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Ladies and gentlemen, good day, and welcome to Expleo Solutions Limited Q1 FY '23 Earnings Conference Call. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Ms. Asha Gupta from E&Y Investor Relations. Thank you. And over to you, ma'am.
Thank you, Vesa. Good afternoon to all participants in the call. Welcome to Q1 FY '23 Earnings Call of Expleo Solutions Limited. The results and investor presentation have been already mailed to you and they are also available on the company's website. In case anyone does not have a copy of press release and presentation, please do write to us, and we will be happy to send it to you out. Representing the management today, we have Mr. Balaji Viswanathan, Managing Director and CEO; and Mr. Desikan Narayanan, Chief Financial Officer. Balaji will start the call with brief overview of the quarter gone by, which will be followed by Mr. Desikan, who will be getting into the detailed financials. After that, we will start the Q&A session.
As usual, I would like to remind you that anything that is mentioned in this call would give any outlook for the future or which can be construed as forward-looking statements must be viewed in conjunction with risks and uncertainties that we face. The risk and uncertainties are included, but not limited to, what we have mentioned in the prospectus filed with SEBI and subsequent annual reports, which you can find it on our website.
Having said that, I now hand over the call to Mr. Balaji. Over to you, sir.
Thanks, Asha. Thank you so much. Thanks to all the shareholders and investors and analysts who are here on the call today and for the interest with Expleo. We have had another good quarter and sequentially growing in double digits with gain and year-on-year at almost 45% growth, primarily driven by the investments that we made a couple of years back on the digital transformation capabilities and software capabilities and also the recently added data management care company as well. So last quarter, we actually had some onetime expenses, which we did incur because of the [indiscernible] higher EBITDA. And this year -- this quarter, we have slightly gone down, but it's still within the range that we had indicated earlier in terms of where we would see. And that's still above what our expectations are and primarily because some of the expenses are -- we have been a little watchful on where we are spending the money as well.
We have had a reasonably good quarter, both in terms of new customers and also in terms of the people joining our company. And we have had -- and we feel that, on top of that, we are at this particular point of time, with the pipeline under demand, we should continue to show good results at least in the near-term at this particular point of time.
The global volatility is something which we are watching out. But at this particular point of time, we don't see any big [indiscernible] because of the inflation and the recessionary pressures in the western countries. And I would like to thank all our shareholders for overwhelmingly working for the merger on -- in the shareholder meeting that was held on 2nd August, with 99.999% shareholders approving the merger team and 100% of our unsecured approving the [indiscernible] pre-merger.
We're looking forward to continued upward trajectory in the numbers. Last time, we were discussing about the unlisted companies and how we want that to ensure some of those numbers. So I just wanted to give a quick indication on where we are with the unlisted company to -- for the same quarter.
For the listed companies, we did INR 127 crores of revenue. And for the unlisted companies, we did around INR 85.5 crores of revenue. And in the listed company, we did an EBITDA of 267 -- or INR 26.7 crores. And for the unlisted companies, we did an EBITDA of around INR 14.8 crores. The EBITDA percentage is 20.9% for the listed company and around 17 point -- a little over 17% for the unlisted company, once again, in line with what we have indicated earlier as well. The growth trajectory is good in both the cases. In the listed company, we're looking at an year-on-year, almost 44%, 45% growth is what's been running so far. And on unlisted company, that upward of 25%, that is little constant. So going forward as well, we'll probably try and include this as part of -- as an annexure in our investor presentation until the merger is done. But we expect that the merger should get done before end of the year.
So thank you so much. And Desikan, if you want to add anything more, please do. Otherwise, we can go for question and answer.
Just a little brief -- thanks, Balaji. Just a little brief about the performance. Good afternoon to all.
Another quarter continue with the revenue increased by 12%. We do see a good performance, but with the same set of challenges across the industry is continuing.
I will just brief about quarter-on-quarter and year around performance. Quarter-on-quarter, revenue for the first quarter improved by almost 12% compared to last quarter, ending at INR 127 crores. EBITDA percentage was 21%. That's almost flat compared to the last quarter. Drop in PAT percentage due to the ForEx loss during the quarter compared to a gain in the previous quarter. Cash position was at INR 148 crores. We did had -- have had some increase in the DSO compared to the last quarter, which is majorly due to one of the top clients who went for a software change -- internal software change. So that really created a good amount of backlog from that customer. They are a top customer. So -- but we got subsequently paid in the due -- month of July. So that is the reason the DSO went up. If I remove that, it will come to around the range of [ 10 to 3 ] days. So we are in line with the DSO also.
