Good day, ladies and gentlemen, and a very warm welcome to the Allsec Technologies earnings conference call hosted by IIFL Securities Limited. As a reminder, all participant lines will be in the listen-only mode, and there will be an opportunity for you to ask questions after the presentation concludes. Should you need assistance during the conference call, please signal an operator by pressing star then zero on your touchtone phone. Please note that this conference is being recorded. I'm now glad to hand the conference over to Mr. Ashish Johri, CEO of Allsec Technologies. Thank you, and over to you, Mr. Johri.
Thank you. Good morning, everyone. Thank you for joining our earnings call today. The results on the presentation have already been uploaded on our website. Anything we say which refers to our outlook for the future is a forward-looking statement and must be read in conjunction with the risks that the company faces. These uncertainties and risks are included, but not limited to what we have already mentioned in the annual report. Let me now start with a very brief overview of our financial performance, following which I will go on to the business updates. Let me start first with financial performance. We have achieved a revenue of INR 77.1 crores during the quarter, a growth of 8% over Q1 and 14% over Q2 FY 2021.
Our EBITDA at INR 18.8 crores is a growth of 19% quarter-on-quarter and 35% year-on-year. Our net profit at INR 12.9 crores is a 64% growth over the previous quarter and 101% higher than year-on-year. For the half year, we have achieved a revenue of INR 148.6 crores, 13% higher than H1 FY 2021. Our EBITDA for H1 FY 2022 is at INR 34.7 crores versus INR 26.9 crores previous year. The board has also declared an interim dividend of INR 45 per share after considering the strong cash position and the positive outlook for the company.
Before I move on to the business update, I would like to thank all our employees and acknowledge the role all our employees have played over the last six months as we have battled jointly the second wave of COVID. We have been unfortunate to lose a couple of our associates, but I'm glad to say that we have come out stronger, and we are poised extremely well coming out of this second wave. I'm also pleased to state that 80% of our employees in India are now completely vaccinated. Now let me kick things off with an update on strategic themes that we have been working on for the last 12 months and the continuing six months as well. First is improving top-line growth. That's the first theme.
North America has always been the key focus for our DBS international business. We have expanded our sales teams over towards the end of last financial year and also over the last two quarters. We have added some real heavyweight leaders on the team, and I'm delighted to welcome a couple of leaders over the last quarter as well. We have also been running very strong digital marketing campaigns in North America, and those campaigns have yielded results in inbound queries. Our inside sales teams have also been revamped, are extremely strong now, and their activities are also yielding higher proposals and wins. Our joint GTM strategy with Quess's North America sales team has also helped us reach more targets, and we have a strong pipeline building along with them as well.
All of this has borne fruit, and over the last six months, as you guys are aware, we have added five new logos in this year and added almost INR 30 crores in ACV with these new logos. In addition to these five logos, we've also expanded with a few of our existing customers. We've added new entities with these customers, new rentals with these customers. We are seeing good growth coming from existing customers as well. We believe this growth story should continue. Our DBS domestic business, which had a COVID-related volume drop in Q1, has also rebounded with a 10% quarter-on-quarter growth in revenue. During H1, we have added two new logos in this space with ACVs in excess of INR 4 crores.
We have also seen volumes returning with our existing customers on the domestic side. Moving to HRO. HRO also has seen strong growth momentum, which was moderated in the last 12 months because of COVID lockdown. We now over the last quarter or this quarter, we are seeing strong growth momentum. We believe that we are past this phase, as can be seen from a strong 9% growth quarter-on-quarter in this segment. We have also increased our sales force in this business substantially, both in India and our chosen global locations. We are also focused on building a partner network and global payroll partner network to service some of the global geographies.
In H1 FY 2022, we have added 46 customers with an ACV of INR 3.5 crores. Our cross-sell initiatives, so that's the second theme. Our cross-sell initiatives are also seeing traction. We have added almost 2.5 crores in ACV cross-selling to our existing HRO and compliance customers, and we continue to have a very, very strong pipeline with existing customers where we're upselling them and cross-selling our existing solutions. We will continue to pursue this stream of revenue with existing customers and leveraging the larger Quess network as well. Moving to the third theme, our cash position and collections continue to be extremely strong. Our OCF for H1 FY 2022 was INR 30.6 crores, an increase of 11% over H1 FY 2021. Our DSO also continues to be very strong at 53 days.
