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Good afternoon, everyone, and welcome to Tata Communications Earnings Conference Call for Q2 FY '23. We are joined today by our MD and CEO, Mr. A S Lakshminarayanan; our CFO, Mr. Kabir Ahmed Shakir; and our Head for Investor Relations; Mr. Rajiv Sharma. The results for the quarter ended 30 September 2022 have been announced yesterday, and the quarterly fact sheet is available on our website. I trust you would have had the chance to look through the key highlights. We will commence today's call with comments from Lakshmi, who will share his thoughts on the business and the long-term outlook; followed by Kabir, who will share his views on the financial progress achieved. At the end of the management's remarks, you will have an opportunity to get your queries addressed. Before we get started, I would like to remind everyone that some of the statements made or discussed on the conference call today may be forward-looking in nature and must be viewed in conjunction with the risks and uncertainties we face. A detailed statement and explanation of these risks are included in our annual filings, which you can locate on our website, www.tatacommunications.com. The company does not undertake to update these forward-looking statements publicly. With that, I would like to invite Lakshmi to share his views. Over to you, Lakshmi.
Thanks, Chirag, and good afternoon, everyone. Before we commence today's call, I'm very pleased to welcome Rajiv Sharma, our Head of Investor Relations, to the Tata Communications family. Rajiv has more than 20 years of experience across equity research, corporate strategy and investor relations, and we are very pleased to have him with us. He will be reporting to Kabir and will be supported by Chirag. I wish the very best in their new roles and look forward to their continued support of our esteemed investor fraternity. With this, I welcome you all to Q2 FY '23 earnings call. I'm happy to share that we have delivered more meticulously on our reimagined strategy. Our products to platform shift, increased investments and front-end sales, particularly in the international markets and building new capabilities across the portfolio continue to help us deliver robust results with our data revenues growing by 11.2% year-on-year this quarter. We remain committed to building digital ecosystems for our customers by co-creating innovative solutions and delivering agile, connected and secure solutions. Doubling down on customer centricity, we soft launched Tata Communications TCX, our customer experience portal and our digital store for our Indian markets. This is enabling us to digitize customer touch points, simplify their process interactions with us. Having received encouraging feedback from our customers, we are planning to launch Tata Communications TCX covering additional products in India and also extended to international markets. Our last investments in core infrastructure and digital capabilities in line with emerging technology disruptions and evolutions give us the confidence to efficiently cater to our customers' evolving digital transformation needs. We continue to be a leading player in India's large enterprise B2B segment and are strengthening our positions ever more. We are witnessing a healthy growth in our international revenue trends, both on Q-on-Q and on a year-on-year basis, which is steadily progressing us towards our long-term ambition of improving the international revenue pie. Moving to our performance for the second quarter of FY '23. We have delivered a strong year-on-year data revenue growth of 11.2% with healthy margins. Our data business remains instrumental to our overall revenue. It improved sequentially by 4.6%, coming in at INR 3,493 crores. Our digital platforms and services revenues stood at INR 998 crores, registering a healthy growth of 16.5% year-on-year and 6.1% Q-on-Q. Our Q2 consolidated revenue was INR 4,431 crores, improving by 6.2% year-on-year and 2.8% Q-on-Q. EBITDA for the quarter stood at INR 1,130 crores, increasing by 1.5% year-on-year and 4.9% Q-on-Q, while the EBITDA margin stood at 25.5%. The profit for the quarter was INR 532 crores, improving by 25.1% year-on-year. We witnessed a profitable data revenue growth despite ongoing supply chain headwinds mitigated by all the actions that we have spoken about earlier. We don't see supply chain headwinds bottoming out yet, nor do we see it worsening any further from where we stand. Our funnel additions have also been healthy across the portfolio with a strong buildup in our digital platforms and services and incubation offerings. Let me give you some more details about our data portfolio. I'd want to start with and spend some time talking about our strongly growing incubation portfolio. We have a 3-pronged strategy here, especially with relating to the connected solutions. One is on-campus and the second is by leveraging the private networks, and lastly, being off-campus. The on-campus opportunity is driven by our IoT solutions, where we cover enterprise segments as well as smart cities. Some of the core enterprise and smart city solutions are deployed at scale and our objective is to deliver high return on investment solutions for our customers, which drives our leadership in the industrial IoT space. To strengthen our offering in the private networks, we launched our private 