JUST DIAL LTD (JUSTDIAL) Q2 FY23 Earnings Concall Transcript

JUST DIAL LTD (NSE:JUSTDIAL) Q2 FY23 Earnings Concall dated Oct. 17, 2022

Corporate Participants:

Abhishek Bansal — Chief Financial Officer

Analysts:

Swapnil Potdukhe — JM Financial Ltd — Analyst

Vivekanand Subbaraman — Ambit Capital Ltd — Analyst

Vijit Jain — Citigroup Global Markets, Inc. — Analyst

Lavanya Tottala — UBS Securities India Private Limited — Analyst

Abhishek Banerjee — ICICI Securities Ltd. — Analyst

Presentation:

Operator

Ladies and gentlemen, good day and welcome to the Just Dial Ltd Q2 FY ’23 Earnings Call. We have with us today on the call Mr. V.S.S. Mani, MD and CEO; and Mr. Abhishek Bansal, CFO. [Operator Instructions]

I now hand the conference over to Mr. Abhishek Bansal, CFO, at Just Dial Ltd. Thank you, and over to you, Mr. Bansal.

Abhishek Bansal — Chief Financial Officer

Hi, everyone. Welcome to Just Dial’s earnings call for second quarter of fiscal ’23. Our operating revenue for the quarter stood at INR205.3 crores, witnessing 10.6% sequential growth and 31.6% on year-on-year basis. Same quarter previous year was severely impacted due to COVID. Our adjusted EBITDA, excluding ESOP expenses, stood at about INR19.5 crores, representing an adjusted EBITDA margin of 9.5%. Our employee expenses have increased by about 37% on year-on-year basis, led by 53% year-on-year increase in headcount across sales, technology, content, marketing functions. Our advertising expenses for the quarter stood at about INR5.2 crores. Other income stood at INR56.5 crores for the quarter, partly offsetting MTM losses that we witnessed in previous quarter. Profit after taxes stood at INR52.2 crores, representing a growth of 58.6% on year-on-year basis.

Coming to business update, we signed up about 71% customers on monthly plans basis, and this strategy has continued to work well for us. Second quarter collection stood at INR230.5 crores, growing about 14.7% sequentially and 26% on year-on-year basis. This growth, considering high proportion of customers came on monthly plans where upfront collections are lower, is encouraging. We have also taken price hikes in certain geographies in recent months and signups have still held up pretty well. Active paid campaigns at the end of the quarter stood at 503,840, which was up about 17% on a year-on-year basis and 4.2% sequentially. Paid campaign addition of 20,000 plus campaigns for the quarter despite price hikes is indicative of sustained recovery which we are witnessing post-COVID impact. Deferred revenue stood at INR378.6 crores, which was up 7.1% Q-o-Q and 13.3% Y-o-Y.

The realizable value of signups that we did in second quarter stood at about INR275 crores to INR280 crores. Realizable value is total money that we typically expect to receive in one year from both upfront and monthly plans that we have sold during the quarter. Considering realizable value trend is significantly higher versus our collections and accrued revenue both, that indicates a healthy trajectory for our core business. Our monthly ECS collections, which is money received from direct bank debit for monthly plans, stood at INR39 crores for September ’22 month versus just about INR13 crores a year ago. So the ramp-up in sales hiring is overall yielding good results, and we should see even better monetization going forward. As far as margins are concerned, they are also on an improving trajectory. Most employee costs hit our P&L immediately, but corresponding uptake in revenue recognition happens with a lag as services are rendered. So as we see our top line ramp up in coming quarters, we should see margins improving further. Overall, cash and investments stood at INR3,819 crores as on 30th September.

Coming to operating highlights, traffic stood at 156.5 million unique users for the quarter, growing about 4.6% year on year. 85% traffic now comes on mobile platforms and total listings in our database now stands at close to 34 million. Our desktop site shall see your complete revamp in coming weeks. New initiatives too are undergoing improvements to enhance user experience. Overall, the way we see it is, we see the core business coming back on track. Revenue is currently just 13% to 14% short of pre-pandemic peak levels, and paid campaigns are about 6% short. And this gap will also get bridged shortly in the next one to two quarters. This is realizable value which is a leading indicator for where things are headed. We are anyways significantly, say, 18% to 20% higher versus our pre-COVID peak levels.

So with this brief update, we shall now open the floor for questions. Thank you.

Questions and Answers:

Operator

[Operator Instructions] The first question is from the line of Swapnil Potdukhe from JM Financial. Please go ahead.