Moving to our fourth theme on investments in innovation. I'll touch upon the HRO payroll platform that we have been working on. That platform modernization continues to progress on schedule, and we expect to start onboarding customers towards the end of this financial year. In anticipation, we have already started building a software SaaS sales team, and we've already started forming channel partnerships in anticipation of being actively in the market end of this financial year. I now move on to the detailed business segment performance. Let me start with the HRO business first. The HRO business continues to perform well to end the quarter at a revenue of INR 28.4 crores, a growth of 9% over previous quarter. We have added 21 new customers and more than two lakh payslips during the quarter.
Our EBIT in this segment grew by 13% over Q1 and 6% year-on-year. We continue to invest significantly in the digital innovation, as I briefly touched upon, and this is driving both revenue and margin improvements. This business currently has a very strong pipeline. Our win rates, both our pipeline and our win rates continue to be at historical highs. I would also like to add that in September 2021, we crossed a very significant milestone of processing more than one million payslips in a month. In the last year, our payslip count has increased by almost 31%, an addition of 230,000 payslips per month. This is a strong testimony to our strong technology and the client relationships that we have and the dominant market position that we have achieved over the last decade or so.
We are also seeing very strong interest from global customers for some of our HRMS and HCM solutions, primarily leave time attendance. We have signed two global deals over the first half of this financial year. We have also strengthened our global payroll platform capabilities through partnerships to be able to better serve our global customers. I will move on to the DBS business now. The DBS business was the one most affected by the COVID pandemic in FY 2021 and also had a moderate impact in the first quarter of FY 2022. The business has since rebounded back very smartly, and we closed the quarter with revenues of INR 48.7 crores, a 7% growth over Q1 and 13% growth over Q2 last year.
Our headcount increased by 20% over Q1, reflecting the strong momentum that we have built in this business. We also upgraded our technology. We had a significant upgrade of our communication systems, moving to the latest version of Avaya, which provides us with much greater flexibility in serving omni-channel requirements from customers. We have had strong sales wins in this space, as I mentioned earlier, and our sales pipeline in North America is also at historic highs. I thank all of you for your support, for being here today and would like to take questions at this point. Thank you.
Thank you very much. Ladies and gentlemen, we will now begin the question-and-answer session. Anyone who wishes to ask a question may press star and one on the touchtone phone. If you wish to remove yourself from the question queue, you may press star and two. Participants are requested to use handsets while asking a question. Ladies and gentlemen, we will wait for a moment while the question queue assembles. First question is from the line of Sugandhi from InCred AMC. Please go ahead.
Yes. Hi. Am I audible?
Yes.
Yes, please go ahead.
Hi. Congratulations on the great results. I have two questions. You know, you have mentioned ACV wins to the tune of INR 38 crore in the first half. If I remember correctly, in the first quarter, you had mentioned a number close to INR 23 crores. Can we assume this INR 15 crore is incremental in incremental gains in the second quarter?
Yes. Yes, you can. That's correct.
Thank you. In terms of your COVID costs, you know, I noticed that there are around INR 1.5 crore. Could you just, you know, make us understand the nature of these costs and, you know, how should we be forecasting these costs in the coming quarters?
Yeah. Hi, Sugandhi. This is Raghu here, so the
Yes.
COVID costs are primarily two. One in Manila, we still have a general quarantine in place, so we have our employees boarded in hotels close to our office, so we incur expense on that. In India, we also incur expense where we still have some people working on work from home more to maintain social distancing norms. We have some rental desktops and laptop. We think the India cost will go down in Q- but the Manila we still don't have visibility on when the general quarantine is going to be lifted. Until that is lifted, we'll continue to incur this cost. As you can see, this COVID cost has kind of flattened out over the last couple of quarters.
We think that is how this will play out in probably the rest of this year.
Sure. You know, it's encouraging to hear that you have made significant appointments on the sales side, both in HRO and DBS. In terms of you know, the impact on your SG&A, how much of that has already come through and, you know, how much of that will come over the coming so in the second half of the year?
