Expleo Solutions Ltd (NSE: EXPLEOSOL) Q4 2026 Earnings Call dated May. 14, 2026
Corporate Participants:
Asha Gupta — Investor Relations
Phani Tangirala — Managing Director & Chief Executive Officer
Periakaruppan Palaniappan — Chief Financial Officer
Ralph Kellison — Chairperson and Non Executive Director
Analysts:
Disha — Analyst
Vaibhav Chechani — Analyst
Sankaranarayanan — Analyst
Gurdeep Singh — Analyst
Salman Shah — Analyst
Anoop Sharma — Analyst
Navdeep — Analyst
Hardik Jain — Analyst
Presentation:
Operator
Ladies and gentlemen, good day and welcome to Expleo Solutions Limited Q4FY26 earnings conference call. As a reminder, all participant lines will be in the listen only mode and there will be an opportunity for you to ask questions after the presentation concludes. Should you need assistance during this conference call, please signal an operator by pressing Star then zero on your touch tone phone. Please note that this conference is being recorded. I now hand the conference over to Ms. Asha Gupta from E&Y LLP Investor Relations.
Thank you. And over to you Ma’. Am.
Asha Gupta — Investor Relations
Thank you Neera. Good morning to all the participants in the call. Welcome to the Q4FY26 earnings call of Explore Solutions Ltd. The results and press release have already been mailed to you and you can also see the same on the company’s website. In case anyone does not have the copy of press release and presentation, please do write to us and we will be happy to share with you. Representing the management Today we have Mr. Ralph Kellison, Chairperson and Non Executive Director, Mr. Fanny Tangirala, Managing Director and CEO Mr.P. Palani Appan, CFO whom we will be referring to as Mani Pani will start the call with a brief overview of the quarter and year gone by which will be followed by Mani who will be giving you the brief update on the financials. After that we will open the floor for Q and A session.
As usual. I would like to remind you that anything mentioned in the call which gives any outlook for the future or which can be construed as forward looking statement must be viewed in conjunction with the risk and uncertainties that we face. This risk and uncertainties are included but not limited to what we have mentioned in the prospectus file with SEBI and subsequent annual reports which you can find on our website. Having said that, I will now hand over the floor to Mr. Fanny. Over to you Fanny.
Phani Tangirala — Managing Director & Chief Executive Officer
Thanks a lot Asha and a very good morning to all and thank you for joining this call and continuing your trust on xplio. So let me start by informing that we have done a good quarter and delivered a good result in Q4 FY26 with income up by 14.8% year on year, 2.5% quarter on quarter and 15.5 on the EBITDA. I would say this growth is primarily from various factors. I would categorize them into four major categories. The good news is the Europe started to lead us from the front. There has been a significant moment with their own European cost pressures.
There is significant work flowing in and that resulted in Europe leading it from the front, which is the fastest growing region for xplear. So that is one from a sector viewpoint. We have banking, financial services and insurance on the technology side and aerospace defense on the engineering side have performed extremely well. Primarily this is an outcome of BFSI being one of the pioneers in adopting technology faster than anyone else. And we being one of the very few who have embraced the AI way in 2023 and started doing PoCs in 2024, we started seeing that.
And I would say today that there is not even a single financial services proposal that goes out without AI element into it. So they are very fast in terms of adopting technology and aerospace defense. This is something which I have been saying quarter on quarter and in our earnings call even before that, probably attributing to the global scenario, there has been a high spend on defense and Aero has been doing very well. And we have a very positive outlook even for the upcoming year as well. And the third area where I see things attributing to the growth is our internal revenue is ticking up, which is extremely good news. And we foresee this trend to continue.
Given the European situation. What we see and the last driving factor obviously is our forex gains. I mean, that has decent impact on the growth. So these are the four major areas which have propelled our growth. And we will see to that this is at least maintained in the quarters to come. Having said that, let me also talk about the pressures, the pressures on margin, pressures on revenue will continue to be there. I mean, this is not something only to explore.
This is a global trend that we are observing. The total ticket size is shrinking with advent of artificial intelligence and its services. The ticket size is coming and the engagements are become shorter. So the only way we want to overcome this is by increasing the volume rather than going after big tickets items which may not be the way to go in future. This continues, but the other part of it is we are in a juncture at this point of time where we have to start cannibalizing our own revenue by infusion of artificial intelligence. This is not a favor anymore. There is a demand.
Most of the customers are expecting any new proposal, any new work. To have a significant element of AI may not be so much in the financials. In the engineering services where the AI adoption is very less. But on the technology side, this is significant. Where our bulk of business is and more so, as I told in financial services, the adoption is much more higher. So literally no financial services proposal today goes out without having any element. So that results in the new business ticket Size to be smaller and also for the existing business.
The renewals will have a significant element of AI, thereby cannibalizing a bit of our revenue to stay relevant. We don’t do somebody else will offer them to do so. We are proactively doing that. This may have some pressure initially, but the success of it will only see a multiplication factor applied thereafter. So from that point of view we stand a clear advantage. This is what something which I’ve been saying every earning calls as well that we have an advantage of early bird. We have put the XPLIO AI platform much ready last year and this year we can proudly say that 15% of our revenues are influenced by AI.
