KFin Technologies Limited (KFINTECH) Earnings Call Transcript

Ladies and gentlemen, good day, and welcome to Q1 FY '24 Earnings Conference Call of KFin Technologies Limited hosted by Kotak Securities Limited. [Operator Instructions]. Please note that this conference is being recorded. I now hand the conference over to Mr. Abhijeet Sakhare from Kotak Securities. Thank you, and over to you.

Thanks a lot. Good morning, everyone. Welcome to earnings conference call of KFin Technologies Limited to discuss the 1Q FY '24 performance of the company and share industry and business updates. We have the senior management with us today, represented by Mr. Sreekanth Nadella, MD and CEO; Mr. Vivek Mathur, CFO; and Mr. Amit Murarka, Head, Investor Relations. I would now like to hand over the call to Sreekanth for his opening comments, after which we will take Q&A. Sreekanth, over to you.

Thank you so much, Abhijeet. A very good morning to one and all. As always, I will start the presentation with a quick overview in terms of the organization KFintech as several new shareholders have participated in our organization in terms of wealth creation. So welcome onboard to one and all. We continue to be the single largest investor solution provider to the vast majority of the asset classes within this country. In mutual fund space in the form of the maximum number of asset management companies, which stacks at 26 out of 45 asset management companies in the country today. In terms of alternate investment funds, about 36% of all the funds are being serviced by us. Issuer solutions, where we manage with around 5,500-plus clients with a market share of 47%, cutting across market cap of NSE 500. Together, managing a folio count of close to [ 230-plus million, ] that's -- and that puts us among the largest, not just in India, but among in -- within the world as well. Quickly deep diving in terms of the mutual funds, we -- our win record is something that we have set certain benchmarks back in the day, having 15 out of 22 asset management companies that have launched in the country. In this quarter, while our country's largest financial services company, Bajaj Finserv, which has also launched its asset management company. We won this mandate in the previous year, has gone operationally with the launch of 4 funds into this quarter. Our market share in terms of the equity AUM is close to 35%. Our complete in terms of the monthly in closing the SIP continues to be running at about 40% of the total inflows into the KFin service funds, even as newer AMCs have launched, and we expect the market share to continue to expand from here on. In terms of issuer solutions, a very interesting space as we've been the first registrar in the country, having handled more than 60% of the IPOs within this country, will continue to handle a majority of them on the mainboard even today. Several corporate actions have been conducted. We have been chosen to be the partner for the Jio Financial and several others, which I will do a deep dive on. Our international and other investor solutions is the fastest growing sector for us over the past 3 years, as we have since become the only market license intermediary, especially registrar and transfer agent who has presence beyond India, we are currently present in Malaysia, Philippines, Hong Kong and Singapore in addition to being India apart from servicing clients in Canada and a few other parts of the world. We have become the second central recordkeeping agent for the administration of National Pension System. We have crossed the 1 million subscriber mark into the previous month, making us the fastest growing CRA nearly twice the speed of the industry. In terms of the alternate investment funds, we had a market share of no more than 7% in 2020. Today, it is about 37% brands as among the fastest-growing fund administrator in the country. Our innovation and the tech labs are at the forefront, and we believe are the reason for the differentiated growth vis-a-vis the industry. We've launched several new products in addition to the 20 that have been launched in the previous year, at least half a dozen new products are in the pipeline to launch into the 4 to 6 weeks. In terms of the hyperscale transaction volume, we process a little lower 1.5 million transactions every single day, little over INR 1 trillion plus transit to our system, inbound and outbound. Making us a critically important institution as has been accorded by the country's regulator in the previous year. We have since then been ESG rated at Level A, putting us the highest rating for any registrar not just in India, but within the world. And we track to our security given the quantum and the gravity of the volume of the transactions that we process and the significance to the capital market structure in terms of the security, we track to the platinum standard of BitSight Security Score where we affected 790 which we have just reached to 800, putting us amongst the best in the country as well. That's a quick snapshot about our organization. As I quickly deep dive into the highlights of the previous quarter. We had purposefully orchestrated to be a diversified business model over the past 5 to 6 years. Diversification in what sense, in terms of the asset classes, not just the dependent on mutual funds, but expand into security markets of equity and bond markets, alternate investment funds, pensions, private retirement schemes. While seated, not just be a single geography focus in terms of the cyclicalities well with us, ergo expand geographically. And that's exactly the path that we have orchestrated for ourselves over the past 5 years. Even as our younger businesses have already taken near about 50% plus of the total share of revenue as against nearly 4% again, 5 to 6 years back. That provides a very good [ headroom ] for as we are concerned. In the quarter that had gone by, our revenue has grown approximately 8% year-on-year. EBITDA growth had been about 13% and the PAT has grown at 16% year-on-year. with a PAT margin at 24%. Both PAT and EBITDA margins have seen a 200 -- near 200 basis points expansion year-on-year. Q1 traditionally being a lighter quarter for the financial services, especially in the business that we are in. We are extremely happy to inform the investors that we have clocked revenue profile pretty much same as what we have for Q4 of the previous year, which effectively means that as we move into Q2 through Q4, the growth would accelerate and so will the revenue and the margin profile. We have since then also carefully orchestrated certain value-added solutions, which is something that is completely devoid of any market fragrance, which is largely on the