Ladies and gentlemen, good day, and welcome to the Allsec Technologies Q2 FY23 conference call hosted by Anand Rathi Share and Stock Brokers Limited. It is my pleasure to introduce the management of Allsec Technologies who are here with us to discuss the results. We have with us Mr. Ashish Johri, CEO, and Mr. Raghunath Parthasarathy, CFO. As a reminder, all participants lines will be in the listen-only mode, and there'll 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 and then zero on your touchtone phone. I now hand the conference over to Mr. Ashish Johri. Thank you, and over to you, sir. Thank you. Good morning, everyone, and, thank you for joining our earnings call today. The results and 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 our annual report. I will start with a brief overview of the financial performance, followed by key business updates, and post that, we will be happy to take your questions. Let's dive into the financial performance. Q2 FY 2023 has been a good quarter for Allsec. We have achieved our highest-ever quarterly revenue, clocking INR 94.2 crores in this quarter. This revenue represents a growth of 22% over Q2 FY 2022 and 7% over Q1 FY 2023. Our EBITDA was at INR 21.6 crores, which is a growth of 15% year-on-year and 7% quarter-on-quarter. Our net profit was at INR 15.9 crores, which is a 23% growth year-on-year and 16% growth quarter-on-quarter. For the first half of FY 2023, we have achieved a revenue of INR 182.4 crores, which is 23% higher than H1 FY 2022, and also our highest ever half-yearly revenue. Our EBITDA for H1 FY 2022 was INR 41.9 crores against INR 34.7 crores in H1 FY 2022, which is a 21% growth. The above half-yearly performance is on the back of our sustained investments in people, technology and processes over the last few years, and that has helped us bounce back strongly in the post-COVID world. Our cash position and collections continue to be strong. Our quarterly collections from customers crossed INR 100 crore for the first time ever. Our OCF for H1 FY 2023 was at INR 40.7 crore, representing a conversion of 98% of EBITDA. The OCF was higher 33% compared to H1 FY 2022. The board also declared an interim dividend of INR 20 crore per share after considering the strong cash position and the positive outlook for the company. Now let me dive into the strategic and the business updates. I will kick things off by commenting on a few strategic themes that we set upon at the beginning of the year. I'm glad to say that we have seen tremendous progress on each of these themes. Let me move on to the first theme, which was improving our top-line growth. Over the last couple of years, we have laid great emphasis on improving Allsec's top line. To this effect, we have put very strong sales teams in both HRO and DBS businesses. While in the HRO business segment, we saw some delayed results because of COVID pandemic, but now the results over the last few quarters have been very strong, resulting in record revenues in the current quarter. During this quarter, we added 42 new logos with an ACV of INR 11 crores. This takes our H1 tally to 86 logos and roughly INR 19.8 crores in ACV. DBS has performed well in the current quarter, with both growth coming from volume increase, especially with the new customers that we have onboarded in the last year. DBS International grew by 36% year-on-year, while the domestic grew 14%. On a quarter-on-quarter basis, international grew by 11% and the domestic DBS business grew by 12%. HRO, excluding statutory compliance, grew 15% year-on-year and 5% quarter-on-quarter. Our pipeline and customer onboarding continues to be strong in this business, but our growth is currently moderated, largely due to implementation and onboarding of customers that is ongoing. The second theme I want to talk about is the HRO platform enhancements. Our HRO platform modernization continues to progress at a rapid pace. We intend to commence onboarding of customers onto the new payroll platform in Q4 FY 2023. Our SaaS HCM platform is also on track for onboarding of enterprise customers by Q1 FY 2024. Moving on to the detailed business segment performance, I will start with Digital Business Services, DBS. The DBS business had a good quarter, with revenues of INR 62.7 crores, a growth of 29% year-on-year and 11% quarter-on-quarter. This was largely driven by new customers onboarded over the last 12 months. Our EBIT grew 48% year-on-year and 12% quarter-on-quarter, reflecting strong profit growth in this business. In H1 FY 2023, we added three logos with ACVs of roughly INR 6 crores. The pipeline for this business remains strong, and we are confident of more wins in the coming quarters. I will move on to the HRO business now. The HRO business ended the quarter at revenues of INR 31.5 crores, a growth of 11% year-on-year. We added 41 new customers during the quarter with an ACV of INR 59 crores. This is one of the strongest win books in the history of Allsec HRO. Our EBIT in this segment grew by 6% year-on-year and remained flat quarter-on-quarter. The muted EBIT growth is on account of investments in people that we made both in operations and IT in anticipation of the strong win book over the last quarter and the prior quarter as well. We continue to invest significantly in digital innovation in this business, driving both revenues and margin improvements. As I mentioned earlier, all our platform investments are beginning to come online or will come online over the next six months or so. With this, I conclude my update, and thank you for your support and also for being here today. We are happy to take questions at this point. Thank you. We will now begin the question answer