Yeah. Because we've added people during the course of the last six months, obviously there'll be some incremental costs if you compare like to like. That is not going to be very material to change the overall SG&A costs. Yeah.
Sure. Thanks. I'll hop back in with you, in case there are more questions. Thank you so much.
Thanks.
Thank you. Before we take the next question, we would like to remind participants that you may press star and one to ask a question. The next question is from the line of Jitendra from Alpha Capital. Please go ahead.
Hello, sir. Congrats for a very good set of numbers. Sir, you have talked very good details about in terms of new additions and all. What kind of growth can we expect going forward?
Jiten, we have a strong pipeline both in our DBS and HRO businesses in North America and in India. We have done extremely well over the last six months. In North America especially, we've added more logos in North America as versus what we've done over the last five years. This has been a historic first half. While our pipeline continues to grow and I remain very optimistic, but that said, the environment is difficult regardless. There is a holiday season we are approaching in North America. I'm optimistic, but also mindful of the external environment. That said, we will not be issuing any forward-looking guidances on what we should expect in terms of the sales momentum.
That said, we are all here to build that momentum above and beyond with what we've achieved.
Sure, sir. We are giving very high, very good dividend, and we have the very good cash on balance sheet also. Can we expect this kind of high dividends to continue, or how we should think about the dividend policy in what?
The dividend that we paid for this quarter or whatever interim dividend is a special dividend. As you would have seen, Allsec has been accumulating cash over the last few years. Therefore, you know, the management felt that this was the right time to reward the shareholders who've been with us for a long time. We've also kind of paid to the maximum extent possible from a India standalone financials perspective because the dividend is paid out of India standalone. While I may have retained earnings in Manila, but we cannot use that fund. Going forward, we will take a call at the end of the period on what is it we are from a retained earnings perspective in India standalone and do it.
You know, we need to be aware that this was a special dividend that we've declared to reward the shareholders who've been with us. Yeah.
Sure, sir. Thank you and all the best.
Thank you. A reminder to the participants, anyone who wishes to ask a question may press star and one. The next question is from the line of Ashish K.C. Zaveri from Ashish K. Zaveri.
Hi. Good morning. Hello?
Good morning.
Hi.
Hi. Good morning. Please go ahead.
Congratulations for the excellent results. My question is that, in last quarter you declared that, we received a dividend from, Manila. This dividend, it was from the operation from one year, or it was been accumulated from the period of time?
Yeah. This has been accumulation over a period of time. We've never, you know, drawn money from Manila in the past. You know, we did that in Q1, and the idea was to get the cash into India, which then gives the management the flexibility to decide the future course of action in terms of utilization of the cash. That is what has helped us in declaring dividend in the current quarter.
Okay. Thanks a lot.
Thank you. A reminder to the participants, anyone who wishes to ask a question may please press star and one. At this time
Next question is from the line of Shailender from Motilal Oswal Asset Management. Please go ahead.
Hi, everyone. Just a couple of questions. One was that, you know, on a DBS front, our incremental ACV is incrementally far more towards 7% of the ACV is coming from international. What does this imply for the margins of the DBS business? That is question number one. Question number two is, you know, you alluded that some portion of the COVID expenses is towards India. If there is a way we can demarcate that would be helpful.
Sorry, what was the second question, Shail?
The COVID expense of INR 1.5 crore per quarter, if you can demarcate how much is for India, how much is for Manila, probably that would help.
Okay. I'll take the first one, which is on the margin. Typically, international business margins are better than the domestic business. Obviously the more we do in terms of the mix, the margins will improve. Having said that, our aim is to grow both together. We've seen in the past, except in the quarters when you know we had COVID-related drop in volumes, our split has been 60-65 versus 35-40. We expect that to continue in the long run because domestic we also have volume growth coming from you know our current customers.
We think this margin will improve as the revenue goes up, which is obviously going to be the fact, but the mix is unlikely to change in the near term. The second one on the COVID-related cost out of INR 1.4 crore, we spend around INR 1 crore in Manila. The remaining is in India.
