Hinduja Global Solutions Ltd (HGS) Q4 FY21 Earnings Concall Transcript

Hinduja Global Solutions Ltd (NSE:HGS) Q4 FY21 earnings concall dated Jun. 21, 2021.

Corporate Participants:

Ravi Ramalingam — Vice President

Partha DeSarkar — Global Chief Executive Officer and Executive Director

Srinivas Palakodeti — Global Chief Financial Officer

Analysts:

Siddharth Oberoi — Prudent Equity — Analyst

Subhankar Ojha — SKS Capital & Research — Analyst

Anand Agarwal — Balaji Invest — Analyst

Maan Vardhan Baid — Laurel Investment Advisors — Analyst

Chirag — — Analyst

Satish — — Analyst

Keshav Kumar — RakSan Investors — Analyst

Presentation:

Operator

Good evening, ladies and gentlemen, a very warm welcome to the Hinduja Global Solutions Limited Q4 FY 2021 Earnings Conference Call. From the senior management, we have with us today Mr. Partha DeSarkar, Executive Director and Chief Executive Officer; Mr. Srinivas Palakodeti, Chief Financial Officer; and Mr. R. Ravi, Vice President. As a reminder, all participant lines will be in the listen-only mode and there will be an opportunity for you to ask questions after the presentation concludes. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Mr. Ravi Ramalingam, Vice President, Hinduja Global Solutions Limited. Thank you and over to you, sir.

Ravi Ramalingam — Vice President

Thank you, Rutcha, thank you. Ladies and gentlemen, I R. Ravi, Head of Investor Relations at HGS, wishing all a very good evening and a warm welcome to the fourth quarter FY ’21 results conference call. To discuss the fourth quarter results and full year FY ’21 financials, I’m joined by Mr. Partha DeSarkar, Executive Director and Chief Executive Officer and Mr. Srinivas Palakodeti, the Global CFO.

Before we begin the conference call, I would like to mention that some of the statements made and during the course of today’s conference call may be forward-looking in nature including those related to the future financial and operating performances, benefits and synergies of the company’s strategies, future opportunities, and the growth of market of the company’s service and solution. Further, I would like to mention that some of the statements made in today’s conference call may be forward-looking in nature and may involve risks and uncertainties.

I would like to add couple of more points, during the Q&A session, questions should be asked only related to the Q4 FY ’21 financials and FY ’21 financials. The management would not be commenting on any of the speculative news doing rounds. There is an investor presentation made by Adfactors and have been already emailed to all the investors. I’m sure all of you had the chance to go through.

Before I hand over the call to Partha DeSarkar, I would like to mention that if there is a call drop during the course of the conference call, please bear with the management. Because of the COVID-19 pandemic, all of us are still taking calls in mobile from various locations and hence call drops are likely to be a recurring problem. Now, I would like to invite Mr. Partha DeSarkar to provide his perspective on the performance of the fourth quarter and also on the full year FY ’21. Thank you and over to Mr. Partha.

Partha DeSarkar — Global Chief Executive Officer and Executive Director

Thank you, Ravi and a very good afternoon to all of you. This time, we have made a change in format of our earnings call. We have actually got a deck that has been uploaded on our website and has been mailed to many of you by Adfactors PR whom we’ve appointed to be in charge of our investor relations deck. So the earnings call will refer to the presentation deck as we go through it.

So the first slide on the deck essentially talks about at a very high level what this company is all about, about $454 [Phonetic] million in revenue with 56 delivery centers in seven countries employing approximately 40,000 people and having about 254 BPM clients. We operate in three spaces by and large, healthcare being our largest space, followed by customer experience transformation, and digital. We handle voice calls, 4.5 billion voice minutes; chat, 325,000 chats; 150 million healthcare experiences and globally we support about 34 languages.

What are our key strengths? This company is today a strong net cash company with very strong free cash flow. 60% of our revenues come from tenured clients who’ve been with us for more than 10 years. We have a good geographical footprint. We call it the right-shore footprint. We have good presence onshore in U.S., Canada and U.K., nearshore in Jamaica and offshore locations like India and Philippines.

Today I’m very proud to say that our client satisfaction score is at an all-time high, it’s the highest scores that we have received since we started the third-party CSAT survey. And also, our employee satisfaction survey also this year has come out to be the highest in all the years that we have been doing employee satisfaction. Our five-year revenue CAGR is about 10.9%. Our five-year PAT CAGR is 27.2%. Our EPS for the last year is INR161 and we paid out a dividend of INR40 per share in FY 2021. I would also like to say that we are a company with Zero Promoter Pledge.

A view of the industry that we operate in, the global BPM spending as you have in this slide out here, has a CAGR of about 5.1%. This is a Gartner prediction and you see that this is a steadily increasing line. For the year 2022, it’s predicted to be about $206 billion and that obviously is a massive market and it’s fairly fragmented that allows us — players like us to play in equal footing with some of the big guys.

