Sagility India Ltd (NSE: SAGILITY) Q4 2025 Earnings Call dated May. 15, 2025
Corporate Participants:
Siddharth Rangnekar — Investor Relations
Ramesh Gopalan — Group Chief Executive Officer and Director
Unidentified Speaker
Sarvabhouman Doraiswamy Srinivasan — Executive Vice President, Group Chief Financial Officer
Analysts:
Manik Taneja — Analyst
Abhishek Kumar — Analyst
Rishi Jhunjhunwala — Analyst
Unidentified Participant
Ruchi Makhija — Analyst
Sameer Dosan — Analyst
Atul Mehra — Analyst
Vishal Purohit — Analyst
Presentation:
Siddharth Rangnekar — Investor Relations
Good evening everyone. And welcome to the Quarter 4 and FY25 Earnings webinar of Sagility India Ltd. This is Siddharth Ramnekar from CDR India and I shall be your host for today. As a reminder, all attendee lines will be in the listen only mode and there shall be. An opportunity for you to ask questions after the presentation concludes. Please note that this webinar is being recorded.
To introduce the management we have with us today. Mr. Ramesh Gopalan, Managing Director and Group CEO and Mr. SG Nivasan, Group Chief Financial Officer.
Before we begin, I would like to state that some of the statements made on the call could be forward looking in nature and may involve certain risks and uncertainties. A detailed statement in this regard is available in the quarter four and FY25 results presentation that has been uploaded to the stock exchanges.
I would now like to hand over the forum to Mr. Amesh Gopalan to begin with the proceedings of this webinar. Over to you.
Ramesh Gopalan — Group Chief Executive Officer and Director
Thanks. Thanks Siddharth Good morning everyone. Thank you for joining our Q4 and FY25 earnings call. We are very pleased to report another very strong quarter led by growth across our clients. FY25 concluded on a strong note and our clients continue to offer us more opportunities allowing us to win further share of wallet driven by operational excellence and strategic focus. Our technology enabled services which incorporate analytics, automation and now increasingly genai are helping us to continue to go deeper into our existing clients and at the same time win new clients. In addition, our focus on mid market payer clients, both through organic growth and further accelerated by the recent acquisition of Broadpath, continues to widen our presence across the US payer market. We are also very encouraged to see early signs of cross sell revenue synergy between Broadpath and the rest of this agility business.
As you know this is our third earnings call since our IPO and in the roadshow we are guided to mid to teen revenue growth and a 24% plus EBITDA margins and I’m very pleased to highlight that we’ve been able to consistently meet our stated growth and profitability expectations over the last three quarters. I will now turn my attention to the financial highlights. We are pleased to share that Q4FY25 we registered a strong year on year growth of 22.2% in rupee terms and 17.7% in constant currency terms.
During Q4FY25 revenues were 181.8 million and in INR15,685 million during the quarter a payer vertical grew 20.8% year on year and contributed 89.7% of the revenue mix. Our provider vertical grew at 36.9% contributing 10.3% to the total revenues. So switching from Q4 to the full year FY25 our revenues for the full year stood at 658.3 US dollar million. Which is in INR terms 55,699 million. This translates to a year on year growth of 17.2% in INR terms and 14.9% in constant currency.
Unidentified Speaker
Ramesh Sorry, can you just check the slides please?
Ramesh Gopalan — Group Chief Executive Officer and Director
No, we. We’ll come to the slide. Srini Switching Switching to full year FY25 results. Our revenue stood at 6. Sorry. Switching to margins and operating profits for the quarter, we delivered an adjusted EBITDA of 46.8 million which is 4042 million in INR terms, which is a year on year growth of 28.6%. This reflects an adjusted EBITDA of 25.8% for the full FY25. Our adjusted EBITDA stood at 173.6 USD million which is 14685 million in INR terms. This is a robust year on year growth of 28.4% in INR term and an adjusted EBITDA margin of 26.4%. So for your information, our adjusted EBITDA does not include other income. Our consolidated adjusted profit after tax for the quarter stood at stood at $2,398 million which is a year on year increase of 45.2%. The ongoing and continued reduction in our debt will continue to benefit our pat margins. Our reported EPS for the fiscal year stood at rupees 1.17 per share, which is a 119.3% increase from last year. Under adjusted EPS for the year stood at 1.76 per share, a 27.6% increase from last year.
Moving on to our employee count, we reported a total headcount of 39,409 at the end of the fiscal year. This accounts for addition of 4,365 employees during the year. Our attrition stood at 27.5% in line with the number for the previous year. I’m also pleased to highlight a couple of accolades that we received from Everest Group during the quarter. Surgility was recognized as a major contender in the Payments and Integrity Solutions peak matrix assessment 2025 and a major contender in the Healthcare payer business process as a service or BPAAS.
