Hinduja Global Solutions Ltd (HGS) Q3 FY23 Earnings Concall Transcript

Hinduja Global Solutions Ltd (NSE:HGS) Q3 FY23 Earnings Concall dated Feb. 14, 2023.

Corporate Participants:

Partha DeSarkar — Executive Director and Group Chief Executive Officer

Vynsley Fernandes — Whole-Time Director

Srinivas Palakodeti — Global Chief Financial Officer

Ru Ediriwira — Chief Technology Officer, Digital Media business

Analysts:

Darshan Mankad — Adfactors PR — Analyst

Unidentified Participant — — Analyst

Jyoti Singh — Arihant Capital — Analyst

Presentation:

Operator

Good evening, ladies and gentlemen, a very warm welcome to the Q3 and Nine Months FY’23 Earnings Conference Call of Hinduja Global Solutions Limited.

From the senior management team, we have with us today Mr. Partha DeSarkar, Executive Director and Group CEO; Mr. Srinivas Palakodeti, Global CFO; Mr. Vynsley Fernandes, Whole-Time Director, HGS; and Mr. [Indecipherable] Chief Technology Officer, Digital Media business, HGS. [Operator Instructions] Please note that this conference is being recorded.

I now hand the conference over to Mr. Darshan Mankad from Adfactors. Thank you and over to you sir.

Darshan Mankad — Adfactors PR — Analyst

Thank you, Seema. Good evening, everyone. We welcome you to the third quarter and nine months ended December 31, 2022 earnings call of Hinduja Global Solutions Limited. 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.

I would now request Partha sir and handover to share his views. Partha sir, over to you.

Partha DeSarkar — Executive Director and Group Chief Executive Officer

Thank you, and a very good afternoon to all of you for taking the time to listen to all of us for this earnings call. I hope you have our earnings presentation in front of you, that was uploaded on our website. And I’m going to refer to it as we speak. So first slide talks about the key highlights of the quarter, without getting into much ado, let me tell you that it’s been a really good quarter.

Our total income was about 8.3% on a year-on-year basis and EBITDA growth was about 57.1% on a year-on-year basis. Our net profit at the rate of INR51.83 crores was a big improvement over the loss of INR37.88 crores a year ago. I’m also happy that the Board has announced the third interim dividend of INR2.50 per equity share. The BPM business has signed a definitive agreement to acquire 100% stake in TekLink, the region has been in-progress for some time since we’ve signed. And we have also setup our new center in the city of Barranquilla in Colombia, that is going to be our second near-shore center in addition to the center has been [Indecipherable] things done that we have Jamaica. Our Digital Media business launched its broadband over satellite solution it’s name NXTSkyFi. And the first variant of that product support education enablement.

Quick input on where we stand on the much anticipated buyback plan. You would be aware that the final buyback price has been fixed at INR1,700 rupees per equity share. The total consideration for this buyback will be INR1,020 crores excluding buyback tax. The record date of this is the 6 of March 2023. And the total number of shares to be bought back into this buyback shall be up to INR60 lakh equity shares.

We’ll move on to Slide 6, where we talk about specific financial. Here you have the revenue numbers in front of you. Our revenues on a Q-o-Q basis have grown from INR1,075 crores to INR1,165 crores that is the 8.3% growth that I talked about. Our EBITDA has also grown handsomely from INR81 crores to INR128 crores that’s the growth of 57.1%. Our profit before tax was negative last year. It’s a small number of INR5 crores this quarter. And profit after tax is a number of INR52 crores. Like we mentioned that EBITDA out here includes the other income as well.

Move to Slide 7. Here we are talking about on a YTD basis for FY2023 overall compared with last similar YTD FY’22, the growth was 18.2%, a handsome growth I would say, from INR3,262 crores to INR3,855 crores. Our EBITDA has grown almost doubled I would say, INR322 crores was what it was last year, we’ve grown it by 94.6% to INR627 crores last year. PBT stands at INR205 crores and profit after tax stands at INR270 crores, once again, I want to highlight that the EBITDA here includes other income.

Slide 8 captures the trend line of the improvement of this business on a quarter-on-quarter basis, you will see that this BPM invested after the healthcare divestment, we have been working on the profitability of the company, which was impacted by the divestment of a fairly highly profitable business. We have been working on quietly improving the profitability of this. You can see trend line. I expect that we will be able to improve on this further in the years to come. But as it stands, the margin expansion has been about 220 basis points.

Digital Media business similar trend line, you will see that the improvement in profitability of about 220 basis points between quarter one and quarter three. Coming to the business as a whole, the performance of the CES business onshore has been showing good steady growth, significant expansion in clients and a healthy pipeline. I have been talking about the pressures that we have in the U.K. business. You will recall that the U.K. business won a large contract from the Health Services industry, which was around [Indecipherable] and treat for COVID. Thankfully, COVID is now under control and therefore the volumes coming out of that contract are significantly reduced from what we had initially thought it would be. And that is why there are some headwinds in this business.