5G Global Center of Excellence in Pune to accelerate industry 4.0 applications and capabilities for enterprises. For our off-campus offerings, it is our MOVE platform which gives us the right to win across connected solutions. Our in-house capabilities are helping enterprise realize business workflows, which have massive cost efficiency and also help generate new revenue streams through platforms like connected vehicles, connected crews, smart manufacturing and MBR in a box. The incubation portfolio progressed multifold, growing by 181.8% year-on-year and 36.1% Q-on-Q. And our core connectivity services grew by 5.9% year-on-year and 2.7% Q-on-Q. This continues to be on the back of our strong underlying capabilities, which continue to deliver consistent performance. Our focus here is to continually invest in the core capabilities, thus transforming our networks to accelerate into new market needs. Now coming to our digital platforms and services portfolio. It has grown at 16.5% year-on-year and 6.1% Q-on-Q. Our multitude of offerings in the digital platforms portfolio are intended to consistently deliver more holistic solutions, stitching multiple products together for our customers' ecosystems. This, as we are beginning to call, this is a digital fabric, which is helping to create a robust moat around increasing customer stickiness and insulates us from structural pricing decline seen in the legacy business. The portfolio grew broad-based across all offerings. Our collaboration portfolio grew by 1% year-on-year and 2.8% Q-on-Q. We continue to benefit from an increasing customer interest in our new offerings, namely GlobalRapide, InstaCC and Tata Communications' DIGO, a platform that we launched in May. We believe with the help of these new offerings, the portfolio will witness increased momentum as we progress. Tata Communications' DIGO is an offering to enhance customer interactions and experience. Through this, we continue to partner with enterprise customers to deliver customized, converged and contextual conversations for the end consumers on the go. Moving to our cloud hosting and security portfolio. This portfolio registered a growth of 21.9% year-on-year and 5.8% Q-on-Q. Our cloud offerings are much broader today as we help our customers in their multi-cloud journey with a multi-tenant private cloud, an industry community cloud, a cloud platform for Kubernetes and analytical solutions. Our ability to broaden this portfolio is one of the key catalysts helping us to drive growth in the medium term. ISO multi-tenant private cloud is getting more visibility and acceptability across use cases involving predictable workloads. Broader focus is winning in the private cloud space and the adoption is increasing across the board. On our security business, our Cloud SOC is driving our growth this quarter. In addition, we are investing in thematic solutions, thus propelling deeper engagement with customers. Our IZO Fin Cloud for India BFSI space, which has stringent data privacy and security guidelines and our security offering delivered from the cloud, which is called Cloud SOC, these are being embraced by key institutions in India. For instance, NPCI has adopted our Cloud SOC this quarter, and ReBIT, a unit created by RBI, embraced our security monitoring services across their IT infrastructure. In addition, we have leading private sector banks and international banks taking our cloud offerings to maximize employee efficiency and improving customer interface. We are providing banks with a fail-safe mechanism as per the guidelines of RBI. Our wins in the BFSI space are setting us well for the immense potential this segment offers. In addition, it is allowing us to align our DPS portfolio more towards recurring revenue streams. Coming to our next-gen connectivity offerings. This increased by 31.9% year-on-year and 15.3% Q-on-Q. We are witnessing healthy growth and are winning due to our recently launched IZO Internet WAN and SD variants. We have further expanded our SD-WAN offerings, and our funnel and order book continues to be healthy in this segment. Moreover, we remain agile and continue to focus on adjacent opportunities such as the multi-cloud connectivity. We already have 3 major international multi-cloud connect customers. Our media services revenue grew by 39.8% year-on-year and 5.7% Q-on-Q. Our media and entertainment business continues to see sustained growth underpinned by the transformation taking place in this industry globally. We are empowering global sports to reach billions of fans worldwide and our build for media and edge-based offerings. We supported 4,000-plus events, reaching over 2.5 billion viewers globally this quarter. Our media ecosystem delivers live matches to U.S. devices, giving them life-like experience, taking them into the action like never before. At the same time, we are focusing on global edge opportunity with media and video native edge cloud deployed globally. This supports low latency video streaming and other applications that need video processing closer to the edge. This has witnessed good growth directly and global media organizations and media service providers. To sum up, as a digital ecosystem's enabler, we remain committed to building innovative and scalable platforms to empower enterprises. With that, I would like to invite Kabir to give an overview of our financial performance. Kabir?