On the year-on-year, the revenue grew by 45% from INR 88 crores to INR 127 crores. EBITDA improved by almost 400 basic point, ending at 21% compared to 17% in previous years. Basically, higher EBITDA has been contributed by the revenue increase. Our earnings per share also increased by around 34%, ending at 16.7%.
Just update about the NCLT thing. We are -- we have done -- this shareholders' thing is done. Now the approval has been received. Now we have -- we are submitting all the data to the NCLT. And they will be doing a couple of things, like checking with the other agency like ROC and I think they will get no due, and they will be asking for us. Now -- from now it will be more a procedural thing which will be happening, but that will take its own time. The current expected time line where we will be finishing it is around November end or December beginning. That's the time line we are looking at.
And once again, thank you everyone for voting in favor. We can open up the floor for a question-and-answer session.
[Operator Instructions] The first question is from the line of Srishti Jain from Monarch Networth Capital.
Sir, could you please elaborate on the key driving factors behind this 12.2 sequential growth? What contribution did we have from [indiscernible] tech? And do you think the start sets up for a similar growth what we of -- like the growth we saw in FY '22?
The primary driver for the growth is -- one is like what we mentioned, the growth of the -- on the digital space. But this quarter, we also saw a significant increase in our traditional testing requirements, as those people who have started off their project in the new calendar year and projects getting into the stage where we will have to do completion [indiscernible] element as well. And apart from that, the data management practice or the Lucid factors which we added also contributed to the growth. The revenue from Lucid for this quarter, it's in the range of around INR 9 crores or INR 8 crores or so. So that also contributed to the growth as well.
And in terms of what the trajectory is going to be, we -- like I mentioned, at least for this year, with data management as a faster revenue practice for the [indiscernible] that it will show the additional growth element. But going forward, out of activity planned, bringing the benefits of the merger, so the non-BFSI segment and the technology segment, and along with that, this data management capability as well. So our expectation is that we would continue to grow the 25% to 30% range at least for the next couple of years.
Sure, sir. Sir, and a significant portion of our growth story is the intent on the parent to outsource. So what was the parent contribution in FY '22? And how do we see that growing in the next 2 to 3 years?
So as far as the listed entity contribution from the group, the percentage contribution still remains in the same range of around 20-odd percent. But however, just like how the other markets are growing at year-on-year 40% plus and quarter-on-quarter 12% plus, this particular segment also is growing at the same rate. So that it can be a 20% range. But as far as the other unlisted companies are concerned, significant portion of that revenue or particularly the Pune revenue comes from the group, that's been growing in that same range of almost 7% to 8% quarter-on-quarter.
The next question is from the line of Manik Taneja from JM Financial.
Just wanted to get some details around profitability of the unlisted arm. And also wanted to get your thoughts around the next 2 to 3 years, wherein there have been some comments around looking to ramp up India delivery to about 10,000 people. What are the numbers currently, including both the listed and unlisted entity? And how do you see that ramp up over the next few years?
Sorry. I didn't get the first part of the question. Your question was on the profitability of the...
So you called out the EBITDA profitability for the unlisted business. If you could also help us understand how that business would have done on a sequential basis and also call out the PAT numbers for the unlisted business.
Okay. Desikan, do you want to take that?
Yes. With respect to the unlisted entity for the quarter, INR 85 crores is the revenue and the PAT is INR 9.1 crore. It is around 10.7%. Sequentially, if you -- if I look at both the company put together for the last couple of years, they were in the range of almost 17% to 20%, the EBITDA percentage. So that's the trend for the combined entity for both Pune and Bangalore.
Sir, I was actually not looking for the EBITDA margin for the listed arm. I was actually looking for how the unlisted business would have done on a sequential basis. Just like we've grown almost like 12% for the listed business, how would the unlisted business have done on a sequential basis?
Yes. So I'll probably try and take that. So we -- on a sequential basis, the unlisted company grew at around 6-odd percent quarter-on-quarter. And the EBITDA percentage Desikan has already covered. And from a PAT perspective, the PAT has approximately...
I think you called out that number to be 91 million.
And also if you could share some thoughts around the ramp-up for India delivery because there have been some reports that you guys have suggested potential scale up to about 10,000 people in India.