session. Anyone who wishes to ask a question may press star and one on their touchtone 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'll wait for a moment while the question queue assembles. We have the first question on the line of Purab Uday Gujar from Cameo. Please go ahead. Yeah. Good morning, Ashish, and Mr. Raghunath. First of all, congratulations on a beautiful set of developments that we are hearing on the business front. Of course, the numbers are showing all the progress. Am I audible first of all before I ask the question? Yes, yes, you are. Please go ahead. Great. My first question is around the cash. We have around INR 155 crores of cash on the books. I'm seeing that we are utilizing INR 30 crores of that as for dividends. What is overall the cash utilization thought process? And even from a dividend policy standpoint, do we have a very clear-cut dividend policy? Or we've been liking the dividends that have been coming along, but from understanding the future dividend flow, would like to understand some of the policy aspect. Yes. Hi, Uday. This is Raghu here. Thanks for your support. On the cash flows after this dividend is declared, we'll probably have another INR 120 crore of cash reserves. At this stage, you know, the dividend policy, what we are trying to do is, at the end of each year, figure out what is maximum allowable, as per the Indian Companies Act. That's what we've been doing for the last couple of years. At this stage, you know, we try to keep some cash, in case we need some money for inorganic growth, which is why, you know, we've not used whatever we can bring some money and dividend out everything else. We'll continue to monitor this situation and the board is, you know, fully cognizant of the fact that our current dividend policy only allows, as the board knows, we will work out what is going to be a more, you know, open dividend policy. As a shareholder, you are aware of what you can expect on a yearly basis. Understood. I do not hear about utilizing it for any specific acquisitions of any technology or other companies. Of course, we have to be mindful of the ticket here. Is there anything on the horizon on that front? No, there is nothing on the horizon. In fact, while we continue to evaluate, there's nothing that is very clear. This is why we said that, you know, we will continue to keep anticipating incremental cash flows. Right. While still having the ability to go for something if something comes up. Understood. Kind of linked to it is the fact that we're seeing a lot of VC activity around smart HRO, if you will, HR tech platform space. It's a two-part question. One is whether we as a company do we want to look at any VC funding because that gives a different kind of VC validation. Is that something that the company has evaluated? Second, is it bringing more pressure in terms of cash burn rate, in terms of having to invest? Because generally a VC activity in any given space will I mean, it'll create inflation, right, on technology spends. Can you help with that? Uday, we are not looking at any VC validation at this point of time. We are, you know, investing based on our internal accruals. As you can see, whatever we're investing is not causing much of a difference in our financials at this point of time. Getting a VC may, you know, lead into a different strategy. At this point of time, we don't want to do that. I think this is also something that we've discussed internally at some, you know, before we embarked on this product roadmap, and we felt that this is a good way for us to move forward. Do you see any pressure coming in terms of inflation on tech spends? Sorry, could you repeat your question? My question is because there is VC activity in the space you operate in on the HRO side, do you feel there is inflation coming in in terms of tech spend or whether it's salaries for the technology developers or other aspects where you're seeing higher spend rate at RN? Yes. Purab, over the last couple of years, the entire industry including us, we have seen technology salaries go up fairly meaningfully. Over the last quarters and maybe a little more than that, some of that inflation in salary seems to have tempered down. I'm also hearing from industry sources that IT hiring is also beginning to slow down, so perhaps the salaries are also reflecting that. Right now, yes, over the last couple of years, salaries have gone up, but the demands are tapering down a little bit. Understood. That was on the business front. On the merger front, I had a question or two. I'll start with this that we see. I mean, I'm seeing more complaints, shareholder complaints, on the different platforms of the regulators. I wonder if most of them or all of them are related to the merger. Have kind of the board discussed the issues raised around the merger and can you help me with some visibility on what's happening at the board level and the company level? Purab, there have been complaints from minority shareholders on various forums as you mentioned, and we have taken cognizance at the board level. There's, you know, obviously, you know, this is probably not a forum for us to talk about this more in detail. That's something that will go through the process as part of the merger, and definitely all the shareholders will have a, you know, proper forum to have a discussion on this and take this forward. Understood. At this stage, there's not much that as management we can comment on this particular process, yeah. Understood. Thank you so much. Any update on the timelines of the merger? Because the original timelines we've spoken and what we are seeing the progress. What is the exact current status of the merger, and what