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Ladies and gentlemen, good day, and welcome to Q4 FY '22 Earnings Conference Call of Expleo Solutions Limited. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Ms. Asha Gupta from EY LLP Investor Relations. Thank you, and over to you, Ms. Gupta.
Thank you, Marge. Good morning to all participants in the call. Welcome to the Q4 and Full Year FY '22 Earnings Call of Expleo Solutions. The results and investor presentations have been already made 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 all. Representing the management today, we have Mr. Ralph Gillessen, Chairman and Non-Executive Director; Mr. Balaji Viswanathan, Managing Director and CEO; Mr. Desikan Narayanan, Chief Financial Officer. Mr. Balaji will start the call with brief overview of the quarter and year gone by, which will be followed by Mr. Desikan, who will be getting into detailed financials. After that, we will open the floor for Q&A session. As usual, I would like to remind you that anything that is mentioned in this call, which gives any outlook for the future or which can be construed as forward-looking statement must be viewed in conjunction with risks and uncertainties that we face. The risks 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. Thanks, Marge. Thanks to all the investors and interested parties who have been there in this call. Excited to announce our financial year '22 results and also the Q4 results. As I mentioned in the press releases as well, we have had a good last 18 to 24 months, and we continue to see good traction from the business side. We have also had a lot of exciting results from a people front and the technology front as well. Signing new partnerships is -- signing more than 20-plus new customers in the financial year. The revenue growth has been robust over the last 6 quarters at least. And then we continue to see reasonably good demand. Of course, given the kind of macro situation that we are seeing with the war and the position and the possibility of some rate hikes. Some of the stuff. We're still being cautious in terms of what kind of investments we are making, but the situation looks or the market demand looks quite focused from the [BR ].
We have a reasonably good success with our automation-first approach and the concentrator that we have taken for the digital transformation. And therefore, we're driving or fueling our growth [indiscernible]. We also plan that we are able to add 2 new larger customers with more than INR 1 million revenue, and with 2 customers who are with INR 3 million and INR 5 million revenue.
If you recollect last year, we had only 1 customer with more than INR 5 million and just about 8 to 9 clients with over INR 1 million revenue.
There has been a lot of traction from our [indiscernible] perspective. We had a very good rates to work sort of our people actually rated us like about close to 75% acceptance level and more than 85% in terms of [indiscernible] literacy work acknowledgment for the kind of response that we are going to price during the pandemic and how we have been able to support the team members considering that they are our primary assets.
And we have also focused a lot on employee engagement, diversity program. I'm happy to tell you that we have actually onboarded a few differently abled people on technical roles, who have been doing these are [indiscernible] as well. And we've seen increasing focus on the online upselling program and also on the technical engagement of them.
Compared to last year, we haven't really gone full steam on the graduate hiring program because last year was our first experiment and this year we are trying to put the learnings from that and making sure that we have a few more broad base rather than from 1 location per se. But that's something which we have committed to for this year as well. So that's all I have in the introduction. We know it's really reason in the quarter recently the financial year. We continue to -- we hope to continue this possibility.
Thank you, sir. Should we open the floor Q&A session?
I'll give a brief about what the performance is for the quarter. Good afternoon, everyone, and -- good to have a good performance during the quarter. It is in line with the market trend with the same set of challenges across the industry, we're obviously hedging the same. We'll walk you through the year-on-year performance and the quarter-on-quarter.
The financial year ended with a revenue of INR 400 crores compared to INR 300 crores around an increase of 34%. EBITDA closed at 19.4% compared to 20% in the previous year. The revenue majorly came from Asia, which has been a bit good during the year.
On the cost side, we had increased -- regular increase in the cost, specifically on the third party, we did really to invest more on that because of the scenario -- current scenario of resource. And also we had cost in training and recruitment. And last but not least, we had some expenses in merger. Those are the major change from last year to this year.
Our earnings per share is 7% ended at 52.58. On the quarter-on-quarter, the revenue grew by 7% to INR 113 crores. EBITDA rise from 15.7% to 20%. Reason for EBITDA increases, of course, revenue increase, plus we had a foreign exchange gain during the quarter of around 18 million compared to a loss of 16 million last quarter. And we also had -- last quarter, we had some software purchase for the projects and some recruitment training costs. So all put together, we had a net [indiscernible] being in later quarter. Profit after tax ended at 15% compared to last quarter of 13%.
One update on the merger activity, you're still pending with NCLT. They have the quota in summer vacation. This is something which is still dragging. So we are working with the consultant to make sure that we can get our [indiscernible] coming. That is the current state of things for the NCLT merger. That's it for me, and we can open for the question line, Asha.
