Pelatro Plc

Ladies and gentlemen, good day and welcome to Pellato Limited's H1 FY26 earnings conference call. As a reminder, all participants' line will be in the listen-only mode, and there will be an opportunity for you to ask questions after the management's remarks. If you need assistance during the conference, please signal the operator by pressing star, then zero on your touchtone telephone. Please note that this conference is being recorded. Before we begin, I would like to remind you that this conference call may contain forward-looking statements about the company, which are based on the beliefs, opinions, and expectations of the management as on date of this call. These statements do not guarantee future performance and involve risks and uncertainties that are difficult to predict. I would now like to hand over the call to Mr. Rishabh Rathore from Confideli Partners. Thank you and over to you, Rishabh.

Thank you. Good day, ladies and gentlemen. My name is Rishabh Rathore from Confide League Partners. I warmly welcome all the participants joining us today for H1FY26 Earnings Conference Call of Palatro Limited. We are with us Subhash Menon, Chairman and Managing Director, Sharad Hegde, Chief Financial Officer. I now invite Mr. Subhash Menon to share his opening remark on the company's performance for the first half of the financial year. Thank you and over to you, sir. Thank you, Rishabh.

Good afternoon, everybody. It is indeed a pleasure to have all of you join our call today. Thank you very much at the very beginning, and welcome to the call. The idea is to present our deck. The deck is on the website, as well as it's been sent to NSC. It's been uploaded in all the relevant places. So I'm sure you all would have had access to the deck. In case anyone has any doubt on the location still, please go to our website, financial.com, and go to the investor section, presentations, and you will find the latest deck there. That is FY2526, H1, investor presentation. I will now take you through the deck, and at the end of that, that will probably take about 10-odd minutes, and at the end of that, we will throw the floor open for questions. The initial section will be handled by me. I'll just share the financial highlights and some cash flow trend and general highlights about the business, and then I will hand over to my colleague to take you through the depth of, you know, the financial in-depth. Now, if you look at the deck, I mean, the first slide, of course, is a title slide, and the second slide is a safe harbor, and so we start with the third slide. As an introductory remark, I would like to share with you that the business is chugging along exactly in line with the expectation. We are quite excited with the possibilities, and we are quite happy with the way things have been turning out. whether it's with respect to new contracts being won or execution or product capabilities being built, appropriate recruitment happening to support all of that. So on all fronts, I think we are going very well, and we see very interesting times ahead both this year and in the coming years. Now, that is becoming obvious from the highlight, which is slide number three. That's where I am now. The highlights of the revenue and the highlights of the half year, which is basically the revenue, EBITDA, PATH, and EPS, as you will see, revenue went up by 58% as compared to H1 of last year. Now, as you all know, in our business, the sales cycle is very long. Implementation also takes time. Sales cycle is like 10 months plus. Implementation is 6 to 8 months or at least 5 months. So given all of that, you know, a quarter is actually a very short time in our business. It's not a long time at all. So the way to look at our business is to look at it from an annual perspective. That is why the year-on-year growth for any period, whether you get a quarter or a half year or the full year, the year-on-year growth is what you have to be focusing on and not so much the quarter, you know, Q1 to Q2, Q3 to Q4, I mean, sequential growth in the quarters. So that's why we are focused on the year-on-year growth here. So in H1, as compared to H1 of last year, our revenue grew 58%, our EBITDA grew 59%, and our PATS grew 63%. The exact numbers itself, my colleague Sharath will read out later, discuss later. The important aspect that I would like to focus on here is the non-linearity being established further or being demonstrated further by the business. As you can see, while revenue grew 58%, path grew 63%. So this will continue to happen, you know, as the business progresses. That's the non-linearity in the business that we are talking about as in any good product business. The next slide talks about the segmental financials. This is the first time we're giving segmental because segmental We just acquired SL a quarter ago, and the effect of that came into effect on 1st July, so it's just a quarter. So it's only for Q2. So the numbers that you're seeing here, although we talk about H1, the SL division number itself is only one quarter, Q2. That's being explained there. On the revenue front, we had a very, very good, we had excellent revenue on the CVM side, And we spoke about the kind of growth we had earlier and on EBITDA as well. So on the EBITDA side, we are now at 23.8% of EBITDA. This is up from the whole year last year of 23.1%. So EBITDA is also improving. Another very, very important aspect I would like to touch upon is the next slide, which is the cash flow trend. Now, you would have noticed that, you know, as the business has been growing, cash flow has been a bit slow in catching up. That's a reality. Now, that situation is changing. If you look at the last financial year, 24-25, the average quarterly cash flow situation was negative 4 crores. So every quarter, on an average, because we do have a little bit of, you know, if one particular large collection slips by two days, it goes from one quarter to the other quarter. So comparing quarters, once again, here as well, it's a bit difficult for us. So we are looking at an average quarterly number on the cash flow front. It was minus four in last year for the four quarters, minus four each quarter. Now for the last two quarters, it is minus one each quarter. So there's been a tremendous improvement. So the negative cash situation has come down by three quarters. It has come down to one quarter of what it was. And I'm absolutely confident that in the coming quarters, it will swing to the positive side. So the business in the initial years, we were slowly catching up. Profits were low. And, you know, revenue was rising. A lot of investments had to happen. Nonlinearity had not kicked in. Now all those elements are changing. We have a higher profit now, profitability now. Nonlinearity has happened. Revenue is growing very well. It's at a decent level. With all that, the cash flow situation is now starting to turn. So you will see a positive cash flow happening in the coming quarter, and certainly for the next year, we will have, for the full year, we will have positive, we'll have free cash flow from the business. So that's an extremely important aspect that I would like to stress upon. And the next slide that I would like to touch upon is with respect to the general highlights of the business. Now, this is a very, very important slide, as important as the numbers itself. This shows the predictability of the business, the possibilities of the business, and how we are seeing the very quality of the business, I would say. So if you look at that, you will see that as we speak, for the year 2025-2026, our contracted revenue is – what we have contracted is 100% of the target revenue, which means We have an internal target of what we would like to get as revenue for this financial year, 25-26. Whatever that number is, of that number, 100% is in the bag as we speak. All of that has been contracted. We only have to execute and recognize that revenue, which will happen as has happened in the past few quarters. At the end of quarter one, this was at 96%. It has improved further in this quarter. And now, so we are only halfway into the year. And at that point in time, we have full visibility for the full year. Even more interesting is the fact that for the next year, 26-27, we are at 59%. So 59% of all revenue that we are hoping to recognize in the next financial year, 26-27, is already contracted. Now, this number was 49% at the end of quarter one, so that has also improved. So this shows predictability in the business, stability in the business, and all of that. Now, moving to the average revenue per customer, this is a metric that we have been tracking. We were at 2.74 crores per customer at the end of quarter one. It's now 2.77. You will see this improving slowly, but there will be a regular improvement. And finally, we've been talking about the revenue CAGR expected over the next three years, 25% to 30% is what we are expecting. So that's with respect to general highlights. I will not talk about the product specifically because this is a repeat of the last quarter slide. If anybody needs any clarity on that, you can ask during the Q&A session. because for others it will be a replication. For the next two slides, the first one is on the CVM division, and the next one is on the SL division. So as you all know, we operate as two different divisions now, CVM and SL, consequent to the acquisition of the SL business. The next slide is about the revenue model. I would like to hand over at this juncture to my colleague, Sharath, who is the CFO. He will take you through the remaining slides.