So the unlisted -- between the listed companies and unlisted companies be added close around 220-odd people in this quarter. And next quarter, along with some of these campus hires and others, we expect that the number to go up. And this year, we are still expecting that we should be able to add anywhere between 1,000 to [ 1200-odd ] people during the course of this year. And by 2025, both organic and inorganic put together, we are quite confident that we should be able to get to 10,000 people. So as of March 31, we had around 4,300. As of June, we have a little over 4,500. And we should close the financial year at 5,000 plus is what our expectation is.
The next question is from the line of Rohant from Multi Act. The participant has got disconnected. We'll move on to the next question from the line of V.P. Rajesh from Banyan Capital Advisors.
And congratulations on superb numbers. Just the first question, I missed the guidance for the revenue growth for this year. If you can just repeat that Balaji, please.
So Rajesh, we don't have a guidance. But our expectation is that last year, there is -- as of March 31, all the 3 entities put together, we did around INR 750 crores. And this year, we think that we would probably be close to around INR 850 crores...
INR 850 crores. Okay. So sequentially, do you expect this revenue growth to slow down a little bit?
So the listed company, primarily because of the exposure to other markets and also because of the exposure to other markets and also because of this addition of the data management capability, is growing sequentially at close to 12% plus. But the unlisted companies, the organic growth has been in the range of 5% to 6%. And we expect that both put together, we would be in the range of around 20-odd percent.
20-odd percent. Okay. And then can you share, Balaji, what was the revenue growth for the parent company in this quarter sequentially?
Yes. Parent company, the expectation is that -- so we don't have the -- we don't -- because this is actually vacation time in France. So we don't have the finalized number. But in line with what Rajesh had mentioned in the previous rationale most the guidance that they published, in the guidance, with -- we should be in that EUR 1.205 billion to EUR 1.21 billion is what our expectation [indiscernible] on the calendar year.
That can I -- Rajesh Krish speaking. What I can certainly confirm is that the -- we should at least see the growth -- at least 20% for this financial year. And I think this is even in line with the figures that we communicated, Rajesh, on previous calls, but we can see and even what we even see with the legal entity here.
The audio is not clear from your line, sir.
Yes. I just...
Can you hear me? Hello?
Yes. Now I can hear you, sir. Yes.
Okay. So again, I just want to confirm that we even see a healthy growth, above 20%, for the current fiscal year at the group level. And this is even going across all the different market segments, and that has evolved.
That's very helpful. So a question, Balaji, given what we are hearing about either being a recession or going into recession, and obviously, banking industry very impacted, where is this growth coming from for us here? I mean it seems like parent is doing very well and so are we, especially on the BFSI side. So if you can just share your thoughts on that, with sort of counter trend growth that we are seeing.
We are actually going -- seeing the growth from our traditional client base only Rajesh -- I'm not sure -- as of now, at least, we haven't seen a big slowdown because most of the digital spend are people who are trying to do the transformation, they haven't really slowed down as yet. But we are keeping a close watch as of now. We don't -- we haven't seen any reduction or reduced spending or stopping of any projects at this particular point of time. It's still [indiscernible] from the traditional segment volume. And like what I mentioned, the focus has been primarily on the software development, data, and DevOps and automation. And that's why we are seeing the growth as well.
The next question is from the line of Udit Bokaria from Catamaran.
Sir, if you can just highlight, like I saw that the North American revenues have grown substantially quarter-on-quarter. So if you can just tell which was the client win which helped you and what is the kind of project that you are doing.
Yes. So the North America growth is primarily driven by our newly acquired data management capability, which came from the Lucid Tech because all of their clients are actually in the U.S. sort of close to around $1 million is what the revenue is, and that's the reason why you are seeing North America for the first time in double digits.
Understood. So it's primarily driven through inorganic. Is that...
That's right. That's right.
Okay. And sir, can you just repeat like you mentioned what's the FY '23 total consolidated revenue target?
So like we don't have a target or a forward-looking statement. But we expect that we should be in the range of around INR 840 crores to INR 850 crores.
The next question is from the line of Rohan Advant from Multi-Act.
