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Ladies and gentlemen, good day, and welcome to the Xelpmoc Design and Tech Limited Q2 FY '21 Earnings Conference Call. [Operator Instructions] Please note that this event is being recorded. I now hand the conference over to Mr. Ravi Udeshi from Christensen IR. Thank you, and over to you, sir.
Thank you, Raymond. Good evening, everyone, and thanks for joining the Q2 FY '21 earnings call for Xelpmoc Design and Tech. Great pleasure to have all of you in this call today. The results and investor presentation have been mailed to you and is also present in the BSE website as well as our website. In case anyone has not received a release, please do write to us, and we'll be happy to send the press release and presentation to you. To take us through the results and to answer your questions, we have the management of Xelpmoc represented by Mr. Sandipan Chattopadhyay, MD and CEO; and Mr. Srinivas Koora, the CFO of Xelpmoc. Mr. Srinivas Koora will start the call with a brief overview of the quarter gone past. And after that, we will throw open the floor open to Q&A. The standard safe harbor clause applies. And with that said, I now hand over the call to Mr. Srinivas Koora.
Thank you, Ravi. Good evening, everyone. Welcome to Xelpmoc's earnings call for the second quarter of fiscal 2021. I hope you and your family members are healthy and safe at home. I'm pleased to share with you that we continue with our execution built on identifying the opportunities in the sector that fit our end strategy. Our operating revenue for the quarter was INR 34.7 million as compared to INR 35.1 million in Q1 FY '21. On a year-on-year basis, we grew by 129.9% as compared to INR 15.1 million over the corresponding period of last year. EBITDA for the quarter increased by 6.3% on a quarter-on-quarter basis to INR 14.9 million as compared to INR 14.1 million in Q1 FY '21 and a negative INR 13.2 million in Q2 FY '20. EBITDA margins also grew from 40.1% in Q1 FY '21 to 40.3 in Q2 FY '21 due to our focus on cost management and the resulting gains on account of the pandemic. Net profit for the quarter was INR 15.6 million, as compared to INR 16.7 million in Q1 FY '21, while it was a net loss of about INR 11 million in Q2 FY '20. More than half of our revenues came from international clients, which highlights our client network connect despite the international travel restrictions. Our team size is about 106, including employees, interns and consultants. Till date, we have served about 41 clients, and our good results have been built on sustained in-depth involvement with our clients. The fair value of our investment in portfolio company stood at approximately INR 439 million as of September 30, 2020, as compared to INR 285 million as on September 30, 2019. One of our portfolio company, Mihup, recently concluded a series A5 round rate. Mihup continues to add to its offering in diverse sectors. Another portfolio company, TSIM has been awarded by Hyderabad Software Enterprises Association as top 10 startups of Hyderabad and also a Winner of Women-Led Startup. Our EduTech Venture solution is being rolled out to increase its coverage from a single-digit to double-digit in terms of number of schools. Though the pandemic has partially limited our appetite for new acquisitions, yet we managed to sign new portfolio companies. Last week, our Board has is -- has approved investment in Afterthought Feedback Services Private Limited, a Hyderabad-based company, which is into market research and online service. And the other company, Groupfit Ventures Private Limited, with plans to go into preventive health care and another company, which is based out of Bombay, Naik Tech, a data science technology and a strategy solution company in the wealth management space. Our Board has also approved investment in our wholly-owned subsidiary, Signal Analytics Private Limited, which will act as a fulcrum for developing and investing in education technology, including related content, activity kits, PFX, gaming and subscription marketing of our core nonspecific IP. Further, our Board has also approved incorporation of the company's UK subsidiary in the interest of promoting our business at a global level. Now I come to the forecast for the balance fiscal. We would be continuing to concentrate our resource on attractive markets and portfolio, including for Fortigo Network Logistics, Mihup, Woovly, health sector insurance, education, EduTech and agriculture. We are seeing some good growth opportunities in insurance and health care due to the increased focus on personal well being. We reiterate our outlook on being EBITDA positive in FY '21 and excluding any use of. We retain our cautiously optimistic outlook given the current challenging times limiting the opportunity to bring on board new clients. With this, now I require the moderator to open the floor for question and answer.
[Operator Instructions] The first question is from the line of Sudeep Gujjar, who is an individual investor.
I have a couple of questions. First is there has been an increase in our trade receivables. So I just wanted to get an idea on that particular item. And the next question is that our investments in Learning Hats and Catalyst population, have been -- I can't see them in the list of portfolio investments. So if you could explain that?