Thank you, Lakshmi. Good afternoon, everyone. Let me take this opportunity to take you all through our financial performance for the quarter. Q2 of FY '23 witnessed healthy growth coupled with strong operational performance. Our consolidated revenue for the quarter stood at INR 4,431 crores, improving by 6.2% year-on-year and 2.8% on a sequential basis. Our EBITDA for the quarter stood at INR 1,130 crores, reporting a margin of 25.5%. Our absolute EBITDA grew by 4.9% sequentially and 1.5% year-on-year. Our data revenue reported strong growth momentum, both quarter-on-quarter and year-on-year across all our offerings this quarter despite the challenges around OEMs. Our key performance indicators in terms of funnel, order book and win rates continue to improve, giving us confidence to set up growth once we see softness around the supply chain constraints wear off. Data revenue for the quarter stood at INR 3,493 crores, improving by 11.2% year-on-year and by 4.6% on a quarterly basis. Voice business continues to decline in line with market trends. However, we witnessed an improvement in our voice net revenue and EBITDA margins, primarily driven by India market shift, which has improved realizations. In our view, this is an industry-wide phenomenon and seems to be short term in nature. Moving to subsidiaries. We see a steady improvement in TCTS. TCTS revenue improved by 1.4% quarter-on-quarter, though it declined compared to last year, coming in at INR 322 crores. EBITDA for TCTS stood at INR 5 crores for Q2. Our payment business continues to make positive shifts as we expand our portfolio under the franchisee model. Revenue for the quarter came in at INR 46 crores, improving by 4% quarter-on-quarter and 12% year-on-year. As on date, we have added close to 2,000 franchisee ATMs to our portfolio and are sharply focused on increasing this further. Economies across the globe continue to witness a series of interest rate hikes, thus increasing the overall borrowing costs, and these are expected to rise further. These have impacted us as well, with our interest costs increasing sequentially by about INR 18 crores this quarter. Our current cost of borrowing stands at 3.69%. We have a well-defined interest rate management policy in place to mitigate such impacts by establishing an optimum mix of floating and fixed credit loans and taking other necessary steps as and when necessary. We will take a balanced view on capital spend to support our growth ambitions versus the need for debt reduction to better manage this volatility. PAT for the quarter came in at INR 532 crores as compared to INR 544 crores in Q1 of FY '22. Our PAT margin stood at 12% for Q2 and improved by 180 basis points year-on-year. Our PAT for the quarter was positively impacted by better profitability and certain tax adjustments. In this quarter, we've recognized a deferred tax asset of INR 29 crores for a couple of our international subsidiaries. Our efforts to simplify our operating model and increase investments to our customer success in international markets have started to yield positive results. Thus, our international business has started showing improvements in terms of operational profits, giving us the visibility on utilization of the NOLs in the near term. Hence, we have revised our policy to recognize deferred tax assets basis near-term profitability, and we'll be doing so on a rolling basis going forward. Cash CapEx for the quarter stood at INR 324 crores, though our approved CapEx is greater than INR 500 crores. Committed CapEx for the quarter was INR 421 crores. Much of this variance can be attributed to the ongoing supply chain issues and delayed deliveries, which have already been called out. ROCE for the quarter stood at 27.7%, well above guidance. Net debt as on the quarter end stands at around INR 6,400 crores. Net debt-to-EBITDA is now at 1.5x as compared to 1.4x last quarter. This increase is largely due to the high dividend payout of INR 591 crores to our shareholders this quarter. Our cash flow generation continues to be healthy, reporting a free cash flow of INR 617 crores this quarter. In line with our growth ambitions, we continue to augment our staffing capabilities and invest in internal and external engagements. You will see some of these costs further ramping up in a phased manner as we progress into the second half of FY '23. Thus, we continue to maintain our margin guidance in the 23% to 25% range. We have received a revised demand of our AGR dues amounting to INR 4,981 crores this quarter from the Department of Telecommunications. This demand includes a levy of license fee for our non-telecom revenues, exceptional items and other income as well as interest, penalty and interest on penalty around these line items. The entire matter is sub-judice and our multiple appeals are pending before the apex court and the Madras High Court. We obtained legal opinion independently in this regard, and we believe we have sufficient ground to defend our position. As such, we have recognized these as contingent liabilities. Our strong operating performance will be a stepping stone for the company's future. We remain committed to delivering a superior customer experience through our best-in-class bespoke solutions, enabling them to digitally transform their business and equip them with the ability to innovate, transform and grow. This brings us to the end of the management commentary. I will now ask Chirag to open the forum for Q&A. Thank you for your attention.