Okay. That's helpful. On the HRO business, two things. One is I think in the slides, one of the slides you mentioned that the headcounts are up 50%, whereas your pay slips are up 30% YOY. You know, to the best of my memory, this is a huge employee expansion that we've embarked upon. Could you just detail it out a little bit more? I understand it's for the new HR SaaS product sales build-out. But if there is a way you can help us understand that, what would be that we will need to be at when the product is launched, and why are we being six months early? I mean, how does this business work? If you could just help us a bit of that finer dynamic, that would be helpful.
In HRO, the pay slip count has increased. The employee headcount has not increased that much. The employee headcount has actually increased only in the DBS side of the business. We've still not added a lot of people for the SaaS platform that you talk about. That's something that will come up as we go along. The current increase in HRO pay slip, obviously, you know, we've grown around 31% year-on-year. That is coming from the growth in both the existing customers' employee headcount as well as the new customers that we've added. The employee headcount at Allsec for HRO has not grown significantly.
That is not a measure that we also look at from a performance perspective because this business is more scalable compared to the DBS business.
Sure. Just the last one-
Just to add on the question on the SME product. We continue to be in beta with few friendly customers where we are building the product out. That process of building the product out is not complete yet. I don't think we've reached a point where we can say we have a competitive product. That process will continue, and we also understand that this is a tough market. We are very, very cautious about our expansion plans for the sales as and when that happens. I don't see that happening this calendar year or this quarter for sure.
Very clear, Ashish. Ashish, one more thing. In the opening remarks, you did mention that, you know, from an HRO standpoint and international arena standpoint, you're trying to toggle up the capability through partnership, to increase the value proposition. Could you just elucidate a little bit more on that?
There are three kinds of partnerships that we are going after in the HRO business. There is the sales channel partnerships and referral partnerships. That is one kind of partnerships. That effort has already started, and we have almost five odd channel partners signed up, and leads, et cetera, have started coming in over the last quarter. That is one. Second is for the India market, we have signed up with a lot of niche solution providers for instance in learning development, et cetera, to complete our offering for customers. These are white labeled solutions that we take to our customers. That is the second nature of partnerships.
The third nature of partnerships is global payroll, where we have existing customers asking us for payrolls where we don't have capabilities. On a case to case basis, we are making decisions either on building the platform ourselves where scale justifies it or going through local partnerships that we are forming. All three are very active and for all three partnerships, on the solution side, both kinds of partnerships we have, we have a pipeline that's beginning to build up.
Interesting. Ashish, one last question, you know, from a very long-term perspective, if you can give us some sense, because, you know, there are a lot of things that are changing. One is the domestic competitive pressures I'm sure will keep dialing up as they always have. Plus this incrementally partnership-led model would require you to share more incrementally with partners for all the global business you get. On top of it, the SME HR SaaS product that will come through, which will be a tough one and a hard one. How should one really think from the margin perspective on the HRO business, say, over the next three to four years? If you can just give us some ballpark idea of how would this.
How each of these three businesses are really different in the margin profile at a unit level, that will be probably a little better. Let the mix give out the numbers.
Sure. So, while I won't issue any forward-looking guidances in terms of growth rates, et cetera, to expect, but I'll just give a few general comments on the business outlook and the strategy. Over the midterm next three years, I don't see too much erosion of margins coming from any of this. We continue to expand globally. Our global footprint in Manila and rest of the world, primarily Middle East, is growing faster than India, and that's a higher margin business. Also, the incremental deals that we are adding in India, while they are larger deals than what historically Allsec has done, and hence priced slightly lower, but they're higher margin and EBITDA deals. So because of all of that, I expect margins to remain flattish.
Sure.
Yeah. I'd leave it at that. I don't expect too much change in margin profile.
Sure. Actually, the question, Ashish, was specifically for the HRO business.
Yeah. My comments were specific to HRO.
Okay, great. That's helpful. Great. Thanks, Ashish. Thanks, Raghu.
Thank you. The next question is from the line of Raghuram NS from Your India Manage Fund Managers. Please go ahead.
Hello.
Hi, Raghunath.
Yes. Hi. Hi. Yeah.
Please go on.