So that puts us in a place where we are leading it. But I mean this is where the sustenance matters. We have to continue to be invested. We are improvising explain AI on a constant basis with the R and D going into that because the others will catch up very very soon. So having said that, let me also spend some time on the 20th the upcoming year. I would say that this strategy we have divided into four major areas. Our four major focus areas are levers. So this year our heavy focus will be to new logo acquisition compared to the last year where we have taken a strategic call of spending more time on existing accounts.
But that helped us definitely that helped us increasing the stickiness and others. But as I talked about adoption of AI will reduce the revenues. So there’s only a way is to go and get new new logos. So from that point of view we have this year started a partner led growth initiative. An aggressive partner network has been created. A partner management team has been reinforced and identified more than 15 partners whom we will go and do a joint go to market strategy across the regions. This covers all the regions and already we started seeing the benefits of it in the the initial years.
But these are primarily going towards the upcoming quarters and months where we leverage heavily on the partner led growth. As I also spoke to you earlier, the new geography the Middle east the last three years has shown a significant gain probably this year it has started showing some resistance in the initial part of the year. But I don’t think so that will continue. Once the war situation is over, that will settle. But in that context we have done significant analysis on the market of Egypt and we have made that as our strategic go to country for the upcoming year.
We have done some investments in making the market know about xplio’s presence in Cairo. We have done events, we have done CXO conferences and we are Very, very bullish about Egyptian market. That is our first strategy where to increase the new business. And the second one is we have looked at our top 20 accounts, our key accounts and we are completely putting the focus on moving all the 20 accounts onto Explio AI platform. Today out of these 20 accounts, at least five accounts are in one way or other adopted Xpo AI.
AI. Our AI capability. And the idea is to expand this to all the 20. So that leaves 60% of our revenue will be in one way or other influenced by AI. The third is we don’t want to spread too thin on the sectors in our investments. So we have identified the two sectors as our primary focus area within bfsi. We have taken payments as one thing which is totally getting revolutionized across the globe. The payment industry is meeting regulatory and compliance deadlines in 2028 in US and many countries in Europe and adoption of a UPI kind in Middle east and North African market is extremely becoming popular.
So with that we have decided that payments will be our area of focus for this year. And we have done some significant investments in generating simulators that can work across the MasterCard, Visa, RuPay or any American Express and the UPIs of the world. So those are the investments we have done and we are gearing ourselves up for the demand and the changeover for 2028 where a significant, significant spend will be made in 2627. So that’s the third the focus area on the payments that is on the technology side.
On the engineering side, as I said, the focus area will be on the aerospace defense. We have a good traction coming in from the India with the make in India initiative. And also we are seeing a significant demand coming from from Israel as well. That is a country which we have been supporting for more than two decades now and it is highly warming up for new activities where we are actively involved in at least three Israeli companies. The last of the strategy, the fourth one is of course the people.
So I have talked to you about in the past. Our investments are on people and with Explore AI is sorry AI360 as our flagship learning and development program. The last earning call I have informed you that we have started this. We’re very happy to announce that 70% of our organization is now AI qualified. We have a three layer three level training program and certification program where the first level is everyone to understand the basics of AI and use of basic AI tools. Second one is one level above with more hands on experience and third level is a thought leadership level.
So in that we managed to get 70%. This is helping us twice because we are now by and large seen in the market as a AI company looking for AI resource. And second, our continuous demand that is coming with the increased AI footprint, we are able to use our own resources. That is what we intend to do. And by end of this year, not even till December, I think by September or October, we want to hit anything between 95 to 100% achievement on this. So as I said that our investments are significantly going on the people and will continue to go on that.
And let me also in that context talk about attrition. While we keep hearing the biggies, laying off 10,000, 20,000 people, there is some fear factor, but that is very frankly not resulting in the lower attritions. Attrition levels continue to be at challenging levels. We are moderating it at around 15%. But there is a stark difference. People with 5 to 10 years experience are the people in demand. People above 15 years are the ones who get laid off. So the demand and attrition or these layoffs are not really helping.
And the demand continues to be there on the emerging technologies at a scale of 5 to 10 range of 5 to 10 years experienced people, they continue to be demand and the attrition is also high in that particular range. So we’ll continue to stay invested on this. We’ll increase our employee engagement with all these training and other programs and employee wellness is taken at the center of our employee engagement. So that is on the. These are the four, so I’ll just repeat. One is on the new business, second is growing existing accounts.
Third is sector focus on payments and aerospace defense and the fourth one is on people. So this will be the strategy for 2027. So now let me also give you few updates and I’m very proud. Today we are inaugurating a new facility in our Bangalore which is much bigger than our existing facility where primarily this is because of our increasing demand in aerospace defense, where we have now acquired a space and we’ll be inaugurating it today with a lab size because we have a significant increase in test bench production and that is our key specialty in this particular area.
