Ladies and gentlemen, good day, and welcome to Unicommerce eSolutions Limited Q2 and H1 FY 2025 Earnings Conference Call. This conference call may contain forward-looking statements about the company, which are based on the beliefs, opinions, and expectations of the company as on date of this call. These statements are not the guarantees of future performance and involve risks and uncertainties that are difficult to predict. As a reminder, all participants' 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 now hand the conference over to Mr. Kapil Makhija, Managing Director and CEO of Unicommerce eSolutions Limited. Thank you, and over to you, sir.
Thanks, Neha. Hello, and good morning, everyone. We're delighted to meet all of you again, and I welcome everyone to the Q2 and H1 FY 2025 earnings call of Unicommerce eSolutions Limited. I am joined today by Anurag Mittal, our CFO; Deepak Gupta, Director, Strategy and Investor Relations; and our investor relation advisor from SGA. We are pleased to report a strong performance in Q2 and H1 FY 2025. The revenue for Q2 FY 2025 and H1 FY 2025 grew by 13% and 11.1% year-on-year, respectively, whereas Adjusted EBITDA grew by 33.5% year-on-year in Q2 FY 2025 and 29% year-on-year in H1 FY 2025. Our PAT grew by 21.1% year-on-year in Q2 FY 2025 and 25.4% year-on-year in H1 FY 2025.
While we covered our company's introduction and business models in detail during our first earnings call of quarter one FY 2025, I'd like to briefly summarize the same today as well for the benefit of new attendees on this quarter two FY 2025 earnings call. Unicommerce is an e-commerce enablement SaaS platform established in 2020. The company operates in the transaction processing and order fulfillment layer, enabling end-to-end management of e-commerce operations for brands, sellers, and logistics providers. As a consumer, when you order online, you see the website on which you place the order and the delivery person who comes to your doorstep. Whatever happens between you pressing the buy button and the product being delivered to your home is powered by Unicommerce. We are this behind-the-scenes backend that powers operations and smooth customer experience for a brand or a seller.
Our platform simplifies the complex e-commerce ecosystem by streamlining operations like inventory management, order processing, warehouse management, and returns. Unicommerce acts as a nerve center for e-commerce fulfillment, ensuring that the post-purchase journey from order processing to fulfillment is smooth and efficient. Our platform integrates with 260-plus partners, offering brands the flexibility to choose the service providers that fit their needs. E-commerce is a fast-evolving industry, with new trends coming up very often. For example, direct-to-consumer and omni-channel were fringe use cases until a few years ago, but they have now become mainstream. Similarly, quick commerce, in a very short span of time, has now become a salient contributor in many categories. Because of the fast-evolving nature of the industry, clients value a cloud-native or a SaaS solution like Unicommerce, which continues to evolve with the market and successfully incorporates new integrations and workflows.
In doing this, we are able to shield our clients from the complexity of continually adapting to new developments. Our platform is scalable for businesses of all sizes, from SMEs to large enterprises across various industries such as fashion, pharma, beauty and personal care, footwear, et cetera, making us an integral part of our clients' supply chains. Unicommerce offers six main products, including four core products spanning multi-channel order management, warehouse and inventory management, omni-channel retail management, and seller management panels. Recently, we launched two new products, UniShip and UniReco, focused on improving order tracking, returns management, and payment reconciliation. Our business model is purely SaaS-based, with revenue tied to the number of transactions being processed on the platform. Our enterprise customers, which constitute nearly 90% of our revenue, pay us a minimum subscription fees each month, in which we bundle a certain number of transactions in this cost.
Once they utilize this allotted quota of transactions, they pay us an additional fee, called the usage fee, for the additional transactions they process on the platform. This makes the revenue model scalable as e-commerce in the country continues to grow and is expected to grow even further. We are a high gross margin business due to our SaaS nature, where revenue comes purely from platform usage and there are no people service components, along with our strong customer retention as well as our dominant market position. India's e-commerce industry continues to grow, driven by increasing digital adoption and shifting consumer preferences. While the long-term outlook for the industry continues to be positive, in the short term, e-commerce growth continues to be soft overall. While the festive season sales demonstrated a strong start, but beyond the sales period, the softness continues similar to last year.
Given the overall macros, our focus is to drive growth from existing clients through our cross-sell or upsell initiatives, continuing a strong momentum of acquiring new clients and our investment in building new products, both UniShip and UniReco. Both of our new products are gaining strong traction with early adopters. These products are currently in the build phase, and we are optimistic that they will gain momentum as they mature. We are also seeing a strong momentum in acquiring new clients. We added 100-plus enterprise clients in quarter two FY 2025, up from 85-plus enterprise clients we added in quarter one FY 2025. Over the years, given the stickiness of our business, we have observed strong client retention, and we are optimistic that these new client acquisitions will drive further growth in the coming quarters.
