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Ladies and gentlemen, good day, and welcome to the Saksoft Limited Q4 and FY '20 Earnings Conference Call. This conference call may contain forward-looking statements about the company, which are based on beliefs, opinions and expectations of the company as of the date of this call. These statements are not the guarantees of future performance and involve risk and uncertainties that are difficult to predict. [Operator Instructions] Please note that the conference is being recorded.I now hand the conference over to Mr. Aditya Krishna, Chairman and Managing Director, Saksoft Limited. Thank you, and over to you, sir.
Thank you. Hello, and good afternoon, everyone. First and foremost, I hope you're all keeping safe and healthy, and our best wishes to all of you. On the call, I have with me my senior colleague, Mr. Niraj Ganeriwala, our CFO from the team; and SGA, our Investor Relations advisers.We are living in an unprecedented time, where health and wellness for all needs to be put before anything else. Black swan event of COVID-19 has taken a huge toll on life, not just from medical point of view, but also economically. As the world fights this situation as one, we at Saksoft are striving to ensure the good health of all our employees and delivering the best to our customers parallelly.As a digital transformation solution provider, we support many core and mission-critical applications for our customers. As a part of our well-rehearsed business continuity plan, we had enabled work-from-home to all employees through individual IT tools and connectivity solutions. Whilst work-from-home has been a part of the work philosophy at Saksoft, the swift move to 100% work-from-home model is a testament of the agility and responsiveness of our entire organization. The crisis management team at Saksoft comprising of senior leaders across functions are ensuring business-as-usual in this pandemic situation.Our employees remain committed to deliver outstanding business solutions and services to our clients. We have institutionalized an extensive client-connect process to ensure that we work very closely with them to address and help them in any other areas that we could in these difficult times.The company has evaluated impact of this pandemic on its business operations, and based on its review and current indicators of future economic conditions, there is no significant impact on its year-end financial results.The extent of the impact of COVID-19 on the future operational and financial performance will depend on certain developments, including duration and spread of the outbreak, the future impact on the customers, employees and vendors, all of which are uncertain and cannot be predicted at this point in time. As the impact of COVID-19, if any, on the future operational and financial performance of the company could be different. From management's estimates in this regard, the company will continue to closely monitor any changes as they emerge and report them on a timely basis.The IT industry is going through a rough phase as many institutions are postponing IT spending. However, at Saksoft, we are well placed since the work done for our customers is predominantly not in the discretionary spends, but rather in budgetary spends to keep the lights on. For FY '20 as a whole, on the geographical front, our key markets of U.S. and Europe witnessed softness in demand on the back of global uncertainties and Brexit fear and now COVID pandemic. However, I'm pleased that we were able to maintain our margins in this competitive environment with increased focus on delivering from our centers in India and the U.K.With our presence in verticals such as of health care and e-commerce and service offerings focused around cloud and digital transformation, we believe that we are poised to grab good opportunity going ahead.The pandemic has been an eye opener for the organizations who have lacked foresight on the digital transformation. Any organization enterprise who has not transformed itself digitally is the one which is having the largest impact of the pandemic. We have increased our marketing efforts in reaching out to the existing and new customers to help them transform digitally in these challenging times.Over the year, we have added new clients and have renewed with a couple of key clients. On the cost front, due to prudent cost management and investing in the right areas, we have been able to stabilize our margins despite modest growth in revenues. With humble pride, we would also like to inform that we have not lost any major customer so far.Now I will request Mr. Niraj Ganeriwala, our CFO, take you through the financial performance for Q4 and FY '20.