Sir, in your press release, you said that the margins are lower than the last quarter, but is above our expected range of 18% due to timing of some of the expenses. So can you elaborate on that? I mean, are margins higher this quarter because of timing or they are lower because of timing of expenses? And what is this timing of expenses [ per day increase? ]
So 2 parts to this. Last quarter, our EBITDA was around 21.9%, primarily because some of the expenses that we had to incur got pushed out. Perhaps -- one was, of course, some of the marketing spend. The other one was on the merger-related expenses. And this quarter also, we did spend some of those. And we expect that some kind of a marketing spend will actually hit us because we are doing some global campaign. You might have seen us more active in [indiscernible] for another. So there are some spend, but it's not a significant number. It will probably be around a couple of crores. That's the reason why. And we have been prudent on what we are spending on now given the current inflationary trends. So even at a global level, as a group, we are trying to relook at what we are spending momentarily. So that's still why the margins are slightly higher. But on the selling expenses are lower than what we are expecting right now. As we start spending more for increasing the pipeline, we'd go back to that range that I talked about.
Got it. Sir, and secondly, on the unlisted subs, we've done INR 85 crores this quarter, Q1 FY '23. FY '22, we were at roughly INR 350 crores. So if you just look at a quarterly run rate for FY '22, that is upwards of INR 85 crores. So this looks like some kind of a lower number. So it was lumpy in the last year that when we had those big contracts in unlisted sub, the revenues were very high and not so in Q4, so we are calling about a 6% growth sequentially, but that is looking low if you look at an annualized number versus last year?
Desikan, you want to take that?
Yes. Actually, okay, one aspect of it is that last, year, if you see the growth compared to the previous year and last year, we had a substantial -- because of one of the projects on the plastic which we got. It's a huge contract, what we had. And also, we had some expenses because of that we invested in the capability. Now that project has gone into a BAU mode and also, we are getting in the same capability, but it's all smaller contracts which has come in. So I can't take -- can -- will not definitely having the same level of growth which we had in the previous 2 years to this year. So that is kind of slowing down. So the increase will not be to the extent, but it will be in the range of double digit is the current view of the unlisted companies.
And that double digit is including the contract in the base, right, like our base was INR 346 crores, I think fund [indiscernible]. Yes.
That's right, yes.
And sir, lastly, can you just elaborate on what exactly do we do in data management, which is a new vertical? If you can elaborate on that.
It's primarily -- what we do for data management space is what we call it as data governance, data cleansing or data quality verification and some amount of augmented analytics. We don't do business analytics. We don't do customer insights, but primarily around how the data is stored, how effective the data is, and helping our customers and governing their data. Because there are leading global platforms in this space, and we are partners with them to do this work.
Sir, any vantage in usage capabilities? Can it be extended to our client base and there is a cross-sell opportunity that exists for us?
Yes, yes, yes. Absolutely. And even we have already started that and we already had one customer from our existing customer base who have been cross-sold with a data management capability. And that's what's -- that's the primary leverage as well. So it's not going to be stand-alone. That's why it's been integrated right from day 1.
The next question is from the line of Aman Vij from Astute Investment Management.
My first question is on the listed entity. So if we remove the Lucid portion, the quarter-on-quarter growth seems low single digits, which I think will be lower than our expectation. Is my understanding correct? And same for the customer additions. So this quarter, we only added like 4 net customers, 100 to 104. Last 4, 5 quarters, we were adding like 10 customers. If you can talk about these 2 points on listed.
Desikan, you want to talk about this?
Yes. With respect to the increase from the last quarter to current quarter, of course, Lucid had made an impact on it. If I look at it, out of the 12%, it will be in the range of 6% to 7% -- 6% to 7% will be the Lucid contribution and balance will be the other than Lucid increase. Even though -- it generally starts lower, and we tend to go -- grow in the subsequent quarters as the way we -- our trend has been. On that -- on the other aspect of it is -- what's the second question you asked?
Line.
Addition of customers. The number of customers, the reason why the number of customers is [ core ] primarily because, as of now, the Lucid customers are considered as just one because we are still innovating the customer contracts. So not all the customers of Lucid are considered as new customers, although they're existing in Lucid. So it's not -- that core customer is actually some the organic business growth, not because of the inorganic numbers.
Yes, yes. But even on organic side, sir, last [ 4, 5 ] customer for every quarter, which -- so 4 seems lower. Let's remove Lucid. So that was my question.
So see, it's a cycle. It's not that every quarter we'll be able to add 10, 12 customers. And we need to consolidate and make sure that we are growing with the customers as well as because -- it's always a cycle. Most of the new engagements start either in the first quarter or in the last quarter because that's when -- also the customer engagement. Or if the customer start new engagements within their profile as well. So that's why you don't see a lot of new customers. Our target is to add anywhere between 12 to 15 new customers in the year, and we are well on target for that.
