Note: This is a preliminary transcript and may contain inaccuracies. It will be updated with a final, fully-reviewed version soon.
Digitide Solutions Ltd (NSE: DIGITIDE) Q4 2026 Earnings Call dated May. 19, 2026
Corporate Participants:
Gurmeet Chahal — Chief Executive Officer and Executive Director
Suraj Prasad — Chief Financial Officer
Rajesh Lachhani — Head, Investor Relations and M&A
Analysts:
Ananya Mukhne — Analyst
Unidentified Participant
Anukool Arora — Analyst
Presentation:
Operator
Ladies and gentlemen, Good day and welcome to the Digitized Solutions Limited Q4FY26 earnings conference call hosted by Aryan Capital Markets Limited. 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 the conference call. Please signal an operator by pressing Star then zero on your touchstone phone. Please note that this conference is being recorded. I now hand the conference over to Ms.
Ananya Mukhne from Arihan Capital Markets. Thank you. And over to you.
Ananya Mukhne — Analyst
Hello and good morning to everyone. On behalf of Arihant Capital Markets, I thank you all for joining into the Q4FY26 earnings conference call of Digitized Solutions Limited today. From the management we have Mr. Gurneet Chahal, Chief Executive Officer. Mr. Suraj Prasad, Chief Financial Officer and Mr. Rajesh Lachani, Head of Investor Relations and M and A. So without any further delay I’ll hand over the call to Mr. Gurmeet Sehal for his opening remarks. Over to you, sir.
Gurmeet Chahal — Chief Executive Officer and Executive Director
Thank you, Ananya. Good day everyone and thank you for joining us for our quarter four and financial year 26 earnings call. As we close out this fiscal year, I want to emphasize a singular theme. Consistent measurable progression. One year into our journey as an independent listed company, Digitize has moved decisively from a domestic BPM led organization into an AI first tech and digital powerhouse with deeper international relevant. Despite a macroeconomic backdrop characterized by industry uncertainty, geopolitical headwinds and cautious client making decision making cycles.
We delivered growth with intense operational discipline. What we described as green shoots at the start of the year have now solidified into structural quarter on quarter execution. We have built a resilient foundation aligned tightly with our three by three strategy to scale to INR 8,400 crores by financial year 31. And we are exiting the year with powerful momentum specifically on quarter four. 26. Our performance this quarter demonstrates that our core growth engine is working. Marked by our fifth consecutive quarter of sequential top line forward momentum.
We are progressing quarter on quarter across our key operational and revenue parameters. Number one, our revenues reached 800 crore. Delivering a strong 2.5% sequential growth and a 9.2% year on year expansion. Our tech and Digital revenues climbed 5.8% quarter on quarter and 27.2% year on year to 249 crores. This segment now accounts for 32% of our total revenue mix up from previous quarters. Proving our rapid transition to higher value technology led services. Our international footprint expanded 4.3% sequentially and 16.2% increase year on year to 304 crore lifting our international mix to 38% of revenue.
EBITDA stood at 88 crores for the quarter mirroring our strong Q3 performance. What these numbers demonstrate is the absorptive capacity of our operational model. Despite fully absorbing a wage code compliance in Q3 our operational profitability did not compress. Adjusted pac stood at 11 crore for the quarter bringing full year adjusted pack to 70 crore while our trailing net profit reflects the final stages of our corporate transition and post demerger alignments. The true vitality of our business is reflected in our cash conversion.
Our underlying operational cash health remains very strong highlighted by 145 crore in operating cash flow this quarter alone and Suraj will later break down our balance sheet strength shortly. For the full year FY26 total revenue reached 3080 INR up 7.1%. Year on year tech and digital led the charge contributing nearly 30% of the FY26 revenues and expansion of 280 basis points over last year while our international mix scaled by 180 basis points to 37.3%. Let me talk a little bit about the sales momentum.
Our commercial engine is firing on all cylinders. Sales momentum remained exceptionally in Q4 with TCB bookings of 620 crore. This marks our second consecutive quarter of 600 plus TCV providing us with high revenue visibility heading into the new fiscal year. We added 29 new logos this quarter alone including eight international clients. Our partnership led strategy is also yielding scale opportunities. Digitite now has active formal relationships across all the three major hyperscalers. In addition, our digital assurance partnership with Tricentis has translated into a robust pipeline and distinct partner awards across North America and India.
We are aggressively converting our AI capabilities into large scale commercial monetization. I’m incredibly proud to announce that Digitide has won several milestone enterprise deals including setting up a dedicated AI center of Excellence in Bangalore and Coimbatore for a global PNC insurance measure, our extension into Coimbatore highlights how our early deliberate bet on tier 2 and tier 3 hubs has materialized into a formidable competitive advantage. While our competition grapples with high attrition and escalating talent cost in primary metros, our established footprint in these emerging hubs unlocks access to highly stable top tier engineering talent.
This dual city architecture gives us an unmatched combination of scale cost optimization and localized expertise. This win underscores our specialized strength in the PNC Vertical and directly validates are proprietary tools such as Pulse Nerf. Our agentic AI framework powered by the Model Context Protocol commonly referred to as MCP, which is already delivering approximately 40% productivity and three times faster deployment cycles in the field. Now let me talk about our most important competitive moat which happens to be talent.