Yes. Margaret, can you please open the floor for Q&A.
Thank you, sir. Could we open now for Q&A session?
Yes.
[Operator Instructions] The first question is from the line of Srishti Jain from Manav Network Capital.
Congrats on a brilliant set of numbers. Sir, I actually wanted to understand a little bit on the demand environment, like you elaborated in your opening remarks that we are facing some geopolitical issues in our dominant geographies. How do we see the demand environment panning out? And in that same line, how do you see growth for us, the listed as well as the unlisted company doing and even for the parent, for the next few quarters also and for the next couple of years, maybe FY '24, FY '25?
So we are closely monitoring the geopolitical situation, but we don't -- at least based on the war and the political situation, we don't see most of an impact for us because we don't really have too much exposure in the Eastern European or in Russia or Ukraine for this matter. But from an economic situation, we see kind of as to how this all will pan out. The higher inflation rates in U.K. and the U.S. and we have seen inflation in India as well going up. So we need to still figure out as to how the demand is going to get impacted because of that.
But as of now, there are no signs of any slowing down or any kind of impact of this so far, at least for the next 2 to 3 quarters. And what will happen over the next 2 to 3 quarters is what is going to be the indication for the next couple of years as well. So we are closely monitoring the situation, and that is also one of the reasons why the third party or the contracts and the costs are slightly higher as well for us. So we're trying to meet the demand that is currently there in the market, which is quite robust.
And for the group, Ralph, would be good if you could probably highlight.
Thank you, Balaji, I can certainly do the second. Overall, we are -- and I want to confirm this even at least with the performance of the management team and with the accelerated growth that we have even seen in this business segment here. We even see a good growth momentum across all the different industry segments, across all our regions and geographies certainly impacted by some of the macro risks -- from a macro perspective, some of the risk that we are facing and certainly some of the uncertainties, even then with the war in the Ukraine, verification of our relation as we don't have any operations in the Ukraine, but we can then put on hold and terminated business activities, even with Russian organizations.
And especially in the -- more on the engineering side of our businesses, still a little bit the uncertain situation. With the pandemic in China and an impact even there of the global supply chain. But overall, as the majority of our activities are in the area of transportation and Energy segment is more in the R&D segment and what we do in the other industries is even then more in digital transformation. We are still expecting to continue with a good growth momentum as we can see that all our customers are investing in the change of their own business model even to implement new business models. And therefore, we are even foreseeing quite a good growth momentum over the next couple of quarters. And this is even underpinned the important performance of the first quarter this year. And that's what we even outlook a little bit more from a group perspective.
Sure, sir, thank you. Sir, and the second question was on the attrition rate, where is it currently? And would we be expecting higher-than-normal wage hikes in FY '23 over FY '22? And what kind of margin levels would we anticipate to negate that impact?
Yes, the attrition rate continues to be high. Our target has always been up 20%. We are currently running at close to 30% attrition rates. And the attrition is certainly impacting, but it's not well the objective of clients in getting contractors and the other models. We have to make sure that we are not losing the business from a customer perspective.
And in terms of wage hikes, I would say that it would probably be still around the same as what we had last year in year between 14% to 15% overall rate hikes is what is likely to be. And as due to the not the lower level will have a significant 25% to 35% and the higher levels will probably see a slightly lower increase. But overall, it's going to be simply similar to what it was last year.
We don't really see this impacting the EBITDA levels significantly because we are trying to control our other costs. We had given up one of our sites and move to Coimbatore. And I keep the way, so we're trying to look at how the other parts and how we'll optimize. But at the gross margin level, we may probably see a 1 or 2 percentage drop because of that.
The EBITDA level, we'll continue to be focusing on that anywhere between 17% and 18%.
[Operator Instructions] The next question is from the line of Aman [ Virch ] from [ Astien ] Investment Management.
My first set of questions are on the unlisted entity. If you can talk about the unaudited numbers like you have been talking for both Pune as well as the Bangalore entity?
The one thing I can think from the unaudited you mentioned, we want to make sure that it is audited and we have -- we can publish it. That's the current thing. I can tell you one thing on the overall. If I look at the other unlisted entity, they are -- on the revenue side, they are doing better than what we expected. And the one thing is that a little bit of -- on the EBITDA side, they will be coming lower than what have projected for. But again in line with what we are also facing. So that I can tell you as a current update about the unlisted company. The ones that is audited, then it will be easy because when we do the shareholders' meeting, we'll be sending a notice in which we'll be publishing the data in there that it will be an audited data, and that will be more in line with what we -- what is.
If you can talk about was the revenue growth more than the listed entity? Or was it less than the listed entity?