And this number, 12 to 15 customers per year addition, is enough for that target? You said we want to grow over the next couple of years at 25%, 30% CAGR?
Absolutely. Because it's a question of not just adding customers, also growing with them as well, so.
Sure, sure. Sir, second question is on the unlisted entities. Can you talk about the customer addition in the unlisted entity for Q1, as well as what is the total customers and maybe even a number of customers which are like above 1 million for us?
Currently, I don't have that data. Maybe I can share with you on e-mail or something. That I will do it.
Sure, sure, sir. Final 2 questions. First, if I look at the revenue per employee for our company versus the other IT companies, it seems a little lower at around [ 2 million ] per employee versus some of the company even do [ 4 million ]. So do you expect this number to go up over a period of time, or our business is such kind that maybe INR 2 million, [ 2.5 million ] is a good number for a business like us, if you can talk about this thing.
Yes. From a services business perspective, I think anywhere between [ 2 million ] to [ 2.5 million ] is a reasonably good number, unless you have products from IT and also lot of other high-margin business that we do. As we start growing in our data and digital capability, this [ 2 million ] probably can go up to [ 2.5 million ]. But what we are tracking is a combination of not revenue per employee, but also profit per employee and also the EBITDA margin as well. So we are in line with what the typical -- the industries actually are slightly above some of our peers at least to look at where we are focused on the digital assurance and individual service subscription.
As we are even at a group level tracking even when revenue and even the net contract capability and region. And I think when you even then see an increase in the digital services that are particularly coming with a higher average revenue per day. And even the revenue [indiscernible] it's been Asia Pacific, Middle East and Europe. I think this is where [indiscernible] to increase even then the revenue, the revenue by capability and it was even then -- something that you can then calculate that was into the revenue [ per head ].
Sure, sir. On the R&D side, you have talked about once we can -- we are -- most of the customers are in Europe only. And once we are able to sell these services directly to other regions, the margins can improve. So has that process started or by which quarter do you expect that process to start?
So we have started the, but it will take some time because the capabilities that we need to build in each of the markets, including the same scheme capability as well. But the process has started. But we'll probably start seeing results in 2023 onwards. Sorry, Ralph, you want to add.
And even when you look at the listed and unlisted company, I think we have a significant contribution from the group or even then especially from the European markets. We see that [indiscernible] when we are onboarding and working more in a global delivery [indiscernible] have a 6- to 9-month sales cycle. And even then, the transition period based on what we already have in the portfolio, I think we are -- we are definitely working even better on the execution. But perhaps including sales cycle for new opportunities and even the transitioning work in due even when we see the impact definitely always after a period between 9 and 12 to 13 months. But we are -- when we look at the portfolio, I think we kind of share the figures. We're not starting from scratch. But there is definitely a strong push and a strong focus from the group perspective, especially from the European countries and on the strategic figure.
Sure. Sir, just final comment. So when we talk about our long-term aspiration of 25% to 30% CAGR, on one side. And then the other side, last year, we did INR 750 crores. And you are talking about INR 840 crores, INR 850 crores, which is 19%, 20% growth. So this gives a kind of dual signal. So either for this year, you think the growth will be lower than our long-term average. If you can talk about the same, because 25%, 30% on INR 750 crore is close to INR 900 crores plus. So are we being conservative? Or do we think this year is a little tough, so maybe even 20% is a good growth?
Not really. Actually, what we have talked about even in the last 3, 4 conference calls before the merger was announced is that we were expecting the technology services business, which is the listed companies business, to grow at around 25-odd percent year-on-year. And that too has been growing at that rate only for the last -- close to around [ 8 ] quarters or so. And prior to that, we were actually in single digits. We were in the high-growth orbit, and we'll continue to do that. And once the merger happens, as a larger entity, the base also gets larger. So obviously, that's the reason why the number goes down to 18%, 19%. But which -- I think it's still above the industry average.
[Operator Instructions] The next question is from the line of Rajesh from Zenith.
Yes. This is Rajesh here. I just wanted to understand, like you have mentioned about 10,000 employees, is it by FY '25, I guess you could get there. Hello?
Sorry. I didn't get you.
You mentioned that we are targeting about 10,000 employees, and this is by which year?
By end of 2025, December 2025.
'25? Okay, okay. And what is the attrition rate at the moment?
We are at around 28%.
28%? That's pretty high even as per the industry standard. Are we doing anything to take care of this attrition?