Hello all. Good afternoon and welcome to our investor call. This is Sharad. So thanks, SM, for taking us through the slides so far. I would like to go through the revenue model that, I mean, the next slide which talks about the revenue model. So our revenue is predominantly divided into repeat revenue and one-time revenue. So repeat revenue being revenue from the existing customer, both contractor and non-contractor, and one-time revenue is predominantly the license and implementation fee that comes at the beginning of most of the license contracts. Now, the repeat revenue is further divided into recurring revenue and reoccurring revenue. So recurring revenue... are those revenues that are contracted, which are basically the – I mean, if certain customers go for the subscription model of our license, then the monthly fixed license subscription fee, the AMC that come along with license, the managed services – I mean, the managed services revenue that we get from customers who have opted for our services, and then the gain shares. So these are the recurring part. And then reoccurring is basically change request or, I mean, what we can call as customization. So the reoccurring part, although may not be contracted, are revenue that flow in from the existing customer because as the product evolves and as the requirement of these telecom operators evolves, they would need some kind of customization, some kind of additions, et cetera, to their already taken product, and change request is what supports that. So the next slide talks about the breakup between these different types of revenue. Basically, the recurring revenue, reoccurring revenue, and one-time revenue. So for the first half, we have had a recurring revenue of 57%, and 22% of reoccurring revenue, giving us a total repeat revenue of around 79%. So we have been telling this in the past as well that any, I mean, a total repeat revenue of anywhere above 75% is always a good trend in our business. So the balance 21% is from various license contracts and licenses that we have implemented for the hub. So that's about the next three slides. Then the next slide that talks about, I mean, that represents our growth strategy. So, Asim, would you like to take us through this? Yeah.

I mean, this is the same as the last time. Once again, we will skip this slide, and if anyone has a question, they can ask, and we'll go straight to the financial summary piece. Yeah. Okay. Thank you.