Just a couple of questions. See, obviously, as you mentioned, there have been very strong customer additions over the last six months. It would be very useful if you could just run us through a theme of, for example, in HRO, there are obviously new customers coming in, that is what you call as new logo. There are existing customers who are expanding their maybe services which they require from Allsec. If you can just run us through some kind of a broad theme of where the new... How, which parts of the HRO offering that Allsec has, where are they stepping into the, into the line? Then existing customers, if they are expanding, where they are expanding.
That would help us maybe understand how this whole thing is panning out, the whole service profile of Allsec is panning out. If you can do that for both the HRO and the DBS businesses, that would be very, very useful.
Sure, sure. Raghunath, the current profile of the HRO business is, there are a few components to it. By and large, it's an India payroll business, followed by the international Manila and Mid East, followed by almost equal to the global footprint is our HRMS offerings, especially leave time attendance. That's the current profile of the business. On the payroll side, I find that we are beginning to win, so that's even the future and the pipeline, the mix continues to be very, very similar to existing profile, but there are a few shifts happening. Shift number one is our pipeline and our wins on larger deals is looking good at this point.
What we have on our books right now, in terms of pipeline, is focused towards larger deals. Like I mentioned, these could be, and these are payroll-centric, by and large. Managed service, payroll-centric. These tend to be better EBITDA deals. Lower pricing, but better EBITDA deals. This will continue to fuel our growth in payroll, especially India payroll. Second is our growth rate for managed service payrolls in Philippines and rest of the world continues to be. Q1 was slightly off for us in terms of growth rate for international, but it has started picking up again.
On the third, there is again an interesting shift happening, where our leave time attendance solution, which coupled with our payroll, we are beginning to get some interest from international customers. International meaning, APAC and Middle East region. Both with existing customers. Largely with existing customers, global customers who are now taking us into these regions. That's an interesting development. It's early days for to know where it'll go. We are excited with that. We'll see how it shapes up in the next six months. These are the, this is the nature of of the beast. By and large, I don't see our business mix between these three components changing too much over the next year and a half.
Hello? Yeah. If you can help us to, in the same way on the DBS side, please.
DBS side, Raghunath, the CFO also answered this question. See, we obviously have had a very good international first half with growth coming in on the international side from North America, and pipeline continues to look strong in North America. Domestic as well, we have, while we don't actively sell in this market, but we continue to have reference customers coming in, and we're happy to onboard them. I don't expect the business mix between domestic and international to change too much, given that in domestic our existing customers also are expanding. In the near term, I don't see the business mix changing over the next six months to one year.
We obviously continue to remain bullish on our international prospects given the kind of period we've had the last six months. Our focus obviously is to keep expanding internationals. Next six months, I don't expect the business mix to change too much between international and domestic.
Ashish, I was more coming from a perspective of the offerings. I was not really focused on the international or domestic.
Oh, okay. Okay.
Obviously, you guys have said, AML investigation has been added.
Yes.
Introduced bot monitoring. I think I was more focused on you guys expanding on that kind of a theme today.
Sure, sure. See from the wins. I'll talk from an offering perspective. I'll give you color on what we've won and what's in the pipeline. We added AML in India again. This is for an international customer, North America-based customer. We added a bunch of services which are very different from the kind of offerings that we've had historically. For instance, there are two offerings we added. One was the automation BOT monitoring, almost like a command center. Another one was tech helpdesk. We added helpdesk. We've added some back office work in for B2B companies in North America, et cetera. All these, there is no pattern other than AML.
Everything has been very diverse coming from the sales activities in the region, very different from our historical offerings which center around contact center. Right? That's-
Correct.
That's good news actually. On the pipeline, I do see that the BFSI tends to be slightly heavy. Banking and insurance tends to be slightly heavy in terms of pipeline. After that, everything is again very broad-based and secular. There is no vertical leaning beyond banking that I see.
Okay. Anything on the insurance BPaaS and those kind of industry-led, you can say initiatives? Obviously, you guys have been very strong on retail and e-commerce, and because of the Quess, we have the background of Fairfax, and there is that insurance, you can say strength that has been passed on. Any kind of developing themes on that side from an industry perspective?
