Hinduja Global Solutions Ltd (NSE: HGS) Q2 2025 Earnings Call dated Nov. 19, 2024
Corporate Participants:
Darshan Mankad — Senior Account Director
Partha DeSarkar — Group CEO & Whole-time Director
Vynsley Fernandes — Whole-time Director & Head of Digital Media Business
Srinivas Palakodeti — Global CFO
Analysts:
Dheeraj Kumar — Analyst
Ranga Prasad — Analyst
Anuj Panwar — Analyst
Presentation:
Operator
Good evening, ladies and gentlemen. A very warm welcome to the Q2 and H1 FY 2025 Earnings Call of Hinduja Global Solutions Limited.
From the senior management, we have with us today, Mr. Partha DeSarkar, Executive Director and Group CEO, HGS; Mr. Vynsley Fernandes, Whole-Time Director, HGS and Head of Digital Media Business; Mr. Srinivas Palakodeti, Global CFO, HGS; and Mr. Amar Chintopanth, Head of Finance, HGS Media. [Operator Instructions]
I now hand the conference over to Mr. Darshan Mankad from Adfactors PR. Thank you, and over to you, sir.
Darshan Mankad — Senior Account Director
Thank you, Darvin. Good evening, everyone. Welcome you to the earnings call of Hinduja Global Solutions Limited for the second quarter and half year ended September 30, 2024.
Before we begin the earnings call, I would like to mention that some of the statements made during today’s call might be forward-looking in nature, and hence, it may involve risks and uncertainties, including those related to the future financial and operating performance of the Company.
Please bear with us if there is a call drop during the course of the conference call. We would ensure the call is reconnected the soonest. I would now hand over the call to Partha, sir, for opening remarks. Over to you, sir.
Partha DeSarkar — Group CEO & Whole-time Director
Thank you and very good evening to all of you. Before I start, want to do an audio check. Am I audible?
Operator
Sir, you are loud and clear, sir.
Partha DeSarkar — Group CEO & Whole-time Director
Perfect. Thank you so much for confirming that. So ladies and gentlemen my pleasure to be with you again for our earnings conference call for quarter two. There is a presentation out on our website, which we will refer to as we speak during our conference call.
So it is the usual safety statement about the future statement — future-looking statements that we will make. And after that, we’ll get into our introductory slide, which is Slide 4, which talks about the Company at a glance. We are the global leader in optimizing customer experience, digital transformation, business profit management, and digital ecosystem. So there are lots of stats out there have known us for a while.
I’m not going to go through all the details out here. Suffice to say that we have three very strong businesses that we manage. I’ll go to Slide 5, which talks about the financial performance. Quarter two FY ’25. Our total income stood at INR1,207.6 crores, that’s approximately $144.4 million. Our operating revenues were at INR1,087.2 crores, about $150 million. And our total EBITDA was INR154.8 crores, which is $18.5 million. EBITDA margins were at 12.8%.
If you take the full YTD for the first half of the year, when the total income stood at INR2,426.2 crores, that is $290.2 million. Our operating revenue was at INR2,179.1 crores, which is $260.7 million and the total EBITDA was INR298.3 crores, which is $35.7 million. EBITDA margins were at 12.3%.
Key highlights that I’d like to call out, I’m on Slide 6 now. We continue to see challenges from our revenue growth and a profitability because revenue growth has been muted. There are macroeconomic pressures, there were election uncertainties, delay in decision-making and awarding contracts, and drop in revenues from the U.K. business.
Hopefully, the two of the large elections now over, and a change of government now firmly in place, we will keep clarity on direction. And therefore, decision-making will become faster in the second half of the year.
Our engagement with existing clients and the pipeline is actually quite healthy. Which finds two main contracts in North America with core technology services. So this is a point that I’d like to call out that our technology services revenues are actually starting to do very, very well. You know that we tried to — we have been in our journey to increase the digital component of our revenues. And I am happy to state that the two wins that we have significant core technology driven.
Similarly, our aging techs, which is our AI-driven platform for customer experience transformation that has won for the UK G-Cloud Framework submission. That means the entire U.K. public sector can use the G-Cloud for their services. So it’s a big win for us.
It all almost open up the market for technology services for us consisting of 24 large U.K. public sector and 317 provincial government services. Very excited with this win. This is happened early in October-November. And though we are yet to pick up revenues from this particular win, it qualifies us for bidding for the U.K. public sector.
Our Australian business HGS OSS, is seeing strong growth offshore in trend to India by our Australian clients as well. New geographies in Colombia and South Africa are tracking well, the promising pipeline for South Africa.
Cybersecurity services, we’ve just entered into cybersecurity services with seven new solution offerings. These are all AI-led, and that’s the new thing about our services. Cybersecurity everyone has a solution. We have an AI-powered solution.
