Release Date: February 18, 2025
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Hinduja Global Solutions Ltd (BOM:532859, Financial) has successfully transformed from a traditional BPO player to a tech-enabled transformation partner, focusing on digital transformation and AI-driven services.
- The company has expanded its geographical footprint, with new operations in South Africa and additional facilities in Bangalore and Canada, indicating growth and increased capacity.
- Significant investments in R&D and M&A have enhanced the company's technology capabilities, positioning it well for future growth in AI and digital services.
- The company has a strong cash position, with 50% of its assets in cash and surplus, providing financial stability and flexibility for future investments.
- Hinduja Global Solutions Ltd (BOM:532859) has seen growth in its broadband business, with ARPUs increasing from INR 169 to INR 199, reflecting improved profitability in this segment.
Negative Points
- The company is experiencing delays in decision-making on contract awards, which could impact revenue recognition and growth in the short term.
- There is a noted decline in revenue due to the transition from onshore to offshore operations, which, while potentially improving margins, results in lower short-term revenues.
- The media business remains a challenge, with significant capital expenditure required and ongoing efforts needed to enhance profitability.
- High levels of deferred taxes and finance costs are impacting profitability, although these are expected to decrease in future quarters.
- The transition to a technology-led business model is still ongoing, requiring patience from stakeholders as the company works to improve profitability and complete its transformation.
Q & A Highlights
Q: The media business remains a significant challenge for the company's turnaround. Could you share insights into the company's plan to enhance its profitability and what key measures are being taken to drive this improvement?
A: Vynsley Fernandes, Additional Whole-time Director and Head of the Digital Media Business, explained that the media business is capital expenditure-driven. The focus is on growing the broadband business, which has shown an increase in ARPUs from ₹169 to ₹199. The company is also pushing the enterprise segment, which offers high ARPUs and long-duration contracts, and is focusing on upselling to existing customers.
Q: Can you provide an update on the internet via satellite and its growth outlook?
A: Vynsley Fernandes noted that while there is interest in satellite internet, regulatory processes are still being clarified. The company is ready to engage once the licensing process is streamlined, and there is a strong governmental push towards digital inclusion, which is expected to drive future growth.
Q: How much further could the company scale in South Africa, and what is the potential for revenue and profitability improvement?
A: Srinivas Palakodeti, Global CFO, stated that operations in South Africa began around June-July, and demand has been strong, necessitating additional space and capacity. The offshore operations in South Africa are expected to yield better margins compared to onshore operations in the US or UK.
Q: With a significant cash balance, are there any plans for potential dividend buybacks or investments?
A: Srinivas Palakodeti mentioned that the company completed a buyback in June 2023, returning ₹1,020 crores to shareholders. The focus is now on using funds for organic growth or acquisitions, particularly in digital, AI, and automation spaces.
Q: Can we expect a reduction in finance costs given the strong cash and treasury balance?
A: Srinivas Palakodeti explained that efforts are being made to reduce debt and interest costs. The company has shown a reduction in borrowings, and future interest costs are expected to decrease as debt is further reduced.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