We have hired a new CEO of the business, Mr. Patrick Elliott. He brings an extensive experience in outsourcing business. Offshore and onshore businesses are actually grown very well. It’s grown better than the onshore businesses and I talked about Colombia. Our new center in Barranquilla has been setup with a team of 30 and it’s going to ramp up in the coming months, we have a good pipeline for Colombia delivery. This is going to be primarily — just primary destination for Spanish language work as well as some bilingual work.

Our Digital Solutions business has been a stellar performance. It grew the revenues by a whopping 36% on a year-on-year basis in quarter three and 51.2% on a year-on-year on a nine-month basis. Focused on deepening relationship with core digital clients drive digital-led solutions for traditional CES clients. We are significantly strengthening the integrated sales teams. We hope that digital team and these are the CES sales teams together under a single leadership, so that we get benefit of revenue synergies across our traditional BPM service and our new age digital service. We focus on longer-term deals such as managed services and cloud and I talked about the digital process that been is almost close to completion. Condition precedents are being closed and the stated expectations expected the TekLink acquisition is expected to close shortly.

Moving to Slide 12, little futuristic. We are shifting gears and Ru will talk about this later on in our presentation from being a services and label-led business into a solution accelerator and platform-led business. Some of the key solutions that we have developed in-house in the last two years is something that’s been proudly called Agent X. It also built a Cloud Accelerator model for cloud telephonic transformation based on platform like Twilio, Genesys, AWS. And we’ve also got our new analytics platform called DaVinci. The addition of techniques will fast track this evolution with a diversified portfolio in data and analytics.

We are still on the outlook for relevant acquisitions that can bring new skill sets and accelerate our growth in this business. By 2025 we want to be a significant digital player with a large percentage of our revenues coming from digital and technology businesses. Few verbatim from our clients, we had net promoter score of 65 that has been the highest in our history. And I’m also happy to state that this is a third-party serving that is done by feedback consulting and has done for many of our peers in the IT services and the BPM space. And this could have 65, it actually puts us in the 90th percentile compared to our peers. Some of — I won’t go, there were bad in quotes, but look into the slides that we have out there, obviously, our clients are extremely happy.

Looking at it. As I’ve said, we’ve made good strides by improving profitability by 220 basis points. There is continuous focus on improving profitability further to get to a fond of at least 10% work goes on. We have the demand for premium service is strong. So we have to write the way by investigating — by investing in an integrated sales and go-to-market strategy. We are leading with digital in client engagement, the digital — excuse me, the Digital Media Services huge opportunity ahead, especially in areas such as convergence, broadband over satellite, education enablement etc.

And Vynsley is going to talk about that in the next section. Over to you, Vynsley.

Vynsley Fernandes — Whole-Time Director

Thank you, Partha. Good afternoon, everyone. Vynsley here. I’m going straight to Slide number 16. As Partha spoke about it, our entire focus as individual global solution in the next digital being a part of the HGS global picture, we are looking at how to innovate and continue the acceleration into the digital space. Slide 16 will tell you that the innovative products that we launched called ONEDigital is already beginning to see significant traction and one of the reasons why we believe, we are seeing traction is on the right side of the slide, which actually shows rather than just launching a product.

We also as HGS continue to walk the talk. We are training people across the country to be able to deliver these digital solutions and this digital up-skilling program that we launched in August last year, as already about trained nearly 740 people and these are basically franchisees, who connect about a subscriber base of just over 150,000, and the process is ongoing, even as we speak. That is in terms of what we’re doing in terms of product.

Our big forays, which is on Slide number 17, is that we have successfully launched NXTSkyFi, which is our broadband over satellite solution. Interestingly, we rather than launch of pure product or pure platform, we’ve actually launched a solution. We are very innovative retailers’ enterprise models. So we’ve partnered with TATA ClassEdge and we’ve already rolled-out education to places in the North and Northeast including Jang in Arunachal Pradesh and Pulwama in Jammu & Kashmir. Students have already signed-up there for this for the education.

We are very happy because not only are we delivering value, but also we are happy that it’s in-line with the Prime Minister’s vision of digital acceleration and digital inclusion of India, that’s something we’re quite proud that NXTSkyFi has done. In line with that, we have also received our VSAT Letter of Intent last month. This reduces our operating costs further, besides reducing our lead times of this way and we will be accelerating the direct service solutions under our broadband over satellite products shortly.

In line with that, if you go to Slide number 18, we took the lead and brought together all our competitors from across the country, all the independent competitors, we brought everyone to a single table — to a single room in December and effectively, the idea was to tell the entire ecosystem that now is the time to connect together to converge in terms of products and therefore collaborate. So we shared various presentations were made, one was by KPMG, which gave us clear insight that. The television industry is still there [Indecipherable] of the industry compared to go-live and there is plenty of room for growth. We also had Accenture presenting Metaverse and the challenges around it and the way to go, and there were lot of other sessions and there is the link available on that slide. Please feel free, if anyone would like to know more about those sessions. There is a link — YouTube link embedded on that slide, you can click on that and go through the — to that presentation.