As I mentioned, in the U.K. public sector A Intex [Phonetic], is our big differentiator in winning new business with clients has been deployed at 16 clients across Canada, U.S., and Jamaica. And as we move into more technology-driven services, we are focusing on skills training for employees with an emphasis on digital.
I move to the next slide, which gives you a snapshot of our Cape Town operations. So you see the building on the top right, it is a campus on Woodstock in Capetown. The site for the famous street which is well known for its association with Nelson Mandela [Phonetic].
South Africa’s business case is that it provides about 40% to 60% savings per FTE. Today, we have about 136 states that have been built up. But there are few stores if and when the demand picks up, we can quickly outsource [Phonetic]. We support four languages: English, German, French and Dutch.
Slide 8. You would have seen some publicity around our AI hub launch in the Philippines. It is a state-of-the-art facility where we are experimenting with our AI service offerings. It is an interactive space where clients, partners, and employees can leverage advanced technologies of automation, analytics, and AI. We have a virtual reality, visual AI, and speech AI, all these technologies on display to showcase to our clients what we can do for them. So very excited with that.
The most important recognition that one can talk about is the recognition that you’ve got from Anil Ji 18 reason and [Phonetic] as leaders quadrant for intelligent agent experience and intelligent CX AI and analytics. You’ll see that on Slide 9. We have under leaders quadrant in the top right hand.
So our strategic focus continues to remain the same. We are a vertical-specific business, and we are driving point solutions toward lean ops with intelligent automation, cost-effective clouds, express on demand. Leading into the potential of Applied AI. Most of our AI solutions are actually catered to client-specific business environment. Our AI partner ecosystem Index, which is now being customized for verticals that we are servicing and the dedicated AI lab.
I talked about talent management. As we steer the Company to more and more digital frontiers, we are going through a massively scaling exercise for our employees across the Colombia, South Africa, Philippines, and India to train them on AI and technology skills.
The last slide talks about what we’re talking about of bringing digital and traditional business together in the intersection of these two circles, which we are calling digital operations, which is AI-driven process management, process improvement, unattended customer service using conversational bots or interactive algorithms. Attended customer service where the human is in the loop and therefore, is continuously watching from the actions that transactional ideas given by AI are continuing to have and AI Ops, which is data-gathering, labeling.
So this is the middle part of the intersection of our CX business and our digital business. Whereas on the two extremes, we will have a conventional business, which is available from localness, from systems integration, etc., and the traditional CNCS contact center with remote deployment, non-targeted back office, and the technology [Phonetic].
So that is the end of my section of the presentation. I will hand it over to my peer, Vyns, to take you through the Digital Media business update.
Vyns, over to you.
Vynsley Fernandes — Whole-time Director & Head of Digital Media Business
Thank you, Partha. Thank you, and good evening, everyone, and again, welcome to the call on the Q2 earnings of FY ’25 and H1 as well.
I’m going straight to Slide 13. I hope everyone can hear me. Darshan, can you all confirm if my audio is through? I’m assuming it’s clear.
Darshan Mankad — Senior Account Director
You are loud and clear, sir.
Vynsley Fernandes — Whole-time Director & Head of Digital Media Business
Great. Great. Thank you. I’m going straight to Slide 13. I normally don’t dwell too much on industry and environment. But this time, I thought it’s important because I’m sure a lot of you have been reading in the press and watching on television that there’s this huge exciting opportunity around the corner called broadband over satellite or basically receiving Internet from space, from a satellite. And full complete kudos to the government of India to push this actively and effectively. What it will do is it will provide connectivity to underserved and rural markets in the country.
So what’s broadband over satellite, just to kind of dumb it down and just to let you know, it’s like — imagine a tiny little dish on your rooftop or even in your balcony or even on top of your car, and there are satellites overhead, which provide you broadband. So effectively, you’re not connected through any wire, you are not connected through any medium, there’s just a little satellite dish connecting to your device in your home where you can receive broadband or you can receive Internet connectivity.
So this is a great model for the future. The reason why I chose to dwell on it is because if you’ll recall, a couple of quarters ago, even over a year ago, OneOTT Intertainment Limited, our broadband vertical has been working on this. We have conducted — and I shared this in our Investor calls as well. We have conducted tests in places like Tawang in Arunachal Pradesh, in, Pulwama, in Jammu and Kashmir, where we actually tested using this technology in terms of how it could bring education to remote parts of the country and bring infotainment.
And if you look at this slide, and this is all thanks to news that is available in the marketplace. The best part about it is that suddenly — access to education, healthcare, the public services of the government, e-commerce, suddenly becomes available everywhere, right, all across the country.
And your company that is OneOTT Intertainment Limited and the fact that we’ve got this amazing — through NXTDIGITAL, we’re already connected in about 65% of rural India. We’re really excited about the opportunity this provides for us. This is a sea change. And for us, it’s probably the next big thing that will happen as we look to, obviously, partner become a service provider to the large global players, who are looking at this space. So stay posted for more news on this subject.