A high velocity AI first organization requires an ecosystem where the world’s best talent can thrive. In today’s competitive landscape, our culture is a primary driver of execution predictability. To that end, I’m thrilled to share that Digitide has been certified as a great place to work for the seventh consecutive year. More distinctively, we have been ranked third among India’s Best Places Best Workplaces in Health and Wellness 2026 this top tier industry recognition confirms that our focus on sustainable high performance is working ensuring we remain an absolute magnet for the specialized technical talent required to fuel our compounding growth.
Financial aid 27 outlook moving from foundation to acceleration in summary, 26 has been a foundational pivotal year for of transformation for Digitig. We have proved our resilience, sharpened our solutions portfolio, secured major international logos and demonstrated undeniable sequential top line gains. As we look ahead, FY27 marks a clear inflection point. The heavy lifting of foundation building is complete. FY27 is about converting those strategic investments into scaled tangible outcomes. We are fully positioned to deliver accelerated double digit revenue growth led by high value tech and digital and international expansion, sustained margin expansion powered by an optimized revenue mix, the completion of our legacy investment phase and accelerating operational leverage.
We are looking at a strong hundred basis point expansion by the time we exit financial year 27 3rd Velocity in these closures backed by our global alliances 4th scaled AI monetization as our primary platforms and enterprise COE’s enter full production. 5th and most important, a deepened strategic people focus by industrializing our advanced upskilling programs to build the industry’s most agile AI workforce. Proactively nurturing our talent ecosystem ensures we safeguard our delivery margin and maintain the high execution predictability our customers rely on.
We enter the new fiscal year with confidence, sharp execution capabilities and a clear path to long term value creation for our shareholders. I want to thank our customers, partners, investors and above all our incredible team of digitizers for their unwavering trust and dedication. Thank you. I will now turn the call over to our CFO Suraj for a detailed walkthrough of our financial metrics. Suraj over to you.
Suraj Prasad — Chief Financial Officer
Thank you Gurmeet and good day to everyone on the call. I will start with the Financials for quarter four, FY26 and the full year FY26. I’ll walk you through the key drivers of our reported performance and also take you through how these results are translating into stronger operating metrics, cash generation and balance sheet strength as we enter FY27. Firstly on revenue we closed FY26 with another quarter of steady and consistent progress marking continuation of the trend we have been seeing through the year.
Sequential Revenue momentum and improving mix Quarter 4 FY26 marked the first quarter. Digitide crossed 800 crores of revenue mark growing 2.5% sequentially and 9.2% year on year. For FY26 revenue stood at 3,080 crores growing 7.1% year on year. We delivered sustained revenue growth with performance remaining resilient across quarters despite a softer macro environment. Segment wise growth remained broad based supported by stability in BTM and strong acceleration in tech and digital. As seen through the year, techend Digital continued to outpace the BPM business, further improving its share in the overall revenue mix.
BPM revenue remained resilient at 551 crores in quarter four growing 1.1% sequentially and 2.6% year on year. For FY26, BPM revenue stood at 2,170 crores contributing to 70% of the total revenue. Second digital revenue increased to 249 crores in Q4 growing 5.8% sequentially and a solid 27.2% year on year for FY26. Second digital revenue stood at 910 crores contributing approximately 30% to the overall revenue of Digitide. The second digital mix has expanded from 26.8% in FY25 to 29.6% in FY26, an expansion of 280bps and stood at 31.1% in Q4 FY26 up 440bps year on year.
This is in line with our strategy of moving forward towards higher value technology led and AI enabled services. International revenue continued to stay growing 16.4% year on year to 304 crores in quarter four, taking the international next to 38.1% in quarter four, an expansion of 238bps year on year for FY26. International revenue contributions stood at 37.3% up 180bps from FY25 driving better price realization and quality of revenue. As Gurmeet pointed out on the deal Momentum, we closed Quarter 4 with PCB bookings of 620 crore and added 29 new logos including 8 international logos for the full year.
TCB bookings stood at 2355 with 114 new logos added during FY26. The hyperscaler led pipeline across AWS, VCC and Microsoft remains healthy providing stronger revenue visibility as as well as we enter FY27 now coming to EBITDA and margins quarter four FY26 EBITDA stood at 88 crores broadly flat quarter on quarter up and up 6.9% year on year with an EBITDA margin at 11%. Importantly this is after absorbing approximately 4 crores of one time impact from the implementation of the new Age code. For financial year 26 we discussed 343 crores with an EBITDA margin of 11.1% the year on year margin moderation versus FY25 as many of the community would remember primarily on account of the demerger related cost as well as the new structural cost of corporate digitized and this now includes the impact from the new wage code as well as the targeted investment in international expansion which we have been speaking about with the foundational to our three by two by three strategy.
Importantly, segment margins improved sharply in quarter four BPM. EBITDA margin expanded 187 bips year on year to 16.3 while tech industry EBITDA margin expanded 289 bps year on year to 12.1% validating our mixed shift thesis. Our priorities remain pure drive a richer second digital mix, improve international revenue contribution, strengthen delivery efficiency and maintain pricing discipline across the portfolio. Productivity initiatives are also yielding Results. Revenue per FTE improved 11.4% year on year 2584K supported by AL delivery and also pyramid optimization now coming to profit after tax and the exceptional items.
The adjusted pack for quarter four FY26 stood at 11 crores compared to 22 crores in quarter three FY26. I would like to take a moment to explain this sequential decline as driven by specific accounting led items that do not reflect the underlying operating performance. In this quarter we had classified certain short term leases during the year which were renegotiated and extended for an extended term and classified them as a lease asset under India’s 116. This has charged an additional 4crores to the India’s financing cost which is below the EBITDA.
