Infobeans Technologies Ltd
NSE:INFOBEAN
Infobeans Technologies Ltd
NSE:INFOBEAN
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Good afternoon, everyone. Welcome to Q3 FY '22 Earnings Call of InfoBeans Technologies Limited. I will now hand over the call to Surbhi Jain from InfoBeans to do the formal introduction and get this earnings call start. Over to you, Surbhi.
Thank you, Asha. Good afternoon, ladies and gentlemen. Welcome, everyone, and thanks for joining this Q3 earnings call for InfoBeans Technologies Limited. I request all the participants to please mute their mic. The results are available on the InfoBeans' website. In case anyone does not have a copy of the same, please do write to us. We will be happy to send it to you. To take us through the results of this quarter and answer your questions, we have today with us, Mr. Avinash Sethi, Co-Founder and CFO; Mr. Siddharth Sethi, Co-Founder and Managing Director. We will be starting the call with a brief overview of the company's performance, and then we will follow up with the Q&A session. [Operator Instructions] I would like to remind you all that everything said on this call that reflects any outlook for the future, which can be construed as a forward-looking statement, must be viewed in conjunction with the uncertainties and risks that we face. These uncertainties and risks are included, but not limited to, what we have mentioned in the prospectus filed with the SEBI and subsequent annual report, which you will find on our website. With that said, now I'll turn over the call to Avinash Sethi. Over to you, Avinash.
Thank you, Surbhi. Thank you, everybody, for joining this call. Let's start. Go to the next slide, please. So for the sake of new participants, InfoBeans is a digital transformation and product engineering company. We create innovative software solutions to our customers to solve their complex business problems. We are present across the globe in places like U.S., Europe, Middle East and India. Next, please. This is a quick glance of InfoBeans. We have a company founded in 2000, 22 years in the making. 75 active clients. So far, we have a 200-client list as of now, but 75 are active of those. About 1,400 people team now. 10 are active Fortune 500 clients, so we have a list of 17-odd clients but 10 are active as of today. Financials of last year, we did INR 196 crores in FY '21. PAT reserves, cash levels are pretty good. And then we've been growing at 43% CAGR year-on-year. Several awards were received -- several partnerships and awards that we have received in the past. We are particularly proud of Great Place to Work, Asia's Best Employer and Dream Companies To Work For awards. Next, please. A quick time line from 2000 to 2021. In the process, we went public in 2020 -- 2017 and then migrated to NSE Main Board in 2019. In the same year, we acquired a company called Philosophie in the U.S. And then in '21, we did our first buyback and also acquired a company called Eternus Solutions, which is truly a Salesforce Platinum Consulting Partner. Next, please. These are some of the esteemed clients, which are marquee names: Facebook, ViaTech, IQVIA, Ola, InMobi some of the Indian companies as well. And then a couple of them are Fortune 500 companies, and really I can't disclose the names here. But these are the customers who are trusting us for offering them with the business solutions, with their regular business needs. Next, please. Board of Directors of InfoBeans are the 3 partners at the top and Mr. Santosh Muchhal, Mr. Sumer Bahadur Singh and Mrs. Shilpa Sahoo as independent directors. So this is particularly I'm very proud of, I'm very happy and very blessed that we have a very experienced core team and they've been there at least for a very, very long time. Now is the next set of founders from Eternus and Philosophie, who are also part of our core team. They've been helping the strategic direction of the company and executing those vision statement that we make together. Next, please. Key indicators that we've been growing in last 4, 5 years, a CAGR of 23%. EBITDA margins in the range of 22%, 25%. PAT margins have been significantly jumped up in FY '21. CAGR of 35% on the net worth side. Dividend payout has been healthy last year. So next, please. Balance sheet performance that's existing -- so this quarter, we did an operating revenue of INR 71.6 crores as compared to INR 44.2 crores in the same quarter last year, 62% growth year-on-year and 26% growth quarter-on-quarter. Same goes with the other parameters where we've been growing happily -- healthily. EBITDA has grown 22% year-on-year and 40% quarter-on-quarter. Same goes with PAT, 18% on year-on-year and 45% quarter-on-quarter. So we are doing a PAT of INR 17 crores this year as compared to almost INR 12 crores last year -- last quarter. This is a decent comparator between Q-on-Q and Y-o-Y. If you look at the revenue numbers, it's INR 74 crores total revenue, 40% up year-on-year and 14% up quarter-on-quarter. PAT is 18% up quarter -- year-on-year and 45% up quarter-on-quarter. Whereas another important number is the Q-o-Q -- quarter-on-quarter revenue growth in USD terms is 27%. Next, please. This is an interesting data point. If you remember the first slide, we talked about revenue for fiscal '21 is INR 196 crores. We touched almost that number in the first 9 months of this year, so pretty solid growth here. And other numbers are also in line. EBITDA is also growing well and PAT is also growing back. So here are the comparatives for the year ended March '21 as well as the Q-o-Q and Y-o-Y actual numbers. INR 71 crores is the revenue from operations. Total revenue, INR 74 crores as compared to INR 44 crores and INR 53 crores corresponding numbers of December 2020. Similarly, if you look at EBITDA, it is INR 23 crores versus INR 19 crores in December '20 and PAT, INR 17 crores versus INR 