Going to Slide 14. I shared in the last quarter that there were a couple of initiatives that we had rolled out. I thought it was important to update all of you with the progress on that. If you look at OneBusiness, OneBusiness was essentially a product that we’ve rolled out through a proof of concept in parts of Mumbai in August. And the idea was, listen, we are sitting on so much of connectivity, how can we leverage it to offer our existing network to offer commercial broadband mainly to the MSME and the SOHO segments.
SOHO segments are — is basically the small office, home office. You’re talking about lawyers, doctors, chartered accountants, designers, people working from home and we ran this proof of concept, and we’ve been able to successfully carry out. We signed on some very, very nice clients in the last quarter itself, right, from Kalyan Jewelers to the Prestige Group. And the POC has been successfully completed, and we’re looking to roll it out across key markets. Essentially, again, we’re providing quality broadband, quality, connectivity to markets across MTN.
And then as things kind of pan out, we look to expand it across to the rest of India. I also shared with you that there would be effectively two offerings. One would be the simple Business Connect offering and there would be a Business Connect Pro. So this is ILL or Internet Lease Line, it’s a dedicated connection to customers and with much higher SLAs than a dedicated customer care team.
So that is on OneBusiness. One7star, as I shared with you, was the relationship we forged early this year. And the strategy was effectively to work with a strong partner and grow the business in certain key markets. We, as you know, took on a majority acquisition of leading Mumbai-based ISP 7star’s broadband business. And this has been an exceptional time for us. We’ve rebranded the business as One7star. So if you see the graphic on your screen on Slide 14, the 7 Star Digital is now One7star. And it’s been doing very well. I thought it pertinent again just to keep you all posted.
And in fact, Slide 15 — if you will go to Slide 15, it’s the branding and communications that we’ve rolled out in quarter — well, quarter two mainly rebranding it for not just existing customers, but also the pitch to new customers. So we’ve come out with graphics all over, holdings, bus stops, T-shirts for the teams, new portal, new website. And we hope any of you who is the customer of 7 Star in the past is now enjoying the One7star experience. And we believe that this is another very strong activity that we embarked upon, and we plan to see it grow significantly as we go forward.
In terms of where we are, this Slide 16 is by far a very critical one, and I wanted to share it with you because I distinctly recall a question at the end of the Q4 analyst call where — when we presented growth, well, we did over 28% last year, if you recall, in terms of subscriber base. And I’ve categorically mentioned that our focus this year would be on improving profitability and moving to a strong profitable base. And if you look at this graphic — if you look at the graphic on the left, we are focused on churning low-yield customers, customers where we really weren’t able to make any money. These were low-revenue customers. And instead of that, we’re focused on improving the quality of service and therefore, driving the broadband ARPUs or average revenue per user.
So while we’re seeing a trend across where revenues — ARPUs are either going down or remaining flat, we’re quite happy that we’ve been able to grow from INR174 ARPU last year in Q2 to INR189. I think the more important thing is that again — which I had mentioned at the end of the Q4 — at the end of FY ’24 analysis, is that our focus would be on ensuring our mix — our revenue mix or our product mix would be sufficiently diversified so as to not — so not just reduce the dependency on the retail segment, which, as you know, would have ARPUs that would face challenges going forward, but more importantly, would cater to a diversified set of customers, which have greater duration of longevity and greater ARPUs as well.
And if you look at the pie chart there, we’ve been able to achieve that in H1 of this year, where today, 10% of our top line for H1 comes from our Enterprise segment and that is very good, and we look to expand that even as we look to expand the pie. And the new managed service model, which, again, I mentioned in the last quarter presentation that we were looking to a focused alliance — with triple players in alliance. We already — it already accounts for around 5% of the top line, not just triple play, but other partners as well. And we believe that this is the future going forward, strong collaboration, leveraging our expertise in technology, leveraging our expertise in network, having the best people on board, and being able to support smaller ISPs in their growth story, managing their businesses to them. And obviously, a win-win situation for the managed service partner as well as for our Company.
And that is also a factor in digital television. We’ve continued to improve our yield. There’s been a slew of measures. If you look at the graph on the right-hand side, everywhere, we’re promoting our mix product — or our integrated product, which is digital television plus broadband plus OTT. So overall, our focus is quality revenue customers across DTV and broadband. We know that there are challenges in the market, challenges in the industry, but I think what always has kept the entire Hinduja Global Solutions apart from the rest is our ability to innovate and leverage technology for tomorrow. So I think we’ve been able to do that pretty well. It’s undoubtedly an uphill task, but we’ll keep on pegging away at that.
With that, I think I’m done at the end of my presentation, and that was Slide 16. And I’m now going to hand over to Pala, Srinivas Palakodeti, who is our Global CFO. Thank you all for listening patiently. Much appreciated. Pala, over to you.