Thank you, Aditya. We will now move to the financial performance for Q4 and FY '20. On the revenues, the company recorded revenue of INR 92.90 crores during quarter 4 FY '20 as against INR 93.67 crores in quarter 4 FY '19. The revenues for the entire financial year FY '20 stood at INR 358.78 crores as against INR 358.05 crores in FY '19, recording a marginal growth of 0.2%. The muted performance was on the back of softness in key markets of Europe and U.S. due to global uncertainties and Brexit.Moving on to the operating EBITDA. The EBITDA for the quarter stood at INR 13.85 crores as compared to quarter 4 FY '19 of INR 17.03 crores. The EBITDA margin stood at 14.9% for quarter 4 FY '20. The EBITDA for the full year FY '20 stood at INR 61.03 crores as against INR 59.16 crores in FY '19, an increase of 3.2%. EBITDA margin stood at 17% as compared to 16.5% for FY '19, an increase of 49 basis points. The EBITDA for FY '20 is higher by INR 5 crores on account of adoption of Ind AS, resulting in an impact of 1.4%. The sluggish growth in EBITDA is on account of increase in the headcount during the year, combined with a marginal drop in utilization.Moving on to PAT. The profit after tax for the quarter stood at INR 9.80 crores as against INR 10.64 crores in quarter 4 FY '19. The company recorded a PAT margin of 10.5% for quarter 4 FY '20. PAT for the full year FY '20 stood at INR 38.65 crores as against INR 38.21 crores in FY '19, an increase of 1.2%. PAT margins for FY '20 stood at 10.8% as against 10.7% in FY '19.The impact of currency movement on our revenues in PAT for FY '20 is not material. The revenue split by geography, America contributed 50% of our revenues. Europe contributed around 27%, while the remaining 23% was from APAC and other regions. When compared from FY '19 to FY '20, America's contribution has dropped from 55% in FY '19 to 50% in FY '20. This was mainly on the back of realignment of certain contracts with a few of our top 10 customers from U.S. to APAC geo.On-site offshore revenue mix was 49% on-site and 51% offshore in FY '20. Our endeavor is to increase the concentration from offshore revenues. Revenue split across verticals. For FY '20, FinTech and telecom contributed 29% and 20%, respectively, while logistics, retail and health care and public sector contributed 10%, 13% and 11%, respectively. Saksoft has 6 customers of $1 million-plus and 7 customers of $0.5 million-plus in the revenue range. The total employee count stands at 1,258 employees, of which 1,121 are technical, and the remaining 137 are support staff. Utilization level of the employees, excluding trainee, stands at 83% for FY '20 as against 84% in FY '19.On the balance sheet side, the debt position has significantly reduced by INR 12.48 crores from INR 40.93 crores as on March 31, 2019, to INR 28.45 crores as on March 31, 2020. In addition to this reduction of INR 12.48 crores, we have made a further cash investment of INR 7.65 crores in acquiring the final tranche of DreamOrbit, making it a wholly-owned subsidiary of Saksoft effective July 2019. In spite of the above debt reduction and incremental investment, our cash position on March 31, 2020, is INR 42.93 crores, which is higher than INR 40.05 crores as at March 31, 2019. The return on equity is 18.6% for FY '20, and the return on capital employed is 24.7% for FY '20.That concludes my update, and we will now open the discussion for Q&A.
[Operator Instructions] The first question is from the line of Viraj Mehta from Equirus.
Congratulations for good set of number. Sir, first thing, in the revenue that you have reported this year and this quarter, what is the constant currency growth and -- that we have reported?
So Viraj, you're looking specifically for the quarter or we are looking at for the full financial year?
Both. Because number -- I mean, even fourth quarter, our numbers were flat or decline of 1%. For the full year also our number was flat. So if you can give me both the numbers?
So for the full year, there is no impact on account of the exchange, if you say between '18/'19 and '19/'20 there is no impact on revenues on the exchange. Between quarter 3 and quarter 4, that is an impact of around 2% on the revenues.
Okay. And sir, if we talk about this first quarter and second quarter, when we talk about reduced spending, how much impact do you see in our top line in first and second quarter?
Viraj, we are not seeing any reduced spending from our customers as we speak today. I don't know where you got that feeling from. What we are seeing is prospective customers are obviously taking some time to reengage and respond because they have other priorities given the pandemic. So as we speak today, we don't see any reduction in spending from our existing customers.
Sure. And sir, if we essentially just look at our EBITDA margins this quarter, they have been affected due to support and third-party charges growing significantly higher from INR 20 crores to INR 26 crores. Just wanted to understand, is there any one-off here? So will our EBITDA margins revert back to 17%, 18% from Q1? Or is like 15% the new normal? If you can throw some light.
Sure, Viraj. This is Niraj. Quarter 4 was a little of a one-off situation. If you see for the entire year, our utilization has gone down by 1%, which was -- which had gone down slightly higher than quarter 4. So we did have certain employees who are incrementally on bench. And in addition, we had to take certain third-party contractors because of which there was an impact on the EBITDA. We do expect that in quarter 1, which is the April to June quarter now, it should improve.
And sir, what will be your guidance for growth in constant currency and rupee dollar because, obviously, rupee dollar has depreciated by around 7% this quarter. So what would be your guidance for dollar revenue and rupee revenue this year?
Viraj, we don't give any guidance, especially forward-looking. The only thing I would say is that times are tough, company has done well in the last year. We are not, as we speak today, that severely impacted as maybe other businesses. So the focus of me and my team will be to grow the business as fast and as rapidly as we can. And I can't say anything more than that.
Sure. And sir, just one last question. Now that…
I'm sorry to interrupt, Mr. Mehta. Sir, there is a lot of echo from your line.