are the revised timelines looking like at your end? Right. Obviously with, as far as the company is concerned, you know, the timeline is very dependent on external stakeholders. We're still awaiting the nod from SEBI. Any calendar that we talk of now can be only after the SEBI approval comes in. In terms of next steps, that is after SEBI, then there's an NCLT, then there's you know, release for EGM and stuff like that. At this stage we don't have a calendar, at least not as per the SEBI approval, yeah. I believe I lost a few words there. Did you say that we are currently waiting for a nod from SEBI? Is that right? Correct. Understood. Yes. Yes. I think, I have a thing or two, but, I will then join the queue again. I will let other parties in. Okay. Thanks, Purab. Thank you so much. Thanks. Bye, Purab. Thank you. We have the next question from the line of Sugandhi Sud from InCred Asset Management. Please go ahead. Yes. Hi. Congratulations on the great results, and thanks for taking my question. I wanted to understand in HRO, you know, given the kind of, you know, higher margins that HRO ex-compliance business has, and you noted that there's been some addition in headcount. Can we expect some improvement in margins going forward? You know, especially given the high vintage that revenue comes through. And if you could also give a sense of how the new platform and the SaaS business, you know, would play out in terms of, you know, the profitability relative to the traditional business in HRO. That's my first question. Sure. For the near term, near term being next six months, nine months, I don't expect margins in HRO to vary too much from what we've seen this quarter. Simply because, we are investing a fair bit in automation and IT resources and operations resources, given the order book that we have. Some of these investments will precede the revenue, hence muting the EBITDA for the next six months at least. I would expect margins to go up as we release some of these resources and start harvesting the benefits of all the automation initiatives. I expect the margins to go back to the historical margins we have seen in this business. We'll basically go back to the historical mean in the HRO business. In terms of the new platform and impact of those platforms on EBITDA, right now. These are platforms which we are building have higher levels of automation. I would expect better margins in those platforms, but it is very difficult to say right now. The critical metric those platforms should trigger is revenue growth, as opposed to profit growth, as opposed to margin growth. Sure. And also, you know, your HRO business, if I remember correctly, a large chunk of, you know, the historically you have reported the verticals it was from IT services. What are you seeing there in terms of, you know, what are you seeing across IT companies? Is there, you know, moderation in the headcount addition or the, you know, the whole supply situation settling down a little bit? How you know, is that meaningful for you or, and, you know, what is the outlook there? Yes. Over the last six months, we are indeed seeing headcount growth with existing customers, especially in IT, ITES, logistics and a few different other verticals. The growth is has tempered down substantially compared to historical. Yes, that is an ongoing trend that's come about in the last four to six months. Sure. That is fair. Just to the bookkeeping questions, you've mentioned that there are some forex gains. If you could quantify that, and if there's any impact on the EBITDA, how much impact is there if there are any other one-offs in EBITDA? What is the expected tax rate for the current year? Okay. There is not much of a benefit in EBITDA out of that forex, the primary reason being that while the rupee has depreciated against the dollar, the rupee has also appreciated against peso. For Allsec, Manila is a large subsidiary, and the gains that we're kind of getting on dollar is lost on the translation from peso to INR. My EBITDA to that extent is more or less, you know, comparable with previous quarters. The benefit that we've got is more on the dollar cash that we had and the revaluation, and that goes also below the line, below EBITDA into other income. That's the point on FX. What was your other question? Could you quantify that number, the below the EBITDA line number? I don't have the number with me currently, but I can certainly get it to you separately, yeah. Sure. The second question was around effective tax rate. Effective tax rate. I think we will, depending on the mix between India and Manila. Manila has a lower tax at 5% while India is at 25%. The mix will work, take it to 19%-19.5%, and that's where we probably be. Sure. Thanks. That's very useful. I'll hop back in the queue. Thank you. Thank you. Thank you. We have the next question in the line of Raghuram N S from EurIndia Ventures. Please go ahead. Hi, Ashish. Hi, Raghunath. I have obviously I'll take the same kind of, you can say a set of questions like how Ashish mentioned from a business, you can say DBS and HRO perspective. I'll start with DBS. Obviously one can see from your PPT that there is significant growth in the international headcount numbers, whereas the volume growth or the revenue growth is still to maybe get reflected in terms of what we have already seen. Is that something that gets explained by the fact that you see larger volume growth and business growth coming in in the next few quarters and you are hiring in anticipation of that? Or is it something else? Yeah. Raghu, let me take that. Some of that is volume for growth that we anticipate, but mostly it's also growth in existing business. You know, depending