Moving on to KPIs for the year ended March 2025, we had 75 active clients. We onboarded 38 new clients and 30 of those clients came through a Broad path acquisition. As we’ve mentioned in the previous call, before I hand it over to Srini, let me give you some color on the future. Like we mentioned before, Our growth strategy remains anchored in three pillars. Deepening our wallet share with our existing clients. Expanding into mid market health plans and selectively pursuing strategic acquisitions. The industry is facing a lot of headwinds in terms of cost pressures, evolving regulatory frameworks and policy changes. However, we see these as opportunities. Healthcare payers and providers are increasingly seeking partners who can deliver scale, savings and transformation and sagility is positioned by well to deliver just that. Despite the economic uncertainties and unpredictability, our model remains resilient. Like I’ve told you before, we impact the operational business of our clients and so we continue to remain strong.
Like before, we continue to expect low to mid teens revenue growth in the medium term and we are also committed to delivering a steady state margin. Our strong cash flows, our healthy balance sheet and our focused capital allocation have provided us the flexibility to invest for the long term value creation evident from the fully cash funded acquisition of Broadpath that we did earlier this year. I look forward to sharing more details during the course of this call and I will address all of your questions.
Meanwhile, I’ll turn it over to Srini for getting into more details of our financial results. Over to you Srini.
Sarvabhouman Doraiswamy Srinivasan — Executive Vice President, Group Chief Financial Officer
Thank you Ramesh. Firstly, welcome all to the March 25th earnings call. Like Ramesh mentioned, we had an exceptional quarter and a great year. Our financial performance has been consistent in the last few years and we expect this to continue going forward as well.
Moving to Slide 8 we have shown the highlight financial highlights. Revenue, EBITDA, profitability all growing northwards and as we had projected. If you look at the ocf, I would want to bring your attention to the operating cash flows. The operating cash flow that we generated was about 12,140 1,214 crores for the fiscal financial year 2025 which is almost 90% of our reported EBITDA. I’ll stay here for a minute for you to absorb numbers, then we can move on to slide nine.
Yeah. Next slide please. This slide gives you a good view and the impact of the seasonality in our business. Like we have always been saying, Our H2 is more pronounced than the first half of the year and we hire for seasonality in Q3 with hit count peaking in December and January and gradually reducing in March. We have shown both years FY24 and 25. You will actually notice that the hit count has in the operational account has reduced by 1,300 people from 39.6 to 38.3. But with the addition of Broadpath we are again back to 39,400 plus employees. Moving on to slide 10 and 11. Both these two slides we are shown both long term as well as short term. All metrics in green. We have provided the key financial metrics. Any specific questions on these two slides? I’ll be responding it to you in the Q and A session. I’ll just pause here. Yeah.
Thank you. Next slide. Rosh, these are key financial indicators. You would notice that our earnings per share has been gradually improving and on the return on capital employed it continues to be very healthy at 54.9%. It’s largely driven by the robust operating performance and our free cash flows stood at 80.5% of EBITDA reflecting very strong cash generation like Ramesh mentioned. You will also notice that there has been a consistent reduction in the debt and as of 31st of March our net debt plus the lease liabilities is only 0.68x of our EBITDA. Again, the reported EPS is at 119% growth over previous year. That’s what Ramesh also mentioned. Yeah.
Moving on to this slide, our organic revenues at 54943 million which represents a 15.6% year on year growth and our Q4 organic revenue at 14929 million which is 6.3% year on year. Under 2.7% on a Q basis, adjusted EBITDA margins excluding other income is lower than Q3 due to change in the revenue mix. Like Ramesh mentioned, we had broad path acquisition that has come in in this quarter and which is predominantly an onshore business. However, that business is doing well and comparable to our onshore business. Plus we also had salary hikes in this quarter starting Jan. That’s one of the reasons as to why the Q4 revenues have slightly lower EBITDA margins compared to the Q3.
Moving on to the next slide, again a quick snapshot on of our revenue and the profitability. Like we have always mentioned, we have what’s the difference between the reported EBITDA and adjusted ebitda? We have some adjustments to the EBITDA as well as some adjustments to the pat. The first one is on account of the earnouts under the acquisition agreements that were pertaining to dci, Birch and Broadpath which we had acquired. These pertain to the earnouts ideally should have been part of the purchase consideration, but these are routed through the PNL and we have provided. The details in subsequent slide the company and these are non recurring in nature. So that’s one when it comes to the adjustments to the pat, you know there was a leverage buyout and we also had the amortization of intangibles.
Sorry I missed talking about the second adjustment in the ebitda. It pertains to the share appreciation rights that company. Some of the senior employees of the company have got from the parent company Sagility bv. This is a non cash expenditure for the company and it is directly settled to the employees by the promoters. So however it is from an accounting standard perspective routed through our P and L and hence it does not impact our operating performance or cash. Like I had mentioned on the adjusted VAT we have the amortization of intangibles which got created during the carve out from the sellers of this business. So this does not this was a share purchase agreement and hence could not have it is flowing through our balance sheet. That’s one of the reasons you will also see very high goodwill and intangibles in our balance sheet.
Next slide please. These are some of the go forward positions that we have shown and you will notice what’s the repayment for loan? What are the potential cash position share appreciation awards that will be routed through the P and L and the earnouts. Next slide please. Moving on to the balance sheet. Very strong balance sheet. We have given notes the goodwill and intangibles have increased due to the broad path acquisition. You also have intangibles that is again due to the broadband acquisition.