I don't know, ma'am, that -- is it better now?
Sir, can you use the handset mode while speaking?
Just 1 second. Is it better now?
A little better. Sir, please proceed.
Yes. So just, sir, one last thing. A lot of participants since last 1 year has been asking about a buyback. I mean, sir, now we have INR 40 crore cash on books. And our stock price is also depressed considering our intrinsic value of the business. If ever there was an opportune time to do a buyback, I do think this would be it. So this was just a suggestion from a minority shareholder, sir.
Understood, Viraj. But our floating stock is so low, we feel there is lots of value for investors to buy at this price. So -- and that's the sort of shareholders we're looking for. So I take your point, and the Board will definitely consider it.
The next question is from the line of Rajeev Agrawal from DoorDarshi.
The first question is in terms of clearing the [Technical Difficulty]…
Sorry to interrupt Mr. Agrawal. Sir, can you speak a bit louder? We're not able to hear you.
Okay. Is this better?
Yes.
Okay. My first question is, when I look at the various technology services from India, I think the commentary is sort of all over the place from being very weak, and they are not sure what will happen to somebody like yours where you are painting a pretty strong picture for your existing clients and not necessarily assure in terms of acquiring new clients. So what is giving us this confidence, which is enabling us to say that our revenue growth should be similar -- or you have not given that guidance, but you're giving that comfort that things should continue on a similar lines as what it has been. So can you give us some sense of what are your conversations like with your customers?
Yes. Our focus verticals are FinTech to be not confused with financial services organizations. So when we say FinTech, we don't talk about large banks. We generally don't talk about banks, which are facing a lot of headwinds in this pandemic. So FinTech is one of our verticals. The second vertical is transportation and logistics. The third is health care and the fourth is e-commerce. Now all these 4 verticals are customers, are SMEs, small medium enterprises. They are not large organizations, multibillion dollars who are always on cost-cutting and different -- they have different objectives. Our applications that we work with them are mission-critical applications, which are necessary for them to run their business.Now if we don't support these applications, their businesses will not be able to run. And that is where the confidence is coming from that in these 4 verticals and the fact that we're doing mission-critical applications for these customers, we don't, at this point, see any slowdown.
Got it. And is this sort of COVID situation giving the additional opportunity with these clients? Like are you seeing more request of your services from these clients?
See, that's where it's a little tricky because whenever something like this happens, especially this pandemic, nobody knows when it's going to end. So the first reaction every customer has is, let me spend what I'm spending now and what is essential right now. Let me think twice before spending more. And that's why I said earlier, I'm not very clear as to prospects and growth what that foresees for us in the coming quarters. I think with a couple of weeks and maybe a month, we will have a better picture.
Sure. The next question is, when I look at Saksoft, it has done pretty successful acquisition, right? And that has been our strategy to find niches and then try to go into those niches, which can grow. Given this situation currently, are you seeing better target for acquisitions and better price? And can you just talk about what you are seeing on the acquisition front?
You know it better than anybody else that the seller never reduces price. So expectations, I don't think, has come down. We are always looking at targets and the focus of my team and my focus and Niraj's focus will be to grow the business. Whether we grow it organically, inorganically, a combination thereof, growth is what matters. And we will do it without diluting capital. So that's what I can say.
Got it. Okay. And then lastly, in terms of the geographies, you mentioned that America was a little weak primarily because it was a reclassification of customers, right, from U.S. geography to Asia Pac, right? I think that was why there was a delta reduction of 5% in U.S. for the year and an increase of 8% in Asia Pac. Can you talk a little bit from a geography perspective, what you are seeing? And therefore, what your opportunities look like?
Our focus is, has been and will continue to remain the U.S. geography and the U.K. geography. We feel both these geographies offer us lots of opportunities of growth in the 4 verticals that we have chosen. So at this point, I don't see any need for us to change track or to change our strategy from a focus perspective.
Okay. So maybe just one follow-up there. The U.K. geography has been in the past, possibly had some impact because of Brexit and what is happening. What are you seeing there?
U.K. has -- you're right that U.K. has seen a lot of stress, but the U.K. government has also been very supportive of this pandemic. They were the first launch, what is called a furlough scheme, which gives employers a lot of flexibility in terms of retaining workforce and also paying them at a very cost-effective manner. So yes, business -- new business is stressed, will take time to build. We don't know what will happen. But I would say the U.K. government has probably been more responsive and better equipped than even the U.S. government. So in that context, we are in a better presentation.
The next question is from the line of Sachin Kasera from Svan Investment.
Sir, just one data question. I think you mentioned -- did you mention the full year constant currency growth? I missed that.