Raghunath, we've added some small processes with existing customers. We have expanded on the insurance side with existing customers. We have been able to cross-sell and up-sell BPO offerings and expanded their footprint a little bit. We also have a fairly reasonable pipeline with insurance customers that I'm hoping we should have some wins coming in the next six months out of that pipeline. Otherwise, it's slightly early to have a meaningful conclusion drawn on that offering just yet. We are just three-four months into actually figuring out how to sell, what to sell, et cetera, from the insurance BPO perspective.
Okay. Anything on the e-commerce, retail kind of side that's any theme developing there or?
Yeah. After banking, that would be the second-largest vertical, but not by a long shot. It's after banking, everything is very broad-based. If you pick out one vertical, it would be retail. We do have some strong prospects coming in in that vertical.
Okay, just moving on. Obviously, I've been one of the longstanding investors and very happy with the dividend, which Raghunath also mentioned to be a special dividend for people like us. Now, going forward, like one of the other people who are asking questions, how do you see this? Is this a clear thing that M&A is more or less you can say is off the table? Maybe we still have more than, even after paying out this dividend, we still have more than INR 100 crores of cash still sitting on the balance sheet. Is that something that's going to be used for any further M&A or is there any other way of rewarding the shareholders which is more maybe tax, you can say tax-friendly way?
Obviously, dividend is something that is not so tax-friendly. Is there any other way being thought about, or is this something now we are back to business as you manage?
Raghunath, we are actively scouting. We continue to scout for inorganic growth opportunities. We continue to be in that space. Over the last year and even now, we have come across a fair number of opportunities where we've had management conversations, but nothing has come to fruition because either we didn't come across anything that was strategic, to be honest, that excited us, and in a few cases, the valuations were just, they didn't make any sense. We haven't moved on it. That said, we continue to actively scout for opportunities.
Okay. On the
Sorry to interrupt you. May we request you to come back into queue for follow-up questions? Thank you. The next question is from the line of Nishit Rathi from CWC. Please go ahead.
Thanks for the opportunity. I just had one big picture question, would love to get your thoughts on, you know. Your HRO business is an excellent business, which is extremely sticky and has had, is extremely stable and, you know, has great opportunities. At the same time, you know, we're seeing a lot of innovation coming from a lot of startups and a lot of SaaS companies which is trying to look at this opportunity at the same time. Just wanted your thoughts around it, right? You know, how do you see this, you know, the challenge that comes from them?
What kind of challenges do you see coming from the increased competition and how do you see this as an opportunity for yourself, you know? You alluded to the fact that, you know, you're taking a partnership approach and creating a service into a more of a platform approach. Would love to get your thoughts on that bit, right, you know, and I'll follow up with that.
Sure. Thanks for the question. Look, we remain extremely bullish about the HRO business and our position in the market. We are dominant leaders in the large enterprise space, and that space is very sticky, very stable. Some of the SaaS competition that you're talking about has not broken into this segment. For this market, which is where our HRMS offerings built for the large enterprise is beginning to pick up traction, not just in India, but across the board. In the large enterprise segment, we remain happy with what we have, and we continue to invest in our solutions. For this market, we are also. We have launched. We've announced two projects over the last one year, very significant technology investments we've announced.
One is we are rebuilding our payroll platform to make it more scalable, more SaaS-oriented, more global in nature, with easier to implement, et cetera. Also to open up SaaS market for us, right? That's a project I touched upon in my comments as well, is on track. It's a pretty significant and very ambitious investment. The other investment that we've done is in building an end-to-end HRMS suite meant for small mid-enterprises. That also I touched upon in my comments. We are in beta with a few customers. We continue to build the product out.
We are cautious about the SME segment, but we are happy with the product that we have and then an ability to take that product to other market segments, not just the SME. We'll see how it shapes up. We are at least six months away from having a differentiated product there. That's investment number two. Investment number three is in our existing enterprise leave time attendance, and there's more stuff beyond that. We continue to invest with our customers and co-create solutions with our large customers. That investment is BAU, and we continue to do that and continue to have wins on the back of all of those investments.