Thanks, Kabir and Lakshmi. We will wait for a minute for the queue to assemble. The first question is from the line of Riddhesh Gandhi from Discovery Capital.
So to understand in your digital platform and finance services, we've sort of gone into a negative EBITDA again. Is it because of actually investments in actual projects which we expect to recoup over the next few quarters? Or is it just a slowdown? Or how should we look at that?
Riddhesh, I mean, I have guided the market earlier as well. I mean, let's not get into each and every line item because there are peculiarities and specifics of that quarter-to-quarter. I think I would encourage you to look at the data services and the DPS portfolio as a whole and also to look at the overall company portfolio as a whole. I think this quarter, although the guidance has been that we will probably be in the low to mid in our range for the year, we've been helped by various things. We've been helped by positive ForEx. We've been helped by the market shift that I mentioned of. And we've been, as a company, delivering EBITDA at the higher end or even breaching the higher end of the range. There are very specifics deal related, non-deal related that sometimes go into in each of these things. That doesn't deter away from the strategic direction that the company is taking.
The only reason I'm asking is that because we, I mean, do break this up. And historically, this was a loss-making area, which has then become profitable. So just want to understand if the profitability, was it driven by some like COVID revenues, which aren't replaceable or effectively if it is sustainable? Or if this is an exceptional like quarter in this area?
Yes. There is -- I would say there is nothing structurally anything to worry about the profitability of that.
Okay. Fine. The next question is with regards to the supply chain issues on the chip side. We had indicated that by Q3 of this year, we expected some amount of normalization to happen. Is that sort of on track? Or how long do we expect because of -- because I know that a lot of the execution of the order book and pipeline, et cetera, is going to be driven by that.
No, I think I mentioned in my commentary that supply chain as far as this quarter is concerned, I don't think it has sort of negatively affected us in revenue because we had put some mitigation actions in the last 2 quarters, such as buying some of them -- some of the equipment in advance. So we had done some advanced ordering and so on. So those mitigating actions are helping us to deliver. Having said that, the supply chain issues are still causing delays. It has not got any worse from the last quarter, but it is not improving either is what I mentioned. There is a second dimension of the supply chain issues, which is more relating to the core network of us investing in our network and increasing the capacity of networks, which is not directly and immediately attributable to any customer revenues. But this is something that we have to expand. And in those areas, because of the delays, some of the projects are delayed. And you are seeing that directly relating to our lower CapEx spend as well because of that reason. But these are some things -- we think it is going to continue for a while longer. It's very hard to predict as to when we will get out of this. But we are treating this as business as usual and managing the situation through advanced ordering and so on and so forth.
So we'd expect to then again see a slight delay in a ramp-up of the growth effectively until these issues are further resolved?
No. I think that's what I mentioned. So this quarter, we didn't have any impact because of the supply chain issues. I mean even if that was there, it was very marginal than to call out anything. We are ordering equipment in advance to make sure that we can deliver. Clients are also reconciling to the fact that these delays are through OEMs. So as long as we have enough in our pipeline and we keep winning, I don't think these delays would cause any substantial issues in terms of -- I mean, of course, if the situation was very different, then we could accelerate some of the deliveries and we could get. But we would treat this as business as usual for the next -- at least a couple of quarters is what we report.
Sir, and just the last question is with regards to any update on the land actually -- monetization at all? Is there anything you can share on that?
Well, this quarter, we had a couple of very small items: 2 land parcels that we actually disposed. As I said earlier -- I mean, we are, of course, guided by accounting policies. When any asset is held-for-sale, that will get reflected automatically in our results and you'll get to know about it. I've spoken at length in previous quarters, in one-on-one meetings, in investor forums as well, we have an articulated, approved real estate strategy. And we will try and align both the internal needs of the business as also the right market timing in order to look at the value maximization for us. And the value maximization could either be through leasing that particular asset or selling that asset. So we will look at the right economic value that we can realize for our shareholders and for the benefit of the business. And that's how I would like to keep it at that level, because then it gives us the flexibility to take the right call.
The next question is from the line of Sanjesh Jain from ICICI Securities.
Good to see data revenue finally picking up, most expected. Lakshmi, you made an initial comment that we have been seeing healthy order book. And in the previous quarter, if I remember, you mentioned that sales funnel was not catching up along with it because of attrition issue and all. I can see there is a lot many employee got added in this quarter. Can you help us -- give us more color on the order book? It's a double-digit growth. What we mentioned last quarter, continues. And how is the sales funnel adding up to understand how will be the future order book growth?