Absolutely, yes. That's our top priority as well. But it was around 30-odd percent last quarter. From that, it come down to 28%. And most of the industry -- so it's the question of how you calculate it. We calculate everybody who's coming in and who is exiting the company. Not -- each company does it in a different way. But for us, we want to be absolutely clear on that. We are losing money, where we are losing that. We are -- all efforts are on to try and figure out how do we retain our talent.
And are we also working on artificial intelligence and electric vehicle platform per se in any of the subsidiaries? Do we have that kind of a goal as a development or through [indiscernible]?
Of course, AI is part of whatever we do both from the data management practice and also in the digital assurance practice as well. And electronic vehicles is something that we work with most of our customers. Ralph, do you want to add anything more?
I can probably add a few words on this. You've seen it on different levels. One is definitely that we are even developing our traditional quality, from quality engineering services and to more a cognitive and predictive and quality engineering approach. And there, we even see where before we can inject machine learning and AI components, especially even. Where and how we can, and could use many activities as much as possible in digital business. Like you mentioned doing, it even then, especially based even on the new unlisted capabilities for private. And we are trying to understand with our customers and even then coming up this rule-based and even predictive approaches there. And the third is we are having in the central R&D department that we've been having in headquarter. We have in there, especially at the IoT side for both [ avionics and aero ], some R&D projects together with our main customer in both of the industry segments where we are even working in the R&D space with some -- on some concepts with I think.
You all know our large customer base and the top customers. So the top car manufacturer and aero companies, we are working there jointly on some of the R&D projects. Yes. So we are covering it both from the more traditional services approach and even really going straight into new technologies.
We'll take the next question from the line of Rohit Balakrishnan from iThought PMS.
Congratulation on a very good quarter. Sir, I just had one clarification and I think a previous caller also asked this. So just wanted to confirm. So I think in -- earlier in the call and even earlier, [indiscernible] mentioned that we'll probably grow at a much faster rate, around 25%, 30% in the next couple of years. And just by using simple arithmetic, that will make us cross INR 900 crores on the base of INR 750 crores, if you take a 20% kind of growth. So I just wanted to sort of get that clarity. If that's -- I mean, am I doing something wrong? Or am I reading something incorrectly or if I heard something wrong? So I just wanted that clarification first. And then I have just one more small question.
No. Rohit, like what -- I have mentioned this in the past as well. So what we are expecting is that the listed entity, which is on the INR 400-odd crore range last year, will grow at around 25-odd percent to close to -- crossing the INR 500 crores mark. But the unlisted company, last year, they had an unprecedented growth because of one of the large project that came in. And this year, because of their unprecedented growth, obviously, it looked like a growth of around 50%, 60% only last year. But they'll continue to grow in high double-digit. And that's why the combined number is going to be around INR 800 and odd -- INR 850-odd crores. So that's what we mentioned. That's the reason why we talked about the [indiscernible] number. So we are obviously looking at seeing whether we will be able to exceed that number. But that's what we are working as our internal guidance at least. It's not a forward-looking statement or commitment, but that's what we are looking at. And that's the reason why we talked about this INR 850 crores.
But I think we're not guiding the market at the moment of a period of several years and then -- with this percentage growth rate. I think we see market overall, with the larger players growing at 12% to 15%. And I think our guidance is definitely that we are doing better than the -- in the benchmark, but not even then the onetime effect that was explained by Balaji.
Sure. So just as a follow-up on this, is that -- I mean on the engineering services side, given the low off-shoring from the parent and given that is a low hanging fruit, would that not -- one would assume that the growth there would be continuously strong given the low base, and as I said, that we have a very strong overall parent at [ EUR 700 million, EUR 800 million ] engineering business. And if they can just increase that off-shoring itself, that will keep make us -- make our entity here grow. So is that the right understanding? Or is that very simplistic and probably not that right?
From an service perspective, definitely an important aspect of the strategy. And from a group perspective, definitely, the priority on EMEA. Now that we're even having several other delivery centers and -- especially in Romania, where we're delivering with a very large team in engineering services, especially for automotive customers and especially the French market. So [indiscernible] the offshore activities only then to one country in the science and even the capability that we have in Romania. EMEA will definitely now August, that we made the top priority. This is even where we will even see that we have a strong focus even then on the off-shoring or the transition of activities to India from the especially large engineering markets in the U.K., France and Germany.
All right. Okay. And last question on Lucid. So can you just maybe share what is the kind -- I mean, what's driving the growth there? Is there some niche areas that they're in? Or if you just maybe spend a bit time on explaining that and how do you see that growing. You mentioned that, that part of the business should grow very well this year.