14 crores. So PAT margin has dropped slightly from 27% to 23%. But as I keep telling that we have a good margin at this point in time. But with the increasing cost structure right now, we'll probably come down on those numbers. Next, please. So some of the investors were seeking a breakup by geography, by business and by segment. This time, we tried to bring those data points to you. If you look at the revenue by geography, it is 77% comes from the U.S. There is a significant portion that has come up because of India. And let me tell you, we have been working with Indian customers very recently and the 3 prominent names that I can recall, which is Byju's and then Ola and then InMobi, third. All 3 of them, each one of them is a unicorn and they are growing very, very healthily. So India business was insignificant in the previous year. But in this quarter, this has jumped up very, very quickly to a higher number. And also looking at subsidiaries: Eternus and PGI, they're also contributing to the business recently well. One thing to note here is Eternus, only December month is counted here. It will -- for all 3 months, it will be in the March quarter where we'll have all 3 months of Eternus coming to us because our acquisition happened on 30th of November. So the consolidation number will only include December as a month of this quarter. Similarly by segment, we've seen a significant jump in digital transformation business. So we have this 60-40 kind of a -- or 55-45 kind of ratio. Now this has jumped to 73% versus 27% in product engineering, so quite a change here. Next, please. So these are the growth strategies that we've been following year after year. And thankfully, it is yielding results for us. Building capabilities and the new technologies, building growth, building a team organically, investing in our people, investing in the right kind of clients and building relationships there. All of those are helping. Lastly, organic growth through acquisitions. We have done 2 acquisitions so far, which is also building up the momentum very, very well. This is a typical IR slide where we've been telling that we will be growing. We're doubling ourselves every 3 years. We certainly want to fast pace that further from here. And if you look at the CapEx for the last 5 years, these are all healthy numbers in 26% to 35% -- 36% range. So quite -- another important data point is we have a decent pipeline, which is visible for next 12 months, over $30 million. Yes, that's pretty much it on the important data points here. Some of the key updates on the Fortune 500 clients, Waste Management was recently signed in this quarter. There are multiple unicorns in our database and our portfolio from India, which is interesting. Integration with Eternus is going on. Philosophie is going to be actively involved from January 1, so it will not be showing as separate business anymore from next quarter. Investment continues in people and practice. And another important update, it is not for the last quarter, but to be onboarded 60 more fresh graduates in January 2022. This is the market data as of 31st of December. Next, please. Can we go to the last slide, please? So I just wanted to highlight the pie of promoters. The promoters are not diluting their shares. It is the ESOPs which is causing the dilution for everybody, including regulators. So just wanted to highlight that fact. Next, please. Yes. That's it. So thank you very much. We are open for question and answers. I have Siddharth also with me, so we'll be happy to answer your questions. Please feel free to put it out and then maybe the worker can coordinate with all the sequence of questions. I'll turn it over to Asha, who have a bunch to take care of.
Thanks. Thanks, Avinash. We'll start the Q&A session now. [Operator Instructions] First question is from [ Hetal Sonpal ].
Congratulations on a great quarter. So my question was with regard to the contribution of the acquired companies seem significant. I think it was 24% in the quarter out of that INR 72 crores?
Yes.
Does that mean...
Or 33%, yes.
Correct. So organically, are you also beating last year numbers if you're not supposed to consider these numbers?
Definitely, yes. So yes, we've been growing organically as well at a fast pace. But I don't know if I have a number here because of InfoBeans itself. So see one of the ways to look at it is InfoBeans and PGI are together for quite some time. For us, the inorganic contribution is only 8% right now. So that number is around INR 6 crores. If I remove INR 6 crores out of INR 74 crores, I'm still at INR 68 crores. And last year, I did INR 64 crores, which is including in terms of other income.
You're including Philosophie as well when you're...
Philosophie is organic now, right?
It's organic already. Okay. Okay.
Because we acquired it in 2019, so it is organic. So inorganic component in this slide is only INR 6 crores.
Right. The second point was with regard to the breakup between digital transformation and product engineering. My experience tells me product engineering is more niche but low margins. Is that true?
I would say it is -- this is -- actually 2 ways. We have some clients where there's a low margin and then we have clients where they're good margins. So it depends on when we signed up the deal. If it was signed up at early, let's say, 4 or 5 years ago, the margins were a little bit lesser because the rate revisions cannot happen so frequently. Might have been last year or in the last 24 months, their margin would have been better. So [ that is balance ].
The growth in digital transformation is because of the acquired companies' contribution coming in, which would mean basically you're not losing clients in product engineering, but digital transformation, there the company is growing.
We're not losing any client. It is -- that is happening on all sites, organic and inorganic.