technological solutions that we are working on, including their own big data platforms such as [ Digix and Quest ]. The value-added solution revenue has grown 16% year-on-year, and we are confident that it would cross 20% as we move into the coming quarters. In terms of the mutual fund business itself, our average AUM has grown 14.5% year-on-year vis-a-vis 14.2% growth for the industry, which means that we continue to have accelerated growth vis-a-vis the broader industry in itself. And we believe that into the coming quarters, hopefully, we should see a greater traction given the quantum of NFO, several of our clients have launched and are set to launch. In addition to the fact that the country's largest financial services company, Bajaj Finserv, which is our client has gone live in just the previous month. And as that happens, the market share on the AUM hopefully will continue to expand as well. Our second larger line of business in terms of the issuer solutions, we have added about 150 clients into the previous quarter. We continue to add near about 10 to 15 clients every single day, either in the space of unlimited or for unlisted or listed clients. And the base, obviously, in terms of the expansion of the retail investor adds us to our revenue profile as our folio-based revenue expands even as we look forward into the coming 3 quarters for a significant corporate action-driven revenue as well. A folio kind -- folio count has been stable. It hasn't seen a sharp price that is largely in the context of the Q4 of the previous year has seen a decent exodus of retail investors, but again, into the later part of the previous quarter, we have seen the numbers expand, which is again going to augur well for us into the coming quarters. We have in the previous quarter, manage about 4 out of the total 7 mainboard IPOs, including that of Mankind Pharma, Cyient, IKIO Lighting and Nexus Select Trust REIT. Several large IPOs are due to be launched into the coming quarter, in addition to corporate actions and the value-added solutions. Our international investor solutions, we have expanded our clients count to about 48. We have one new client in Malaysia and Singapore each in the previous quarter. And one of our existing clients in Philippine has added a substantive number of new funds into our overall service domain, which is something that would add, I'd like to believe a sizable revenue and a material impact on the Investor Solutions revenue as we move into the quarters and the transition figures. We have also since then won our maiden contract for fund administration in Thailand, which is of that of one of the largest bank-based asset management company in Thailand. In due course, subject to the approvals from the regulators, we will be setting up our an office in Thailand. That notwithstanding, the current contract could be delivered in its current form without necessarily having office in Thailand as well. So very, very excited to start a brand-new geography, which is probably the largest in Asia after India and China. And there are -- there are several asset management companies and a very large scope for a net investment funds, including for that fund administration. In Gift City, our market share is at 60% more often than not every second and every 2 out of -- 3 out of 5 funds are being serviced by KFintech in terms of Gift City. We have clearly emerged as a differentiating service partner who has full comprehension of the Gift City rules and regulations and to have the ability to handle both the transfer agency and the fund administration solutions by courtesy -- by virtue of our acquisition of Hexagram into the previous year of making us the only RTA who has the ability to have scaled solutions for all types of fund administration. We have -- out total number funds are at about 416 on AIF, domestic. It's about 37%, close to market share. We have won several new funds, and we're very excited to onboard several private equity funds, which has a much larger corporate than a typically AIF. And that is a new competency vertical that we are growing. As we move further deeper into the East and hopefully, our journey into the western part of the world this year, Europe and America would augur very well as we develop competencies to manage hedge and the private equity funds and where our AUM in this year-on-year has grown by 42% on the alternate investment funds. In terms of the new contracts for Hexagram we have won 21 total -- taking the tally to 21 clients in India at this point in time, making us probably the only entity who can have handle TA and FA at scale for mutual funds, for alternatives, for insurance companies and banks as well. I quickly summarize the natural pension system. We have crossed the 1 million subscriber base into the month of July. So as of the quarter ending June, we were just a tad bit shy of 1 million subscriber base. We have grown nearly 2x that is 24.1%. We have grown year-on-year vis-a-vis 12.9%, the growth of the industry in the pension. This is largely on the back of several technological innovations and solutions that we have orchestrated to drive growth in the intermediary-driven pensions as well as in the governmental sector. We are very hopeful to have some strong government sign-ups since the coming quarter given the stage we are in at this point in time. I'll quickly move on in terms of a broad brush of the mutual fund performance within India. The previous year had been -- had seen good growth just shy of about 7-odd person. But the last quarter had seen sizable growth, moving the AUM from about INR 40.5 trillion to INR 43.1 trillion for the quarter ending June 2023. We all know and what is available in the public domain is that the mutual fund sector in India is expected to touch nearly about INR 100 trillion. That's INR 100 lakh crores into the next 6 to 7 years, which means it is more than 2.5x expansion that is possible. And given we are one of the 2 service providers in this industry, we expect to dovetail and flow along with the industry whilst providing several cutting-edge solutions for our clients to grow faster as compared to the industry. In terms of the SIP flow, which has been at the forefront of the growth of the industry, it has been consistently clocking INR 14,000-plus crore per month kind of a number for the past 4 to 5 months. The SIP book is expanding based on the number of NFOs that have been launched and we have in the horizon in the next quarter, we believe the number will continue to expand at a much, much faster rate. This is a very important metric to track to given -- it is the retail SIP flow, which is the bedrock for the growth. It is sticky. It is something that provides a