So as of now, it's only the first quarter, and some -- from a growth perspective, sequentially in single digits. But the objective to try and see what the synergies are and how we are able to cross-sell these services to our existing customers, which will help us in growing faster. So I would say that give us another quarter or so for us to assess what's the kind of potential. And then there, we'll grow. But as of now from whatever we expected in terms of the numbers that they -- that this business has to deliver, there are sure about that. So from last year, what the business is, what they're going to do this year, at least 25% more.
The next question is from the line of Mithun Aswath from Kivah Advisors.
Obviously, your listed companies been reported. I just wanted to understand, from the unlisted company viewpoint, once the merger is through, do you see a lot of opportunity for you to go to market together and get clients directly as well apart from the outsourcing opportunity from the parent? And do you see that happening maybe in this year or would that be more in FY '24? And would that then help you propel your growth much higher in FY '24 than compared to FY '23? Because INR 850 crores and INR 750 crores is not even 20%. It's 13%. So if you could just highlight that.
Yes. So the whole synergy of the merger is try and sell the non-BFSI related segments to other customers in the direct market. It is India, Asia Pacific and the Middle East. However, you'd understand these are knowledge industries. You need to understand the industry. You need to understand the customers better. For that, you need investment as well. So that's why we're waiting for the integration to happen for us to -- we are already planning for it. We have done some steps towards this. But most of the engagement would actually start only in the calendar year 2023. And that is obviously expected to propel the growth higher than whatever.
The next question is from the line of Manik Taneja from JM Financial.
Just wanted to pick your brains around.
Your audio is not clear from your line. Please use the handset mode.
Is this better?
Yes, sir.
Yes. Just wanted to pick your brains around the fact that the parent entity has considerable business on the R&D side and more so on the auto and the aerospace. If you could help us understand where are we in terms of capabilities in taking up more work for the parent from India in these segments.
So the group has been outsourcing the work to India for many years now. So from a capability perspective, we certainly have the capability, but the requirement is to scale the capability first. And that's what we are looking at in terms of planning on what kind of work will come and how do we stay that particular capability. There are some niche capabilities like what we talked about on the project that we got last year, which is primarily around niche plastics technology. There are some core [ avionic ] technology and products, which the group has bought in U.K. and in Germany that kind of scale and capability in India. But that would depend on when we will actually be able to -- when the particular -- but can move and when we need to build that capability, but at least 85% or 90% of whatever the group does. We have the capability, but we need to only build the scale.
Sure. Sorry for prodding you on this. But if I have to think about this scale up to about 10,000 people by March '25, how much of it was in the term...
Sorry. December '25. Sorry.
December '25?
Yes.
Yes. Sure. So even if you have to probably scale up to from about 4,300 as of March 31, 2022 to about almost like a 2.5x jump by end of calendar year '25, how much of this growth do you think will come in from the R&D versus the revenue assurance or the testing piece that is currently bigger than the R&D piece right now?
So right now, the business breaks at 70%, 30%. 70% of the business is on the technology services space. And we expect that would probably be 60-40 or 65-35 if we were to continue the growth trajectory across both, expecting that the group's business in the engineering segment will grow. So that's what I had mentioned in the last couple of quarterly investor calls. So that's what our expectation. As we scale, the business mix is likely to be 60-40 or 65-35 in the next 2 to 3 years' time.
The next question is from the line of Srishti Jain from Monarch Networth Capital.
Sir, I just wanted to understand that earlier, when we were talking about the merger, you expected the engineering business to grow faster than our -- the listed entity. And that was pre-acquisitions. So now what has actually - pre-acquisition of Lucid Tech. So what's actually changed? Are we seeing some slowdown? I understand the base effect coming into play. But other than that, has anything changed in the engineering front? Because you're still expecting that to grow at a faster pace.
Balaji, appreciate all the questions, even at the engineering side, I think we are in the earnings call for Q1, I understand that you are taking and asking questions for the [indiscernible] 3 years, especially even to get a better understanding on the engineering business. So I think we have some activities we have even with significant growth that was mentioned by Balaji with some of the initiatives we generally [indiscernible] slowdown in our engineering activities. We see a shift of the mechanical engineering is competing away from Europe, especially on to Romania from our perspective. and into EMEA and I think this will definitely continue even due to a significant cost pressure in the market in addition to the second growth segment for us. It's all in aero and automotive around electronic and [ embedded ].