Srinivas Palakodeti — Global CFO
Thank you, Vyns. Good afternoon, everyone. Thank you for joining us on this Q2 earnings call. I hope my voice is clear.
Vynsley Fernandes — Whole-time Director & Head of Digital Media Business
Yes, Pala, loud and clear.
Srinivas Palakodeti — Global CFO
Thank you, Vyns. I’m on Slide 18. This is the revenues performance for the quarter ended September ’24. So on a year-on-year basis, there is a drop in revenues by roughly about 8%. The drop in revenue on the BPM side is about 13%; and on the media side, the revenues are up by about 10%, which is leading to the overall drop of 8%. And this drop in revenues is primarily due to reduction in revenues from our U.K. business, again, primarily from the U.K. sector.
So for the first half of — for the quarter ended — actually for Q1 and Q2 of the current year, the BPM business accounts for around 71% to 72%, and the media business is about 28%. And compared to the same period last year, it was — about 78% was coming from the BPM business and about 22% was coming from the media business.
On the margin side, our EBITDA margins have shown an improvement on a sequential basis, up from 11.8% to 12.8%, but lower than where we were a year ago, where the margins were about 15.9%.
One thing to call out. In case between Q1 and Q2 in the current year, there is a decline in other income. While this is primarily because of the exchange rate fluctuations, in Q1, we had an FX gain of about INR8.3 crores, and in Q2, that became a loss of INR8.9 crores. So on the other income side alone, there is a swing of about INR17.2 crores, primarily on the account of the FX variation.
And this is primarily happening because of the — as a global company, our revenues costs are accounted into multiple currencies. And as you know, FX movements have been pretty volatile, not just between USD and INR, it’s also been volatile between USD and GBP as well as USD and JMD. Practically, all our currencies have shown volatility.
Moving on to the next slide. On a half-yearly basis, our revenues are down by about 5.8%. And at the EBITDA margins, we are down from about 15.6% to 12.3%. PAT for the first half of the year, including profits from the discontinued operation, came in at about INR111 crores, substantially higher than what we had at INR35.1 crores for the first half of the previous financial year.
Moving on to Slide 20. This is on the balance sheet. Our balance sheet continues to remain strong. Our net worth as of September is over INR7,828 crores. There is an increase in the DSO days between March ’24, which was a 25-day — 62 days to 65 days at September ’24. Clearly, there is seasonality. If you see what happened last year from September ’23, Q2 FY ’24 where it was 67 days, it has come down to 62 days. So we have no concerns on our receivables. All our clients are well-established and strong customers who pay us.
The other thing to call out is on the debt side between March of ’24 when we had total debt of INR1,306 crores, that debt has reduced by INR49 crores to about INR1,257 crores as of 31st of — 30th of September. So we have been able to reduce our total debt during the current first half of the financial year.
Moving on to Slide 22. As I said, this is on the cash flow side. Key thing to call out is during the first half of the year, our capex stands at close to INR66 crores, which is roughly about INR5 crores lower than the same period last year. So we are being prudent about our capex and also this mix is being determined by the type of business which we are doing. Other thing — only other thing to call out is the — we had some payments to be made for the TekLink acquisition, which continues to perform well. So there were some earn-out payments. And during the year, we paid out roughly about INR129.5 crores towards the TekLink acquisition.
Moving on to Slide 22. As I said, our balance sheet is strong. We have shareholder funds of about INR7,083 [Phonetic] crores and our total net cash and treasury surplus, which is total cash and treasury surplus net of debt that stands at INR5,090 crores. And if you see between March and September, there is an increase of about INR77 crores on a net treasury and cash surplus being driven by a reduction in debt as well as increase in the overall gross in treasury and cash surplus. So we are a strong — we have a strong position on the balance sheet side.
Coming — moving to Slide 23. This is on the revenue split. Our CX services account for about 57% and our Digital and Media business accounts for 43% of the revenues. Within this 43%, so about 21% of the total revenues come from the digital services, what Partha referred to in his slide of Digital business as well as from the Digital Operations business. The CX services share has remained fairly constant in the range of 57% between Q1 of this year and Q2 of this year, though the digital revenues have shown a slight increase of the total revenue.
Moving on to Slide 24. This is the revenue by origination and by delivery. You would see that the U.K. business — from an origination perspective, U.K. business is around 12%. This has shown a decline from what it was in the earlier periods for reasons you mentioned in our earnings calls. We had a lot of revenues coming in from — related to COVID. And with COVID behind us, some of those revenues have also dropped — have tapered off and dropped.