Yes. So to answer your first question why the trade receivables increased. Most of the billing has happened in the month of September and October because of which we have seen trade receivable. And the investment in Catalyst and the Learning Hats deal and the process, most likely we should be able to conclude in this quarter. When we have given it to the exchanges and intimation, we said that it will take time because it's in the process. It will be concluded this quarter.
Okay. And another thing, the increase in the investment value of our portfolio, is it purely due to revaluation? Or we have increased fixed income per investment per year.
So basically, in couple of entities, our investment has gone up because this can be, whenever we sign up with any new entities, we also pick up equity for developing technology. So PENCIL is one among them. And apart from that, what happened was there was also a round of investment which has happened in Mihup, which I stated right now, where Mihup has gone ahead and raised Series A round of funding, A5.
The next question is from the line of Hasmukh Gala Finvest Advisors.
Just a few questions. My first question is that what will be the plan for the education ventures?
What do you mean by that, sir? Education venture, we are just having a product which will be catering to schools. That's the education part of it as well. And apart from that, we are trying to get into some other areas, which are -- you may call edutainment, not the formal education spectrum, but in creating interest in science or interest in other subjects through activity-based approaches and stuff like that. That's a different line of business, for which we are just taking Signal as a subsidiary, and we will be constructing some paradigms there. The idea is to go for B2C things here through a clutch of investments or start-ups, who we will cocreate along with the founders.
Okay. But even though the AMDP online learning, et cetera, is going on because of this COVID situation, so do you see any increasing opportunities in the education space?
Everyone sees the opportunity, that's why there are so many takers in it. It all matters as how you execute it and how you are able to distribute it. So we are taking care of those aspects and doing it, but we believe that edutainment has a growing need now, especially because of not just the pandemic but also because of the non-modernization of things in gaming and toys and self-sustenance onto that part. We do see an opportunity here.
Okay. My second question is the new investment that you have announced, do they have any platform? Or would you be creating any platform like what Fortigo has?
All of the projects that we take, sir, is where we have our technology role to play, and we have the technology implementers. And we act like the cofounder for technology for all these ventures. So yes, by rule, any venture that we are investing in is because we want to develop some sort of a technology platform or a solution, which will cater to that targeted audience.
Okay. Okay. My other question is somebody asked the question previously, how much extra investment we have made in the existing company, as a result of which, our total valuation has gone up around 26%?
We can answer that technically. I don't think we have made any big investment in any of the existing companies.
See basically, what we did was in couple of entities like Leadstart Publications and [indiscernible] where like based on the technology because investment has gone up, but it's very marginally. Both in investment, what you see, especially coming from Mihup, in case if you look at Mihup as on March 31, 2020, it was 5.31%, which has gone to 11.84%.
Yes. Yes. Okay. Sir, my other question is what kind of value creation and the time horizon do you have in mind, so that the wealth of the shareholders can increase in our company?
We don't have any number in mind, sir, but of course, we'll try to maximize whatever opportunities we get. And we have taken sectors which we believe will have an auto growth, which will lead to the value increase. And from the past experience, if we look at it, I think the choosing of the sector and entrepreneurs has been pretty much verified by the increasing share in their holding. So to put a number on that, we want to enter the sectors that we have already remarked. We will not deviate from that. We will try to capital with every opportunity. But as you understand, with any start-up, the chance of success and failure is not predetermined. We try to minimize the chance of failure by putting in our best effort. But choosing the sector, we make sure that we are not chasing the wrong goals by making sure. That's -- it's about judgment and all. But finally, all it comes on to the execution and how the market takes it. Hello?
The next question is from the line of Puneet Motihar, who is an individual investor.
Congratulations on good set of number. My first question is regarding the ESOPs. We have 2 different pricing for the same. Can you please throw some light on that?
Yes, it is basically people who have joined at a different phase of time and whatever negotiation that we did with them. Based on that, it has been issued. So that was predetermined while onboarding an employee.
Okay. So certain employees will get INR 10 ESOP...
Depends on when they joined, at that time whatever is the fair value.
Yes. We've agreed with them based on that and subject to Board approval and et cetera.
Okay. Okay. Sir, and my second question is based on hiring. We have close to 106 employees onboard. When do we expect that number to cross 150?
No such time limits or anything of that sort. We will hire as we feel the need for it. And there will be some increase for sure because our project load has increased significantly in the last 4, 5 months. But we don't have a target that we have to get to 150 people and all because unlike other places, we are not into a body shopping business. We hire on the need basis and on the kind of calculations basis that we need to do for new work that is being done. Devising the existing frameworks, being able to make more sense out of it or more variations out of it is the current focus. For the moment, we are always -- we typically are slightly less than comfortable kind of a situation in terms of recruitment, but we are never short staffed.