Yes, Sachin, we did mention, and we said that there is no significant impact on account of exchange for the full year as compared to the last year.
So basically, on a constant currency growth, it's more or less flattish?
That's right.
Any reason for why it was a flat year for us? Any client -- specific client issues or some verticals where you had the issue? Because most of the peers in the industry have reported between, say, 5% to 8% growth, including some of the leading ones.
It's -- Sachin, it's tough. It's a -- this is becoming a tough industry. Growth is always difficult. And you can never compare us with a Tier 1 player. We have to be -- we are different. So in spite of lots of efforts to grow, growth has alluded us last year. We are hoping that this year, we will be able to grow better.
That's fine. We can understand. But -- and if you would like to comment, what was the reason why -- I can understand that we may not be exactly comparable. And as you mentioned, we have been putting in lot of effort. And despite those effort, what do you think was the key reason we weren't able to grow? Is it that certain clients we face, certain loss of market share or something else? If you could just highlight on that.
One main reason was that one of our large customers started a captive in India. And that hit our revenues a little bit, and it took us some time to recover from that. So that is probably the only thing that comes to mind. Otherwise, like everything else, some business -- some customers spend less, the others spend more, and you were able to bring in new customers. Obviously, our -- we were not able to bring in new customers and new business faster than what we lost. And that's where I think the disappointment is there for us, for me and my team, which we will try to rectify.
Sure. And just so take it further, is it that this is what you had, in fact, budgeted also? Or is it that the -- when you started the year you were looking at a far better number and just because execution, we had certain challenges? Or some issues like this captive one that you mentioned, we ended the year with more or less flattish number? Or is that something that you had anticipated at the beginning of the year?
No, no, we definitely didn't anticipate it, we were expect to growth -- we were expecting to grow better than industry average, but we didn't. I mean, that's the truth.
Okay. No sir, my question is because last year, the industry had a still okay year, and we had certain challenges. And this year, the industry outlook because of COVID is definitely far more challenging. So in a year where when we are looking at above industry growth and despite the industry doing okay, we could not grow. What is that -- what gives you the confidence that this year, despite the challenges that the industry is facing, you should be able to show some growth? If you could just tell a little bit more about that.
Yes, I come back to always you need to peel the onion to understand if growth will come, is it reasonable to expect growth. So I come back to what I said earlier, look at our verticals, we have FinTech, we have health care, we have e-commerce, and we have transportation, logistics. Now take the case of health care. Our focus in health care is tele-health. Now will tele-health increase spending because of the pandemic? The logic is yes. Can we capitalize on that? I cannot say for sure, yes, we will definitely make every attempt to capitalize on it. So the same thing goes for e-commerce. The same thing goes for FinTech. So I think we are in the right place. Now maybe the pandemic will help us with more opportunities because considering that our services around digital transformation, companies that have not embarked on digital transformation have suffered the most. So they will definitely learn from that and spend more. So I think we're in the right space, the pandemic might give us opportunities, which were not there last year. I hate to say that, but that might be something that will help us.
Sure. And on transportation and logistics, you don't feel because that is supposedly one of the industries that could have been impacted? Or we are more on the logistics side, and that's why the impact will be far lesser?
Yes. When I say transport and logistics, I'm not talking airlines. I'm not talking freight. I'm talking trucks, mainly trucking, which has not got impacted because goods still have to move. And there is -- that business has not seen any downturn as of now.
Sure, sure. Any gaps you think in your sales and marketing…
Sorry to interrupt Mr. Kasera. Mr. Kasera, sorry to interrupt. May we request that you return to the question queue for follow-up questions? The next question is from the line of Vaibhav Badjatya from HNI Investment.
So in the initial remarks, you mentioned that there had been some reclassification from U.S. geography to Asia Pac. So just wanted to understand that if you look at the numbers from last 3 years, Asia Pac has shown substantial growth even in 2019 over 2018. So this reclassification impacted, which year? Is it both 2019 -- FY '19 and FY '20? Or it was just a 2020 phenomenon?
Vaibhav, so this has impacted only in the current year, which is FY '20. And when I'm saying reclassification, what I mean is there are some top 10 customers who contract with us from a U.S. perspective, but in the current year, they do have some subsidiaries and other entities in India. So they have split the contracts. And the same amount of revenue is now coming from both the India and the U.S. customers rather than only U.S. So that is basically the reclassification.
Got it. So now that explains the 2020 Asia Pac high growth. But in 2019, if you -- if I see the Asia Pac revenue number, which increased from INR 23 crores in FY '18 to around INR 55 crores, which is more than double. So what would you attribute this high-growth in 2019 -- '19 to?
