Kellton Tech Solutions Limited (519602) Earnings Call Transcript

Ladies and gentlemen, good day, and welcome to the Kellton Tech Solutions Limited Q1 FY '27 Earnings Conference Call. [Operator Instructions] I would like to thank you all for participating in the company's earnings call for the first quarter of financial year 2027. Before we begin, I would like to mention a short cautionary statement. Some of the statements made in today's con call may be forward-looking in nature, and such forward-looking statements are subject to risks and uncertainties, which could cause actual results to differ from those anticipated. Such statements are based on management's beliefs as well as assumptions made from the information currently available to the management. Audiences are cautioned not to place any undue reliance on these forward-looking statements in making any investment decisions. The purpose of today's earnings conference call is purely to educate and bring awareness about the company's fundamental business and financial quarter under review. Now I would like to introduce you to the management participating with us in today's earnings call. We have with us Mr. Niranjan Chintam, Chairman and Whole-Time Director; Mr. Karanjit Singh, Chief Executive Officer, India; and Mr. Srinivas Potluri, Chief Executive Officer, U.S. I would now like to turn the conference call over to Mr. Niranjan Chintam, sir. Thank you, and over to you, sir.

Thank you, Sagar. Good evening, good morning, good afternoon, wherever you are joining in from. Thank you for joining our Q1 FY '27 earnings call. Just want to start off with the financial highlights, and then I'll hand over to Karanjit to talk about operational and customer wins. So the financial numbers, we have achieved INR 316 crores, which is about close to 7% year-on-year growth with an EBITDA of 11.1%, the EBITDA absolute number being INR 35 crores and a PAT margin of 7.1% and the PAT absolute number being INR 22.3 crores. The EPS for this quarter is INR 0.42. So these are the highlights from a financial point of view. Karanjit to talk about our operational highlights and the customers that we have got this quarter. Karanjit, over to you.