Thank you, [ Hetal ]. Next question comes from the line of [ Varun Agarwal ].
Congratulations on a great set of numbers. I just want you to know what are the areas in which we are looking for new acquisitions?
I think the acquisition strategy has been well defined, and we're still on that path. So I keep sharing that, that there are -- there's an aspiration for InfoBeans. The aspiration is that we want to work on cloud side of it, which is using ready platforms like SalesNOW or Salesforce and UiPath. So these are the 3 areas where we are looking for active -- actively looking for these companies. We are also looking for user experience as a specialized skill set, and we want to enhance some capabilities on those. So these are the aspirational areas that InfoBeans is very clear and very focused on. We are also very clear that we don't want to go into things like product companies or SaaS companies or e-commerce companies or digital marketing companies or infrastructure play. We don't want to do that. So I think one more area which I forgot was automation. So we are happy to go into RPA kind of companies, which is UiPath-related companies. So that way, we have a very clear focus areas. And that's where we have seen if you have been following our journey, it takes over time to figure out the right candidate and take the plunge. So we've been very choosy about where we want to go.
So anything is blockchain...
Just to add to that, we think that would help us traverse this product engineering and digital transformation journey better. That would be a good fit, has a very general tone. And in that, Avinash has mentioned so many other things. But those -- all of those things help us do our existing services around product engineering and digital transformation better, maybe a new generation of technologies, maybe expanded scope of technologies and so on. So this is the overall rationale, very high-level rationale.
Is blockchain included in that?
Yes, blockchain is definitely included in that.
Thanks, Varun. Next question comes from the line of [ Neerav ].
A couple of questions. One is that in the organic piece, you've seen very strong growth. So if you could just guide us, explain to us in terms of what has driven this sharp revenue increase? Because over the last couple of quarters, you've grown at about -- in dollar terms about the 9%, 8%. So anywhere between 7.5% to 9% quarter-on-quarter. And this quarter, if I were to exclude the Eternus acquisition, you've grown at about 14%, 15%. So what would have driven this sharp revenue increase? And second question is regarding this new client that you've added on the waste management side. If you could just explain to us in terms of what would be the profile of work that you would be doing with them?
So [ Neerav ], thank you for coming on the call. I think the margin is -- sorry, the growth in revenue is primarily a factor of the demand and our ability to fulfill that demand. So one such example is we signed up with Byju's. And within 3 months, we have really increased the team size very, very rapidly to take it to $1 million-plus run rate. So we have been able to go aggressive. And I think I mentioned in a couple of last calls that we are willing to take this talent crunch battle aggressively and not really worry about margins but worry about the top line. So that strategy is playing out where we are able to grow organically. Plus, I think the other factor is also that the utilization levels have also increased for the business. So that is helping us. Siddharth, do you want to take the other question?
So Waste Management, regarding Waste Management. So Waste Management, we are building digital products for their internal consumption. Waste Management, as you know, is a very big organization, Fortune 500 and present in I think more than 160, 170 countries, in India as well. So we are trying to help them with their digital transformation products, especially using .NET and similar technologies.
All right. And just on the previous question. If -- so if we were to bifurcate the growth in the quarter between the top 10 core clients and others, so what would be that split? And going ahead, if you could share that number, share the split, it would be great. And sorry, one more question in terms of what would be the headcount for the company at the end of the quarter?
So we have close to 1,400 people now, including Eternus. We have added -- again, including Eternus, we have added more than 300 people in the last quarter. Yes. So on the split between top 10, I don't have the data right now. But all I can say is every other client is clamoring for people where they need a lot of work to be done. So demand is pretty high everywhere, including new clients, existing clients. And usually, I mean, obviously, this quarter might be different. But usually, we generate 90% business from their existing customers. So -- but yes, the point is taken. We'll put it down, and we'll try to give some breakup in future between new and existing clients.
And just one more. You said that you'll be adding pressures in the fourth quarter. Any number in terms of what would be your net hiring in the quarter?
So last -- okay, I'll tell you. So net hiring is going to be close to 100 plus between 0 to 1 year or maybe about 18 months kind of a window. So this sort of graduates, fresh graduates are 60 and we are going to add another 40 people between around 1 year kind of experience. So we are hiring in that band, so that the bottom of the parameter is supported. And for the year, we targeted more than 200 people.
Thanks, [ Neerav ]. [Operator Instructions] So next question comes from the line of [ B.A. Sharma ].
Congratulations for an excellent results.
Thanks. You've been missing for the last few quarters. Where are you?
Yes. So a couple of questions were there, but 1 or 2 are already answered, so I will limit myself to only 2 questions now. We have a treasury of INR 129 crores as of December. And I would like to understand what is the pending acquisition cost to be paid, assuming all the milestones are achieved? That's number one. Number two, what is the taxation implications on the profit, both at the stand-alone level and on the consolidated? If you can briefly explain that.
Okay. So taxation of what, taxation of...