That was another -- again, one of our top 10 customers, with whom we have a global MFA, and most of the revenues used to be Europe- and U.K.-denominated. They also have started giving business from their global centers in India. So that's where the APAC piece of it in the last year had grown.
Okay. Got it. And now coming on the vertical side, I mean you have always mentioned about FinTech, transportation, and I think e-commerce is included in retail and health care vertical. But if you look at the telecom vertical, the growth in telecom vertical has been quite good, I mean, so just wanted to understand as to what is driving this growth? Is it -- have we gained market share from customer? Or have you benefited from any consolidation in the telecom sector?
In the telecom sector, we work with a large telecom operator headquartered in Europe. And they went through a vendor consolidation and they selected 2 vendors, and we were 1 among the 2 vendors. So that has helped us sort of cement our position in that vertical with that customer.
But nothing to do with a couple of M&As that we have seen in last few years in India or abroad?
No. This is not a B2C telecom operator. It's a B2B telecom operator.
Okay. Okay. Got it. And the last question for me. So if we look at your cash position and you also have some level of debt on the balance sheet. So you have both cash and debt. And I believe that most of the cash is there in the subsidiary and the debt is the holding company, which is -- so is it -- are there any ways where we can use this cash to become gross debt-free also rather than having this inefficiencies lying around in the system?
Tell me, do you think it's better to have no debt?
So actually, it depends on the tradeoff of rate of interest, I'm not sure what is that both the numbers are, right? I'm sure we might be earning less on cash. And we might be paying more on debt in terms of rate of interest.
But actually to maximize shareholder value, you must have debt. I mean, that's our approach. As long as we don't have -- we're not excessively burdened by debt and we can easily service debt. And we -- you're right, as long as we can get debt not very expensive, it's always prudent to have some debt. So I would rather keep some cash with us for situations like this for a good opportunity to come from an M&A perspective than to have a debt-free business because I think a debt-free business just ticks a box for some analysts, it doesn't help the business.
So I understand if it provides us flexibility in terms of acquisition, then it's workable. Okay. And lastly, if I look at your employee cost, we're just trying to work around some numbers. So the employee cost that is there on a consolidated basis, which is there in the financial statement is around INR 181 crores for FY 2020. So if I want to derive a per employee cost, should I divide it with the number of employees present, which as given in the presentation, which is 1,258 or it -- or your -- or this number of employees does not includes -- or this number of employees includes subcontracting cost as well?
No. So you can divide it by the number of employees. The subcontracting cost would come in the separate line, which is the support third-party charges.
Yes. But this number of employees does not include subcontracting employees, right? Subcontracted employees, this 1,258 number of employees. Does this include subcontracted employees?
No, that does not include subcontracted employees.
[Operator Instructions] The next question is from the line of Keshav Garg from Counter Cyclical Investments.
Sir, in fourth quarter, sir, our stand-alone sales went up by around 20% Y-on-Y. Sir, but consolidated basis, sales are marginally down. And sir, even the -- our stand-alone operating profit is INR 9 crores and consolidated is INR 11 crores. So basically, we did very well on stand-alone basis, but not that well on consolidated. So basically, there has been degrowth from our subsidiaries, both in terms of revenue and operating profit. Sir, so what's the reason for that?
Keshav, as I had mentioned a little bit earlier, in terms of the realignment of the revenues from the Americas to the APAC geography, so this top customer who had resigned contracts with us splitting the contract between U.S. and India. The India piece of the business gets accounted now in the stand-alone financials, which earlier would be a part of the subsidiary. That is the reason you see that there is a good increase in the stand-alone, whereas on a consolidated basis, it's flat or it's slightly lesser. So it's -- to a large extent, it's a realignment with a couple of our top customers, splitting the revenues between U.S., U.K. and Asia Pacific.
Sure, sir. And sir, also, sir, are you facing any -- I mean, are the customers asking for any discounts or extension of credit period?
Yes. We've had a couple of cases of customers asking for better prices. Nobody really asking for credit extensions. But wherever they have asked, we have given because we feel that this is a time when we need to be as supportive of our customers as possible. Now of course, this is within reasonable limit. In fact, in some cases, where customers have said temporarily, they want to reduce their strength, we have given them some resources, free of cost, so that we stay connected and of relevance to these customers.
Sir, so basically, despite this, you are expecting margins to work?
Absolutely. Because this is not the norm, this is an exception. But please remember that these are times which are unprecedented. So if we can't help our customers in these times, we have no reasons to exist.
Sure. And sir, one last thing, sir. Last year…
Sorry to interrupt.
