Ramco Systems Ltd
NSE:RAMCOSYS
Ramco Systems Ltd
NSE:RAMCOSYS
Price:
367.55 INR
1.28%
Market Closed
Updated:
May 16, 2024
Section:
Earnings Call Analysis
Summary
Q3-2024
Q3-2024
Stabilizing Revenues and Net Loss Reduction
The company has stabilized its quarterly revenues at $15.51 million, with a flat trend from the previous quarter, while reducing net losses from $5.72 million in Q1 to $3.13 million in Q3. Operational efficiencies and cost management initiatives have realized approximately $5.6 million in annualized savings. Recurring revenue grew to $9.8 million, marking six quarters of consistent growth and a 9% quarter-on-quarter rise in the pipeline to $138 million. The Aviation Maintenance, Repair, and Overhaul (MRO) segment generates about one-third of revenue. Despite previous one-time write-offs, management now anticipates a 4 to 6 quarter turnaround, focusing on a healthy balance sheet and profitability.
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Ladies and gentlemen, good day, and welcome to Ramco Systems' Q3 FY '24 Earnings Conference Call, hosted by DAM Capital Advisors Limited. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Mr. Anmol Garg. Thank you, and over to you, sir.
Thank you. Good evening, everyone. On behalf of DAM Capital, we welcome you all to Q3 FY '24 conference call of Ramco Systems. We have with us Mr. Abhinav Raja, Whole-Time Director; Mr. Subramanian, CEO of the company; Mr. Sandesh Bilagi, Chief Operating Officer; Mr. R. Ravi Kula Chandran, CFO of the company; Ms. Gayatri, VP Finance; and Mr. Vijay Raghavan, Company Secretary.I'll now hand over the call to Mr. Abhinav Raja for his opening remarks. Thank you and over to you, sir.
Good evening, everyone, and thank you for joining us on our third quarter earnings call. Your ongoing engagement and interest in our journey is very much appreciated. As many of you are aware, we've been undergoing a strategic reassessment and a focused effort on turning around the company over the last few quarters. Our commitment to innovation and a strategic focus on select range of product lines and investment in automating our development processes are core components of our turnaround strategy. And these efforts are bearing fruit as reflected in our performance over the last few quarters.We closed the quarter with revenues of $15.51 million, maintaining the momentum in the second quarter, where we posted revenue of $15.48 million. It's important to note that while our revenue has remained flat, we have seen a promising reduction in our net losses. These have decreased sequentially from $5.72 million in the first quarter to $4.73 million in the second quarter, excluding the onetime expense and write-off of $13 million and now in Q3 to $3.13 million in the third quarter.This trend is a clear indicator of our turnaround efforts. And we are confident of the sustained improvement in the forthcoming quarters as well. A key factor driving this positive trend has also been one of our cost reduction programs implemented over the last -- since the beginning of the financial year. This initiative yielded approximately $5.6 million of savings on an annualized basis for the current year, contributing to an improved financial health and operational efficiency.With this brief summary, I would like to now hand over the call to Sundar who will provide you a more detailed insight into our quarterly performance and our strategic road map going forward.