The both combined figures with the unlisted entities, it would be less than the listed entity, we are expecting around about INR 300 crores. That's the way we are looking at it.
It's been in the range of around 25% to 28% is what the growth rate was. The unlisted entity growth rate is around 35%. .
Sure, sir. That helps. On the employee count, so if you can talk about what the current number is and also if you can divide among the 3 entities. And just wanted some clarification. So the numbers we have mentioned in the presentation is around 1,700, but my understanding is the number should be around 2,100. So is the 400 people still on bench, not currently in project? So if you can talk about these 2 things, the current employee number across the 3 entities, if you can segregate and why the difference between 1,700 and 2,100-odd...
See the 1,700 is only the -- generally, we put only the delivery folks not including the subcontractors. So that, if you put together, it will be around 2,000 is the number what we have in the listed entity.
It's only employees and that too in delivery, so we don't have the third-party consultant added in that.
So the number I mentioned the last fall was 4,000 or 2,100 in the Chennai and then 900 in Pune and 1,100 in Bangalore. If you can give the updated number for Q4.
Yes, we have around 4,600 people in total, and close -- out of that, the builder apart from the support headcount, it would probably be around INR 4,300. And the split is somewhat similar, close to 2,000 employees in -- 1,950 or so in Chennai and a little over 1,000 in the Bangalore engineering fees and close to 1,000 in Pune as well.
And the addition sir we are targeting for this year?
For -- we should be having a net addition of at least 400 to 500 people.
Sir, you mentioned 100 to 500?
Sorry, what is the 100 to 500?
Sorry, what number you mentioned.
400 to 500. Sorry, if my voice is not clear. It's 400 to 500.
Okay. Okay. Because earlier, if I remember correctly, we were targeting like 1,000 employees addition. So any reason for this a little lower guidance?
No, that includes the trainees as well. The 1,000 that we were targeting was including the trainees as well. So on the trainee head count, not all of them will be billable right from day 1.
Okay. But if we talk about like-to-like number, we are still maintaining that 1,000 employees?
Yes.
And if you can talk about the quarter-on-quarter growth we are expecting for next 2, 3 quarters. Is it still 7%, 8%? Or should we expect a little lower given that headwinds in the economy?
We don't see any reason why it should be lower than where it is right now. But yes, it should be anywhere between that 6% to 7% as well is what our expectation. But of course, quarter-on-quarter, we have closely monitoring what the demand situation is.
[Operator Instructions] The next question is from the line of Vinayak Mohta from Stallion Assets.
Congrats on a very good set off numbers. I broadly had a question regarding the combined entity. So if I remember -- so right now you are broadly at advantage of INR 700 crores, so at a 20% to 25% growth rate, you would broadly be doing a INR 1,000 crore revenue by FY '24 and a PAT of broadly INR 130 crores to INR 150 crores. Is that a fair assumption to have given the order wins or the demand environment that you've been visiting, considering the situation that you think might be a little bumpy in the near term -- near to midterm given the situation overall?
Yes, that's our target as well. So our objective is that we should cross INR 1,000 crore during the next financial year.
Next as in FY '24, right?
That's right.
Yes, okay. So my second question would be, I just wanted to understand how would the ER&D grow out here? Because broadly, if I remember correctly, at a INR 150 crore run rate or something. So there -- and what would be the blended -- how do you see the margin trajectory going forward? Because ER&D automatically is a higher-margin business? So how would the margins move in the next 1 to 2 years? Because right now, we're at 17%, 18% as you have guided for. So I just wanted to understand that trajectory and the growth in that business over the long term, where do you see as the business mix be standing at ?
So the unlisted company saw a good growth in the ER&D business in the last financial year, close to around 45%, 50% and all the other businesses put together was in the range of around 25% to 28% of what the unlisted company growth rate was in terms of revenue.
The challenge in terms of talent is actually even more higher in that segment of the business. And so that's obviously impacting the margin. What we used to consider as a higher market business also comes with a higher cost on. So the margins are still around the same as what the traditional said businesses as of now at least.
And we think while the demand was quite robust. Right now, we're also looking at how it's going to pan out, particularly in the manufacturing industry and then the automobile industry over the near term because there is more demand on the digital side, even in the ER&D business as well.
So we expect that it will continue to grow at 25% year-on-year. For the margins are likely to be around the same as what our normal tech services business is at least in the near term. But in the longer term, it should certainly get better.
Understood. Is their growth 25% right? Or will you see a higher number?
25%, yes.
The next question is from the line of V.P. Rajesh from Banyan Capital.
Congratulations. One question on the numbers, organic numbers for the unlisted companies. When do you think there will be available? And does it hinges on getting the approval from NCLT or is it a separate process?