Swapnil Potdukhe — JM Financial Ltd — Analyst

Hi. Thanks for the opportunity. I have a couple of questions over here. So first one is only collections. So would like to understand what proportion of the total collections, new collections are we getting from B2C customers and how much of that is coming from B2B customers.

Abhishek Bansal — Chief Financial Officer

So Swapnil, on collections, approximately, 25% to 30% is coming from B2B segment customers and rest is coming from B2C segment customers.

Swapnil Potdukhe — JM Financial Ltd — Analyst

Okay. And the ARPUs in the B2B would be at what range versus the B2C?

Abhishek Bansal — Chief Financial Officer

So typically ticket size in our B2B monetization are about 10% to 15% higher versus our overall average.

Swapnil Potdukhe — JM Financial Ltd — Analyst

Okay. And the second question is with respect to a new line item that is there in your balance sheet, basically intangible assets under development, I would like to understand what does it actually pertain to. My initial sense was that did it might be related to the capitalization of certain cost related to new initiatives. So any take on that?

Abhishek Bansal — Chief Financial Officer

Yes, you are right. So this INR22 crores of capitalization pertains to new initiatives pertaining to transaction-oriented services that we have been working on. This does not pertain to any of JD Mart or B2B-related initiatives, since those particular platforms are already live.

Swapnil Potdukhe — JM Financial Ltd — Analyst

And how should we look at these expenses going forward on a quarterly basis or some sense on the run rate that we can expect?

Abhishek Bansal — Chief Financial Officer

So quarter these expenses were about INR12 crores and second quarter they were at about INR9 crores. So I think these expenses, as we see, could even trend down. So it all depends on how these particular platforms become live. If they become live even in a phase wise manner, so as and when they keep coming live, the corresponding expenses get depreciated. So overall, as far as expenditure is concerned, I think annual run rate should be similar or close to what the half yearly run rate is.

Swapnil Potdukhe — JM Financial Ltd — Analyst

Okay. Now how should we think about expensing out these expenses?

Abhishek Bansal — Chief Financial Officer

So these expenses, the way accounting works is that these are typically expensed over the useful life of that particular asset. So there is a — we try to assess that for these particular platforms that are being created, what could be the reasonable, conservative useful life. Could be say two to three years. And in that particular period, these get amortized.

Swapnil Potdukhe — JM Financial Ltd — Analyst

Okay. And just, sir, last one, how should we think about the A&P expenses? Last quarter, I remember you had guided for around INR60 crores of A&P expenses for the full year, but in the first half I think that number is way too low. So how should we go about thinking about those?

Abhishek Bansal — Chief Financial Officer

So advertising spends for first two quarters, you are right, they were about INR11 crores, INR12 crores. So advertising currently most of it what we are doing is digital in nature. Whenever ATL campaigns kick in, they tend to be lumpy in nature. We had guided for about INR60 crores of advertising spend for the full year. The way first half has panned out is that we have spent more on, say, employee expenses and hiring our team across various functions, and part of it has been offset via lower advertising. So for full year, at this point of time, I think could be around INR30 crores to INR40 crores instead of what we had previously budgeted. As and when we think we need to go aggressive on ATL campaigns, we will review the same.

Swapnil Potdukhe — JM Financial Ltd — Analyst

Okay. And should we focus some incremental advertising next year onwards or will it remain at the INR35 crores to INR40 crores range…?

Abhishek Bansal — Chief Financial Officer

So there could be advertising for any new rollouts that we do, either pertaining to the core business or new initiatives. So as and when those particular initiatives come to — become fructified, we will take an adequate call.

Swapnil Potdukhe — JM Financial Ltd — Analyst

Sure, sure. Thanks a lot for taking my questions.

Abhishek Bansal — Chief Financial Officer

Thank you.

Operator

[Operator Instructions] The next question is from the line of Vivekanand Subbaraman from Ambit Capital. Please go ahead.

Vivekanand Subbaraman — Ambit Capital Ltd — Analyst

Hi. I hope I am audible. So I’ll start with a few bookkeeping ones. So could you give us a sense of the top 11 markets and rest of India campaign in revenue? Secondly, Abhishek, I joined a bit late, so if you already discussed the realizable value of collections and comparison to pre-COVID levels that would be helpful. And if you can also briefly touch upon what is the proportion of campaigns that you signed up during the current quarter that were monthly in nature versus your overall stock of campaigns how much it’s roughly [Phonetic]? Third bookkeeping one is on traffic, how much is inorganic? So I’ll ask my other questions after these.