Yes, I mean just one last comment. Sir, so last year, we did, sir, INR 56 crore operating cash flow, and, sir, our market capitalization is INR 180 crore. Sri, so basically 3 years -- in 3 years, we are making as much money as our market capitalization. Sir, and despite that you are further expecting growth. Sir, so this is a very opportune time to do a share buyback, sir, because if you go for M&A, sir, where will you get an acquisition opportunity, which is available at 3x the cash flow. And sir, since our company we have already acquired many companies, sir, so by purchasing our own shares and extinguishing them. Sir, the EPS of the remaining shares will go up even though the profits might remain flat. And sir, secondly, if you consider the tax angle, sir, now dividends are being taxed at 43% marginal rate. Sir, but in buyback, sir, the tax rate is only 23%, and there is no capital gain tax. Sir, so even from that point of view, it is great. And sir, dividend once it's given cash goes out of the company. Sir, but buyback, the effect is permanent that the number of shares permanently get reduced, sir, so the EPS will permanently get increased. Sir, so please consider this.
Definitely, but you should also consider buying the stock because you just justified it.
Sir, the thing is that the market is saying when the management itself has got no value for the stock that I mean at no price, the company is doing buyback, even though it has got a financial strength in the balance sheet to do a buyback. So then why should the market give value to the company if the management itself don't see value in the stock?
So Keshav, just to clarify that, the promoter holding is closer to 70%. And we have a ESOP trust shareholding, which is roughly 5%. So a nonpromoter, nonpublic hold -- the nonpublic holding is only -- the public holding is only 25 point some percentage. Even if we have to do a buyback, it can be very, very limited. Now either the promoter buys, which is not possible in this scenario, and company buying back is something we are not evaluating currently because that, again, will increase promoter shares to a higher percentage, and the public holdings will come below 25%. So that is the challenge over here.
The next question is from the line of [ Saumil Shah ], an individual investor.
Just wanted to reconfirm. Almost 2 months have passed for the current quarter. And till now, we are not seeing any impact in U.S. and U.K. geographies due to this pandemic?
Yes. We are not seeing any major impact. Like I said, the previous gentleman asked a question about customers asking for discounts, credit extensions. So of course, there is an impact. But is it going to majorly impact our revenues? As of now, now we don't see that.
Okay. And is it possible this year due to this pandemic, offshore revenues can be much more than the on-site revenue? Is it possible?
You might recollect our conversations of some time ago where the question was similar, but it was in a different context, which is that more and more countries, the U.K. and the U.S. are becoming nationalistic and immigration policies are coming under lot of scrutiny. So can we really rely on H1Bs and foreign workers from India going there and generating revenues? And our answer to that was that we are delivering through our centers in India. Now that has been our focus for a reasonably long period of time, and we will continue that focus. So yes, that will be our intention. And now with the pandemic putting the world at where it is, customers are more open to getting the work done out of India than they were before, especially the U.K. And we see that as a very positive sign.
Okay. Okay. And are we working on any ballpark number for the next 2 or 3 years? I mean, any revenue targets internally, which we have set?
Growth is key. We have not grown last year. We definitely want to grow this year. That's my focus, my team's focus. We are putting in all our efforts to grow. Now whether we'll grow by 5%, 10%, very difficult to say. But that's -- if there's one thing that is keeping me awake, it is growth. And so that is why the…
Okay. Because I've seen 1 article of India Infoline, that we are targeting some INR 700 crore revenue for next 3 years?
It's always good to have some long-term plan because it sets a perspective. So yes, we would want to do that. But I'm sure this article was before this pandemic happened. So whether we'll get there or not, maybe we get there faster than 3 years. I really can't commit. But all I can commit to you is that we will grow.
The next question is from the line of Ayush Mittal from Mittal Analytics.
Congratulations on a good performance. Sir, I have 2, 3 questions. The first, when I look at the numbers and the kind of cash flows that we are generating, the dividend payout ratio looks very low. What is the reason for that? Also as per the industry standard.
We've always tried to increase dividend year-on-year. And if you see our record, we've been doing that. So last year, it was 45%. That is INR 4.50 per share.
No, what I'm -- sorry, I mean it's -- the idle way to look at the dividend is the dividend payout ratio, which is the dividend upon net profit. So usually the IT companies pay out somewhere more than 20% to 25% of their profits as dividends because cash flow is not needed for growth in most of the cases.
Yes. We are about half of that. We are at about…
Yes, we are at around 10%, 12% payout.
Yes. We've just been a little prudent on this because we have debt, which we need to service. And we've always been keeping, conserving cash for M&A. So that's the reason we've been prudent. Now definitely, the Board will look at increased dividend payout.