In terms of KPIs and the next slide, which is 19, tells you very clearly of how strong the digital media business has been in Q3. Our focus has been clearly on improving the quality of revenue and the sustainability of the business rather than just aiming for top line. So while we haven’t really focused on growing our business, our focus has been on quality and that is reflected as part of pointed out in the EBITDA performance were quarter-on-quarter, we’ve seen an expansion of about 220 basis points in Q3. The same story is relevant even for the Y-o-Y performance for the nine months, where we’ve been able to grow in terms of our EBITDA performance, not just in terms of absolute value, but also in terms of margins over the previous year.

Staying on this slide a bit, we — if you look at it, there has been a clear focus in terms of stabilizing the video business, which did go through across the board, across the country, went through some significant challenges in the last three years owing to the headwinds of the pandemic, but that, as you can see, it’s fairly stable and growing. Our broadband business, which is our focus continues to grow and all the key parameters, the three key parameters that you see on the second half of the slide, which is the 90 day net churn same months renewal, as well as the on-time renewal. All of that is seeing very, very positive traction. That is the summary for the Digital Media business.

I’m going to hand over to Srinivas Palakodeti, who is the Global CFO of HGS to take you all through the financial slides. Thank you, everyone. Palakodeti, over to you.

Srinivas Palakodeti — Global Chief Financial Officer

You, Vynsley. Good afternoon, everyone. Thank you for joining us on this session. I move to Slide 21 on the financial performance. As you know, in the last one little year-over-year, there have been multiple changes in HGS, the healthcare business was sold-off in January ’22 and during the year, the media business became part of HGS, right. So these results are purely, strictly comparable on a like-to-like basis, so it includes all the revenues margin coming in from the Digital Media business and excludes anything pertaining to the healthcare business. So it’s like-to-like comparison.

So from on a year-on-year basis, our revenues are up by about 6.4%, other income is up by about 94.4% and total income, including other income and revenue from operations is highest of about 8.3%. Other — as you would have seen from the results, we’ve had a loss of about INR60 crores, this is coming from exchange rate variation. These are primarily mark-to-market in nature. So that’s the reason there has been at depth in other income for during quarter ended December ’22, as compared to the quarter ended September ’22.

At the EBITDA level on a year-on year basis, revenues — EBITDA is up by about 57%. Depreciation is up by about 44% and the interest expense, there is a reduction. So there is a drop of about 6% there. We do have an exceptional item reversal of some excess expenses recovered. And that’s why there is a negative sign. So this added to the other income. I’m sorry, exceptional items. So we have a PBT of INR4.7 crores and we have tax reversals of about INR47 crores, giving us a PAT of INR52 crores, which compares very well compared to a loss on INR37.9 crores, which we entered between quarter ending December ’21. So the substantial increase on a year-on-year basis between December ’21 and December ’22.

Moving on YTD basis, I’m on Slide 22. Total income is up 18.2% and out of which other income, which includes FX variations as well as interest income that’s up about 326%. Our EBITDA is more or less come close to doubling from our INR322 crores to INR627 crores, giving us total EBITDA margin of 16.3%, including the other income. After taking into account depreciation, interest and the exceptional item, the profit before tax has come in at about INR205 crores compared to a loss of about INR125 crore for nine months of the previous financial year. And at a PAT level, the profit after tax is about INR279 crores as compared to a loss of INR78 crores in the quarter ending December, so again, on a nine-month basis, substantial increase in profit after tax.

Moving on to slide 23, the book value per share, taking into account shareholders point as of December of about INR8,880 crores comes to about INR1,692 crore and if you recall the buyback price is at around INR1,700 per share, which is at a significant premium to the current market price of INR1,300. At the — from a trailing 12 month basis, our EPS comes to about INR62 per share. We have gross debt of about INR330 crores and cash of about INR1,343 crores, giving a net cash position of about INR1,014 crores.

Moving on to Slide 24. So this gives us a better picture in terms of where we have in terms of borrowings, which is INR330 crores and take into account the cash investment in debt instruments, as well as short-term loans given, the total amount of cash and treasury surplus, the sum of these three items comes to about INR6,716 crores.

Moving on to Slide 25. This is the revenue split for operating revenues of INR1,165 crores. The BPM business accounts for about 65%, this is voice as well as the non-voice. The Digital Services comprising digital media, digital cloud services, analytics, all that put together comes to about 31%, and other income comprises of 4%.

Moving on to Slide 26 on the revenue from operating revenue, from origination perspective, the U.S. continues to be the largest source for origination that were 33%, 29% from India. This includes the Digital Media Services. U.K. is about 20%, 13% is from Canada and others basically Philippines, Jamaica, Middle East accounts for about 6%. On the left hand side, the revenue by delivery, India also about 33% U.S. 36%, Philippines accounts for about 9%.

