Dev Information Technology Ltd (NSE: DEVIT) Q2 2025 Earnings Call dated Nov. 13, 2024
Corporate Participants:
Jaimin Shah — Chief Executive Officer
Analysts:
Chandni Chande — Analyst
Harsh Shah — Analyst
Abhay Yadav — Analyst
Navneet Singh — Individual Investor
Tara Kaur — Analyst
Unidentified Participant
Mahesh Sheth — Individual Investor
Presentation:
Operator
Ladies and gentlemen, good day and welcome to Dev Information Technology Limited Q2 FY ’25 Results Conference Call hosted by Kirin Advisors. 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. [Operator Instructions] Please note that this conference call is being recorded.
I now hand the conference over to Ms. Chandni Chande from Kirin Advisors. Thank you, and over to you, ma’am.
Chandni Chande — Analyst
Thank you. On the behalf of Kirin Advisors, I welcome you all to the conference call of Dev Information Technology Limited. From management team, we have Mr. Jaimin Shah, CEO and Managing Director.
Now I hand over the call to Mr. Jaimin Shah. Over to you, sir.
Jaimin Shah — Chief Executive Officer
Thank you, Chandni, and good afternoon, and happy Diwali to everyone. Thank you for joining us today for DEV IT’s earning call for second quarter as well as first half year of FY ’25.
To begin with, let me introduce, give you a brief introduction about DEV IT. DEV IT is a global end-to-end IT service company listed on both the platform NSE and BSE, and we have been empowering business worldwide since 1997. We headquartered in Ahmedabad and we offer a full spectrum, which is end-to-end IT services, including cloud services, blockchain, digital transformation, enterprise applications and managed IT services. We have also ventured out into creating our own intellectual property product in the name of Talligence, which is AI-BI analytical platform, a tool for tally users and ByteSigner, a cutting-edge digital signing solution. Over the year, our growth has been driven by our dedication to innovation and our commitment to quality and a client-centric approach. And we are recognized with certifications such as ISO 20000, ISO 27001, ISO 9001 and CMI [Phonetic] Level 3.
Now let me discuss the financial highlights for the quarter ended September 30, 2024. As you all know that in almost all calls, we have been harping upon increasing more and more profitability, also increasing revenue from the services sector and that too from corporate side. So to continue that focus in this quarter, DEV IT achieved remarkable growth across both consolidated as well as standalone figures. Our consolidated income rose to INR48.24 crore, up by 69.26% year-on-year. Standalone total income also grew significantly by 43.70% year-on-year and reaching of INR43.84 crore. We are also happy to report an impressive increase in EBITDA, which is one of our focus area, which surged by 329.64% on a consolidated basis to INR11.23 crore, which is reflecting a
Margin expansion of 1,411 bps to 23.28%. Standalone EBITDA also grew by 351.02% to INR11.56 crores with a margin of 26.36%, an increase of 1,796 bps. Our profitability was equally robust and that is also increasing with consolidated PAT raising by around 390.66% year-on-year to INR8.11 [Phonetic] crore and standalone PAT also reached to INR9.14 crore, which is representing a remarkable 463.13% growth. This brings our PAT margin to 16.81% and 20.78% on a consolidated and standalone basis respectively, which is by over 1,100 basis points in both the cases.
Our significant achievement in this quarter further demonstrated our capabilities and strategic focus on enterprise as well as our corporate segment. We secured key contracts from India market as well as overseas market which includes Kaushal Darpan project of RajCOMP for portal integration across over 140 Polytechnics and 1,500 ITIs. Another major project with RajCOMP is the RAJKISAN SATHI Portal, which is approximately INR5 crore of the maintenance program for 13-odd applications. We are also pleased to announce a five-year approximately INR1 crore contract from Gujarat State Fertilizer and Chemical, GSFC for managing their IT services, which we managed since last so many years. So, this is a testament to our client relationships and service quality. Besides this, we have also got really good remarkable contracts from corporates as well as overseas market where due to NDA, we cannot disclose their names publicly.