Also this year we also took a call to rationalize our residual value policy for some of the property, plant and equipment which were erstwhile carried at a 5% of residual value. This acceleration of depreciation in this quarter to bring it line with the group’s depreciation policy results in an additional depreciation of 4 crores in quarter four. So together these adjustments account for approximately 8 to 9 crores of incremental charges below EBITDA and quarter four. Both are accounting driven and reflect alignment with the Group policy and India standards rather than any declaration in the operating performance.
Reported fact for quarter four was negative 5 crores impacted by an exceptional charge of 16 crores. This represents the past service costs arising from the New Age group which is applicable to the revised compensation structure which the Company is rolling out from 1st of April 2026. This is a one time non cash adjustment with no recurring P and L impact for the full year. Digitad ended financial year 26 with a reported PAT of 6 crores and an adjusted PAT of 70 crores after adjusting for exceptional items of 65 crores relating to BIMA’s related costs, the new labor code for the past service cost and the wage restructuring impact.
FY26 adjusted tacit margin stood at 2.3%. Now moving on to working capital, DSO and Cash Flow there has been significant progress which we have made in tightening our working capital cycle. As was clearly evident in our quarter four we achieved a robust cash conversion. We delivered cash flow from operations of 145 crores during quarter four which translates into an OCFP EBITDA conversion of 165%. This reflects stronger collection rigor, includes revenue assurance and normalization of billing factories post demerger related disruptions.
So you might remember post demerging into Digitad we had to renew and mute all our contracts which impacted our OCS conversion in the first quarters. Now that has been caught up and we are certainly in a very strong position as of year end. For the full year OCF stood at 263 crores representing a 77% conversion of FY26 EBITDA of 343 crores, a healthy outcome considering the disruptions in the first half of the year from innovation of contracts. DSO improved by four days sequentially to 75 days in quarter four and a significant 16 day improvement from the peak of 91 days in quarter one.
FY26 FY26 CAPEX was 105 crores primarily directed towards technology, platform, AI capabilities and infrastructure, scale up on it and leasehold assets. As we enter FY27 we’ll continue to focus on our cash conversion and the DSO discipline as key operating metrics across the organization. Moving on to Balance Sheet Our balance sheet remains healthy with strong liquidity and net GAAP position of 182 crores at the end of quarter four FY26 up from 125 crores at the end of quarter three FY26 an increase of 57 crores.
Our credit profile remains strong. ICRA has assigned a stable and A1 ratings on our bank facilities and also reaffirmed our A1 rating on our commercial paper reflecting the strength of our balance sheet. This gives us flexibility to keep investing in capability building hyperscale, related partnerships, technology platforms and strategic growth opportunities including inorganic opportunities in the tech and difficult space within our defined capital allocation framework while maintaining financial discipline.
Overall, Quarter four has been strong and a confidence inspiring. Close to financial year 26 it delivered revenue growth, strengthened cash conversion, reduce DSO and maintained a healthy balance sheet. At the same time, our tech and digital and international mix continue to improve, segment margins continue to expand meaningfully and we have exited the year with our best quarterly revenue point till date. Now with this I will hand over the call back to the moderator.
Questions and Answers:
Operator
Thank you very much. We will now begin the question and answer session. Anyone who wishes to ask a question may press STAR and one on their touchtone telephone. If you wish to remove yourself from the question queue, you may press star and 2. Participants are requested to use handsets while asking a question. Ladies and gentlemen, we will wait for a moment while the question queue assembles. We’ll take a first question from the line of Gaurav from Capital Farming Consultants. Please go ahead.
Unidentified Participant
Yeah, hi, thanks for an opportunity to ask question. Congratulations to the management set of members. My first question is that since we have reported a high single digit growth in turnover, if you can guide what was the growth in USD terms in FY26 over FY25 since we have guided our vision of USD 1 billion dollar turnover by FY 2031, right? And out of this growth, how much was contributed by our existing clients when we started FY26 and how much was driven by new clients that were born during FY26?
Gurmeet Chahal
Gaurav Good morning. So Gaurav, the constant currency growth is 5.2% over 25 and your second question was if you repeat that, was it about what?
Unidentified Participant
Yeah, I was asking that since you mentioned that 5% growth turnover growth in FY26 in USD terms. So how much of this was driven by existing clients and how much was driven by new clients that we won during FY26.
Gurmeet Chahal
Yeah. So Gaurav, while our existing customers continue to grow this year, given the sales focus, we’ve added slew of new logos. That’s why if you see that our revenue contribution from the top 10 customers actually came down by roughly 200 basis points. Which underscores the point that the new accounts that we added are giving us the revenue momentum in the year.
Unidentified Participant
Okay, so you mean to say entire growth was driven by the new clients that we won during the financial year? Shall we read it like that?
Gurmeet Chahal
No, no, no, Gaurav. What I said is I was answering both your questions. First is both are existing and the new customers grew in revenue. Specifically, what I was answering was the revenue concentration. So I was giving you a data point that the revenue contribution from the top 10 customers came down by roughly 200 basis points. Which reflects the fact that we have added revenue from new customers as well.
Unidentified Participant
I got it. But I think the question remains unanswered. Would you be able to quantify that how much growth was driven by the existing client base and how much was driven by the new acquisitions of client? Would you be in a position to give some data point on that?