And our current lab may not meet that kind of requirement. So we have acquired this space which is having at least four times bigger lab on the technology bench, manufacturing and assembly part of IT and also for the technology teams, these are much bigger and more employee friendly space and a state of art facility. So that is something which also indicates that our demand and our growth is validated by this. So with all these as things we are looking at a strong pipeline, but uncertainties as we all speak continue to remain.
We have achieved what we have done despite all these uncertainties, but hopefully we will continue on this and come out successfully in the coming quarters as well. Thank you so much.
Operator
Shall we open the floor for questions
Phani Tangirala — Managing Director & Chief Executive Officer
Mani will cover on the financials?
Operator
Sure sir.
Periakaruppan Palaniappan — Chief Financial Officer
Thanks Phani. Good morning all. Thanks for joining the call. I’ll now talk about the financial highlights for this particular quarter Compared to the previous quarter, our operating revenue for the quarter ended March 26 is at 2,863 million compared to 2007. 94 million in the previous quarter which is a growth of 2.5% primarily due to benefit from forex depreciated against Euro as well as US dollar. Total income grew by 3.1% to rupees 2009. 89 million in this quarter primarily due to higher operating revenue and higher other income from forex gain at constant currency.
Our operating revenue decreased by 0.9% to Rupees 2007. 68 million in this quarter compared to 2007. 94 million in the previous quarter. Adjusted EBITDA for the quarter is at 15.5% versus 16.6% in the previous quarter mainly due to wage increments partially offset with operational efficiency improvements. Profit after tax including other comprehensive income is at 16.5% compared to 8.1% in the previous quarter as the previous quarter had an exceptional cost on account of labor code changes and also due to higher mark to market forex gains in this quarter.
I’ll now talk about the highlights of this quarter. Compared to the same quarter of last year, our operating revenue for quarter ended March 26th is at 2008. 63 million compared to this 2558 million in the same quarter last year which is a growth of 11.9% primarily due to higher on site revenue growth from Europe in the BFSI vertical and benefit from Forex due to repeat depreciation primarily against euro and the US dollar. Total income grew by 14.8% to rupees 2009. 89 million in this quarter primarily due to higher operating revenue and higher other income from forex gains at constant currency, our operating revenue grew by 0.7% to rupees 2005.
76 million versus 2005. 58 million in the same quarter last year. Adjusted EBITDA for the quarter is at 15.5% versus 15.6% in the same quarter last year primarily due to wage increments fully offset with operational efficiency improvements. Profit after tax including other comprehensive income is at 16.5% versus 9.1% in the same quarter last year primarily due to operational efficiency improvements and lower depreciation and amortization cost in the current quarter. I’ll now talk about the financial highlights for the full year.
FY26 compared to the FY25 our operating revenue for FY26 is at 11,080 million compared to 10,248 million in FY25 which is a growth of 8.1% and this is primarily due to forex gain on account of repeat depreciation against euro and the US dollar. Total income grew by 10.1% to rupees 11,459 million primarily due to higher operating revenue and higher interest income from higher cash balances at constant currency. Our operating revenue decreased by 0.4% to Rs. 10,212 million compared to 10,248 million in FY25.
Adjusted EBITDA for FY26 is at 15.6% versus 16.2% in FY25 primarily due to impact of wage increments partially offset by operational efficiency improvements in our core delivery costs and optimized spends on non essential and discretionary costs. Profit after tax including other comprehensive income in FY26 is at 12.3% versus 9.8% in the previous year due to higher other income from cash balance and higher other comprehensive income on mark to market forex theme partially offset by wage increments and one time impact from labor code changes.
Earnings per share is at 79.89 rupees in FY26 versus 66.52 rupees in FY25 which is an increase of 20.1%. Cash position stood at 376 crores as of March 26 versus 229 crores as of March 2025. That brings my update to an end. Thank you. Over to you Asha.
Questions and Answers:
Operator
Thank you very much. We now begin with the question and answer session. Anyone who wishes to ask the question may press star and one on the custom telephone. If you wish to remove yourself from the question queue, you may press R&2. The participants are requested to use handsets while asking a question. Ladies and gentlemen, we will wait for a moment while the question queue symbols. Participants, you may best RN1 to ask the question. First question is from the line of Disha from Sapphire Capital Partners. Please go ahead.
Disha
Hello, Am I Audible, sir.
Operator
Yes, ma’, am, go ahead.
Disha
Yes, thank you so much for this opportunity. So firstly my question was on our growth. So you mentioned these four drivers that we’re targeting for FY27. What sort of overall revenue growth are we expecting and what sort of margin guidance for FY27?
Phani Tangirala
See, I mean with so many uncertainties around, these are very hard predictions. But our direction is to have a sustainable double digit growth in terms of revenue and remain at the current EBITDA levels, ma’. Am.
Disha
So around. So I’m seeing the EBITDA round without including the other income. So around 15.5, 15, 16% sort of range. Right.
Phani Tangirala
This is something which I’ve been consistently saying that that is a range which we are confident around and we’ll stick to that.