resilience for the industry, especially when there are any macro headwinds that may come where the institutional money could be expense rather quickly. The overall folio count has moved from about INR 90 million to about INR 150 million in just a matter of 3 years. That's -- these are all the good performance metrics in terms of the mutual fund. And as I said, several new asset management companies, including that of Bajaj Finserv and Old Bridge, which is here to launch, I'd like to believe will help us to have and expanded market share even as we grow along with the industry. On the other asset classes, such as alternative investment funds, the number of AIFs that are registered, licensed and have started their operations has been growing quite substantially. We have grown 23% year-on-year from the number of AIFs and 4% to quarter-on-quarter, which obviously has contributed to the revenue. Even as I believe that several of these funds, which have launched in the very recent quarter would add a faster growth of revenue rate commensurate to that of the growth of the number of funds that we have added. The number of demat accounts, as I said, have grown in the previous quarter by 25% year-on-year as last year saw some amount of its orders of the retail participants into the broader markets. This augurs well in terms of the folio-based revenue that we hope to see into these -- the next 3 quarters. Even as the corporate actions, we believe will be friendly given the corporate profitability of India is pretty high at this point in time. Moving on, in terms of the market share, the overall AUM, as I said, we continue to expand year-on-year. We are at 31.3% on the overall AUM, equity AUM saw a marginal dip of 0.1%. This is in the context of some of the NFOs which haven't fructified into the Q4 of the last year, which have since then had. And given we have a higher proportion of equity, which is about 56% of the total asset classes and the subdued market performance of Q4 meant there has been a very, very marginal erosion in terms of the market share even as the overall number, as I said, AUM has grown 14.5% compared to 14.2% of the industry itself. Moving on, in terms of the corporate client list, as I said, we are at -- grown 12.2% year-on-year and about 3% quarter-on-quarter. We have also orchestrated several transitions from other registrars into the previous year. Notably including that of Union Bank of India, Castrol, so on and so forth. And we have several in the pipeline even as we have IPOs that are yet to be launched in the coming months. We have been appointed and as a matter of pride, we've been the service partner of our Reliance Group for the past 30-plus years. And as Reliance has orchestrated Jio Financial Services Limited, we have been identified as the RTA from a corporate registry standpoint. And we have also heard recently a publication of news in terms of the joint venture with BlackRock to drive the asset management industry. Managed 4 out of the 7 mainboard IPOs, as I've already called that out and 82% market share as per the issue size in the mainboard IPO for the quarter that had just gone back. So it's not just the number of IPOs, but also the size of IPOs which matters a lot, especially in the context of the folio count and that is where we have had 82% market share in the previous quarter. Our Investor Solutions for international from Q3 -- sorry, from Q1 of FY '23 to Q1 of this year, year-on-year, we have moved the numbers from 32 to 48 clients. Part of that also in the context of having Hexagram winning several clients in terms of fund administration in the Asian markets. So total TA, the RTA work which KFin traditionally had been doing is 36 in count and fund administration, which is the core forte of that of Hexagram, which now also, of course, institutional services [ like KFintech is at about 90 ]. The overall AUM, itself has seen a little bit of dip, again, largely in the context of underperformance of the Asian markets into the previous year, even as we have seen a steady rise into the past 2 to 3 months. And as I've already called out, the expansion of 28 new funds of the largest AMC that we have in Philippines augurs well for us in the coming quarters. As we have seen, the volume has started to steadily rise, and we have several -- we have 2 AMCs who were under transition to the previous year, have just gone live in the month of July, which means the revenue pertaining to those as many, many companies will start to kick in from Q2 onwards. The AUM for alternatives, itself has expanded 41.4% even as that the number of funds has expanded close to 50% year-on-year Q1. And that in the context of several new funds which have been licensed and are ready to launch would only add for the revenue profile. We continue to believe that alternative investment funds will have a very, very strong and outperforming growth compared to any other asset classes, including that of the mutual funds into the coming years. And in addition to that of the passive that is the ETF growth, which also had seen a stellar growth over the past few years, if I may. Fund administration, the platform that we have acquired in the form of mPower coming from Hexagram and several other platforms Hexagram itself has -- is a very critical cog in the journey line that KFintech has pitched for itself, which is truly to aspire to be the first entity from India to be a global fund administrator and we cannot be one unless we have a very strong fund administration platform and capabilities in addition to that of a transfer agency services and platforms. In the last 4 years, we believe we have gone strength to strength, both in terms of acquisitions as well as the client addition and the asset classes that we serve within this from mutual funds to insurance companies to banks, to primary equity and hedge funds. And across the geographies including Canada, Hong Kong, Singapore, Philippines and Malaysia and Asia to India. Within India also Gift City, if I may specifically add that out. I've called out pensions already. We continue to expand our profile without much noise, very steady growth, 25-odd percent. And as the base value increases, it steadily pushes us into from -- a negative EBITDA business is the only business line where we have negative EBITDA. And that is largely a factor of the scale itself. And as we are moving the scale, we believe that into this year, natural pension system will turn profitable. And as we move away to the further quarters, we would start seeing the contribution to our broader book coming from the pensions as well. I've worked at this point in time, hand over to podium to Vivek to quickly cover the financial performance.