So the share of U.K. revenues has come down. The India revenues of 36% comprise the Media business, the HRO business, and we do have some clients on the digital side who are from India, primarily subsidiaries of clients for whom we do work overseas. From a delivery point of view, India accounts for about 40%, U.S. is about 23% and Canada and U.K. at 13% and 10%. Philippines comes in at 12%. We expect, as we grow, to have, Partha mentioned, South Africa. We do expect that to grow going forward, looking at the fact that operations have started in the current quarter, and the pipeline looks promising.
Moving to the next slide. This is revenue by vertical. The tech and media and telecom sector that has not changed. That’s been at the range of 55% between Q1 and Q2 of this year. As far as the public sector is concerned, this clearly has shown a dip. It was in the range of about 12% earlier, that has come down to about 8%. As I mentioned, this is primarily from the U.K. sector — U.K. business where revenues have dropped from quite a few of the public sector clients, primarily on the health care side, related to COVID. BFSI has shown an increase and stands at 16%. Consumer and retail have also shown an increase at 13%. Some increase in the Others. So that’s a broad breakup in terms of our total revenue split for the quarter.
On the — moving on to Slide 26. This is the client concentration. The top customer accounts for about 10.6%. This is from the BPM business, top five accounts for about 24% and the top 10 customers account for about 32%. These all come from the BPM business. The most — a lot of the digital business — the media business are — clients are from the retail side. But we do expect that to change, as Vyns mentioned that we are going to focus more on the corporate as well as the small office businesses, semi corporates for the broadband business.
On the DSO side, there is, as I said, an increase between March ’24 to September ’24 as well as from June ’24 to June ’25, but as I mentioned on the earlier slide, this stood at about 67 in September ’24 — sorry, September ’23, that came down to 62 days in March ’24 and has come down to 65 as of September ’24. So roughly a 2 DSO day reduction between Septembers ’24 and ’25. And more importantly, as I mentioned, that we have a strong client base and — who are financially strong. And so we have no discomfort or any concerns on the receivable side.
This is pretty much my last slide. So I would now like to open the Q&A session. And also back to Darshan for moderating the Q&A session. Thank you, everyone, for listening to me.
Questions and Answers:
Operator
Thank you very much. We will now begin the question-and-answer session. [Operator Instructions]
We have the first question from the line of Dheeraj Kumar, an Individual Investor. Please go-ahead.
Dheeraj Kumar
Thank you for taking my question. I would like to know the current revenue contribution from the cybersecurity services and OneBusiness, One star. And what is the contribution that we are looking forward in maybe the coming two or three years?
Partha DeSarkar
Pala, do you want to talk about the cybersecurity aspect?
Srinivas Palakodeti
Yes. Thank you for your question. Cybersecurity is something which we have started only in the current financial year. So revenues at this stage are not — in the current quarter are not significant, but this is an area which looks promising, and we expect that to grow going forward. It may take a year or two to build up some scale, but this is an area of large growth potential going forward. Vyns, you want to take the one about.
Vynsley Fernandes
Yes, sure.
Dheeraj Kumar
Just wanted to understand the precise number, is it INR1 crore, INR10 crore? Do you have any precise number for cybersecurity, even if it’s not significant?
Srinivas Palakodeti
I need — I don’t have it off hand, to be honest. I need to check and I’ll have to come back.
Dheeraj Kumar
Okay. Thank you. And OneBusiness, One star?
Vynsley Fernandes
Yes, yes. So sir, One7star is actually more a joint venture where they had an existing business itself. The idea of strategically partnering with them is not so much financial, but it’s strategic in being able to expand in markets. So rather than looking at it from a revenue perspective, we are looking at it from a reduced cost of acquisition.
So my cost of acquisition, if it is X in parts of Western Mumbai, it reduces significantly by about 20% to 25%. That’s how One7star works. On OneBusiness, your question is absolutely valid. It’s a new product that has been rolled out. The ARPUs for such a business, I can share with you the ARPUs are closer to about INR10,000 quite easily for a link.
What will be the quantum of value? We’ve only completed a POC, which has given us about 17 to 24-odd links. We’re just rolling it across Mumbai in the first phase and then — Mumbai, Thane, and Navi Mumbai and then taking it to other cities. So I think by the end of Q4, we will see traction from Mumbai, Thane, and Navi Mumbai and then onwards to the other markets.
Dheeraj Kumar
And what is the contribution that we are looking forward, maybe in the coming three years?
Vynsley Fernandes
We — I’ll tell you, we just did a POC, right, in August, sir, right? It was a three-month POC, which was August, September, October. So we’re still in the process of firming up a business plan. But as I mentioned to you, and if you look at the pie chart, our idea was more to ensure that our dependence on the retail sector reduces. To what quantum? That is a bit of a difficult thing to mention right now.
But I can promise you this that we’ll definitely be in a position to give you a much better sense once it’s commercially rolled out in — towards the end of Q3. So by Q4, we’ll be able to give you actual numbers, sir.