Okay. And sir, when I look at the historical numbers of the company, one thing that I see is that the growth rate has been around, like it happens in phases, and it has been around 10% odd. Going forward, you have been talking about growth. Any number that you have in mind? And also, historically, our margins used to be around 10%, 12%. Now they are 17%, 18%. So what has changed in last 3, 4 years? And how sustainable are these margins?
Our focus always has been to grow but grow with profitability. And we've managed the business as optimally as we can by focusing on utilization, by focusing on average delivery cost and that has paid off dividends. In fact, you will recollect in our previous calls, I've always said that as a team, we want to focus on delivering from our centers in India. With dedicated teams working from India, that gives companies like ours, the maximum margin.Now as a proportion of that business and total revenue increases, margins go up. And that's why you've seen EBITDA margins rise from where they were to where they are today at 17%. Now can they keep going up, at some point, they will plateau off. So that's something to keep in mind. But yes, there is no reason why we will not be at these margins going forward.
Okay. And the growth rate, sir, like past, we have done around 10-odd percent. What kind of number do you keep in your mind when you target the growth going forward?
Last year, we didn't grow at all. And if you look at it, it's like every alternate year we grow a reasonable amount to make up that 10%. So this is our lucky year, I hope.
We move onto the next question, that is from the line of [ Kapil Chopra ], an individual investor.
Many Congrats, Mr. Krishna and Mr. Niraj on the great set of numbers, sir. Sir, this is the year where every next company is trying to reinvest -- reinvent itself in the post-COVID scenario. So whatever your statement so far, I just have to discuss one positive and negative thing. A lot of Tier 1 companies in the IT itself has added that the business may shift to the companies like Saksoft globally. So how you plan to cut the cost and offer your clients a reasonable deal in the coming times?
It's important to understand that our target market is companies which are $100 million to $2 billion in top line. So we don't -- our target market is not the very, very large organizations or the Fortune 100 or top 50 companies. Now will a company, which is let's say, $500 million in sales, deal with a Tier 1 player who is 50x their size? Will they get the attention that they need for their business? And the answer is very clear. That is why they come to Saksoft. If you were running your business and you were wanting attention for your IT, would you go to somebody who's 50x your size? Or would you come to somebody who's smaller and more responsive? And I think that's where our opportunity is. And that's why it's disappointing that we have not grown and we will try to fix it this year.
Okay. And sir, as per Slide #9 of your PPT, last year, telecom, retail and health care did well for Saksoft. And so what are the sectors, if you can specify, I'm not asking for any ballpark numbers, but what are the sectors which may do well for Saksoft in this year?
Health care will definitely do well. And the other one that will do well is e-commerce. We feel these 2 will benefit from what's happening to the world today, especially in health care in the tele-health space. One of our customers, for example, does translation work in U.S. hospitals. So when a patient comes into a U.S. hospital, the law requires that there must be a translator for every language for the patient and the doctor. So there is a third person. So between the doctor and the patient, there is a translator. Now these are all virtual. So the translator is virtual, could be anywhere in the world, the patient could be virtual and the doctor is virtual. Now that's where our opportunity is. Now we have built frameworks there, and this is the space that we're trying to exploit.
Okay, sir. And in the AGM also and in the last AGM also, sir, a lot of people have talked -- spoken about the buyback and in this con-call also, lot of analysts were talking about the buyback but if the -- you will do the buyback, there would be great amount of a liquidity problem. Normally, not on the result days, but the normal delivery volumes are below 5,000 or 10,000 on a daily basis. So if we'll do the buyback, that's a feedback, this will reduce it. And our share capital, paid up capital may go below INR 10 crores also. For NSE listing, there is a minimum requirement of INR 10 crore paid up capital, is what I believe, sir.
Thank you. I'm glad you support the -- our view right now and very good. Thank you.
[Operator Instructions] The next question is from the line of Sachin Kasera from Svan Investment.
Yes, one question regarding margins, you mentioned that because of better offshore, the margins have improved. So how do you see the offshore/onshore mix next 2, 3 years from where it is today?
Today, we are at 49%, 51%. So 49% is on-site, 51% is offshore. I would say we would like our target 45%, 55%. Will we get there next year? Unlikely, but that's where our objective or our goal is.
And what is the type of margin benefit? Assuming we achieve it over a period of 2 to 3 years. So what is the positive delta of the margin that this 5% can give? Is it like 100 basis point, 150 basis point? What do you think can give a positive delta?
Niraj, can you guess?