Thank you, Abhinav, and good afternoon, everyone, and thank you for joining in this call. Let me quickly take you through the Q3 performance. We are continuing on our path of significant turnaround, simplifying and strengthening our business. Our focus remains on ensuring product quality, product quality implementation with healthy financials. We have recently secured strategic partnerships with prominent services firm, both Deloitte India and BDO. These partnerships will blend the Ramco's advanced payroll platform with the vast consulting expertise and services offered by the partners, establishing a benchmark for the global payroll excellence.With this, we expect the growth to be led by platforms and subscriptions. As mentioned earlier, while the revenue is at $15.51 million, a very important aspect to know is the positive trend in the recurring revenue. Our recurring revenue for Q3 was at $9.8 million. And from -- which is a movement from $8.72 million last year at the same time. It was a movement of more than $1 million in just a year's time.This marks our sixth consecutive quarter of consistent growth of our recurring revenue, which is very healthy. Our quarterly order booking stood at $7 million. This is primarily attributed to deal decisions, the prospects moving to the next subsequent quarter.While that is one reason, the other reason is also we have repriced some of the deals upwards. And so that as part of our deal tightening process, we have repriced the deal. And in addition to that, we have also some deals. We have dropped some deals that did not fit into our new qualifying criteria. The criteria with respect to the size, the product segment or the market, we have dropped those deals.This is, again, as part of the turnaround process. We have instituted a tightened deal review process and that has really helped us to do these 2 things. So we concluded the quarter with a healthy unexecuted order book of $180 million. This will translate into revenue in the next 3 years, thereby giving us a good start to the next quarter.Our cloud orders that are primarily subscription-based SaaS solutions, we continue to grow at a healthy pace with a 59% of our revenue recorded from cloud and SaaS customers. In addition, there has also been a healthy pipeline growth. We added an additional $138 million to our pipeline in Q3, which has been a growth of 9% quarter-on-quarter.More importantly, we are excited to announce the modernization of our flagship HR and payroll solution, a product enriched with a decade of intellectual property and innovation. Rebuilt from ground up on new cutting-edge technology stack, this AI-powered solution features a server-less, distributed in-memory architecture. This evaluation not only signifies our strategic focus on key product lines, but also sets a new industry standard in efficiency and performance. We are excited to bring this modernized offering to our clients and our partners, leveraging our rich history to shape the future of HR and payroll management.In closing, I want to mention that our investments in technology and innovation continue to be gain results. As our turnaround strategy unfolds, we are expecting a stronger growth and improved results in the coming quarters. Thank you.Yes, back to the operator.
[Operator Instructions] First question is from the line of Manan Poladia from MKB Securities.
First of all, congratulations on posting a good set of numbers. Sir, my first question is with respect to this turnaround that we have currently executed and the write-offs that we took the previous quarter. I just want to understand directionally, say, for the next 4, 8, or 12 quarters, how are we thinking about our business? Are we thinking about doing more of HR and ER services? Or are we also intentionally growing the MRO segment?
Yes. I think these are the twin focus areas with HRP kind of a horizontal market, where we have -- where we do have a global presence, where we do have partners. And we are also launching our new [ tech-sac ] in a couple of days. So that is an area where we do see a tremendous amount of growth opportunities. And we do have the solutions to really exploit those growth opportunities. That is #1. The MRO is a very niche area and it's a very deep area. We will continue to be growing this area. But the number of customers that you would see in the HRP and the number of customers you would see in aviation would be vastly different. That's an area of specialization, the other is one of the areas of modernization. So we will focus on these 2 segments on growth.
So just as a follow-up, my focus on MRO comes from the fact that there has been significant news flow of new MRO bids opening up in India and another MRO business coming into India. So I just wanted to understand the industry structure that whether we will be a onetime supplier and we'll have an annual contract? Or is it basis how much MRO happens basis our software that we will have a larger chunk of their wallet share?
That is something we can't really say that at this point of time. But we have to understand 2 things; a lot of MROs are coming to India now. That's a good thing for us and we are a wholly made in India software. So that is a very good place for us to be. And -- but having said that, the number of prospects we look at is a limited set. We don't want to really go wide and everywhere in the world to really look for the MRO customers. Our solution is really deep. And based on what the opportunities that we see in the market, we'll keep growing it. So again, if you look at our MRO, we do have -- there are many different areas are f there. One is the Airframe MRO is #1. And that we have fairly a lot of large customer base and a good footprint.The second one is that on the component MRO is where we have a good specific solution for that. And that is something that we have implemented in select customers.The third one that we are doing right now, building out at this point of time is engine MRO, and which is a very, very specialized. It is a very deep specialization in that. And that is at this point of time that is being implemented. That product is soon really being completed. And we will focus on these 3 areas.And these 3 areas, we expect these 3 areas to have a tremendous potential. And we are in the right place at the right time.
Sir, my second question is with regards to the depreciation that we put on our books every quarter. So I think that is a very large amount. And my understanding is that it is not replacement CapEx. It is just depreciation from old assets that have been sitting on our balance sheet. Could you give me some clarity as to what part of that depreciation I should pencil into the replacement CapEx for our own equipment?
Manan, we capitalized the R&D expenditure. And we every quarter $2 million plus. And this keeps on getting added to the balance sheet. And we depreciated over 10 years. So the amount of capitalization is more and the amount of amortization is less so that it gets added to the other side.