Ashish, is it fair to say that, you know, maybe the competition has not yet woken up, and at some point of time, they will hit you? The way you are thinking about it is you are yourself preparing for that. Whenever that hits you, the way you're thinking about it is any kind of challenge that will come on the pricing side will be compensated by more offerings. Wherein you will kind of, in a way, protect your turf, right? You will offer more, you will get more services into the same customers and maybe lower might be required to lower some of the pricing whenever it comes.
Is that the way you should be thinking about it or that's not even a challenge in your mind as of now?
See, my honest take is that too much is made out of the competitive pressures, and most people are confused about competitive pressures in our market, which is in our market segment, which is large enterprise. The large enterprise market is very different from the SaaS player, which is medium and small enterprise market. The pricing pressures while they are everywhere, but they are more dominant in the mid and small enterprise market, which historically Allsec has not done. We are making an attempt at, we're building products for that, right? That is out in the future. In the large enterprise, which is bread-and-butter market, we remain happy with what we have, positioning. We are cognizant of the competition.
We respect the competition, and hence we continue to innovate and invest in our products for this market segment as well.
Got it. So far. If my understanding is right, you are saying that right now you're not seeing that that market is different. It takes time, and it needs a lot more stability, which you offer. It's not if someone offers price, it's not like overnight you can lose someone, but you are aware of that. At the same time, you are one of the challengers there yourself in the SME space, so that is an opportunity. It's a tough crack, but you will try that. That is. Is that understanding correct?
Yes.
Just a last part on it. You know, how you mentioned, right? In terms of modifying, what do you think is the biggest barrier that a SaaS company Why is it tougher for the SaaS companies to get into large enterprises? Is it, is that, you know, is exactly the same thing that, you know, the expectation and the delivery that is required, they're not there? Or it's just, you know, they just like the stability of whatever you offer?
Again, I'll give you my perspective, but this is debatable. I feel that too much is made out of SaaS software capabilities and not enough is spoken about quality of service and quality of delivery. Quality of service and delivery is what prevents the upstarts and the newer companies from actually making a dent in this market.
Got it. Just to give a sense, you know, how much time does it take for you to break into a customer? You know, basically what you're saying is it takes a lot of time for these companies to develop trust and move from one system to another, right? Once they are into it, they don't like changing. Is that understanding correct, right? That's the biggest entry barrier. It's a very long sales cycle. It's not easy to
Yes.
do that.
That's right. That's right.
That's helpful. All the best, Ashish and team. Thank you very much.
Thank you.
Thank you. Participants are requested to limit their questions to two per participant. Time permitting, you may come back in the question queue for a follow-up. The next question is from the line of Rahul Kayan from SMIFS. Please go ahead.
Hi, Ashish. Hi, Raghu. Just wanted to understand the competitive intensity in the DBS business in North America. Who are our typical competitors, and, you know, how many people are sort of vying for the same client? Plans for future increase in the North American sales team for DBS.
Rahul, hi. Morning. Thanks for your question. Rahul, so we play in the mid-sized company market in North America, which means the giants like Infy, TCS, Wipro is not our competition by a mile. Our competition is very dispersed. Actually, there are a fair amount of players with no one having a dominant position. We run into Fusion BPOs, Visionet, et cetera, all relatively small scale. The nature of the wins, et cetera, there isn't a dominant player. We also run into a fair amount of nearshore small footprint local North American BPOs, but those tend to be more niche oriented.
They tend to be either collections or they tend to be very focused on specific offering or industry vertical, but we do come across them. The competition is there are two things in what I said. One is no one has dominant position. Second is that said, there are a lot of players vying for the pie. Not too much differentiated positionings amongst a lot of people, but whoever like Quess has a full service play in that market has an edge. Through our InsurTech and tech offerings with MFX, it adds an edge to our offerings in North America, Allsec's offering in North America. That stance has been vindicated with a few wins we've had in the last five months, which are tech-oriented wins.
For instance, the BOT monitoring, the automation monitoring command center. Another one was the tech helpdesk. Some of our pipeline is also helped by the fact that we have tech behind us.
Okay. Any plans to add more people in North America?
Rahul, we've just added two heavyweights in this last month and a half. With that, at least for the next six months, we are done. We are anyways headed into the holiday season in North America. For the next six months we are done. We continue to augment our India pre-sales, sales support capability. That will continue to expand. We will continue to expand on our digital marketing campaigns. The sales team for the next six months, we are most likely okay.