Moving on to Slide 27, this is the split again revenue by vertical. The largest vertical is media, followed by consumer, this is consumer e-commerce products anything consumer-facing, telecom and technology is the third largest sector at 11% and same sizes, public sector, which is predominantly from U.K. Moving on to the client concentration, again, this is based on the clients’ total revenues — operating revenues of INR1,119 crores. The top customer accounts per book 7.3%. Our 28% which will be for top five and top 10 accounts for about 43%. Our business in terms of DSO days continues to be healthy and it comes in at about 62 days, come back to 60 days as of 31 of March.

Moving on to Slide 29 that shows that HSG share price movement and we were at about INR1,300 on close of 5:00 P.M. and we are about the same level today. The share price — and this factor into account, the one is to one bonus, it was issued in February ’22. So our shares have been trading in next four month from about a year ago.

With this my section comes to an end, so I’ll now hand it back to Partha — no, sorry, Ru to discuss the digital future and how HGS will deliver the digital picture.

Partha DeSarkar — Executive Director and Group Chief Executive Officer

So [Technical Issues] so if you could now see that we’ve got a portfolio of services that we have. We have our traditional BPM businesses, we have technology businesses, we have Digital Media businesses, we have [Technical Issues]. Our goal is to deliver compelling digital solutions and services to fulfill clients’ needs globally today and for future and we will take you through what that looks. I’m going to hand over to you to take us through the next three slides or what’s the future of this business looks like and what the view of the power of this business. Over to you, Ru.

Ru Ediriwira — Chief Technology Officer, Digital Media business

Thanks, Partha. So as Partha said, our aim is to look at how we can deliver a widest variety of solutions and products and services to the market so that we can provide the largest solution offerings to clients from multiple different industries, right, whether that is through our acquisitions over the last couple of years. We’ve really built-up a huge technology base, we really invested in new talent and new products and service offerings, put together offer clients, a much widest selection of service offerings.

So if we just move to the Slide number 32. So from being a traditional business process management organization, we are now able to look at technology services, Software as a Service, Platform as a Service, which we’re already doing three products like Agent X and DaVinci. We have a good — we have a very strong software development organization with the merger of next NXTDIGITAL, we now have a very strong engineering base also to complement all of these technologies.

The data services with TekLink and with our own internal development. We’re starting to look at business intelligence and analytics to add the capabilities around artificial intelligence in various industries and have we can improve processes and — process itself for companies. And we have a very strong base through NXTDIGITAL itself, with respect to networking and connectivity both for media and telecommunications, which can expand well beyond the India to the rest of Asia-Pacific and potentially globally. So at the whole aim of this slide is to really demonstrate how we are expanding and we are now able to offer all of these tight range of services, as I said to multiple different industries, whether that is medium telecommunications, financial services, energy, healthcare or any other sort of industry lines, we can now develop so this end-to-end solution offerings for them.

So if we just quickly move to Slide 33, this is just a snapshot of one of these types of end-to-end solution offerings that we are starting to develop. Using all the skill sets and acquisitions and capabilities within the organization, so in this first example, where we are looking at a series of network management solutions aimed at any industry, really that is based that has multiple different networking and connectivity requirements and this is not geography-specific. It can be applied anywhere globally, in any geography. So we are looking at development — we are developing network management solutions, both as Software as a Service, as well as the Platform as a Service, which will enable companies to really procure connectivity services in a much more organized fashion, it can be today as well as we able to monitor and manage via the large network connectivity platform.

So think of the financial services organize — the financial services industry, banks, which have hundreds, if not thousands of branches across the geography can now manage all that connectivity in a much more organized and clear fashion. We’re also developing. We’re working on developing work-from-home solutions. So now after COVID as we are still hybrid working very much is scheme of things in this new world post-COVID and how do we really improve the work-from-home conditions such that we ensure not just secure connectivity to backend system, but also that we can monitor and I’m sure that people are actually delivering what they supposed to be delivering.

As Vynsley discussed earlier on, another key area that we are working on with live interactive education, again this is not India specific. This is something that can be rolled-out on a global and not the geography basis, in terms of how can we deliver to more rural and — areas that are not well-connected, live educational facilities thoroughly improve both the quality of life in those areas.

Managed services, we are implementing managed service offering, which would be advantage of NXTDIGITAL’s engineering teams and HGS with existing customers supporting really end-to-end solution of managing customers’ networks, designing, deploying and then really managing them going forward. And the infrastructure, particularly in India, we have apparently connectivity networks and really be able to expand those with partners and with competitors to be able to deliver wider connectivity services and broadband over satellite as Vynsley mentioned with NXTSkyFi, the opportunities that that offers within the — I just if humongous, right, whether that is monitoring remote wind farms, how little color generate is — education and there is a whole suite of services that really broadband and stuff like can start to deliver both within India, as well as internationally. So these are just some of the integrated solutions that we already starting to develop as a combined organization and there’ll be many more of these as we go along.