I would now like to highlight a few initiatives that we have taken during the quarter to increase retention and grow revenue. For our core products, we have integrated 10 plus new marketplaces and logistics providers. We have also developed new features such as hyper local supply chain workflows, including customer and warehouse geo coordinates, proximity order routing, HQ control tower, and other new features for customer and courier fraud prevention. We have also added features in our new products, such as unified sales and payment insights for sellers in UniReco and automated refunds and product exchange workflows in UniShip. We will continue to add new features to stay ahead of the curve, with an aim to become a one-stop shop for e-commerce enablement.
Further, to optimize costs and build sales and operational efficiency, we are centralizing the call support for all our enterprise clients to improve efficiency of the account managers assigned to our customers. We are also leveraging the existing sales team for cross-selling all our new products across existing clients. In addition, to bring in additional enterprise sales efficiency, we are also focusing on improving the cross-team collaboration across sales, pre-sales, product, and onboarding. Looking at the growth drivers for Unicommerce will be: First, will be e-commerce growth, where India's e-commerce market is still under-penetrated, providing significant growth potential in the long term.
As discussed in our last quarter's earnings call, the TAM for our core products is about $260 million, and for the complementary offerings that we offer, it is close to about $420 million, bringing the overall TAM to be about $680 million. Currently, more than 85% of the market for our core products, as per our estimates, is still untapped, whereas significant portion of this market is managed using Excel or manual operations. However, we are observing a gradual shift towards a SaaS platform like ours. As the complexity and the scale of the market increases, more and more brands will look for software to manage their operations, positioning us to benefit from this trend.
To illustrate the growth potential, approximately 4- 4.5 billion e-commerce shipments were processed in India last year, compared to over 130 billion e-commerce shipments being processed in China last year. This comparison underscores the vast headroom for growth in India's e-commerce market, reinforcing our confidence in its promising long-term trajectory. The second growth lever for us will be new client additions. Many traditional and untapped categories are moving online, and many more are yet to move online. And with increasing scale, many of these brands are looking to move to a SaaS platform, as mentioned before. The third growth lever for us will be new products. Our vision is to become a one-stop shop for e-commerce enablement, and in line with that vision, we have recently added two new products, Uniship and Unireco, and we'll continue to add more products.
The fourth growth lever for us will be international expansion. We are working towards going deep in both Southeast Asia and the Middle East, the markets we currently operate in. In summary, Unicommerce is positioned as a leader in the e-commerce enablement space, with a strong competitive advantage through our integration capabilities, deep partnerships, and sticky products, driving consistent revenue growth and expanding profitability. Given the exciting long-term prospects of the Indian e-commerce market, we are confident that Unicommerce will continue to be a compelling growth story. We have demonstrated a market cluster growth rate consistently over the years, and we expect to perform on the same lines going ahead. I'd now like to invite Anurag Mittal, our CFO, to share our financial performance in both Q2 FY 2025 and H1 FY 2025. Over to you, Anurag.
Thanks, Kapil. Hello, and good morning, everyone. We are happy to report a good performance for the quarter two and H1 FY 2025. During the quarter gone by, our revenue for the quarter grew by 13% year on year and stood at INR 293.1 million during quarter two FY 2025, compared to INR 259.3 million in quarter two FY 2024. For the half year H1 FY 2025, our revenue grew by 11.1% year-on-year and stood at INR 567.8 million, compared to INR 510.9 million in H1 FY 2024. Our adjusted EBITDA for the quarter grew by 33.5% year-on-year, and stood at INR 61.7 million for the quarter two FY 2025. For H1 FY 2025, our adjusted EBITDA grew by 29% year-on-year and stood at INR 106.3 million.
As we continue to reap the benefit of operating leverage, our adjusted EBITDA margin grew by 322 basis points year-on-year to 21% in quarter two FY 2025, compared to 17.8% in quarter two FY 2024. For H1 FY 2025, our adjusted EBITDA margin grew by 259 basis points year-on-year and stood at 18.7% compared to 16.1% in H1 FY 2024. Our profit after tax grew by 21.1% year-on-year to INR 44.7 million in quarter two FY 2025. For H1 FY 2025, our profit after tax grew by 25.4% year-on-year to INR 79.9 million. Our cash and bank balance stood at INR 881.9 million as of September 2024.
Our cash flow from operations were positive INR 161 million in H1 FY 2025, compared to negative cash flow from operations of INR 13.1 million in H1 FY 2024. As discussed in the last quarter, I would like to reiterate, any enhancements made to our existing products over the years have been expensed through the profit and loss account, and we continue to follow this practice. For the new product development, the associated costs have been capitalized as assets under development on the balance sheet, amounting to INR 45.1 million in H1 FY 2025. To summarize, our sustained investment in the existing products, combined with the development of new products and the operational efficiencies provided by our scalable model, position us well for the future growth and profitability.
Given the strong early momentum of our new products and the ongoing advantage of the operating leverage, we are confident in our ability to leverage these investments and create long-term value for the company. Coming to the KPIs for the quarter and half year, our annual recurring revenue as of quarter two FY 2025 stood at INR 117.2 million. Our net revenue retention ratio from enterprise clients continues to be 100% plus for many years, reflecting steady revenue growth from contracts with our existing customers, thereby indicating sticky client relationships. Our enterprise clients as of H1 FY 2025 stood at 904, reflecting a growth of 21.7% year-on-year. The annualized run rate for the number of order items processed for quarter two FY 2025 stood at 931 million plus.