Gurmeet Chahal
Sure, sure, sure. I can. Look. In the year we added approximately 205 crores of incremental revenue revenue. Of that 205 crores, about 45% came from new customers that we added in the year. As you know that the in year revenue contribution from newer deals is less because of the ramp up phase and the remainder came from the expansion in the existing customers.
Unidentified Participant
Thanks. My second question is, since our subsidiary All Digital is also a listed entity, right? And just couple of days back they also reported their FY26 numbers, right? So when we compare the standalone old Digi and the consolidated digitized, right? It seems that if we exclude all the numbers from the consolidated digitized, then digitized, remaining digitized, I mean to say, seems to be operating at the losses, right? Because all digitac is profitable and we all know the numbers that they have reported, the fat margins are handsome over there, right?
Not in absolute numbers, but percentage wise. Whereas consolidated digitized, when reporting numbers, not only the high amount of fat numbers and percentage reported by Old digitized is hidden over there, but they are meaningfully less, right? In Consolidated Digital. So is this the correct understanding that the remaining digitized just having the turnover, just having the numbers, but not making much cash, operating cash, I mean to say profitable operations, Right? Is that the correct understanding or you would like to explain in a different way?
Gurmeet Chahal
So Gaurav, that would not be the correct understanding. And the reason is all the corporate costs that we carry are actually residing in Digitide. Which is for across all our operations. Whether it is our subsidiaries in U.S. In Canada, all DG and the Digitide. So the corporate costs are in the digitite. Hence the comparison that you made would not be the right comparison.
Unidentified Participant
But is it? Like many of the IT companies if the corporate is corporate entity or I would say corporate center is bearing all these ads. Right. Then they pass on certain pricing in terms of internal contracts right to their subsidiary. So that each and every subsidiary Visa Visa revenue that they are earning they are having appropriate cost as well do if we are not having that kind of arrangement in digital which is being followed in some of the other listed peers of yours in IT space. Or is it the same practice that is being followed across the board?
Suraj Prasad
So Gaurav, this is Suraj. Let me address that in two parts. What we have the operating model definitely there are cost transfer pricing arrangements between entities. What the operating model is that most of the corporate center leadership as well as the sales leadership which are in international geographies are distributed across multiple legal entities. And most of our international revenues are emanating out of altogether. Because that is led by the sales leadership based in the US as well as the corporate leadership based in India.
So the architecture at Digitide is that the services, the practice, the delivery and the sales leadership are managed centrally. There is a proportion of cost allocated to altogether. You also. You’re right. But that doesn’t take care of the overall corporate cost mostly towards the sales. International sales cost based. So on a like to like basis it may not be fair to compare the standalone P and L and the consolidated P and L in isolation. It has to be looked at holistically.
Unidentified Participant
Okay. Okay.
Suraj Prasad
Just a clarification. I request you
Operator
To join back the Q please. As we have participants waiting for the term. Thank you. Ladies and gentlemen, we request you to restrict to two question at a time. Please kindly rejoin the queue for follow up questions. We’ll take our next question from the line of Aditya Banerjee, an individual investor. Please go ahead.
Unidentified Participant
Hello. Yeah, hi. So I have only one question. That operating cash flow at 165% of EBITDA is exceptionally strong. So what is the sustainable OCF conversion you target going forward?
Suraj Prasad
Yeah, sure. Aditya. So as I mentioned during my opening speech we had a transition into a new company. Which meant all our contracts had to be novated from the name of erstwhile quest to digitized so we had a major completion of our cash cycle in the first quarter. In fact, we had minus 38 in quarter one. So the reflection of what you see in quarter four is also a catch up of the overall full year cash flow. What you should actually look at is the normalized cash flow for the full year, which is around 263 crores, which is around 77% of our operating EBITDA.
So this should be a reasonable target. We in fact had overachieved our ambitions for this year. Our normal target baseline, this is 70% conversion this year. Since we had an extraordinary year, we had significant process improvements in the billing cycles as well as the collections. So we accelerated it over the second half of the year. But on the overall basis you should assume around 70% of cash conversion from the EBITDA.
Unidentified Participant
Okay, so thank you so much.
Operator
Thank you. Next question is from the line of Sanjay Shah from KSA Securities Private Limited. Please go ahead.
Unidentified Participant
Yeah, good morning gentlemen. Thanks for opportunity. So we my question was more on our hyperscale LED pipeline currently how converting into actual revenue from this hyperscale pipeline of AWS, Azure, AC, AGP.
Gurmeet Chahal
Mr. Shah, good morning. So as you recall in FY26 we signed the three partnerships and now that has started to translate into revenue realization for us. First let me tell you that right now approximately 15% of our overall pipeline is hyperscaler led. And then some of the deal, the growth momentum that you saw, 27% year on year in the tech and digital is actually being contributed by the revenue that is translating from the conversion of these deals. The AI center of excellence deal that I highlighted in my opening remark is actually on Azure.
You know, so three things are happening. Our pipeline, the hyperscaler LED pipeline is growing and there is a contribution now directly from our partners in that. Secondly, that is helping us win more and hence the acceleration in tech and digital revenue. And three, that creates the bedrock for AI transformation. As we all know that, you know, AI runs on data and data runs on cloud, to put it simply. So our strategy is clearly working there. Mr. Shah,
Unidentified Participant
Sir, how should investors think about our pearls now commercially? Will it remain service enable layer or can it evolve into a recurring platform or IP revenue? Sure.