So, financial, as mentioned by Mr. Madan, the growth, I mean, the value has grown at 58% year-on-year. So, the total value that we achieved for the H1 was 60.74 crores at the group level. EBITDA grew by 59% to 13.81 crores. And PAC that we have achieved is 8.21 crores, which grew at 63% year-on-year. The corresponding numbers for the last, I mean, H1 of FY25 were 8.67 crore EBITDA and 5 crore PAC. So, there is a clear growth trend here on the profitability. So, as mentioned again, the H1 revenue, H1 numbers also reflect our new division, that is, H1 division that we acquired effective 1st July 2025. A total of 6.91 crore of the total revenue was contributed by H-10, H-10 division, so which accounted to slightly more than 11% of the total revenue. And the EBITDA that the H-10 division achieved was 1.02 crores, which was around 50% of the revenue from that division. CBM division alone gave us a revenue of 53.8 crore with an EBITDA of 23.8%. The EPS stood at 7.83 per share, as against 6.55 during the first half of last year. So, these are a few major highlights of the financial.

So, and... Are you carrying anything else on the balance sheet?

Yeah. So, apart from this, on the balance sheet side, the trade receivables stood at 33.55 crores at the end of the first half, representing a DS of 100 days, and the cash stood at 20.7 crores. Yes, over to you.

Okay. All right. So before we throw the floor open to questions, I would like to kind of, you know, explain a little bit further about the business. As you all know, we have – Products of our own, we have, you know, today we have got multiple products because of the acquisition as well in different sectors. Sectors within the telecom space itself, apart from our contextual customer engagement hub, which has campaign management and loyalty management, we have now added e-top up and stuff like that. So on all these fronts, what we have been doing and which is very, very crucial for our growth is to come up with new versions. So for the acquired business, now we have planned launches of new versions for all the products acquired through the next three, four months. So by March of 2026, we would have launched brand new versions for all the products we acquired in July. So that's a very important step for us because this enables us to step up with respect to capabilities of the product. and also to retain our customers further, and finally to cross-sell and up-sell to our customers, thereby resulting in more revenue. So, as I stated initially, we are firing on all engines, and we have been launching new versions, we have been launching new capabilities, and we'll continue to do that, and we are We're going deeper and deeper into each customer. Now, that's a very important qualitative aspect. As it is, our products are viewed as tier one products by our customers. So, they're very critical products. And when we go very deep into our customers with multiple products and multiple capabilities and services, then we become even more critical. Now, this has been... This has been increasing or the relationship has been deepening in that sense. So that's another good news from our side. And I'm not surprised with this because of the capabilities of the platform. I'm only happy to report that it is happening as expected and we'll continue to do that. So to sum up, we are very, very happy with the performance of the past six months. We believe that things will be similar or better in the coming quarters, and we'll continue to report on a quarterly basis. Although, as I said initially, you should look at our business slightly from a long-ish term perspective. So really on an annual basis, quarter-on-quarter growth, one year to another year, or half year to another half year, instead of just sequential growth. So with that, I would like to throw the floor open to questions. I'm sure there are some out there, so over to you, Kishore.

Thank you, sir. Ladies and gentlemen, we will now begin the question and answer session. If you have a question, please press star and 1 on the telephone keypad and wait for your turn to ask the question. If you would like to withdraw your request, you may do so by pressing star and 1 again.

Let us wait a moment until the question queue assembles. The first question comes from Mr. Jay Shah from Shah Investments.

Please go ahead, sir. Yeah. Hi. So I have a few questions. So like this half year witnessed a very solid revenue growth. So from your perspective, which are the strongest business verticals and anything that surprised you in a good way this time?

The strongest, I mean, I can't say strongest. There are only two divisions. One is CVM and one is SL. So the stronger one definitely is CVM because that has been our core business for several years. We've been building that. You will see SL division also growing very well in the coming years, but that will take some time for us to be. As I told you initially, we are now launching new versions of the product. There was a lot of work to be done on that division, and we are going through all of that. And you will see that happening on that side, on the SS side as well, that growth happening in the future. But currently, it is a CBM division. Surprises, I mean, if you are asking about negative surprises, none whatsoever. Posse was, as I told you, I'm not surprised with the growth.

I mean, this is in line with what we were expecting anyway. Okay. And...

On the contracting visibility you spoke about earlier, with almost all of FY26 already locked in, how does that influence your internal planning for hiring and delivery capacity?

We are not planning for hiring and delivery. Are you asking whether we have adequate delivery capacity to complete the year properly? Yes. Yeah, of course. See, as I told you, our implementation cycle is at least five months, generally six to eight months. So if we already don't have everything in place today, we can't execute by March 26th anyway. So our business is a very long-term kind of business. You need to plan for the long term. So when I say it's all contracted for this year, I also mean we are absolutely geared up and prepared to deliver and execute and recognize all that revenue as well.

Fair enough.

And on the SL thing, like, are we already, have we started to see any cross-sell conversations opening up because of this product suite? Any early examples that you can share?