Dheeraj Kumar
Okay, understand fair enough. The reason I’m asking this question is because since the past 12 quarters, the Company’s earnings have remained stagnant from almost at the same level and it’s reflecting in the share price. Our share price is a three-year low and we would like to know if the Company is working on anything new, which could increase revenue in the future and thus also lift it for all the investors.
Srinivas Palakodeti
Absolutely, sir.
Dheeraj Kumar
And my last question regarding the financials. I see that we have borrowings of around INR100 crores. But I don’t see the reason why we have this debt when we have so much of cash flow in our balance sheet. The interest that we are paying is reflecting on the profit and loss statement, and there are many who just read the profit and loss statement and invest or sell the stock. So what is the reason behind this?
Srinivas Palakodeti
Let me take that. Good question. So the numbers that we have presented are at a consolidated level, whether it is debt or net treasury cash [Phonetic]. But the — a lot of the cash is come from the sale of the India — sale of the health care business. And that money is outside India and earning reasonable returns from a dollar return perspective.
But, technically, you could bring in money into India and bulk of the money in India has been used for buyback transaction costs, other growth initiatives. But if you bring the money back to India, you would end up having a large tax in the form of tax on dividends. And — so that’s one of the reasons coming in the way of bringing all the money back to India. There would be tax — a lot of tax inefficiencies, which is coming.
Dheeraj Kumar
Yes, totally fair. I think that it’s a good way to look at it. And how are we going — what are the plans to use that money because it’s been a long time after the sale of the business? And are we planning any acquisitions? Or are we planning any expansion? Or will it just stay invested and we will only gain the interest on it?
Srinivas Palakodeti
No. So good question. So if you go back to what we have done, we did the — soon after the sale of the health care business, we acquired a business called Diversify, then we acquired a business called TekLink in USA that acquisition happened in the month of — I mean, it happened in February of 2023. So currently, we continue to look for opportunities for growth.
It could be — like we started operations in Colombia and South Africa or it could be through acquisition. So we continue to look for acquisitions, which fit what we want to do and more importantly at valuations, which makes sense.
Dheeraj Kumar
And these two acquisitions that we have done, are they in the same domain of providing IT or IT management services or are they — do they belong to a different business?
Srinivas Palakodeti
So the business, TekLink, which we acquired that’s into — primarily into analytics, so which is part of our overall plan to grow the digital operations and the digital service. The other acquisition which we made, it’s called Diversify. It is an Australian company. It is into the traditional offshoring.
And also a little bit of a niche business called micro staffing, but more importantly, the primary rationale for doing that was to get access to the Australian market because we were not present in Australia until that time. And what we are seeing now over a period of time is a lot of traction for the digital services, a lot of traction opportunities coming up for catering through the UK — sorry, through the Australian public sector as well as for the traditional BPM business, offshoring into India and Philippines. These things clearly take time, but we are pretty happy with the way both the acquisitions have shaped up so far.
Dheeraj Kumar
Thank you. Thank you very much for your time and clarifying my questions and good luck.
Srinivas Palakodeti
And thank you for the very interesting questions.
Dheeraj Kumar
Yes, it’s a pleasure.
Operator
Thank you. [Operator Instructions] We have the next question from the line of Ranga Prasad, an Individual Investor. Please go-ahead.
Ranga Prasad
Good afternoon, everyone. I hope I’m audible. At the outset, let me say that I’m deeply concerned about the continuing losses of our Media division, both on a quarter-to-quarter basis as well as on a Y-on-Y basis. I’m wondering if we have a road map as to when we can expect this division to turn profitable or at least where the losses can be stand. It has been reported in the media that Elon Musk’s Starlink is also going to be coming to India to offer broadband on satellite. Would this significantly increase the competition to our broadband business? I have other questions, but first, if I could get some clarification on this?
Vynsley Fernandes
Sure, Mr. Ranga Prasad good evening. Sure. So I’ll be absolutely — so first, let me start with your second question first. So as far as what you just mentioned about Starlink coming to India, there’s also Amazon Kuiper who’s looking at India. There’s OneWeb through Airtel and there is obviously Jio SES, which is there. There will be others also like Viasat and a couple of other players.
I think what these companies need is they need a strong partner in the country to be able to support them. And I’m not talking about regulatory support. I’m talking about that besides regulatory, there are four key things that any player requires. The first is a good strong knowledge of satellites. And as you know, we are the only HITS player in Asia, and therefore, we have experience in satellite.
The second parameter is being able to understand broadband, the packages of broadband. We have — we are in ISP today, India’s fourth largest private ISP in the country. Third thing is you would need to have significant penetration in rural India because basically broadband over satellite or satellite Internet is targeted greatly at markets which are underserved or unconnected.
And as you know, sir, we are present in over 4,500 pin codes. 65% of our subscriber base comes from semi-urban, semi-rural, and rural India, including places like the far northeastern reaches of India, Andaman and Nicobar Islands, where we have a strong presence, even Kargil, right? And we’re very proud of our connectivity in all these places, Tawang in Arunachal Pradesh, Pulwama. So — and the fourth most important thing is an entire ecosystem of sales to installation, to service, to support.
