder, Vice Chairman & MD [17]

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Yes, around that.

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Unidentified Analyst, [18]

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Okay. Understood. Congratulations on a great set of numbers.

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Operator [19]

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(Operator Instructions) Our next question is from Nihal, Kumar of Axis Securities.

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Kumar Nihal, Axis Securities Limited, Research Division - Research Associate [20]

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Yes. Can you hear me? Hello?

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Harikesavanallur Ramani Srinivasan, TAKE Solutions Limited - Co-Founder, Vice Chairman & MD [21]

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Yes, we can hear you.

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Kumar Nihal, Axis Securities Limited, Research Division - Research Associate [22]

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(inaudible) those are on higher levels.

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Harikesavanallur Ramani Srinivasan, TAKE Solutions Limited - Co-Founder, Vice Chairman & MD [23]

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Sorry, can you repeat the question? We lost you in between -- there was a transmission loss.

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Kumar Nihal, Axis Securities Limited, Research Division - Research Associate [24]

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Okay. So I'm talking about other expenses. It's on the higher side this quarter also. So if you can throw some light on this?

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Subhasri Sriram, TAKE Solutions Limited - CFO & Executive Director [25]

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In fact, actually, as a percentage to revenue, it has been actually quite moderated. I would not look at it as an -- on the higher side. I think this is also probably -- the way we see it, this is probably the way it is going to be going forward but -- in ratio between employee costs and cost of revenue [with service], but [the normal costs] coming at contract levels into the (inaudible) and the other expenses than on the employee side.

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Kumar Nihal, Axis Securities Limited, Research Division - Research Associate [26]

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Okay, ma'am. So can you assume that -- this is the run rate going forward as a percentage of revenue?

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Subhasri Sriram, TAKE Solutions Limited - CFO & Executive Director [27]

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Yes. This -- I would say this quarter would be a more representative quarter of going forward because this actually also has the full revenue of 2 of our recent acquisitions. And this is probably [more representative] of the coming years -- quarters.

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Kumar Nihal, Axis Securities Limited, Research Division - Research Associate [28]

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Okay. At the end I wanted to ask that if the acquisition cost has been absorbed completely or it has gone into this quarter also?

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Subhasri Sriram, TAKE Solutions Limited - CFO & Executive Director [29]

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No, this is more business related. If there has been, they're at a very small margin, and it's more in terms of [PMA] related costs. But I suppose the PMA related costs is going to be going forward in a couple of more quarters as well. So it's not just an exclusive or only for the quarter.

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Kumar Nihal, Axis Securities Limited, Research Division - Research Associate [30]

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Okay. And ma'am, in terms of clinical trials, can you throw some light on how it is going to be? I mean, more of innovative drugs or more of generic clients in terms of BA/BE studies? What is the focus area and how it is at present in terms of [breakup] if we talk about in clinical trends?

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Harikesavanallur Ramani Srinivasan, TAKE Solutions Limited - Co-Founder, Vice Chairman & MD [31]

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It's worth to cover a couple of different areas. Clearly we are working with generics, so we will continue to do the BA/BE studies for generic pharma. We will also do patient-based studies which have clinical end points, studies for generic pharma. So those are the 2 sets of offerings, if you will, in the trials space, focused on generic manufacturers.

When you move to innovatives, we of course do Phase II, Phase III and Phase IV studies for both the biotech companies and pharma. And so we will continue to kind of look into that space as well. So the short answer is we will cover both generics and innovatives, pharma and biotech. And now medical devices segment has also been added as a consequence of KAI Research.

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Kumar Nihal, Axis Securities Limited, Research Division - Research Associate [32]

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Okay, sir. If you can just give a brief -- I mean, which is the major segment area for TAKE Solutions at present if we talk about, in terms of ratios, it is 50-50 or 40-40-20, something?

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Harikesavanallur Ramani Srinivasan, TAKE Solutions Limited - Co-Founder, Vice Chairman & MD [33]

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Currently, the clinical business is about 40% of our total revenue, 52% comes from regulatory and safety, and the balance comes from the consulting services that we have.

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Kumar Nihal, Axis Securities Limited, Research Division - Research Associate [34]

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Sir, actually I want within clinical, it is more of innovative-drug driven or generics driven?