If you look at what’s new since the last five years, you will see the graph on the right telling you that though the whole pie has been growing, traditional BPO as a percentage of the total revenues is now a lower percentage as compared to others. So if you look at it, Business Process as a Service, that service includes many custom-made platform as well, has also been growing pretty handsomely in the last five years.

What are the highlights of last year? I think we had a fantastic year where many things came together, but the key thing that helped us survive the pandemic has been the speed at which we deployed the work at home solution. So we’ve been able to report a very strong top line and profitability growth. The fact that we did not have travel, tourism, and hospitality — you know, it is a very miniscule portion of our revenue. That actually helped us a lot because these three sectors have been seriously impacted by the pandemic.

I talked about the fact that this year has also seen our highest-ever ESAT goals and CSAT goals. So in a way, it can also be said that these three are actually connecting three dots together: happy employees, happy clients, and happy with shareholders as well because you have seen the numbers for this quarter, they have been really, really strong. We’ve had very big wins in healthcare and the public sector, specifically the U.K. public sector. The U.K. public sector has played a stellar role in the growth of quarter four. These are two specific projects that we did pertaining to Brexit support for the U.K. government and for vaccination support for the U.K. government.

The work at home technology that we talked about was the key success factor of our ability to produce strong results. When pandemic hit us in quarter one, we had no idea that the full year would be so strong and the one factor — the single-largest factor that helped us was that we had about 1,000 people operating in Canada from work at home anyway and all we had to do was to rapidly deploy that technology and that knowledge globally and I have to say that we are one of the first few companies who were off the block with a really fast deployment of work at home.

The technology that was required to deliver it, the fact that we had to ship dongles and UPSes and headphones to every associate’s office, all of that was done in record time and that made sure that after quarter one, we recovered our revenues in quarter two, quarter three and quarter four and the results are there for all to see. The comparison with previous quarter — previous year quarter on a like to-like basis, we’ve grown by 21.5% [Phonetic] in rupee terms and 31.7% in EBITDA. And that you have to bear in mind that we sold off the India domestic business in Jan 2020 and that is why the numbers look so spectacular because February and March, we did not have revenues from India domestic.

Next slide, Slide 8 talks about as reported. A good performance again both profit after tax growing about 190.6%. The revenues grew about 18.6%, EBITDA grew about 24.5%, profit before tax grew about 72%, and profit after tax grew about 190.6%. Very pleased to say it has obviously been the strongest quarter in our 21-year history. If you compare the two years because I think that’s more relevant. It takes out the effect of pandemic and you will still see that in the year of pandemic, in the year that we actually sold off the India domestic business, we’ve still grown our revenues by 14.6% and our profitability by 16%.

Slide 10 gives further detail as reported what you get to see despite the sale of India domestic, we are still able to see about 6.8% of revenue growth, you are able to see 7.9% of EBITDA growth, 27.1% of PBT growth, and 63.4% on profit after tax growth. Clearly, we are very happy to produce these kind of numbers specifically on the profit after tax numbers.

How is HGS evolving? You will see that the channel mix today has actually dropped significantly from what used to be a traditional voice-based business. Voice-based business sometime back was almost more than 75% of our revenue. Today with the addition of digital and transaction processing, the voice-based revenues have dropped to about 68%. We have signed up about 37 new logos for digital services in FY 2021. The area that we are focusing on is what we call AAA which is Analytics, Automation, and Artificial Intelligence.

This year also has been a spectacular growth year for U.K. This is because we have had massive wins with the U.K. public sector and the business has virtually grown by 60.7%. I talked about the fact that we won large contracts from the government in cooperation with Fujitsu on the Brexit support. We’ve also had a contract to support the NHS in the U.K. vaccination roll out in quarter four. Our headcount has increased to 2,357 from a number which was close to about 1,000 and all of that has been done in just one year.

We’ve actually been able to deploy technology which is cloud-based that has allowed us to flex our capacity fantastically and we’ve also been able to hire from all over the U.K. as opposed to being tied down to the three cities like London, Chiswick, and Preston where we had our physical location. We’ve been able to do this from all over the U.K. and that’s one of the secrets behind the success of U.K. this year.

I mentioned about work at home and why that is a game changer. It took us two [Phonetic] months to completely move work-at-home and this is a global deployment. Today, about 85% plus of our workforce is working from work from home. A very few who have information security needs are working on — or are working on some critical processes continue to come to office, but this is the single contributing factor for our ability to recover our revenues in quarter three — quarter two to quarter four. Everything, not only production processes, even support processes i.e., interviews, recruiting, hiring, onboarding, training, everything has moved to work from home.

I myself as the CEO of the company has been working from home for the last one year. I’ve gone to office in only one year. My CFO, Mr. Palakodeti has also been similarly working from home. So this has been a massive success story. And as I mentioned, the fact that we deployed technology in the form of cloud has also helped us flex our capacity and the good thing about cloud is we are not stuck with infrastructure.