In terms of industry recognition, we received the prestigious IT-as-a-Service Award at the MSP India Summit 2024 organized by SME Channels Magazine. Another significant highlight was the launch of Single Window IT System, which was developed by us for the GIT [Phonetic], which they call it SWIT for — it’s called GIT and the said project was inaugurated by Hon. Prime Minister a couple of months ago. This entire system and various other systems, we have developed for our clients and this is how we also contribute ourselves for the national e-scaling initiatives.
We are also looking forward to aim to continue expanding our offering with a focus on emerging technologies including IoT, cybersecurity and AI. To continue that our, one of the initiatives called DEV Labs where we are going to have AI center of excellence very soon. Our growth strategy also includes depending on our presence, which is physical presence in North America and exploring new markets to capture emerging opportunities. With our client-centric approach, we are confident in our ability to drive efficiency and transformation for our clients while positioning DEV IT as a leader in IT service sector.
Our subsidiary Dev Accelerator Limited which is called DevX, a prominent provider of managed office space is also coming out with their IP on [Phonetic] the filed DRHP last month. In summary, Q2 of FY ’25 has been an exceptional quarter for us. We are encouraged by our strong financial results, continued client partnerships and the strategic projects, which we are undertaking. This is the showcase of our philosophy called employee, people first and business always. As we move forward, our team remains dedicated to deliver unparalleled value through innovation and deep understanding of our clients evolving their digital needs.
We thank all our shareholders, partners and our clients for their trust and support. We are also excited to build to our achievements in the quarter ahead. So, thank you very much for your patient hearing. Now floor is open for the questions. Thank you.
Questions and Answers:
Operator
Thank you very much, sir. We will now begin the question-and-answer session. [Operator Instructions] Our first question is from the line of Harsh Shah from Reera Holdings. Please go ahead.
Harsh Shah
Yeah, hi, good afternoon, sir. My first question is around Dev Accelerator [Indecipherable].
Operator
Sorry to interrupt, Mr. Harsh, your voice is not audible. Can you please switch to handset mode?
Harsh Shah
Is this better?
Operator
Yeah, please go ahead.
Harsh Shah
Yeah, my first question is on the Dev Accelerator IPO. I believe that you’re coming at the IPO at the [Technical Issues].
Operator
Sorry to interrupt, Mr. Harsh, your voice is still not audible.
Harsh Shah
Is this better now? Can I…
Operator
Yeah, yeah, now, it’s better. Yeah.
Harsh Shah
Okay. My first question is regarding the Dev Accelerator IPO. I believe that the IPO is coming at the same valuation at which we recently sold shares. 28 lakh shares at I think some INR11.64 crores. So just wanted to get an idea that are we not doing this IPO at a relatively lower valuation, maybe somewhere around INR175 crore, INR170 crore. Because we were expecting a very high growth in this business. So just wanted to understand on that.
Jaimin Shah
So, thank you very much, Harsh. I don’t know whether I am allowed to speak about the valuation. So not aware about the technicality. But IPO is not coming at the same valuation, which we diluted our stake — share in September end. So I don’t know whether I can review those numbers or not. But numbers would be — valuation numbers would be higher.
Another thing. Yes, you rightly said that the sector is really moving high, and that is how DevX is also aiming to get a really good valuation. And they are also hoping that once they got the note, they will immediately come out in the primary market.
Harsh Shah
Okay. Because I was referring to the note, to the accounts, note number five, where we have mentioned that the company divested 28 lakh shares for a consideration of INR11.6 crore.
Jaimin Shah
Yeah.
Harsh Shah
So that comes to around INR40.5 per share.
Jaimin Shah
No, no.
Harsh Shah
And then [Speech Overlap].
Jaimin Shah
[Speech Overlap] was INR270 crore. So…
Harsh Shah
270 crore?
Jaimin Shah
[Speech Overlap] valuation upto INR270 crore of the DevX, and accordingly [Speech Overlap]. Sir, these 28 lakh shares, 28-point — okay, I’m sorry. So this 28.7 lakh shares, it’s how much percentage of the company, Dev Accelerator? I don’t know about the percentage of the company, might be around 2% or 2.25%. Not more than that.
Harsh Shah
So in last last six to eight months since FY ’24, we have divested more than 6% — almost 6% to 7% stake in Dev Accelerator. Is that right?