So not all of it has to be replaced, right? It's just old R&D that is being depreciated on our books.
Correct.
And what would be our annual R&D spend right now?
$9 million, $9 million to $10 million.
[Operator Instructions] Next question is from the line of [ Uday ] from Eco Invest.
Congratulations for a good set of numbers, first of all. My question is how many percentage is the revenue from MRO segment in the sales this time? And going forward, I understand you have a strategic tie-up with General Atomics. So are you in conversations with Hindustan Aeronautics? I read somewhere that you are already in conversation. So I just wanted to understand that further.
So Aviation, if you look at it, it is nearly 1/3 of the revenue comes from the Aviation segment, which is MRO. What was the next question?No, no. So we don't have -- we have a very small footprint. We don't really have anything large.
And sir, going forward, as you rightly said that you are launching something else in MRO, the engine component. So I mean, in what scale it can jump the MRO segment?
Can you say that again?
Sir, you just said that you are launching some new version of the MRO software, right, MRO segment. So I just wanted to understand, right now, its 1/3 of your total revenue. But what would be the future revenue out of MRO segment? And what would be the profitability in the MRO segment?
Yes. In terms of the MRO segment, if you look at the component MRO on the airplane, those products are really ready. And again, the products, it keeps growing. But where we are building out at this point of time is the engine MRO, which is very specialized even within the MRO at this point of time. So we do see a lot of opportunities. And that is why we even decided to invest it in the first place. But it will be very hard to really quantify the kind of growth that we would see there or to put a profitability number there. But what we believe is that our -- some of the repricing that we have really done in some of these areas because we know that our software is very valuable and it has got a good value in the market. It adds a lot of value to the customer base that we have. So we are very pretty certain about it. So we think that the returns will be pretty good. But at this point of time, we are not making anything into our forecast.
Sir, you cannot quantify it. But you can say it can double or triple in forthcoming quarters. Can you give guidance in that side?
But that is also quantifying. We wish for those things to happen very quickly. But it's all quantifying. We don't want to really get into that.
Sir, you did this onetime provision in last quarter. And the commentary at that time was that it is done to make the company in the profitability. But still, we see the loss. So when can we expect to get company in profit? The next quarter, the quarter after that? Do you give -- can you give any idea about that?
So the onetime provision is what the -- onetime write-off is something that we did last quarter. That is something that has been accumulated and what we are doing, every quarter, we are looking at $2 million is taking a hit. Instead of that we decided to do a complete clean-up, which is what -- something that we did last quarter. And along with that, we have also taken some of the revenue reversals, which are also pending. So that we are really cleaning up the, our this thing, our book, so that it is clean going forward, that is one.The second thing is that additional provisioning we have taken this quarter is that this is something that we did that even in the last quarter. We have a claim from one of the aviation customers when the contract got terminated. And that is the provisioning that we have taken in the last quarter and we are also taking it in this quarter.And we are continuing our discussion with the customer at this point of time. And we hope to really finalize the settlement sometime by -- during this quarter. So if you really look at our bottom line numbers, even if you look at the EBITDA number and also the net loss numbers, you can see a steady increase of -- decrease in the net losses and getting into the profitability.Depending on the nature of the deals that we really find and the kind of optimization turnaround efforts we have put in place, we would like to get into that pretty soon. But we don't know how soon, that is something we don't know. For the entire turnaround, we have put, from here going forward, we are looking at another 4 to 6 quarters for a complete turnaround. Certain things can happen early. Certain things can come late. But that should be -- maintaining a very healthy balance sheet is one of the fundamental aim to run a profitable business. So for that, we are taking all actions at this point of time.So if you go through our balance sheet, you can also see a steady improvement from last quarter to this quarter.
Next question is from the line of Vivek Kumar from BESTPALS Research and Advisors, LLP.