Good evening, everyone. So let me just first go through the client wins during this quarter. So we have had some significant wins. So I'll just go over one by one. So the first one is a Fortune India 500 conglomerate. It's a big conglomerate. And we have a strategic engagement with them to basically build a unified enterprise workflow platform, and we are leveraging our low-code/no-code platform to basically deliver these solutions. So this will actually help them modernize their financial and governance processes. And of course, it's highly configurable and of course, integrates with multiple systems that they have. And eventually, it will lead into the AI-assisted process automation as well. The second one is a leading UAE enterprise group. Here, we are basically designing a cloud-native enterprise operating system that helps unify their business operations, governance, finance and enterprise workflows. Again, this will have some API-led integration as well as AI-driven operational insights and intelligent automation, obviously, all to support the business decision-making. The third one that I have is a leading energy infrastructure company in the Middle East. We are helping them basically build an enterprise workflow platform that helps them digitize some critical time-critical operational processes, which, kind of, also have some regulatory approvals and all that. So this will completely help them do things much faster than the fragmented manual process that they have today. The next one is a leading global industrial services enterprise. So they are building a mission-critical field operations platform. In fact, they've recently got funded, a huge round of funding. So we are helping them with the engineering on that platform towards performance optimization, modernization and user experience improvements. The next one is basically a global leader in test management services. So here, we are building a cloud-native, kind of, intelligent field service customer engagement, kind of, a platform for them. And we will have AI-assisted scheduling, technician route optimization, integrations with their back-end ERP and other middleware on the GCP cloud platform. So this kind of helps us bring in our expertise in cloud modernization and enterprise integration and intelligent field operations. So these were some highlights of some of the wins we had this quarter. I'll switch to the operational highlights at this point. The first big one is that some time back, we would have spoken about having won a contract to deploy our Optima Digital Oilfields Platform for Oil India. So that project has been successfully completed in less than 6 months. This is done in the Northeast in very difficult terrain across 46 sites or plinths as they call them, covering about 80-odd wells. So we have deployed everything from the sensors all the way to the Optima platform. And this will help them basically enhance their operational visibility and production intelligence. So this really strengthens our leadership in industrial IoT systems, cloud-native platforms and of course, AI-enabled energy solutions. The second one, if some of you kind of track us, you would have heard about our PR on Phoenix.ai. Phoenix.ai is, call it, a product or an accelerator that we have launched, which helps modernize enterprise legacy system at almost -- it does it 80% faster at half the cost. So we had won an enterprise modernization project, and we have leveraged -- we have built our own framework for doing this. So this really helps to modernize any older monolithic applications to scalable cloud-native microservices-based intelligence. And of course, it uses all the latest technologies that are out there and all the stuff that you hear from OpenAI, from Copilot, from Claude. So this really is about 4 million lines of code, and it is actually a specialized ERP that we are modernizing, of course, multiple modules, covering 4 million lines of code being done to a very aggressive time lines. So what this achieves for even the customer is that you can do it at about maybe 1/3 or half of the cost and at a much faster time line, which otherwise manually would really be either not possible or would take much, much longer time. We also announced the launch of our Structi.ai platform. This is an AI context engine for enterprise intelligence. So this basically helps an enterprise to get the context and basically transforms their unstructured data into contextual AI-ready intelligence. So the first thing, before you can do any AI, you really need to have your data in order. So Structi.ai is that framework. So it covers a lot of other technical things like metadata enrichment, intelligent data orchestration, generative AI and of course, it can process millions of data assets in various formats. The next one is that we also have acquired the Select Tier partnership with Snowflake. So this is our emphasis on the data side. So we just strengthened our partnership and moved up to the Select Tier Partner during this quarter. This will really help us. Basically, it kind of recognizes our continued investment in strengthening this capability in the Snowflake and the AI-powered data platform, cloud modernization and enterprise analytics space. And it will help us go to market with the Snowflake much better. The other one is around a leading global agriculture company. We have modernized and AI-enabled their enterprise platform for employees, retailers, channel partners, where we are leveraging intelligent automation and data-driven workflows to support operational efficiency and also personalized stakeholder experiences. Another one is for a leading NBFC. We have modernized their loan origination system and the sales portal, which help them address certain other customer segments using the cloud-ready digital lending platform with intelligent workflows. And, kind of, it enables them to launch a loan against property, kind of, a new offering. And the last one here is an award that we received for the work that we have done. So BW Businessworld People Tech Future Awards 2026. We got the Gold Award for the Best HR Tech implementation. This was in recognition of the successful delivery of our Government of Karnataka HRMS2 program. It's one of the largest program, which covers almost 55 departments, all the departments of the government, the state government, covering almost upwards of 5 lakh employees across all these departments. So this is basically -- it highlights our ability to execute large-scale mission-critical digital transformation projects, which obviously have a lot of complex architecture and integrations to various systems. So that kind of are all the stuff that I wanted to cover on the operational highlights. Back to you, Niranjan.

Thank you, Karanjit. Sagar, let's get the questions queue started.

[Operator Instructions] Your first question comes from the line of Sai Jithendra, an individual investor.

Basically, I had a few questions, sir. It's regarding one of the acquisitions that we had made that is Kumori. May I know what's the revenue impact with that acquisition? And the second one is we had, I think in AGM, we had a $50 million FCCB proceeds planned, right? But what was the further process we have taken for getting those proceeds?

Okay. Thank you, Jithendra. So let me answer the Kumori one first. Kumori, this quarter, we -- see, the acquisition for Kumori was more for capability and not revenue. So we wanted to get into the space of ServiceNow. So when Kellton started on its own in the ServiceNow space, we had some certifications, we had some capability. But when the customers are going and looking about us on ServiceNow portal, they were not seeing much activity, no case studies, nothing. So what we felt was in order to jump-start our offerings to our customers, our reach to the customers, our marketing capability, we felt a need to go buy a company that gives us the capability. So with the acquisition of ServiceNow -- sorry, with the Kumori, now we have the certifications that are required, the case studies that they have now become Kellton's case studies. So with that, right, we can go market ourselves to the customer saying that, hey, we have this many certified people, and we have so many case studies that we have done successfully. Now the customers are having confidence. People are having confidence with us, and we are getting client wins because of that. Just to answer your question on the revenue for Kumori, this quarter's revenue or the last quarter's revenue was about INR 4 crores. It's not much. That's the reason why I said we acquired that company more for capability and not revenue. Now answering your question of the FCCB round, yes, we did the first round. The second round is delayed because of the global headwinds that we are facing. You understand all the global headwinds that are going on. And also today, IT industry is not -- or IT companies have not seen a good limelight. So we're just waiting and watching. It is going to happen. It's just a matter of time, but it got delayed because of the whole global headwinds than anything else. Sagar, next question.