Thank you, Sreekanth. On the financial performance, our revenue from operations went up by almost 8% year-on-year, largely due to almost 11% growth in the domestic mutual fund revenue and about 15% growth in the international, other investor solutions. The issuer solutions revenue year-on-year came down by about 4%, largely because there were lesser corporate actions in the first quarter of this financial year as compared to last year's same period. On the global business services, there was a marginal depth of about 70 seats, which resulted on the RTA side, as the mortgage business continues to grow in terms of servicing. But overall, about 8% growth on the revenue. EBITDA continues to grow at about 13% year-on-year. And the EBITDA margin has been growing as compared to last year same quarter, which was 37%. This year, first quarter was 38.8%. While on -- our guidance on a full year basis of 40% to 45% EBITDA margin remains intact. We catch up during the rest of the quarters as we see the growing revenue and the growing AUM and the increased market share across businesses. On the profit after tax, there is a growth of 16% year-on-year, and that is again a reflection of both increase in revenue as well as cost management. Our expenses went up only by about 4.6% year-on-year as compared to same period last year. Overall, PAT margin is healthy. It has grown to 23.9%, almost 24% against 22% last year same period. As Sreekanth mentioned, there is a healthy increase both in revenue as well as PAT margins. And as a result of that, the diluted EPS has gone up from 2.22% to 2.51% year-on-year. We remain a cash surplus company with almost INR 320 crores of cash and cash equivalents. And that money will be used in terms of the aspiration to go towards acquisition and setting up businesses across Europe and U.S. besides the growth in Thailand that Sreekanth talked about. That's mainly on the financials. Over to you, Abhishek -- Abhijeet, I'm sorry.