Taxation of income tax, I mean, corporate tax, the profits generated by Indian companies and the profit generated by the overseas companies. So consolidated balance sheet, the P&L that you are showing tax.
Sure, sure. So I think we did mention during Eternus acquisition that the total cost is going to be INR 130 crores plus INR 20 crores as incentive. So out of that, we have paid INR 65 crores already and remaining is to be paid over 3.5 years. The INR 129 crores balance that you see in the cash and cash equivalents includes account receivables as well. And the taxation part that you talked about, so we are evaluating that right now. So Eternus is 100% taxation bracket company. InfoBeans still has a window where it become -- I mean, Eternus will have to pay taxes, which is all the [ biggest slab ] that at least applies to the corporate. So there would be some tax application there. But the margins are nowhere enough to cover for that kind of extra cost.
So in the P&L that is published, the taxation comes to hardly 9.5% or 10% of the pretax. So how is that calculated? On what basis? That was my question.
No. So that is because of the MAT entitlements that we have or the advance tax that we paid probably in the previous quarter, all of those adjustments. So we are a MAT -- I mean, we're still a MAT-paying company. And I think for the next 3, 4 years, we'll still be a MAT-paying company.
So we have a SEZ.
Yes.
Yes. You have a SEZ.
Yes. That's right. So we have a new SEZ also in Chennai, comparatively, as he said, started last year. And currently also our Indore SEZ will still enjoy some tax benefits.
So what part of Indian profit is going to be tax-exempt?
Nothing is tax-exempt. I think we still have to pay [ everything ].
So what happens is -- no, no. So I'll tell you. What happens is we have SEZ operation, and we have a non-SEZ. The SEZ operation is significantly large to still let us fall into a [ breakout ] where we have to account for MAT as a taxation. So that is where I think for the next 3, 4 years, we are fairly covered. So I would say, '25 -- until '25, we are fairly covered, 2025. Yes.
Next question comes from the line of [ Suresh ]. I think there is an issue, we will go to next participant. Next question comes from the line of [ Archit ].
3 things from my side. Yes. Firstly, on the margin. So I mean, I wanted to understand what led to the margin improvement this quarter given that the industry is facing supply constraints. And with that, if you can also answer what are the sustainable margins that the company is looking at? I guess, in the last call, you did mention a number of around 24%. So that's the first question.
Yes. I'd stick with our 24% target. We obviously [ under ] target. Anything more is better. I think the margin improvement has happened on 2 fronts. One is Philosophie has been doing well. InfoBeans itself is doing well because of the increased demand. And I think all the businesses, even Eternus is doing well. So with this all -- everywhere the margins are showing well because the utilization levels increased as well as the rate revisions that are also showing up in some cases. Not all, but in some cases. So I think it is a cumulative effect that increase in the revenue, utilization rates revise pricing, all of those are showing up. But I'm still not very confident that this will -- going to sustain for long. 25% is where we feel is a steady state that we are comfortable.
Understood. Second question is like there was a mention, I think, in the last [ PP ] that the company wants to double in every 2 years. So I mean, is that target intact? And what is the company doing differently which is going to lead to that kind of a growth? Maybe if you can also talk about what is the sales strategy? Are you expanding the sales team or maybe acquiring new clients, which should lead to that kind of growth?
So it is a combination of 2 things, Archit. We are growing organically. We're investing in our organic growth at various [ months ]. I think there's a slide with our growth strategies. We've been actively pursuing that. We went public in 2017. And in that, the first quarter -- in the RHP also, we talked about these growth strategies. We've been following those strategies, and we are seeing the results. Secondly, we have an active strategy where to go inorganic also. So a combination of both of these will work, and it has actually worked in the last 4, 5 years. And we want to continue to repeat what is working for us. So if you look at it, organically, we attempt to grow at around 20% year-on-year. Inorganically, we attempt to grow around 25%, 30% year-on-year. That is the ideal scenario. And if you look at the past numbers, we've been doubling ours sales every 3 years for almost 10 years now. So this [ strategy ] is working so far for us.
That's helpful, Avinash. And the last thing from my side, so it seems that the client concentration is a bit on a higher side. So I wanted to understand how strategic is InfoBeans is to these clients? And do you see a further scope of a wallet share gain with these clients, the existing top line clients, I mean?
This is Siddharth. Yes, absolutely. We are extremely critical to many of these top 10 clients, even Fortune clients. Let me say with utmost humility that we start working for some of them, some of the business lines might get affected. We are that critical. For the unicorns also, we are very critical. We are helping them as a strategic partner. For the logistics company that we're working with, we are very critical. We cannot be replaced easily in any of these clients. And in fact, our strategy is to start off small, but then when we enter a client, we make sure that we become critical to them. To the extent that we are internal champions that InfoBeans is doing this job, then nobody else should touch it. And this is not a phenomenon of only over the past 1 or 2 years, but this has been the case for the past 15 years of our journey, wherein we make a very conscious strategic effort to enter the heart of any clients that we've worked with. Having said that, we still have tremendous opportunities to grow in many of these clients that we have because we choose our clients in such a manner where the wallet share is something that we can grab. First of all, the wallet itself has to be large. And second, the wallet share is something that we should be able to target and grab over a period of 1 to 2 years. So lately, what we have been seeing is some of the work that we are doing, we are able to get to the $1 million mark or $1 million run rate in a few months or a couple of quarters at the most, which 2 or 3 years ago was maybe 1 or 2 years. So we have reduced that cycle as well.