Over to you, Partha.

Partha DeSarkar — Executive Director and Group Chief Executive Officer

Yeah. So we have come to the end of our presentation, therefore I hand it over to the moderator for the Q&A session. Over to you.

Questions and Answers:

Operator

Thank you very much. [Operator Instructions] We take the first question from the line [Indecipherable]. Please go ahead, sir.

Unidentified Participant — — Analyst

Hi. So can you please help me understand the other income component of our financials, because I believe without that we would even not be PBT positive? So [Indecipherable] as the understand, what does this other income that we see every quarter in [Technical Issues]

Operator

Ladies and gentlemen, the line for the management is disconnected. Please hold while we reconnect. Ladies and gentlemen, thank you for being on hold. We have the line for the management reconnected. Sir, please go ahead.[Technical Issues]

Unidentified Participant — — Analyst

Yeah, sir. Am I audible?

Partha DeSarkar — Executive Director and Group Chief Executive Officer

Yes, yes, please.

Unidentified Participant — — Analyst

Yes. So I have just had — my first question was regarding the other income component in our financial statement. We see other income large amount of other income every quarter, and I believe without that we would be — our PBT would also not be positive. So can you help me understand, what all does that includes?

Partha DeSarkar — Executive Director and Group Chief Executive Officer

So there are two, three different components. One is the interest income, as I mentioned, the — sitting on a large treasury balance. So that’s the one with treasury income, which comes there. Offset in the current quarter is an FX loss, and you’ll see there on the publishing page that comes to about INR60 crore of losses, which come from the FX variation. So the other income is not only — there’s also the impact of INR60 odd crores, which has come from the quarter and this quarter and from the digital media side, income from sale of set-top-boxes, those kind of things which come under other income.

Unidentified Participant — — Analyst

All right. And sir, my second question is regarding the digital business that acquired from NXT. So I believe that that business was not a profitable business at the time of acquisition. And currently, we are competing with large players in the broadband space and also considering that most consumers are moving away from the traditional set-top-box or the traditional TV channels to software like Netflix and other Hotstar. So what would be our plan to compete with the bigger players and how can we drive growth in such a segment, where we see such big players and also market that is against us?

Vynsley Fernandes — Whole-Time Director

Sure. So thank you for your question. This is Vynsley here. I think you’re absolutely right in terms of the changing dynamics of the industry, right? More and more people are moving to online. More and more people are moving to content on demand. But there’s also a significant part of India, which is still not connected. And these are not — this is not something I’m saying. This is what the — what the numbers point to themselves. There’s about 80 million homes that are still unconnected in terms of a television, and those are an aspirational market. So we are — we’ve been smart about one thing, rather than launch a wired connectivity service for the television business in 2015, we launched a satellite service. So that means even the most rural part of India can convert digital and receive television literally overnight. That’s one side of the spectrum to answer your question.

The other side is that if you look at our focus in terms of growth, we are looking effectively at the broadband business and improving the quality of revenue in that area. Just to give you a very, very — very short sense, if you look at clearly the broadband parameters, we are already the fourth largest broadband private ISP in the country today with over 1 million customers. Our entire focus of growth is on that. So last year this time, we were about 740,000 customers we’ve grown nearly 50% to where we are today at 1.18 million. And we see that growth continuing because more and more people want a wired broadband connection. And as you know, the government recently changed the definition of broadband to 2 MBPS. So that is something that we are delivering. I mean, we deliver up to even 1000 MBPSs as you would probably know.

The third thing is as a business we are very proud about one thing in the group and HGS in particular, we’re always at the forefront of innovation. So right now, if you look at broadband over satellite, we are the only bundled solutions player in the country today where already launched. Everyone’s talking about launching and of course, we welcome them because a lot of them are also looking to kind of align with us and become our partners. But we’re not necessarily waiting for that. We’ve already launched our service. As I shared with you on the deck, we partnered with Tata Studi to deliver education and it’s already working beautifully in places like the northeast and the north, where connectivity is a challenge. So I think as an organization we are very clear that we focus on the trends and with the changing trends we continuously innovate.

And one more thing, again, just last point to your question. If you saw the very — if you go back to Slide number 16, I specifically mentioned that our focus is not on pure play television. It’s on a integrated solution for customers, which is basically not just television, but that also includes broadband, which speeds up to a 1000 MBPS includes international, regional OTT, includes voice-over IP and intercom, includes CCTV and also community and building Wi-Fi. So I think we’re well structured to take on the challenges and like I said, our focus is to continue to innovate and grow. I hope that answered your question, sir.