Abhishek Bansal — Chief Financial Officer

Okay. So, Vivek, first question, top 11 cities contributed about 42.5% by volumes and about 63% by revenue. Second question, realizable value trends. So last quarter realizable value of sales that we did during the quarter was about INR275 crores to INR280 crores. Pre-COVID the peak that we had was about INR235 crores to INR240 crores. So overall, about 18% to 20% higher was realizable value for last quarter.

Third question regarding proportion of monthly campaigns. So about 71% of the deals were signed up on monthly basis in last quarter. Basis that, as things stand, overall about 50% of the campaigns — the quarter-end active campaigns are currently on monthly plans and the same number was only about 19% to 20% a year earlier.

As far as inorganic versus organic traffic is concerned, about 10% of the traffic came via inorganic route and rest of the 90% traffic was organic or without any fee for it.

Vivekanand Subbaraman — Ambit Capital Ltd — Analyst

The next one that I have is on the product roadmap for the projects that are under development. Could you give us a sense on when you will make these products JD Shopping, JD Real Estate live with respect to commercial launch. And could you also please give us an update on the status of the trials that are going on right now?

Abhishek Bansal — Chief Financial Officer

So on the new initiatives, several pilots are in progress. We are in the process to work out. Basically, user experience is paramount, which is being looked at across these verticals. Some of these projects tend to be long gestation projects. At the same time, we want to be sure that whatever key initiatives that we are taking, they should have a long-term profitability roadmap in place as well.

At this point of time, the way we are looking at the business is the core business we want to get, since that is the cash cow for the company, we want to get that back on track ASAP and which is already visible. And the new initiatives we are working to enhance user experience, and as and when we see some of those going to the next-stage, we shall share a more detailed update.

Vivekanand Subbaraman — Ambit Capital Ltd — Analyst

Okay. Just one follow up on the product roadmap. So would you be able to give us a sense of where these three projects are, JD Shopping, JD Xperts, and JD Real Estate in terms of commercial readiness? Is anyone service much more advanced in terms of the rollout?

Abhishek Bansal — Chief Financial Officer

Okay. So, firstly, say, in case of JD Real Estate, essentially the thought process is that can we enrich our content by creating a catalog of the agents and builders on our platform. So earlier if you were searching for real estate agents, we were simply giving you list of those agents. Now the need of the hour is also to list properties be it for buying, selling, or renting. So that is a — I would classify that as catalog creation for those particular real estate related listings.

In case of JD Xperts, there are about 9 to 10 services that are being piloted in about 10 cities. AC repair and pest control are being piloted across cities, and certain other repairs and service-related categories are selectively being tried and tested. We are in the process of onboarding vendors as well and the good part is that whatever services that are being rendered, the user rating is reasonably good.

And similarly in case of JD Shopping, so we are doing certain pilots to figure out what would work best for both the users and the vendors. So that is where these projects are.

Vivekanand Subbaraman — Ambit Capital Ltd — Analyst

Okay. On JD Shopping, I had one question, given that the government has recently also done trials of its own marketplace, which is ONDC, are you guys working with them or is this something very different? Just to understand if — it seems that the government is targeting merchants who are pretty similar to the merchants that work with you.

Abhishek Bansal — Chief Financial Officer

So, if you see the way we understand is that it’s not a platform that a government is creating, it’s a architecture, it’s a process that our government is trying to put in place. So the government is saying that on one hand, you have the buyer apps, on the other hand, you have the seller apps. So seller apps are used to onboard a particular merchant, basically create a digital catalog of that particular merchant. The buyer apps are the front-end apps on which the user traffic is coming and the user can purchase whatever goods or services they want to. At Just Dial, we are also evaluating integrating both as a seller-side app and the buyer-side app. The key advantage could be SMEs who are listed on our platform, we could easily create digital catalogs for them and it will be beneficial for SMEs because they can then enable those catalogs on any of the buyer side apps they want to.

On the other hand, SMEs who means we have already created their digital catalogs via any other seller apps, we would encourage them to also enable their inventory for our particular platform as a buyer app, because since they have to pay commissions only on orders that are received, they have nothing to lose. So that could basically give us a ready inventory of those particular SMEs. So, overall, as I see, it’s not about targeting our particular SME base. It is about an approach towards digitalizing as many SMEs as possible, which in fact works well for us because the same SME can be [Indecipherable] you create these digital catalogs, so a digital advertising along with the capability to receive orders both are very important for any SME in this particular Internet era.