Gurmeet Chahal
So Mr. Shah, the Pulse nerve is actually an orchestration layer. So it will not be, it should not be seen as a platform. It is an enabler for the AI transformation. However, we have other IP assets. You know, to give you an example, we have created a platform called DocuSense which is IP Asset reusable asset which we are taking to our customers like that. We have also infused AI into some of our existing platforms like Smart Pay for payroll and digicollect for collections. So they will give us the non linear revenue Pulse Nerve is an orchestration platform which will be an enabler for the large service deals for AI.
Unidentified Participant
Sir, you highlighted strong healthcare outsourcing demand due to US policy changes. Is this translating into a large deal size or faster client conversion? And can we compare this with a company called Sagility?
Gurmeet Chahal
Yeah. So first answer. Yes. In fact in the first quarter of fifth financial year we have already won two new healthcare deals. And if you recall healthcare in US was a new vertical. We started, you know, in 2026, we started to focus in 2026. So our existing customer has expanded. We have added a new capability of revenue center management and now we’ve added two more customers in US alone in the first quarter. So definitely for us healthcare is an area of focus which is already translating into revenue and expansion.
Your second question was comparison with Fragility. As we all know, you know Fragility is a very respected organization WHO is 100% focused on healthcare including payers and providers. Our focus currently, Mr. Shah, is more on the providers. So it’s not a like to like comparison. But yes, we are addressing opportunity which they are also addressing on the provider side. And most of the wins that I highlighted are on the provider side where we are doing three things. We are their revenue enablement partner, we are their customer experience partner and most important now we are their revenue cycle management partner as well.
Unidentified Participant
Very helpful. So my last question was. Sanjay,
Operator
I request you to join back the queue please as we are participants waiting for the talk.
Unidentified Participant
Thank
Operator
You. Next question is from the line of Amit Mehendale from Robocapital. Please go ahead.
Unidentified Participant
Thank you. So my first question is with regard to our revenue revenue growth, I mean looking at 1 billion targets in FYI31, that effectively means that we have to, we are you know, baking in the revenue growth of say upwards of 20%. So are we expecting similar growth for FY27 28 as well?
Gurmeet Chahal
So first of all, like I mentioned in my opening remark, we are very, very confident of a double digit revenue growth in 2728. So that’s the near term, you know. So double digit
Unidentified Participant
Is, can you quantify double digit like 15, 20, 25, some ballpark number will be helpful.
Gurmeet Chahal
Yeah, early to mid teens. Now coming to the FY31 look, our FY31 goal was 8, 400 crores of which we had highlighted that about 17 crore will come from inorganic route. So that means we have to grow at about 15% CAGR. FY26 was the first year of the foundational year. In the six year journey. We are already exiting at 9% year on year momentum. So the 14 to 15% CAGR growth over the period is where very, very confident of that. So our goal doesn’t change from that perspective.
Unidentified Participant
Right. And the second question is on the operating cash flow that we generate. How do we plan to deploy that cash flow? I mean or put it differently like how much do we are we planning to spend on capex and how much money will allocate to acquisitions.
Suraj Prasad
Yeah, thank you. Amit, this is Suraj. So our operating cash flow generation is mostly flowed back into the business. So we typically around 100 crores of cash deployment, typically around 70, 80 crores into my maintenance capex. And typically this year, like this year and FY26, 27 we have two large leasehold premises which we are also moving into. So around 50 crores, 20 crores into that. So barring the maintenance capex is mostly accrual to our cash flows which we will also pursue for our inorganic customers acquisition strategy as well.
So our objective is to maximize our operating processes to improve the DSOs and consistently improve our operating cash conversions. And that will be deployed both for our internal growth as well as for inorganic pursuits.
Unidentified Participant
Okay sir, Great. That’s it. Thank you. Thank you.
Operator
Next question is from the line of Arvind Dureja, an individual investor. Please go ahead.
Unidentified Participant
Hi. Good morning sir. Can you hear me?
Anukool Arora
Yeah,
Unidentified Participant
Hi. Thank you. Thank you for taking my question now sir. You know I have been listening to the con calls since Q4. And I vividly remember that in Q4, FY25 then Q1 and Q2, basically H1, FY26, you were pretty clear that there will be expansion in the margins. But even in Q4 your margins are flat. And now I see that depreciation has also inched up. So ultimately below the EBITDA earlier you your ebit was close to 5% now which has dropped to 3 odd percent or less than 3%. So my question is what will be your guidance for EBIT rather than ebitda?
Because then now I can see depreciation is meaningfully improved. Now on the call you did say 4 odd crore was one off. So even if we exclude that there is still a meaningful, you know expansion and depreciation.
Gurmeet Chahal
So Arvind, thanks for your question. So you had two parts to Your question. Let me address the first one. See if you look at our operational EBITDA actually and like I mentioned in my note up front, barring the wage code alignment that we did for Q4, our operational EBITDA has actually improved. In fact Suraj also highlighted how our margins in the two segments, both BPM and tech and digital improved. You know, so operationally there is an impact margin improvement from an outlook perspective we are confident of 100 basis point margin expansion in the coming year as we exit the coming year.
Unidentified Participant
But sir, I remember in Q2 you were pretty clear that you will see margin expansion in Q4 of FY26 which has not happened. And now you are pushing to Q4 of FY27 meaning we will still have the similar margin of close to 11%. Can you talk about the profitability because it was close to 130 odd crore in FY25 dropped to 70 crore. So what profit and what kind of profitability do we expect? Because ultimately EBITDA is meaning meaningless for an investor. Ultimately we have to look at the profit.