Yes. So the -- firstly, as you mentioned and I mentioned in my commentary as well, adding and strengthening our international regions with sales, and we will continue doing that, and investing in marketing in those regions will help us to further accelerate our growth in those regions. As far as order book is concerned, I think we saw a good order book in the last 2 quarters. This quarter was also quite good. I don't want to comment on a quarter-on-quarter basis the order book because there will be pluses and minuses based on -- a deal getting pushed out by a week will color the numbers. But overall, the order book is good. As far as the funnel is concerned, our overall funnel value stands at a similar level as last quarter. So even if we are closing the deals, we are able to add opportunities into the funnel. And therefore, our funnel remains healthy and stands at similar levels as last year. One marked thing about the funnel is also the color of the funnel in terms of the types of deals that are there. We are seeing a lot more of digital platforms and solutions deal in the funnel. We are also seeing a lot many -- larger deals in the funnel. So these are -- again, these are in line with our strategy, where we have been saying that the digital platforms is what needs to accelerate our growth. The funnel shows that we are accelerating the funnel addition in the digital platforms. We also said that we will engage more deeper with customers in order to craft larger deals, and that is also reflected in the funnel as of -- as we see today. So I think we are moving all these in the right direction.
Great. Great. Just one question. If our sales funnel is same and you're adding more to order book, is it fair to assume that our order win rates or the conversion rate from funnel to order book has seen a material improvement? Will that be a fair assumption?
No. Purely from a number standpoint of view, it's standing the same. Again, it depends on which portfolio we're talking about. But largely, the win rates are -- I had talked about improved win rates a few quarters ago, and I think it stands at that similar kind of levels. So I wouldn't say that we have dramatically improved the win rates in the last couple of quarters, but it is quite healthy is what I would say. I think the fact is we wanted to add more into the funnel because as the larger deals comes into the funnel, the time the customer takes to scrutinize and evaluate will take longer. But that is the character of the larger deals anyway. So we are quite happy with the size of the funnel, the color of the funnel. And the time taken is not very material as long as we can keep adding good quality deals into our funnel.
Great. Great. One follow-up question probably to Kabir. Order books look great, total revenue looks great, but somehow the net revenue acceleration has not kept the pace with the gross revenue. So what are we missing there?
In this quarter, it's more a mix effect, Sanjesh. As I said, we had a good contribution of the India market shift in the voice business, that kind of came in. So that overall net revenue if you actually look at --- that's, I would say, the mix effect. But otherwise -- sometimes you kind of play the portfolio well. If there are very competitive deals when we look at -- as we are improving our product penetration ratio and winning more, selling more to our customers, if there is a competitive price play that we need to do and if that's a dilution of NR in that particular deal but overall adds to the customer profitability better, then we take those tactical calls. So that's where I would leave it at that. But of course, the devil is more in the detail. And if you go by product portfolio, it's a different story. But at a uber level, that's the large theme.
No, I was looking more from the DPS perspective. Sequential growth was 6.2%, while it was a decline on the net NR basis. That's not really a value creation, right, in that sense? Was it more like a project execution, CPE cost, which was upfronted? And we are doing revenue recognition over a period of time, which we changed a few quarters back. Is that playing a game in this as well?
Not really. I mean, I see only mix. I see a little bit one-offs that were there in the prior quarter. But it's a longer runway, I would say. So it's the foot in the door into large accounts and a combination of those things. So we had one-offs in Q1 which resulted into that. But I would largely say it's a longer runway and the large account play that we would like to do. There are a couple of deals in cloud, for example, where we took that strategic call. So it's more strategic. That way, we should be able to see -- as we do migration and start the workloads, you may see lower margins. But as consumption picks up, then those margins will then come through. And when you look at -- even the lifetime of the deal per se, let alone us adding further more to it.
Fair enough, fair enough. Lakshmi, one on the collaboration side. Now that's still not picking up. I understand SIP trunking was declining. But if one was to see that portfolio ex of SIP trunking and DIGO being now commercialized, what is the ex of SIP kind of a growth this portfolio has the ability or a potential to deliver, say, over next 3 to 5 years? Can the ex of SIP trunk can grow at 25%, 30% CAGR? Does that potential exist in that particular line item?