Okay. Okay. And sir, most of the recruitment will be done in India? Or will there be some onshore recruitment as well?
Once you set up the European venture for U.K. and all, we have allocated some budget for at least having 2, 3 head people who are stationed there. We are not trying to set up a plant office in London. We are trying to create a business in London, which will be a subsidiary of India. To that effect, whatever is the right person to approach the market because sending a person from here who will gather the market intelligence and then marketing probably is a little bit of a long-term planning. We may do that for junior people, but we do plan to hire 1 or 2 senior people, but not more than that.
Okay. And the London business will mainly cater to trade stream? Or are there...
No, no, no, London business is for the European market services.
Okay. That includes the trade stream as well.
Yes, yes, yes, everything.
The next question is from Ayush Gupta, an individual investor. There seems to be no response from the line of Mr. Ayush Gupta. We'll move to the next question. The next question is from the line of Om Prakash Shah from Amity Investments.
Sir, our valuation is, you are at INR 43.9 billion from sources and papers we know that they have been much, much, much higher than that. So is there future or early fair value given to this?
Yes, sorry. Srini, you go ahead. I had some disturbance. Please sir.
Yes. Basically, we have given you fair value based on like very conservative estimate and based on the last round of funding of the companies.
So, for example, in case any of the companies can go out and raise at a pretty higher valuation. You know the start-ups, how the valuation can keep on increasing quarter-on-quarter. For example, you have seen Mihup. Mihup, like, it was valued close to about [ 5.31% ] [indiscernible], but it has jumped to 11.84%, more than 100% jump in 6 months.
Yes. But for note there will be allotment done at much, much higher prices to the Accel partners, Ideaspring and Nandan Nilekani from Fortigo, sir. So is that included or not, sir?
Fortigo is a separate entity. Fortigo, we are showing it, which is about INR 19.5 crores as of March 31. And as of September, it is INR 21.79 crores.
The next question is from Selva Kumar, who is an individual investor.
Like my question -- I have a couple of questions. So when you -- looking at the value of the portfolio, like, some of the companies, the fair value is decreasing, like, when compared to March 31, 2020, and then the value is decreasing, for example, Madworks Ventures Private Limited. Can you please throw some light on that? What is the future prospects of those companies, for the value being decreased.
See pretty much we went based on the performance. And as you know that the last 6 months, like most of the businesses were suffering because of the pandemic. So we have taken a very, very conservative approach. And in case if you look at it, it's about INR 5.99 lakhs going to about INR 5.12 lakhs. In case if you look at overall, the portfolio size, it's about close to about less than 1% or 2%.
Okay. Okay. So you mean to say that like -- I mean, the profits are looking good, but still due to the pandemic, like...
Yes, basically, we have taken a very conservative approach.
In the absence of any other benchmark on the external funding, we take a conservative approach based on the situation and the business' fitment into it.
Okay. Okay. Yes. Okay. And my next question is like so we have some data products, like -- so how much really it is contributing to the revenue.
Sorry?
So we have some data products, right, like, DocuX, all sorts of things, like how much it is really contributing...
Yes. As I said, those products are expected to be -- there are some projects going on, some proof of concepts going on. But as I had said earlier also, we expect the revenues from those to come in only next year, first quarter, second quarter onwards.
Okay. Okay. Okay. So then taking...
Some take time to mature. Products take time to mature. You have to deploy it in some places, you have to do some things, which are fine tuning, then you can actually make it into product. Product cycle is longer.
Okay. Okay. Okay. So when looking at the cash flow, like, so where we are really getting the money, like, is it from the corporates? Or is it from the start-ups?
That Srini can tell better. Srini?
Come again?
Source of fund, source of income.
Source of?
Income, income.
Income.
With sectors, yes.
Yes, other source of income is basically purely on...
The source of income, which is our main paying customers, setups, corporates, what are the main paying customer groups.
Main paying customers are generally start-ups. Learning Hats is one of the biggest customer, who is paying us. Slate is on one of the customer, who is paying us. And Leadstart Press, TSIM, like this list goes on. And majority of those, they are start-ups.
The next question is from the line of Harish Kumar Gupta from Nirmal Bang Securities.
Yes, sir, I have a question. Like, sir, right now, we are around 100 employees, and our quarterly run rate is around INR 4 crore. So can you please tell me like, if you want to achieve the turnover of double, like, INR 8 crores, our employee -- number of employees will be doubled? Or what will be the approximately ratio?
See, doubling the revenue has several aspects to it. But in -- if you look at a kind of a metric that you're trying to look at, then depends on which source the revenue is coming from. If we decide to go stay profitable, but still go the start-up way, then the number of revenue, number of people that we would need probably would not double for doubling the revenue, but probably would have to increase by 75% to 80%, if we focus on our start-up company -- and the corporate mix in this current fashion.