Unidentified Participant — — Analyst

Yes, sir. Thank you very much for elaborating. So I have another quick question regarding this only — another thing that I want some clarification on a tax rate that we see currently received that negative of [Technical Issues] tax rate. So can you elaborate on that as well?

Vynsley Fernandes — Whole-Time Director

Sorry, just repeat your question.

Unidentified Participant — — Analyst

The tax rate that we are looking at currently in the finance statement [Technical Issues] basically paying negative tax. So can you please help us understand the reason for that and what should be the excepted tax rate going forward?

Vynsley Fernandes — Whole-Time Director

So if you see the results for the quarter ending one and two, this is the impact of the consolidation and we’ve looked at the overall taxable positions of HGS plus the media business put together and looking at taking to account the certainty of the future profit, we have created a deferred tax assets, right? So there is — that’s what you’ll see in Q3. That’s why you are getting it as negative number. So the taxes are coming primarily from the deferred tax item, but otherwise at the overall level, we would be in the tax rate of about — I mean the current tax would be in the 25% range.

Unidentified Participant — — Analyst

All right, sir, thank you very much. My last question would just be regarding this future outlook given that the IP [Technical Issues] for the coming — and how do you see our company doing in the next say one year, next couple of couple of years in terms of the revenues and the margins?

Partha DeSarkar — Executive Director and Group Chief Executive Officer

Yeah. We have had [Technical Issues] growth. So if you go back to our HGS — we’ve grown at the minimum 10% year-on-year for a very long time. With the healthcare divestment, obviously there has been a pressure on our margin that’s pretty clear. And because healthcare was an extremely profitable business, mine as a team is now focused on improving the profitability of the rest of the business, which — the profitability is about mid-single-digit. We would like to include the profitability of the business double digits and therefore on. There are some plans in place as well. It’s going come from taking some costs out. It’s also going to come from acquiring more profitable revenue than businesses as we could profit.

Unidentified Participant — — Analyst

Great, sir. So can we expect a double-digit margin for FY’24?

Partha DeSarkar — Executive Director and Group Chief Executive Officer

Yeah. Look, I cannot give you a committed timeline when we want to achieve that because that’s going to be almost like guidance. We don’t give guidance if you look at our track record and then decide for yourself. We have been highly profitable from the beginning of — from our inception, right? So — and we’ve also seen that we’ve actually gone on improving the margins. There are some lever that we can pull around rationalization, we know that large part of our workforce is working from home. In the North American — is almost as high as 95%. So last time, last year and even some parts of this year, we had long lease liability but we were not able to exit up. Thankfully, we’ve been able to now exit up some of the lease liability as a result of which margins will improve because our lease costs will go down. We also able to divert some of the properties that we used to own in Canada and U.K. and we’ve got — returns from those divestment. So that is also another lever that we can pull. We also believe that we can improve our IT costs and that is the third lever that we can pull. Unfortunately, even in the time of COVID, we locked ourselves into some long-term IT costs that we can’t exist right now without paying significant exit cost. But the current pricing of those services is actually much lower than the lock-ins that we have today, as in when we exist from those contracts as per contractual commitment, then even our IT costs will increase further. So these are four lever that we have. And the fifth one is growing or acquiring businesses that are much more profitable, which is in the technology space. So things are five things that we have in mind. I won’t be able to tell you that all happen by 2014, but this is election, where I would like all of us to go.

Unidentified Participant — — Analyst

All right, sir, great. And sir, when would incorporated —

Operator

Join the question queue, sir, as we have many participants waiting for the turn.

Unidentified Participant — — Analyst

Yeah, sure. Thank you very much and all the best.

Operator

Thank you. [Operator Instructions] We take the next question from the line of Jyoti Singh from Arihant Capital. Please go ahead. Jyoti Singh, your line is unmuted. Please go ahead with your question.

Jyoti Singh — Arihant Capital — Analyst

Yeah. Thank you for the opportunity. So my question is that earlier we did business [Technical Issues] after that we did the buyback. And now they are doing like technique we did and also that educational thing we did. So overall, what’s your view on the company and what’s the big thing that we are planning to do going forward and what are the strategies that we are following to make our commitment more stable?

Partha DeSarkar — Executive Director and Group Chief Executive Officer

So I think Ru tried to cover that in the last closing of presentation slide, we should — that is good slide. That tells you a broad spectrum of services that we want to get into. Some we are already in, some are termination scale, we are about to scale them up. So that broadly answers your question. If you have any specific question, happy to answer, but your question is, [Indecipherable] what we’re going do that question is already answered in the specific slide. You should — I’ll give you that slide, you should look at that.

Jyoti Singh — Arihant Capital — Analyst

Sure. Also sir, my question is on the that — on the Slide number 19 mention about the ARPU. So this sets in last quarter, are we working on any strategy to improve the ARPU? Are we [Technical Issues] expecting to remaining the range with the company focusing on volume gain. Those on the digital video ARPU in down trend of turnaround?

Operator

Ladies and gentlemen, the line for the management is disconnected. Please hold while we reconnect them.