Yes. I think the overall collaboration portfolio is lifted up because of the GlobalRapide and the DIGO portfolios that we have. But this is a fairly -- still a large part of our DPS portfolio. So excluding that, yes, I think our growth rates are quite good. It's about 25%, excluding not just the trunk, excluding all of the collaboration.
No, no, I was asking more from the collaboration perspective, which has...
Only collaboration space?
Yes, only collaboration. If I were to remove SIP from it, is it growing in line with the remaining portfolio in the DPS?
I think the GlobalRapide, InstaCC and DIGO are all growing in line or better, I would say. But the SIP trunking is a large part of collaboration today. So that colors the overall growth of the collaboration. But your -- if the question is excluding SIP trunk if the other products in that portfolio is growing, it is growing, they are all growing at a very healthy rate. So the GlobalRapide is growing very well, InstaCC is growing very well and DIGO is growing very well as well.
Fair enough. Just last question from my side on the margin. Despite delivering a much better margin...
Sanjesh, I just also want to add. The reason why we can't exclude the SIP trunk I'm saying is -- see, the way we are seeing the collaboration space is that we would like to think of ourselves as a global voice cloud for enterprise. So it is one of the largest coverages around the world with our voice and messaging infrastructure that we have. And on top of it is what we are building in our collaboration, which is the GlobalRapide, the InstaCC, the call center on the cloud and so on and so forth. So this -- and our ability then to provide all of these as a fully-managed service for our customers, ensuring compliance across the world, ability to monitor this end-to-end and deliver the productivity that they seek, this holistic package is what is helping us to actually build the moats against even some of the other CPaaS players who will try to sell point solutions to the enterprises or compared to other providers who might have certain capabilities, but not the broad and wider capability that we are able to take to the customer. So I just wanted to make that point. But purely on the growth and the curve of the growth, all my comments that I said before are quite valid. Purely from a [indiscernible] if you had to exclude SIP, then everything else will grow. But we have to understand that underlying that platform is what is powering all of the other capabilities, yes.
That's a confusing part for me. Because if I look at your peers, Indian listed peers, they are growing that upwards of 50%. And they have a fairly healthy revenue there. They're still growing at 50%. While we have a disproportionate advantage of having completely an integrated solution and that we are barely able to grow. So what are we missing there then? Because the other peer numbers are fairly available in the market. Now they're growing at 50% plus on an annualized basis and we are still at a flattish.
So I think so far, Sanjesh, our SIP solutions have not been sold domestically. We have been primarily helping major international players with that capability. Or India players who have an international footprint is what we have been doing. Now with us getting into the VNO license, we will be able to start selling some of these. But what you are comparing with an Indian peer to the international may not be a like-for-like comparison as far as the SIP and the collaboration portfolio is concerned. But the -- purely from a DIGO point of view, again, we've just launched it. It has got a much wider capability. But other players are largely reporting a messaging increase, A2P increase with India or in other markets outside of India. So it's not a like-to-like comparison of the portfolio, I would say, Sanjesh, in terms of what we have to offer and where the products were focused on so far.
Fair enough, fair enough. Just one last question on the margin side. We have been -- continuously being more than on the upper end of the margin, but our margin guidance still continues to remain at 23% to 25%. And telecom is fairly a large operating leverage business. Are we being too conservative on the margin side?
Sanjesh, I would -- even this quarter, if I were to exclude the ForEx and the one-off benefits that we actually got from the market shift, our underlying margin is exactly in the middle of the range. That's what I have guided the market before. That's where we continue to be. So we've so far been positively impacted with things which have flown into the bottom line. I don't want to go quarter-by-quarter, whether it's this quarter or next quarter. If I were to in the medium term look at what should be the shape of this business, we would like to operate in the 20% to 25%. And any benefit that we get and we will continue to get, whether it is operating leverage, whether it is waste reduction, whether it's efficiency improvement, whether it is mix benefits, all of which our endeavor is to actually reinvest them back into the portfolio even within, I would say, our traditional networking business on to the next-gen connectivity, also into the digital platforms and services portfolio as well move IoT in the incubation part. All of these need oxygen. And that will actually come -- and I see that as the sources of margin improvement for me, which then gets repurposed and channelized to drive growth. Once we get to a good absolute level of business in DPS and then they continue to have stable growth trajectory, is probably the time for us to unpeel and then say, "Can we look at margin expansion?" But that is a few years away. At this stage, I think we should have the mindset of reinvesting all of these benefits back into the business. That's where we are focused at, Sanjesh.
