Ladies and gentlemen, good day and welcome to the Q3 FY26 Results Conference Call of Pelatro Limited, hosted by ORIM CONNECT . 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 this conference call, please signal an operator by pressing star, then zero on your touch-tone phone. Please note that this conference is being recorded. I would now like to hand the conference over to Ms. Janvi Patil from ORIM CONNECT. Thank you, and over to you, ma'am.
Good afternoon, everyone, and a warm welcome to all of you. I am Janvi Patil from ORIM CONNECT , representing the Investor Relations team of Pelatro Limited. On behalf of the company, I would like to thank you all for joining us for the Q3 FY26 earnings call. Before we begin, I would like to state a brief cautionary statement: some of the statements made during today's call may be forward-looking in nature. These forward-looking statements are subject to certain risks and uncertainties that will cause actual results to differ materially from those expressed or implied. These statements are based on management's current expectations, assumptions, and information available as of now. Investors are therefore advised not to place undue reliance on these forward-looking statements when making any investment decisions. The purpose of this call is to share insights into the company's business, performance, and financial results under review.
Now I'm pleased to introduce the member of the management team present with us today, Mr. Subhash Menon, Chairman and Managing Director. Mr. Sharath Hegde, Chief Financial Officer. With that, I now hand over to Mr. Subhash for his opening remarks. Thank you, and over to you, sir.
Thanks, Janvi. Good evening to everybody, and welcome to the Q3 Financial Year 2026 Q3 Results Call of Pelatro. We have uploaded a deck on our website, as is our usual practice, and I presume you all would have accessed that. We will take you through that. But I must tell you that a few of those slides are repetitive as compared to Q1 and Q2 because they cover products and certain other relevant details like that, which do not change from quarter to quarter. So I will go through those slides rather quickly, and if anybody is new to the call, attending our calls for the first time, and needs some clarification on that, please feel free to ask. Once we get to the Q&A session, please feel free to ask, and we can go back in the deck and explain that.
We have had a good quarter three, as was expected. The growth has been good as compared to last year. As you all know, we do not quite track quarter-to-quarter growth because in our business, honestly, given the kind of long sales cycle and long implementation cycle, a quarter is a very short period of time. Given that, we really focus on year-on-year growth. So if you look at what happened in the first nine months of last year and what's happened in the first nine months of this year, you will see a significant growth. So that's where I would like to start. We expect our momentum to continue because we have been bidding and winning more customers. Our existing customers are taking more services and products from us. So with all that, the growth momentum is continuing.
If you go to slide three, you will see the slide is about company. So currently, we are now at 46 telecom networks in about 35 countries, and we are collectively handling about 1.5 billion subscribers on our platform. Of course, it's not one instance. It's multiple instances adding up to that. You know that we are very focused on technology, and there are about 11 patents at this point in time, about 480+ employees. So the most important aspect here is the 46 telecom networks that we work with. A few years ago, that was less than half, I mean, two, three years ago. This growth, as it keeps increasing by a few telecom networks every year, gives us better and better opportunity to be connected in a deeper manner with the telecom ecosystem. Moving to the next slide, which is the revenue model.
I won't spend time on this because this is something that you all know. There's no change in this, and we don't anticipate or expect any change. There's repeat revenue and one-time revenue. The repeat revenue is put into two buckets, divided into two buckets. One is recurring revenue. The other one is recurring revenue. The recurring revenue, which is largely change requests, are also quite predictable. They keep happening because when our customers use our platform, they have to keep coming back to us for change requests. The next one is one-time revenue, which is perpetual license and implementation fee. That also is continuing. These revenues, the percentages go up and down depending upon which contracts get recognized in which quarter. The next slide is our presence. As you can see, it's a very busy slide.
There are quite a few countries that we are in today, 35, I told you initially, and those are listed there. So we're very, very dominant in Asia, Middle East, and Africa. That's where our real presence is. Moving to slide seven, that's where the products are listed. Actually, the mViva customer engagement platform is detailed, rather. The product listing is in the next slide. Here, the capabilities are mentioned. I won't spend time on this. This is a repetitive slide. It suffices to say that we employ a lot of AI/ML technologies in our platform to make it very current, very relevant, and very advanced for our telco customers. The next slide has a portfolio of today. We are divided into two divisions. One is CVM division. The other one is Estel division.