Suraj Prasad
Arvind, this is Suraj. It’s a great point Arvind. So look at it in two parts. First of all the operating margin improvements in our both the segments as we guided are improving. Of course there has been additional element of cost coming by way of the wage code. If you understand we are into a people business. So this fundamentally shifts our baseline cost of our BPM business, particularly India BPM business which was little outside of our guidance as it was not known to us. And your question on depreciation as I mentioned there are two parts to it.
There is an additional accelerated depreciation of around 4 crores which is a one time charge for the quarter four. But fundamentally if you look at our lease payments etc. So we have guided that we’ll be moving towards consolidation of premises which will increase our leasehold assets for the temporary for time being but over a period it will deliver efficiencies. So both these are on track. The operating margin improvement on a year on year basis as Gurmit mentioned, based on the revised structure of wages as well as the new wage code impact for compliance, both factored in as well.
We should be improving it by 100 basis points in the next year. That’s the guidance we can give you at this point.
Unidentified Participant
So now the profit that you have you posted, you know barring one of adjustments of close to 11 Garods plus I suppose 4 Karods for additional depreciation and finance cost so that’s roughly 8 crores. Right. And you minus 25 for taxes which is close to 6. So are you saying that going forward your profitability will be close to 15 to 17? Karods ballpark. Let’s look at it on a full year basis from Arvind. So your adjustments towards the one off items are correct. So some of them if you know I’m. I’m sorry to interrupt.
I mean why should we look at it on full year basis? Because then from Q4 you have this additional depreciation which I suppose will continue from Q1. Earlier last year Q4 your depreciation was 49. This year it’s 66. You said 4 crores is one off. So even if we exclude that I suppose steady state your depreciation going forward should be 62. Am I right?
Suraj Prasad
Yeah. So Arvind, we are making two things. The 4 crore depreciation which is the one off which I mentioned is on our property plant and equipment which is our capital assets. What you’re looking at the depreciation is overall depreciation including the lease assets. Our lease assets have gone up in this year if you notice both digitized and albigee results. We have taken long term leases for the premises which will start reflecting in our lease costs. But it is at a significant better commercial value than what we are existing before the movement.
So you will find an operating improvement in that even despite this depreciation moment. So both the lease assets, the observation, right. That will be at a steady state. But the capex of depreciation of photos which I mentioned is on the property plant in the one time. Hope that’s clear.
Anukool Arora
Thank
Unidentified Participant
You.
Operator
Thank you. Next question is from the line of Anukul Arora from Invid Research. Please go ahead.
Anukool Arora
Yeah, hi. Thanks for the opportunity. So just following up on the last question on the depreciation side. So. So on the steady state are we expecting this standard of 62 or SARODs to continue going forward?
Suraj Prasad
Hello, can you hear me
Operator
Now? We can hear.
Suraj Prasad
So the depreciation which is the one time increase which you can normalizely look at will be around 38 to 40 crores on a lease basis which will be a steady state depreciation almost 120 to 130 crores. And as I mentioned some of the leases are very long term leases. So therefore there will be a slight uptick from the last quarter FY25 if you look at. But if you look at the steady state from quarter four onwards it should be around 40 crores. On a recurring basis which should be consistent,
Anukool Arora
It will be 40 odd crores, right?
Suraj Prasad
That’s right.
Anukool Arora
All right. All right. So my other question, I think in the last call you had mentioned that some inorganic growth as a part of a strategy is what we are looking at. So anything on that? Any potential acquisitions that you have done.
Gurmeet Chahal
So thank you for the question. As we had highlighted that inorganic is a critical part of our growth thesis. So we are continuously looking at targets. In fact as we speak speak we are evaluating about six potential targets. Two at an advanced state. But given that we are a value investor, whatever acquisition that we make will have to pass through the lens of our value thesis. We are hopeful that this year we will be able to make at least one acquisition.
Anukool Arora
Thank you. That would be really great. Just one last question if I can ask.
Operator
I request you to join back the queue please as we have participants waiting for their turn. Thank you.
Suraj Prasad
Next question is. Sorry, one moment for my clarification. This is Suraj. So the earlier question, just to clarify the 40 crores depreciation which I mentioned is on the leasehold assets. The 20 odd crores of the recurring depreciation of the PPE will continue depreciation. If that was the question. We take 760.
Operator
Thank you. We’ll take the next question from the line of Ankit Dharamshi from RNM Capital Trust. Please go ahead.
Anukool Arora
Hi, good afternoon. Thanks for the opportunity. I have a model.
Operator
Yes. Can you use your handset mode though?
Anukool Arora
So my. I have a follow up question. Can you just give a bridge for the 100 patients, I mean 100 pips margin expansion that you guided. How much would be from tech and digital? How much would come from all DG and how much would come from our DPM business? That is the one question. And second question since now we we told that we have moved to the new new campus and now we have away longer term lease contracts. So is there in any, I mean are we looking to save any of our physical assets and I mean any just guide on that.
And third on the growth part also if we put some curve, I mean the double digit growth that we are guiding 14 to 16%. How much would be from all DG and how much would be from the digital, I mean standalone digital.
Gurmeet Chahal
So you had three questions. Let me start with the first one. The margin expansion of 100 basis points. There are essentially three levers. One is the revenue mix which would be led by the acceleration of tech and digital. Second would be the geography mix, you know, pivoting More towards international. And then there is a third element which is the operational efficiencies that we are driving in the business. So the overall 100%, if I were to say, you know, the tech and digital should give us about 40% of that.