With our continual efforts towards adding new clients and reducing customer concentration, our top 10 clients' contribution reduced to 21.6% in quarter two FY 2025, from 26.8% in quarter two FY 2024. For H1 FY 2025, the top 10 client contribution reduced to 21.2% from 30.4% in H1 FY 2024. With this, I would now like to open the floor for Q&A. Thank you.
Thank you very much. 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 handset while asking a question. Ladies and gentlemen, we will wait for a moment while the question queue assembles. Ladies and gentlemen, you may press star and one to ask a question. The first question is from the line of Sumeet Jain, from CLSA. Please go ahead.
Yeah, hi. Thanks for the opportunity and congrats on a good set of margins. Firstly, you know, want to understand around the pricing trends, Kapil. I mean, if you look at the revenue per item processed in this quarter has been down both sequentially as well as on a YOY basis. So can you just give a brief glimpse into the competitive intensity and how the pricing trend is behaving?
Thanks, Sumit. As we've mentioned last time as well, our steady state price per item continues to be in the range 1.2-1.3, and that has also been the case in quarter two. I think, given as we've time and again mentioned, that our revenues linked to the number of transactions, and effectively the number of items being processed. what we're trying to do is to do an upsell motion to the new product set we have in so that the Uniship and Unireco for the same item that's going out of the warehouse through our WMS, we are able to charge additional through Uniship and Unireco.
So we are able to build revenue lines on top of the same item that's going out. And the second initiative that we had introduced was price escalation clause on our new contract since last year. So some of that goodness will also start coming in. So far, the pricing has been consistent in the same similar ballpark range, and we are also kicking in putting in some of the initiatives which will bear fruit in the subsequent quarters.
Got it. That's helpful. And secondly, I mean, in terms of number of customers, there is a decent pickup in the enterprise customers, and I read that 85%-90% of your revenues come from enterprise clients. But on the SMB side, I mean, we have seen that has been consistently coming down for the last one and a half years. So is there any conscious effort around to reduce the concentration on SMB side?
Sure, Sumit. So we've always used the SMB plan as a funnel to upsell clients on the enterprise plan. Long tail of the SMB clients are usually the clients who have low volume and churn due to them either shutting down or stopping their online business. And hence, clients on the SMB plan continue to see high churn. Our purpose is to ensure that we are able to serve all our customers, irrespective of their size, efficiently. But given the nature of the business, some churn in the SMB segment is inevitable, and hence, we are working towards minimizing this.
Got it. And then if I look at your employee benefit expenses, I think sequentially and both Y-o-Y, it has actually come down on an absolute basis. So is it to do with capitalization of certain R&D-related spend? How is it?
So, as we've mentioned, that the business has inherent operating leverage, where our costs are largely fixed because our core products are largely stable. We do need to do some incremental investments, but broadly, we, the costs for us are largely fixed, and that's why there is an inherent operating leverage which is visible in the employee expenses as a percentage of revenue going down consistently. On the capitalization point specifically, I'll ask Anurag to come in.
Thanks, Kapil. In addition to what Kapil mentioned, Sumit, I also want to add on that, we are investing in new product development, which we intend to commercially launch towards the end of this calendar year or next part of the, or the early part of the next year. Accordingly, the investments to build this product suite is capitalized, including manpower expenses. So today, all our revenue is from existing set of products only. Accordingly, for calculation of adjusted EBITDA of 10.6 crore, the costs considered are largely relating to the existing product suite.
Therefore, the adjusted EBITDA margins of 19% represents the true operating margins of the company. Post the commercial launch of the new products, the operating expenses will start getting expensed out in the profit and loss account, having marginal impact on the earnings. Even then, we remain confident of our improvement in the margins paying out. I hope we addressed your question.
No, yeah, that's helpful. So can you give us some sense as to, you know, what is the kind of operating leverage in the, in the business we have? And, you know, is there any medium- to long-term EBITDA or EBIT margin target you have in mind? Because it's very difficult to, you know, forecast the kind of operating leverage you have in the long run, given that employee benefit has come down quite materially in the last one and a half years.
Definitely, Sumit. In fact, if you see in quarter two FY 2025, we have reported 21% adjusted EBITDA margins, which is 3.2 basis point increase year on year from quarter two FY 2024. In FY 2025, we have reported 18.7% adjusted EBITDA margins, which is 259 basis point increase year on year from H1 FY 2024. For the full year, we expect this kind of operating leverage to play out as in our core business. Large part of the cost is fixed. Accordingly, we'll be able to grow our EBITDA margins for FY 2025 versus FY 2024. Further, as we mentioned, we are also investing in new product development. We intend to commercially launch these new products sometime in the end of this calendar year or early part of the next fiscal year.