You are able to ramp up and ramp down depending upon the seasonality of demand and supply. That gives you a lot of flexibility. It is also a very, very capex light model and that we believe is the working model for the future. We believe because we were able to deploy work-from-home last year, our annual savings on account of savings on utilities, maintenance, travel all of that is to the tune of $5.6 million on a net basis for this hybrid delivery model.

I want to talk about our COVID response. The fact that we moved people back home, they are working in the safety of their homes and that has been our primary concern, employee safety. Every employee has been taken care of. We’ve made sure that there is enough availability of technical support, wellness, and fitness are all issues, engagements have all turned virtual. We’ve done everything that is possible to make sure that our remote employees are productive and happy.

Even in the second wave, when India particularly went through a big hit, we focused on employee health, safety, and wellbeing. We’ve given 14 additional leave for affected employees in some geographies. We’ve added counseling and support groups, extended plans for family members, increased life cover in case of employee demise, focused on employee mental health. The stress has been the biggest productivity killer this year. We’ve tried to make sure that our employees are stress free. Today as we speak, we are also organizing a vaccination plan for employees in Bangalore. Two weeks back, we did it in Mumbai, and this week, we are doing it in Bangalore, all of this to make sure that our employees are safe so that they can be productive.

So what’s the new normal. We will be continuing to work — we call it the work from anywhere model. We will continue to leverage cloud technology, which as I mentioned is a capex light model. We will continue to invest in digital, which is the AAA strategy that I talked about Artificial Intelligence, Automation, and Analytics and we are looking at how can we drive verticalization deeper so that we enjoy from the domain experience.

Key takeaways, as I said, the three connected dots: happy employees, gain happy customers, and hopefully as shareholders, you are happy as well because of the numbers that we have been able to produce. Never before have these three metrics been aligned so perfectly. It just goes to demonstrate how at the core of everything that we do is a very happy and productive employee who is giving his best to keep his customers and ultimately, his shareholders happy. We’ve also taken care of the community. Our CSR program despite the constraints of the pandemic, we have had 51,000 plus hours volunteering which is benefiting about 220,000 beneficiaries. So we’ve really impacted all four stakeholders of the business. With that, I’m going to hand it over to Pala for his financial update. Pala, over to you.

Srinivas Palakodeti — Global Chief Financial Officer

Thank you, Partha. I hope all of you are able to hear me?

Partha DeSarkar — Global Chief Executive Officer and Executive Director

Very clear.

Srinivas Palakodeti — Global Chief Financial Officer

Thank you. So we move to Q4 FY ’21 performance. As Partha mentioned, we have actual growth of about 21.6% in terms of revenue, but from a reported basis, the growth is about 18.6%. We’ve had an FX impact of about 1.5% in terms of — on the revenue. There’s actually been a phenomenal growth in terms of volumes of about 19.5% and then if you back off whatever was the drop due to the impact of sale of business, it about [Phonetic] 2.5%. We are in a very strong position of 18.6% revenue growth on a year-on-year basis. Margin, you would see have improved from 14.3% to 15% and at the PAT level, the profit has shot up by about 190%. So we almost delivered in Q4 of FY ’21, profit which have — almost thrice the profits delivered in Q4 of FY ’20.

On a full year basis, the revenue growth may look muted at 6.8%. As we explained earlier, we’ve taken out the revenues from the India domestic business and if you also — there were some pass-through revenues which we have explained are no longer there. So out of the total growth, FX impact is 4.1%, volume growth is about 9.4% and then there is 2.1% impact of businesses which we have exited giving to revenue growth of 6.8%.

Margins have also improved and there is a growth of about 8% at EBITDA level. Couple of callouts on the exceptional items, 211 [Phonetic] million in FY ’20 pertains to write-off of some goodwill on intangible whereas the exceptional item in FY ’21 that is related to additional purchase consideration paid for acquiring the balance stake in at HGS Digital LLC or Elements. So in January of FY ’21, we completed purchase of the balance stake. So we now own 100% of HGS Digital LLC.

We have declared three interim dividends of INR6 each during the year. The final dividend declared — approved by the Board and this is of course subject to shareholder approval is INR22 per share which includes INR15 of special dividend that brings a total dividend of INR40 per share and a pitch in terms of payout comes to about 25% of the consolidated profits and in absolute amounts, the dividend has increased from INR20 per share for FY ’20 to INR40 per share for FY ’21.

From a revenue split perspective, healthcare continues to perform very well and accounts for about 55.8% of total revenues. USA continues to be the largest market in terms of origination at about 73% and as Partha mentioned earlier with the strong growth in U.K., that has now become the third largest market and accounts for about 9% of total revenues. In terms of PAT, this is at INR336 crores of PAT, this is highest ever in terms of the PAT in the history of the company. EBITDA is also at an all-time high at about INR773 crores and as you people who have been tracking, there’s also been a significant increase in our market cap and as of today, it’s roughly around INR36,000 million or INR3,600 crores.