Jaimin Shah
No, DEV IT has divested — are you talking about DEV IT or are you talking about DevX?
Harsh Shah
DEV IT’s stake in DevX.
Jaimin Shah
No. You valuated that stake two years back.
Harsh Shah
Because in your annual report, FY ’24’s annual report you have mentioned that as of 31st March 2024, Dev Accelerator — DEV IT holds 28.45% stake in Dev Accelerator.
Jaimin Shah
Yes.
Harsh Shah
And now as for this latest filing, this take stands at two point — 21.9%. Have we done any fundraising in this company?
Jaimin Shah
So DevX has raised a fundraising in the DEV company.
Harsh Shah
Okay, okay. Understood. And — okay, got it. Sure. And the next question is regarding the acquisition that LT1 Inc. had done. It’s been almost one, one and a half years since the acquisition was done. So just wanted to understand what kind of synergistic benefit has our company derived from this acquisition. Because I believe LP1 Inc. has got good chunk of business in the United States. And we were expecting that their — them buying stake in DEV IT would open up a lot of opportunity for us. I just wanted to understand on that side.
Jaimin Shah
Yeah. So that’s what LT1, we already received a couple of orders but the stake remained 3.8% as of now, they could not able to acquire a promotor’s stake due to their internal arrangement with the financial institution. So they are just holding 3.8% stake in DEV IT. So not that kind of substantial stake in DEV IT. And also, we have received order from LT1 in last financial year.
Harsh Shah
And is promoter looking to pair their stake to LT1? Because back in the day, I think there were some discussions about share purchase agreement where the existing promoter might sell some stake to LT1. So is that discussion still going on?
Jaimin Shah
So that is what I discussed, that share purchase agreement got expired which we as a promoter and LT1 signed.
Harsh Shah
And there are no talks of renewing this decision again?
Jaimin Shah
[Indecipherable] anything else further.
Harsh Shah
Okay. And on bookkeeping side, 32 — we did consolidated revenue of around INR36 crores this quarter, if we exclude the other income, what would be the mix between government orders and private?
Jaimin Shah
So, government order is around 51% and private is around 49%.
Harsh Shah
And going ahead, we were — so taking FY ’24 as a base, the previous discussion was that we will be keeping the government business as it was as it stood in FY ’24 and clients would double the private business from the private clients. So, any update on that?
Jaimin Shah
So that is what we are working towards it. And if you compare our last year’s number with current year, government business has not been increased. It’s rather decreased by a few percentage. So still, we are continuing with the same thought process that will increase our private sector business and government sector business will continue as it is. But if at all some good business comes, then we cannot deny that good business from government. So, it depends upon case-to-case basis where we as a management and our operation team feel that some of the government projects are really worth taking and really giving good value to our service delivery as well as profitability then we’ll definitely pick up those orders.
Harsh Shah
Okay. And sir, again, excluding the other income our EBITDA this quarter was negative INR1 crore compared to INR5.8 crore in Q1 FY ’25. So just wanted to get an idea what led to the sharp decline in the operating EBITDA if we exclude the other income?
Jaimin Shah
This is regarding because we have substantially, if you recall my last investor call that — not last but almost all last two or three calls, well, we wanted to invest more into manpower and also acquiring a company where they have really good leadership team as well as they have IP. So, in last three months, we have significantly invested into building our AI and BI capabilities as well as Microsoft enterprise capabilities. So that in next quarter — two quarter, we can really work and close those high value and high profit business from corporate as well as overseas market.
Harsh Shah
Okay. Because, sir, in this quarter, I can also see INR12 crore of cost of goods sold. If I look at the COGS line item, it is around INR12 crores. It is much higher than INR6 crores, which was there in Q1. So, what is that COGS regarding?
Jaimin Shah
So, this is regarding our products which we sell it in the market like ByteSigner, like Talligence and Microsoft licenses.
Harsh Shah
Okay. So, you’re trying to say that you have purchased these software products, which will be sold in later years — later quarters?
Jaimin Shah
Exactly, exactly.