on which business the growth comes in, you have a per revenue per employee difference here. I would say that, you know, and as you can see our ACV win for this year is what, you know, will translate into revenue for the next couple of quarters. And obviously we will build some capacity for that. But the remaining is all mix change in our existing portfolio. Obviously, as a corollary to that, one can see it's going above. The absolute numbers are going above 1,300, approaching 1,400 kind of number. Sure. Yeah. The capacity that was in Manila, at least, was about 600 seats. Is this something that now is making it very clear that there has to be a capacity addition there? Or what's the plan for that? We are very close to using our space in Manila. We will be looking at some expansion in the next six months for sure. Okay. We are already evaluating a few options. Okay. We have a few months to make that call. Okay. On a constant currency basis, obviously there has been huge movement in currency, and that is something that my previous question investor was also alluding to. On a constant currency basis, how would this have looked, if it had been the currency kind of fluctuations were not there? In terms of I'm speaking about DBS only because that's where the significant revenue growth has happened last quarter. I would say, you know, the Raghu as Padmaja was trying to explain earlier also is that the large chunk of my revenue contribution comes from Manila. What has happened is that while the US dollar has appreciated against even the PHP, the PHP has depreciated against the INR. Finally, when you bring it down to the INR terms, the impact on EBITDA is definitely very insignificant, and on revenue probably, because the US dollar has appreciated by around 10%, the impact in revenue is only 3.5%. Oh, okay. That brings me to. Two currency parts and both have moved in different directions. That brings me to the next question. Obviously now one is seeing pretty significant or very good capacity utilization from both Manila and India side. What we have seen previously is that at that kind of good capacity utilization, the EBITDA levels for DBS would be at around 14%-15%. We are still maybe hovering around the 13% kind of level. Is it a fair assumption to do saying that now that we are at this kind of levels, it will, like what Ashish also mentioned on the HRO side. Obviously there is a mean level of EBITDA for DBS also, which got affected due to various factors, COVID-related, capacity utilization related. Would it be a fair statement to say that it will go back to the 15% kind of mean level, yeah? 12%-15% is where DBS will be, Raghu. That is definitely an aspirational one for us to be. Depending on how both businesses perform, a lot of some of these allocated expenses will play based on which revenue grows faster. We end up taking a slightly higher charge. Yeah, 12%-15% is always where we look at for our DBS business. Okay, moving on to the HRO business. Obviously Ashish also mentioned that this is one of the highest ever quarterly ACV additions. Is this something that is sustainable going forward, or is this something that is just a one-off kind of an event? How do you see this? How do you see the markets evolving? Raghu, we expect this run rate to continue. This is not one-off, because our pipeline and the deals approaching closure, et cetera, continues to be at sustained high levels. This is, I think, this is not a one-off. The trajectory and velocity should continue for some more time. Oh, that's very good to hear. Okay. The second thing was on the impact of Simpliance now becoming a part of the Aparajitha Group. Obviously, that has been announced this quarter. Now Simpliance, Allsec obviously used to work with Simpliance and, you know, in various, I'm sure engagements. Now it becomes a complete part of Aparajitha. How do you see this impacting the, you can say, how Allsec presents itself to clients? Raghu, Simpliance always was a third-party vendor to us while they were a sister company, but we've always treated them as another service provider to us with arm's length commercial contract driven by market pricing. I don't expect anything to change on that front. They continue to be a service provider and the technology backbone for the Simpliance business. I don't expect anything to change as a result of it. If there are any ups and downs, we'll evaluate options and strategies when we get to that. As of now, nothing changes. Oh, okay. You have enough other technology service providers who will be able to service that kind of part of the client requirement? Yes. I mean, there are enough technology providers in the market. Okay. The third question on that was obviously you have mentioned that the SmartPay, that is SP4 product development pipeline timeline. Marketing is to start in two months' time. I would imagine the product development must be more or less at a very advanced stage now. Is it something that there are no real uncertainties around the product development and the rollout now? Is it something that we have reached that kind of state now? Yes. We expect to start onboarding new customers, probably in the January-February timeframe, followed by a full market launch. A soft launch, marketing launch in January-February and a more intensive marketing campaign by March or so. We already have a customer running on this platform. We expect to take that customer live. It's an existing customer. We expect to take that customer live on this platform, probably by January. As you can imagine, the platform is in a pretty advanced stage of development at this point. Essentially what we are working on now is the peripheral development