The DSOS I would want to call out here has been. It has been a stellar performance and the DSOS has significantly improved. March 24th we had a DSO of 85 days and this year it it stands at 79 days and this includes unbilled revenues for March. Yeah. Overall cash flows. Cash flows. Again, healthy cash generated from operations. Just give me a minute something. Cash generated from operations stands at 12,141 million rupees. Free cash at 10,896 million rupees. And like Ramesh mentioned, all the acquisition that we did with Broad Path, all have been paid from operationally generated cash and we didn’t have to borrow any money. The debt that you would see on the balance sheet is to the promoter debt which was also called out in the drhp. And that’s the repayment that we are also we have given the schedule.
So next slide please. That’s it from Mehruv. I think any open to questions.
Questions and Answers:
Siddharth Rangnekar
Thank you, Srini. Participants who wish to ask a question kindly click the raise hand icon at the bottom center of your screen. We will wait for the question queue to assemble. The first question comes from the line of Manik Taneja from Access. Manik, your line has been unmuted.
Manik Taneja
Thank you for the opportunity. I hope I’m audible.
Ramesh Gopalan
Yes, yes.
Manik Taneja
So Ramesh, I wanted to get your thoughts on two things. Number one, we’ve been hearing from a number of insurance companies in the US about challenges in certain parts of their portfolio because of the changes at the government level and the policy level. So given your well entrenched in some of your top customers, do you envisage any near term challenges in your customer portfolio in the foreseeable future? That’s question number one. And the second question is with regards to the typical seasonality that we have in our business, how should we be thinking about both near term revenue growth and margins in. In the backdrop of the typical seasonality of our of our revenue base?
Ramesh Gopalan
Okay, thanks. Thanks Manik for the questions. Let me take the first question. Right. Like I mentioned in my opening speech, there is profitability pressure across the board. Right? So. So especially if you look at the the clients who have a heavy exposure to Medicare business, Medicare Advantage business, you saw a couple of them reporting high utilization in calendar 24, which impacted their profitability significantly. And those clients, just to add to that, those clients have consciously decided to exit the plans in certain unprofitable segments because of which their membership actually reduced during the open enrollment season. The. Just concluded. Right. So that was a very conscious choice by those plans. Some of that impact is playing out as you, as you would have noticed the recent announcement of results by United and so on. So those profitability pressures on the Medicare business segment continue to exist. There are also pressures even in the commercial book of business for some of our clients. Having said that, and I’ve said this before, our clients profitability pressures and operational issues in fact gives us an opportunity to partner with them to help them reduce costs further. So from that point of view, we don’t see that directly impacting us in terms of opportunities for us to partner with our clients and deliver more work. However, it’s granted that when our clients go through profitability pressures, they expect us as a service provider to help them reduce costs further. So there’s always this pressure of trying to reduce more cost, asking for price reductions, looking for other opportunities to reduce costs for them. And so that pressure is always on us as a service provider. And that’s what this business is all about. How do you generate those efficiencies? How do you try and pass on those efficiencies to your clients so that they can reduce their overall cost of work? But like I said, in terms of opportunities, we don’t see that decreasing. In fact, we are in active conversations not only with our existing clients, but also with new clients. And we don’t see any slowing down of the, of the deal pipeline because of, of the economic issues. In fact, I would probably say that those profitability pressures in fact have increased the, the propensity for clients to, to work with service providers like us. So, so that’s, I mean, I can get into more details if you have specifics on that.
The second question, in terms of seasonality, that’s something we’ve discussed in the past. Also in our business, H2Is, is more seasonal than H1 because most of the, the AEP or the open enrollment happens in Q3 and Q4. We continue to, to staff up for Q3 and then we deliver on that towards the end of Q3 and the beginning of Q4. And so Q3 and Q4 will be much higher than Q1 and Q2. So typically when we talk to analysts and investors, we ask them to look at year on year growth, more than a Q on Q growth and within. I mean, if you have to look at sequential, then look at more in terms of halves, right? First half versus second half, because the difference between Q1 and Q2 and sometimes Q3 and Q4 could be positive. There could be an increase or a decrease, but essentially H2 will be higher than H1 and all of these quarters on a year on year basis will give you a better visibility of our growth. And like you said, we still continue to maintain our low to mid teens growth on an year on year basis.
Manik Taneja
Just to clarify with the broad path acquisition, does that. Seasonality increase. If you could talk about, about the revenue patterns for Broad Path.
Ramesh Gopalan
Yes, Broad Path. The seasonality will increase in fact, because Broadpath is, I wouldn’t say a large part, but, but a reasonable part of the business is in new member acquisition. So, so they help clients acquire new members during the open enrollment season. And so their Q3 revenues are, are substantially higher than, than any of the other quarters. Right. And so, so that will add to our seasonality. So. So we expect to see a slightly more pronounced H2 this year.
Manik Taneja
Sure. Thank you. All the best for the future.
Ramesh Gopalan
Thanks man.
Siddharth Rangnekar
Thank you. Manik. We have the next question from Abhishek Kumar of gm. Abhishek, your line has been unmuted.