Sorry, Rajesh, I could not hear it. You were talking about NCLT approval you're talking about or...
No, no. I'm asking about the audited numbers for the unlisted entities. By when will they be available? And is it related to the NCLT process? Or is it separately that you can actually share that number with the investors?
Technically, we don't need to, is my view that we don't need to share the numbers of the unlisted company. But once the audit is over and it goes through the ROC then we will filed ROC, then it will be more a public thing. But prior to that, we expect that once the shareholders' meeting is -- approval is given by NCLT, we will be -- the notice will have the unlisted numbers financial. So that way we are expecting something somewhere around the new time frame to publish it.
So Rajesh, the NCLT and the audited results don't have anything to do with each other. The audit is going on right now and auditors results should be available sometime in June because there isn't really any time pressure like the listed companies to complete the audit. And that we already filed with ROC as per the normal process. And depending upon how soon we get the NCLT approval, it will be included in the shareholders meeting notification as well.
Understood. Understood. That's helpful. And basically, you mentioned that there were merger costs in this year. So can you quantify that number, please?
Which cost? Sorry, Rajesh telephone line is -- which cost you said?
Merger-related costs, you mentioned there were merger-related costs, which were in this financial year.
Yes. That's relating to the proportional is what we pay for the consultants who involve the banker and the auditor and the legal piece. Those are the costs which I was mentioning about during the year.
Right. I was just asking what is the number? What was the total number for the year?
Around reaching around INR 41 million.
INR 41 million, okay. And do you expect more costs like this to accrue in fiscal year '23 or majority of this is done in the last financial year?
The majority is done in the last financial year. We will have some costs only from incremental costs will be coming not much. One thing will be there will be some stamp duty which will come, which may be coming once we do the merger. That's the time the stamp cost will be coming. That is 1 major cost that will come .
And then my last question is just about the dividend. So we have talked about coming up with the policy, et cetera. So any update on that side would be helpful.
Yes. So we have published a dividend policy and we are looking at like what I mentioned in the last couple of FY results. So looking at how do we utilize the cash. We did the small acquisition recently, and there is one more which is likely to come up as well. But between now and the quarter 1 AGM, we will decide on what's the quantum and how we are going to distribute cash dividend.
The next question is from the line of Rahul Picha from Multi-Act.
Sir, I wanted to understand that right now, roughly more than 45 -- around 45% of our revenue comes from the Asia region. So just wanted to understand our currency exposures in that market. Are our billings done in USD? Or is it like in some other currency?
Asia. You were talking about Asia, right?
Yes.
If Asia is majorly Middle East, Singapore and India. Not much. The one thing is there is that when we -- if you look at we do billion dollars for Middle East. And majorly, it will be done in the Middle East and India. It is IMF. That way, we do have EFC accounts where we have the dollar what we repay from the client.
And if you look at the way we are meeting our bank accounts, whatever the prices come from the client we keep in EFC account and try to pay all the expenses related to the respective currency in that quarantine. So that we don't have any product impact, something the local expenses got comes in to stay in that currency itself. So that way, the exposure is minimal.
And with respect to -- since the U.S. dollar is weakening against INR, I see only a positive trend coming in this Asia market. India, IMF, so there is no exchange rate.
Yes. And sir, my second question was on the acquisition that we did. So can you just speak about that, like what capabilities have we got through that? And what is the purchase consideration that we have paid for it? And any quantification of revenues that, that entity might have?
So the -- so you would expect Expleo solution which we acquired or our specialists and of data governance and analytics. And there are partners with the data governance platforms.
Sorry to interrupt you, Mr. Viswanathan, we cannot hear you very clearly, sir.
Is it better now?
Yes. I would request you to repeat your response, please.
Sorry, yes. We lose it Expleo Solutions that we acquired are actually specialists in data governance and analytics. And their primary business is actually in the U.S. So the last year, they did a revenue of close to $3 million. And this year, they're likely to do close around $3.3 million to $3.5 million is what our expectation is.
And this will actually give us a real good hold on our own data practice as well because we have been focusing on health care, banking and other industries on how we could support the implementation, testing and the application integrations of the API integrations, particularly from a data perspective, and that's what is going to give us the capability for us. We are already seeing some traction with our existing customers as well. And the partnership of the tech that with the global platform also gives us an opportunity to cross the large services to some of these large customers as well. So that's the basis on which we went ahead with those transactions. Desikan, you want to add anything more?
So I think that's one of the things which we have majorly bought is that the IP and the know-how what they have. They are selling it as a license to the client. That will be our entry point for any new clients, and that's the way they have been doing their business. That will have the good amount of clientele which will be coming in. So those are the things which we think that will have an added capability for us, some will say.