Your next question comes from the line of Krishnansh, an individual investor.

Could you please throw some light on the accounts receivable balances? As it has been increasing year after year. And it is quite unusual for an IT company. In my limited knowledge, the accounts receivable don't pile up in the IT space.

So I'll just give you a perspective there, Krishnansh. Just to give you a perspective, we have many large customers, right? I don't want to name names. These are Fortune 100 companies in the U.S. where our clock begins after 90 days. That means after we raise an invoice, we collect after 90 days. We have customers like that in the Fortune 100. We are a small company. We are not like the large companies that have the muscle power to negotiate. For us, it's like take it or leave it. That has been the case traditionally, and it has been there. So to answer your question on the receivables, on the absolute numbers and the percentage-wise, we are almost the same. We have not grown. But in absolute numbers because our revenue is growing, right, the numbers are also increasing because of that. So if you look at our DSO days, we are at 100-plus days is where we are. In addition to that, we also have customers in India, that is the government customers, the LICs of the world, the HRMS of the world, where the lead cycle of getting invoices cleared is long. So those are the reasons why our receivables are high. So that has been the case traditionally, and it's continuing on. And that's not a reflection of our inability. It's just that we don't have the muscle power to negotiate better.

Contextually asking, the account receivables are being getting converted. They're not being provisioned, but it's taking a long time?

That is correct. We don't have -- if you can see, right, we have not written off too much. We have written off probably a few crores, but we're talking about a handful of crores over a period of 1 year or so. But beyond that, we have not. So these are uncollectibles, sometimes disputes, we write off. I don't have the exact number of 2026, but I'll get the number and answer while we're going on what we wrote off last year, okay? Just to give you an idea of how low the number is.

[Operator Instructions] Your next question comes from the line of G Vishwa Narayana, an individual investor.

Hi, Vishwanath. How are you? What can I answer for you?

Sir, what is the next 2 quarters' guidance? What are you giving, sir?

So at this point, right, you know what's going on in the headwinds, right? Unfortunately, right, we thought that the war is going to end, and it has restarted. So a lot of customers for us, we have what we call delayed starts. So people are signing on contracts and are delaying the start because the companies themselves are worried about their cash flow. This is what we're talking about in the U.S. We also have certain companies where we get to a state of negotiations done, the contract needs to be executed, they're pushing it. Okay, we'll do it next month, kind of stuff, because they're worried about the cash flow of their own company. So I don't want to give a guidance because at this point, right, whatever guidance I might give may not be -- may have an impact on what is happening with the global environment that we are facing at this point. So we will be doing -- if you look at it from a total year point of view, right, we will be at par or better than what we did last year from a growth perspective.

Your next question comes from the line of Harsh, an individual investor.

Hi, Harsh. Yes, what can I answer you?

My question is regarding the revenue growth has been relatively moderate over the quarter. So what gives you confidence in accelerating growth during financial year 2027?

Okay. So it's twofold, like I was talking to Mr. Vishwanath, right? We have -- pipeline is there. It's just a matter of getting them executed and started, right? Where I said the delayed starts that are happening. So there is demand out there. It's just people are not, people, I mean, customers, are not getting us to let us start or not signing on the contract, so they can start. So that's one thing that is good news for us. Second thing is AI-led, right? A lot of AI-led inquiries are coming in. Yes, some of them are smaller. AI-related projects and pure AI-related projects are small. But whatever we are doing from a transformation perspective, there is a component of AI in every project that we are doing now. Unlike before, now every project has some AI twist to it. They are demanding certain things that we have to do in the AI. So that gives me confidence that once all the chaos that is happening around the world settles down a bit, we would be in a much better shape. We will be doing. That is the reason why I confidently said to Vishwanath that we would meet and/or beat what we did last year. So that is my answer to this.

The next question comes from the line of Shruthi with Softel.