This is consequent to the acquisition of the Estel software business by us about six to seven months ago. The CVM division has these products. Once again, a slide that has got repeated because, I mean, just for the sake of completeness, we are mentioning all this here, but the products don't keep changing. So these are the products that we have. There are five products on the slide and a set of managed services to go along with those products. The next slide, which is slide number nine, that's the portfolio of Estel division. Here, there are three products. One is on the e-Top Up, which includes recharge and voucher management. The other one is sales and distribution management, and the last one is mobile money. Again, some managed services to go with that. The next slide is a revenue bifurcation slide.
Here, you will see what happened in the quarter. As I have stated in the past, between recurring and reoccurring, we are looking at least about 70% at all points in time. That's our internal target. Again, between these two buckets, the percentages could change, as I stated earlier. So in this particular quarter, sorry, when you look at the nine months now, you will see as compared to the earlier year, including this particular quarter, we had 57% of recurring revenue, 20% of reoccurring revenue. That is 77% of recurring plus reoccurring. We had some large perpetual license deals, and that's why the percentage of that third element, which is one-time revenue, has gone up to 23%. This could very well change by the end of the year. It can change in any quarter.
So all we have to see is whether we have a healthy mix of recurring and reoccurring in the total revenue bucket, revenue composition, and that continues to be the case. The growth story, I mean, in the next slide, which is where the customer numbers and all are seen. As you can see, every year, we've been adding 5-6 on an average, 5-6 customers. Sometimes it's more. Sometimes it's a little less, but that's the average. In the past 6 years, we've gone up quite significantly from 30 networks to 46 networks. So that's what I mean by an average of about between five and six telcos every year. Out of that, about 31 today are using our managed services. So when we started tracking this in 2019, only one out of 13 was doing that.
Today, about 60% or a little more than 60% of our customers—I mean, almost like 65%-66% of our customers—actually take services from us as well. And that's good for us because that means higher and higher revenue. So that's from slide 11. Now we move to slide 12. This is just to show the key strengths of our platform. It is very end-to-end. We use a lot of technology, which is patented, which is scalable. Our largest customer on the CVM side has about 250 million subscribers on the network. Our largest customer on the Estel division has almost 500 million subscribers. So the products have really scaled to hundreds of millions of subscribers. So whichever telco we go to, we are fine with that.
Our strength really comes from the fact that our core strength comes from the fact that we have very deep domain expertise. We understand the telecom network extremely well, and that is why we are able to bring out products which are very relevant, pertinent, and of great value to the telcos. And as we keep building new products and improving their capabilities, this particular knowledge space of this particular thing that we understand, the key strength that we have, really helps us in coming out with better and better products. We have a little bit of touch at this point in time on the fintech side. I mean, we can't really call it banking, but it's actually the mobile money part of it for the telcos. That also is something that we are doing.
Investment rationale, the product is completely end-to-end, so that really gives us a very strong foothold within the telco. The scale is proven. It is massive. We have recurring and expanding revenue models, so there is more and more recurring and reoccurring revenue happening. We win more customers. We go deeper into them. We get services revenue additional. We cross-sell our products. So with all that, there's a very high barrier to enter. It's not easy at all for competition to enter in a very quick manner. It's a long sales cycle. They have to have references. They have to prove a variety of things. They have to have track record, and then maybe they can come in and compete with us. So it's a high barrier for entry. There's a large moat.
Our technology is very differentiated as compared to our competition because of the fact that we do a lot of in-house development of technology. We have a lot of patented technology in there, and we are continuing on that path to have more patents. So that is also helping us differentiate. So on the whole, it's a highly differentiated platform. It's very end-to-end. It's highly scaled. Not every software vendor will have something at this scale. And our revenue model is very attractive, with all of that creating a significant moat in our business. Moving to the next section, which is actually financial overview, I will let my colleague Sharath, who's the CFO, take you through that over the next 10 minutes, and then we can open the floor for questions. Over to you, Sharath.