The next question is from the line of Disha, who is an individual investor.
Hello?
Disha, there's a lot of disturbance on your line. Request you to use the handset if you have hands-free.
Yes, I'm on a handset. Can you hear me?
Yes, much better.
I have a question on Woovly. Recently, certain media articles stated that Woovly has pivoted to a social commerce model. So can you highlight the opportunity in that particular space? And how is Woovly trying to monetize, things like that?
Sorry. Am I back here. Can everyone hear me?
Yes, sir.
So did the last question get answered? I was in the middle of it and then I got broken off.
Okay. So I was asking about Woovly. So certain media articles state that Woovly has pivoted to a social commerce model. So I'd like to understand the opportunity in that space, the social commerce space in India, in general. If you could throw some light?
We seem to have lost the line for Mr. Chattopadhyay. Participants, please stay connected while we reconnect Mr. Chattopadhyay. [Technical Difficulty]Participants, thank you for patiently holding your lines. We have the line for Mr. Chattopadhyay reconnected. Over to you, sir.
Sorry, guys. Bad network. I just -- I was not reachable apparently, so it's fine. Yes. So I was answering a question about the manpower and how it changes depending on the source, right? So as I was telling that if we need to double it up with keeping the current mix of focus on start-ups and all, then we would not need to go to 100%, but surely 75%, 60% to 75% more, people will be needed to double the thing at the same ratio. However, if we go on the services part, the number of increase could vary anywhere between 30% more to 60% to 75% more.
Hello?
Yes, hello.
Yes, go ahead with your question.
Yes. Yes, sir, I wanted to know about this company called Woovly that you have invested in, is pivoted to a social commerce model. So I'd like to just understand the opportunity in the social commerce segment today in India. And how is this going to pan out and things like that.
We thought it's a great opportunity. And that's the reason we pivoted. It's doing pretty good. The numbers and facts that they're on Linkedin report that is there for that, but until now we have not lost any customer base because of the pivot. In fact, given the pandemic, there was no point telling them how to fulfill their bucket list. And they are hardly able to go out of the home. So it was more of a customer-driven need, where we felt that the social commerce is something that the same customer base would want. We piloted that, that had some success. And we are seeing some early traction. And according to the -- we have not got detailed reports on it, but just from the talks we'd be -- we obviously keep on talking to our entrepreneurs. It seems to be profitable right from the beginning.
Sir, I have another question. Can you hear me?
Yes, yes, please go ahead.
Hello?
Yes, please, go ahead. We can hear you.
Yes. Sir, of all the investee companies that we have, how many companies actually have a monetization plan or a strategy in place? Like there are a few companies where we don't know whether they are in seed stage or whether they have the right product market state or where are they? Like, for example, Taxitop Media or Star Publishers, do they have a monetization strategy in place? How are they faring? Like is very less coverage on these investee companies? So I'd just like to understand that part.
Yes. So there are 2 parts to your question. Firstly, if there is no monetization strategy, we, of course, don't start the project. So there is a monetization strategy by default for any of our ventures because we are into the class of ventures, which are focused on sectors, while monetization is a must before we start the venture. It cannot be something like we will invest now, we will grab eyeballs and then we'll see how to monetize. So all of them start with the monetization policy. That said, they all, of course, have to look at the market realities and keep on voting. And that's why we insist that there should not be an obstinately fixed plan. It should be dynamic and market oriented. Now the second part is the stage of development of a product or the company is there. And typically, companies are mostly -- invest mostly in 2 stages. They are either in premarket stage, wherein they're developing the product and do it, and we have some startups in that phase. But because of stealth and all those things, we don't maybe disclose these details too much. And the second start-ups, of course, are the ones where they already have got market share, but they are also in continual development to keep on updating themselves to stay relevant and to have more opportunities in the market size. So as a nature of it, most of the start-ups are always in enhancement or core development, either of these 2 stages. None of them are in a different phase. And to answer that to your first question, without a solid business plan or a monetization scheme or strategy, we don't even start the project, not even invest in them.
The next question is from Yashesh Ajmera, who is an individual investor.
So I just wanted to understand one thing. It was that what is the mode of service. So like is it on a continuous basis? Or is it where we provide a platform to a start-up on an initial basis, we get the equity, and we continue to engage with the start-up and make sure that the valuation has grown over a period of time. So I just wanted to understand this simple thing.