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Subhasri Sriram, TAKE Solutions Limited - CFO & Executive Director [35]

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Almost about -- out of that 40%, about 7% -- or 33% is innovative drugs and about 7%, 7-odd percentage is on the generics, which is largely the [Phase I and Phase II] trials.

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Kumar Nihal, Axis Securities Limited, Research Division - Research Associate [36]

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Okay. And going forward, it will be at this rate only or the innovative drugs are going to dominate?

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Harikesavanallur Ramani Srinivasan, TAKE Solutions Limited - Co-Founder, Vice Chairman & MD [37]

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So innovative drugs will obviously dominate because the value of the Phase II, Phase III trials, that's our largest [feat] and they will go up. And even when the biosimilars are there, the cost of the trials is much higher than that associated with generic. So you will see both the innovatives and the biosimilars dominate.

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Subhasri Sriram, TAKE Solutions Limited - CFO & Executive Director [38]

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In the case of generics, currently, the trials are largely (inaudible) with reference to our facility, which is [of 280] at that facility. So typically, at this point in time, we operate within that capacity constraint. So that only can give a little bit of price flexibility, but cannot give exponential growth on that.

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Kumar Nihal, Axis Securities Limited, Research Division - Research Associate [39]

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Okay. And what about the new acquisitions in U.S.? So they're based on generics or innovative, or the same ratio of which you are talking?

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Harikesavanallur Ramani Srinivasan, TAKE Solutions Limited - Co-Founder, Vice Chairman & MD [40]

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So the KAI Research largely deals with federal agencies and innovative companies. The other one is a clinical data sciences company, again, deals with largely innovative.

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Operator [41]

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The next question is from Tushar Bohra of MK Ventures.

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Tushar Bohra;MK Ventures;Analyst, [42]

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Yes. And congratulations on a good set of figures. I just want to understand, going through some of the [competitors] or clinical assays companies' outlook, and they seem to have mentioned a lot of traction on PV as a space, pharmacovigilance. Want to know your comments also, and how do you look at that segment in particular, let's say, over the next 2 to 3 years? Hello?

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Harikesavanallur Ramani Srinivasan, TAKE Solutions Limited - Co-Founder, Vice Chairman & MD [43]

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Yes. So I think, if I understood the question correctly, I think clinical drug development, clinical research and the clinical trials space will certainly see a lot more growth. There's a significant opportunity in that segment. And PV will continue to be a required service offering alongside -- so we will continue to deliver PV alongside doing main trials stuff. But that's how we see it. The main growth is coming through the trials process itself.

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Tushar Bohra;MK Ventures;Analyst, [44]

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Okay. Upon...

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Harikesavanallur Ramani Srinivasan, TAKE Solutions Limited - Co-Founder, Vice Chairman & MD [45]

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Your voice is breaking, sir.

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Tushar Bohra;MK Ventures;Analyst, [46]

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Is it better?

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Harikesavanallur Ramani Srinivasan, TAKE Solutions Limited - Co-Founder, Vice Chairman & MD [47]

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Yes, it is better. Yes.

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Tushar Bohra;MK Ventures;Analyst, [48]

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Can you help segment the order book into clinical trials and PV regs?

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Harikesavanallur Ramani Srinivasan, TAKE Solutions Limited - Co-Founder, Vice Chairman & MD [49]

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I would say, at this point of time, it will be more or less reflective of -- the clinical order book would be [more] because of the longevity of the contract; it will be about 50% to 55%. The balance would be in PV regs. Because the consumption of the clinical order book takes a longer time than the PV reg order book.

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Tushar Bohra;MK Ventures;Analyst, [50]

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So about $270 million, 55% of that would be the clinical research?

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Harikesavanallur Ramani Srinivasan, TAKE Solutions Limited - Co-Founder, Vice Chairman & MD [51]

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Yes. But the consulting in the -- the consulting has the shortest consumption time. You normally turn around an order book almost twice or thrice a year in the case of consulting. In the case of clin PV, it takes roughly about a year, but the clinical takes much longer on average.

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Tushar Bohra;MK Ventures;Analyst, [52]

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So there was one metric that I was just tracking for clinical assays coming in globally, I think the book-to-bill ratio or even the conversion ratio is roughly about 1.3 to 1.4, so not much again. Whereas for us, it was probably closer to 0.8, 0.85. How do we propose to increase that? And what do we -- what is the outlook on that particular metric?