Thanks. Thank you, Subhash. Good evening, everyone.
So the next few slides are on the financials, and I'll summarize them all quickly. So to start with, we are very happy to present another strong financial quarter. For the nine-month period ended 31st December, the revenue grew 62% year-on-year to INR 99.12 crores, while the EBITDA grew by 73% year-on-year to INR 22.38 crores. This supports the non-linearity expectation. The EBITDA is growing at a higher scale as compared to the revenue. The EBITDA margin too has been.
Could you come a little closer to the microphone? Your voice is slightly muffled.
Okay. Is it better now?
Yes, a little better.
Okay. Okay. So as I was saying, the EBITDA has been growing significantly as compared to revenue, and the EBITDA margin too has been expanding. So it's expanded to 22.6% from 21.13% last year, excluding exceptional items to that INR 13.6 crores with a margin of 13.8%. I also wanted to highlight that we have already surpassed full-year FY 2025 numbers on both revenue as well as PAT fronts, which clearly demonstrates a very strong momentum in the business. Then coming to the quarter, so Q3 FY 2026 performance, revenue grew by 69% year-on-year to INR 38.38 crores, while EBITDA grew by 119% year-on-year to INR 8.57 crores. PAT, excluding the exceptional item that we have reported, stood at INR 5 crores at 13.1%.
So that's a quick highlight on the financial numbers. And we have a slide on slide 19, which gives certain key financial metrics, which is, again, a comparison between past years. All the metrics, as you can see, are improving as well. This was a quick take on the financials. Maybe we can open the floor for question- and- answer.
Thank you. We will now begin the question and answer session. Anyone who wishes to ask a question may press star and one on their touch-tone telephone. 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. Our first question comes from the line of Prasenjit Paul from Paul Asset. Please go ahead.
Yeah. Good afternoon, everyone. Hope I am audible. So first, my first question is regarding the tax rate. We can see that your tax rate is pretty low, around 6%. So if you can help us to understand why so and what's the expected effective tax rate for FY 2026 and the coming financial year 2027?
Sure. So yeah, the effective tax rate for nine months has been around 7%, while Q3 is around 9%. The main reason is that our subsidiary in Singapore did have certain carry-forward losses, which we are taking to set off against profits that we have been earning and which effectively nullifies any tax liability there. So on a consolidated basis, this is what is contributing to a lower tax rate. And the full-year expectation is somewhere around 9%-10% effective tax rate.
Okay. And for the next year, FY 2027, will it remain similar or it will go back to the 20% plus?
No, it wouldn't vary too much. But I mean, so there is one thing that we need to be mindful. It all depends on the revenue contribution between the various entities, like if the contribution revenue or the profit contribution, I mean. So if the contribution is higher from the Indian entity, then the effective tax rate could be slightly higher. Whereas if it is from the subsidiary, then that would have a better thing. But as I said, the variance will not be too much.
Okay. And so my second question is, given the AI and all, so we all know that the SaaS companies worldwide are suffering from the AI threat. So how do you see this domain compared to the AI fear? So do you think that AI would be beneficial for you, or do you think that would be a threat for your business model and what you are doing to prepare for that upcoming AI threat?
This is Subhash Menon. I'll answer that question. We actually see that as a great opportunity. Let's look at the space that we are in. We are in a space where we collect a lot of data. We have the opportunity to analyze all of that and come up with great findings, actionable intelligence, and then inform our customers basically on what they should do and benefit from that. So the sector actually naturally lends itself to be AI-enabled or to have a lot of AI within it or to leverage AI. So it will be a threat if Pelatro, as an organization, does not move forward on AI. It will be an opportunity if you take the situation forward by bringing in a lot of AI into our products. And that's exactly what we are doing. The latter is what we are doing.