And today, we have 10,000 franchisees across the country, which is about 40,000 feet on the street. We’ve got our own 1,300-strong task workforce. So with all those factors, we believe that we would be in the most suitable position to align with a suitor, obviously, given certain preconditions, etc. But I think that what we have done on the terrestrial side and in terms of building a strong infrastructure network, services, and platform and rural connect I think we believe that we’ll be a strong player in that, probably partnering with one of the big players, sir. So I hope that answers the second question, sir.
Ranga Prasad
Certainly. Yes.
Vynsley Fernandes
Thank you, sir. Sir, on your first question, as you know, this is a significantly challenging industry. And we are — we keep on innovating virtually every year to be able to push things ahead. I think the entire industry faces challenges — is facing challenges, especially the digital distribution industry. We are the only independent platform left in the country — largest independent platform in terms of a multisystem operator with HITS, and we believe that this combination that we’ve built of leveraging our digital television business to grow our broadband will see green shoots, sir.
That much I can assure you. We are facing challenges quarter-on-quarter. But if you look at the way we’ve changed the product mix ever since we’ve come out of the lockdown and consumer preferences have changed, we’ve not let that temper our growth, we focused on growth. I mean, just if you look at the top line, sir, last year, at this time — I mean, last H1 of FY ’24, we were clocking about, I think, INR500-odd crores in H1.
This year, we’ve touched INR608 crores in H1 itself, right? So that’s a 22% growth. But your point is valid, sir. The focus is now strictly on profitability. And that is being harmonized through integrating broadband and the digital television in a much bigger way than probably we did earlier. And given the fact that we’ve been able to now deal with the onslaught of OTT customers changing preferences, free digital television services. So we believe we are on the right track, sir.
Ranga Prasad
See, this lack of profitability has been weighing very heavily on the share price. As you know, today, the share price is about INR630 or INR640 vis-a-vis the book value of INR1,680. That’s a discount of over 60%. So clearly, the market is getting to be very concerned about this lack of profitability. I’m just saying that.
Vynsley Fernandes
You’re right.
Ranga Prasad
Point to be noted. Now I have some questions on the financial. It’s more in the form of clarifications. One is the balance sheet shows a goodwill amount of INR997 crores. Could you please tell me what it is because it’s also been increasing? This quarter, it has increased from INR959 crores to INR997 crores. And is there a plan to amortize this goodwill over a period of time? If so, over how many years?
Srinivas Palakodeti
Yes. Thank you. Good questions, Prasad. Let me answer that. If you look at between March ’24 and September ’24, there is an increase primarily — there are two drivers. One is the — Vyns talked about it, the 7star acquisition, which happened during the — I think it was in April. So that’s — there’s some goodwill which got created. And the rest is actually happening between — primarily on the account of FX variation.
To go back to a slightly different perspective, these are all goodwill which has got created, primarily from the acquisitions which we have made, goodwill on — I mean, goodwill on consolidation. It could be TekLink, it could be diversified, it could be the earlier acquisitions as well. And from an accounting standard point of view, these are to be tested for impairment. Otherwise, they remain constant on the balance sheet.
Ranga Prasad
Okay. Could you give some clarification on your deferred tax assets? You are showing deferred tax assets of INR240 crores and an additional income tax assets of INR500 crores. What is the distinction between the two?
Srinivas Palakodeti
So some relate to taxes, which we have paid and for which we are essentially waiting for the tax refunds, the pending clearances, and this is primarily overseas. Deferred tax is primarily on the — either out of losses which we have incurred in the past, on which there is certainty and we have created a deferred tax or normal in case in terms of timing differences between time period to period.
For instance, in a year — for instance, if you — there are some payments due, you can claim a tax rebate only when they are paid rather than on an accrual basis. So those are the others which come from the deferred tax assets.
Ranga Prasad
The next clarification is regarding comprehensive income. They are showing INR93.75 crores in this quarter. Could you please throw some light on that? And how it will affect our future net profit? Would it actually have any impact on the profits to be reported in the subsequent quarters?
Srinivas Palakodeti
Operationally, no. This is purely from an accounting treatment. For instance, if I take a forward cover or any hedge, which is — and the hedges are still valid and have not been impaired. Any mark-to-market on those hedges would go into the other comprehensive income.
And they would come in only in an extreme case — for instance, something has happened and the hedges are ineffective, in which case, it would hit your P&L. But normally, there would not be any impact on your profit after tax because these are items which go straight to the balance sheet without touching your P&L.
Ranga Prasad
Okay. My final question is regarding interest expense. I see that it’s going up even though the revenue has been coming down, revenue from operations. Is there any particular reason why it’s going up? Is it because of interest rates going up? Or is it because the quantum of debt that we have taken has gone up?