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Harikesavanallur Ramani Srinivasan, TAKE Solutions Limited - Co-Founder, Vice Chairman & MD [53]

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Yes. So that's a metric that we track quite meticulously at our end, because we moved from the reg PV space, where typically it is 0.7:1, 0.8:1. The most mature of clinical research companies will have above 1.5, at least 1. I think by the year-end, we should tend to about 1:1, and hopefully take it from there. Because as we get a multi-country studies, higher value studies, you will see the clinical bucket going up. And that's when you, more or less, tend to the ratio of 1.5:1, but in our case, I'd say, maybe 1.3 is a good one because the reg PV is always going to be very strong for us. So by year-end, we should tend to 1:1, that is the [short outlook].

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Tushar Bohra;MK Ventures;Analyst, [54]

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Sir, just interesting you mentioned that, just in terms of understanding whether the more clinical business also helps in more reg PV and maybe [a year lead] into the [regulatory] business? As in, do clients also reach out to you at the start of clinical experiments in that "you can take the end-to-end, please, for us?" Are you seeing more work along those lines?

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Harikesavanallur Ramani Srinivasan, TAKE Solutions Limited - Co-Founder, Vice Chairman & MD [55]

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In fact, they do when -- it is the small and mid-tier clients, they typically tend to clump everything together. But the larger clients have preferred providers for each set of activities. So they may do trials with one, they may do regulatory and PV with the others. That's the general [bio] behavior. But in this mid-tier segment, yes, the opportunity to get the whole business end-to-end is very high.

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Tushar Bohra;MK Ventures;Analyst, [56]

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If I may slip one question. You mentioned 2 -- or I guess about 2 [winner] of greater than $10 million that we won this quarter. Could you help us with what would be the total number of deals today that we're executing that are above $10 million? And maybe how the deal of -- the pipeline that we're bidding for, how that number is moving up in terms of size and quality of engagements?

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Harikesavanallur Ramani Srinivasan, TAKE Solutions Limited - Co-Founder, Vice Chairman & MD [57]

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I'll give a more maybe descriptive view of this because I may not have exactly the numbers on the table. But first, let me talk of these 2 deals. One of them is a renewal of a customer who's been with us for quite a period of time. One is a net new addition to the business from a top 5 pharma, a different segment of business that we've not been traditionally doing. Typically, we -- our deal sizes for the Phase II, Phase III has been in the region of, let's say, $5 million to $8 million. That seems to be the sweet spot. But as we hit more multi-country trials, which are, let's say, 15 countries or so, the ability to push this up beyond $10 million rises. There are a few opportunities that we are currently pursuing in the RFP space -- maybe, don't hold me to it, but maybe about 10 would be in the region of over $10 million deals in the RFP space that we are pursuing. But typically, our wins have been in the $5 million to $8 million range.

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Tushar Bohra;MK Ventures;Analyst, [58]

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Sir, when you say $10 million, the greater than $10 million could even be, let's say, $20 million, $25 million, $30 million for one of those (inaudible) deals. Just trying to understand the scale vis-a-vis what we have been doing in the past.

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Harikesavanallur Ramani Srinivasan, TAKE Solutions Limited - Co-Founder, Vice Chairman & MD [59]

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Yes. I think the largest of them would be in the $25 million bracket. We've not gone beyond that, but we can't say at this point in time, say that we will be successful in that or not. But typically, they are all above $10 million and below $25 million, that's the range.

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Tushar Bohra;MK Ventures;Analyst, [60]

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Very well. Sir, our new logos, in that sense -- are we tracking that [number]? And could you give that for this quarter, maybe?

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Harikesavanallur Ramani Srinivasan, TAKE Solutions Limited - Co-Founder, Vice Chairman & MD [61]

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Sorry, come again? I'm...

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Tushar Bohra;MK Ventures;Analyst, [62]

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Number of new clients added to the business. Do...

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Harikesavanallur Ramani Srinivasan, TAKE Solutions Limited - Co-Founder, Vice Chairman & MD [63]

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We track that. I will mail that to you.

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Operator [64]

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Our next question is from Dharmik Patel of Activealpha.