We have already covered that in some past con call. I've explained the process, but I'll explain it again, apologizing to others who may be bored by the repetition. The thing is we work more like a build, operate, transfer, observe kind of a model, right? So as a fact, when we start off the project for a certain period of time, we surely are the sole developers. But as each of them grow in size and stretcher and can support their own teams and have critical mass to form teams, we start helping them form the teams right from the senior management onward. And then in a phase of time, we transit out from active development, but we keep on engaging with them for any development, which is new in nature or as a challenger to the current development by finding onto that path. So our values and all are slightly, you may say, random in that case, depending on the need base. But for the core set of start-ups, where we are at the starting point or until product maturity, we are in the co-development or complete absorption phase in those parts.
The next question is from the line of Sandeep from Wipro.
Hello, am I...
Yes, Sandeep.
So my first one is like what are the performance of the major, firstly, companies that you have? Like can you just give some details about it, like, Fortigo, for example. How they are doing right now? And where do you see the growth, success and all that.
I think whatever information we are allowed to give, we give. Because remember, these are separate companies. We have to adhere to their principles also. But I think Srini can briefly tell you whatever is public able?
Yes. Whatever is publicly available and whatever that we can do, we have already included, but we will not be in a position to discuss more about these portfolio companies because those are separate entities. We are also like a part of an investor, and there are other investors also involved.
But whenever a landmark event happens, we do highlight that, we do tell. Whatever is publicly available, we try to keep everyone involved on that. So whatever is publicly available, I can tell you. Mihup has got the Tata Motors contract, wherein every Tata Motor in the passenger car segment, which is shipping, is going with the Mihup. We have bagged some orders from some of the planes, I don't think the names are giveable right now. That will depend on them. And also about the fund base. Fortigo , whatever is disclosed in the public, not much more public information has come. So if you look at our annual report, the last public known information is already there.
Next question is, like, I can see there is a good amount of cash buildup from the operations and also like the cash and cash equivalents have also grown quite a bit. So what are the plans with that particular cash that you have in the account right now?
So we've already told some of our plants, right, where you saw the permission of the subsidy in London, which we will obviously need to invest money in. We have talked of certain investments we have done in this quarter on some of the startups. We have to find our next batch of startups also. So we'll be actively pruning onto that part and holding on to those things. So those are investments that will happen. And there are certain plans that we have for which we have signaled it by having the Signal subsidiary setup, which we said in the edutainment sector. So as and when we get clarity and sort of distributable information, we will keep you updated, first of all. But let me be very clear, we are not here to becoming your money manager by holding money and investing in equity, which you could have done better than us, our mutual funds. The idea of the company money is to best utilize it by keeping provisions for 20 days. We will adhere to both those principles and make sure we maximize the utilization of co-part.
The next question is from the line of Mayur Damani, who's an individual investor.
And first of all, I just want to congratulate you for a decent set of numbers. And at the same time, means in the investment community, our company has also been considered as a mini Info Edge in the making. So congratulations for this because this is a very good achievement at this stage. And with respect to investments, means, do we have an option to increase our stake in the evolving businesses as and when it happens in future? For example, in ideal insurance wins, our cost means our acquisition and this thing is a little less. So as the insurance penetration increases in India, do we have the option to increase our stake at the old acquisition price?
So as a prior contract agreement or anything of that sort, we, of course, don't have anything like that in place. But given our relationship with our start-ups where we are involved and interested in, I think that's always an option at every funding round. We have seen that it will not make a -- it will be like a drop in the ocean, if we try to go with our idly amount of capital that we can invest into it. That said, for whenever there's a promising thing or something we believe in, we have taken the exceptional route. But that -- but primarily, we will not want to invest money in the raw form into start-ups until a certain level of maturity more for Xelpmoc itself. We are very flattered to know that we are being compared as a mini influence, but we want to state clearly that we are Xelpmoc, and we want to be known as the company which looked at it in a different way. Our entire involvement is much, much more deeper than just investments. So that's the reason why probably the comparison to InfoAge ends. Our main focus is to make sure that the principle is we believe that when the money is being spent on technology, we are the best value for that amount of money. So instead of giving money to a start-up to buy technology, we would rather build the technology for them and give more value for that money. That has been our philosophy from day 1, and we want to adhere to that.
The next question is from Siddharth D., who is an individual investor.
You've kind of answered part of it with the previous question. From most of the new investments as you're investing through OCPS or CCPS, and I mean a significant amount of your revenue, I think, also comes from investments that you have made into other startups. So my question basically is if your revenue is tied into your investment, are you looking at other revenue streams as well as from external, I mean other sources? And would you be funding other investments by raising other debt or external debt?
Srini can answer why we do OCPS and even in terminology, but I can tell you the basic philosophy. Please, Srini, go ahead, and then I can add on to you probably.