Abhishek Kumar
Hi, good morning. I have couple of questions. First on this Medicare Advantage, obviously there’s a lot of noise and looks like, I mean there are certain section of the street that believes it is specific to United because they have been a little more aggressive in, in expanding in that space. You know, just from your perspective, your clientele, you know, especially the top three, do you see them already asking for some, you know, price reduction? And also if we were to look at the growth for this quarter, can you break that down between volume growth and pricing growth, especially the organic growth, just for us to get some sense of any impending pressure on pricing.
Ramesh Gopalan
So let me give you the broad response and then we’ll get into specifics. So like I mentioned to Manik’s question, Abhishek, this Medicare Advantage utilization rate has been playing out at different times for different, different payers. We’ve seen a couple of our payer clients go through the same pressures last year. Right. And like I said, they’ve consciously decided to exist at an unprofitable segments and so their membership actually reduced marginally in the Medicare segment over the last aep. Right. And so to your question, price reductions is not a new thing. So even in good times, people want a constant decrease in the cost of delivery. But when clients are under profitability pressures that ask just increases.
On the other hand, a lot of times these price reductions are not just outright price reductions without giving us an opportunity to do some transformation. So we also get the opportunity to introduce technology, to introduce automation and through that take out some of the costs. So a large part of the price reductions that we give our clients do not directly flow to our bottom line because like I said, we are able to generate those efficiencies in our operations.
To your specific question of volume growth versus price growth this, this quarter, look, across the sows, we have multiple price points. So, so I don’t know, Srini, if you have specific numbers, but I would say substantial growth is volume growth, right. Volumes by mean volumes in the existing sows, volumes because of addition of new sows. And so Srini, can you. There have been no price increases.
Sarvabhouman Doraiswamy Srinivasan
There have been no increases.
Ramesh Gopalan
We don’t get price increases. But I wouldn’t attribute any price decreases also in Q4, Srini.
Sarvabhouman Doraiswamy Srinivasan
No, there has been no price change. I would say, in fact, when it comes for renewal, there is always pressure on to reduce the prices. There has been no price increases.
Abhishek Kumar
Maybe one more question on regulation then. I have one on margin. You know, the other thing that, you know, the Trump administration is trying is to put pressure on the pharma companies. You know, do we have any second order impact of that on the claim amount and therefore, you know, our realization with our account, with our clients.
Ramesh Gopalan
Yeah, that’s, that’s a good question, Abhishek. Right. So it’s still to play out, right? So we do work with a few PBMs, right? What is the direct impact on that and how much of that is going to be passed on to consumers or how much is going to come out of the margins? Those are yet to be seen. We haven’t seen any impact. And like I said, mostly the pricing decisions don’t really have a direct translation into the work that we do for our clients because as I’ve always said, we do core operational work for our clients and that continues. But obviously like we just discussed on the Medicare plans, if there are pricing pressures, that translates to, to further pressures on service providers like us. But in terms of volume of business transacted and the work that we do for them, we don’t see a big impact on that.
Abhishek Kumar
Okay, one last question on margins, Srini. If you can break down the decrease in margin sequentially this quarter between, you know, what has come through broadp consolidation and what, what has been led by the wage hike. Thank you.
Ramesh Gopalan
Yeah, so I’ll give you some broad numbers, Srini. You can, you can add to that. Right? So, so if you, let’s talk on the adjusted EBITDA margins. Because the difference between the, the reported EBITDA and the adjusted EBITDA is two things, right? One is other income and, and other income itself had almost 2.4% reduction between Q3 and Q4. If you look at the adjusted EBITDA that was lower by 2.6%, of which the impact of broadband. Was roughly about 110 basis points. Right. And I’ve said this at the time of broadband acquisition for the full year also we expect broadband acquisition to be dilutive of EBITDA margins by almost 120 to 150 basis points at least for the, for the next fiscal. And as we improve as some of the synergies play out and we, and we reduce some of the SGNA that impact will reduce in the future years. So, so out of the 2.6 260 basis point about 110 basis point is because of broad path and the, the salary increase net of the headcount reduction is about 60 to 70 basis points and the balance 80 to 90 basis points is basically the, the Forex loss which has been classified under other expenses. That’s because of the balance sheet restatement and that’s predominantly in the Philippines.
Sarvabhouman Doraiswamy Srinivasan
Philippines.
Abhishek Kumar
Okay. Thank you so much and all the best.
Siddharth Rangnekar
Thank you. Abhishek Participants who wish to ask a question, kindly click the raise hand icon at the bottom center of your screen. We take the next question from the line of Rishi Junjunwala of iifl. Rishi, your line has been unmuted.
Rishi Jhunjhunwala
Yes, thanks for the opportunity. Just a couple of questions. Right. So first is, you know our top three clients this year have grown double digit. Right. And, and we know how large these clients are and how deeply we are entrenched in them. And despite that we have been able to register double digit growth. So just wanted to understand the incremental nature of work that is coming from these clients given that, you know, even at 140, 150 million dollar odd kind of revenue base for each of them, one would assume that or the common concern is that you know, they will start saturating and may not grow. So just wanted to, you know, get some color on the nature of what we are doing in those clients.