So in all our products today, we have extensive AI capabilities, and we are actually about to launch a very, very strong AI module or platform, whatever you want to call it, in the next one month, which is a collection of all the AI capabilities that we have launched till now onto a platform, and then we are branding that particular platform. You will hear about it in the first week of March. We are attending a major conference in Barcelona, which is Mobile World Congress. That's when we'll announce something. So in that way, we are actually improving the AI capabilities of our customers when they use our products. So we believe AI is a great opportunity for us, and we'll continue to work on that.
Don't you think that AI will ultimately put the pricing pressure, investment, more on research, and ultimately, that will squeeze your margin? Or do you think that, no, AI can actually be a margin enabler? So what do you think? Is it a threat for margin, or it can help to improve margin?
You see, that really depends upon what kind of business that you are in. See, if this is about cost reduction, AI will be a threat for margin. For all cost reduction activities, AI will be a threat because AI will reduce cost in various ways. I mean, at least that is what is believed. Ours is not a cost reduction play for our customers. It is revenue growth play. So when it's revenue growth, AI will not create, I believe, will not lead to a reduction in margin or, I mean, there would be natural competitive situation, which could have some pressure on margin at some point in time or the other, and that could wax and wane. That's possible. But as a general trend, no, I don't think that will affect our margin.
Okay. Thank you. That's all from my side.
Thank you. A reminder to all participants, you may press star and one to ask a question. Participants, please press star and one to ask a question. The next question comes from the line of [Yash Menaria] from [Manarian Investments}. Please go ahead.
All right. Audible?
Yes.
So sir, I want to ask a question regarding the stickiness of the recurring revenues. So what percentage of customers renew the contracts without the price renegotiation?
Every customer of ours till date has renewed contracts. So we absolutely expect contract renewal to be a regular phenomenon, and we don't think these customers will move away that easily because it is actually not easy also for them to move away that easily given the kind of depth that we go to within a telco. So all of that is continuing, actually. I'm not to say that customers will never leave us. I can never make that statement, but it will not be a very common occurrence.
Sir, how does the pricing power evolve over time?
I don't think we should be talking about pricing power and all that because that is not—I mean, see—we are dealing with very large corporations here, and most of the vendors like us are small organizations. So I can't say there is a pricing power and all that. What I can say is the way we look at it is if we can keep proving to them, if we can keep establishing that we are adding value, we are helping them increase revenue, we are helping them reduce churn, then I think they will keep finding budget to support us, and we will have revenue. So at this point in time, our margins are already pretty decent, and there's scope for improvement, and improvement will happen. So I think we should be happy with that.
As long as there is some more improvement of the margin in the years to come, which will naturally happen, that should be fine. It's all about proving to them and always staying current with respect to their expectations of revenue increase and value addition.
Okay. So I answered one more question regarding what portion of revenue growth is driven by the existing customers versus the new customer additions?
So if you look at if you look at it from that perspective, I think our revenue growth—I mean, organically, when you look at not from the acquisition and all that because we had the Estel acquisition. From an organic standpoint, I would say about 60%-65%, maybe about 60% of the growth is actually from existing customers, and the rest would come from new customers.
Okay, sir. And so what portion of the revenue growth was organic versus the acquisition-led?
If you look at our CVM division and Estel, we have shared in the results that have been declared, you will see segmental revenue of CVM and Estel. The CVM division side is all organic. There's been no acquisition there. The Estel side came through an acquisition in this financial year.
Okay, sir. Thank you for answering the questions. I will join back in queue.
Thank you. Participants, please press star and one to ask a question. The next question comes from the line of Prasenjit Paul from Paul Asset. Please go ahead.
Thank you, sir, for the repeat opportunity. Sir, my question was the margins. So I have also listened to a few of your last conference calls. While you have mentioned that the aspiration is to move margin even more than 20%, kind of. But while I'm looking at your peers, yes, there are not enough listed peers. They don't, I mean, earn that sort of margin. In fact, there is one, the Tech Mahindra subsidiary is there. So even that Tech Mahindra subsidiary, one of your competitors, so they are a much bigger player than yours, but their margin is below 20%. So what kind of margin do you think that is sustainable given the competition, AI-led innovation, and everything? And what's your aspiration? Okay. So we wish to reach that direction when it comes to margin.