[Operator Instructions] Next question comes from the line of Suresh.
If it's not happening, maybe you can write it in the chat and then we'll just answer on the chat.
Suresh, it is not happening. We are not able to hear you. We'll go to the next participant from the line of [ Ankit Gautam ].
I'm 22 years old and I've been your shareholder for the past 2 years and you have benefited me a lot. And this was my first share, which I researched and bought. So thank you so much, and congratulations to growing your business this wonderfully.
Glad to know that.
Glad to know that.
I just wanted to know what's the attrition rate in this quarter because this industry is facing much issue in this side. And in your slide, you said that you are investing a lot on each of your fresh employees and hiring and training a lot. So what's your spend on that? And what's your loss on attrition rate if many people are going away? And what's your target to maintain that attrition rate?
Do you want to take that?
So yes, attrition rate, we have to look at it -- and first of all, it's a very good question and the industry is facing it. But how are we tackling it, that is what the differentiator is going to be. If you go to either one of those slides where we have key team members, if you just take a closer look there. Where are we worried? We are worried when some of these highly experienced core team members think about leaving. But if you see here, the parameters for 14 years, 15 years, 13 years, 11, 12, 18 and more than that is only 6 that have been shown here, but 10 plus is actually even much more than this. I think it goes up to 200, 250 people who have been with us for so long and they have rose already in the organization. So the attrition level there is 0. Not close to 0, it's actually 0. That is something that we're extremely proud of. We are facing a little bit of attrition at the bottom of the pyramid or people who have joined in the last 2 years, where there's not experienced the culture of the organization because the offices are practically closed. And there is very less person-to-person interaction. And that is where there is some sort of attrition, but we are working very hard to ensure that, that attrition also is under control. And we are replenishing and training our resources very, very actively. So this is something that, of course, is an area [ we must have concern ], but an area where we never want to lose good people. But people who do not have affinity with the organization, do not understand the culture well, have not spent a lot of time, 6 months or a year, and if they want to leave for a better job, better paycheck, actually. I wouldn't say better job, but a better paycheck, that is where I would not worry too much if they have to leave for a better paycheck to get a 30% jump just after 6 months working here, there's not much that we can do there.
To add to that, we have over 300 people who have completed 5 years with us. That's a significant strength that we carry. And I think we're building on top of it. And the attrition rate has increased definitely. So I mentioned last time also, we are at 25%, which is pretty high but that continues. It is there for everybody. So we are building the bottom of the pyramid right from fresh graduates from the college versus hiring 1 year experienced people and then grooming them into the new technologies that we need them for. So plus there's a lot of planning and development for the existing team who are into, let's say, legacy. We are growing them into new ones and spending on their training and all of those [indiscernible] investment that we are making. I'm going to have it on top of my mind, but it is definitely in our, I would say, around INR 8 crores to INR 10 crores that we're spending only on training bench -- I mean, these fresh graduates learning and development.
I just wanted to add 2 more questions. Hello?
Go ahead.
Yes, sir. How far we -- what do you think are -- Happiest Minds, are we like -- are we seeing like Happiest Minds? So in future, do you think we can get a fee like Happiest Minds and we can be valued like Happiest Minds? And the second thing -- first, this one. And second thing, I just wanted to know that we have cash of INR 120 crores after the acquisitions and how many acquisitions we are looking for the next financial year?
We are happier than the happiest.
We have cash in the bank, and we are looking for acquisitions. There is no way I can tell you how many, if any at all. We are making our attempts. If it happens, it happens. We continue to make our attempts. So there is no way I can tell you whether I'm going to do 1 or 2 or 3 or maybe 0, I don't know.
Next question comes from the line of Altria.
So my first question is on your capital allocation strategy. I just want to know, are there any metrics you look at when acquiring a target, maybe like an IRR or a margin target? Or do you just look at filling up -- increasing your value proposition? Also relating to this -- relating to the capital -- I mean, the capital allocation, you've said in the past that you are not averse to raising money. So would you be -- if there is an acquisition in the future and you need to raise money, would you raise debt? Or would you dilute the shares? That would be my first question.
Speculative...