We continue to reduce our debt. During FY ’21, we reduced debt by about INR2,106 million and we have ended the year on a net cash basis of INR1,365 million. Our capex for the year was INR1,581 million. This is higher than what we had in FY ’20 for two reasons. We had to incur extra capex to pass off the dongles, hotspots, and other equipments we acquired to enable our employees to work from home. The other thing is when we work from home obviously each employee needs to have a separate computer whereas if they work from office, it’s based on shifts that can be shared. So there is some impact of that as well. DSO days while slightly higher compared to FY ’20, pleased to be borne in mind that revenues in actual terms grew by about 21% in Q4.

At an overall level, our collections have been good and we have had no impact of any financial health of our clients deteriorating because of COVID. Cash flows continue to remain strong and about 49% of our free cash — of EBITDA got converted into free cash and we’ve also seen an increase in return on capital employed from about 16.2% last year to 18%. Out of a total debt, about 64% of our debt is in the form of long-term loans. We have most of the loans linked to LIBOR, but we also have loans which are in the form of interest rate swaps and fixed rate.

As we speak on 31st March, there was no debt in India, except for an ECB of equivalent of little over INR110 crores. While we do have surplus because of regulatory requirements, we are not in a position to prepay the loan without RBI approval. Coming to FX, we continue to take forward covers on a rolling 12 month basis. So we have FX covers with an average of about INR76.9 for the dollar for FY ’22 which compares very favorably with the current spot rates of little over INR74. We have rates touching — going all the way up to INR84 when you look at our forward covers for FY ’23 and ’24 and of course, this is not fully hedged. We typically hedge up to 75% of our expected revenues. On the Philippines side as well, we have rates in the range of 48.6 [Phonetic] to 48.9 [Phonetic]. This is broadly in line with the current spot rate of 48.67 [Phonetic].

Partha talked about the CSAT scores being at all-time high, ESAT scores at all-time high. If you recall by end of December ’20, our PAT for the current financial year for the first three quarters had already exceeded the full year’s profits of FY ’20 and clearly, we have as we declared better results, the markets have recognized our performance and our share price has been a significant increase and it has gone up by — it has gone up about close to 285% over the last 12 months or so, definitely higher than the increase in CNX IT and NIFTY 50. That is all for my section. I would now like to hand it over to the moderator and we’d be happy to take question and answers. Thank you.

Questions and Answers:

Operator

Thank you very much. We will now begin the question-and-answer session. [Operator Instructions] The first question is from the line of Siddharth Oberoi from Prudent Equity. Please go ahead.

Siddharth Oberoi — Prudent Equity — Analyst

Yeah, hi. I wanted to know — you’ve reported that the healthcare contributes 65% of the revenue. What is the profitability of this division?

Srinivas Palakodeti — Global Chief Financial Officer

Hi, this is Pala here. We don’t give individual breakup of any particular line of business. So we only report overall profitability.

Siddharth Oberoi — Prudent Equity — Analyst

But is it a low margin business or a high one? If you can give that amongst your portfolio of businesses?

Srinivas Palakodeti — Global Chief Financial Officer

No, I don’t want to give specifics. What we are willing to share is the overall margins rather than specific margins of a particular vertical.

Siddharth Oberoi — Prudent Equity — Analyst

All right. So, of course, the performance has been very good and the pace of revenue growth is almost about 8% QonQ. So has this been possible because of the last two, three quarters of the orders bagging or is there something else at work here?

Partha DeSarkar — Global Chief Executive Officer and Executive Director

What do you mean by something else at work. I didn’t understand the question.

Siddharth Oberoi — Prudent Equity — Analyst

I mean is it that the existing customers are giving you more orders or is it the new orders, the recent orders that you have bagged are contributing more to it?

Partha DeSarkar — Global Chief Executive Officer and Executive Director

It’s a combination of both. Our existing clients have also grown very, very well. As I also mentioned that we’ve had two large wins in the U.K. public sector. That has contributed very handsomely in quarter four. So the answer to your question is the combination of both factors.

Siddharth Oberoi — Prudent Equity — Analyst

All right. Okay. Also any update on the inter corporate deposits between company and the promoter?

Partha DeSarkar — Global Chief Executive Officer and Executive Director

Pala, you want to take that?

Srinivas Palakodeti — Global Chief Financial Officer

Yeah, I’m continuing. We do have ICDs. They were all repaid during the year. We were sitting in a position of cash surplus and as I mentioned earlier, we do not have any working capital borrowings on the India balance sheet. The only loan which we had on the India balance sheet was an ECB, which we cannot prepay without RBI approval. So these funds have been redeployed and the money is available upon — I mean repayable before end March 2022, but payable back on demand if there is a need — to meet the needs of the company.

Siddharth Oberoi — Prudent Equity — Analyst

Okay, sir right now, there are no deposits lent to the promoters, is that correct?

Srinivas Palakodeti — Global Chief Financial Officer

No, no. As of 31st March, there is debt — short-term debt of INR359.5 crores. These are all repayable before March 2022 or on demand. So we can call that money back as and when required.

Siddharth Oberoi — Prudent Equity — Analyst

All right. Also I wanted to know about this special dividend you know, what is the significance of this? Is it not recurring? This 25% of the profits that you are paying?