around this platform. The core platform itself is approaching closure. Oh, very good to hear. Okay, so is this client that you have obviously started a beta trial or whatever you call it, is that a large customer or is it one of your medium-sized kind of customers? It's a medium-sized customer, but we've also tested one of our larger customers over the last quarter. At this point, that large customer, we paused more testing simply because it just detracts from assessing the platform capabilities. We have tested both with the at large volumes and with the mid-sized customers. Okay. In summary, the uncertainty around the product launch is no longer really there now. It's a matter of time now. It's not. Okay. That brings me to the end of the HRO thing also. Overall, a couple of questions for you, Raghunath, on the balance sheet and balance sheet items. You obviously alluded to it before, but I just wanted to bring up the specific details. You have shown higher unrealized Forex gain of INR 549 lakhs in the cash flow statement. Is this something that's going to come in to the P&L over the next quarter or two, or how is this going to impact? Where will it start showing up in the P&L? No, it's already in the P&L. That goes into the other income for the half year. This is when I say unrealized in cash flow, it's basically coming out of the P&L. Oh, that's why the other income has shown an increase. Yeah. Okay. The second question was on the higher current liabilities or trade payable. That's a significant increase that you guys have shown. Is that something that is related to obviously the number of headcount growth or is there something else? Absolutely. You're right. The BPM revenue growing, you have that many accounts being added and that creates such a payable at the end of the quarter. Okay. That obviously adds to the thing that you guys are preparing for, growth coming in. Okay. Okay. Thank you so much. Wish you all the best. Thank you. Okay. Thank you. We have the next question in the line of Nishith from CWC. Please go ahead. Yeah, hi. Thanks, Ashish and, Raghu. Thanks for the opportunity, and, I think the numbers are really good. I had a couple of questions on the HRO side. Just wanted to understand, is my understanding right? Basically, we had around INR 28 crore of revenue in Q2 last year, and we have around INR 35 crore, right? Wherein our compliance business has been fairly flattish, and we've had, like, 15% growth in the HRO business. Right. I just wanted to understand how much of the HRO business growth would be from existing client versus, new customers that you would have won in the last 12 months. Nishith, in this quarter, most of the revenue growth has come from new customers. The headcount growth with existing customers is muted compared to historical. Historically, we see anywhere between 7%-10% headcount growth with existing customers. This year, we are not seeing that kind of growth numbers. It seems to be more in the 2%-3%, so far. Most of our growth has actually come from new customers. Has there been any churn that we've witnessed in older customers? Is that resulted because of it or? No. Because IT would have added customers and stuff like that, right? Employees would have gotten added there. It's not because the churn is. Or was there any pricing compression that has taken place? No. We've had no churn, nor have we had any meaningful pricing compression. At this point, it is purely driven by headcount growth from existing customers being muted. Whether it is, you know, an industry trend or whether it is very specific to a few different customers, I can't comment on that, but it is largely we haven't seen any customer churn or pricing compression. Fair enough. The other thing I wanted to understand is, you know, in the last 12 months, we've added roughly INR 20 crore plus worth of ACV, right? We've added 165 odd new clients, right, in the last 12 months. Right? Our revenue to that extent in HRO has only grown by, let's say, so if we've added INR 20 crore plus, you know, I should have added INR 5 crore kind of plus revenue. There is that lead lag. How much time does that lead lag get addressed? You know, when you've added a new customer with a new ACV, generally, how much time does that take for it to kind of fully show up in your revenues? Historically, it has taken about six months from when we announce the win to when revenue starts coming in. There is roughly three to four months of transition and give or take a few months for a commission closure, et cetera. Over the last couple of years, these timelines have stretched initially because of COVID, and we are still feeling a little bit of a lag. The timelines right now are probably running nine months at this point. That's number one. Number two is, of course, given our win book also we have a very substantial backlog of commissions that we are currently working through. That is very exciting actually, Ashish, because what you're basically saying is the last three, four months where you kind of accelerated. Last three, four quarters where you've accelerated this ACV win. The impact of this is about to come in the future quarters, right? If my understanding is correct. Yes. Basically mean that gives you much greater visibility going into the next half or kind of stuff, right? Because you have deals in the bag, which is now more of implementation out there. Yes, that's right. That is very good to hear. The other thing is, you know, historically last four quarters you've been winning about 40-odd deals, right? But the ACV, it's been around INR 4 crore-odd. This quarter seems to be, you know, the same 40-odd deals, but close to INR 10 crore of ACV. That's like, it's