Harsh Shah
And sir, it would be really helpful if you can come out with presentations every quarter mentioning soe data like, your share from private and government, how is DevX performing and few such data points. This would be really helpful for us. So, [Indecipherable].
Jaimin Shah
Certainly, we’ll share it with you. It is already there. We’ll share it with you.
Harsh Shah
Sure. And sir, last question, if we look at the — as we stand today our H1, which is revenue of almost INR71 crore on consol basis and EBITDA of INR4 crore, INR4.5 crore if you exclude the other income. So, in terms of guidance, what would be your two year guidance in terms of revenue and margin for DEV IT? We’re not talking about the Dev Accelerator but only for DEV IT, what kind of performance are we expecting?
Jaimin Shah
So, that is what I have also shared in last call as well, that this year, we are expecting around INR180 crore to INR190 crore revenue with PAT from INR15 crore to [Indecipherable] crore and next year, we are expecting more than INR200 crore and PAT is more than INR20 crore.
Harsh Shah
So, this year PAT you are including the INR11 crore gains from DEV IT or excluding that?
Jaimin Shah
Yes, yes, all including.
Harsh Shah
Okay. So, if you exclude that, then we’ll be somewhere around INR10 crore to INR11 crore.
Jaimin Shah
Exactly, exactly.
Harsh Shah
For this year and next year, we are expecting INR200 crore revenue and 10% to 12% margin.
Jaimin Shah
Exactly.
Harsh Shah
Okay, okay, sure. Okay. Thank you so much, sir.
Jaimin Shah
Thank you.
Operator
Thank you. [Operator Instructions] Our next question is from line of Abhay Yadav from GC Capital Partners. Please go ahead.
Abhay Yadav
Hello.
Operator
Yes, Mr. Abhay, please go ahead with your question.
Abhay Yadav
Sir, my first question is what steps has DEV IT taken to achieve such impressive growth in PAT margin from 5.8% to 16.8%?
Jaimin Shah
So, a couple of thing, we have decreased our less margin resources and business to higher margin resources and business. So, if I go very precise that we are focusing more on AI-BI and Microsoft Enterprise and managed IT solutions. So, in last three to four months due to NDA, I cannot able to share those client’s name. But really, we have a good corporate and that too India’s one of the biggest corporate clients in AI-BI side. So, our main focus is to increase those business units so that we can increase our profitability as well as we can have longer contracts in place.
Abhay Yadav
Okay. Okay, sir. My next question is the EBITDA margins have increased significantly, especially in the standalone business. Could you share the key operation efficiencies or cost control measures that help achieve this?
Jaimin Shah
So, a couple of things which I discussed earlier as well. That we have decreased our bench resources as well as we have replaced traditional technology resources with latest technology resources. And that too AI and BI and Microsoft Enterprise side. And that is how our acquisition of Dhyey Consultancy is giving us more benefit. And that will give again more benefit in coming next two or three quarters. Because we are right now investing more into good quality resources into AI-BI, then managed IT services and Microsoft Enterprise services.
Abhay Yadav
Okay, sir. My next question is can you provide a breakdown of revenue growth in Q2 F ’25 by geography and industry verticals?
Jaimin Shah
So as far as geography is concerned and vertical is concerned, as I told earlier to Harsh that government which is pure e-gov projects, which comprise of 51%, so that is purely India market and only for government market. And remaining 49% is corporate and [Indecipherable] overseas market. So out of the 49%, 30% is our overseas business and remaining 19% to 20% is India corporate markets.
Abhay Yadav
Okay. Thank you, sir.
Jaimin Shah
Thank you.
Operator
Thank you. Our next question is from line of Navneet Singh [Phonetic] who’s an individual investor. Please go ahead.
Navneet Singh
So, actually, I am interested in knowing about the guidance on the two product items we have that is Talligence and ByteSigner. So, what is their guidance for our next quarter and how we see going forward any new intellectual property we are coming with or not?