No, fair, Kabir. But then we should be more optimistic on the revenue growth side. Will that be a fair assumption?
Well, let's meet our first marker that we have said of double-digit revenue growth. I mean, I think this is the first quarter where we're going in the right trajectory. And once we have a sustainable repeated performance, then you're absolutely right, that we should be able to push for it. And it's not -- this is a B2B business where you -- and a long gestation and with all the supply chain challenges. When we put in those investments to reap and see the results of that investment also takes a few quarters. So thank you for the patience. You guys have been listening to us, to our investment stories all through, and this is the first quarter where we have actually seen results. And we should be able to continue that same momentum if -- and we should not move away from that philosophy of how to run the business.
[Operator Instructions] The next question is from the line of Mr. Pratap Maliwal from Mount Intra Finance.
Am I audible, please?
Yes, you are.
So I had a question around the next-gen connectivity vertical that we have. So this quarter, we've seen good growth in there. Now previous quarter, you had said that there were some maybe supply chain issues and some project deliveries were affected, which had delayed the revenue recognition. So have the revenues come back in this quarter itself? And has that given us the growth? Or can we maybe take the number for this particular quarter as the base and then project for more growth after, which has been the case?
Yes. No, I think the -- see, in next-gen connectivity, we have a multiple set of products, which, combined together, forms the next-gen connectivity. One is the IZO Internet WAN proposition, where we are helping our customers to replace MPLS with Internet solutions. The other is -- I mentioned about the ISO Multi-Cloud Connect, which we are just doing a soft launch, and that's another set of work. And we also have -- we've soft launched a WiFi 6 and LAN capability. And the last part is the SD-WAN. So there are 4 parts to these areas. Particularly, when it comes to the SD-WAN, which is where I think we were hampered by some of the OEM issues. And similarly, on the WiFi 6 as well, there are OEM-related issues that are there. So it's likely to have some up and down based on the OEM's ability to deliver and then, therefore, us to deliver to the clients. So there will be some changes. But overall, if I have to comment on the next-gen connectivity, I had already mentioned that we are quite encouraged by the sizes of the funnels that we have, both in India as well as in the international market, encompassing the full capability of our next-gen connectivity solutions. So we would look for continued execution on the funnel and continued execution on conversion of that revenue.
Okay. Sir, I'll just try and maybe rephrase. So this quarter the growth has come from maybe us getting some new business and some of that funnel has been converted into new orders. Is that...
Yes, I think you might say so. Some of the backlogs have been cleared as well as the new funnel, new customers have been gotten. But yes, I think that's the overall -- network transformation is a story that we have been talking about, the customers moving to the cloud, customers shifting to the Internet. There will be a change. There will be customers wanting to do those transformations. And we are beginning to see that play out.
Okay, sure, sir. And just one other question. A leading telecom provider in India, recently, there was news that it had come out with an IoT-based connectivity solution based on ESL, which has been adopted by telematics providers and vehicle tracking solution providers. So what I'm trying to understand is that is this in competition with our offering and the move vertical? And if we're in trial with such solution providers or any recent success that we can call out, please?
Yes, MOVE does that and more actually. And we have -- our proposition is one of global as well as addressing the India market, and we're addressing multiple segments in the industrial IoT segment as far as MOVE is concerned. And I think I had a fairly extensive commentary on it to say how we are doing and how the portfolio is growing as part of our incubation business. So we believe the product of MOVE is quite strong and addresses multiple segments, addresses the markets in India as well as the international markets. And we have seen and shown fairly good momentum of growth with that product.
No more. Thank you, everyone. This brings us to the end of the Q&A session. I would now request Lakshmi to share his closing comments.
Thank you, everyone. As I said, this quarter has been a very, very good quarter for us, hitting a double-digit growth on our data portfolio after a very, very long time. I think all the platforms that we have launched and the capabilities that we have added to these in the last few quarters are showing results. The color of engagement that we are having with the customers and the color of funnel is improving. And with that, the teams are doing a tremendous job of ensuring that we execute this truly like a digital company. So I think we would look for and hope for continued momentum and execution. And I would also like to wish all of you a very happy Diwali in the coming festive season. Greetings to all.
Thank you so much, Lakshmi. This brings us to the end of the call. The recording will be available on our website in the next 24 hours. You may please disconnect now. Thank you.