Srinivas Palakodeti — Global Chief Financial Officer

So in the — as I said, last year we paid a total of INR20 and this year we paid INR40. We are in a dynamic situation. So looking at — so we’ve just called it special dividend but even if you see the other part, there is an increase compared to the same dividend which we have declared in the previous three quarters.

Siddharth Oberoi — Prudent Equity — Analyst

Okay, but since you called it special, it’s like a one-time one something or is it — can this be continued in the future?

Srinivas Palakodeti — Global Chief Financial Officer

Okay, so we will — the Board will take a decision as we go through the year. So right now I don’t want to say anything more beyond the fact that our dividend for the full year are at INR40, which is double of what we had in FY ’20.

Siddharth Oberoi — Prudent Equity — Analyst

Okay, all right sir. Also regarding this tax rate, why is the tax rate so low. In the previous con calls, you had stated that it will be about 30%, 32%. So is there a shifting to a different tax slab or something?

Srinivas Palakodeti — Global Chief Financial Officer

So I think we did mention, anyways, it’s part of the publication page. There was an option to take either full rate and with tax benefits or take 25% without tax benefits. So we did our evaluation, we were better off. So that’s what we have opted for.

Siddharth Oberoi — Prudent Equity — Analyst

So but then from FY ’22, you revert back to the original or —

Srinivas Palakodeti — Global Chief Financial Officer

No, no, it’s a one-time election. So you can’t change that. So for India, we will be at 25% of our profits without any exemption even if we have receivables.

Siddharth Oberoi — Prudent Equity — Analyst

[Technical Issues] what are the tax rates there?

Srinivas Palakodeti — Global Chief Financial Officer

That’s something about 12%.

Operator

Sorry to interrupt. Mr. Oberoi, may I request you to please rejoin the queue, we have participants waiting for their turn.

Siddharth Oberoi — Prudent Equity — Analyst

Sure. All right, okay.

Operator

Thank you. The next question is from the line of Subhankar from SKSCP. Please go ahead.

Subhankar Ojha — SKS Capital & Research — Analyst

Yeah, hi. Thanks and congratulations for great set of numbers. So two questions basically on the dividend part. So FY ’21 effectively it is 40% and excluding that INR15 is about 25% — sorry, 15% and last year actually we had 20% payout. So are you going to maintain a 20% kind of payout numbers because last year [Technical Issues] This year, excluding the one-time it is 15%. Are you going to maintain somewhat 15%, 20% kind of range?

Partha DeSarkar — Global Chief Executive Officer and Executive Director

So Subhankar thanks.

Subhankar Ojha — SKS Capital & Research — Analyst

Or we are to gradually improve that because I mean overall I think on a quarter-on-quarter basis, there has been a higher payout?

Srinivas Palakodeti — Global Chief Financial Officer

So Subhankar, there are two ways to look at it. So if you look at the first three interim dividends, those were at INR6. Now here it is a total of INR22. So there is — I mean if you split it up that INR15 is special. So INR7 is what would have been against that’s what you need to compare. I think the more relevant portion is that for — our profits have gone up and we maintained the payout ratio at 25% and we paid INR40 per share compared to INR20 per share last year.

Subhankar Ojha — SKS Capital & Research — Analyst

Right, understood. Just a second, related to the margin, it has been phenomenal in terms of improvement in the overall margin. Now what will be the — I mean obviously not asking for a guidance but what are the factors that we watch out for in terms of a margin improvement of your own or an erosion because FY ’21 we had a benefit number work from home that you just illustrated. So are the clients while talking to them, are you getting a sense they are pretty okay with this kind of model or they are willing to come back after things normalize.

Srinivas Palakodeti — Global Chief Financial Officer

I don’t know, Subhankar, I was not able to hear you, your line was very disturbed.

Subhankar Ojha — SKS Capital & Research — Analyst

Okay, is it better now? Can you hear me now?

Srinivas Palakodeti — Global Chief Financial Officer

Yeah, yeah.

Subhankar Ojha — SKS Capital & Research — Analyst

Okay, so I was asking about the margin — EBITDA margin. We had seen a significant improvement in our margin last year. So what are the factors that we will have to watch out for FY ’22 in terms of a margin improvement from partner [Phonetic] or a erosion. I mean are the clients willing to continue with this work from home model or are they kind of asking employees to come back to office once the things normalizes?

Partha DeSarkar — Global Chief Executive Officer and Executive Director

Yeah, but I mentioned the fact that U.K. performed very well. If you go back to our history of U.K. performance, it used to be slightly loss making unit — operating unit. This year, it has made a fantastic turnaround. It has made a very handsome profit and even in the current year, we are seeing encouraging signs from U.K. So from a loss-making unit to a significantly contributing unit. That’s been a swing that has contributed a large amount to quarter four profitability and we expect that to be sustained.

Your second question also is about what happens to our clients. It is a little premature. We haven’t yet had any clients coming and saying that we have to come back to work. The dialog has just about started, but we are not in a position to give you any concrete yes or no to the answer as to whether our clients are asking us to come back to office. That hasn’t — we haven’t yet taken a position on that nor have our clients taken a position on that.