Disha
Okay. And so you highlighted about Egypt being our target market for this year. Could you elaborate a bit more on what sort of revenues you see from what sort of initiatives have we taken? How will you scale this? How are you scaling this market? If you could just elaborate a bit more on that.
Phani Tangirala
Our entry into Egypt is primarily driven by our success in Middle east, be it in United Arab Emirates, followed by our subsidiary creation in Saudi Arabia. So all these have been bearing fruitful results. And then we had always an eye on Egypt, which is from a proximity point of view, very close to our Dubai offices. So that’s where we started investigating the market. And then we realized that financial services is probably one of the areas which are highly adopting change and with the sovereign AI being also initiated in Egypt.
So that is where we thought we will focus. And the entire last year we have spent time analyzing the market and our target segment areas. And this year we started our market campaign aiming at one, to make the industry or the region know that XPLO has arrived in Cairo. Second is we are doing marketing and social media campaigns on that front. Most recently two weeks back, we have done a CXO roundtable conference with the banking CXOs and got into touch with them to understand their needs, their challenges and how we can position ourselves.
So these are the areas where we are at this point of time. We are highly focused in covering each and every bank and understanding their pain points and address what we can do. Quantifying the business is something which we will do it subsequently. But more important now is the actions. Are we doing all the right actions to make ourselves felt in that particular market? Yes, we are doing everything. And then it’s only a matter of time when the pipelines start growing up. Ma’, am, we will be able to quantify how much revenue. But given our track record in Saudi and UAE and even in Kuwait, I see that that is a promising market. Can’t put a number against it at this point of time.
Disha
Yeah, I understand. And so you, last time I think we spoke, you also mentioned about something about inorganic growth and acquisitions that we target. So any update on anything that is close to being finalized? If you could just share any updates on that.
Phani Tangirala
Thanks for asking that. And definitely yes. And as a part of our optimal cash utilization strategy, we definitely are inclined towards doing M and A. And that is where we have identified close to nine assets last three months and we have moved into a due diligence space in three and very, very likely to close something in the upcoming quarter.
Disha
Any sort of color on what, what exactly when? So whenever we, whenever we are acquiring, what sort of acquisition rationale do we have? What sort of assets are we looking at? How will that synergize our existing business?
Phani Tangirala
Earnings call, ma’. Am. So our we want to look at something which is putting us into a stronger portion in terms of client acquisition in one particular geography that will be us. So it is a two prong approach. One is where the acquisition should help us deeper into US market and second, from a service point of view it should be a complementary service to what we do. So it could be anything on the AI space or anything on the data space or any of the key implementations on the assembly salesforce or those are the things where we see which is not very limited to one particular sector which can be cut across. So from a service point of view it is industry agnostic service and from a region point of view, high US focus. These are the two criteria we have imposed on ourselves to see while evaluating the assets. And that would continue.
Operator
Thank you. Disha, will request to come back for a follow up question. A kind request to all the participants. Kindly limit yourself to two questions for participants. Next question is from the line of Weber from TCG Asset Management. Please go ahead.
Vaibhav Chechani
Hello, thank you for taking me and congratulations on a great set of numbers, sir. So my first question is on what sort of services or I would say AI service, AI improved services are we currently increasing in BFSI proposal and what is the sort of win rate is there around the renewal that we are seeing over the last one year?
Phani Tangirala
Okay. In terms of the kind of services I can broadly classify into two areas. One is on the digital assurance and digital engineering. So digital assurance is primarily because of the DNA that we carry on the quality assurance in the past which has moved into quality engineering and now has a very high adoption of artificial intelligence. Let me spend a little bit more time telling what on that front. If you see the traditional software development life Cycle always had 80% of the effort spent in code generation and 20% on ensuring that the code is of quality.
Right? That equation has totally changed. That 80% has shrunk much, much smaller with advent of AI that is coming on the part of the digital engineering. But once something comes from a black box like AI, the need for maintaining the quality is much more than before. So the spend is going through a shift where the generation of code is becoming a lot easier. But to ensure the quality with all those guardrails of AI and to ensure that you are not into biases or any other parts of the negative things that come out of AI, you need to have a very robust quality assurance part of it.
So that is what we provide is anything that comes out of code generation. We use AI infused services to ensure that not just the functional fitness is there, the performance fitness is there, but it is also protected against the malign side effects of artificial intelligence. That is on the QA side when it comes to the digital engineering side, where when ever since we started developing the last 10 years, the software development DevOps, DevSecOps kind of a thing, there is an infusion of AI. We have our own platform, Explore AI under which we have a sub tool called Codeplay which is not only catering to the requirements of the sovereign AI or the local thing, but also helps in faster generation of code, faster generation of processes. Re engineering digital modernization of legacy platforms into this. In all these aspects, this AI is infused. So to answer your question, primarily if I see where the revenue on the pipeline is showing interest, these are the two on the quality assurance, AI infused and on the digital engineering side, also AI infused primarily on legacy modernization.
Vaibhav Chechani
Understood. And my second part to this question was since you mentioned that renewals would be under pressure because all of the FSR proposal will be coming with the AI services being a part of it. So with our two focus services, like you said, Digital assurance and digital engineering, what sort of win rate are we having around renewables for FY26, if you could.