Currently, the investments to build this product suite is capitalized in the manpower expenses, as we explained, and as the commercial launch, the operating expenses will start getting extended in profit and loss account, having marginal impact on the margin. Even though, even then, we remain confident of our improvement in margins to play out.
Okay, got it. That's, that's very helpful. And lastly, you know, in terms of the festival season demand, Kapil, you mentioned it has been soft throughout this year, but, you know, in twoQs, the festivals were ahead actually than the last year. So how should one read threeQ in that context, given that, you know, last year, majority of the festivals were in threeQ, whereas this time around it has been slightly pre-booked?
Sumit, yeah. So what we've seen is the initial part of the festival season saw a strong growth, but after that, we've seen the softness continue. I think we are just one month into the quarter, so it will be hard for us to figure out how the rest of the quarter will play out. But we've seen some softness play out post the initial part of the festival season. So we'll, I think we're able to comment on that once the quarter completes. But as of now, like I said, our focus as a management team is to ensure that we continue to improve the revenues of existing clients through cross-sell, upsell initiatives, continue to have the momentum of acquiring new clients and continue to invest in our new products.
No, got it. And lastly, on your venturing out into the newer geographies, I mean, you guys don't give a split of your export revenues, but can you give us some sense how has it been trending over the last, two, three quarters?
Sure. So, international revenue has been consistently in the ballpark range of 3% of our revenues. See, international for us is a long-term investment, where I think our focus is that because our core products are largely ready for these international geographies. So our investment largely is in the sales and marketing domain, so we continue to invest that, and over time, some of these investments will start playing out. Right now, our focus is to go deeper into three geographies across South Asia and Middle East that we are operating in. And we want to continue to drive growth in those—these regions. As of now, it has been consistently 3%, and we want to continue to invest in the sales and marketing in these geographies, so that some of these investments can start giving us results in subsequent quarters.
I guess in these geographies, obviously, you don't have a first mover advantage, and there must be some incumbents who are already serving those markets with a flywheel effect of, you know, tying up with the ecosystem partners. So how are you guys attacking this market, being a challenger versus, you know, the key player in India?
Sure. So these markets, as we've discussed earlier on as well, are still in terms of the evolution of e-commerce, are still slightly behind India. So the product is largely ready, where we've been able, as a platform, being able to handle a lot more complexity. So the key benefits that we see in the Indian ecosystem play out in these international markets as well, where they're able to get a platform which is end-to-end, is able to comprehensively tackle various use cases of post-purchase journey, is a very stable, scalable platform which has handled a large scale. So all of these are playing out as advantages, in these markets.
Our GTM motion in these are driven by a combination of us deploying a sales force on the ground, to having an inbound motion to digital marketing, as well as conducting few events in region, which we call as Decode, which is essentially a roundtable series involving 20- 25 relevant e-commerce professionals. And third is leveraging some relevant channel partners, which could be a logistics player, an aggregator, a fulfillment provider. So a combination of these three are working out as our GTM motion in these markets.
So got it. That’s very helpful, Kapil. All the best to the entire team. I will get back to the queue.
Sure. Thanks.
Thank you. A reminder to all the participants, you may press star and one to ask a question. The next question is from the line of Sonal Minhas from Prescient Capital. Please go ahead.
Hi, this is Sonal Minhas. Am I audible?
There's a bit of an echo in your voice.
Sorry, let me just change. Okay, got it. Is it better now?
Yeah.
Okay. All right. I wanted to understand, like, the funnel between the SMB customers and the enterprise customers. Like, is there a data or a timeline which helps us understand, like, how many of your SMB customers actually graduate to be your enterprise customers? What is the churn at the SMB level? Just trying to, I think, get a sense of the funnel.
Sure. So SMB plan, as I mentioned, acts as one of the acquisition channels for enterprise clients. Typically, we see 15%-20% of new enterprise clients acquisition from our SMB plan. As of quarter two FY 2025, we had 28 clients out of the 104 enterprise clients we onboarded that came from the SMB plan.
Got it. Okay. And any subjective comments on one, you mentioned that some SMBs find it difficult to scale up. Anything regarding the product, basically, which you've gotten the feedback on on from the SMBs, which basically is more like a product input, which basic...
Sorry, some of your voice is again going.
Yeah, yeah.
Sorry, could you repeat the question?
Yeah, I, I will state the question again. Any subjective feedback that you've received from SMBs who decided not to continue with you, on the product, which is more like a product feedback? Anything which you would like to share on that?
Sure. So, see, majority of the customers that churn out of the platform are largely for reasons that are beyond our control, where they have gone out of business, like they've shut down or they've stopped their online business. That's bulk of the SMB clients, and typically the long tail of SMB is very low in volume.
Qualitatively on the product, I think, what we've always heard is that, it gives them the flexibility on the SMB plan, where they're using the multi-channel order management system, which allows them to process orders on a single platform, and more importantly, sync the same inventory across different demand channels. So one of the biggest value adds there, they are able to get with a very minimal manpower, they are able to manage multiple platforms at a single place. And given that a large portion of the market is already using our platform, we are increasingly seeing more and more users are trained on that workforce. Typically, the workforce is not very well educated, the users of the platform. So initially, there is a learning curve for this workforce to get used to the platform.