And the only specialized activity because significant on-site integration and all the customers and the large, especially auto customers are doing this in a time in Europe full of uncertainties, pandemic picking up, a war in Europe and even a significant energy [indiscernible] today. No one knows what will be the impact in winter when. Then that will definitely be especially for the large group from the production side and probably been partly France will [indiscernible] gas delivery from Russia. So we don't see today a slowdown in activities when we see that the customers on the one hand side are a little bit cautious on even making the long-term commitment given the short-term challenges that we see in this part of the world, position to this significant and bigger growth in electronic and embedded but even there we see all over the different customer engagements that we are doing across our Indian [indiscernible].
Ralph, this is the operator. The audio is not clear from your line, sir. Please check.
I hope that you can give me and probably even a...
Yes. And now it is clear. I request you, sir, to repeat the last line.
Yes, yes. So probably I just mentioned, so we don't see a slowdown in the demand today. There is a shift due to the cost pressure in the mechanical and engineering definitely into offshore. Significant investments embedded in electronics, which require adequate skills. In the delivery centers in India, you know this is still a little bit European, that's what is happening there today when it comes to embedded and engineering. And there, we even see when we can synchronize even there the skill, that they would tend us to grow. But as I said, customers at the moment, especially on aero and automotive, still investing. But even looking very carefully on what is happening even with the short-term challenges, as I mentioned, especially the energy prices, it can have a huge impact on supply chain and production, and even then on the cash that these companies will generate and even the pandemic is definitely picking up again in Europe during the winter time.
Sure, sir. And sir, we've actually gone to big contracts. Would you like to elaborate, throw some light on that, the tenure, the time line, the kind of services that we'd be providing.
Sorry, Srishti. I didn't get the point. What about?
You won 2 new contracts in the USD 1 million to USD 6 million segment, right? Is there anything material that we would actually be doing there?
So one of them is actually an existing customer who moved into the $1 million plus practically. The work that we are doing, like what I mentioned, for this quarter, we also got a couple of traditional quality assurance work as well from significantly larger numbers. For one of the customers, we were actually moving into core banking transformation piece as well. So that's the reason why we increase in the $1 million to $5 million range. And our objective is to try and create more customers in the $1 million to $5 million -- $1 million to $2 million range, which would actually become the $2 million to $5 million over the next year or so, that's one of our expectation.
The next question is from the line of Aman Vij from Astute Investment Management.
Sir, on the digital revenue front, so we have done quite well over the last couple of quarters. We had an aspiration to take it maybe even at 45%, 50%. So is there -- maybe this quarter, you got more traditional customer. But is the trend towards that, by the end of this year, we'll move to 40%, 45% digital? Or if you can talk about this thing.
Yes. We expect it to be around 40% by end of the year, what we are still -- what -- and that's the segment which is growing faster than the other segments as well. So -- and that's where we see customer demand not just from our own customers but also from the group as well.
And the aspiration is still towards within next couple of years to take this to 45%, 50%?
That's right. So this year, we should get closer to the 40% range. And the expectation is to get closer to the 50% range or 45% to 50% range in the next couple of years.
Sure, sir. And on the Europe front, if I see, this quarter was a little softer. So was it just one-off or are we seeing some impact of recession? Because the other geographies, Asia and Non-Americas did quite well. I'm talking about quarter-on-quarter. But Europe seems to be slowing down little bit. So was it one-off this quarter? Or even next quarter, you are seeing some slowdown in the Europe part?
So it is more from an overall mix actually. So it's a mix change. Even though value, it has grown. But because of the mix change, you see that percentage changing so.
So value-wise, also it has gone down quarter-on-quarter, from 57 CR to 56 CR for the quarter? So...
We're not seeing any because value wise -- we don't see that because we only display the percentage in the presentation, the revenue by region that is more a percentage mix, what we give.
Yes, yes. But if you calculate the actual numbers, there seems to be a slowdown. But you are not seeing any slowdown in Europe. That is the question.
No. As of now, no. We don't see any slowdown.
As there are no further questions from the participants, I now hand the conference over to the management for closing comments.
Okay. Thank you so much. Thanks once again for all the interest and the questions. And I hope we were able to answer most of your questions. And hope to see you all in the next investor call. Wish you all a very happy independence day, and stay safe.
Thank you. Ladies and gentlemen, on behalf of Expleo Solutions Limited, that concludes this conference call. Thank you for joining us, and you may now disconnect your lines.