I can't share the names of the customers, but the answer is yes. In one customer, they have already selected the SL product, which is already a customer on the CVM site. We are waiting for the contract negotiations to close. In the second one, they have shortlisted us. Again, it's a CBM customer, and they have shortlisted us. In the third one, also shortlisted. So, yes, there are three opportunities we are working on as we speak.

And how is this particular division expected to contribute in revenue and capabilities?

We have not declared the different revenue numbers of the divisions. It definitely might be much smaller than the CBM side, because when we acquired also, it was small, right? I mean, we acquired a business with about 28 to 30 crores kind of revenue number annually. So, it will be, you know, much smaller than CBM, but I'm not able to share the future numbers at this point in time, but it will be smaller.

Okay. Yeah, that's it from my side.

Thank you.

Thank you, sir. Ladies and gentlemen, if you have any questions, please press star and one on the telephone keypad. I repeat, if you have any questions, please press star and one on the telephone keypad.

The second question comes from Mr. Deepak Poddar from Sapphire Capital. Please go ahead, sir. Hello. Am I audible, sir? Yes. You are available now.

Okay, okay, great. Thank you very much for this opportunity, sir. So just a few things I wanted to ask. Now, in the presentation, we have mentioned a CAGR of 25%, 30% over the next three years. So it includes all sorts of inorganic contribution as well, or this 25%, 30% only organic we are talking about?

This is organic because we can't really be planning for inorganic.

Okay. So inorganic, whatever comes would be over and above this, right?

Yes. Whatever comes would be over and above this, but then nothing may come also, okay, because we may not acquire anything in the next three years. That's also possible.

Yes. Fair point. But anyways, this year at least you have a still contribution to come, right? Yes. So this quarter we saw a full three months of consolidation, the 7 crores contribution on revenue that you mentioned?

Yes. Yes. That 7 crores, yes, that's the quarterly number from Estill division, 6.91.

Okay, okay, understood. So I was just trying to understand, so what has changed on a quarter-on-quarter basis? I mean, last quarter versus this quarter, this 7 crores has got added, but your EBITDA is same, whereas your Estill EBITDA was around 1 crores. So I'm just not able to understand, so where is this, I mean, why there was a decline in margins for us?

So if you – I will let, you know, Sharath also answer. There is no decline in margin on the CBM side. If you're looking at consolidated, yes, because SL division margin is not as high as the CBM division. So the weighted average is coming down because of the weighted average thing. Sharath, anything else? Is that what it is?

Yeah, yeah, that's what it is. So the margin – the decline in margin is mainly due to the weighted average decline.

Okay. But on the absolute number also, I mean, from first quarter to this quarter, I think from 27 crores. No, hold on.

You need to understand one thing as I explained earlier. First quarter to second quarter is not a comparison that really applies to the nature of this business. Things can swing here and there. You should really look at annual growth. So quarter one of last year to quarter one of this year. I mean, H1 of last year to H1 of this year. This is the real comparison for our business because, as I told you, our implementation cycle is some six months or eight months. Our contracting cycle, I mean, sales cycle is like 10 plus months. So in a business which has got long sales and implementation cycle, consequently long revenue recognition cycle as well, just one milestone going from 30th September to 1st October could make all the difference between the two quarters. Okay, I got it. So, sequential, when you say quarter on quarter, if you're comparing last year to this year, fine, we can talk about that. But sequential, Q1 to Q2 of the same year, Q2 to Q3 of the same year, you should not compare in a business. That is a wrong metric to follow. Okay, understood, understood.

Fair point. So, on an annual basis, what's the margins we are looking at on an annual basis?

Sharath?

Yeah. So, on an annual basis, I mean, we expect the margins to improve further from H1. So, I mean, I would say EBITDA somewhere around 24% and at somewhere around 14%.

Okay. So, when we say EBITDA of 24%, that excludes other income? I mean, it will be including other. Including other income. Okay. And 14% would be the PAC. And this we are talking for the entire year, right? Not for the second half. No, no. For the entire year. For the entire year. Okay. And any more inorganic plan we have? I mean, are we scouting for more opportunities there?

We will keep looking for opportunities, but we will be extremely careful about an acquisition. We have got very strict guardrails or guidelines which we would follow. So, yes, our eyes and ears are always open. We are always looking out for opportunities, but nothing concrete at this point in time.

Okay, understood. And a couple of new products also we were planning, right, apart from this campaign management and loyalty management. So, can you throw some more light? So, at what stage is it? I mean, something on the line of data monetization or customer data platform. Okay.

Those products have already been launched. On the CVM side, now we have got five products and we don't intend to increase that in the near future. On the SL side, we have three products and there again, our plan is to further expand those products instead of adding new products. So, overall, we have got eight products at this point in time.

So, five products on the CVM side and three products on the SL side. Okay, understood. And how is the traction? I mean, something you can, how is the traction or how is the feedback on this new product from the customer side?