almost double of whatever you've done. More than double of whatever you've done in the last five quarters, right? What really changed out here and how do you see that, you know? It seems like you've landed some really big clients in this. Yeah. There are a few large deals in this. At the same time, I'm also seeing expansion of our near closure and the total pipeline as well. Yes, this quarter there will be one-off compared to history. Going forward, the prospects are bright. I know in the last question you told Raghu that, you know, you think that you could maintain the pace. My question here is, you know, you will be. You've added sales force and you are launching two new an upgraded version of your older platform and you are launching the SaaS platform. Is it fair for us to kind of assume that, you know, both the number of clients won and the ACV kind of per customers, you know, could actually see a substantial acceleration from what you've done in Q2? Is that a fair ask? If your question is do we see deal sizes going up in the future, it's tough to comment on that compared to where we are. See, in the last six months, our deal sizes have indeed gone up compared to history. Will they go up from here? It's a little difficult to say. I would expect them to remain average deal size to remain as it is now. At least in the near term. At the Q2 level or what you've done historically on an average of the last At the Q2 level. Wow. Even that is. The number of wins because of all the stuff that is coming through. You know, you could actually see an acceleration from the 40-odd clients that you're adding per quarter. That could go up, right? That should logically go up. Yes, perhaps. Difficult to say. Which is fair, I understand. I'm just trying to. I'm not asking for guidance, I'm just trying to logically build mental frameworks wherein we have added sales force. We have added firepower in terms of new products, and we are seeing good momentum out here. We are saying that this momentum should just accelerate from here on. It's difficult to quantify how much, but that is the direction that we should be thinking in, right? That's the way it is. Yes. Is this share win from other customers or are we finally starting to see, you know, because this was one of the. In one of the calls you had said that, you know, when the market goes through a massive disruption that we've seen during COVID, you know, a lot of companies evaluate and the older practices get relooked at, right? Are you seeing some of that happen or is it primarily share win from other competitors or is it like you're starting to see new to outsourcing customers come to the fray out here? Tough to say, Nishith. I would say the current deals are 50/50. Half of them are slightly under half of them would be new-to-the-market customers. Slightly more than half will be wins away from competition. What was this number a year back, Ashish? Was it also 50/50 or was it a lot more towards new winning from competitors? It's not much different from what we've seen in the last couple of years. Okay. It's similar to whatever it is, 50/50. Mm-hmm. Okay. No, this is very helpful. Thank you very much. Thanks, Nishith. Thank you. We have the next question in line of Kunal Shah, an investor. Please go ahead. Mr. Kunal Shah, can you hear us? This is the operator. Kunal Shah, can you hear us? Hello. Yeah, am I audible? Yes, you are now. I wanted to ask regarding the share exchange thing between Allsec and Quess. Don't you think it is not fair for Allsec holders? It's not- Would you like to comment on that? Something that we can comment on. The process is ongoing. We've had feedback coming from the shareholders and those are being looked at. That's not something that Ashish or I can comment on. All right. Sure. Yeah. It is fine. Yeah. Everything is done from my side. Thank you. Okay. Thanks, Kunal. Will that be all, Mr. Kunal Shah? Yes, fine. All right. We have the next question on the line of Purab Uday Gujar from Cameo. Please go ahead. Yeah, hi. I'm back again. Ashish, I wanted to ask a few things on HRO, and particularly on trying to understand the way to look at the business. Of course, ACV is a good lead indicator, and we are seeing the momentum when the previous investor had, I mean, the answers to his questions helped in understanding that. How do you personally, what do you track within the HRO business as your main indicator? I wonder if just the payslip volume, although that might be a slightly lagging indicator, but is that kind of the main barometer on the HRO side? Yes, it is. It is ACV. I would treat it as a better lead indicator because in the payslips you get deals of various sizes at hence at many price points coming in. Those things get very difficult to discern just if you look at payslips. Understood. Practically all the engagement on HRO side will obviously have a payslip component. Is that a fair assumption? Sorry, say again. All the engagements on the HRO side, they will always have a payslip component, right? Yeah. Purab, so what Ashish was alluding to was like this. If someone is taking only a pure payroll service, the per employee per month cost will be different to someone who is probably having a mix of payroll, compliance, HRMS and an HRMS versus no HRMS, right? Mm-hmm. That's the reason why, you know, pure payslips, while it's an indicator of growth, it may not necessarily be a one single metric for you to look at overall growth. I think that is what we were looking at. The absolute revenue that comes in is more important, you know, to monitor from a group perspective. Understood. Thank you. Which is why ACV is a better indicator for us. Understood. My next question