Jaimin Shah
Thank you, Parmeet [Phonetic] ji. So, as we all know that IT services companies, they are purely into service sector and providing services to overseas plants as well as India market clients. We ventured out and we decided that we should also have our intellectual property product and for India market and for the partner community. So, we — after all the studies and everything we invested into two products because we have really good market penetration into these two product side. One is a ByteSigner. ByteSigner is the outcome of one of our service delivery for digital signature provider. If you all recollect that a few years ago and now everyone should have a digital signature. But when Indian Government started digital signature, we were one of the early entrants and we were one of the leading distributor for digital signature. And that is how we had a really good customer base as well as partner base.
And by signing those signatures, we realized that clients are having issues signing digital signature for bulk documents. So, for all the pages they have to sign individually. So, we came out with a ByteSigner where client can select those number of pages and can sign digital signature in the one go. So, this is the purpose of digital signature, which is a very low-cost product and where we are approaching more and more quantum of the customer.
Another one is Talligence, which is also outcome of our partner base across India because of the digital signature and because of our Microsoft Enterprise license business. As we all know that India has a huge clientele of tally accounting software, around 4 million-plus users are there and they hardly have really good AI-BI dashboards on tally accounting software. So, we came out with a product called Talligence which is AI-BI engine, which works on tally accounting software and provides you really out of the box dashboards and API-related dashboards on your mobile as well as on your desktop. So, it’s really very comprehensive product where right now we are hitting [Phonetic] channel partners across India and we are really getting a good response. So, within a year or so, we are expecting that Talligence will give us really good clientele as well as really good mileage and profitability in our IP business.
Navneet Singh
One follow-up question on that. So, what is a revenue contribution from Talligence and ByteSigner in Q2 and what will be our forecast on these two products?
Jaimin Shah
So, revenue consolidation right now is very insignificant, I can say it’s not a huge one. Right now, we are building the product as well as building channel partner ecosystem and doing lots of digital and media marketing. So, our idea and our forecast is around INR2 crore to INR3 crore of revenue from Talligence from next year and then after INR5 crore to INR10 crore of revenue and this is an annuity-based product. So, year-on-year, the same number will continue with increased increment in the revenue.
Navneet Singh
Understood. Is there any other product IP that we are working internally?
Jaimin Shah
Yeah. We are working — we have already worked towards a few products and that — those products are purely on Microsoft Enterprise solution, which is Microsoft ERP called Microsoft Dynamics F&O and Business Center where we have developed around 22-odd solutions and those solutions are already on Microsoft Marketplace and few partners, they are already using those solutions and when they deploy Microsoft Enterprise into their client area. So those 22-odd solutions, they are basically developed by Dhyey Consultancy Private Limited, which we acquired 100% recently.
Navneet Singh
So, do we have any revenue forecast for this financial year or next financial year on those 22 products that we have on Microsoft Dynamics?
Jaimin Shah
Yes, that we are working on it. And by end of December, we’ll come out with the exact number. We are waiting for one approval from Microsoft side that we have already shown our interest to have AI Center of Excellence in Ahmedabad. So, we are waiting for their approval. So as soon as we get that approval, we’ll come out with our plans and as well as the numbers.
Navneet Singh
Understood. So that is all from my end and all the best.
Jaimin Shah
Thank you. Thank you, Navneet.
Operator
Thank you. Our next question is from line of Tara Kaur from DY Capital. Please go ahead.
Jaimin Shah
Hello.
Operator
Yeah, please go ahead.
Tara Kaur
Sir, my question was that what is the top 10 client contribution?
Jaimin Shah
Yes, thanks. Top 10 client contribution is around 28% of our total revenue. But if I include top 10 clients and just one state government means Gujarat government or Government of Rajasthan and central government, then that comprise of around 40%.
Tara Kaur
Okay. And how many new clients we have added in H1 FY ’25?
Jaimin Shah
So that I have to come out with exact number. If you can allow me to get that number in a day time, will it be okay?
Tara Kaur
Yeah, yeah. Sure.
Operator
Does that answer your question, Tara ma’am?
Tara Kaur
Okay. And my last question is that how is our working capital in DEV’s?
Jaimin Shah
Sorry?
Tara Kaur
How is our working capital in these?
Jaimin Shah
Working capital in DEV IT?
Tara Kaur
In DEV.
Jaimin Shah
Sorry, your voice was broken. Working capital…
Tara Kaur
Can you hear me now?