It's pretty decent. I mean, it's good. As I told you, the impact is very long, so it always takes some time. But from what we can see, there are great possibilities for some of these new products as well.

Okay. And just a few more things from my side. How many telcos right now we would be having as our customers?

We have around 45 plus telcos at this point in time as customers across the two divisions.

I mean, including the SL, right?

SL1, yeah. Lesser number on the SL side, many more on the CBF side.

Okay, okay, okay. I understood. Okay, I think that would be it from my side. I would like to wish you all the very best. Thank you so much.

Thank you.

Thank you, sir. Ladies and gentlemen, if you have any questions, please press star and 1 on the telephone keypad. The next question comes from Mr. Shubham Jain, an individual investor. Please go ahead, sir.

Hi, sir. Congratulations on a good set of numbers. I have two questions, sir. So the first question is that in the last call, you had mentioned that right now you're not planning to diversify into other sectors like banking and all. So I just wanted to understand, is the SAM still the same or are we also... now thinking of diversifying or maybe selling to other sectors as well?

It stays the same and that would be the case for the near future at least.

Got it. Okay, sure. And so the second question is that basically I just wanted some commentary on, let's say today, I mean, if we have to, let's say scale our business from 100 CR revenue to 500 CR revenue, what is the part towards it? Is it just about onboarding new clients and cross-selling the Excel and our primary product, or is it something else?

Fundamentally, that's what it is, winning more customers, because from a product standpoint, I think we've got adequate products now to get to much higher revenue. I don't know about 500 crores, but, you know, significantly higher than where we are today. We have got adequate products. So it's really about selling to more customers and, you know, winning their business and then scaling up.

Got it. Thank you, sir. That's it.

You're welcome.

Thank you, sir. Ladies and gentlemen, if you have any questions, please press star and 1 on your telephone keypad. The next question comes from Mr. Rahul Singhania, an individual investor.

Please go ahead, sir. Yes, sir. So, I had a couple of questions.

Sir, on margins, are the margins steady around the same range? So, from a practical standpoint, do you see any levers that could improve margins in the future, especially short term?

I will address that from a qualitative standpoint, yes, because non-linearity is increasing. It's getting better. So with that, yes, the margins will improve.

And so connected to that, as more revenue comes from Singapore, does it have any positive impact on margin or tax efficiencies?

Now, you see that what comes from Singapore, what is contracted by India, these are all based on the conveniences of the customers, what they prefer, and what makes sense and all that. You should really be focusing on consolidated here and not so much the standalone because, as I said initially, whether we contract from Singapore or contract from India is just based on whatever is convenient for the customer.

Okay.

And we will, of course, try to be as tax-efficient as possible, no doubt about it. We'll try to improve the tax efficiency. But the guiding factor here really is what the customer prefers. And also one very important thing, what the withholding tax is between Singapore and that customer's country or between India and the customer's country.

Which region do you feel are showing the strongest order momentum right now? Any idea that is coming out?

Yeah, it is from a number of customers' perspective, it is Middle East and Africa. But when you look at per customer revenue, the higher thing is Asia because Asian customers are larger. Larger base. Asian customers are larger. I mean, they've got more subscribers and they're larger telcos.

And in places like where we already have strong presence, like Asia, Africa, etc., is there still enough room to expand within existing clients?

Plenty. Because if you look at Africa as a region, they've got about 50 countries, they've got about 150 telcos. So, if you take Middle East, that's probably another 30-35 telcos. So it's a large market. I mean, we will not reach a saturation point anywhere in the near time, in the near future.

And so lastly, with the combined Filatro plus STL offering now being broader, how do you feel about our growth plan? Do you see any areas where caution is warranted?

We are a very cautious company. This is why I stated earlier that, you know, when it comes to inorganic growth, we'll be extremely careful. And the most important thing in our business is to ensure that the customers are happy. So if you ask me to choose between winning a new customer and keeping the existing one happy, I will choose the latter. I'm not saying I will sacrifice the first or something like that because winning a new customer is Sorry, keeping an existing customer is actually the path to winning a new customer. So we're very, very cautious about our support and service to ensure that the customers are happy. So this is something that we'll be extremely careful about.

Thank you, sir. That's it from my side. Okay, welcome. Thank you.

Thank you, sir. Ladies and gentlemen, if you have any questions, please press star and 1 on the telephone keypad. I repeat, if you have any questions, please press star and 1 on the telephone keypad. The next question comes from Mr. Rupesh Tatia from Long Equity Partners. Please go ahead, sir.

Hello, sir. Thank you for the opportunity and congratulations on good set of numbers. I am, I think, very new to the company, so some of my questions are very basic. So, first question is, sir, only the telcos are your customer or the customers of telcos are also your customers?

Only the telcos.