Ramesh Gopalan
Thanks, thanks for the question, Rishi. Right, so we’ve answered those questions in the past also. Right. Like we said, while we are being with some of these clients for 20 plus years, there are still opportunities for increasing our penetration with these clients. There are some parts of their business that they either haven’t outsourced at all or the penetration has been very low and we continue to find those opportunities. In some cases it could be in the clinical and it’s not the same for all clients. Right. So in some cases we’re penetrating more on the clinical side. In some cases there are parts of the business segments that been exposed to before that we’re getting exposed to. And in some cases, the volumes in the existing line of work is just increasing. Right. And like I’ve mentioned to many of you before, in spite of having. One or two or even three partners. Some of these clients in the past have tended to keep some work in house. And with mounting cost pressures and profitability pressures, our clients have started releasing some of those additional volumes also to us. So it could be additional volumes coming from the same line of business that we’ve been doing for them in the past. And that is some part of it. But the majority is getting to new service areas where clients have traditionally tended not to work with service providers like us. Right. And we continue to find those opportunities. And in the broader sense, again, going back to the points that we discussed in the past, when most of our clients are under profitability pressures, it makes it more pertinent for them to look for additional opportunities to take out cost. And so working with someone like us makes it possible. Right. So from that point of view, some of these opportunities have increased as we speak.
But coming back to the top three versus others, well, the top three have grown in double digits. The rest of the clients have grown even faster than that. So we continue to add to the new clients and some of the non top three are growing at 15, 20% plus. And with the addition of Broadpath, that’s just diversified our client base even more. And as we continue to execute on the cross sell to broad path clients, we expect a larger percentage of growth to come from the non top three as well.
Rishi Jhunjhunwala
Understood. So it would be fair to assume that the current growth momentum should continue over the next 12 months also. And there is no particular macro reasons because of which there could be a dent on that.
Ramesh Gopalan
No, on the growth. On the growth. We continue to maintain the low to mid teens projections that we’ve given. And we don’t, at least at this point in time, we don’t see any reason for that to be under pressure.
Rishi Jhunjhunwala
Understood. So and just on the margins, Right. So this year we have executed pretty well on adjusted EBITDA. There has been almost like a 200 plus basis points of expansion and we ended at like 26.4. We have talked about being in the range of 24 to 25 on a sustainable basis. So how do we look at, you know, the fiscal 25 margins versus, you know, the, how it might play out over the next two years? Do you intend to utilize the incremental margins for, you know, some of the productivity benefits you want to pass on to the customers or gain more business or do you think that we can actually, through better execution, reset our margin band higher than 24 to 25?
Ramesh Gopalan
No. At least for the next 12 months, we are guiding to similar 24 to 25 numbers, which is where we want our at least the short term steady state to be. Like I said, in some quarters it could be marginally up, in some quarters it could be marginally down and because of the seasonality of the business, we hire in one quarter, they deliver in the other quarter. So, so you could see some differences play out in terms of the margin, but the steady state will be around the 24 to 25%. There is a little bit of dilution because of the broad path acquisition. Like I said, 100 to 120 to 150bps dilution we expect in the margins from those city state numbers. But that’s broadly where we want to guide at least for the next 12 months because we want to continue to invest in our technology and the client facing teams because the opportunity to take out costs is very important. Like I said, as the clients are going through profitability pressures, the ask to reduce costs is increasing. And the only way to do that while protecting our margins is, is to be able to use technology. And for that we need to invest and, and continue to build on our capabilities.
Rishi Jhunjhunwala
Great. Thank you so much sir. And all the best for next year.
Ramesh Gopalan
Thank you, Rishi.
Siddharth Rangnekar
Thank you, Rishi. We take the next question from the line of Mehta. Your line has been unmuted. Please go ahead.
Unidentified Participant
Thank you. Just one question, can you talk about.
Siddharth Rangnekar
I’m sorry, Bhavik, Your line is
Unidentified Participant
The pace of deep closures and the ramp ups over the last few months.
Siddharth Rangnekar
Could we ask you to repeat your question? Line was not clear.
Unidentified Participant
Is this better?
Ramesh Gopalan
Much better, thank you.
Unidentified Participant
Yeah, sure. So just one question, can you talk about what in the base of deal closer than deal ramp ups over the last few months? Right. Because at least for the broader IT companies we have been hearing about a lot of delays coming through because of the uncertain macro. But just curious to know, you know, what been the trend for Sagittari.
Ramesh Gopalan
We’ve added sri. Correct me if I’m wrong, I think we’ve added about eight new clients for the year. I think two or three of them were added in, in the last quarter. And as we speak today, in this quarter, again, we are, our deal pipeline continues to be strong. We are in active conversations and in the final stages with at least three, three additional clients. So we don’t, like I said in the beginning, we don’t see the, the impact on the pipeline or the, or the deal closures because of the nature of our business. Right. Since we continue to impact their core operations, clients who are under profitability pressures want to take advantage of the work that we do. And so we don’t see any slowdown to our deal pipeline.