Ladies and gentlemen, thank you for being on hold. The line for the management is reconnected. Sir, please go ahead.

Partha DeSarkar — Executive Director and Group Chief Executive Officer

Yeah. [Technical Issues] the general direction of the company, we tried to answer that in a fair amount of detail. Slide number 32, we should get to the slide, it will give you direction where we are headed. We are trying to do many things, some of these are already there. Some of this is in update business, some of them new service offering. So direction roll [Indecipherable] is their in Slide 32, that’s the generic answer to that I can give to a generic question that you had, but if you have anything specific to ask, then I can be more specific.

Jyoti Singh — Arihant Capital — Analyst

No, sir. I was asking about the ARPU rate. If you can just [Indecipherable] flat quarters, so are we working on any strategy to improve ARPU? Or we are expected to remain in the range with the company focusing on volume gain so both on the digital video ARPUs and broadband subscriber ARPU?

Vynsley Fernandes — Whole-Time Director

Yeah, sure. So thank you, Jyoti. This is Vynsley here. As I was mentioning earlier, the focus over the last three quarters for us has been on ensuring sustainability and quality of revenue. We have — therefore, our Q earlier used to be towards growth. If you look at the last couple of years, these last three quarters coming out of the pandemic and the challenges faced, we focused on two things. One was improving the quality of revenue and sustainability. And the second was coming out with innovative products. If you look at the performance of Q3, and if you look at the — if you — actually, if you do an analysis, I’m sure you as the analyst would know, if you look at a peer-to-peer comparison or if you look at both nine months as well as Q-o-Q, you’ll see that there has been a consistently improving an upward trend in terms of the margin, both in terms of value as well as the percentage margin. That is reflective of the fact that we want to ensure growth and the retention of high quality and high ARPU customers. So the ARPU that we provide in the data is a blended ARPU of enterprise and retail customers. But that is a very significant and stable ARPU. If you look at mapping it quarter-on-quarter and that will continue — you see that continuing Q-o-Q as well as, again that last year as well. I hope answer your question, Jyoti.

Jyoti Singh — Arihant Capital — Analyst

Yes, sir. Thank you, sir. And the second question is on the profit side that that has been largely impacted by provisions attributable to healthcare businesses. So I wanted to understand, why the provision has not been transferred despite being entire business to merge?

Partha DeSarkar — Executive Director and Group Chief Executive Officer

So this particular part was not transferred, because it’s an old legacy item and that has been settled and hence there was it.

Jyoti Singh — Arihant Capital — Analyst

Okay. And sir, on the buyback side, the cash we will going to utilize, I mean, what are the strategy on that side and how are we going to ensure some cash on the book for continuing at a growth momentum?

Srinivas Palakodeti — Global Chief Financial Officer

So as you know, we’ve announced the buyback of INR1,020 crores. And so — okay, the record date is fixed December, and you’ll see [Technical Issues] March and we’ll see how the — what the buyback goes. So there’ll be some amount INR1,020 crores odd, which will go for the buyback and, but the rest of the cash is available for growth of the business. We — as we announced technically, and we hope to close that soon and we will continue to look for opportunities to grow our overall predominantly digital strategy, what we discussed a little earlier in the call.

Jyoti Singh — Arihant Capital — Analyst

Okay. And sir, on the Digital Services have current around — currently around the contributing 30% of the revenue. So is there our intention to increase the same given the higher EBITDA margin?

Srinivas Palakodeti — Global Chief Financial Officer

Yeah. Digital in general has higher margins and obviously, we would like to grow the share of the digital revenue.

Jyoti Singh — Arihant Capital — Analyst

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

Partha DeSarkar — Executive Director and Group Chief Executive Officer

Thank you, Jyoti.

Operator

Thank you. [Operator Instructions] We take the next question from the line of Heena Parekh from [Indecipherable] Securities, Please go ahead.

Unidentified Participant — — Analyst

Hello? Hi, can you let us know what’s the strategy for Media & Communication business and say the loss has gone up year-on-year and quarter-on-quarter. So by when can we expect the business can turn profitable?

Vynsley Fernandes — Whole-Time Director

Okay. I’ll start with the strategy. As you know, as I was explaining with Jyoti, if you look at the kind of product portfolio that we’ve been focusing on, if you look at individual verticals, you’ll see cable television globally is — has a structural decline. So the wide broadband in terms of being a standalone product, when you look at combining and offering these solution under a single window, under a single operating method, obviously, the offtake is much higher. I mean, I’ll give you a simple example. You are at home and imagine you get one person coming over home with the cable, another one coming for the broadband and third person with voice, then the fourth person for your CCTV service, fifth person for your OTT — OTT, of course, you can go into online, but all the other services tend to be a challenge.