Phani Tangirala
Very Frankly, the win rate has not been a challenge. One is we have been with these clients. Most of our clients are with us for more than decade. I mean, most of our critical clients are there, some of them as high as 20 to 25 years also. So there is the win rate is not major issue. But what is the issue is the what I said before the ticket size the same piece of work is now expected to be delivered in 40% or 50% of the efforts. So that brings us the whole thing downwards. So then you are under pressure to sell more and that is how we are engaging with our clients to increase the scope of the work for the same amount what they used to pay earlier by rendering more services by increased scope coverage for them.
And that is how it is. So there is a bit of cannibalization that is happening and there is is a bit of pressure on that particular front but win rate is not because we certainly are one of the pioneers in providing these services and our strength to the game has always been we understand the business because we are a business focused, sector focused, domain focused company and that helps. And then we understand the customer’s requirements also that particular customer’s requirements because we have been in the system for 20 years so so the win rate has not been challenged but the ticket size and the ability to draw the same revenue of last year is what will be under pressure. And that is not we are explore is not the only I think this is a market trend where everyone is if they are not AI ready then you have no choice but to show the growth on that.
Operator
Thank you very much Vaibhav I’ll request to come back for a follow up question please participants kindly limit yourself to two questions per participant. Next question is from the Sankar Naranan from I thought PMS Please go ahead.
Sankaranarayanan
Good morning sir. Thanks for the opportunity. Am I audible?
Phani Tangirala
Yeah.
Sankaranarayanan
Yes sir. So we are seeing the productivity gains through a LED services which is deflating our existing revenue. So can you quantify the productivity of AI due to the implementation in our core legacy services and if at all let’s say if it’s in the range of let’s say 20 to 30 percentage how much of it’s being reinvested to the same back to xpliu.
Phani Tangirala
Okay, good thing one is we have range of services and the productivity gains vary from service to service. As I said before if it is a code generation the productivity gains are as much as 60%. If it is an automated execution of test cases it could be anything between 30 to 40% so it ranges anything between 20% to 60% depending on what service you render. Then your second part of the question is how much of that is reinvested. That is the most unfortunate part is today the entire market doesn’t allow you to do that benefit of those productivities to be translated because they know that the suppliers use artificial intelligence and upfront they want that benefit completely be passed out to them. So at this point of time though we have a premium attached to each of the AI service it is not in comparison with the savings that we pass get out the of of it. Because bulk of that saving still goes back to the customer.
Sankaranarayanan
Okay, because some of your peers in the Tire 2 segment, so they were all saying that the 50 percentage or roughly 60 percentage of whatever productivity that they are giving is being reinvested back to themselves so their net productivity will not be the high number. But in our case you are saying that we are not getting any reinvestment from our client.
Phani Tangirala
To slightly disagree on that because it cannot be generalized because we apply in the same market. If someone is doing a piece of work for 100k and I’m going to challenge that saying that why are you paying 100k and I can do it for 60k. So then it becomes again everyone will be in the same plane, right? So very difficult. Unless you are running large multi year contracts on fixed bid projects which cannot be renegotiated halfway through there is a possibility of plowing back your gains. But the customers are smarter than us very frankly. They know what is happening and nobody is letting go vendor away with huge gains just because the AI is put in.
Sankaranarayanan
Got it sir. And second question is on our growth. So this year in this quarter we have done 12 percentage of revenue growth. So in the overall FY26. So how much of our growth, 8% growth has come from experience group and how much of our growth is coming from our own efforts?
Phani Tangirala
Okay, the growth, see our revenue proposition between the business coming from group is around 30%. Right? So that ratio is not significantly changing. But I would say that by two or three basis points the revenue coming from group has increased, which is what I made in my opening statements that the revenue coming from group has increased. Which is definitely good news because from our total revenues I would consider Xplio Group as my largest customer. So and if that is growing then definitely that is a positive news. But having said that we are the direct business is not lagging too much behind. I mean we are just one or two basis points lesser in terms of growth, but both are growing. That’s why the percentage is still hovering at around 32 to 33% of the total revenue coming from group.
Operator
Thank you. I’ll request to come back for a follow up question. I request to all the participants, kindly limit yourself to two questions per participant. Next question is from the line of Gurdeep Singh from Countercyclic and pms, please go ahead.
Gurdeep Singh
Hi sir. Thank you for the opportunity. So these are the following list of my questions. So for this year our EBITDA has mostly remained flat year on year even for Q4 despite the dollar appreciation and the currency euro appreciation. So I would like to understand why has it remained flat? Is it because of lower margins in our current orders? And when we say we’re looking at a double hilly double digit growth for FY27 and considering that the rupee would not depreciate as much as it did in FY26. So do we realistically think that our EBITDA margins will be maintained or they will fall?