But the good part is now that we've been around for more than a decade, a lot of users are already familiar with the interface. So I think for the SME clients in particular, given that the product is very comprehensive, initially the training of the users may take some time, on the SME users, and they may find it a little complex to use to begin with. And that we are trying to solve through mass training programs, holding webinars for these SME clients, and ensuring that they are able to use the platform effectively.
Got it. Thanks for the answer. Then, if you could just give a sense of the pricing of your SME plan vis-à-vis the enterprise. Just a ballpark. So what would be the difference on a per transaction level, basically for an SME plan compared to enterprise plan?
Okay. The SME plan, there are two SME plans that we offer. There is a standard plan and a professional plan. The standard plan is available at INR 3 per transaction, per order, and a professional plan is at INR 3.5, per order, and this is, the standard plan is a basic multi-channel order processing and inventory management that I just talked about, and professional plan gives a very lightweight WMS for them to use. So those are the two plans that are available to our SME customers.
Got it. Thanks for this. And any... This is my first call, actually, on Unicommerce, actually. So just want to understand, any revenue guidance you've given, for the next year or twenty-four months? Just trying to, I think, get the numbers right. Yeah.
Sure. We cannot share an exact guidance, but as a company, what we've delivered is a market plus plus growth. When market, e-commerce market, during the pandemic, as per estimate, grew at 30%-35%, we delivered a 50% revenue growth, and last year, the market, as per estimate, was about mid- to late-single digits, and we delivered nearly a 15% revenue growth. We are confident that as a team, we'll continue to deliver a market plus plus growth rate.
Got it. Okay. Thank you a lot, Anurag. I'll fall back in the queue. Thank you.
Thank you. Ladies and gentlemen, you may press star and one to ask a question. The next question is from the line of Sahil Doshi from Thinkwise Wealth Managers LLP. Please go ahead.
Hi. Good morning, sir. Just wanted to understand the pricing bit a little better. For example, we've seen a 20% kind of a growth in volumes, but the revenue growth is around 11%. So there's been a price compression, and just to the previous participant, you did give out the slab. So this doesn't really come in sync with the kind of pricing which we are seeing per transaction. So could you possibly illustrate what's really happening and how does this come across?
Sure. Sahil, our enterprise customers, as I described, which constitutes nearly 90% of our revenues, pay us a minimum subscription fee in that, in each month, in which we bundle certain number of transactions in this cost. So even in the past quarters also, you would see that our revenue growth lags the transaction growth, because a large portion of a transaction growth gets absorbed in this minimum guarantee. We have, over the last many years, we've been able to add 900 enterprise clients. But if you look at the last quarter itself, we have added 100 enterprise clients. So given that our sales momentum is far higher than the existing customer base, a large portion of our transaction growth gets absorbed in the new customers' minimum guarantee itself. So our revenue growth will all...
You will see it has a lag metric to the transaction growth. You will always find it. It's not a pricing pressure, just that the transaction growth, a part of the transaction growth gets absorbed in the minimum commitment that the new clients have given to us.
Understood. So is it right to say that the 20% kind of volume growth, which you've seen in this quarter, would have been largely SMB and new clients, and enterprise would have grown some 10% or so?
No. So, it is a function of both. See, our revenue growth is driven by both our existing customers, so they continue to grow at a market growth rate, plus the new clients that we are acquiring. So it is a combination of both. We will not be able to give a split right now because of the business sensitivity reasons, but our growth in transactions and our revenue are driven by both existing set of customers as well as the new client acquisitions that we do.
Understood. Just to get a better sense, at what rate would our enterprise steady state could be growing at? If you can just possibly give that, as a number.
So, one of the good measures for us to determine the growth of our enterprise customers is a metric that we track called NRR, which is Net Revenue Retention. This number is net of churn. Our enterprise customers have continued to demonstrate a healthy growth, and that's why over the years, we've consistently demonstrated 100%+ NRR. And so, that could give you a sense of that the existing enterprise customers also continue to grow healthily, enabling us to provide 100%+ NRR in a volatile industry like e-commerce, where a lot of customers, a lot of startups tend to shut down or stop their online business. We've continued to demonstrate a consistent 100%+ NRR growth.
Sure, sir, but just to better understanding, is this like? Could you possibly give a like-to-like or a comparable number? Because it's pretty dynamic, given the nature of your business and like you said, different pricing. So just to understand on a steady state basis, is it possible to share some kind of a metric, just to understand what's the base growth of one client on a steady state basis?
See the existing clients enterprise growth, like I mentioned, Netocern continue to demonstrate 100% plus growth. So they are able to drive a portion of the growth. The rest of the growth comes from the new clients itself. I think at this point, I'll be able to share this information into the business sensitivity. But I do understand that in that there is a split in terms of the growth of existing clients and new clients in terms of modeling this business better, that the investors might be requiring that.