Okay. Now, I cannot comment on their margins. I have no idea. They've got various other products as well, so I can't be commenting on that. With respect to us, internally, what we are looking at, from an EBITDA perspective, we believe we can be between, say, 26%-29% or maybe 30% kind of EBITDA. That is the number that I would look to get to in the next couple of years. I think that is sustainable.
But sir, how? Because your acquisition, while you did the acquisition, even that subsidiary margin is around 15%-16%. So do you think that subsidiary margin will move up to that even 25%-26% level?
Both divisions will move up. You will see that nonlinearity happening.
Okay. So even after considering all the spending that you will do in research and development work?
Research and development, we are anyway writing off, right? I mean, we are not capitalizing. So that's already being written off at this point in time. So yes, with all that, you're right. I mean, that's where we are planning to get to.
Okay. So you mean to say that above 25% margin is sustainable considering your business model?
I don't know what you mean by margin. I would call it EBITDA.
Yes, yes. EBITDA margin. Yes. EBITDA margin or operating profit margin.
Yeah.
Even with the kind of growth, I think in some previous past conference call, you mentioned 20%-30% kind of growth. Even with the kind of growth, I think the EBITDA margin is sustainable at above 25%.
That's our belief. Yeah.
Okay. Okay. Okay, sir. Thanks a lot. Wishing you all the best.
Thank you. A reminder to all participants, you may press star and one to ask a question. The next question comes from the line of Nishita from Sapphire Capital. Please go ahead.
Yes. Hello.
Yeah. Hi.
I wanted to ask, do we have any acquisition plans for FY 2027? Is there any company which you are looking to acquire, or is the growth that you guided of 25%-30% completely organic?
See, we always keep looking at acquisitions. It's a constant process. It's not that we plan for something now, then we stop after one stop after five months. We restart. It's not like that. It's a constant process. But we will only acquire if we see something which is exactly in line with what we want to do, I mean, with the pricing and the product and all that, the cost of acquisition and all that. So if that means we don't have an acquisition for the next five years, so be it. If that means there is an acquisition happening in the next five months, so be it. So there is no specific plan for one acquisition in this year, one acquisition in the next financial year. There's no specific plan like that. We just keep looking.
If we find something which we can acquire, we would like to acquire, and if all the contours are in line with what we want, then we'll acquire. So it may so happen nothing may happen in the next few years also, and something may happen in the next five months also. I don't know.
A company like?
No, I couldn't get you. You couldn't get you, ma'am. You may have to repeat.
If there is a company, what would be the factors for that company for us to acquire?
Okay. So first and foremost, okay, so maybe somebody can go on mute. There's somebody speaking in the background. First and foremost, there should be some synergy among the products with us, either with respect to just the product itself or a synergy from the customer angle, or they should have some customers whom we are interested in. So a product synergy, customer synergy, geography synergy, or something that is very, very interesting for us, that has to be there. That is the first thing. The second thing, of course, it has to be in the telecom space. That's the second thing. I'm not prioritizing. I'm just listing. The third thing is that the valuation should be in line with our expectation. We are very concerned about ROCE, so we will not sacrifice ROCE while acquiring. Those are the three things.
Got it. Got it. And my next question would be on the EBITDA margin. So you mentioned that 26%-30% EBITDA in the next couple of years is sustainable. And currently, we are at 22% of EBITDA margin. So what is going to drive the growth? And in FY 2026, what margins can we expect to end FY 2026 with?
See, FY26, there's only one quarter left, so there may not be a dramatic improvement in EBITDA margin. So you should look at something similar only. I was talking about in the next two, three years kind of growth. Now, what would drive that? The nonlinearity in the business. So when more contracts come, more customers come, we won't have to increase our cost in line with that. That is already obvious. Now, if you look at the growth in revenue and the growth in EBITDA, I mean, in the deck on slide number 16, you will see that. For the third quarter, our year-on-year growth on revenue side is 69% while EBITDA grew 119%. That's what it is. So there will be nonlinearity in the business, no doubt about that.