Vivekanand Subbaraman — Ambit Capital Ltd — Analyst

Okay, helpful. So is there a play for you in terms of your Omni product also in this? I’m just trying to understand because when you say that…

Abhishek Bansal — Chief Financial Officer

Yeah. So the seller side app, which is the platform to create a digital catalog for any particular business, that is where this particular Omni product that we have already created could come in handy. We are already studying ONDC. It’s in very initial stages the overall ONDC architecture. And I think we will figure out where we fit in the entire ONDC ecosystem.

Vivekanand Subbaraman — Ambit Capital Ltd — Analyst

Right. And the last one I had, you mentioned about the focus being on getting the core business back on track. So in collections, already it seems like you are back. If its realizable value is INR275 crores to INR280 crores versus say INR235 crores, then you are definitely 17% to 20% higher than pre-COVID levels. So when do you think, Abhishek, this translates into revenue? That’s one.

Secondly, with respect to the paid campaigns, the growth we have seen has been steadily healthy in the last three quarters. And this quarter we are also seeing that the yields have hardened. So how should we think about that in the next few quarters to give us a sense of how collections could evolve?

Abhishek Bansal — Chief Financial Officer

Okay. So on your first query around when does it translate into revenues, so that trajectory is now already visible. So if you see, we are about 31% higher versus the loss of revenue that we saw post-COVID impact. We had gone down to as low as about INR156 crores or so. And from there now last quarter was at INR205 crores. And so that way, whatever realizable value improvement we have been seeing over the last two, three quarters that is already percolating into better revenue. And similarly in coming quarters also there should be an improving trajectory.

Same is also reflected in paid campaigns. So, in fact, paid campaigns have caught up much faster versus revenue simply because in monthly plans we are signing up much more number of customers. In coming quarters, you will even see the realization per campaign inching up in coming quarters. So I think overall the way it will pan out is that collections should keep moving towards catching up with realizable value and P&L revenue will keep moving up to catch up with the collections.

Vivekanand Subbaraman — Ambit Capital Ltd — Analyst

All right. This helps. Thank you for the elaborate explanations.

Abhishek Bansal — Chief Financial Officer

Thank you.

Operator

[Operator Instructions] The next question is from the line of Vijit Jain from Citi. Please go ahead.

Vijit Jain — Citigroup Global Markets, Inc. — Analyst

Thank you for the opportunity. Hi, Abhishek. I have two questions. One is, this comment on realization that he just made inching up. I’m just wondering on a like-to-like basis when you go back to some of the — and signup some of the campaigns that you may have lost during the COVID period, are you taking price hikes there or this is just a matter of tier one slightly coming back faster and therefore your realization is improving. So I’m just wondering if there’s a pricing action taken here as well. That’s my first question.

Abhishek Bansal — Chief Financial Officer

So on the pricing action, two things have happened. One from last November or so, we withdrew all kinds of discounts that we were offering during the COVID period. So one that is helping. Second, in recent months we have also taken up price hikes. For example, in tier one cities, we have tried to hike up price by about 12% to 15%. And despite that our deals have held up well. So it’s a combination of withdrawal of COVID discounts and now additional price increases, basis [Phonetic] relevant geographies and categories that is into play.

Vijit Jain — Citigroup Global Markets, Inc. — Analyst

Got it. And my second question is on the headcount. Obviously, a lot of headcount addition as we’ve also gone back into adding a lot more campaigns. Just wondering how you look at that going forward. And related question to that, what’s your tech headcount right now?

Abhishek Bansal — Chief Financial Officer

So on the overall headcount, majority of the additions are taking place in our sales team. So there since we are finding that we now have a well-oiled machinery that is able to grow the number of signups despite price hikes, etc. So we do intend to continue hiring keeping, say, next two fiscal years in mind. At the same time, we are trying to ensure that we don’t lose sight of productivity. Our cost of sales — direct cost of sales should stay well within our defined limits.

And as far as overall technology team headcount is concerned, one second. So technology team headcount is about 450 employees or so.

Vijit Jain — Citigroup Global Markets, Inc. — Analyst

It’s the same as a couple of quarters back, right, because that was the numbers there as well. Just trying to double-check that.

Abhishek Bansal — Chief Financial Officer

So on a year-on-year basis, there is an increase of about 95 employees in that. In recent one or two quarters, it might not have been that much increase.

Vijit Jain — Citigroup Global Markets, Inc. — Analyst

Got it. Thanks, Abhishek. Those two were my questions. Thank you.

Abhishek Bansal — Chief Financial Officer

Thank you.