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Dharmik Patel, Activealpha Capital - Associate [65]

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My question is to Ms. Subhasri. How much debt have you repaid in this quarter?

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Subhasri Sriram, TAKE Solutions Limited - CFO & Executive Director [66]

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Debt repayment?

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Dharmik Patel, Activealpha Capital - Associate [67]

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Yes, for this quarter.

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Subhasri Sriram, TAKE Solutions Limited - CFO & Executive Director [68]

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No, we didn't have any loan maturities during the quarter, other than the normal working capital. But we haven't taken any fresh loans during the quarter, I might say that way, other than the normal maturity. And this -- with the working capital limits which we have been using on and off.

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Operator [69]

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The next question is from Pankaj Bobade of Axis Securities.

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Pankaj Bobade, Axis Securities Limited, Research Division - Assistant General Manager of Research & Research Analyst [70]

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Hello? Hello. Am I audible?

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Harikesavanallur Ramani Srinivasan, TAKE Solutions Limited - Co-Founder, Vice Chairman & MD [71]

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Yes.

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Pankaj Bobade, Axis Securities Limited, Research Division - Assistant General Manager of Research & Research Analyst [72]

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This is Pankaj. I just wanted to add 3 questions right now. One, wanted to understand what is the reason for pressure on margins? I mean, last quarter since -- last year, same quarter, we had margins of around 13-point-odd percent. This quarter, we have around 9.5%. Second thing, how are our new acquisitions doing and how are they faring in terms of profitability and when they will -- when will they contribute meaningfully to our consolidated entity? And third, we had a vision of reaching $0.5 billion of top line, just wanted to understand where do we stand right now? And what's our trajectory to achieve the same?

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Harikesavanallur Ramani Srinivasan, TAKE Solutions Limited - Co-Founder, Vice Chairman & MD [73]

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Okay. And now first of all, to tell you, the acquisitions that we have done are progressing very satisfactory. KAI has tremendous RFP activity that is taking shape. And DataCeutics has already started registering wins and so the low-hanging fruits are already coming in. Once the offshoring starts, the margin should pick up. So they are on the growth curve, and they are as per plan.

As far as your question on the margins is concerned, there are 3 reasons for that. The first is there is a 1.5% reduction in EBITDA. This is, one, because of the blend that has happened on the 2 acquisitions that has happened, besides some expenses that have increased in the normal course of business. In the last year, we had about 1.5% which was due to the other income because we had cash on the balance sheet that was earning income. And we used that cash to acquire the companies. So that cash is no longer registering any other income that is there. And there is a general increase of about 1.1% in other expenses, in headcount, capacity creation, et cetera. So that's why it is there. Once the capacity improves and the 2 acquisitions start getting scale, I think we should be back to better margins.

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Pankaj Bobade, Axis Securities Limited, Research Division - Assistant General Manager of Research & Research Analyst [74]

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So when do we see this -- these 2 new acquisitions kicking in with full vigor and contributing to the consolidated entities? [By what the --] if you remove also last 2 years level, 6 months back onwards, if you see, we were delivering from 8% higher-single digit CQGR growth, and we are faltering for the last 2, 3 quarters. So we just wanted to understand where do we -- when do we see that -- [annual spirit] regained, as far as our performance is concerned?

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Harikesavanallur Ramani Srinivasan, TAKE Solutions Limited - Co-Founder, Vice Chairman & MD [75]

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So I'm not sure I understood the question, can you come again?

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Pankaj Bobade, Axis Securities Limited, Research Division - Assistant General Manager of Research & Research Analyst [76]

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So if I'm not wrong, we were making -- we were growing at 8%-odd CQGR, right? Say it happened from 2016 to '18 and mid of '19, and thereafter, we are faltering. So just wanted to understand there, when do we reach that level?

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Harikesavanallur Ramani Srinivasan, TAKE Solutions Limited - Co-Founder, Vice Chairman & MD [77]

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I don't think it can be taken as faltering because you have to understand that we are growing well above the industry standard. So at a smaller base, you, obviously, the percentage looks much better. But as we grow, I'm not sure whether that pace of growth can be kept up. Even this is -- I think we are doing pretty well. It's above the budgeted figures that we have and above the guidance that we have given. So I'm not sure I am entirely in agreement that that growth rate can be maintained going forward.