Unidentified Participant
Okay, thank you.
Operator
Do you have any more questions?
Unidentified Participant
No. Thank you. Thank you.
Siddharth Rangnekar
We take the next question from the line of Pranay Roop Chatterjee. Pranay, your line has been unmuted. Please go ahead.
Unidentified Participant
Hi. Thanks for the opportunity. Am I audible? Yes. Great. So my question on regulatory has been answered and well covered. So I’ll just move on from that. Your revenue guidance was low to mid teens. I just had a couple of questions on that statement. Is that in INR terms or constant currency?
Ramesh Gopalan
Yeah, that’s a good thing, right? These, yeah, most of all of our guidance is in constant currency. Right. So. So the low to mid teens is in constant currency and that’s organic growth. Right. And as you know, we acquired Broadpath towards the end of January. So we just had two months of revenue of broadband last year. And so that’ll play out for the full year in FY26. So if you include broad path on top of that, our constant currency total growth is likely to be upwards of 20% for FY26.
Unidentified Participant
That, that is clear. That is clear. Got it. When you guide incrementally on an organic basis, low to mid teen, even beyond, let’s say FY26, do you include inorganic growth in that as well or you feel that you can do a low to maintain both?
Ramesh Gopalan
No, we are not including any inorganic that we do from here on. We are not including in that guidance. But like I mentioned post, our broad path acquisition, see Broadpath was, was, was a unique acquisition for us because it was not as much about capabilities as about giving us access to, to the mid and small clients. And like I said, we had 30 plus new clients added to our portfolio thanks to the Broadpath acquisition. So going forward, I’m not saying we won’t do that, but it’s more likely to be capability focused acquisitions. And so even if we do those, they may not add too much to the revenue. But to specifically answer your question, we are not including inorganic revenue in our guidance.
Unidentified Participant
Perfect. Quick clarification on your margin guidance. You just mentioned 24 to 25% on adjusted EBITDA levels. I presume the broad path dilutive impact would be on top of that for FY26.
Ramesh Gopalan
Yes. Yes.
Unidentified Participant
Perfect. Good. I just had to. To end my discussion, I just wanted to speak a bit about the AI impact on your business. This has been asked multiple times previously as well. So I thought maybe why not be a bit more specific and address certain nuances. So your business, you offer a wide suit of products, right? So if I were to focus on areas which were more prone to conversion to an AI product. Or let’s say automate for example, where you have deployed employees to basically receive, make phone calls, you know, be a liaison between insurance company and the end customers. And you also made the acquisition, which is exactly in this field recently, which is AI product, to deal with this. When such a product comes in, how does that affect your overall revenue per unit work done? If I were to put it that way. Or let’s say per conversation that you’re having, when you deploy an employee to do it, you get a certain revenue, but when you have automated, you get a certain revenue. And I would presume automated, it’s lower, right? Let me answer it in a generic sense.
Ramesh Gopalan
So be back office or be front office. Today, our billing models could be either based on FTEs that clients ask us to deploy to handle those volumes, or it could be per transaction. So AI could have Genai AI could have multiple impacts. The largest impact is additional productivity or reduction of effort. And so depending on the business model, we could have multiple ways of monetizing that. When we do AI work for client, essentially the productivity improves, like I said, the effort reduces. And so if it’s a transaction trade, all of the gains accrue to us. But obviously when we start this journey, there is an explicit understanding with the client that some benefits of those will be passed on. So those benefits could be passed on to the client by a reduction in the transaction rate. And how much we reduce the transaction rate to what efficiencies we generate determines what part of the gains accrue to us versus are passed back to the client. Right.
In an FTE case it’s not as straightforward. But then again we get into gain share agreements. Most of the AI work since it improves that efficiency, you still can work on a transaction basis, but whereas if you automate something completely, then we could have a different model. For example, a transaction handled by a human could be X dollars, whereas the transaction handled completely by a bot could be Y dollars, which is, which is 20% of what a human handles. Right. So there are different ways of pricing and monetizing that. But largely to answer your question, any impact of AI will have a revenue cannibalization impact.
Unidentified Participant
That is perfectly logical, sir, and in line with what I understood. Would that is it too early to comment on what impacts such a conversion? It could be 10% of a business, 80% of your business, no one knows in 10 years time, but sows and it and,
Ramesh Gopalan
And it varies depending on the maturity curve of different clients, how much they they actually want us to do. At this point in time and so on. Like I’ve. I’ve mentioned to Many people in our meetings before. The cannibalization impact that we see currently is in the range of about one and a half to 2%. Right. So which is already kind of factored into the guidance that we are giving. So when I say mid to teen, low to mid growth, that is net of this revenue cannibalization, we predict that over the next two, three years that one and a half to 2% could go as high as 4 to 5%. But again that’s our prediction over the next two to three years. But we’ll have to wait and see how clients adopt and how much of these pilots actually become full scale implementations.
Unidentified Participant
And does this conversion affect your margins in any way? Is it too early to comment on that?