Srinivas Palakodeti
So multiple things. So one, as I mentioned, between September — between March and September in this year, this is actually reduced debt. But this interest expense is also — I mean, there are two broad drivers. One is any loans which you have taken on which you have to pay interest. The second part comes from if you have taken any leases and then you have lease payments which include the — there is a component — it’s a noncash item, but it shows up as an interest cost and depreciation.
And it also includes, if I were to take a premise on lease under Ind AS 16, the rentals are ignored and then I have to replace it as if I have borrowed money to own that particular building and then I have to charge interest and depreciation on that building, even though I don’t own that building. So the — more than the cash interest part of it, it’s the Ind AS 16 accounting part and the lease accounting part, which is driving the increases in interest, especially if you see the difference between Q2 of FY ’24 and Q2 of FY ’25, where it has gone up from about INR46 crores to INR62 crores.
Ranga Prasad
Okay. And finally, see, there’s been a lot of negative publicity on the ongoing search and survey assessment going on. In fact, some media reports have said that the burden on the Company can be as much as INR2,500 crores. Now the Company has not given any clarification on that. So is there any update on this ongoing search and survey assessment?
Srinivas Palakodeti
So we have been making disclosures as required from — I mean, from quarter ending December ’23. So there was a search and survey which happened in November, December last year. And we have received — and again, this disclosure we have updated if you see our publication page. There is a show cause notice which has been received. We are in the process of replying to the notice. And — so that’s where we are, sir.
Ranga Prasad
Okay. So no definite figures have been mentioned?
Operator
We request you to please return to the queue if you have further questions. Thank you. We have the next question from the line of Anuj Panwar from Family Office. Please go-ahead.
Anuj Panwar
Yes, hi. Thank you for the opportunity. I just have two questions. So in the BPO business, how do you see the growth in revenue and profitability going forward? And secondly, when are we planning to launch our broadband over satellite offering? Like does it require further R&D? Just wanted to understand what’s the status on that.
Vynsley Fernandes
Pala, would you like to take the question on the BPM side first?
Srinivas Palakodeti
Yes. So thanks, Anuj, good question. As I mentioned, between — we’ve had challenges primarily from the U.K. public sector part. So we are focusing on the private sector and more on the offshoring. So the South Africa center was primarily set up to drive the higher-margin profitable businesses. The other part is, as Partha mentioned, that we are also focusing on technology services.
We have signed two contracts for clients in North America, where we are offering services beyond the traditional call center, BPO kind of a business. These will scale up — we expect them to scale up during the year, but the remaining part of the financial year. But the full impact will come only in FY ’26 — in the year starting April or 1st April ’25. And we believe these — since they have also a component of offshoring, that would help us — that will help improve our margins in the longer run. Vyns, you want to take the question about the broadband?
Vynsley Fernandes
Sure. Anuj, just to tell you, I’m not sure if you would — so a couple of — I think it was probably a year ago, Anuj. We already have started providing broadband over satellite solutions using what is called a geostationary satellite or GEO, right, using the government INSAT series, and that is already running. We do — we connect a couple of solar — sorry, a couple of solar farms in the country. We’ve run it in Tawang in Arunachal. Those were tests that were done to see how good the quality would be in terms of education, in terms of using it for communication.
We are already running that service, but it is running very small because it’s a geostationary service. The big players that, even Mr. Ranga Prasad referred to, are people like Amazon Kuiper and OneWeb from Airtel or Starlink were looking at LEO services or low earth orbit satellites. That service, in my opinion, will probably come in next year.
And the Telecom Regulatory Authority of India, which is the regulator for our industry, has, in fact, gone on record stating that they would come out with a pricing structure, etc., by December 15 this year. I’m talking about barely a few weeks away from here. So we believe by the end of middle of next year or so, we’ll start seeing LEO tests happening in the country. We hope to see that. So we’re happy to kind of bolt on at any point in time, Anuj. I hope that answers your question, Anuj.
Anuj Panwar
Yeah, that answers my question. Thank you. That was helpful.
Vynsley Fernandes
Thank you.
Operator
Thank you. Ladies and gentlemen, we will take that as a last question for today. I would now like to hand the conference over to Mr. Partha DeSarkar for closing comments. Over to you, sir.
Darshan Mankad
Sir, you’re probably on mute. We can’t hear you.
Partha DeSarkar
Yeah. Can you hear me now?
Darshan Mankad
Now we can hear you.
Partha DeSarkar
Okay. All right. Ladies and gentlemen, thank you very much for listening to us in our Q2 earnings conference call, and we look forward to talking to you again in February when we bring up our Q3 numbers. All the best, and good night.
Operator
Thank you.
Vynsley Fernandes
Thank you, everyone.
Operator
[Operator Closing Remarks]