So yes, it is dependent on so many factors. We are willing to acquire companies, what we look at is the capabilities that they are bringing to the table. IRR is probably the last thing in my mind as to when -- because numbers can change dramatically. And we've seen it quarter-on-quarter, we've seen it in the business so many times. And if you're -- so we believe that if a team is good and the capabilities that they're offering is good, they are profitable, whether they are 10% or 30%, it will -- it is variable. What we are looking at is the quality of the team and the capabilities and whether it is fitting in our vision or not. So that is our focus. On the acquisition side, we are not averse to take debt but only a very small amount of debt. Secondly, the deal is attractive, the size is warranting more capital to be raised, we'll be doing that. So it is all subjective. It is hypothetical at this point in time. But yes, I can tell you that we are open to multiple combinations of and debt or fundraise or whatever.
All right. So I just had another question. So I noticed that the other expenses has actually reduced in the current quarter compared to the previous one. So can you just elaborate on that, please?
So a couple of things. I think the other expenses was a combination of spend that was done on performance bonus as well, which was a significant component. The other thing was, I think the -- if I look at the -- we don't have it here, but on the balance sheet on the P&L statement, it's is there. So one other thing probably is -- there was a [indiscernible] that we -- no, no, sorry, not that. [ Performance monitoring ], I think, is a major component that will contribute more than INR 2 crores, INR 2.5 crores of defense between these 2 expenses and between these 2 quarters.
All right. And also, I noticed in the last year's balance sheet and the P&L, there was around INR 10 crores of impairment in the intangible assets. So may I know the reason for that also?
So this is a tranche that we need to pay towards Philosophie as a last tranche, which was -- which is due in January now. So it was -- I mean, it was based on the targets. Their fiscal ends in December '21. So therefore, this was an intangible asset that we are -- not asset, I would say it is a liability to pay off this large tranche payment, which you asked.
Next question comes from the line of [ Rajesh ].
Congratulations, Siddharth and Avinash, a great set of numbers. Just first question is just on this P&L slide that you have. You're saying total expenditure, including tax and OCI. So I thought the tax will be below EBITDA, right? So am I missing something or just the labeling is incorrect here?
Absolutely.
Yes, I think on total expenditure -- yes, this total expenditure including all of that.
Okay. And just a suggestion on this slide, it will be helpful if you not include other income in your EBITDA calculation. Because if you think about it, right, your December '22 EBITDA percentage was much lower compared to this quarter if you take out other income and then calculate it. So just a suggestion if you can start not putting other income as part of EBITDA. Now on to my questions. Number one is, given the growth we are seeing, do you have a sense how much it's coming from volume versus pricing? And I'm just wondering if you don't have the data, are you able to get price hikes with your clients? So that will be helpful to know.
Yes. We're able to get price hikes on the clients. Our new rates wherever we go to a new client are much higher than what we were charging, let's say, even 6 months ago. And so volume and pricing, I think both are going hand in hand right now. So we have some pricing bar and we are getting work in significant volume. So our strategy, as I said earlier was -- as I said earlier also has been that we have to go to the heart of the [ patient ] and not stay on the fringes. And that is something that we've been able to do, and that has allowed us also to retain business, increase business and increase our rates.
Okay. And if I were to compare year-over-year, what has been the growth in the Philosophie business?
So Philosophie is doing very well now. I think the numbers, I wouldn't have any, but they -- on a quarter-on-quarter -- I mean, year-on-year quarter comparison if I do, they would probably have grown at, I would say, 30%, 40% because 2020 was a washout year for them. And that is where I think there's a slight technically leeway that I wanted to -- or maybe for the interest of the participant here, I just wanted to highlight that fact that if you look at December '20 and September '21 on the slide right now, the other income component was high in both the quarters because of the government grant that we got from the U.S. dollar. So that was a conscious call that we took as a company that we will not lay off anybody. And since we didn't lay off anybody, we made losses in the year 2020. And that is what was paid off by the government as a compensation. So it is within the plan, and that's where I tend to feel like it is more of a business -- [ incur a lot of ] business compensation, so to speak. Because if I were to not make those -- and to save those jobs, I would have not made those losses. And since the government is paying [indiscernible] back, these are squaring up in the sequence in both the quarters. So that is where my sense is that it is still a business-related stuff, and it is okay to have a part of that calculation. It's not a technical thing, but it is more of a business thing. And so I think the intent in the fair comparison will only have when we add these 2 things in place. [indiscernible]
Yes, yes. Understood. Understood. And I'll take it off-line with you. My second question was regarding this -- the practice areas we have. So are you seeing -- what kind of growth are you seeing in different practice areas? And relatedly, the acquisition that we have done, are you seeing more growth on the Salesforce side incrementally?
We are seeing good growth on Salesforce side. We are seeing good growth on ServiceNow also. But at this point in time, we're not doing a practice-wise segregation and tracking at growth. But on the anecdotal version, yes, I guess we are seeing growth on these practices.
Okay. And then my last question is what is the percentage of revenue from Fortune 500 companies and the percentage of revenue from the unicorns?
Again, we don't do that.
We don't want to do that, yes.
Yes. We don't do that. But yes, it's hard to see if there is a significance -- or there is a data which is of significance, we just have to share that.