Ramesh Gopalan
Like I said, right, there are different levers to continue to protect our margins pricing of all of these AI, I gave you a few examples. If it’s transaction or if it’s FTE or if it’s complete automation and so on. So broadly the attempt is to, is to try and stay margin neutral. The attempt of all of these implementations is to pass on a large benefit to the client. Right? So that’s the underlying thesis. So a large part of the benefit will accrue to our clients, whereas we will try to cover the cost of our implementation and broadly keep our margins neutral through the process.
Unidentified Participant
Got it. And my last question, quickly, this can be a yes or no answer at your client level. I understand they are facing cost pressure and trying to outsource more, but exactly because of this, do you see at a client level them trying to figure out ways to automate some of their core administrative processes in house in any client, do you see some of these starting?
Ramesh Gopalan
Look, I mean obviously the aim to automate, reduce manual labor is not new now. So that’s been the attempt all along, Right. With the availability of new technologies, the pace just goes up. Right? And some of these automation journeys can take a very long time. So if a client wants an immediate reduction to their current cost, working with a service provider like us gives them that immediate impact, then whatever automation can be done by us, by them, that plays out over a slightly more medium term. So, so, so I don’t think any of this is new. Right? Even in the past when clients gave us work, there were still attempts to, to improve productivity, to increase automation. And, and that will continue to be the case in the future as well.
Unidentified Participant
Thank you for answering my questions sir. I wish you all the best. You have executed pretty well this year.
Ramesh Gopalan
Thank you. Thank you Pranay.
Siddharth Rangnekar
Thank you. Pranay Participants who wish to ask a question, kindly click the Raise hand icon at the bottom center of your screen. We move to the next participant. The question comes from the line of Ruchi Mukeeja from ICICS Securities. Your line has been unmuted.
Ramesh Gopalan
Hi Ruchi.
Siddharth Rangnekar
Ruchi, your line has been unmuted. Perhaps you’re on mute.
Ruchi Makhija
Thank you for the opportunity. Ramesh, you did mention that you started to see some synergy benefit from a broad path. Could you elaborate more what kind of success we have on synergies?
Ramesh Gopalan
So, so Ruchi, like we mentioned at the time of acquisition, the the synergies broadly were of two kinds. Right. One is on the cost side. They have a sizable operation in the U.S. we, we also have a sizable operation in the U.S. some of the SGNA could at some point in time be be consolidated and and we could see some synergy benefits from those. Second is all of the vendor contracts. Right. So, so, so they are overall they were a smaller company than us and so some of the synergies in software licenses and all of those costs could also play out. So those are things that are happening as we speak. So we are trying to consolidate some vendors, we are trying to look at our SDNA positions and so that will play out during this year.
The biggest synergy, the reason for the acquisition was more on the client side synergies. Like we mentioned, they have 30 plus clients, all of them in the most of them in the mid market and smaller space and their service portfolio was rather limited compared to the broad service portfolio that we have. That’s the synergies where we are starting to see some impact. It’s still early days. It’s just been three months since the acquisition. But we’ve already had interesting conversations with over 10 of their clients in areas where sigility could add value, which Broadpath didn’t have the capability in the past. Right. They are yet to convert into contracts and so on. But the early conversations are very encouraging and we hope that during the course of the year we’ll be able to convert some of those into specific contracts.
Ruchi Makhija
Understood. You did mention that this year as a part of your growth along with the Wallet share Green MA would be a key area. So do you envisage a very active M and a activity in FY26 or we would focus more on integration of Broadpath before moving on to the next.
Ramesh Gopalan
Yes, the integration of Broadpath is very critical to us because it was a sizable acquisition from a clients and people point of view. But we continue to look at other acquisitions as well. Right. So there’s nothing impending that I can talk about. But like I said, one of our other than. Expansion into, into additional clients. Our focus continues to remain building our capabilities in the, in the different areas where we service today. And so those capability focus acquisitions is something that we’ll continue to target. Yeah. How many when is still too early to, to comment on. But we are still active in the, in the MNA space.
Ruchi Makhija
Yeah. The last one, you did mention that technology investments are very critical for margin resilience. Could you Talk about for FY26 what kind of areas we are prioritizing to invest?
Ramesh Gopalan
Look, AI Gen AI is an area that continues to be a big focus area for us. Right. Like I’ve mentioned in the past, we’ve worked on several use cases. We are piloting many of them with our existing clients and depending on how they progress, they’ll be good candidates to take to new clients as well. So that’s an area we continue to work on. We’re also working on healthcare specific solutions. Right. So we’ve invested in a number of those solutions solving specific problems in the healthcare space which are common across clients. And so that’s in the area of utilization management, provider data management and so on. And so we continue to invest in those healthcare specific solutions as well. So those are the two broad areas that we’ll continue to invest in.
Ruchi Makhija
Thank you and all the best.
Ramesh Gopalan
Thank you Ruchi.
Siddharth Rangnekar
Thank you Ruchi. We take the next question from the line of Sameer Dosani from ICICI Prudential amc. Sameer, your line has been unmuted.
Sameer Dosan
Thanks for the opportunity. How to think about dividend policy. Regenerating a good amount of cash flow right now. So how to think about dividends from here on.