Operator

[Operator Instructions] The next question is from the line of Lavanya Tottala from UBS. Please go ahead.

Lavanya Tottala — UBS Securities India Private Limited — Analyst

Thanks for the opportunity. So, Abhishek, I just wanted to understand if you see any timelines for the new initiatives that are in pilot stage now. So do you see any timeline for this launch to happen completely — maybe, at least for JD Xperts, which is available already in 10 cities?

Abhishek Bansal — Chief Financial Officer

So Lavanya, we do — we are working internally with a certain timelines for specific categories, etc. But I think, at this point of time, we want to ensure that we get these particular verticals right before we make any meaningful announcement. So as I said that the core business is about discovery, the second new initiatives are pertaining to adding a transactional layer. Adding transactional layer has multiple elements to it. You need to ensure user experience is right. You are basically taking responsibility for the experience that is getting delivered. So some of those particular nitty-gritties we are still figuring out. As and when there is a tangible update, we shall share the same.

Lavanya Tottala — UBS Securities India Private Limited — Analyst

Okay. Got it. So even in the — the services which we are offering now, did we expand in terms of whatever we were doing in pilot? Previously in last quarter how many cities and current quarter what’s the trend in the number of cities that this pilot was going on?

Abhishek Bansal — Chief Financial Officer

So certain services are live in a certain specific set of pincodes because you need to onboard merchants for each category and to cater to all the relevant pincodes. In terms of number of categories, I think previous quarter there were about eight categories. Now there are about 9 to 10. But I think coverage is getting expanded in terms of more number of pincodes. So 10 categories, 10 cities, this covers a huge proportion of the universe for on-demand home services. But within that, there are nitty-gritties in terms of how many merchants you have, how many pincodes you are catering to, what all services within a particular service you are providing and so on.

Lavanya Tottala — UBS Securities India Private Limited — Analyst

Okay, got it. So also on our core business, so you have highlighted that now the monthly plans are about 50% as compared to around 19%, 20% which was a year earlier. How do you see this trend going ahead, because these monthly plans which we have launched was to promote — our vendors to come back onto the platform? Do you see this trend to continue, or do you think that it will go back to what it was earlier?

Abhishek Bansal — Chief Financial Officer

So for last about two to three quarters, every quarter we are signing up about approximately 70%-odd customers on monthly plan basis. Rest of the customers, some customers have their preference, they want to sign up on full annual plans, etc. So if we continue to stay on 70%, then overall active paid campaign count after a few quarters should converge with the 70% number.

Lavanya Tottala — UBS Securities India Private Limited — Analyst

Okay. Got it. And I just missed the number which you have given for collections. Can you just help me with that number?

Abhishek Bansal — Chief Financial Officer

About INR230.5 crores for the quarter.

Lavanya Tottala — UBS Securities India Private Limited — Analyst

Okay. Thank you. Thank you so much.

Abhishek Bansal — Chief Financial Officer

Thank you.

Operator

[Operator Instructions] The next question is from the line of Abhishek Banerjee from ICICI Securities. Please go ahead.

Abhishek Banerjee — ICICI Securities Ltd. — Analyst

Hi. Sir, am I audible?

Abhishek Bansal — Chief Financial Officer

Yes. Please go ahead.

Abhishek Banerjee — ICICI Securities Ltd. — Analyst

Yeah. So couple of questions from my side. Last quarter you had mentioned that the proportion of B2B sales for you had gone up to 26%. What would it be for this quarter?

Abhishek Bansal — Chief Financial Officer

For second quarter also it was close to 26%.

Abhishek Banerjee — ICICI Securities Ltd. — Analyst

Got it. Sir, any faster growth that you’re seeing in the B2B segment generally?

Abhishek Bansal — Chief Financial Officer

So B2B segment is contributing to higher growth in terms of whatever realizable value that we are seeing in that particular quarter. I think there the contribution would be around 30% or so. But post-COVID now even the B2C segment is coming back strongly, which again obviously is a focus area for us since that is the majority revenue contributor. We do have a dedicated 650, 700 member B2B sales team, which is working on monetization. At the same time, work is ongoing in terms of enhancing content for B2B vertical. So overall, yes, B2B has relatively higher growth versus B2C.

Abhishek Banerjee — ICICI Securities Ltd. — Analyst

Understood. One more question, sir. What exactly is the cash in hand as of now after the raise?

Abhishek Bansal — Chief Financial Officer

Total cash and investments at the end of the quarter was about INR3,819 crores.