Subhankar Ojha — SKS Capital & Research — Analyst

Got it. And in terms of this growth momentum, I mean, you had a great quarter four with volume growth of 19.5%. FY ’22 I mean, do you see a similar growth trend will continue or as you said like quarter four you had a benefit of the vaccination program in U.K. Is it a kind of one-off or you think that these are the volume growth numbers that can sustain. 19.5% is like pretty high teen, but do you think it will be somewhere between 18% [Phonetic] or 10% to 20% range.

Partha DeSarkar — Global Chief Executive Officer and Executive Director

Subhankar, look it is very difficult to say which way vaccination will go. You yourself must be reading in the press what’s happening to vaccination all over the world. There are so many theories floating around. So whether the vaccination support will be an ongoing activity, whether the vaccination will be seasonal activity is difficult for us to comment on that right now. We do have the vaccination support program. That is going to continue for quite a few months going forward. And then as and when vaccination strategies change, it will be time for a second shot, third short, fourth shot, we don’t know. They’re talking about people below the age of 18 now getting vaccinated, right? So if you look at the vaccination that has happened worldwide, it has mostly been targeted towards people 18 plus of age, right?

Now if you start vaccinating children, that creates a new wave of vaccination support. So, you know, I will not be able to tell you for sure, no this is seasonal, no, this is going to stay. We’ve signed up with the U.K. government to support that government. Whatever the government’s policy is towards how they want to vaccinate the population, we are going to be their partners.

Subhankar Ojha — SKS Capital & Research — Analyst

Understood. Thanks so much and all the best.

Partha DeSarkar — Global Chief Executive Officer and Executive Director

Thank you, Subhankar.

Operator

Thank you. [Operator Instructions] The next question is from the line of Anand Agarwal from Balaji [Phonetic] Invest. Please go ahead.

Anand Agarwal — Balaji Invest — Analyst

Yeah, thank you so much for giving me opportunity. First of all, I hope that all the team of HGS are doing well during this pandemic. My question is related with the — this — the year has gone I mean fantastic. As you said that work from home that was the major reason, but I just want to understand a broader picture say two years down the line, how you are seeing what kind of growth the company is targeting in both the verticals — in all the verticals?

Partha DeSarkar — Global Chief Executive Officer and Executive Director

So, sir, the best answer for this would be to look at our history and see what has been our track record of growth. So I think we will be able to sustain the track record of growth that we have delivered year-on-year and that’s what you should count on.

Anand Agarwal — Balaji Invest — Analyst

So this year, so can we expect that this year was exceptional. As the kind of growth this year, we have seen is better than earlier.

Partha DeSarkar — Global Chief Executive Officer and Executive Director

No, as I said, you have to look at it over the long-term.

Anand Agarwal — Balaji Invest — Analyst

Especially profitability, not in terms of revenue. Especially, I mean in margins and profitability.

Partha DeSarkar — Global Chief Executive Officer and Executive Director

Look the attempt will be to improve our profitability going forward. As I said, work at home itself has contributed about $6 million in operating profitability, right? If you are able to sustain this model — it is a capex light model as well. So if you are able to sustain that and our clients agree to keep continuing to do work at home on an ongoing basis, I think this margin can be sustained. Also, if the U.K. performance continues in the way that it has performed last year, I also see the profitability being in a good stable situation.

Anand Agarwal — Balaji Invest — Analyst

Okay and one more question. I mean this — as there was a rumor in the market for the hiving [Phonetic] of this healthcare vertical. So is there any view on that?

Partha DeSarkar — Global Chief Executive Officer and Executive Director

Look, at the very outset of the call, I think Ravi, who’s in charge of investor relations clarified that we will not be commenting on rumors or speculation.

Anand Agarwal — Balaji Invest — Analyst

Okay, thank you so much. That’s from my side. Thank you.

Partha DeSarkar — Global Chief Executive Officer and Executive Director

Thank you.

Operator

Thank you. The next question is from the line of Maan Vardhan Baid from Laurel Investment Advisors. Please go ahead.

Maan Vardhan Baid — Laurel Investment Advisors — Analyst

Good evening everyone. Thank you so much for the opportunity and congratulations on a great set of numbers. So maybe if you could guide us through what is happening in U.K. I mean, obviously, one is aware of the changes that you’ve made over the last couple of years, but finally one is seeing that in the numbers and it seems that business is probably going to grow at a different pace than the rest. So maybe if you could take us through how you see that business ahead?

Partha DeSarkar — Global Chief Executive Officer and Executive Director

So it’s been a turnaround. You know, if you have been tracking our performance, our usual performance has been rather dismal till about 2019. This year, as I said, because we are a part of the U.K. government procurement framework, we have been able to bag quite a few orders pertaining to Brexit support and pertaining to NHS, the vaccination. So that’s what’s added to our revenues and our pipeline U.K. public sector pipeline is actually pretty strong. So we hope to be able to continue the growth here.