That’s my first question. And my second question would be you mentioned about AI cannibalizing some of our current revenues. So do we see any AI redundancy risk maybe in the coming two to three years wherein our clients would, I mean wherein AI capabilities would reach at a stage where the clients would themselves be able to, I mean you use AI to fulfill their requirements. That’s my second question. And my third question would be regarding the loans of 100cr that we have given. So I want to understand to whom have we given these loan loans and at what rate? And finally, why are we not paying out dividends this year? These are my list of questions.
Phani Tangirala
So out of these four questions, first two I’ll answer. Third on the loans I’ll get my CFO to answer and probably ask my chairman on the dividend part of it. So the EBITDA is still at a decent given that we have a good wage revision and then you have the labor code coming in, we have not allowed it to reduce because the wage revisions in the market trend today is anything between 8 to 10 10. And that has being in a services business where people are at 90% of our cost, bulk of our cost, that is not possible without we having a very robust operating expense control being put in place.
So like what Mani has repeatedly said in his opening remarks, the utmost effort has been put in to protect the EBITDA level despite having these one time costs like the labor code or the wage revisions which we can’t go too low from the market because that will have an attrition and then you will have a rehire cost adding to it. So from that point of view, I think this is in line with my statements even in the past that we will always hover around it. We see this coming and we will continue to see this. And also the advantage you are giving on the corporics while it is true. But we also have a significant population on site. I mean in Belgium, in Dubai, in United States where the cost also will have the same impact. So that is being negated. So on the AI redundancy part of it, while on paper what you say is right. But we at this point of time see any of our customers maturity level beyond even 50% of what it should be when it comes to adoption of AI and doing it themselves. In fact bulk of the customers.
That’s where I see it as a huge opportunity rather than being worried about AI is bulk of the customers have not even made one attempt to get into the AI. We are talking about a good number of customers where they are talking and implementing AI while that number is good. But as a proportion of total number there are many who have not even got into for the fear or for the lack of understanding. They are in exploratory stage. So the entire market itself is in multiple phases. There are some who have not even attempted to understand, some who are exploring, some who have done POC and some who have implemented.
For us to go to a stage where 100% of this market adopts it and runs it on their own and we don’t require any implementer or service provider is far too fetched imagination. At least my judgment on this sir. So that I don’t think so. I’m only seeing that this is a huge opportunity that we want to ride on and that will sustain for several years to come. So that’s on your the continuity and air redundancy part of it. The third is on the loans. Whom are we giving loans and how much rate? Maybe Mani.
Periakaruppan Palaniappan
Yeah. So the loans that’s given to our own group it’s a related party transaction. So the average return that we are getting on this given at an ARM slim. So the average return that we are getting is at around 9.5% to 10%. That’s the interest rate that India is getting.
Phani Tangirala
And the last one is on dividend rank. You like to.
Ralph Kellison
I think the last one on dividend I think it’s. I think already it has been explained by on the priority that we are even giving on the execution of our M and A strategy. I think you have heard that we had screened the market identified the targets are now even in the process and Vani has already even indicated even a timeline there and giving this priority. We will focus to execute on this with the highest priority today.
Operator
Thank you. Good evening. I request to come back for a follow up Question. Next question is from the line of Faisal Hawa from Miji Hawa and company. Please go ahead. Sorry. The next question is from the line of Salman Shah from Paris Investments. Please go ahead.
Salman Shah
Yeah, hi Dean. Good morning. So I wanted to know more on our aerospace and defense sector. So we are into engineering services, basically making some parts in this area or are we into software services in this area?
Phani Tangirala
We are in. I mean you have covered everything. So we are into multiple services on engineering. One is manufacturing engineering, mechanical product engineering, electronic and embedded systems and pcpr. So these are the primary services. But however, we also on the electronic and embedded systems have a good track record thanks to our French parent where we started manufacturing test benches in France decades back to major customers like Thales or Airbus. And that has now significantly moved to India because of the mechanism India initiatives.
And that has gained up and also on top of it more and more defense and on the defence aircrafts and military helicopters being manufactured out of India is happening. So the demand for the test benches that are required for all these manufacturing aerospace vehicles I would say is much more higher now. And even the test benches have to be manufactured, otherwise it makes a significant high cost manufacturing them in Paris and then eventually shipping over to them. So to answer your question, we while bulk of our services are into the engineering services, we are also through our partners do manufacturing and take a complete design to print responsibility for the product, where we are responsible for the final product and we ship it out of our premises. But the actual manufacturing part, we outsource it and we take the accountability for the precision of its working.
Salman Shah
Because even in previous call you mentioned that we are very positive on this piece. But still it is around contributing around 11% of the total revenue. So can we expect it to reach to what some good numbers, 20, 25% in next one or two years? What EBITDA Margins are we enjoying there?