First and foremost, importantly, why we go ahead with OCPS is like the contracts what we enter with these technology companies for developing technologies for a period of 2 years or 3 years. So accordingly, we enter into OCPS, so that this can be converted into equity over the period of time as and we build a technology. So it's a win-win situation for both the Xelpmoc and also the start-up. So even if you look at our current revenues, like I don't see that the most of the revenues are from this issuance of shares, but yes, close to about 50% to 80% will be coming to issuance of shares. But otherwise, the balanced revenue, what is coming is directly through cash payment from the start-ups or couple of corporates.
Yes. Coming back to your second part of question that would we be raising debt to invest into something or the other? Well, if the opportunity looks very promising, yes, we may. But that is surely not our preferred method or anticipated strategy. We have the method that we are following now as something which is working out. But that said, we -- probably when we go into new markets and we have more ambitions, some amount of investments would be necessary. See if the public face of the company, of course, is since 2019, but there have been 3 years and more existence before the company went public. And at that point, unknown to most of the public market dominion, we had to invest a lot of money without knowing things will come back or not at all. It's only when it formed into a solid business, which was learning as a ticket tape did we go public. So when we start a new venture, that capacity and that thought has to be there. So when we start a London operation or we stay -- tomorrow we say that we want to set up a Bangladesh operation or day after tomorrow Africa operation, the risk of new thing will always be there. So once we go there, we would obviously have risks much more than our current business here because it's more of a set pattern now. We know some more roughly the probability to success. So that's a number. We would still like to limit it to a frugal means, but if we think that the opportunity is big and the Board approves, of course, we can take any steps. So all options are open, but that's not the preferred route out for us in for future.
Just to clarify, I will not take too much more time. So your major source of revenue that you see is through investment and transaction...
No. No. Sorry, I forgot to answer that question, sorry, sorry, that -- I forgot to answer that question. As we have said that, there are 3 revenue routes for us: the start-ups are, of course, where we develop for them, but that's not a high-margin thing at all. That's really that's almost 0 margin. Our main thing comes from corporates and other parts or from start-ups which have gone ahead and done well in life, right? And we do hope that the corporate and services industry post pandemic will again pick up. We had seen a kind of a just post -- pre-pandemic, we had seen a rise in that because we have put efforts into marketing. But unfortunately, the pandemic struck and our marketing efforts had to take a beating there. But we do hope from January onwards, things are going to clear up, and we'll be back on track on that part. Whatever we could market in that time has sustained us for a certain time. And despite the pandemic and all, we do see prospects of some corporate contracts here and they're coming in, but it's not in the avalanche way that we would want it. So that is surely the second the pole or the pillar of revenue that will be there. And in many of the start-ups, we do have contracts, and we do have understandings wherein -- or our entire thing, whatever you call it in legal terms, that apart from the development at cost and the equity that we hold, we also get a pass-through of the revenues earned by that start up. Now those start-ups are just single light of day. So that would be the third pillar of revenue, probably, let's say, 9 months down the line or so.
The next question is from Hasmukh Gala from Finvest Advisors.
Yes. I have one question. This new acquisition that we have announced with Signal Analytics Private Limited, that is a related-party transaction. Now what will be the activities of that company?
So the related-party transaction to a level of INR 20,000, and that's because of the corporate laws where it's easier to form a company with 2 individuals. And then -- so that's -- there's no related-party transaction in that sense. It's just a technical related-party transaction. The fact is we have a 100% subsidiary now. And like I said previously, we have set it up because we want to park a little bit of a fulcrum kind of an approach there, by which we are able to go and create a bouquet of services in the edutainment sector, not the formal education sector, but gaming, the robotics toys, those sort of ventures we do, we do out of there.
Okay. And sir, there is a similar name company, Signals Analytics based in our Europe, USA, do we have any connections at all with them?
No. No. No. No connections at all. Any connections is purely accidental. We didn't even know until you told us. There is no connection...
One thing, it is plural. It is Signals Analytics, and we are Signal Analytic.
Our reason for giving signal was because it's almost like a play thing for the kids and it is with go, no-go interest, not interested, very interested. So we thought of it that way, and we named it this way. It's mainly a data analytics based -- the fulcrum will have to be data analytics-based system, which does subscription management and stuff and gives impetus to the other companies to know what kind of product would suit this kid the best.
The next question is from the line of Subrata Sarkar from Mount Intra Finance.
Sir, I'm tracking your company very recently. Sir, just to understand one thing, like, this year, valuation which you have done of the investment, so what is the method of that, number one? And second is like, sir, how to get an understanding of how much percentage shares you are holding on that particular company or something like that? So that we can have an understanding like...