Abhishek Banerjee — ICICI Securities Ltd. — Analyst

Okay. Sir, there was a preferential issue as well, right?

Abhishek Bansal — Chief Financial Officer

That happened in same quarter last year.

Abhishek Banerjee — ICICI Securities Ltd. — Analyst

Okay, sorry.

Abhishek Bansal — Chief Financial Officer

So before that particular preferential issue, we had about INR1,500 crores cash. Preferential issue was about INR2,165 crores, and basis any additional accruals and mark-to-market gains, current treasury size is about INR3,820 crores, INR3,819 crores to be precise.

Abhishek Banerjee — ICICI Securities Ltd. — Analyst

Got it. Now if I am to see into the future, so you mentioned that you will calibrate your media spends as and when the need arises, right? So for the new initiatives, do you see some capex also going out?

Abhishek Bansal — Chief Financial Officer

So there is some capex that happens in terms of catering to any additional IT infrastructure that we might need, any additional other whatever resources that we might need. For example, last full year capex was about INR15 crores, but in first two quarters we had about INR14 crores of capex. So partly it is for new initiatives, partly it is also for the core business in which there was very low capex for last three to four years. So that is how it is.

Abhishek Banerjee — ICICI Securities Ltd. — Analyst

Understood. Now going ahead, as you see the core business coming back strongly, do you see room for efficiencies of scale? What is the margin outlook in your mind at least?

Abhishek Bansal — Chief Financial Officer

So the new salesperson that comes onboard after a certain tenure, they tend to reasonably show up higher productivity. So since there has been significant hiring over the last three quarters, the employee costs have seen a jump immediately, while it has reflected in higher realizable value also. I think as the current staff tenures, the revenues monetization should be even higher. Overall, over a sustained long-term period, 25% to 30% margin is where we would want to go at. And incremental margins at that point of time could either be deployed into additional advertising or any other initiatives. So we’ll take a call at that point of time. Today, if I were to look at my margins basis the money that I’m collecting versus even the realizable value, they are already at a very healthy level.

Abhishek Banerjee — ICICI Securities Ltd. — Analyst

Understood. So when you mean over the medium-term, you mean the next couple of years I’m guessing?

Abhishek Bansal — Chief Financial Officer

Yeah. So I think fiscal ’24 will be a relatively stabilized year in terms of we would have come out of the COVID impact plus we would have had done a good chunk of our hiring already and that particular salesforce would have started to become tenured.

Abhishek Banerjee — ICICI Securities Ltd. — Analyst

Got it. And your new initiatives will obviously, at least to begin with, be margin dilutive, right? And the pilots that you were planning were supposed to happen like I think by Q4 of this year. So is there any change in that or are you sticking to that only, especially in JD Mart?

Abhishek Bansal — Chief Financial Officer

So some of our new initiatives, the INR22 crores that we spend that anyway is capitalized. So that has not been denting our particular margins. In fact, this intangible enables us to see a clearer picture for our core business. We’ll continue to see invest in these particular pilot projects. The pilots are happening on a day-to-day basis. So some of the best way to do pilots in these particular products is to make them live, see what is the user experience for employees that are using the service, external users that are using the service. And that is how you keep improving. And once it is stabilized, then you work towards scaling traffic. So that is what the thought process would be. At the same time, we would want to ensure that we don’t want to run a business where for next five years we don’t have any sight of profitability or profitable growth in place.

Abhishek Banerjee — ICICI Securities Ltd. — Analyst

Absolutely. That makes perfect sense.

Operator

Mr. Banerjee, sorry to interrupt, but for any follow-up questions, may we request you to rejoin the queue please. Thank you. The next question is a follow-up from the line of Vivekanand Subbaraman from Ambit. Please go ahead.

Vivekanand Subbaraman — Ambit Capital Ltd — Analyst

Hi. Just a couple of follow-ups. So one on the employee side, so prior to COVID, you had around 13,000 employees, but now it’s 15,000. So, Abhishek, is it possible to help us with the bridge in terms of the additional headcount that has been added where has that — or rather what projects are they assigned to? Secondly, how are you thinking about the productivity metrics for employees across businesses?

Abhishek Bansal — Chief Financial Officer

So firstly, when we had 13,000 headcount pre-COVID, we had about 9,800 employees in sales function, which today stands at about 11,300. So a 1,500 addition in that — is in directly sales function for the core business versus overall 2,000 delta, which is 15,000 less 13,000. The rest of the 500 employees are part of the addition is on the technology team, part is in content team, and certain other specific teams for new initiatives.