is around understanding the product suite. I mean, I believe we have enterprise customers. Of course, there's a SaaS platform. I remember a SME platform being spoken about, and currently we are discussing SmartPay, I mean, we are beta testing it and we're about to launch. Can you help us break down what the product suite looks like and in terms of market segments? Is we have a separate one for SME and a separate one for enterprise? How have you structured it? What SmartPay in itself is a complete suite or, I mean, the complete part of the payslip suite or is there other components to payroll processing in SmartPay? Purab, historically, we have two different products. There is SmartHR and then there is SmartPay. Mm-hmm. SmartPay is the payroll engine and SmartHR is the everything other than payroll from an HR tech perspective. Mm-hmm. Both our customer base and our business is largely large enterprise centric. Mm-hmm. That doesn't change. Now we are launching two different products. Both of those are replacement for the two products that I just spoke of. We are rebuilding our payroll engine and that's what is in beta testing right now. The HRMS as well will come online in the next six to nine months or so. Both the new products are SaaS oriented, modern tech stacks, et cetera. These will replace the existing products. The idea is that it'll help us accelerate the revenue momentum. Of course, the automation levels are higher in both, so probably cost may also see some reductions. I see. My comment on the SME platform is that misplaced or did we have a plan that we changed now? Yeah. The HRMS product that I just spoke of, that we are building. Mm-hmm. It started off as an SME product, but we ran betas last year on that product. The economics for the micro and mid-size SMEs segments were not very encouraging. We pivoted the product into a complete enterprise solution. But the way we have architected this product, it can cater to customers of any size. That said, from a business perspective, given the results of the beta, we are unlikely in the near term to go into the micro and mid SME segment. One specific question on the cash side. I believe, when I compare the two balance sheets, the standalone versus the consolidated, I see that we have around INR 37 crore in cash and cash equivalents in India, which makes me think that the remaining is perhaps sitting in Manila, right? Perhaps INR 65 crore-INR 70 crore. Wanted to understand whether we continue to hold the cash there or do we plan to bring it back? I mean, are there CapEx plans in Manila? Some sense on the utilization of India versus Manila. Sure. Apart from INR 37 crore of cash, there's also mutual funds that's in India, probably around INR 50 crore. That's around INR 80 crore in total. There is, you know, our plan always is in Manila to try and bring the cash back into India to keep the cash in one place. Our CapEx requirement in Manila, it can very easily be funded in three months or six months of cash generation in Manila. Understood. Fundamentally, we plan to bring the cash from Manila back to Mumbai. Right. There is also some legal requirement there on retention of money and stuff like that in Manila itself, one of which requires us to bring cash at various points of time. We will follow that and try and bring money into India. Thank you. That covers my questions. Thank you so much. Thank you. Thank you. Due to time constraints, this is the last question. The line of Shrey Loonker from Motilal Oswal AMC. Please go ahead. Yeah. Hi, good morning. Compliments to Ashish and Raghu for a good quarter. So just a couple of questions. One was, you know, we plan to launch the SmartPay, SmartHR. Ashish, a question to you. Do you think, with the hindsight benefit, do you think we are late in launching this, or do you think the market remains still very prime for us to capturing market share, given how hotly contested and, you know, devoid of economic this sector may be at that level? Shrey, I think we are in time. While the market has been very hotly contested, but if you look at the players who came into the market over the last few years and all the VC funding funded players that came in, very few of them actually knew the intricacies of the business. We, in the last couple of years, have seen cycles where we have taken over some customers from some of those. The maturity levels with some of those players is not as high as what we have for the large enterprise market. Those folks perhaps may be more suited to the SME and the micro SME segments, which is where we don't intend to play at all. But in the large enterprise segment, I don't think we are late. Competition will come and go, and these are just business cycles. I don't see any systematic threat in the large enterprise market for us. Sure. Ashish, we've always struggled to kind of size this industry for ourselves. You know, given that, you know, for the next foreseeable future, we will remain a more large and a mid entity addressable opportunity. Is there anything that you can incrementally help? I know this is a question I've been asking for long now, but is there anything incremental that you can help us to size the penetration level, the nuance as to how the conversations are changing towards outsourcing, and what kind of feedbacks do you get? Why is it still such a small industry in a country which is digitally so otherwise advanced? Shrey, I'm not sure I can help you on today's call with sizing of the industry. Perhaps, we in the industry need a little more work to answer that question. I'm not sure I can give out any numbers on that yet. On the Indian market, look, the Indian market historically has been where payroll