We will be thinking of a representation that takes care of our business sensitivity, and we'll be able to come back to all of you in the subsequent quarters on how best to model the growth. But at this point, I just want to highlight that our existing clients continue to grow healthily, ensuring that we are able to deliver 100% plus NRR. And then a part of our growth comes from our new client acquisitions. And beyond this, as our new products mature, that will add as a third growth lever for us to be able to add revenue lines on top of this growth.
Understood. Appreciate that, sir. So the second question is mainly on understanding the TAM and the opportunity size. So if I'm correct, our share of business, meaning our domain, would typically relate to the dropship segment of the e-commerce, which would roughly be around 45%-47% of the market.
Yes.
Within that, we would have a share of around 39%-40%. So could you possibly illustrate, is this the only domain area for Unicommerce? And how fast is the dropship market growing compared to the e-commerce?
Sure. So I just want to clarify here, processed about 20%-25% of India's dropship volumes. And dropship, as you rightly pointed out, is about 45%-47% of the overall market. The dropship model has been the fastest growing model within the e-com, Indian e-commerce ecosystem. There are three key models in the e-commerce landscape, as I described in the last earnings call. The first is an outright model, where it's a classic first party model, where the platforms are buying inventory from a brand, where a Cloudtail equivalent platform like a Cocoblu or Retailer are buying inventory from a brand.
The second model is a fulfilled by model, where a brand is keeping stock in a Flipkart or Amazon warehouse, and if customer is placing the order, it is the platform's workforce, which is shipping the goods to the end customer. The dropship model enables a brand to control the entire customer experience by fulfilling the demand to stock lying in their own warehouse or in the warehouse of a third-party fulfillment provider. Dropship model, as I mentioned, is the fastest growing model. As per our estimates, this model was in early double digits pre-pandemic, but now it contributes nearly half of the overall e-commerce market, and beyond the dropship model is still growing. As I described earlier in the call, that a large portion of the dropship model still continues to be managed on Excel or manual operations.
As per our estimates, about 85% of the market that gets managed on Excel and manual operations, so beyond the fact that the dropship model is also expected to grow from nearly half of the market to about 65% of the market, as per our estimates in the next few years, the fact that as the scale and the complexity of the ecosystem is increasing, more and more brands want to move from managing things manually to moving to a SaaS platform like us, and the fact that a lot of categories and a lot of brands are still yet to move online, and in particular to the dropship model, we will continue to see a healthy momentum on the new acquisition.
So from an India and e-commerce landscape perspective, these three will continue to drive growth for our existing core products. Plus, on top of this, we continue to add new products to in line with our vision, to become a one-stop shop for e-commerce enablement. So these four levers will continue to drive growth for us within the Indian e-commerce landscape.
Thank you, sir. That's very helpful. Just to follow up on this, for example, you know, you called out, you got, say, VIP, Landmark in this quarter. So just to better understand, are these guys who are actually migrating from some other player or it's their in-house and a captive arm, which is now going to an outsourced model?
So I cannot specifically comment on these two players, but in general, a lot of brands actually move from Excel to directly our software, because as I mentioned, bulk of the market still continues to use Excel or manual operations. We see some transition of brands happening from other players to us, because of the advantages that I've outlined before. And beyond these two, the upsell from the assembly plan continues to be the third lever for us to acquire enterprise clients.
Understood. And if I can take one more, just on the new products and the opportunity, could you possibly illustrate what is the market size there? What is the TAM? And, any ballpark illustration of what is the kind of, the products which you're looking to launch in the year end, what is the kind of opportunity in that?
Sure, so the TAM for our complementary product offerings that we offer today is about $420 million. And these two products are Uniship and Unireco, where we are enabling two seamless order tracking and returns management to Uniship, and a seamless reconciliation of the payments that they are expected to get from the marketplace. Uniship focuses on streamlining the operations on the website, and Unireco helps streamline the payments, like identify the leakages on the various payments from various marketplace platforms.
Two things that help acceleration of Uniship and Unireco is one, increasingly more and more brands in the Indian and the emerging market landscape prefer that they get all the solutions under a single umbrella, because it's a big headache today for brands and sellers to integrate multiple point solutions, and that's why we've got very positive response from our existing customer base on both Uniship and Unireco, and they are waiting for these products to mature. The tentative timeline for that is year-end or early part of next year, and as they mature, I think it makes a lot of sense. At least the brands and sellers have told us that it makes a lot of sense for them to have everything under a single umbrella.
And second is that, we today, Uniship and Unireco, like I said, will be able to, when they mature, allow us an opportunity to add more revenue lines on the same item that's being shipped out of the warehouse. Today, it's very early for me to comment on what kind of opportunity upside we will see from these products, because they are still in the build phase. But given the positive response from both the earlier adopters and potential customers who are looking to get onboarded, we feel that, this should help become a strong lever for growth going forward in the subsequent quarters and subsequent years.
Sure, sir. Thank you so much. I'll get back in touch with you, sir.