Okay. As mentioned by -- as it was mentioned by Balaji, when you look at the R&D initiatives and you look at the transformation pieces in our target markets, I think it is over to the main specific part. But the 2 most significant enablers are over data and security. And therefore, it was even important for us even to make an investment into this data led capabilities.
Okay. Sir, just if you can specify the purchase consideration for this acquisition?
So the purchase consideration consists of payment based on what the current revenue is and the future revenues. So we have the payout considerations around INR 400 at least another 15 more months. And it's still looking one time of the revenue at this very point around $3 million to $3.2 million.
Okay. And sir, my last question is on the salary hike. Like in the past, you have stated that normally, our hikes happened in the month of January. So have you taken any hikes in the last quarter?
Yes.
Okay. And can you quantify how much that would be?
It's more of a market trend. That's something which we make sure that it is in line with the benchmarking and how the market is. If you ask me, it will be -- it is in line with the market trend is the one what we have done.
The next question is from the line of Tushar from Ratnabali Securities.
So my first question is regarding like COVID is receding now and the traveling is opening back up. So can you just explain how our margins can be affected in the near future?
And my second question is regarding our employee workforce. So data that we have, I have shown that our employee base has almost doubled in the last 18 months. So could you please explain whether this is based on anticipatory demand? And what kind of pressure can it have on our margins going forward.
I didn't get your first question. What was the first question?
Right now, as other IT companies are also saying that traveling is opening back up. So travel expenses, which was being saved in the last 2 financial years, that should start coming back on, [indiscernible]. So can you just give an estimate on how future quarters might be showing in terms of other expenses?
Yes, it is likely to open up, but it's not that it's going to go back to what it used to be in 2019 or first quarter of 2020. We don't see the travel expenses impacting our margins at least in this quarter or next quarter. It's not going to be that significant at this particular point of time.
If you are seeing amongst our -- because the travel opening up some of the on-site deployment are also increasing. And so our on-site contribution of revenue has gone up from 32% to 36% in this quarter.
In terms of margin impact, I don't see anything that is happening at least in the next couple of quarters. We'll see the close work from our selling expenses, which is what is primarily going to be driven by the particular quarter. Under the employee count, where we almost doubled in the last 18 months, and out of which close to around 350 to 400 are the trainees out and out of which a significant number of people have already been deployed in some projects forever. And we don't -- it was in anticipation of both future demand and also the attrition that was picking up at that particular time line.
We will do something similar but may not be to the same quantum during the course of this year. But we are trying to do it across all the entities rather than doing that count wondering with the listed entity across.
The margins, I had mentioned earlier that our expectation is that we will continue to be in the EBITDA range of around 17% to 18%. And we don't see any reason why we should peak of anything lesser than that at this particular point of time. So it's not a guidance, but we don't see any reason why we should impose anything less than that right now.
[Operator Instructions] The next question is from the line of Rohit Balakrishnan from ithoughtPMS.
Congratulations on a good numbers. So Balaji most of the questions have been answered. Just I could not hear a couple of things probably. So first was on just the book numbers. On the unlisted entity, you said that we have crossed INR 700 crores. I mean, I could not hear that number.
Okay. And what would be the cash at consolidated level today? I mean on listed as well as unlisted.
That I can say it's around INR 155 crores, [indiscernible] I need to get you. I don't have it right in front of me.
Okay. Okay. I remember it was also INR 300 crores at the time of -- close to INR 300 crores at the time of an announced merger. So okay, sure. I'll probably get in touch with you to get that number separately.
So in terms of outlook, Balaji, for FY '23 -- on the listed entity, you mentioned that we still can see 6%, 7% kind of quarter-on-quarter growth that you have alluded to in the past. What about the unlisted entities? What -- I mean, are we seeing similar kind of growth there? And what is the kind of outlook that you are looking at? Because I remember in one of the calls, you've mentioned that probably for unlisted entities, they can grow much faster given the plan of the group and the overall offshoring goals that we have as a group. So if you can just shed some light in it.
So probably, Balaji, let me answer this question. And we do appreciate all the interest. And all the other business segments that we even have. From today's perspective, there's no reason why even the other business segments should even at the lower growth rates than what we have even here in scope of this call and the discussion and the numbers that are in front of you. It is certainly supported even then by the growth in the -- from our perspective, so-called engineering segments are ever off and for transportation. Even then supported even by a strong shift even into our centers and our activities in India. So I can certainly confirm that we don't see any indicators why even the other business segments should grow at a lower pace than the numbers that you have in front of you here.