has been done in-house. All of that is beginning to change. There are new-to-the-industry customers that we tend to see now. It is not where we would want it to be, but it is beginning to happen. It's a slow turn. You know, how would we, you know? You've got to remember, for the MNC market, some of the market gets taken by the ERP players. That's non-payroll players, et cetera, come in. That's the reason why this industry has been smallish compared to where it should be. That will hopefully change over the times to come. Any light that you can throw, Ashish, on how the business nuance has changed, pre-COVID, post-COVID? How the conversations have changed? Is it still a CHRO who you talk to in an organization, or do you or does it or having a conversation with the CEO level has started happening given that HR has become, you know, it's high attrition, high churn, you know, high volatility in the business environment. What triggers outsourcing in your view? The conversations in industry. Nothing has changed in terms of the buyers compared to history. 50% of the buyers tend to be CHROs, another 50% tend to be the CFO organization. That itself has not changed. But I do see more demand for higher automation. I see more demand for higher employee experience and better UI, UX. And I also, compared to maybe three, four years ago, perhaps, it is very difficult to pinpoint this, but perhaps we may be seeing more new to the industry customers may be starting to come in. It is very difficult to say that with certainty. But those are the three things I would say. Sure. That's helpful. The other conversation that I joined in a bit late to the call, but you know, some part of the response which I'm just trying to put it all together is that at one point, at one instance you did mention that the SSG or the employee growth from your existing customers is slowing down to 2%-3%, and yet we see you clocking high ACV in the quarter. Could you just help us put this puzzle together? Because how much of this phenomenon of low SSG, is it only IT industry or is it across the industry that you're seeing? Because, you know, the data that we see from Naukri and, you know, the Monster Professional sometimes, we do not see such broad-based slowdown, except for the IT industry. Could you just give us some sense of how broad-based is this? If it is, you know, restricted to a few industries, then which are those industries and how much do they contribute to us? The headcount, you know, tempering of the headcount growth, we see it largely coming from the IT segment and logistics. Is that an industry phenomenon or is it a phenomenon restricted to a few customers of Allsec? I'm not very sure of that yet. It is too early to call it a trend just yet. We have to observe maybe another quarter or so and look at other data as well. I don't know if this is industry slowdown or slowdown of a few customers. It is right now logistics and IT, ITES, is where I see it. These two industry clusters would form what percentage of revenues for us on the HRO, pure HRO? Actually, I don't have that number right off the bat. We can get back to you on that. Sure. No problem. Once we are done with the launch pipeline of SmartPay and SmartHR, the free cash flow conversion should look up, right, given that now the CapEx requirement will be broadly bandwidth. Sometime post Q2 next year, the free cash flow conversions. I mean, ideally, how do you think about free cash flow conversions from a longer-term perspective, not from the next 12-month perspective? OCF, I'm presuming you're talking about OCF or you're talking about net cash addition. Free cash. Yeah. Incrementally will probably go up by maybe INR 1.5 crore-INR 2 crore because that's what we're currently burning on the product development. I don't see a major change in net cash over the next year and a half. Sure. Did I hear it right that on an incremental basis, you are aiming at 100% dividend payout of incremental cash flows? No, no. I'm saying I have a flexibility because currently my dividend policy says with the board. Management does not dictate that. Sure. Got it. Just the last question, Ashish. You know, there's a lot coming through in terms of transitions or, you know, converting of these ACVs, the migrations and these two product launches over the next six months. Just wanted to kind of understand, do you think, do you feel confident in the bandwidth and the capacity in the organization is there? Because, you know, just a lot happening in the next six to 12 months for us. Do you think from a bandwidth perspective, you feel confident that you have now a team which you probably or the army that you would desire? Yes. Yes, Shrey, I'm confident. I earlier spoke of actually pulling forward a lot of our HRO hiring. We've hired in anticipation of all of this growth coming in. I feel fairly confident. Great. This is helpful and all the best to you for the future. Thank you. Thanks, Shrey. Thank you. That was the last question. I now hand the conference over to Mr. Ashish Johri for closing comments. I'd like to thank all of you for your faith in the company and faith in the management and the time that you gave us today. These are obviously exciting times for Allsec. While we have done well in the last year and plus, we are also excited by what's to come next in both businesses, DBS and HRO, with a host of product launches in the next six months and new customers in DBS coming online. We are excited about where we are. Thank you so much for your time. Thanks, everyone. Take care. Thank you. On behalf of Anand Rathi Share and Stock Brokers, that concludes this conference. Thank you for joining us, and you may now disconnect your lines.