Sir, my question is, you are talking about that you're confident about the turnaround. So if I can ask, now that you've been in the company for 1 or 2 quarters, so if you can give a broad description of where was the problem in terms of, is the product the problem? Is product market fit the problem? Is distribution marketing the problem? Or getting the right customers was the problem? And how are you going about cleaning this, is my first question? Because that helps us understand what actually went wrong and what is your diagnosis and what are you trying to -- because it is very confusing because in the order book…Next, my second question is that the order winning is now $7 million per quarter. Don't you think getting back to profit will be much more delayed because now your pending order book will keep on falling. And I'm not able to understand this -- the revenue. This is my second question is, when revenue -- because in the last quarter, you said there are many good big deals that we are signing and they are getting postponed.So the 2 questions are, first is what was the actual problem with Ramco? Is the product by itself and we are working on the product or market fit or marketing or wrong customers? Where did we go wrong? And what is your diagnosis now that you're fully entered and counted?And second is this order win, sir. If the order wins are so low, then turnaround will get more delayed, right, or my understanding is wrong?
Yes. Very, very 2 good questions. So let me answer the second question first and then first question later. The second question in terms of the order book, again, it is because of the delays, as I told you it has been delayed. And many, many customers have delayed signing the orders. And some of the deals have been also large deals. And typically, if you really look at it, one is that there is a macroeconomic situation, so many customers, though our order value may be small. But in general, they have really moved the procurement in the next quarter, to the next financial year. That is something that we are really seeing.And second thing is that aviation is, again, a slow-moving industry. So, all these deals are really coming from aviation as such. And they move from one quarter to another quarter, that has happened. So none of these deals have been kind of been the large deals that we are really talking about are being lost or they have been shelved. They are kicking, alive, and they are still talking to us. And the customers are -- see, if we look at the global market, right, the interest rates have really gone up. With the interest rates going up, the customers are also looking at what kind of interest that they have to really service if you write the new order. So they're also delaying this a little bit. So that is one factor.The second factor, what we have done, which also means, is a good segue to the next question is that also the reason being is that one of the fundamental things we look at why we are looking at the implementation quality and what we do with the product market fit. We thought that we should really look at what happens first.If you go to the first -- the first and the foremost is that what kind of deals that we are really signing. And one of the things I really looked at it and they look at a lot of deals that have been signed in the past and things that have been working or not working at this point of time. It's a lot of things pointed into the kind of deals that we really signed and the kind of contracts that we've got in.So the fundamental thing we did is that we instituted a good deal review process, where we look at that, a few things we look at it. Whether the deal, what the customer wants, that should fit into our product. Is there a 90% fitment? Or is there a 90% fit, that is #1.This is the area where we want to be. For example, we will be very good in logistics. But we want to really restrict it to Australia. If somebody from make it in USA or [indiscernible] for a logistic deal, earlier used to be basically is not really good.So based on the criteria with respect to the size of the market or the product and the deal value, we disqualified many deals. That is something that we have really done. That is #1.Second thing is that we add a lot of value to our customers and because of our products is very rich in our IP. And when the richness in the IP is not reflected, because it was reflected in our order books, but it was never reflected in our pricing.The customers that we thought -- we found that the customers were paying a lot less. So many deals we have really looked at those deals and gone through those deals and seen the kind of value we deliver to the end customer and then we have repriced some of these deals up, not down, up.So that repricing also takes you into another round of negotiations. That was something that we are doing. So it is -- we think that it is a temporary phenomenon in terms of customers postponing the deal. That is one thing which we are seeing in many cases in the industry.But the second is something that we wanted to happen. We deliberately said that we will price the deal higher because of the kind of value that we are adding to the customer. And that has gone into the further round of discussions with the customer at that point of time. But on the whole, the repricing that we've not seeing any kind of strong pushbacks.Generally, customers have been kind of okay with the new prices that we are really doing. So these are the reasons. So we think we are in a very good place. But at the same point of time, we will also redouble our sales and redouble our marketing. That would really help the overall in terms of order booking.
Sir, my -- my second question was if you're winning such low amount of deals and profitability will never be there because we'll never win [indiscernible] it will be not even 4 to 6 quarters. It will be much beyond because unless your deal value goes up a lot, how do you turn to profitability? That was why I was asking because it was $7 million, $10 million. So it would take a really long time for us to really start getting back to previous highs and from there going, right? Is my understanding wrong?