Thank you.
Thank you. Ladies and gentlemen, you may press star and one to ask a question. The next question is from the line of Parth Vasani from KK Advisors. Please go ahead.
Yeah, good morning, and thank you very much for the opportunity. Sir, I had few questions. First is that we have witnessed a strong performance in terms of client acquisition in Q1 as well as Q2, and as generally we see strong performance in tier one cohort, and growth from these new additions will ideally come from the next year. So are we seeing a substantial growth for next year?
I think it will be difficult for me to comment on the growth aspects on the next year, but as I mentioned, we've always keep demonstrated our market cluster's growth rate, and we are hopeful that we'll continue to do that in the subsequent years, quarters and years as well. Addition of new clients is definitely one of the strong growth levers for us, but there are other growth levers beyond the e-commerce market. There are also new products that should play out in the next year and international markets, so it will be a combination of these four growth levers.
It'll be hard for me to comment on which growth lever will be the strongest and will drive growth, for subsequent year, but at this stage, all I can say is that we'll continue to demonstrate a market first growth rate.
Okay. Got it, sir. And second one was on the cash flow side. So if you can give some color on cash flow, because there has been a good improvement in cash generated from operations from like negative INR 13 million last year to positive around INR 160 million. So if you can just throw some color on that.
Sure, Parth. During FY 2025, we got the cash flow from operations near about INR 161 million, you rightly said, as compared to negative INR 13.1 million in FY 2024. Our cash flows are higher, primarily due to the collections we have received from the initial holders, so for the spends we have done for the acquisition activities in the previous year.
Okay. Okay. Yeah. So got it. That, that is it from my side. I'll get back any concerns. Yeah. Thank you.
Thank you. The next question is from the line of Sameer Dosani from ICICI Prudential AMC. Please go ahead.
Thanks. Thanks for the opportunity. I'm not sure if this question has been asked, but if you can share some qualitative feedback about your new product launches and whether you have been able to get some customers around there. I understand there is no revenue at this point of time, but qualitative feedback and around about and some quantitative outlook or target or roadmap that you can share in one or two years about these new products. Thanks.
Sir, I'll start with the first question, which is on the qualitative feedback on the new products. I think both the products have been well received. They solve very important pain points in the brands or the sellers life cycle, where today on the brand website the experience, the default experience is fairly broken when it comes to tracking and returns management. And Uniship is a very solid addition to the experience that they offer to their customers in terms of offering a marketplace-like experience on the brand website, in terms of tracking, where the customer is able to easily understand where the product is in the entire life cycle. And also, on the return, gives a very seamless experience of initiating returns, getting visibility on what the return status is, et cetera.
Similarly, on the Unireco, it is giving them full visibility on the right payments that need to be deducted by the marketplaces, so that if there are any leakages, they can be identified seamlessly and then can help the brands plug those leakages. Specifically, I think the one more overall overwhelmingly positive feedback that we've received is that they are able to manage everything under a single umbrella. On the functionalities of the product, as I said, they are in the build phase. I think what we've been able to ensure through our core products is that whatever functionalities we have offered is very stable, is top class, and is very scalable.
I think the initial feedback from these early adopters is that these two new products also give the same feedback. That as they find our core products very stable and scalable, they have said that whatever we've got, they work well. They are able to work well at scale. But given that these are very deep products, there are a lot of feature demands that come from early adopters, and we are working towards building and incorporating that feedback. So the good part is whatever we have delivered, the customers are happy with it. But given that these two products are solving very important pain points for these brands, they would want to have them very comprehensive.
So far, the expected timeline for us to be able to have a very comprehensive offering for these two pain points is end of this year or early next year. It is initial feedback in terms of being able to get everything under a single umbrella and the product being stable and scalable are, I think, good feedbacks. On the interface, I think the brand and sellers are found the interface easy to use, because they're also used to the Uniware, the warehouse management and the order management interface. It feels like a natural extension of these products, and that's why the users are finding it very easy to adapt to these interfaces as well. These are few initial feedbacks, but like I said, these are very early days for us.
The feedback is definitely encouraging, but we have to do a lot more to ensure that the products become fairly comprehensive, to be able to handle their pain points comprehensively. In terms of an outlook for the next one or two years, like I said, I think it will be difficult for me to give an exact guidance at this stage, but as a business, we have demonstrated a market-leader growth rate, and we'll continue to do that. Today, new products are very early, and they are not contributing anything material to our top line today.
But over time, as the products mature, and once that happens, we are hopeful that we will be able to have a decent portion coming in from there, besides the other growth levers that continue to play out, which is the market growth as well as the new client acquisition.
Got it. Just one small follow-up. So basically, on the core product, you are, you're shifting manual plus Excel to your platform. But there is in Uniware ownership, is it like last year displacement game or changing or taking their work to our software? What is really happening, you think? And if I'm not wrong, the revenue per order is higher, right? Because the core product in this case, the TAM is higher, you think? Thanks.