Wonderful. That's great to hear. And Balaji, one question on this on the scope that we have. We've added a lot of clients and also increased the $1 million and $5 million client count. I mean, can you just share -- you've been sharing in the past as well, but just maybe a bit more on what is really driving this growth? We have been really growing very well and we continue to be very excited about it. So I mean, is this largely driven by our own outreach in terms of organically finding clients versus support from the group? I'm talking only about the listed entity at this point of time.
Yes, it has all been primarily around the sales effort on the account management of also both with existing customers, as well as new customers. And like what I mentioned in the last 3, 4 quarters as well, our objective is to try and look at where the opportunities and try and grab this opportunity even if it leaves. We have a stretch of -- we have to make an investment, and that's what is actually driving most of the growth at this particular point of time. And it started showing results over the last 4, 5 quarters, and we hope that it will continue to be in the same trend.
And just one last question before I go back to the queue. This acquisition that you did, you mentioned it was -- did you mention how much did you pay for it? I sort of missed that if you...
So the total consideration between the IP, the assets, the people and the business that they were answering is around a little over the 1-year revenue, which is around $3.2 million, but that's what paid over a period of 18 months or so.
Got it. So we have -- I mean, you've not yet paid it out, but it's about $3.2 million, $3.5 million roughly?
That's it.
The next question is from the line of Asish Dash from Sharekhan by BNP Paribas.
I will again ask you on the cost side. So employee costs have increased. That is one reason you mentioned that like -- is there any other thing that's involved in that increase of employee cost? That is one.
Second question on cost side is the other expenses as a percentage of revenue declined substantially. And I know there is absence of software purchase consideration. But will it sustain -- this level will sustain in FY '23, this other expenses to revenue, total revenue?
And our exit margin is strong. Why we are guiding 17% to 18%. What is the major headwinds you see in FY '23?
Now just one because the first one I could not hear it properly. Can you repeat the first question you asked?
Employee cost. I expect for the employee cost, it has increased 12% around quarter-on-quarter. One is due to the high wage hike. So what are the other components are there for increasing the employee cost? Or is there any other thing?
Not much. It's majorly -- one is the increment also the number of people in case from last quarter of this quarter also has contributed to that increase. Other than that, I don't see any big increase. With respect to the other costs, yes, last quarter, we had some cost, which was not there in this quarter.
But looking at the trend of the cost, there are certain costs which comes in. If you look at the retention of employee, training and other activities, which we do, these are the things which may have an impact on the overall margin. So that is very difficult to kind of predict in the current market. If you look at our subcontract costs from last year to this year, a substantial increase because the market demand has completely changed.
Now if you look at the current market requirement is that we need to look at how to retain people and also do the recruitment. So these things are aspects which we can't define a certain cost as a cost which will be there. So keeps on fluctuating. So that's the reason we give -- we don't give a guidance, but just we are looking at the trend and saying that it will be in the range of the EBITDA, it will be in the range of 17% to 19%. So that's the only thing.
Other than that, even the current -- major process that it's an employee cost, that's having a little bit of fluctuation due to the market change, that is something which we are putting it in there in what we see as a trend in the future.
Got it. My second question is on your guidance. Earlier, you are giving the guidance of EBITDA margin for the combined entity to remain in the 15% to 17% post merger. Now your listed entities has turned better than your aspiration of 18% in FY '22. And now you're saying that your unlisted entity has some impact on the EBITDA margin. So would you like to maintain that guidance? Or what is the outlook on your margin guidance for that and common entity?
Technically, that is not a guidance because we are not proposed to we are just more talking about probable kind of number...
We don't expect any big change in that in the [indiscernible] continue to be the same. It's not a guidance like basis. We don't really give any guidance, but that's what our expectations are.
Okay. Your aspiration. Just last question. Any large teams you have owned during this quarter because you mentioned that there are some [indiscernible] in Q3 and Q4. So any large gains you have won or anything in the pipeline?
So we don't really discuss our client list that are confidentiality reasons, but we haven't really done anything in the last quarter, but last year, of course, we won 2 major customers. 1 million plus, some 5 million plus. And we have a couple of them in the pipeline as well. But normally, we don't really disclose our client list.
The next question is from the line of Deepan Sankara from Trustline PMS.
So firstly, can you throw some light on these 2 new customers added during this quarter?
I think you are asking about 2 customers above 5 million. Is that what you are asking about?
What exactly as during the quarter 2, right?
During the year 2 customers with one with more than 5 million and one was more than 1 million or rather during the year, not during this quarter. We had actually covered the 5 million plus customers in the past as well. It's one of tech companies and it's a global client. We are facing across multiple geographies as well. And that account continues to grow with the kind of capabilities and the services that we are offering at this particular point of time.