No. You're partly right to think that doesn't come much later, because if we look at our unexecuted order book, it is at about $180 million. So that is not going to see immediate impact in terms of the revenue that we raised during the quarter. What can really impact us in this quarter is that if the license revenue goes up, license is always a lumpy revenue when it comes to directly fixed book, which happens in case of aviation. Some of the aviation deals are lumpy revenue. That can really move up and down.But given that most of the revenue that we are getting has moved into the subscription-based thing. So we don't really see an immediate impact to the revenue. When you don't have an immediate impact to the revenue, which we – and while we are making improvement and improving the processes, adding both the automation for the productivity, you will see the bottom line order automatically going up.So currently, we are not seeing any threats to both the top line and bottom line, because the current -- the unexecuted order book is fairly healthy for us at this point of time.
So can we go on the first question, sir, what was your diagnosis? And where do you think that goes lacking? And why are you confident that you can turnaround? Like where is the confidence coming for you? Because and what went actually wrong?
Yes. So one of the -- apart from one thing I told you is that we were signing deals where that were really suboptimal for us, that is #1. #2 is that I think this is something we addressed even in the last quarter's investor call. We are going into the areas that where we were not really too comfortable with, some of the new areas, for example, the areas in logistics, in some areas. So we said we will cut down this logistics BU. And we will say let us -- we will focus on in Australia and New Zealand, where we are doing some good work. We have not expanded into other areas. These were initially, if you really look at it, earlier the diagnosis was that we were going into too many areas and getting into a lot of new build-outs, that we were not really doing. So we said we will stop the investment in building out the new areas, particularly in things like logistics, ERP, and SRP and focus on the markets where we are good in, #2, and which we were not doing it earlier.And third is that we improved the deal qualification, which is something I spoke about. That is #3. #4, look at how is the implementation efficiency. Are we really meeting the customer deadlines that we are really committed to in [indiscernible] new contract with the customer? Are we doing it with the right amount of people with profitability?So all the financial metrics we are looking at. So we are really doubling down on all these aspects and looking at all these aspects at the same point of time. And we have instituted weekly and biweekly and monthly reviews to look at many of these metrics. So that we keep monitoring things that we are doing rigorously.
So when do you see order bookings picking up, sir? Substantially it should be a few years away or a few quarters away from your understanding of all your organization?
I think the kind of delays we are seeing, maybe it will be a few quarters. I don't think it is going to be few years. It may be quarters, not years. That is what we're beating because the market has got a knack of bouncing back. And I think it should be a few quarters away. That's what I think.
And which products do you think you will now -- because now there will be new priorities, like is it payroll, what in logistics and aviation, what, all depends. So you're also opening a lot of subsidies. What is your new search going forward in terms of where do you want? Where do you see both demand and where do you want to establish yourselves? So if you can throw light on what will drive the demand on the order book in the next 1, 2 years?
Yes. So see, in terms of what we are doing at this point of time, we are looking at the areas where we have established presence and where we can quickly implementing. We have a good subject matter expert desk and we have an established client tech. That is what we are looking at. So by that cut, we see the HR and payroll is going to be #1. As we said that that is an area that has been really growing really fast. And that has got around close to around 50% of the revenue comes from that area or which is less than 50% comes from that area.We are launching a very modern technology stack day after tomorrow. That is something that we are revealing day after tomorrow. And we have signed up partnership with both the Deloitte and BDO because they looked at our solution, they liked it. They think it is a partner friendly. And they think that they can really go to the market with what they have. And it will be a good addition to their payroll services. So the #1 for us is HR and payroll.The second is that on the aviation, we told you we have -- we are recognized as a product. Our product is recognized as a special one in the aviation industry. That is the second area. And the third area where we are very strong in where the customers do see a tremendous amount of the value in our products, we'll go to the cement ERP, the ERP for the cement companies, that is something that we are really good. And it is also cement is also part of the larger group's DNA. And we are very good in the solution that we have. And those are the 3 areas that we will really double down and invent. But that really doesn't mean that we are shutting down the other areas.We are really focusing, sharpened our focus on few select markets and few features in those particular product sets. So we will be opportunistic in those areas. So we are not shutting others down. There'll be opportunistic. But we are really bullish about these 3 areas.
Next question is from the line of Manan Poladia from MKB Securities.