Phani Tangirala
So the margins are in line with the overall margins. But from these are defense contracts. I mean, if you see bulk of it is dependent on the government to government agreements. There are so much of back and forth on that. So while the outlook is extremely positive on that, with a significant amount of aircrafts now, both Boeing, Airbus and Dassault Aviation all wanting to manufacture out of India. I mean, this is an absolutely unpredictable market. In fact, I mean, something of a complete manufacturer of Rafale has to have should have started in the first quarter of last year. But for various geopolitical issues that has not even started. While on paper it is all done and dusted. So Dealing with governments and dealing with supply chain sometimes that becomes very unpredictable. But only thing which I can say is this one segment where we have grown and I foresee growth. And that’s why in my opening statement also I have said that aerospace defense is continuing to be our focus area and we’ll continue to focus on that. But very difficult to give a forward looking percentage at this point of time.
Salman Shah
Okay. And so my final question, can we know more on our parent company? So what is the size of our parent and what revenues and EBITDA they are enjoying versus what we are doing?
Ralph Kellison
I think the parent company in terms of revenue is approximately at 1.4 billion euros in revenue and think the EBITDA margin the business is generating is close to 10%.
Operator
Thank you. So many. I’ll request to come back for a follow up question. Next question is from the line of Anup Sharma from Stanford Investments. Please go ahead.
Anoop Sharma
Yeah, thank you for this opportunity. Couple of questions. One is there has been a management change at the group level. So what are the key priorities of Walter now especially relating to India business?
Phani Tangirala
Yeah, so Walter has taken at helm but I think Ralph is in a better position to cover this.
Ralph Kellison
I think you are. You’re absolutely right. There was in the parent company it change in the CEO position. And we have now for a little bit more than four months a new CEO while the Capilati on board. And he has certainly been assessing the situation. What we can clearly see is that the portfolio of the company both in engineering and tech services is where we have our key strengths and we will continue to build on this. And this is even what we have having here with respect to this entity. In addition to this we have the industry sector of aero, defense, Automotive, Transportation and BFSI representing more than 75% of the group revenues and not only the revenues for ESL here.
So even there we see that the priorities from a capability and industry perspective will remain. He will certainly make an impact based on the strategy he’s currently preparing with the executive leadership team. At a group level. As we are talking here about the entity here, I think it can only play in favor as we can clearly see a continued acceleration on best shoring and offshoring. A strong focus on the industry I have mentioned. And the entity here that is even ESL is I think is very good equipped even to cover additional demand that will most likely even come from the group.
Anoop Sharma
Okay. Okay. My second question is really on the engineering piece. I think some people touched on it. So you know, despite the merger with group at the time of merger with our group and entity, we were quite optimistic on the engineering piece. But over a period of time we continue to see BFSI actually continue to dominate. And within the engineering, the auto piece really hasn’t done well. It’s shrunk quite a bit. So is it looking like a structural thing that we might lose out on auto? And really where do we want to see the engineering piece that’s not really done well as to what anticipated or espoused to be?
Ralph Kellison
And I even give it the perspective of the group. The group is generating roughly two thirds of its revenue in engineering. And there you can even clearly see that there’s an upside potential on ENS even to cover and to capture additional demand in engineering going forward. And as Fanny said, it will predominantly even then in the aero and defense segment, as you have probably even seen and heard that especially the European automotive industry is facing significant headwinds. Not only the French car makers, even the the German automotive segment is under huge pressure. And not only cost pressure, obviously significant divestments. Even there, cash constraints in the industry, a lower ability to invest. What even has an impact even on the GDP of some of the European countries at the moment. So when it comes to engineering I think there’s certainly an upside here for ESL in the industries I’ve mentioned. But we are continuing to expecting headwinds in the German and in the European automotive segment.
Operator
Thank you Anuj. I’ll request to come back for a follow up question. Next question is from nine of Nav from K Ventures. Please go ahead.
Navdeep
Hello.
Operator
Go ahead sir, you’re ordered.
Navdeep
Yeah, yeah. Good morning team. Congratulations on red serif numbers and thank you for the opportunity. So I want to ask you to elaborate on our Middle east and West Asia business because you mentioned that we have now moved into Egypt and we also have dealings with the a few companies in Israel. So what I want to understand is because we have also significant presence in aerospace and defense, how is the current geopolitical situation being looked at by the company? What is the feedback from our partners from there? Is it going to be helpful for us to gain more contracts going forward? If you can please elaborate.
Phani Tangirala
Okay, so from a Middle east point of view, we had a fantastic run of three years until this war. And very frankly at this point of time also I could say the impact of the current war can be divided into two segments. The segments on the the financial services where we are extremely strong is so far not impacted. That’s the good news and rather growing. The other part is on the retail side, where we have the retail because of the supply chain, with all the ships not moving, the sales have come to almost in the Middle east, especially in the Dubai to a standstill.
So where we are seeing that any industry other than financial services is having some headwinds because of this. But we expect that to be short lived. And the client side also when we engage with them, it may assume back from June is the hope. So that is at the overall level. And now you also talked about how the geopolitical situation and the aerospace and especially on the defense side it is impacted. As I clearly said, there are two reasons that we should look at. One is Israel rail and where the investments have always been high.
And that is continuing to grow up with the current thing. So that while war is not something what we want, but that also propels the need for newer innovations. And when newer innovations happen in the defense sector, then we are one of the frontrunners. So Israel will continue to grow. On the other side we are seeing a significant demand coming in the defense of Saudi Arabia. Saudi Arabia has been procuring helicopters and defense equipment which have to be locally customized. And then for that there is a kind of a testing that needs to be done on the verification validation site where we see an opportunity.