Okay. Okay. And what is the reason specifically for this digital slowing down Q-on-Q to 4% growth versus company growth of 7% Q-on-Q?
It's -- the digital is not much drop. It is more from a -- it's fluctuating the percentage, if you look at it, it's a very small, some 38.6% to 37.7%. We are talking about a 1% fluctuation in the quarter-to-quarter. But [indiscernible] value as it has increased. So we don't see anything dropping there.
Yes. But the trend is not reversing, right? So that's what we wanted to make it clear.
Generally, for the digital, if you look at it, the trend has been raised from 26% to now we are in a 38% range. So do we see that will kind of maintain in this quarter. And also we have increased the ultimate...
The trend is not reversing. It is likely to only grow markets. I don't see any reason why the trend is [indiscernible] the demand is still there in the market.
Okay. Okay, okay. And lastly, what is the kind of direct contribution from the group for full year?
That's in the range of 20% of the -- again, a little bit of the direct contribution of the group -- what we mentioned -- what I'm mentioning here is that the clients which we have -- the group as a client is around the revenue is around 20%. The contribution asset is more than 45% because there are reasons why the group is strengthening the client, and we also signed with them directly. So that way, we have support coming from the group, all the European clients. That all put together, it will be in the range of around 45% to 50%.
The next question is from the line of Hiten Jain from Invesco.
So I have a few questions. So first is, when we look at your revenue growth trajectory, just looking at fourth quarter of last financial year, fourth quarter FY '21, first quarter of this financial year, second quarter of this financial year. You were reporting a 10% sequential growth. Now you come down to 6% to 7% kind of a growth.
And even when we look at headcount CAGR, obviously, in 2 years, you've kind of doubled, but your revenue CAGR is lagging your headcount growth. And even quarterly outcomes, we are seeing the slowdown from 10% to 6% to 7%. So what is exactly happening here? And is this that 10% was unsustainable, 6% to 7% discount? So that's a slowdown from what you've been doing, but your headcount, the growth was quite strong. But in fact, in this quarter, your headcount is also just 2% up Q-o-Q. So is there a slowdown from -- if you look at quarterly trends?
No, not slowdown. See, when we looked at it last, last 4 quarters back, the base was lower as well. If you look at the quantum of growth, it has always been more than that. So 10% Q-on-Q between Q4 of 2020 to the Q1 of 2021. If you look at the quantum, it's probably higher now. But since the base is higher, obviously, the percentage is showing lower. So we don't see any slowdown at all. And obviously, when the base becomes bigger, then the growth percentage also is likely to be in that range. And from the employee count versus revenue, as we have mentioned this last time as well, the reason is that we had actually hired close to around 350 to 400 trainees last year in anticipation of growth. And this is what we will see those utilization of those resources and driving revenue over the next few quarters as those trainees become available and they start generating revenue as well.
Then anticipation and that was an investment that was made primarily because from the India or other costs are not in the same line as what it used to be earlier during COVID times, and we thought to be used but we need to make sure that we are investing for our future. So while there is really no -- we're working on trend or a slowing down of any of those trends.
And -- okay. And this crew business from group. So last year also, it was 21% of your total revenue from group direct. And this year also, you've spelled out that number is 20%. And then you talk about this indirect exposure where group facilitates business in Europe. But Europe is the slowest growing geography today, it just grew 19%. Even if I look at mix of Europe, it was -- in fact, 2 years back, it was 59% of revenue. Today, it's 51% of revenue. So isn't -- shouldn't this group be driving a higher traction in your business?
It is one. So when we see the biggest thing is that we in all the other markets are growing at 35%, even to sustain in the same percentage we also have to grow at 35%. So what has happened around the last year as well. So despite being a slow growth market last year and just right now, Europe is actually seeing phenomenal amount of demand. May not be the -- if you look at U.K., Ireland when the demand is certainly to picking up significantly.
And if you look at where we are growing at the 35%, [indiscernible] growth market as well as existent. Ralph, do you want to add anything more?
When the relative performance of even taking the base as you have described and confirmed it. On the other hand side, we see across the European markets definitely a good growth momentum, but we didn't see there not only in the financial service and the insurance and banking industry, but even in other segments, state even now quite a tendency even to keep activities within the European Union. This is even something that should not be underestimated when we even look at our growth trajectory. And therefore, we are happy even that we can even continue with the same contribution to the growth that we can see in this entity.
Yes, Balaji. But even this year, like it just grew 19% year-on-year, Europe versus 34% for the total company.