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Pankaj Bobade, Axis Securities Limited, Research Division - Assistant General Manager of Research & Research Analyst [78]

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Okay. So we had some vision of reaching $0.5 billion of top line, and when are we likely to touch that magical number?

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Harikesavanallur Ramani Srinivasan, TAKE Solutions Limited - Co-Founder, Vice Chairman & MD [79]

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We have -- we closed last year at $292 million. We will hopefully be closer to $370 million, $380 million this year, and maybe we will outdo that. Once we achieve that, we will have a very good indication of where we will be in the following years. But we -- we should be pretty much on target there and thereabouts, I don't think we have a cause for concern there.

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Pankaj Bobade, Axis Securities Limited, Research Division - Assistant General Manager of Research & Research Analyst [80]

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And with improving margins, right?

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Harikesavanallur Ramani Srinivasan, TAKE Solutions Limited - Co-Founder, Vice Chairman & MD [81]

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The margin will be at -- you have -- we taken over 2 units where the average margins are low, they are sub-15%. And so it is not likely that in this year we are going to see an improvement in margin. I think it will be flattish from where we are currently.

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Pankaj Bobade, Axis Securities Limited, Research Division - Assistant General Manager of Research & Research Analyst [82]

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Okay. And then my final question, you had hired a few top executives -- top level executives. And we had expected some really good traction coming from after they joined. Just wanted to understand what is the status?

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Harikesavanallur Ramani Srinivasan, TAKE Solutions Limited - Co-Founder, Vice Chairman & MD [83]

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The status is already reflected in the numbers. So whatever we've done, we've -- is not -- is the effort of the combined management team. So I think we're quite satisfied with the output that we've been receiving from several of our senior colleagues.

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Operator [84]

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(Operator Instructions) Our next question is from Harsh Jhanwar of Centrum PMS.

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Harsh Jhanwar;Centrum;Analyst, [85]

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So my question is on the -- can you give us the CapEx guidance for the year?

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Subhasri Sriram, TAKE Solutions Limited - CFO & Executive Director [86]

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We -- for our budget, we do expect in terms of our tangible assets, in terms of our [present] investments in our facilities and others, ensuring the [sudden] replacement and refurbishment, we expect something close to 20-odd crores. But we still, last year, had indicated last time, in terms of our [IPs] and investments in intangibles, it has been quite muted in the past 2 years. There are certain goals we would like to progress and there may be some investment capitalization [possibly during] in this year. Now for the first quarter, close to about 20-odd crores, 20 crores to 22 crores, has been towards CapEx. But obviously, we'll have to see how the next 2 quarters pan out in terms of our investments. And that obviously depends upon the growth and the order book levels.

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Operator [87]

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We have a follow-up question from [Sandeep] at (inaudible).

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Unidentified Analyst, [88]

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Yes. It's me again. Sorry, I missed out asking one particular question. See, the question I have is -- your valuations -- okay, this is of course my personal opinion, but your valuations are very attractive from an investor perspective. My only question is: has the management thought of a possibility of buybacks at all? Of course, now there are cash buybacks, but have you even thought of it? Or there's nothing in the offing or is it a position that you can take?

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Harikesavanallur Ramani Srinivasan, TAKE Solutions Limited - Co-Founder, Vice Chairman & MD [89]

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So I think we are investing in growing the business, so I don't think at this point of time, there is merit in allocating capital to buybacks.

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Unidentified Analyst, [90]

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Understood. Fair enough. It's just a position in (inaudible) but I understand that your focus is on growth. Okay, that's about it.

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Operator [91]

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Ladies and gentlemen, that is all that we have time for, for questions today. I would like to hand the conference back to management for some closing comments.

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Harikesavanallur Ramani Srinivasan, TAKE Solutions Limited - Co-Founder, Vice Chairman & MD [92]

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Ladies and gentlemen, thank you for being on the earnings call of Q1 FY '20 of TAKE Solutions Limited. If you have any further queries, please feel free to reach out to us and the management will be delighted to share with you further information and clarifications. Thank you very much, and have a wonderful day.

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Operator [93]

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Thank you very much. Ladies and gentlemen, on behalf of ICICI Securities Limited, that concludes this conference. Thank you for joining us, and you may now disconnect your lines.