Okay. Lastly, Ashish, you know, on the Quess synergies which you spoke about at the beginning of the call, how is that playing out on the DBS and HRO front? If you could please speak about any other synergies you could think of with Quess, you know, besides on the marketing front, what other synergies you are seeing, that'd be good to know. That, that'll be all from my side. Thanks and all the best.
Thanks. Thanks, Rahul. Rahul, on North America DBS, I briefly touched upon the synergies. It's marketing sales synergy is one. The other is offering synergy with InsurTech and being able to present our tech services along with our BPO offerings. It does give us a little more leverage. That is already there. In North America, we also continue to run joint marketing, digital marketing campaigns. In India for HRO especially, both on compliance offerings and on our HRMS offerings, there is a healthy list of cross-sell, up-sell with Quess customers. Their customer list is obviously longer. We have a strong. We've had a fair amount of large wins coming from that list as well over the last one year.
I remain delighted with where that pipeline is. There is also a very strong systematic and methodical cross-sell and up-sell team in Quess that we leverage when we need help across larger customers or where we don't have connects. There is a very systematic process around that, and that engine is working extremely well in my view. The third synergy is on the operational side. A lot of our tech work, for instance, in our tech modernization is also being done by Quess group companies. In particular Heptagon and MFX are helping us drive a lot of our tech innovations. The platform modernization, et cetera, that we're talking about is we are being helped by some of those entities.
We also leverage the deep expertise, IT expertise that sits in Quess Corp. Then the final synergy I would say comes from procurement and getting better deals, et cetera. Whether it is IT vendors the likes of Salesforce, et cetera, or just commodities, the telco lines, the internet bandwidth, et cetera. We just have access to better rates, et cetera. That's the fourth synergy.
Okay. Thank you. All the best.
Thank you.
Thanks, Rahul.
We'll take the last question from the line of Jitender from Alpha Capital. Please go ahead.
Hello, sir. Sir, just on the balance sheet, how much cash would be in India and how much would be in Manila?
You know, after this dividend is declared, we will have around INR 70 crore in India and around INR 40 crore will remain in Manila.
Sir, if INR 40 crore that, which is in Manila, if we bring it to India, we'll have to pay the taxes there.
Correct. Manila will also need money to run its operations, so we will have to figure out what to do and when to do.
Sure, sir. Sir, in the last year, we gave INR 15 dividend, which was like 20%, 60%, 70% of the profit of the last year. Is this kind of thing we should continue assuming because current, as you're saying, is special dividend. 60%, 70% kind of dividend distribution plans or what would be that please?
This interim dividend that we've given now is a special dividend, which, you know, obviously is taking into account the past cash accumulation that we've had in Manila, which we got in Q1. Going forward, you know, we will look at what is the amount that is permissible under the Indian standalone retained earnings portion and what is the requirement for business at that point of time. Just to very clearly state that this INR 40 crore is a special dividend that we declared.
I understood that, sir. I'm talking about last year. We gave INR 15 dividend last year, FY 2021, which was like 50%-60% of last year's profit. That kind of number should be a more sustainable number or what should be a more sustainable number going forward?
Yeah. At this point of time, we've not worked out on that, so we'll have to revert to you separately on that. What we did last time was also to give you the dividend based on the amount that was maximum permissible under the retained earnings at that point of time.
Sure, sir. Thank you.
Because we've not declared dividend in the previous year. Now that we've cleared all the you know past accumulated profit, we'll have to now look at what is going to be the ongoing profits.
Sure, sir. Thank you and all the best.
Thank you.
Thank you. As there are no further questions, I now hand the conference over to Mr. Johri for closing comments.
Thank you everyone for joining us. As always, it was a pleasure taking and fielding questions from you. Thought-provoking questions from all of you. Closing the call, I wish all of you a very happy Diwali and a festive season coming up. Thank you so much for your time. Take care.
Thank you. Ladies and gentlemen, on behalf of IIFL Securities Limited, that concludes this conference call for today. Thank you for joining us, and you may now disconnect your lines.