Yes. No, I think it's important because what it highlights about our business is that for a small company that we are, we are really punching above our weight. And I think it's worth highlighting that point.
That's a good point. That's a good point. You're absolutely right. I think part of it is also because of our strategy. Being a small company, it's very difficult to get into a Fortune 500 company. In fact, it takes months, if not years, to get into one of those. But if you look at our strategy, our acquisitions and our internal strategy, if you look at Philosophie, it allows us -- because it is a design company, it allows us to get into a Fortune 500 company. If you look at our core competencies on cloud and digital transformation, that also allows us to get our foot in the door. For example, technology like Salesforce and ServiceNow. They have been big enablers for us to get into some of these companies. And again, you would not -- probably not see this too much with companies our size in this space. And this has been a conscious effort not only during COVID, but even before COVID, this actually happened before COVID. So all of those strategies are now paying some good dividends.
No, I agree that...
Yes, we'll start to slice and dice in those formats and try to see if we can come a bit more meaningful segregation here.
Yes. No, I'm very impressed that you're adding Fortune 500 clients and that roster is increasing every quarter or the revenue from that particular client base is increasing. So congrats again, and all the best.
Yes. So I just want to add for the benefit of all investors the strategy here is, as I said earlier, to go into larger wallets. If you -- I mean this market is not going to last forever, right? This real [ day to day ] IT services market. But what it will help us do is if we are able to grab all of these larger clients then when the market is not so hot -- not today, but let's say, 2, 3, 4 years down the line, 5 years down the line, we'll be able to then mine these accounts and it will be a much more sustainable and profitable venture going forward. So this has been a very conscious effort on our side.
[Operator Instructions] Next question comes from the line of [ Priyank ].
So my question is on employee cost. So if we look at the employee cost on a stand-alone as well as consolidated basis, as a percentage of revenue, the employee cost has gone much lower compared to the previous quarter. So just wanted to understand how should I see that number. Is it the operating leverage kicking in or something -- other thing? Or -- and how sustainable that thing is?
So I think -- let's not worry too much about the employee benefit cost in last -- let's say, the last 2 quarters and the future 2 quarters because it is not benchmarkable. So many moving parts here. It is actually confusing us all the time. I don't want to further increase that [indiscernible] There's too many moving parts going on, right? So I think probably 2 more quarters and things should stabilize. That is when there would be a better way to do it. I keep seeing that employee cost is increasing. It is increasing dramatically. And the good component is also getting into contractor costs, which is not into employee benefit expenses that you see on the sheet. So it is not a valid comparison there, to be very honest.
Okay. Okay. And on a stand-alone basis, I see there is a good increase in other expenses compared to previous quarter or the December '20 quarter. So what is driving that thing?
There's an increase or a decrease?
Increase.
Stand-alone basis.
And on stand-alone?
Yes.
So I think the other expenses typically decreased because of the travel cost, because of the facility expenses, because of -- travel started, right? So we have people traveling across the geographies. So that was one primary reason. It might be a few more small reasons, let me just quickly check if I have the data handy. [indiscernible] are you there online?
Let us come back to this...
This is for stand-alone, right?
Yes, yes.
I think travel is a big component. The other component is a consultancy fee for Eternus acquisition. And then, I guess, sales and business promotion is another expense, which has increased. Yes, I think that's the -- it's not much of an increase, I would say. It is probably INR 1 crore or so, not much. The recruitment charges are so much these days and they're also adding up. Yes.
Okay. Okay. Got it. Yes. And in the other income side, there is no like onetime income?
We are done with that. We are done with other income [indiscernible]
Next question comes from the line of [ Prajul ].
Can you hear me?
Yes.
Yes.
And I just wanted to know like you have plans to hire quite aggressively the fresh grads and less-experienced guys. What's the strategy you have in place to train them? Do you have any internal training capabilities? Or do you depend on an external provider, which adds to your expenses?
Okay. So we do both. We have internal training programs that we conduct. We also have external programs where we need expertise of a particular kind. And our team is busy in delivering projects. So they can't afford their time otherwise we'll lose billable revenue. So we do both.
Next question comes from the line of [ Berit ].
Am I audible?
Yes.
My question is regarding the Eternus. I want to ask what amount we can expect it to add to our top line on an annual basis?
So we mentioned that last time. For fiscal '22 -- sorry fiscal '21, '22, the target was INR 60 crores. For '22, '23, the target is INR 80 crores. So that is their projection there given to us, and we are going by that.
INR 6 crores for single month. Okay. Okay.
Next question comes from the line of [ Raghav ].
I have only 1 question. Do you have any strategy of going into India, Tier 2, Tier 3 cities where [ employee ] cost will be less but we have plenty of engineering colleges and talent pool, right, because most of them migrate into [ high-cost interest, let's say, Bangalore ].
We're in a Tier 2 city [indiscernible]
Yes, I know. So you have other Tier 2 cities like now -- I don't know where. You have a huge population, talented people, but eventually they had to move out from their house and actually work in Bangalore. Obviously, they get paid more, but I think there is some potential which probably IT companies can leverage to further reduce their employee cost to remain competitive. What are your thoughts on that?