Sir, my question is with regards to this new partnership that you've spoken about with Deloitte and BDO. I just want to understand what is the scope of this partnership first in technical terms and fundamental terms? And secondly, what kind of additional business or orders are you looking to generate from this partnership? I understand that you cannot give me guidance, but if you could just give me ballpark numbers or internal projections or something of that sort, that would be great?
Both internal projections and ballpark numbers are all guidance and I can't really give you, sorry, no number. But look at these services, look at these, they're all really global organizations. They are in the top 5. And their customers are really vast across the globe and that is the reach that we get from them. And remember, we have also moved from the product space, which primarily on-premise product to the cloud-based platform. So we are a platform play. And given that platform, they can really make it as part of their services. And they can give it to their end customers.So when our [Technical Difficulty] so beyond that, I can't really say that. But again, this is all at the inception stage at this point of time. We have signed up those partnerships that we have been talking to some customers through them, that is happening. And we are also launching our new payroll engine the day after tomorrow. And we will get to know more about it as we go forward.Currently, today, if you're asking me, I'm both optimistic and bullish. They are equally optimistic and bullish.
Sir, could you give me some sense as to, especially in this payroll software business, when will we independently sign a client? Usually what is the deal size like? And how does it fluctuate depending on organization size or sector, et cetera? If you could just give me some color on that.
Yes. Look, it depends upon the geography and the headcount. But typically, we are seeing in the range of $1 million plus in the multi-country payroll opportunities is the deal size. And our target is to increase this outgoing by increasing the headcounts and multi-country. I think from that perspective, it is more of the recurring revenue we are looking for. And most of the recurring revenue growth we have seen is by increasing [indiscernible] and that will accelerate now. Deal size for -- depending upon the developed countries, if it is, then 5,000 to 10,000 headcount will be $1 million plus. That's the rough where you can look into color of deals and revenue in that size.
Also, 2 more questions. One, on our current order book. In what time frame would we look to execute the order book that we have outstanding, #1. Secondly, sir, considering all the orders as well as the pipeline that you have, what would you say is your estimate for how our recurring revenue -- recurring revenue flow should shape up in the next, say, 4 to 8 fiscal -- 4 to 8 fiscal quarters, sorry?
Yes. Currently, the $180 million or so just give the indication and which is 3 years, that will be 3, 3-1/2 years that will be consumed. So that is current order booking will be consumed in 3 to 3-1/2 years. And fast revenue growth and the recurring has been around 12.5% if we consider over the last 12 months. At least, that said, that rate we are seeing and we are trying to accelerate that.I think we won't be able to give how and where it is, but that is the past, that is what we see. That is where we are and we would like to improve and we hope to do that. Yes.
Just one question, this 12.5% is the same currency? Is this in dollar or are you saying in rupee terms?
It is in dollar term. Yes, on the number what we have given is in dollar terms.
Yes. And also, if you look at it, Manan, is that all the partnerships that we are signing, the deals that we are seeing around in the past models. See, we have shifted around 50% to 60% of the company from the license to SaaS, right? So more we go into the platform-based model, more we go to partnerships. And that side of the growth is fueled is recurring revenue that always remain quite heavily. So -- and that is something that has been growing under the [Technical Difficulty].
I'm so sorry, sir, your last couple of lines got cut out. There was some network issue, I think.
[Technical Difficulty] launching, which is a modern technology platform we are launching, these 2 things will really help us through the year, so it is as simple as that.
Next question is from the line of Rahul Jain from Dolat Capital.
Congratulations on improved performance. Sorry for harping on this question again. But I still could not gather exactly what precisely caused the moderation in the deal win in this quarter. Is it the net number, which looks lower, based on some adjustments we might have done to the past wins? Or this is the net new, is the one which we've got lesser signed during this quarter?
Management, your line is not audible. Sir, you're not audible. Please, unmute your line. It seems that we have lost the line for the management. Please stay connected while we reconnect them to the call. Thank you. Ladies and gentlemen, we have the line for the management reconnected.Sir, we have Mr. Rahul Jain in the question queue.
I know this has been asked earlier as well. But I'm still not able to figure out the exact cause of the moderation in the deal win. Is it some adjustment that we take to the deals, which we might have won in the past to a lower number? Or this is a net new, which is a lower number this time?