Yes, [indiscernible] other revenues are growing faster. I don't see any reason why 19% is certainly a reasonably good number of [indiscernible].
Probably, let me try to clarify again. We see the same growth as when you look at it from a European perspective. But on all the growth in Europe is even when translated even in the same way, even the into the growth even of this entity. As I said, yes, we even then see that we see a significant growth even in our centers that we even have within the European Union, in Eastern Europe. And this is season where even when these centers are in contributing to our growth strategy. So not all the growth that we are generating and there is no one correlation between the growth rate that we see in Europe and the increase of business activities for this entity.
Sure. And another clarification, I just wanted to understand when I look at your numbers. So the number of active customers has gone up from 68 to 100 year-on-year. But whereas your 1 million to 6 million is up just 10 to 11. And on the other hand, $0.5 million to $1 million is down from 17 to 16. So does this data tell that perhaps your client mining is not very active as compared to client hunting?
No. It's not actually -- if you look at any benchmark, the benchmark to retract almost what is the revenue that's coming from existing customers. And what's the revenue is coming from new customers. If you look at what our trend has been in the past, we have been in the range of 5% from new customers. And that's the trend that we wanted to get to at least to 10%, which is what we have been able to do this year.
So it's not that the focus is not on the existing customers. Otherwise, you can't make a 5 million customers in 1 year. So that's the reason why you have 2 5 million customers who have been mined at on another special focus on what the strategy reforms are and where we are going.
Sir, your voice is not is not clear sorry.
Sorry. There is a focus on both. And our objective was that we wanted to reverse the trend of new account growth from new account revenue from trend of around 4%, 5% a couple of years back. So at least the 10%, which is something which we have been able to achieve this year.
And also in terms of how the top customer contribution are and how we are able to spread it. So the 9 customers of more than 1 million last year to 11 this year. It was actually an indication of how we have been able to mine the accounts and grow. Having said that, sure thing have we done everything right, may not be and that's our focus on how we can get everything going for us to directing customers as well.
So your top 5 customers last 2 quarters has been very weak. In fact, this quarter, your top 5 customers is down 8% Q-o-Q. Last quarter, they were up just 3% Q-o-Q. So is there some slowdown in your top 5 clients? And would it be fair to assume that the group is one of those top 5 clients or you don't -- or how do you account for that?
No, we don't account for the group as -- in those client list. And some of this could be seasonal, but we don't see any slowing down with any of our customers. And whatever we set our target for the year, we are actually in line with that, and we are trending in the right direction with all our customers at this particular point.
We'll take one last question, which is from the line of Anuj Sharma from M3 Investments.
Congratulations to Balaji and team for a good set of numbers. I had one question on the group. So the group has done some acquisitions, one is a assystem care. So what implications would it have on our Indian operations, both the listed and the unlisted? And generally, what will be the strategy in terms of group acquisition and our benefits through it?
We had the acquisition of a assystem care even this business or life science business even when became part of our business activities in our portfolio at the beginning of the year. We see that the [indiscernible] position continue to diversify even our engineering activities in addition to transportation, automotive and aero. So that we will then continue on the one hand side with the current portfolio, and we will even bring our technology portfolio that is what is even represented by this Indian entities here closer to the and life science clients, and it is not only then the acquisition that we have made with assystem care in the Life Science business, we even see that with the acquisition that we have done with the state government organization. We will see that we continue to generate synergies between all the different capabilities that we had in our portfolio. As we've even seen a significant part of the Life Science business will be data driven going forward.
All right. And just one small extension on that. So how long would you think it is late for the acquisition and the synergies to flow to the Indian entities or the Indian group?
At the moment, we are integrating this life science business. It has to date business activities in France and in Switzerland and in Belgium. So first wave is definitely in the first half this year to integrate it with our French customers. And then from the second half, we will even then see how we can even bring the portfolio of our existing slated portfolio to the life science customers. And then from 2023, we will even then see on how we even then explore new opportunities in the market. And with these 3 ways that we have defined there or between 6 and 9 months, we will even seen that synergies probably more in 2023, but we will already start to see them probably in the last quarter of this year.
Thank you. Ladies and gentlemen, that was the last question for today. I now hand the conference over to the management for closing comments.
Thanks, Margaret. Thank you so much for all the questions. It is quite interesting and thanks for all your interest shown in our [Foreign Language] results. I looking forward to seeing you all in the next investor call or. Before that, hopefully, if we get the NCLT clearance in the call for the model discussion as well. Thank you so much once again, and stay safe, take care. Thank you.
Thank you. Bye-bye.
Thank you. On behalf of Expleo Solutions Limited, that concludes this conference. Thank you for joining us, and you may now disconnect your lines.