Should we begin with the question-and-answer session, sir?

Yes. Yes, we are ready for Q&A.

[Operator Instructions]. We have our first question from the line of Faisal Zubair Hawa from H. G. Hawa & Company.

Hello?

We are unable to hear you. Please speak louder.

Hello?

Yes, go ahead please.

Is there any way that this can be disrupted by a blockchain-based system also, which could cost much lesser? And are we also looking at some alternatives?

This is Sreekanth. I'll take that question. Thanks for asking that. See, I would answer it this way. Newer technologies are always important to bring the cost to serve down as [Technical Difficulty] India processing millions of transactions a day and trillions of rupees worth of transactions each and every day. We have been steadily reducing the cost to serve within the industry over the past decade plus today. We believe that this industry is already served at possibly the lowest anywhere in the world. I think a typical cost portfolio for an entire year is just about INR 30. You compare and contrast that to any other industry, including around demat accounts or bank CASA accounts, where you will be running to hundreds of rupees. The technologies that we have already embraced and adopted are cloud and native mobility solutions. Blockchain itself is a very complex solution. And it is not a software. I just want to clarify that. It is not something that a KFintech alone or any other entity alone can embrace and say that, look, now I have a better solution to do it. Blockchain works on trust, blockchain works on an integrated solution which requires not just the registrars, but also the stock exchanges, the depositories, the distribution network, the asset management companies, the clearing corporations, everybody to be upon the same platform for blockchain to run for the very simple reason that any transaction that we process today necessarily goes through all of these hoops, right? So for example, today, you were to buy us in 1 unit of a mutual fund of any fund manager, you will need the bank account, you will need the bank, you will need the clearing corporations, you will need payment aggregators, KRAs, registrars, depository, so on and so forth. So unless there is a solution which is topped down, which requires the entire industry to be elevated to a blockchain. We believe that it is not a software that can just be implemented to gain efficiencies. There is a working committee currently constituted by the country's regulator where we are part of it. There are discussions ongoing in time to come, we will see in terms of how the blockchain could be broadly adopted by the entire infrastructure requiring capital markets.

Mr. Hawa?

Yes.

Does that answer your question?

Yes, it does.

[Operator Instructions]. We have a next question from the line of Aejas Lakhani from Unifi Capital.

Sreekanth, first question is that in the issuer solution business, on -- from -- if you were to look at it from a revenue portfolio, we used to earn about INR 8 to INR 9, which has tapered lower. So could you comment, is there anything there? Because the revenue per portfolio is much lower.

Yes, most certainly. See, the revenue per folio is -- currently, there are 5,000 clients, as I said, roughly. And the price in the unit -- pricing that is a folio pricing for each of the entity is a negotiated rate. This is not a regulated rate, so to speak. And the -- and hence, the total cumulative folio rate that you see in any quarter on any given day is a factor of where there has been more retail expansion in terms of the client base. For example, if I were to have 10 clients where the unit price is, say, INR 15 and another 10 clients where the unit price is, say, averaging around INR 8. Now the retail expansion can happen in any ways which I cannot predetermine. For example, in the example that I just took, if there has been a much broader retail expansion amongst the clients who have had a smaller unit for you, as compared to that of the entities where I have a better pricing mechanism, it is possible that the overall average tends to come down for that specific period. Now as we move into the next month or the next week or the next quarter based on the results, if the other entities at that point in time have a broader retail expansion, the unit price will again go up. So all I would say is that this is a point in fact, and this is a market-driven number. This is not a negotiated number. This is not discounts, if I were to clarify that, if that's what you have in your mind. This is a play in terms of the market dynamics, which would move up and down into various months and the quarters. I hope I answered that question.