It's a net new, Rahul, that is a lower number this time, because as I told you earlier, some of these things have been moved out either through this quarter or the next quarter. And some of the deals that we really disqualified those deals based on the pricing constraints. So we have done that. And some of the deals we have really repriced it, which is some of the other vendors have also done it earlier. And we have really used it. And we have repriced some of the deals. And we are in advance stages of discussions for that.
So any specific reason why we might have done this repricing all of a sudden? Is it likely we have reworked on our cost model or the profitability that we would like to work? Was those the cause of the reason for this repricing change?
Partly, yes, partly it is that. And even the license fees we have really increased. These are all increased. No decrease has happened. And license fees, we -- if you really start looking at our license rate, is something that we have not really increased for a few years. And we standardized it and give the license, that is #1.And the same thing goes for the subscription too, #2. And 3, for the implementation, we have been trying to be very competitive, but we have not really baked into some of the customer-specific things and the cost of fee also had gone up significantly.So in terms of implementations also, we have given the new pricing list. So it is primarily increasing the -- revising the cost, the price approach to the customers so that it really reflects the value that we provide to the customers.And in addition to that, Rahul, the other thing maybe you'll be able to appreciate is that, traditionally, this is something that Ramco has done for many years, is that you sell the licenses for a year. And then you go into the fixed rate model for implementation. And this fixed rate is one of the reasons why we have had many other problems, because fixed rate we need to be able to understand the requirements fully well or the customer should not feel the requirement and the customer changes the requirement. They are -- if there is a delay in their side, what we need to really do is that we -- we keep burning the cost.So what we have really done is that we have moved away from the fixed rate billing that we have done and move into the timing material. So primarily, the licenses are different. The contract for the implementation will be on the time and materials, both are at the higher pricing. So we have really rationalized our financial model so that it mirrors the existing market sentiments. That's what we have done.
Just one more aspect to it, with these revised pricing on the AMC side, is it only relevant for the newer customer or we may also do it for the renewal cases whenever they come for the existing base?
We are doing it for both. Newer customers, absolutely, there's no problem, because we increased it and go to them and then have the negotiations. Then the existing customers, we have to tell them, we are telling them this is our new pricing. This is our new pricing. And this is how we are signing up the new pricing there. And there, there is some resistance because they're used to really paying some old price list for a long period of time. So there is some resistance there. But since we're processing with the revised prices. That is something that we do.In addition to that, we are also giving a lot of services, whatever services we do extra for them. Those things we are creating a healthy change requirement, CR system, so that we go to the customers and say, any extra value that we provide, any extra work we do for them, you have to pay us more. So we are really tightening all the levers so that we get paid right for the work we do.
And of course, some of these things are very, very relevant from a long-term perspective and also for relevance of the business perspective. But is it safe to assume some of these things would cause near-term disruption in terms of some client attrition or stuff like that? And so we should bear in that -- bear in our mind that the growth on a like-for-like basis may not be so exciting in case that option is not that encouraging.
We are not seeing that. As long as we give better quality of the products and service them well, the satisfaction is very high. We are not seeing the customer exiting because of that. We are not seeing that yet. But there could be some customers, maybe a very, very low single-digit percentage that could really happen. Where the deal, there's -- our revenue from them, if is not material, we are okay with it. But there will be a little bit of collaterals, damage that could happen. So far we have not seen anything.But having said that, many customers have really agreed and they are really looking at increased prices. They are not -- though they have –- they said there is a little bit of push back when we increased the AMC price. And then they finally come to an understanding and agreed to that price, some price in between, they agreed to us. So generally, the customer pushback is not too high. That has not really happened.The third thing is that the software that we do, in terms of the value, the functionality is very rich and the ERP, HRP, aviation, they're all very sticky products. If nobody wants to really take one ERP and move it to another vendor or move from one payroll system to another payroll system. They don't want to do it for a minor delta in terms of the pay. And these are all very large customers. Some of the customers are really marquee customers. And they have hundreds of billion dollars as their revenue coming in. And this is not even a material delta to them. So as long as we position ourselves right and make the request in the right way and throw the value to the customer, that is not -- we should be okay. And that is what we are seeing. We were really scared initially, but things are okay.