We haven’t cracked the deals yet, but we have been in pursuant with pursuing these opportunities with the government sector on the defense side in Saudi Arabia. And hopefully something will turn it around. So to answer your question, yes, Middle east has a slow setback in the last two, three months, but hopefully that will not last long. And on the defense side it is only being promising.
Ralph Kellison
I think it’s not a regional conflict. I think it even we should not underestimate. There is not only the conflict and the war, there is is still another war in Europe. And both of them are even resulting even then in a significant impact on the situation and the economic situation, especially in Europe. And even now, I think even with energy prices going up, even on the US limited even capabilities due to higher energy prices to invest across certain industries. Yes, there is definitely an upside in in defense. But even where we see where the defense spend is going today, going more into production and increase in production sites then really into investments into R and D spend. We should not underestimate this. So I think significant part even of the cost or even the money that is going into it is more production related than really R and D related.
Navdeep
Sir, a small follow up on the same. We have seen that we have expertise in the aerospace thing. Are we also into drones or something because we have seen how there is a debate going on in the world regarding the efficacy of drones versus defense aircraft. And secondly, if you can just elaborate on the same lines regarding India, given the favorable European current age we have. Thank you sir.
Phani Tangirala
So on the drone specifically we are, we have done a massive campaign last year on the EVTOL industry, electronic vertical takeoff and landing and there are far too many startups who have emerged, hundreds of them within India on the EVTOL space. So we went in a very cautious note on that and waited for things to settle and rightfully so. By end of the year, one third of UITOL companies have started showing decline. So but to answer your question, this is an area where we have significant expertise and we are focusing but we don’t want to put all our investments in that until that industry totally matures.
Today it is primarily controlled by the defense organizations and. But EVTOL as a private industry is flourishing and we are equipped for that at this point of time. We haven’t signed a deal on EVTOL yet, but our pipeline has those elements already. But that is something which is the future. So we are just geared up on that. On the similar outlook on India though India defense spend may not directly impact us, but the offset requirements of Indo French deals could be a high value thing that we can look because there is an offset amount each of these have to be spent in India and we are very well poised to consume that.
So from that point of view there is a opportunity. But as I said, this is again the same offset is what I believe will materialize a lot in later 25, 26 but it has now been pushed to the end of this year. So it all depends on when they will actually start monetizing and materializing the manufacture of these aircrafts in India. So it is so much dependent on that. But that’s what will fuel the growth of ASD aerospace defense in India rather than the geopolitical situation which is impacting directly India.
Operator
Thank you very much ladies and gentlemen. We’ll take the last question from the line of Hardik Jain from Whitestone Financial. Please go ahead.
Hardik Jain
Yeah, thank you for the opportunity sir. As you mentioned in your speech and in your answer to one of the questions that most of these productivity gains due to AI, we have to pass on the benefit to our customers. So I just want to understand so large part of our revenue model or billing would be based on the man hours that we spend on the client or is it milestone basis? Just wanted to Understand that.
Phani Tangirala
So we have a combination of both. While the client demands a bulk of the transfer of the benefit of the productivity has to be going to them, which results in our top line coming down. AI is a kind of addictive. If organization pays success or productivity gains in one area, very, very highly likely that they will expand it to other areas within their organization. So that is where we are still able to protect our top lines on our key customers. Because we are engaged in one, we show them a 40% productivity gain, then immediately there are two such opportunities within the same organization that comes.
Of course you may say that this will have a saturation, but then you have to go to another customer, then you have to exhaust each customer. So there is a time factor to that. So at this point, point of time, while passing the complete benefit to them may sound that are we not retaining anything for ourselves. This is driven by market. If I don’t pass 100% of the benefit to the customer, and if someone else does, then we lose the total thing. So we are not risking that. And then we have been lavish in passing it back to the customer.
But the results are very, very encouraging. There are two slides. One is their expanding the scope and where they have been engaging us only on the quality assurance in the past, are now allowing us to infuse AI into their software development, into their L1 L2 support, into their many other robotic process automation. So that is how I am seeing it and not at all worried on passing on the benefit totally to the customer.
Hardik Jain
Okay, thank you, thank you.
Operator
Thank you very much. I now hand the conference over to the management for closing comments.
Phani Tangirala
Thank you everyone. I think we are well poised both in terms of our strategy and our actions. We have a great support from the group and Ralph has been there with this ever since last 12 years. So that link is helping us big time. And we brace all these headwinds and hopefully we’ll sail out with good success. Ralph, you want to
Ralph Kellison
Say thank you even to all the shareholders for the continued support. And I would like to thank the CEO and the CFO for all the great achievements over the past quarter and years. And we are looking forward to do the same in the near mid and long term future. Thank you.
Operator
Thank you very much on behalf of Experia Solutions. That concludes this conference. Thank you for joining us and you may now disconnect your lines. Thank you.