Sir, we are extremely transparent about these things. If you go to our annual report, every holding into the last second decimal place is given there. There is absolutely -- everything is out in the public domain. You just have to look at the annual report for that part. And I think Srini has just explained that the fair market valuation is done on the basis of conservative estimate on the last known time of fund insertion. That is the best way to think of what's been the method.
Yes. I mean, it's based on...
Is it done by some third party?
Yes. It's done by third-party, sir. It's done by third party. It's done by third party based on the discount and cash committed. And apart from that, what is the holding, et cetera, we have given complete details in our annual report, including other investors who are part of that particular portfolio company.
The next question is from the line of Ayush Gupta who is an individual Investor.
And my question is like in this quarter, we did sales of INR 3.5 crores. So out of those INR 3.5 crores sales, can you tell me like how much is contributed by our investor startups, I mean our portfolio companies that we have invested? And how much percentage of sales has been contributed by the clients, the non-portfolio companies?
Srini?
So basically, the majority of the investment is coming from our own start-ups. You can assume that's close to about 90 to 90 -- approximately 90% to 92% is coming from our own start-up entity or where we have a deep relationship holding some sort of an investment.
Okay. And like my second question would be like, as stated in the last couple of con calls that we have plans to start our foreign countries like Africa and Southeast Asia. So any update on that?
The first update was that we gave about London, that's our first port of halt. And after that, we will look at that, we are in talks with some of these places, but they're in very early stage, nothing to disclose as of now because it's just at the ideation stage right now.
I think the reason we have been always thinking that the pandemic will end in another 2 months, 3 months, but it's been going on. I don't see a clear view in sight, but I hope -- and more or less from the data that I have in hand and all it seems that January is something we can safely assume we will slowly start trickling back into normal business.
The next question is from the line of Kishan Toshniwal from DKMS & Associates.
First of all, congratulations on big set of numbers. I have 2 questions. You have shown the operating margins at 43%. First of all, is it sustainable going forward?
No, sir. That's there in the last Board meeting or analyst call. So this is not a sustainable EBITDA margin at all.
Yes. Then why is it at 43%? What you are seeing that it is going to go down? What is the reason behind it that you feel that this is not sustainable?
Because of the pandemic, a lot of the costs that are there, which is significant for a small company, costs like marketing costs and rental costs, the staff welfare costs, when the office is running. Those things have not been incurred during the quarantine period, right? So that adds to our benefits. And for us, that because of our negligible size right now, those are significant numbers.
Okay. And the second question is the revenue that you are showing of INR 3.5 crore, then INR 3.4 crore and all this, how sustainable is -- when can we see the next, what you say, jump into it? Like it has come from last year, there was, say INR 1 crore, then it has come to INR 3.5 crore, now INR 3.5 crores. So when are we expecting it to move to the next level? Or is it...
At this point of time, we expect it to grow, but in the jump kind of a scenario, I think we'll wait and watch until the whole because we are not income -- we are not inert to the environment around us. But I think to give a fair assessment, once we get out of this extraordinary situation we all are in, that will be a fair time to do it. But I personally feel that you will see some hike, but of course, not a jump to the level we would have wanted, had you asked me this question 7, 8 months back when pandemic was not in the scenario. So now we have very less option, but to restrategize. And once the pandemic situation goes out, once we understand what is happening, we will be, again, looking at a new fresh set of plans and be able to tell you there. But at the same time, jumping and all is not the objective. The objective is to making sure that we have taken -- right from the day when we went public, we had said this is a 5 to 7-year time frame. We want to make sure that our end goal of 7 years is what we don't get lost from in doing per suites of sudden jams here and there for the short term. So the growth is the first objective. And whenever I have a chance between growth, which can be slow revenue earner, but through an amazing start-up idea that we want to pursue, we would chase that more than lucrative contracts, which can give us higher EBITDA and higher margins. So I hope you understand the philosophy with which we'll approach the problem and how we'll do it. But despite then, we will have growth, but whether it will be a jump or not, that will depend on opportunities we seek.
But we're going to maintain this at least?
I hope so. Yes, sir.
The next question is from the line of Amar Koradia, who is an individual investor.
Firstly, congratulations on building this beautiful company and a wonderful set of numbers. So someone on the call compared us to an InfoAge, but -- and of course, we are a little more what it is. But the business model and the portfolio has a lot of similarities to Y combinator. So on that line, sir, just 1 single question. Do we intend to demerge or separate the 2 businesses, 1 would be the enterprise business, the other would be the start-up and investment-light business in the future? And the second question, which has partly been answered, but I will still ask if I can get more insights. Do we intend to do direct equity investments like an early stage or an Angel investment, where there is not much of a technological understanding? But as Sandipan sir said if the opportunity looks exciting for growth, you would want to go for it. So do we have any such plans?