Maan Vardhan Baid — Laurel Investment Advisors — Analyst

Since obviously this business has transformed and one can’t historically look at the pace this business has done, so when one looks forward, what is the kind of pace that one can expect this business to grow at?

Partha DeSarkar — Global Chief Executive Officer and Executive Director

You’re talking about the U.K. business or you are talking about the company’s — the total business?

Maan Vardhan Baid — Laurel Investment Advisors — Analyst

Yes, the U.K. business.

Partha DeSarkar — Global Chief Executive Officer and Executive Director

The U.K. business has been totally transformed, you’re right. It’s grown at about 64% this year over previous year. So look, we do want to sustain the revenue pipeline that we have built. So I think going forward also, you will find a strong performance from U.K.

Maan Vardhan Baid — Laurel Investment Advisors — Analyst

Fair enough. Also on the U.S. side, obviously there has been a change of guard on the government over there. So are there some policy changes or something that we see happening which might work in our favor or not work in our favor?

Partha DeSarkar — Global Chief Executive Officer and Executive Director

Nothing specific that I can comment on. Pala, do you have anything specific to comment on?

Srinivas Palakodeti — Global Chief Financial Officer

No, the only thing I would say is that you know every four years or eight years, there is a change in the U.K. — sorry U.S. Presidency, but during this whole period, we have — our healthcare portfolio has grown in terms of revenues.

Maan Vardhan Baid — Laurel Investment Advisors — Analyst

Fair enough. So in terms of — since on the health side, the earlier regime had a very specific and a very — so is there some view on that. Are we going back to those days of Obamacare or that coming back?

Partha DeSarkar — Global Chief Executive Officer and Executive Director

You’re talking about the Affordable Care Act.

Maan Vardhan Baid — Laurel Investment Advisors — Analyst

That’s right.

Partha DeSarkar — Global Chief Executive Officer and Executive Director

Yeah, look the Affordable Care Act may be back in some shape or form. We don’t have any concrete comment on that today.

Maan Vardhan Baid — Laurel Investment Advisors — Analyst

Right, sir. Thank you so much.

Partha DeSarkar — Global Chief Executive Officer and Executive Director

Thank you.

Operator

Thank you. [Operator Instructions] The next question is from the line of Chirag [Phonetic], an individual investor. Please go ahead.

Chirag — — Analyst

Yeah, am I audible?

Srinivas Palakodeti — Global Chief Financial Officer

Very clearly, go ahead, Chirag.

Chirag — — Analyst

Sir, I have a few questions like we are into this IT business since quite long and other leading players of Indian IT industry have also started the same like when we started. So why there is — I mean reluctancy in growing the pie and all because most of the — whenever the IT boom and IT upgradation happening, the Indian IT sector able to capture a good tailwind of turnover and all. So this time in the cycle, do we change the strategy of getting orders and delivering the strategy and all in line with what the top players are doing in industry? Something — some changes did we initiate it to get the benefit of maximum of this tailwind which is scattered [Phonetic] post-COVID world?

Partha DeSarkar — Global Chief Executive Officer and Executive Director

Chirag, one clarification, we are not in IT, we are in IT-BPM and majorly BPM as opposed to majorly IT. So our competitors are not really the IT firms that you are talking about. If you compare us with companies like Firstsource, WNS, EXL, Genpact, you will find that we have done reasonably well in comparison, but comparing us with IT firms are — is not necessarily the right comparison. We are not in that business.

Chirag — — Analyst

Okay. Thank you.

Operator

Thank you. The next question is from the line of Satish [Phonetic], an individual investor. Please go ahead.

Satish — — Analyst

Hi, can you hear me?

Operator

Yes.

Partha DeSarkar — Global Chief Executive Officer and Executive Director

Yes.

Satish — — Analyst

So congratulations on very good performance. After a long time, I could see that is some pickup on your performance and even the words also sounds to be very confident and reassuring to the people who are investing in the company. Congratulations on that. Coming to the question the previous caller asked, same question I want to pose to you. You are not in IT, but in what way you can be compared with IT companies like eClerx. Can we compare your company with eClerx? And going forward, are you going to add any other verticals of cloud-based business models? That’s all.

Partha DeSarkar — Global Chief Executive Officer and Executive Director

Yeah, eClerx is similar in many ways. As I said, there are four, five companies who operate — operate in the zone that we operate, eClerx is one, Firstsource is another, WNS, EXL, Genpact. These are the five, six companies, even Allsec I would say is a BPO company. Apart from that, the people that we compete with are captives of the firms in India. So yes, to your direct question, eClerx is a competitor, but we don’t necessarily compete with them, but I would rather call them a peer as opposed to a competitor because we don’t come across eClerx in competing RFPs. So that is the answer to question number one. Question number two, yes, we do want to grow our cloud practice. It’s a small practice today, but we do want to grow it in the future.