Okay. Okay. And whatever business improvement, customer experience improvement, lead management, loyalty management, all these are for telco customers? Or is it like the telco is providing some solution or services to, I don't know, a retailer or somebody, and then through you, you also serve the retailer? Or this is just related to telco products like, you know, recharges and postpaid and some of those stuff. It's just not clear to me.

Okay, that's a good question. So first and foremost, we serve the telcos to help them serve their subscribers, understand their subscribers better, and engage deeply with their subscribers to sell their products more, cross-sell, up-sell, all that. We also have this product called data monetization, which helps the telcos to serve their B2B customers. For example, if a telco has Nike as a customer and Nike wants to market Nike's products, say some shoes or whatever, to a target segment which is within the subscribers of this particular telco, the telco will, our platform, the data monetization platform, will be used by the telco to provide the capability to Nike for them to send their campaigns So those are not telco products. Those are shoes or whatever else or, you know, apparel or sports gear, sports wear, whatever, to the subscribers of the telco. When you look at loyalty management, we help, that's another product of ours, the telcos do provide loyalty as a service. So if somebody, you know, if a retail chain wants to run a loyalty program, the telco can help them to set up and run a loyalty program using our platform. So We do have, and lastly, in our campaign management platform, we have a B2B module, B2B, you know, offering. And there, the telco helps the business customer of theirs. For example, for word of an idea, if Air India is a customer, they will help Air India with their own connections and usage and variety of things. So, Our solutions are used by Telco for their own marketing purposes, and they can use it to help other customers of theirs, businesses, naturally businesses, not individuals, to run their campaigns or their loyalty programs, et cetera. So it's both in that sense.

So now, I mean, whatever revenue you have in FY25 or first half of FY26, how much is, let's say, telco native revenue and how much is, you know, this sort of, I don't know, CTAS, maybe this, it looks like a CTAS to me, this CTAS revenue.

No, we can't differentiate that because all our revenues come from telco and telco will get some revenue from their customers. That's fine. But that doesn't flow through to us. We serve the telcos. We charge them X amount. They charge Y amount to their customers, whatever it is. I don't know. So that's not transparent to us, and I'm not able to share. I can't share that information. So we don't get a – there's no pass-through revenue from their customer to us. There's only our contract with the telco, and telco gives us whatever.

So there is no sort of like per transaction because I saw you mentioned A2P also in one of your slides. So there is no like a per SMS revenue or per transaction revenue. It's not like that. You sell software.

No, we don't get into that kind of – we don't get into that. We do have recurring revenue, which is modeled differently.

Okay, okay. So, I mean, the question, sorry, there are a lot of CPaaS companies in the market, right?

Yeah.

So, then you mentioned Nike. So, why would Nike choose, for example, a Telco product versus a CPaaS product to run a campaign?

What is it that we... Nike is... The CPaaS is also provided by the Telco to Nike or somebody like that. Nike or maybe some other platform, some other somebody else Nike would go to a telco because of what the telco is offering them by way of capabilities. Now, when they use our platform, somebody like a Nike, they can do very targeted campaigning. They can do extremely focused campaigning on, let's say Nike has men's shoes for men between 18 and 25. They can go straight to that kind of a target segment because our platform enables them to target like that. They can use the AI ML capabilities of our platform to target. That's why.

Okay, okay. And in your, I mean, so this selection of customer is some sort of algorithm, but how about the communication channels and the customer journeys? I mean, do you support WhatsApp? Do you support text messages?

We support all of that.

Okay, okay. I see. It's interesting. So another question, sir, is you have 45 telcos, and I think per customer revenue is around 2.75 crore. And what you are saying is there is no sort of proper transaction-based model for So then it's very difficult, right, to take this 2.75 number to, let's say, 5 crore in 2-3 years or 10 crore in 2-3 years with existing products.

See, our growth will come from two different angles. One is, of course, this number growing. I can't comment on whether it will grow to 5 years in the next 3 years or 5 years. That's difficult to comment on that. But there is another second thing, new customers coming in. So the growth will be a function of these two. So whatever growth we have committed, that will happen as a function of these two things.

Okay, okay. And who would be your, you know, sort of like a large competitor, someone you look up to that if we become like this, that will be like a good achievement from me?

So I don't want to be commenting on whom we are looking up to and all that. I'll just state as to who are out there. So there are companies, there are two types of companies here whom we compete with. One are smaller companies like, I mean, there are organizations like Flytex and Comviva. These are smaller companies whom we compete with. Then the large ones we compete with are the likes of Pega and Adobe and Salesforce. So those two are our competitor sets. Now, we have got our own advantages or USPs as compared to these two sets. I'm not going into that. But these are the two sets that we compete with.

Okay.

Okay. Okay, sir. Okay. I'll come back in the team. Thank you for answering my question.