Ramesh Gopalan
You want to take that?
Sarvabhouman Doraiswamy Srinivasan
Yeah. Sameer, as you had noticed that we had spent significant cash that we generated last year in acquiring broadband and even as on the balance sheet date, we have a healthy cash. So we have also given you the repayment schedule for our term loan that has been agreed. So the the payment of term loans and other financial commitments that we have already made post, which definitely we are likely to come with a policy but it’s too early. I would say probably in the next couple of quarters we will decide and we might come out with a dividend policy.
Sameer Dosan
So apart from the 820crore debt we have to pay to the parent, we don’t have any other obligation, right? We don’t have a deferred consideration.
Ramesh Gopalan
Yeah, we don’t have any other obligation. Yeah, that’s the only obligation and that is a structured. We are not paying everything in this year itself. So there is a structured payout, so we will follow exactly that.
Sameer Dosan
Okay. And the. Other thing is this 25 to 24 to 25% adjusted EBITA margin. This is net of dilution from broad path acquisition, right?
Sarvabhouman Doraiswamy Srinivasan
No, this is before dilution of, of broad path, which will be another 120 dips.
Sameer Dosan
Okay. So one should, one should think margins would be around 23, 24%. Consider that dilution.
Sarvabhouman Doraiswamy Srinivasan
Yes.
Sameer Dosan
Okay. And over time we can recover. This is what we mentioned.
Sarvabhouman Doraiswamy Srinivasan
Yes.
Sameer Dosan
Okay. Got it. Thanks.
Siddharth Rangnekar
Thank you, Sameer. We take the next question from the line of Atul Mehra from Motilal Oswal Asset Management. Atul, your line has been unmuted. Please go ahead.
Atul Mehra
Yeah, hi. Good morning, sir. And congratulations on very strong performance. So my question is, given how the landscape is likely evolving in US Healthcare with Trump administration and so on, do you see that like the opportunities for M and A could be very interesting and could be perhaps sizable also in some of the cases, given that in a dynamic kind of environment, you will always see in terms of some, something which is available in distress or whatever. So anything that comes to mind or in your radar on that particular sense.
Ramesh Gopalan
Interesting, Atul. Right. So. So look, I mean, I’ve told you the kind of acquisitions that are a good fit for us. Right? So. So these are more either technology capability or services capability, catering to, to payers and providers. So. So yeah, we are on the lookout to your question. Are we seeing a lot of deals out there under distress? Not yet. We are not seeing any of those. But yeah, I mean, we also want to make sure that the quality of clients, the quality of relationships and the profitability are solid before we decide on an acquisition. Like I said, we are active. We are looking at all deals that come to the table. And so if there’s a good opportunity at a reasonable valuation, we’ll definitely do that. But at this point in time, we are not seeing too many of those.
Atul Mehra
Got it, Got it. And secondly, I have a question for Srini. So Srini, while you have spoken about the debt repayment schedule, is there a provision to prepay it in advance or is there any in terms of cost implications around early prepayment?
Sarvabhouman Doraiswamy Srinivasan
Actually, these are external commercial borrowings routed through and we have an average repayment period to satisfy through the rbi. So unfortunately, we do not have prepayment option. So it is just for the next couple of years even. We want to pay it off quickly, but we have to hold an average repayment period.
Atul Mehra
So in the next two years, broadly we should be fully clear,
Sarvabhouman Doraiswamy Srinivasan
We should be done with it. Yes.
Atul Mehra
Right. All right. Thank you. Thank you very much and wish you all the best. Thank you.
Ramesh Gopalan
Thank you.
Sarvabhouman Doraiswamy Srinivasan
Thank you.
Siddharth Rangnekar
Thank you. Atul, we take the next question from the line of Vishal Purohit from Investrix. Vishal, your line has been unmuted. Vishal, you can go ahead. Your line has been unmuted. Michelle, perhaps you’re on. Yes, please go ahead.
Vishal Purohit
Yeah. Thank you so much for giving me the opportunity. My question related to the earlier two questions of the debt in your books and the repayment schedules. You know, how do you plan to fund this? Is the cash flow sufficient or you would look for other opportunities to fund this?
Sarvabhouman Doraiswamy Srinivasan
Vishal, you would have noticed the cash that we generate every year. So we will be paying these debt repayments through operationally generated cash. We will not borrow to repay these debts.
Vishal Purohit
Scenario, if I can ask the question, do we see some promoter level selling or OFS kind of scenario to just to repay the debt?
Sarvabhouman Doraiswamy Srinivasan
No, no. The debt is on the operating company. It’s a promoter debt. Right. So the company has to pay the debt.
Vishal Purohit
Okay. All right. So you don’t see any kind of equity funding taking place to fund, just to fund that in the images short term?
Sarvabhouman Doraiswamy Srinivasan
No, no, no.
Vishal Purohit
Thank you so much.
Siddharth Rangnekar
Thank you. Vishal, that was the last question for the day. Thank you members of the management, on behalf of Agility India limited. That concludes our webinar for the day and you may log off the event.
Ramesh Gopalan
Thanks everyone.