As far as KPIs, etc., are concerned, anyone on the core business side, obviously, on the sales side, it directly relates to how monetization and profitability is panning out. For newer initiatives, it is linked to rollout of new features, users rating for those particular new features, and so on. So for new initiatives, they are primarily linked to the ramp-up of product rollout, and for existing live products it is primarily, as far as possible, linked to revenue and profitability.

Vivekanand Subbaraman — Ambit Capital Ltd — Analyst

A follow up. So the 1,500 people added in sales, those people are largely for the core business, right? Is that how one should think about it?

Abhishek Bansal — Chief Financial Officer

They’re completely for the core business.

Vivekanand Subbaraman — Ambit Capital Ltd — Analyst

Okay. So in a way, Abhishek, if I were to look at, let’s say, the realizable value of the collections, which is around 15%, 20% higher versus COVID, your sales headcount has moved up similarly. Is that a fair way to see things in terms of productivity?

Abhishek Bansal — Chief Financial Officer

So it has moved up similarly. The way I look at it is that while a majority of this particular sales team has come on board in last six to nine months, as soon as these particular sales employees cross, say, 12 to 14 month tenure, their output productivity improves even further. So while I have already received 15%, 20% higher output compared to 15%, 20% higher manpower addition, going forward, I should get benefits of operating leverage in terms of this existing sales team becoming tenured in nature. So the average tenure of existing 11,300 employees would be lesser versus 9,800 employees that I had at the time of pre-COVID. So as and when this 11,300 average tenure goes up, that should aid my monetization even further.

Operator

Thank you. The next question is from the line of Mohit Motwani from [Indecipherable]. Please go ahead. Mr. Mohit Motwani, may we request you to accept the prompt on your screen and unmute your audio and please proceed with your question. As there is no response from the current participant, we move to the next question which is a follow from the line of Abhishek Banerjee from ICICI Securities. Please go ahead.

Abhishek Banerjee — ICICI Securities Ltd. — Analyst

Hello. Yeah, just a couple of more questions from my side. So in terms of employee productivity, what is it with respect to pre-COVID levels right now? Is it at 80%, 90%, or have you already reached 100% of employee productivity?

Abhishek Bansal — Chief Financial Officer

So, Abhishek, the way we look at it is employee productivity, we look at for a certain tenure what is the productivity. So for a like-for-like comparison, the same tenured folks are already higher versus the pre-COVID levels. However, considering we have a good chunk of employees in our lower tenure bucket, that is why overall cohort’s productivity might be lower versus pre-COVID.

Abhishek Banerjee — ICICI Securities Ltd. — Analyst

Yeah. So can you give me that number, that overall average number so that I get the handle on how that will impact margins?

Abhishek Bansal — Chief Financial Officer

Okay. So the way we look at it is, we look at gross cost of sales, which is revenue less direct salaries and incentives that we pay to our sales employees. Pre-COVID that used to be about 40%, 42%, and currently equivalent number is about 45%, 46% or so. Having said that, the way productivity is panning out, we should be at even better or lesser cost of sales versus where we were pre-COVID.

Abhishek Banerjee — ICICI Securities Ltd. — Analyst

So at least a 300, 400 basis point margin improvement coming just from there?

Abhishek Bansal — Chief Financial Officer

Yeah, it should be even higher. Or the other way to look at it would be that today’s quarterly cost structure is showing as INR205 crores as top line, but the same cost structure is bringing in INR230 crores of collection, and the same cost structure will likely generate INR275 crores to INR280 crores of collections in future. This INR275 crores to INR280 crores is the realizable value of sales that I did in last quarter. So versus about whatever INR180 crores odd cost structure I had say INR185 crores, INR186 crores, INR186 crores should not be benchmarked to INR205 crores. It should be benchmarked very theoretically to say INR275 crores or worst case INR230 crores of collections that I got during the quarter.

Abhishek Banerjee — ICICI Securities Ltd. — Analyst

Absolutely clear. Very clear. Just one last question on the new initiative side, which I was trying to ask then. So most of the new initiatives which you are going to do is going to be on the hyperlocal B2B side, right? At least that’s the — that is how the apps look, right? So my understanding is these kind of businesses, it is generally gross margin accretive from day one — it is gross margin positive on day one, right? So is that understanding correct?

Abhishek Bansal — Chief Financial Officer

Can you elaborate further that how do you conclude that these are margin-accretive from day one?

Abhishek Banerjee — ICICI Securities Ltd. — Analyst

I mean gross margin positive, so you will not make sales which actually cost more to deliver than what your customer is paying.