Thank you. Thank you, sir. Ladies and gentlemen, if you have any questions, please press star and 1 on the telephone keypad. We have a follow-up question from Sudipat Padar from Staffay Capital. Please go ahead, sir.

Yeah, am I audible? Yes, you are. Okay, yeah. So just one more clarification on the tax part. I mean, why our tax rate is lower and how should one look at going forward?

Sharath?

Yeah, so the tax rate is lower mainly on the account that the Singapore taxes are – the effective rates in Singapore are lower than that of India. That is one. And further, on the Singapore side, like, we do have some – I mean, like, there are ITs that are housed in Singapore which get enhanced tax deductions, so which effectively reduces the taxes further. So, that is actually the reason for overall lower tax, I mean, lower effective tax rate. And, I mean, so, like, as I mentioned, this is enhanced deduction. I mean, that's not a permanent one. So, as long as that exhausts, there are certain advantages. And beyond that, the taxes might get evened out.

Okay. So, how should we look at effective tax rate for this year and next year?

So, I mean, the effective tax rate could be in the range of 22% for the current year. So, next year, I think it's a bit too early to comment on.

Okay. This year, 22%. But in the first term, I think our effective tax rate is not even 5-10%, right? It's in that range, 5-10%.

No, I mean, so, during first half, like, we do have certain accruals as well, right? So once the HCL part came in, the gratuity and even cash met accruals that we do regularly, these are not paid out. So there will be deferred tax assets that are created out of it, which are, I mean, counter-effecting the cash taxes. So that is where the overall effective tax rate is slightly lower for the first half, but we should be looking at it now.

For the entire year, 22% is a good number to work with, right? Yeah, yeah, sure. Okay. Okay, okay. That will do it from my side.

Thank you very much. Thank you, sir. Ladies and gentlemen, if you have any questions, please press star and 1 on the telephone keypad. I repeat, if you have any questions, please press star and 1 on the telephone keypad. We have a follow-up question from Sushubham Jain, an individual investor. Please go ahead, sir.

Sir, so now that we have grown our sales by 58% in the H1, is it a fair assumption to say that the guidance that we have given is still on a conservative side and we might actually end up with a higher revenue on a year-only basis?

We have not given any guidance for the year. The only indication we gave was 25-30% CAGR for the next three years.

Yeah, so basically what I'm saying is that that means that basically every year we are at least saying that we will be able to grow by 30%, but I'm just saying that because H1 itself is, you know.

Yeah, so naturally this year it will be higher than that 25 is 30%. Got it. Should be. Because on H1 we are already much higher, right? Exactly, exactly. Yeah.

And can we assume the same thing for the PAT as well? Or like there can be other expenses that can come in?

We have not made any statement about PAT. So I would not like to comment about that at this point in time.

Sure, sure. And so the second question is, can you also give a bit of understanding on the current pipeline? Maybe you cannot tell the name for like how many customers we are in touch with and what is the expected timeline? potential percentage of conversion?

We have a very healthy pipeline, and at any given point in time, we have about 30-odd opportunities in the pipeline. And typically, our conversion is about one-third. The cycle itself is about 10 months plus.

Got it. Got it. And, sir, in an ideal state, let's say if there is any one customer to who we can sell all the products, what is the maximum revenue that we can generate on a yearly basis from one customer?

It's extremely difficult to comment on that. It depends upon at what price you sell to them and all that. But if you're talking about all eight products being sold to the same customer, we are probably talking about – I don't know, maybe about 7, 8 crores at least per year from that customer, at least, if not more. Because there are some customers from whom we're getting higher than this at this point in time, even though we have not sold all eight, okay? So it's a very, very difficult question. So even 7, 8 crores is on the lower side. I would say probably a million plus easily, at least, at least.

I was trying to make a sense of 40 customers who are able to cross-sell at some point of time. Everybody buys everything.

What will the number be? You should multiply that 40 with at least like 8 or 9.

Got it. That's it for my answer. Thank you.

Thank you. Ladies and gentlemen, if you have any questions, please press star and 1 on your telephone keypad. We have a question from Mr. Siddharth Murakia from SMTPL. Please go ahead, sir.

I wanted to check. So you've mentioned that 100% of the target revenue has been contracted. Can you please share any numbers on what that target revenue is?

That would be a guidance, and we're not sharing that. You'll have to do your own projection based on what we have been achieving. I'm sorry for that.

And you would say that those target revenues factor in 25 to 30 percent CAGR over the next three years? Yeah. Or would that be a conservative?

At least 25 to 30 percent, yes.

Okay, but the target could be higher than that.

Yeah, I mean, target always has to be higher than what is committed, right?

Okay. And any other key factors that you would like us to consider in when we're modeling for what to build up that target?