Secondly, there was this note [indiscernible] customer obligation provision that you also mentioned about in your commentary. So is it largely done within, if you could explain the precise cost for this?
So this is – we were with HAECO. This is, I mean, which is primarily when we got into this, they terminated the contract. And this is an aviation customer. They terminated the contract. And after termination, we got a claim request from them. And once the claim request came from them and we started negotiating with them, that happened sometime last quarter. But we thought we could convene, I mean, we should really complete the dissociation process by last quarter. But we could not do it because of their own internal changes -- their own internal changes and also then a lot of people went on New Year holiday, a lot of those disruptions happened. So we continue to talk to that customer to see a good way to settle it. So given that it has been another quarter, so we have taken an additional provision at this point of time, so that it really puts us in a -– primarily we have been just conservative on taking that one more, some more provision so that it doesn't really hit us when the actual settlement happens. But the discussions are in the -- at an advanced stage.
Just to understand it, sir, we have booked the revenue for the same customer. And at the same time, we see certain concern on potential recognition of it and that's why we have provided it again.
No. We have really raised the invoice. We got the money also from the customer, that has been done and that has been returned. What is the quantum of the money that we are going to refund, that is something that we are discussing. And we don't want to take the legal route, nor the customer wants to take a legal route, because at the end of the day, we end up paying for the loss. And meaning --and so we are discussing where we want to really settle and that decision is happening.
So what would be the net impact of it versus what we might have booked and what we might return? What could be the net impact for us?
Yes, almost whatever is needed. I think our estimation is that it's completed in this quarter. There's no further major. I think the way it is going today, what we see.
Yes, and last one for [ RKC ]. About this not to account charge that we have mentioned on the employee cost of some ESOP, is it a net negative number, which is like it has helped us in the employee cost reduction? And is there more to come in there?
See, we are taking the ESOP cost. And we are also accounting the reversals on account of exit from the company. The employee that we have left and they could not [indiscernible] auction. Whatever charge we've already taken, we are reversing and there is a net figure, what we are saying.
So is there more such to happen or -- and what could be the jump on a sequential basis, on a -- or what is the normalized run-rate? Is it simply this existing cost and add up to that, which will bring us to the actual run rate?
There's not the, I think, there's a jump, Rahul, there's may deduction because the model, how it charges, the charges loaded offering to a 3-year vesting period. So the loading is mainly on the first year and second year comes down, third year is still lower. And it can become still lower if are some reversals on account of the separation. So it's not go, unless we issue fresh grants to a lot of people.
Yes. And outside of this particular aspect, do we see a moderation in this cost stability given the need for the people that we might have?
So we keep on granting, in fact when we have granted today to a couple of employees on a mid-basis. It'd not be on a large-scale basis. The [indiscernible] one time we did the last time as a retention because we were certain that the industry was struggling with heavy attrition, so do we? And what we did is a onetime big amount of ESOP, which we granted, which we are not planning to do. There will be a small amount of grants, but there is not going to be any large amount. So what RKC said, the write-off would -- only should be coming down, it should not be increasing.
Just last bit, on the demand side, what's your sense? Is there any pocket of weakness you see from a macro perspective or any tailwind that we see in a specific market or the product line?
No, I think Sundar explained that. I think the -- I would say the demand side, it is not decision side, we are seeing a bit of delay and quarter on decision being pushed. That is across, we have seen it in -- across geographies, in fact. I think people are cautious in some of the decisions. But with demand and I think activity on what we are working, that we have not seeing any drop. In fact, our inflows for the inquiry and other things are also unstable or increased book. It's only the question of decisions which we saw a bit delay in this cycle.
Next question is from the line of Deepesh Lakhani from Dolat Capital. As there is no response from the current participant, we will move to the next question. Ladies and gentlemen, that was the last question for the day. I would now like to hand the conference over to the management for the closing comments.
Thank you, everyone, for attending our Q3 earnings call. I think as Sundar also mentioned, our turnaround sort of process is underway. And we're happy to see the improvement in our bottom line. And we remain positive that the order booking also should pick up in the coming quarters. And we look forward to connecting with you guys next quarter again. Thank you.
Thank you. On behalf of DAM Capital Advisors Limited, that concludes this conference. Thank you all for joining us. And you may now disconnect your lines.