So as I said, there are no straight nos to any of these things. We live in a very different world, but there are certain things. I'll answer your last question first. The probability of us doing that probably is about 5%. Only if the idea is strikingly, very extremely absolutely exciting, and we don't need to play a role, but still we want to stay invested, we may do it. But the likelihood of that is very less. Coming to your first point as to whether we want to -- in future, whether we want to get into that route and all, of course. But when I say future, I mean 3, 4 years down the level, at least. And by that time, I don't know how the entire finance world or how the entire investment world will change itself. But of course, if there's an opportunity by which we can do that, we will do that. But for the moment, our focus is completely being able to bet on our own capability in being able to execute. And those are the start-ups we want to do the maximum bet on. So that's the main difference that we want to say. Now as a differentiator between us and, let's say, the other aspects that you talked of, be it InfoAge or Y combinators, we are actually developing the product. We are doing the entire hard work. We are not just a funder or an advisory body or a kind of a filtration process. We are much, much more than that. And our second aspect is, as we have told differently is that because we think of ourselves as the 4 founders and all, for 1 problem area, we work with 1 entrepreneur set only. That certainly is a very distinguishing factor of Xelpmoc.
We have 1 last question. We take the last question from the line of [ Chetya ] Agarwal, who's an individual investor.
Hello?
We can take one more question if he's not there.
Hello, hello?
Hello.
Hello, am I audible?
Yes, yes, go ahead.
Yes.
Yes, sir. I have a couple of questions. Like, can you please bifurcate the revenue segment wise? And the second question is, what are the directions for the quarter 3 and quarter 4? And the third question is any plans for investment in other industries like renewables and any other industries?
So I think the first question has already been answered. I'll just repeat it, probably have missed it. So we did say that 92% of our revenues are coming from our start-up bouquet itself and 8% from external sources. From the third and fourth revenue perspective, we obviously want to make sure that the amount of revenue coming from the corporate sector and from other sources increases significantly. And as a significant, at least, goes to a ratio of 80:20 minimum in the next 2 quarters or so. We are on it. But at the same time, we are aware of the constraints that we have due to the current COVID situation. But as you know, that we are a small company, we don't want to focus marketing dollars on an impossible situation. We'd rather wait for the time and put our mind to better usage. And is there any other question, I think there were 3 questions.
One more question is like any plans for -- in which...
The other sectors, the other sectors.
Yes, other sectors.
Of course, we are always looking at crossover sectors and new emerging sectors for doing our part. But more importantly, given the heat stack that we work on, I think innovating on that part and making better services is a bigger focus for us than looking at innovative areas, which are new and untested for the moment. We may do 1 or 2 of them. But the bulk of our focus will still remain on making sure that we stick to our core competence and our focus on the heat sector.
And sir, any like investment in renewable energy sector?
No.
Hello?
No. We don't have any investment in renewable energy sector, no.
No, any plans for that, like if you get the opportunity in that?
Not really. Not really. Not really. Unless it is about doing some sort of a software management of that, anything which is core and outside...
Yes. For the ERP or the ERP system based product -- platform where the...
Yes. ERP can be sold to the -- yes so we have an ERP product, which we would rather try to sell to these industries than get into the industry itself. When we think of getting into a particular sector, we think that we are part of the solution making and developing process. Anything else which is verifiable, we will be tackling with our product offerings.
That was the last question in queue. I would now like to hand the conference back to Mr. Sandipan Chattopadhyay for closing comments.
I think from a personal point of view, this has been one of our most understated, but extremely efficient quarters. Despite the incumbent adverse effects and situations, the fact that we took the right strategic calls of not pursuing hard problems and trying to more or less introspect and try to leverage that is there. A lot of thanks to the team, which is not in the development part, but in sourcing of the start-ups and all for closing some amazing deals, which we think we'll see nice things. The ideas that we have got and that the kind of risk averse, if you may say, to some extent, but some sort of an aggressive stance that we have taken in setting up London subsidiary, I think these are sort of indicators as to the fact that the confidence and the kind of overall part that we are seeing in trying to expand ourselves is displayed properly and also not just displayed are not on theoretical, but actually in actions. So I think this was a pretty much of a -- in retrospect, I hope that when we look back in a year or so, this would be probably one of the changeover quarters for Xelpmoc.
Thank you very much. On behalf of XelpMoc Design and Tech Limited, that concludes the conference. Thank you for joining us. Ladies and gentlemen, you may now disconnect your lines.
Thank you, everyone, for being here. We appreciate that.
Thank you, everyone. Yes, bye.