Honestly, I don't know exactly what all factors you consider for modeling, so I don't know which other factor you should. You should really be looking at potential new wins, number of customers. So you look at our track record over the past few years, and maybe you can take an average and apply. You already have this 25% to 30% from us as a potential revenue growth number. you also are seeing some growth in the average revenue per customer. So you can look at that over the past few quarters or past one year or something and then factor that in as well. What else can I tell you? I think that's about it at this point in time.

Okay, so average revenue per customer should remain kind of, Similar, the customer growth should be linear, and we can extrapolate that forward?

The customer growth you can take as linear, but the average revenue per customer will not remain the same.

It will grow.

Okay.

You look at the growth of the average revenue per customer over the past one year, and that will probably give you some indications.

Okay. Got it. Thank you. You're welcome.

Thank you so much, sir. Ladies and gentlemen, if you have any questions, please press star and 1 on the telephone keypad. The next question comes from Mr. Majid from PinpointX Capital. Please go ahead, sir.

Am I audible?

Yes, you are.

Yes, sir. Thank you for the opportunity. I just want to understand, as you are saying, in next year, you are looking to grow at a 25% stage, right?

25 to 30, we have said.

Yes. So, in that case, if you want to grow at 25 to 30%, your revenue is going to double by that. So, if that is the case, and you are also saying that you are also going to increase your average revenue per user from 2.7 maybe to 5%. So majority growth, is it going to only come from the average revenue per user or increasing your customers?

No, I mean, 2.5 to 5. I mean, somebody commented about 5. We have not quite commented on that. So that's one aspect. The next aspect is that the 25 to 30% growth is, you know, is a number that we certainly achieved. But we're not saying that, you know, you may want to factor in a higher number there possibly. There would be customer growth as well. So it's going to be a combination of customer growth and average revenue per customer growth. But I don't think we have any way, we have said anyway that in three years, 2.5 will be 5%.

But do you think directionally in coming in the year, but for the mid-term, you're going for 5%.

No, no, no, no. We have not said 5. Somebody asked in the call earlier whether we will be at 5 or something like that. So, what I indicated was from last year to this year, please look at the growth in average revenue per customer. It went from 2.5 to 2.77 now.

So, just want to understand which factor was like out of that 25-30% growth,

Maybe it will be driven by average revenue per customer or it will be more on customer addition group?

Yeah, the bigger factor would be number of customers. Okay.

And sir, you have also done an acquisition of another company. It's slightly pulling down your margins, but how you are looking that to scale up in terms of margins and everything?

On the margin front, we will see that improving to the CGM levels in near term, in short term.

So it can improve to what level, sir? To the CGM division level, I said.

Okay, okay. Yeah. Fine.

So right now, the division is a drag. Right now, the division is a drag because of the lower margin, lower profitability. That will change positively next year.

Okay. Sir, finally, I have just one more question. Sir, at this time, you were able to have a good receivable date. You were able to reduce to around 36 days for H1S5 26. Would that be maintained for the end of this year or the receivable date would increase?

No, no, no. Sharath, we need to comment on the receivable date because people are looking at the phase of the balance sheet. Please explain.

Yeah. So, we need to, I mean, when we say receivable, there are both... built as well as contracted receivables. By contracted, I mean like there are certain unbuilt revenues which we have already like delivered, but we are yet to build. So, as per the NDIS reporting, the unbuilt receivables will be sitting in other revenue as contract receivables. No, no, no, not other revenue. Sorry, sorry. Other current assets, my mistake. So, I meant to say current assets. It will be seen in current assets as contract receivables. Now, in the investment that we have presented, the AR of 33 crores that we have mentioned there, we have included both built revenue as well as built receivable as well as contracted receivable in there. So, you will have to take that, and when you take that and do an analyzed DSO, you will actually arrive at 100 days. So 100 days is the DSO that we have achieved for the first half. And we have always been saying that in our kind of business, like a DSO of 100 to 120 is always a healthy one. So we are within that healthy range.

Perfect. Thank you, sir.

Thank you so much. Thank you so much. Due to time constraints, that will be the last question for the day. Now I hand over the floor to the management for the closing comments.

Thank you very much. Once again, thanks, everybody, for your time and for your questions and for your interest. Really appreciate that. I would like to have already stated all these things, but I would like to sum up by stating them once again that the business is chugging along very well. We are winning more customers as expected, and that will continue to be the case. You will see exciting growth in the years to come with respect to revenue. And we expect nonlinearity to continue in the business, which means profitability also will grow in the coming years. That is the nature, that's the very nature of a good product business, and that will be demonstrated by us every quarter. So with all that, I believe we have some very interesting times ahead and look forward to your support in the years to come.

Thank you, Sam.

Thank you very much.

Ladies and gentlemen, this concludes your conference for today. Thank you for your participation and for using Dur Sabah's conference call service. You may disconnect your lines now. Thank you and have a pleasant day.

Thank you. Bye.