Abhishek Bansal — Chief Financial Officer

So it depends. My top line would be my commission revenue, right? So my top line would not be the entire transaction value from the platform since I’m an agent, I’m not a principal.

Abhishek Banerjee — ICICI Securities Ltd. — Analyst

Yeah. So you will be supplying the logistics services, right? So that will be a cost for you.

Abhishek Bansal — Chief Financial Officer

Yes, that will be a cost, but you are right that in case of overall unit economics, for example, if I have a 8% commission, whatever spends that I would want to do should ideally fall in that 8% commission bucket.

Abhishek Banerjee — ICICI Securities Ltd. — Analyst

From day one. That’s what — that’s all I was trying to understand. Yeah.

Abhishek Bansal — Chief Financial Officer

That is how ideally it should be, but honestly, the ecosystem is such that portals are spending much higher to get that 8%, which is what we want to not do because for others who have done that even for the last 10 years, they are still struggling with profitability. So we want to be cautious on how we tread path for these…

Abhishek Banerjee — ICICI Securities Ltd. — Analyst

Absolutely, sir. And probably that explains the delay in those things actually coming up, right?

Abhishek Bansal — Chief Financial Officer

Yeah, definitely. So we want to be sure that, okay, it is very easy to scale some of these things, right. So you can scale up, but at what cost is the key question.

Abhishek Banerjee — ICICI Securities Ltd. — Analyst

Got it. Perfect. That answers all my questions. Thank you so much.

Abhishek Bansal — Chief Financial Officer

Thank you.

Operator

[Operator Instructions] The next question is a follow-up from the line of Abhishek Banerjee from ICICI Securities. Please go ahead.

Abhishek Banerjee — ICICI Securities Ltd. — Analyst

Yeah. Just is there any update on your integration with the parent…? Hello?

Abhishek Bansal — Chief Financial Officer

Yes. Please go ahead.

Abhishek Banerjee — ICICI Securities Ltd. — Analyst

Is there any update on the integration with the parent on Jio platforms? How is that working?

Abhishek Bansal — Chief Financial Officer

So we are working with overall RRVL team, firstly, to get our strategy piece right. Second, as far as integrations are concerned, some integrations have already taken place with the Jio teams being — Jio being integrated with our particular app. Efforts are underway to also place JD app as part of various platforms that they have. For example, My Jio and any other similar platforms.

Abhishek Banerjee — ICICI Securities Ltd. — Analyst

Got it. And any interlinkages between the JD Partner app — sorry, the Jio Partner app with JD, because that is also a B2B centric platform — or a Jio business for that matter?

Abhishek Bansal — Chief Financial Officer

Yeah. So I wouldn’t say anything crystallized at this point of time. As and when there is any specific update for the same, we shall share.

Abhishek Banerjee — ICICI Securities Ltd. — Analyst

Understood. Thanks.

Abhishek Bansal — Chief Financial Officer

Thank you.

Operator

[Operator Instructions] The next question is from the line of Vijit Jain from Citi. Please go ahead.

Vijit Jain — Citigroup Global Markets, Inc. — Analyst

Yeah, hi. Thank you for the opportunity. Abhishek, I just wanted to clarify on the comment you made about revenue less direct expenses, including incentives. I just wanted to rehear the numbers you used because you mentioned I think 45% as gross margins pre-COVID and 40% right now. Is that understanding correct?

Abhishek Bansal — Chief Financial Officer

No. So 45% was my gross cost of — is my current gross cost of sales, which used to be 40% pre-COVID. So gross margin currently is about say 55% versus it used to be, say, 60% earlier. And this 55% should surely cross 60% levels in coming quarters as and when my existing sales force gets tenured.

Vijit Jain — Citigroup Global Markets, Inc. — Analyst

Got it. So when you do this you’re basically just including the direct sales force expenses within your personnel expenses? That’s the broad math…

Abhishek Bansal — Chief Financial Officer

So primarily salaries and incentives that I pay to my sales employees and any other small direct cost that might be there?

Vijit Jain — Citigroup Global Markets, Inc. — Analyst

Got it, understood. Thank you, sir.

Operator

[Operator Instructions] As there are no further questions, I would now like to hand the conference over to Mr. Abhishek Bansal for closing comments. Over to you, sir.

Abhishek Bansal — Chief Financial Officer

So, in case you have any further queries, please do reach out. We would do our best to address. Thank you so much for joining and best wishes for the upcoming festive season. Thank you.

Operator

[Operator Closing Remarks]