Sure. I think good questions, Sameer. One is in terms of the new products, the Uniship and Unireco. Today, just like our core products, it is a combination of both. There are many brands that are getting launched. There are many brands that are going direct to consumer, right? So by default, they start with manual operations. I'm talking specifically for Uniship. Some of them may be using an existing solution. We are replacing them because brands are able to get everything under a single umbrella. But a large portion still moves from manual operations, because the trend on moving direct to consumer is still very nascent. Similarly, on Unireco, today, it's largely manual, where there are Excel sheets that are being maintained to identify the leakages.
So I think, having an automated solution for Unireco is a welcome change for them. A large portion is moving from manual operations to this. In terms of the TAM, yes, the TAM is larger, and because it's a combination of multiple products that we're talking about. So, combination of those could mean a higher realization per item, but effectively, if you look at it, it's incrementally adding to the same item that's going out. So for us, it's an incremental revenue addition, as opposed to a fresh, sort of a business unit or a business line getting created. So we are treating these as extensions to our, to our existing products, and that's how the customers also view it, that they're getting everything under a single umbrella.
I think the actual rate, and the monetization of these products will become clearer as the product evolves and becomes more comprehensive. As I said, today, we are able to cater to few of their demands, and we continue to get a lot of feedback from our customers, so we are working on improving that, and once that happens, towards the end of the year or early part of next year, we'll be able to give a better color on the potential of monetization, monetization potential of these two new products.
Thanks. Thanks for those comprehensive answers. Thank you.
Thank you. The next follow-up question is from the line of Sonal Minhas from Prescient Capital. Please go ahead.
Hi, this is Sonal again. I had a follow-up question regarding the employee benefit expenses. If I look at the numbers, quarter on quarter, and even if I look at it, even half-yearly basis, the number is falling. I think there is some piece of component there. Just wanted to understand, like, what would be the guidance for the employee expense, one year out, two year out? What is the CAGR that we see? And, is the employee expense kind of, factoring in the growth for the next three, four years? Just wanted to get a sense of that, actually.
So, so in fact, you know, I've covered this question partially in the previous section also. In fact, in quarter two, FY 2025, we have reported 21% adjusted EBITDA margins with clearly 22 basis points. And in H1 also, we have reported 18.7% adjusted EBITDA margins with 259 basis points. Right. As we, the second point is that we are building our new products, and once these new products will actually come into play sometime in the early part of the next fiscal year, we'll start getting the revenues off of them, right? Third thing is like operating leverage is something which plays a big role here.
In fact, as you see, below the gross margin, our other expenses are largely fixed, and our employee benefit expenses are. We are also getting the efficiency from the employee benefit expense standpoint, where the employee benefit expenses are continuously reducing in terms of the percentage of revenue, and as our topline starts growing further over a period of time, our employee benefit expenses will start further reducing in the percentage terms to the revenue down the line.
Just to add to that, I think, as you, as Anurag has described, there is an inherent operating leverage in the business because the costs are largely fixed, because our core products are largely ready. While we do continue to invest in new products and international expansion, but in both these cases, our core platform is ready. So our incremental investments into the new products is not significant. It's not akin to us launching a separate business unit and same for international expansion. And that's why we are able to repurpose some of our existing teams, as we described, both in sales, that our existing sales team is being utilized for cross-selling some of the new products, and similarly in technology team as well.
We are repurposing some of the teams to focus on building the new products, because our core products do not require significant investments. While e-commerce is an evolving industry, so we'll continue to have some incremental investments, but broadly, the products are already ready, and that's why there is an inherent operating leverage in the business, and which will we have demonstrated over the last few quarters, and we will continue to do so going forward as well.
So is it fair to assume that the like the people expenses or the employee costs will basically grow at increment plus plus like whatever the good startup increments basically benchmarks are there in that range ballpark like. Or is that a fair summary for the next 12-24 months like in that range or that plus plus? Like so 15%-20% just asking like a number basically just to understand.
Yeah, sure. So historically, if you see, that's the trend that has been there, where the costs have been largely fixed. The only, the only increase was the increments that is offered to the team. So with the current set of initiatives, that continues the case, where we feel that our core does not require as much of investments, and we'll continue to use some of our existing teams itself to focus on our new initiatives. If there is any material new initiatives that we take up subsequently, we'll come and update to the market. But as of now, with the initiatives that we have on hand, we feel that our costs will continue to be largely fixed. There will be just an inflationary increase that we will see in our expenses going forward on the fixed costs, on the fixed side.
Got it. Okay, that's it from my side. Thank you.
Thank you. Ladies and gentlemen, we'll take this as the last question due to time constraint. I now hand the conference over to Mr. Kapil Makhija for closing comments.
Thank you, everyone, for joining the call today. We hope we have been able to give you an overview of our business and also answer your queries. Should you have any further queries or clarifications, please feel free to reach out to Strategic Growth Advisors, our investor relations advisors. Thank you and have a good day.
Thank you. On behalf of Unicommerce eSolutions Limited, that concludes this conference. Thank you for joining us, and you may now disconnect your lines. Thank you.