We'll definitely explore it. I mean we are always constantly looking out for good talent. In fact, we came out with an advertisement in [indiscernible] I think it was a couple of weeks ago. We're constantly exploring it at this point, we are not very interested in spending money in setting up a physical office. But if we're able to get talent, then we'll definitely take it from anywhere and everywhere. In fact, we're also looking at countries like Bangladesh and Philippines to get talent from there.
Next question comes from the line of [ Jaikishan ].
First of all, congratulation to [ promoter ]. It's really decent numbers, the company is reporting. Yes, the question is that I just wanted to understand your perspective in acquisitions, like have you set up any parameter like we'll acquire like 50% of our size company -- I mean INR 50 crores, INR 60 crores or we are open to acquire a company which has like the size or the revenues more than us. So any -- those kind of -- what is your -- like what do you think when you acquire on sizing perspective, revenue size?
Yes. Usually, I think you're right. The comfort factor for us lies, let's say, from 20% to 30% kind of range of our size. So if we are a $50 million company, we probably would like to acquire a company which is $10 million to $15 million. So that's the comfort.
Okay. And one -- another question I would like to ask, what kind of service you provide to InMobi? Because that company itself is a digital company, right, kind of IT company. So what service you provide to them?
Yes. So we provide product engineering services.
Okay. And last question...
A company like that will be needing help in order to...
We work with Facebook also.
Yes, yes, yes. And last question, sir, when you say 24% sustainable margin, that includes other income or it's a pure EBITDA margin?
Again, it is more of a technical thing, but I would say it includes other income.
Next question comes from the line of [ Ashit Kothi ].
Congratulations, sir. And my question is if you could give us some insight on to the revenue breakout in terms of business segments. What are business segments you are servicing, industry segment? That is one. And second is in terms of like AI, e-mail, blockchain and digital transformation. So these are the major areas where you are operating supposedly. In that area -- how much each areas are contributing to your revenue?
So Ashit, there is a breakout slide on the presentation. We don't work in AI/ML, we work in digital transformation and product engineering. So that segment is already there slightly. 73% of digital transformation and 27% of product engineering.
But I suppose AI/ML, something has been mentioned in the slide, which...
Sure. No, we don't know that.
One sec, you can -- and [ reason for not ] buying buyback in April '21, I mean say not too many opportunities for acquisitions were available.
No. Ashit, you didn't like it?
No, it's not a question of liking it. It's something like liquid cash, which you have and there are no better opportunities available to acquire and grow business, then you go for buyback.
So Ashit, again, this is a technical thing. We did a buyback and then we acquired a company, okay? So INR 10 crores was the money that we parked for buyback because we had a good profit last year, we wanted to reward our shareholders. And after that, we did a buyback -- sorry, we did an acquisition in November. And we did signed [ the term ] somewhere around July, August time frame. So there is no such thing. And again, the INR 10 crores was too little to make a conclusion that there is not a good opportunity, I would say.
And Avinash, I would like to add one more thing. We paid the dividend as well.
We paid the dividend, yes.
Yes. So that is nowhere interlinked.
Next question comes from the line of [ Richa Agarwal ].
Asha, we will have to call it off. We are 5 minutes over our budgeted time. I will take the last question, and we'll just close it.
My question is regarding this breakup of digital transformation and product engineering. So as an analyst, I want to understand what implication this mix has. For example, had it been 50-50 or 30-40. What would be an ideal mix? What kind of implication it could have on the overall margins?
Honestly, no idea, Richa.
Okay. All right. So basically, wherever the industry is growing, you are trying to capture the opportunities and that's the strategy. Is that the right way to understand it?
It is natural [indiscernible] effect. There is a lot of Salesforce work coming in. We will continue to do that, right? It's a lot of customers demanding the services that we offer, we'll build on top of it. So at this point in time, everything is selling.
Right. And sir, contribution of top 5 clients in this quarter, if you could share that number. And maybe going forward, if we could have some kind of continuous representation of what kind of client concentration.
Yes. So top 10 customers gives us more than 70% of the revenue. Top 5, I would say that is at 45%. That is top of my mind.
This was the last question for today. I'll hand it back to management for closing comments.
Well, thank you very much. The questions have been pretty good, and we'll try to take your feedback and upgrade the presentation and kind of information that you're seeking. We keep a lot of those things. I will try to improve every time. Thank you for staying invested. I was happy to note that the first investment that [ man ] made was InfoBeans. I'm happy that he was here, we got to talk to them. Feel free to reach out to us through investor relationship or through on the website. There's an e-mail that you must have got, you can respond to e-mail address mentioned in that e-mail itself. Feel free to be in touch, and look forward for your continued support. Thank you very much.
Thank you very much, everyone. Appreciate it.
Thank you, everyone. Please take care and stay safe. This ends the call. Thanks.