The international expansion should also give us about 40%. The remaining will come through the operational efficiencies. So that was your first question. Second question, Ankit, you broke in between a little bit if you don’t mind repeating. So that we answer your exact question.
Anukool Arora
Are we looking to monetize any accounts? Is he going to.
Gurmeet Chahal
No, we are not. And now your third question was that the growth. So look, we have two segments, you know, which is the tech and digital and the BPM. Our stated goal is that by 31 our tech and digital should be contributing 40% and our international should be contributing 50% of the overall revenue. So the revenue acceleration will be biased towards the international which has both BPM and tech and tech standalone. So the majority of the revenue acceleration will come from tech and digital and BPM in international while we continue to grow in the domestic business as well.
So I hope I have answered all three of your questions. Ankit,
Anukool Arora
Ankit, Sorry
Operator
Your voice is not clear, it is sounding muffled. We’ve lost the connection. We’ll move on to the next question from the line of Manoj Jetwa from KSC Shares and securities. Please go ahead.
Unidentified Participant
Good morning sir and thank you for the opportunity. So my question is pertaining to healthcare opportunity in US as we are focusing more on the provider side which is almost around 200 to 300 billion dollar opportunity to where we are standing into debt right now and how we envisage the healthcare opportunity in achieving the goal of 1 billion dollar in revenue by FY31, sir.
Gurmeet Chahal
Sure Mr. Jitra, like I had highlighted to a previous question, healthcare is a chosen vertical for us. We started to focus on healthcare in a meaningful way only in FY26. We are already crossed about $25 million of revenue there, slightly more than that. By 31 we believe that healthcare will be 12 to 15% of our revenue mix. So that means we are looking at about 120 to 150 million. So it’s almost five and a half to six times growth from where we are. So we are actually going to incubate, we have started to incubate a new line of vertical and it will be a meaningful 12 to 15% of our contribution when we are a billion dollar company.
Unidentified Participant
So my second question is pertaining to the vision of the one billion Dollar revenue. But how do you reconcile the present perception of the investors and what all the milestones and investors should see which could think the company from a solution driven company rather than just a BPM company. Sir.
Gurmeet Chahal
Yeah, so you’re absolutely right. Look, we are pivoting towards both tech and digital and international. In fact as an investor you should look at the acceleration in these two on tech and digital 27% year on year growth and in international 16% year on year growth. I would argue that both are actually in the topmost quadrant of the industry. So the thesis that we had when we started the journey that these are the two areas we are going to double down, we have done that and we have actually demonstrated in FY26 that it is working.
And the proof is in the growth that we are seeing in those two segments. And like I answered to a previous question on the architecture for 1 billion. So when we started that our vision was 8400 crores by 31001700 crores to come in organic. We are exiting the year at 9% momentum. So now we have to grow at about 14 to 15% organic which we are super confident given the wins that we have had, the traction we are seeing and the current pipeline that we have.
Operator
Thank you.
Unidentified Participant
Manoj,
Operator
I request you to join back the queue please. Thank you. Next question is from the line of Gaurav from Capital Farming consultants. Please go ahead.
Unidentified Participant
Yeah, thanks for follow up question. Since we are saying that we have a healthy balance sheet, right. And surplus cash. But we can see that there is finance cost on quarterly basis as well as on yearly basis. So Suraj, if you can help 100% understanding what exactly is this finance cost? This is interest or there is borrowing or something else. That is the first part.
Suraj Prasad
Sure. So if you look at it our finance cost for a quarter, if you look at the last quarter we had an overall cost of around 15 crores. Office around 12 crores are coming from my India’s financing cost. As I mentioned this includes the one time of 4 and 4 crores which was done from a recognition of leases. So on an organic basis if you look at around 8 to 9 crores is a funding cost which is coming from a lease accounting. The balance is a mix of two. Roughly around 90% of that would be coming from our working capital lines which is predominantly now at US and Canada business.
At a standalone level. We don’t have any debt and balances towards your financing cost as per defined benefit plan accounting. So that it also includes the accounting cost to it. But overall, if you knock off the financing cost from the leases, it is with the meaning tool on a quarterly basis.
Unidentified Participant
Yeah. So second part is just for understanding purpose in terms of our business. Right. Since we have a large headcount that we have employed for a lot of our customers depending on the assignments that we have. Right. So if this staff of ours headcount of ours, do they work from our premises which is owned by the company on its balance sheet or do we have the rented premises for which we are supposed to pay the monthly rent? If yes, then on a quarterly basis in the numbers that we have reported, in which line item does that rent resides?
Suraj Prasad
Okay. So Gaurav, to answer your first question, almost all of our premises are on lease. We have only one owned premises which is owned by the company for a small set of people. But primarily it is a leased model. So most of our employees work out of office and they are out of lease premises. Now to your second question. Where does rent resides? As for the in place accounting of 116, accounting is 116. These are broken into two parts. The leases are amortized over the lease term and they reflect in two line items.
One as depreciation and one as financing cost. So if you look at the corresponding item you will find the right of use asset which we create in our balance sheet for those leases and the lease liability also which is created in our balance sheet. So those rental costs are reflecting your depreciation and interest. To an earlier question which I mentioned, the overall cost of around 44 crores in the quarter. 4. The normalized basis 40 crores is towards the India’s depreciation. It may not directly translate to the rental.