So the idea was of integrating all of this and bringing it to the pool, which is something that we’ve done. So ONEDigital is obviously our push. The second big thing and this is in sync with the digital inclusion and the digital vision and mission of our Prime Minister’s to take digital all across the country. And therefore our broadband and satellite offering, which obviously has an uptime way beyond what a conventional connectivity of fiber can divide. We chose to launch it in the far reaches — far reaches of the northeast and north. But however, having said that, broadband and satellite is a strong enterprise product, right? We’re already in talking to corporates in terms of providing them a hybrid solution of wired and wireless connectivity. So imagine, if you have a network of ATM and the cities, you connect them on wire wherever you have fiber.

And as you know, we have over 10,000 kilometers of our own fiber and more than 120,000 kilometers of fiber or from our front — the rest parts of India, which obviously, require satellite connectivity. And that’s where those ATM to those services will be facilitated by broadband over satellite. So there is significant traction we are looking at in terms of which are the areas that we want to target, which are the market. We’ve taken it — we went on course as you know, we signed an MOU for the service only in May and but we announced it in June and barely in three, four months time. That is in October and just as Diwali, we launched the service. We expanded it in November, we applied for our VSAT license, we received our VSAT LOI in the month of January. So I think you’ll see a lot of traction in this space happening in terms of providing these solutions.

So yes, the focus will be on ARPU. Yes, obviously the focus is on improving the bottom line. Obviously, we have a strong EBITDA performance, but as a business of obviously, you’re looking at seven levels below the EBITDA to be able to make sure that the business is on course. So that’s the kind of approach that we have.

Unidentified Participant — — Analyst

Okay. And so the revenue for digital business has gone down in last couple of quarters, but the EBITDA has increased. So is there any strategic shift in the clients that we are acquiring or serving to for this shift?

Partha DeSarkar — Executive Director and Group Chief Executive Officer

You’re absolutely right, Heena, that has been the focus. The line or the mantra for us is improving the quality of revenue and sustainability. During the lockdown period, there is a lot of customers that were on-boarded at very low ARPUs, obviously with the challenges of the lockdown, etc. Our job is to provide high quality service to anyone and everyone who needed it. As we’ve come out of the pandemic, our teams are focusing on quality and sustainability, which is why while there would a marginal dip, in fact, if we look at the nine months number, it’s varies about just under 2% — 1.6% reduction in revenues, while as the EBITDA actually improved as well. So that will keep on happening as we improve the quality of revenue. And we also looking at improving top line, absolutely. That’s part of the focus as well. And we will see that happening over the next few quarters.

Unidentified Participant — — Analyst

Okay. And sir, last quarter you had mentioned that the healthcare business was a kind of misstep and hence it was demerged and discontinued, next step to EBITDA margin improve from next financial for the business without healthcare being included?

Partha DeSarkar — Executive Director and Group Chief Executive Officer

See, the healthcare business was sold off in January ’22, right? So essentially, for the last four quarters, starting from Jan ’22 to December ’22, the results are available. Whatever results we have published are excluding anything any revenues or margins from the healthcare system. And as you know, you’ll see the earlier part of the deck, we have shown you the quarter-on-quarter improvement in our business and both the digital media business as well as the BPM business excluding other income, they have shown 220 basis points improvements in the EBITDA margin.

Unidentified Participant — — Analyst

Okay. And one last question with regard to acquisition of TekLink, how will we expect this to really tick in and what kind of contribution can we expect in next financial year?

Partha DeSarkar — Executive Director and Group Chief Executive Officer

So I would refer you to the call we had post the — we completed the transaction, but essentially the transaction was signed in first week of December. We are in the stages that the conditions, precedents have been fulfilled. Almost all of them are done. So we do expect that to close — complete that. And of course, we will be making the announcement as in when we complete the transaction as we are required to do. That company would have revenue somewhere in the range of about 13% in the current run rate.

Unidentified Participant — — Analyst

Okay. Okay. Thank you. Thank you so much.

Operator

Thank you. Ladies and gentlemen, that was the last question for the day. I would now like to hand the conference over to Mr. Srinivas Palakodeti for closing comments.

Srinivas Palakodeti — Global Chief Financial Officer

Thank you, everyone, really appreciate your joining this call to go over the earnings for the quarter ending December. Again, I do apologize a couple of times you have to wait as we got disconnected especially during the Q&A session. So I apologies for that. And as we end the financial year, we do look forward to you — you are joining us when we go over the results for the quarter ended 31 March ’23, as well as the financial year ’23. So look forward to interacting with you in the near future. Thank you, everyone.

Partha DeSarkar — Executive Director and Group Chief Executive Officer

Thank you, everyone.

Vynsley Fernandes — Whole-Time Director

Thank you.

Srinivas Palakodeti — Global Chief Financial Officer

Thank you.

Darshan Mankad — Adfactors PR — Analyst

Thank you.

Ru Ediriwira — Chief Technology Officer, Digital Media business

Thank you, everyone.

Operator

[Operator Closing Remarks]