Satish — — Analyst

Okay and the revenue, we are going to sustain, that is for sure because the confidence our company shows over a period of time and this time — last time I participated in the con call and you were sounding a little bit hesitant in telling something to the people, but this time, I could see that there is a confidence that you are having and the same confidence can I expect in the years to come?

Partha DeSarkar — Global Chief Executive Officer and Executive Director

I answered that question. It’s not about one year or one quarter. You look at our performance over the last 10 years, look at our revenue CAGR and then you will be able to ascertain what kind of growth you can expect from us. About confidence, lack of confidence, that’s a subjective comment, sir. I don’t know how many CEOs were confident when we were facing a pandemic about giving future projections for the company.

Satish — — Analyst

Okay, one final question, one final question, I’m ending here. Generally, you are an IT company who are much enabled in what you call the technology platform. Why your results are so delayed when a company like Infosys or TCS can produce the results in the first week of every quarter or second week of every quarter. Why you are delaying it so much? Because that creates a little bit of what you call misunderstanding in the market. So just I wondered.

Partha DeSarkar — Global Chief Executive Officer and Executive Director

Yeah, COVID has — yeah, okay, Pala you take it.

Srinivas Palakodeti — Global Chief Financial Officer

Yeah, so let me take that. So, clearly, results have come out later and we had this unfortunate situation where there are some people from both from our auditors side and our own employees who were required to finalize the accounts, they unfortunately had challenge — I mean they had health issues arising out of COVID. So we took longer, but well within the time limits permitted by SEBI, but as we go through, we expect things to come on track in FY ’22. And clearly, we would like to close our results and come out a bit sooner.

Satish — — Analyst

Because you should understand that things of that confidence level. You know, it gives a credit [Phonetic] to companies in the market. That’s what I want to tell you. [Speech Overlap].

Partha DeSarkar — Global Chief Executive Officer and Executive Director

Thank you. Thanks a lot.

Operator

Thank you. [Operator Instructions] The next question is from the line of Keshav from RakSan Investors. Please go ahead.

Keshav Kumar — RakSan Investors — Analyst

Hi, sir. Thanks for taking my questions. Congrats for FY ’21, especially for Q4. Sir, I wanted to ask that what is the tenure of your contracts you have with your clients? If I can have even an average timeline?

Partha DeSarkar — Global Chief Executive Officer and Executive Director

Pala, want to take that?

Srinivas Palakodeti — Global Chief Financial Officer

Yeah, so our contracts are typically three years, but we have the same set of clients who have been with us for about 20 years or even more. So one is a contractual term where you may sign an SOW for say three years and they get renewed, but we’ve had clients who’ve been with us for many, many years and as we mentioned earlier, about 60% of our revenues come from clients who’ve been with us for more than 10 years. So this is a business with long tenured clients.

Keshav Kumar — RakSan Investors — Analyst

Okay, sir and do you also have shorter tenured clients, maybe a smaller percentage?

Srinivas Palakodeti — Global Chief Financial Officer

Some of them could sign a short-term projects and based on performance, a lot of them evolve into long-term contracts.

Keshav Kumar — RakSan Investors — Analyst

Okay, so sir, this past one year amongst the client onboarding that has happened, could you give a fair or even a rough idea as to how much percentage of them would be long-term and maybe three or more than three and otherwise?

Srinivas Palakodeti — Global Chief Financial Officer

Yeah, most of them are long-term. When I say long-term, those are two or three years tenure. As I said earlier, in the beginning there were some contracts with the onset of COVID where people — the clients wanted to turn short-term, but as we went through the year, even they have turned long-term. We do some work on the digital experience etc. which is more like project-based, but again, one SOW ends and another SOW typically starts.

Keshav Kumar — RakSan Investors — Analyst

All right sir. Sir, one more thing. So do you also have payments milestone based as in amongst these contracts, say there is a client — there is a contract for three years. So is it an annuity-based business or would it also have milestone components?

Srinivas Palakodeti — Global Chief Financial Officer

See, most of — almost all our revenues come from what is called transaction-based or FTE billing. So we get paid per call answered, per transaction processed and as I said, these are clients who’ve been with us for a long time. So we have recurring revenues from each client.

Keshav Kumar — RakSan Investors — Analyst

Okay, all right, all right sir. Thanks a lot.

Srinivas Palakodeti — Global Chief Financial Officer

It’s not project-based let me clarify.

Operator

Thank you. Ladies and gentlemen, as this was the last question, I now hand the conference over to Mr. R. Ravi for closing comments.

Ravi Ramalingam — Vice President

Thank you, Rutcha. Again, Ravi here. Thank you to all the participants for joining us in the fourth [Phonetic] results conference call. If there are any further questions or clarifications about the Q4 or on FY ’21 financials, please email me or to Pala and we will be more than happy to get back to you. This is Ravi signing off on behalf of the HGS management. Again, thank you.

Partha DeSarkar — Global Chief Executive Officer and Executive Director

Thank you, everyone. Thank you for participating.

Srinivas Palakodeti — Global Chief Financial Officer

Thank you, bye-bye.

Operator

[Operator Closing Remarks]