Okay. Understood. Thank you so much.
You're welcome.
Thank you. A reminder to all participants, you may press star and one to ask a question. The next question comes from the line of [Yash Mineria] from [Manarian Investments]. Please go ahead.
Hello.
Please go ahead, Yash.
Yeah. Actually, sir, my question was regarding the acquisition only. So I got the answer.
Okay.
Thank you. Participants, please press star and one to ask a question. The next question comes from the line of Prasenjit Paul from Paul Asset. Please go ahead.
Yeah. Thank you, sir, for the repeat opportunity. Sir, my question is, as I checked about the past of the company and all, so I just wanted to understand from Subhash said that earlier, you led the company Subex, and unfortunately, that company failed. So what different you are doing in this company, Pelatro, that it won't end up in the fate like Subex, rather it can evolve to a much bigger player? So if you can just share your view.
Okay. So when do you think Subex failed?
Because it actually, I mean, ended up with a costly acquisition, then took some foreign currency loan, and then went into debt burden. Then the stock price crashed. I hope back in post-2008 crisis, it went into a debt trap, if I'm not wrong.
You're absolutely right. That was a mistake at that point in time. It was an expensive acquisition compounded by the fact that it was supported by debt, FCCBs, which became debt-only, quasi-debt, but really became debt. So that's it. Now, please look at my response. Okay. Please look at my response to the earlier question on acquisitions. I said we will be focused on RoCE. So that will naturally ensure that we won't go for a costly acquisition because when it's a costly acquisition, your RoCE will go for a toss. So therein lies the answer. So I personally have learned my lessons from what happened at that point in time. If you look at the acquisitions of Subex, there were seven acquisitions. Six of them did very well because we didn't commit any of these mistakes.
Seventh one was this mistake, and it went for a toss. So we will continue on the path of the initial acquisitions of Subex, which were very successful, and try to build Pelatro based on that. So that's why I'm saying we will be very, very careful about what we pay. So RoCE means what valuation, every aspect of that, what instrument we use, what is the quantum. All these aspects are very important for us. So the financial metrics will be extremely critical for us to acquire and the financial structure. And that will ensure that RoCE is not sacrificed. So that repeat will not happen of that mistake.
Okay. If I'm talking about long-term vision over the next 4-5 years, so where do you wish to see Pelatro if I'm talking about just revenue point of view? Right now, it's a small company. Over the next 4-5 years, where do you wish to see this company?
I mean, that will become a projection, so I don't want to give a number or anything. We will have a healthy growth and a healthy margin is all I can say. You should look at the historical track record over the last couple of years, how things have been progressing, and derive your own conclusion.
Okay. Okay. Okay. And if I'm not wrong, I think the second generation is already in the board. So may I know, are they actively involved in day-to-day business? Or I mean, the question is about the succession planning. So what's next? Because in software company, key persons are very important. So it all depends on the key persons or the promoter to drive the company to make it bigger. So what about the succession planning and all?
The next generation is not on the board. I think you've got that wrong. When you say next generation, naturally, my two sons. They are not on the board, but they are shareholders at this point in time. They are not active in the business. They are not active in the business. They are aware of the business. They know what's going on, but they are not active in the business at all. At this point in time, they are not part of the business, and they will not be for some time. But at some point in time, at the right time, I'm sure they will join, and there will be a proper succession planning and all that. But right now, I'm just focused on building it myself.
Okay. Okay. Okay. Okay. Thanks a lot and wishing you all the best.
Thank you.
Thank you. A reminder to all participants, you may press star and one to ask a question. Ladies and gentlemen, as there are no further questions, I would now like to hand the conference over to Ms. Janvi Patil for the closing remarks.
Thank you, everyone, for joining the call today. On behalf of Pelatro Limited, we appreciate your time and participation. For any further queries, please reach out to us at letsconnect@direct.orim.in. Thank you, everyone.
Thank you, ma'am.
Thank you.
Ladies and gentlemen, on behalf of ORIM CONNECT , that concludes this conference call. Thank you for joining us, and you may now disconnect your lines.