So for which we can look at our cash flow statement where our annual lease payments are on 168 crores. These are sort of more closer estimate to the actual rental cost the company are paying on a cash basis. I hope that just a
Unidentified Participant
Clarity on this. Just a clarity on this. Since you highlighted that in our cash flow statement, right. This lease payments 168cr that you are mentioning. And since we are highlighting also that our EBITDA is somewhere around 18% and these lease payments are after that EBITDA line item like interest and the depreciation. And since it is an actual cash outflow to run the business. So as an investor, right. When we are looking at the reported EBITDA number, doesn’t it signify that we are looking at a wrong number to evaluate the business?
Like the CEO just mentioned that we are a Value investor as a company. Right. So as an investor when we evaluate digitized we should include the lease payments that is being paid when arriving at the net profitability. Right. Like someone was asking, we should concentrate more on the profit before interest and taxes. Right. A bit. Rather than the ebitda. Because lease payment and which way we are supposed to make the payment. It is not that we have made the capex and on that the non cash item depreciation is getting charged which is an end.
Which is cash flow to the company but it is cash outflow from the company. Is that the correct understanding that our profitability is marginally less what we are claiming in terms of the again and again claiming on the EBITDA numbers? Cash. Cash influential. And by I’m coming on that number our envisaged return on equity 18% by FY 2020, 31. And now when we are looking at the reported numbers it is less than the fd. Right. Which investors are getting. So I’m. I’m connecting both of them. Is it. Is it really depressed numbers or something else?
Suraj Prasad
Gaurav, I think if you understand how the financial reporting happens this is not an implicit report depressed numbers. This is how the Indian accounting standards mandated to be reported. Right. So when you look at a return of equity you every investor should look at the profit after tax which is even after your tax calculations for all practical purposes. So you’re right in saying that the operating health of the company would be reported directly by with ebit which is normally how the investors and the company also internally looks at it.
However, the financial reporting standards required to be mentioned below the line because it gives equal treatment to companies who have their own premises versus the lease premises. There’s an equitable comparison method. It is as per the law of the land. I hope that’s clear. Thanks a lot.
Operator
Thank you. Next question is from the line of Mantan Patel from Patel Investments. Please go ahead.
Anukool Arora
Hello sir. Good morning. I’m audible.
Operator
Yes, please go ahead
Anukool Arora
Sir. I have only one simple question. What will be our steady state net profit margin? The bottom line without adjustments and anything.
Suraj Prasad
So if you look at the adjustments which you have done during the year. If you normalize that you have a reported path of 2.3%. For the financial. This is the number if you exclude all the one timers or exceptional items etc from your financial reporting. So that’s the number for 526.
Anukool Arora
No, I am asking about the percentage. In percentage terms what will be the debt profit margin in coming quarters like steady state.
Suraj Prasad
Yeah. So if you look at a steady state from a guidance perspective. As mentioned for an earlier question, our operating margin performance, we’re expanding it target is to move by 100 basis points in the next full financial year. That definitely will have a disproportionate impact on the pat because as you mentioned that takes into account multiple of depreciation, leases etc. So it will be much higher than that at the bottom line level. If you look at like to like. But from an operating performance what we should be looking at is a hundred bits expansion in mind.
Anukool Arora
Sir. Still my question is not answered. Sir, I am asking only for one number. Net profit margin in percentage terms steady state.
Suraj Prasad
So that’s what we can say. This is a gradual process of improvement for 100 basis points by end of next year. Sir, we can’t give number. Sir, I’m not asking for
Anukool Arora
Guidance or I’m just asking for like steady state margins in percentage terms like 3%, 4%. What will be the net profit margin without adjustments. And I’m not talking about EBITDA number. I’m talking about net profit margin percentage.
Rajesh Lachhani
Mansanji, this is Rajeshani. See that eventually is guidance, right? If we guide on the revenue and we give you the profit percentage it’s actually translating into a guidance of pat which we normally do not do. I think Gurmeet and Suraj have very clearly mentioned that we are looking for a operating ebitda expansion of 100bps by exit Q4FY27. And you can come down to the profit numbers by yourself. Because you’ve already given guidance for depreciation and finance cost etc. So I’ll ask you to do that workings and arrive at the conclusion
Anukool Arora
So that I’m doing for last two or three quarters. But in every quarter there is some exceptional items. And in this quarter there is huge increase in depreciation and amortization cost. So those numbers I cannot. I cannot arrive at
Suraj Prasad
Suraj. Again as we said we have also mentioned about what the specific exceptional items and quarter four mostly in the depreciation side as well as from the wage code. So if you understand from quarter one of next year the full wage restructuring and the wage code is fully in impact. So you can assume that the expansion what we talked about in the operation EBITDA is relating to that my depreciation is. I’ve already guided the incremental depreciation for the full year both on leases as well as others at a steady state basis.
As I mentioned, if you’re on 2.3% of the but your corresponding increase in PAT would be higher than what it is in operating margin is what I mentioned. So from a baseline perspective, what I’ve given you is the current baseline of 2.3%. Okay, thank you.
Operator
Thank you, ladies and gentlemen. We’ll take that as the last question for today. I now hand the conference over to management for closing comments. Over to you,
Gurmeet Chahal
Amelia. Thank you. And I want to thank all the participants who joined us today. Like I mentioned earlier, we are entering FY27 with confidence, sharp execution capabilities and clear path to long term value creation for our shareholders. Once again, thank you.
Operator
Thank you. On behalf of arihant Capital Markets Ltd. That concludes this conference. Thank you for joining us. And you may now disconnect your lines. Thank you.