Yes, it's a little difficult, Sachin, because with currency and everything which gets impacted. But ideally, with a 1%, 1.5% improvement towards offshore, we would expect 15, 20 basis points improvement in margin to happen. That's generally the thumb rule which we see.
Sure. Second question was regarding the headcount. So the headcount has gone up by approximately around 90 people, and whereas the revenue has been flat. So is it that we faced some pricing pressure, and that's why the billing rate has come down? Or if you could -- or is it that we had more freshers and they have still not become productive?
So Sachin, our revenue also until a few years back and until last year, had some component of onetime licensing revenues. If you look at the last line, which is other expenses, that has gone a substantial decline from INR 42 crores to INR 26 crores. Yes, around INR 4 crores, INR 5 crores rent because of the Ind AS 116, but we had license sales of more than GBP 1 million last year, which are not there in the current year. So the onetime license revenue has been gone away, and it has been moved into services revenue, which is more consistent and that is why you see the shift of the expense from onetime cost in the other expenses to the employee cost.
Okay. Okay. Just one thing, there's been a lot of discussion regarding the cash and all. And you mentioned that there are certain issues, SP1 technical because obviously company cannot go for buyback. My question would be that, see, most of the IT companies were relate -- they are in the 15%, 20%, and they all have now moved to between 50% to 75%. So I think the least we can do is that we can keep certain amount of cash, which we think are required for a exigency like a COVID, maybe some cash for a acquisition. And have a very clear-cut save off policy, I know there is a minimum. This is the amount of cash that we row and beyond that, whatever is the cash only we'll payout to the shareholders. And I think that will definitely be noticed by the markets, and that should definitely lead to some better re-rating of the company. That's from my side. All the best.
Thank you.
Ladies and gentlemen, due to time constrains we're taking the last question, that is from the line of Vaibhav Badjatya from HNI Investments.
So just on the sales strategy of the company. I understand that because of the size of our company, we can't have -- you can't have heavy sales-driven strategy. But given the cash that the company is generating, is it -- I just wanted to hear your views as to is it worthwhile to consider that to invest in sales at the cost of short-term profitability? Because I think that would be in the interest of long -- in the long-term interest of the organization. Maybe if we don't consider a short-term impact on the financials due to heavy sales cost, but that can actually give lift to organic growth from a longer-term perspective.
Life as become quarter-to-quarter. So I would love to say that we could forget quarter-to-quarter and hire 3, 4 sales guys and don't worry it's quarter-to-quarter, we don't do so well for the next 4, 5 quarters. But I know these earnings call will kill us. So what you say theoretically makes a lot of sense, but is it practical? I don't know. The challenge is always facing ourselves, which is what we have been trying to do. Invest in sales at the same time, keep an eye on the quarterly results because that is very important. And honestly, listing and this quarterly pressure, I think it's also very good for discipline. It keeps us on our toes. It keeps us honest. If business can't make money, then there's no reason for business to exist. If we can't reward shareholders, then we don't need to exist. If we can't take care of our customers, we don't need to exist. So I'm not disagreeing with you, but I'm saying that I think it's difficult for us to invest excessively in sales and not worry about the quarter.
Got it. And lastly, we have spoken about our dedicated team model. But just wanted to understand that how it's different than the FinTech contract because if the utilization of the team is planned, and we are responsible for executing the project, how did -- how do these 2 things go together?
The difference really is in understanding that customers want some element of consistency with the teams that are working with them. So they don't want to lose the domain knowledge, business knowledge that a resource has. And for that they pay. So even though they might not have work for that resource in a particular month, the fact that they want that resource still to be part of their team, they have to pay for it. So that's how we sell it. And obviously, the customer sees value because otherwise, they would not agree to it. But honestly, if you ask me, I think it's a good deal because you're getting a resource at a margin of what it would cost you in your own country, #1. #2, this resource has the requisite domain knowledge, technical skills that you need for your business. He understands your business. He understands your teams that he's working with. And obviously, for that, you will pay a price.
Ladies and gentlemen, that was the last question. I now hand the conference over to the management for the closing comments.
There's some closing comments from our side. We believe that things will normalize over a period of time. Businesses will once again emerge as they were in pre-COVID times. We would like to assure all our stakeholders that we are confident that our selection of industry verticals and our drive for specialization will be the key enablers for the growth in the coming quarters. We believe that we are in a sweet spot to leverage this opportunity. I hope we've been able to answer all your queries. In case you require any further details, you may please contact us or our Investor Relations advisers, Strategic Growth Advisors. Thank you, everyone, for joining us.
Thank you. Ladies and gentlemen, on behalf of Saksoft Limited, that includes this conference call. Thank you for joining us, and you may now disconnect your lines. Thank you.