I would just -- this is Vivek Mathur. I would just add to Sreekanth. The issuer solutions revenue comprises of 3 components. One is folio-based revenue. Second is corporate actions. And third is the various value-added services that we offer like e-voting, EGMs and all. So in fact, our folio revenue based on the new clients has actually gone up. There is a reduction in the overall average revenue per folio because of lesser number of corporate actions in the first quarter as compared to the previous year same quarter. And that's the impact that you would have seen about 4.4% reduction on year-on-year quarterly reduction.

Yes. So just adding more to this, Aejas, while what Vivek was alluding that, while my folio -- specific folio revenue has gone up by 6%, almost year-on-year basis in the first quarter. And as you move into the subsequent quarters and all, these corporate actions, which typically happens in the Q2 to Q3, which last year was a little different here. I mean, wherein we have seen prepone of several corporate actions in the first quarter of FY '23, which we are not seeing, and this is more a normalized year compared to the last year and all. So as we move along into the subsequent quarters and all, I mean, this thing would get normalized. And you would see the average numbers would pan out similar to what we had last year numbers.

Got it. This is helpful. On the international piece, could you speak a little bit about, you've had a few wins when does the revenue traction start to build from that? I heard you mentioning it earlier that 2Q onwards. So could you just give some sense of the existing wins? How the revenue scale ups will take place there? And other businesses that you're chasing in the region.

Yes, I'll do that. Thank you. so we should look at the international business or most of, I guess, the kind of work that we do into 3 components. There is an existing client base, which has already been transitioned and has been in steady-state delivery. So that is the base revenue, the recurring annual revenue annuity, however you would like to call it. The second component is the wins that we have typically take anywhere between 3 to 6 to maybe sometimes some complex transitions can go up to even 8 to 9 months of transition, right? Now I had called out that 2 such deals which we have won in the past, the transitions have been completed in the month of July, earlier this month. And hence, that line of revenue will kick in immediately from this month onwards. When I say this month, I'm talking about August onwards, right? Then we have deals which we have signed in the recent past into the last 2 to 3 months, which need to be transitioned into KFintech for the revenue to kick in. That is a recurring revenue, even as there will be a certain onetime revenue for the transition itself, which effectively means there is a revenue stream that we will get even for those deals. Now let me call out the sizable ones. The deal that we have won in Thailand is that of a fund administration work for the third or fourth largest bank-based asset management company in that part of the world. This is our first client. And we have had conversations, including the of demos. We had to replatform our entire solution to meet the requirements of the Thai regulator and the Thai business equilibrium. And for that, we took the past X number of months and have grown to the satisfaction of the client that our solution works just as well in Thailand as well. Now the transition for that would start pretty much immediately. And we believe that it is a 4- to 5-month transition, as I said, for which there is a onetime in episodical revenue we will get, post which there is a recurring annual revenue. As far as the 48 additional funds that we've gone from the largest client that we have in Philippines is concerned, the transition has already begun for those ones. The additional revenue that we will get will be on top of the new flows that will happen into those funds from here on, which means that it is again pretty much immediate. Whereas there is a significant near about $15 billion worth of assets lying with the same teams in the current context, which are yet to be transitioned. Now the moment that happens, that would also kick in as an additional revenue. So long and short of it is this is not -- there is not a significant lag or a lead time for all of these. Some of these would -- some of these revenue would be recurring revenue for the contracts that have been transitioned for some of the other deals, it will be a transition revenue because we just won, and we are in the process of transition. Even as all the old and existing deals will continue to provide the recurring annuity revenue, if I may. I hope that clarifies it.

Yes. So if I were to reiterate what you're saying is you're saying old wins where the recurring -- where the months of transition are over will start now. The new wins, which you have won, the transitioning income will be there for the next few quarters before they move to recurring. Is that understanding, correct?

Absolutely correct.

Perfect. Okay. A couple of other things on the employee cost side. So I just want to understand that has there been increments in this quarter that -- and is this a new normalized employee cost base?

I'll take that question. This is Vivek. So this is a nominal increase that we have given to retain certain talent and give market corrections. And the actual increments will take place from July and that impact you will see in the next quarter, which will not be abnormally high, but there will be some impact.