Jaimin Shah
Yeah.
Tara Kaur
My question is that how is our working capital in DEV’s, like, how is our working capital cycle? That is what I’m trying to ask.
Jaimin Shah
Okay. So, working capital because we are now investing more into newer technology as well as newer geography. So, our working capital requirement is really high as compared to what we have done so far in last five to 10 years. So, we are expecting around INR7,200 crore of working capital because of acquiring couple of companies as well as having our own physical presence in North American market where we want to have our own AI-BI capable people at client place as well as in North America.
Operator
Ms. Tara?
Tara Kaur
Yes, that’s all from my side.
Jaimin Shah
Hello?
Operator
Yeah, that’s all. Okay. Thank you.
Jaimin Shah
Thank you.
Operator
[Operator Instructions] Our next question is from line of Raj [Phonetic] from Arjav Partners. Please go ahead.
Unidentified Participant
Hello. Am I audible?
Operator
Yes, Mr. Raj.
Unidentified Participant
Sir, I just skipped a part on the growth part. How much sales are we expecting in FY ’25 and in FY ’26?
Jaimin Shah
How much sales revenue you are…
Unidentified Participant
Yeah.
Jaimin Shah
Asking? Yes. So as I told earlier that this year, we are expecting around INR170 crore, INR180 crore of revenue in FY ’25 and more than INR200 crore in FY ’26.
Unidentified Participant
And how much would be our EBITDA and PAT?
Jaimin Shah
So, PAT, we are — this year, we are expecting INR15 crore to INR18 crore and next year more than INR20 crore.
Unidentified Participant
All right. And how much is our current order book?
Jaimin Shah
Our current order book is around 45% of the total revenue.
Unidentified Participant
45%. So can we expect around INR70 crores, INR80 crores is the order book?
Jaimin Shah
Exactly.
Unidentified Participant
All right. Okay. And sir, all right. Thank you.
Jaimin Shah
Thank you.
Operator
Thank you. Our next question is from line of Mahesh Sheth [Phonetic] from — who’s an individual investor. Please go ahead. Hello?
Mahesh Sheth
Can you hear me?
Operator
Yes, yes. Please go ahead with your question. [Technical Issues] Sorry to interrupt, Mr. Mahesh, your voice is not audible. Can you please get to a place with better network reception?
Mahesh Sheth
Yeah. [Technical Issues] now?
Operator
Yeah. Please go ahead.
Mahesh Sheth
[Technical Issues] insight into our [Indecipherable] business rate and any strategies implemented to enhance our client retention?
Jaimin Shah
Are you talking about client retention or are you talking about client rating? Because your voice is breaking, that’s why.
Mahesh Sheth
Retention.
Jaimin Shah
So our client retention is more than 90% and that is how — this is one of the strength and that is how our philosophy is all about that people first and business always. And so majority of clients they are there with us from so many years and same goes with our employees.
Mahesh Sheth
Okay. Sure, got it. And as you said earlier, our revenue outlook for FY ’25 is around INR170 crore [Technical Issues].
Jaimin Shah
Hello?
Operator
Mahesh — Mr. Mahesh?
Mahesh Sheth
Yeah.
Jaimin Shah
INR170 crore to 180 crore.
Mahesh Sheth
So, can you just let me know the factors which can influence this forecast?
Jaimin Shah
So, there are a couple of factors which include in our forecast. One is definitely our India market business where we know that how many new projects are going to come. Second one is our order book and third one, once we see elections over in USA, now many inquiries have started but due to the year-end, we are expecting that more and more business will happen in first quarter of next year.
Mahesh Sheth
Okay, sir. Okay. That’s all. Thanks, sir, from my side. Thank you.
Jaimin Shah
Thank you, Mahesh.
Operator
Thank you. Ladies and gentlemen, that was our last question for today. I would now like to hand the conference over to Ms. Chandni for closing comments.
Chandni Chande
Thank you everyone. That conclude the conference call of Dev Information Technology Limited. If you have any queries, you can write to us at research@kirinadvisors.com. Once again, thank you for joining us.
Jaimin Shah
Thank you.
Operator
[Operator Closing Remarks]