Okay. Vivek, a follow-up on that is that I remember that there were these episodic increases to retain talent that took place in the previous year because tech was going through its own employee upgrades from a peer perspective. So is that behind us? Or is some part of it still continue?

No, no, that's behind us because -- that's already behind us. That was an abnormal increase, as you know. It was almost in the range of for IT engineers to retain them that was in the range of almost 50% to 60%. And that had a material impact on the onetime impact on the cost. Now it is running. So that's behind us. This is a nominal increase that you give in the range of 7% to 8% per annum to maintain the task force that we have. So that impact will come in the next quarter, but nothing abnormal is going to happen like it happened last year.

Just to add some more color to that, if I may. On the IT front, for example, even as there were average comp increases that were recorded because of the overall wage inflation that happened not just for us, but across the sectors in India and abroad. We have since then rationalize the total head count itself, down by nearly 120 people, which is roughly a 14% rationalization of the manpower headcount. So what you're really seeing is an increase in average comp largely offset by productivity gains through either better automation or if it comes to technology through better bottom of the pyramid management as we move into Tier 2 cities. For example, we have since we last spoke, expanded our operations in Bhubaneswar quite sizably and provides us a very strong, resilient player of committed workforce at lower price point and ergo the overall impact on the payroll would be marginal to that extent. So -- it's not just the increase of comp that should be looked at in terms of the overall cost expansion that would be forecasted, but also what are we doing to drive the productivity and take the headcount out, which, to a large extent, negates any impact of the payroll cost.

Got it. No, that's very helpful. Sreekanth, so what I understand is the annual increments will take place from quarter 2. This was more to retain a certain part of the tech team. And incrementally, our setting up centers in Tire 2 locations like Bhubaneswar, where the cost structure is lower. Is that understanding correct on the employee base?

Absolutely. And it is not our future activity. We have already completed that activity. So we have today about near 100 people, which we are doubling up. And hopefully, we will soon start moving the operations not just IT into other locations as well. Yes. The answer is yes, and it's already done. I mean, and we are continuing to progress in that direction.

yes, one more addition to that is the integration of WebileApps that we acquired, their employee cost is also included in this quarter.

Okay. Okay. That explains it. And just on the other expenses, you've been investing ahead of the curve in technology. How are we thinking about that line item for '24?

So for '24, our journey line for innovation is very, very interesting and substantive actually. While the overall quantum of the cost could be similar, but we are doing it materially differently from the past, largely driving through partnerships with the industry. For example, since we last spoke, we have created a strong partnership with AWS and with several other industry participants, whether it is on the data center side, whether it's on application layer, whether it's on the data layer, and basically taking the burden of the cost and innovation together. But at the same time, taking it to the market together so that they're part of compounding comes together, right? We have a series of assets as early as, I think, 15th August, for the Independence Day, we have launches lined up, which are several very cutting edge first in the industry, not just in India, but across the world, if I may. We're excited to have -- to make our own little mark in terms of the financialization of the country. So we have created a hot site for our DR capabilities, significantly enhancing and creating a benchmark of standards, if I may, within the country as has been duly recognized by the regulator as well. And in addition to just the hardware expansion, the technologies associated with that. It is truly the products, platforms and the data monetization that would, I believe, drive the revenue pools into the coming years even as the quantum of investor base quite sizably expands. So we have about 5 new products or platforms into the alternative investment space. A couple of them in the corporate registry space, especially with the regulation on PIT, with the regulation on insider trading so on and so forth solutions that needed to be created in the country are created at this point in time. Likewise, in the case of the mutual funds to where we believe the market share expansion is important, our clients' growth. In addition to us just processing, we need to help them grow. And that's where, I guess, a decent amount of our tech solutions spend also is going. Not to forget the important aspect of geographical expansion, as I said, as we move into Thailand, we need a platform that's ready. So the last few quarters, for example, some amount of effort and burn has already been baked into creating the platform for a country. At any given point in time, these solutions will have a long-lasting economic impact for the company as we have the ability to then expand the client base on the same platform.

Got it. And could you just speak about the INR 130 crores payout that is due in -- if I remember, October, is it October?