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Allsec Technologies Ltd
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Ladies and gentlemen, good day, and welcome to the Allsec Technologies Q4 FY '23 Earnings Conference Call hosted by DAM Capital Advisors Limited. [Operator Instructions] Please note that this conference is being recorded.
I now hand the conference over to Mr. Aasim Bharde from DAM Capital. Thank you, and over to you, sir.
Thank you, Galbi. On behalf of DAM Capital Advisors, it's my pleasure to have you all on me Allsec Technologies Q4 FY '23 earnings call. From the management side, we have with us Mr. Naozer Dalal, CEO; and Mr. Gaurav Mehra, CFO.
I would now hand over the call to Mr. Dalal for his initial comments. Thank you, and over to you, sir.
Thank you, Aasim. Good evening, everyone, and thank you for joining in our earnings call today. Having been appointed as the CEO effective 16th of February this year, this is my first interaction with all of you. And to that effect, we'll start by briefly introducing myself.
I've been part of the banking and process outsourcing industry with a cumulative experience of excess of 33 years, leading names like Standard Chartered Bank, the prudential back office in India; the TATA Group with my immediate prior role being with our group company, Connect Business Solutions, as its Deputy CEO. It is a privilege for me to now lead a respected name like Allsec, and I'm excited for the journey ahead for the company as also excited about interacting with all of you today.
The results and the presentation have already been updated on our website. Just by way of standard disclaimers. Anything we say, which refers to our outlook for the future, is a forward-looking statement and must be read in conjunction with the risk that the company may face.
I have with me Mr. Gaurav Mehra, Chief Financial Officer, who has joined the company in early January '23 and who will twin with me in interacting with yourselves. I will hand over to Gaurav for a brief minute to introduce himself. Gaurav, please?
Thank you so much, Naozer. Hi, good afternoon, everyone. So as Naozer said, I joined the company about a quarter before and very glad and happy to connect with all of you in my first earnings call.
Just a bit of background about myself. I joined -- I came from the technology background, and I remain associated with the companies like the Expleo, if you have heard, it's a global technology company. It's a public listed company with close to INR 800 crores turnover. I remain associated for larger parts with the technology companies, names like the HCL, DXC. And very glad to become a part of Allsec, and it's been a fantastic journey for the first quarter and look forward for more upcoming interaction and sharing more information with the group and the investors. Thank you.
We'll start with a brief business overview and updates covering both our lines of businesses, the Digital Business Services, what we call as DBS and the Human Resources Outsourcing, which we call HRO. And then followed up with a detailed financial performance. Post that, we are happy to take your questions.
So to start with [indiscernible] headlines, we are pleased to share with you yet another set of robust results. For full year '22 revenue from operations, exactly INR 91 crores, up 23% year-on-year, driven by growth in both verticals. DBS by 26% and HRO by 18%. Our PAT at INR 49 crores is up 37% compared to financial year '22. Both our businesses, as mentioned, continue to perform extremely well with the HRO business clearly emerging as a market leader this year.
Our business process reached a high of 1.2 million per month being -- at this number being 20% to 30% higher than competition. We have added new clients in 3 digits across the business compared to March '22, with out total clientele being serviced being now just under 600.
We clocked 100% occupancy in our Manila center this year, with additional seats being taken in April '23. We were named among the 10 most promising Asia technology service providers for 2022 and 10 Best Contact Center Companies to watch in 2023 by leading industry publication.
Our staff attrition at 8% were held at the same level as last year being near best in class in the domestic outsourcing industry.
Our cash position and collections continued to be strong. Our collections for March at INR 42 crores was the highest ever monthly collections ever achieved.
I will now provide the progress update on the 2 tech projects. SmartPay version 4 and the new HR management system, which we are building. These key strategic initiatives. We have used the time since the last earnings call over the last half year to enhance the scope which basis in formal market feedback from our customers. And therefore, the time line, which [indiscernible] had mentioned in the last call, has lift marginally at best by a quarter. That said, we are already running 2 customers in a [indiscernible] mode for SmartPay version 4, and the initial results have been encouraging.
We will also commence parallel run for one of our largest customers in June. The outcome of the same will determine the leading migration plan for all our customers. The new HRMS tool 2 is in the final stages of user acceptance testing with track migrations and further runs to follow from later in quarter 2.
We will now move to our new sales achievements for the last financial year. We have signed sales with annual contract values of approximately INR 45 crores in FY '23, which is about 1/3 higher compared to FY '22. This is across HRO and DBS. We have added market logos, including targeted conversion of net competitor logos. With these acquisitions, we have been able to enter figure 2 untapped vertical segments, for example, pharma for the domestic HRO business and health care for the international DBS business.
As part of our sales efforts for the current year, we will continue to look at new domestic geographies, Western India particularly, cross-sell between our payroll, compliance and domestic DBS customers and enhanced efforts on inside sales and digital marketing for international DBS.
We now move on and share 2 key trends, which we saw in FY '23, and I would like to share that -- has had reasonable impact on the cost of running our HRO business and in turn, led to market completion, which you will hear in the latter part of the session 2. The first thing, FY '22 new sales saw significant lowering of the average [indiscernible] ACV, which in turn led to some diseconomies when they were transitioned into BAU in FY '23.
The second thing, you'll also recollect, my predecessor mentioned this in the last earnings call, which we had highlighted that while hiring was done in advance of the timing of revenue realization, the transition time line themselves got elongated at times up to 3 to 6 months. We have reversed both these trends and have already seen higher ACVs in the new sales completed in FY '23.
We have also made some operational and systemic improvements to considerably short term the transition time lines and have made some good progress made in that starting March and including into April.
I'll now move to our operational performance. Our meeting of the operational KPIs remained strong for both DBS and HRO, including improvements over what we did in FY '22. In some -- in many cases, we have been named best partners in many of our customers' lead tables in terms of the outsourcing which they do. We continue to provide value-added and digital services to our customers, including but not limited to foreign automations, bundling RPA in our solutions, et cetera.
We continue to receive high and increasing feedback on social media, Glassdoor, AmbitionBox, et cetera. A direct outcome of our continued focus on employee engagement, this being a key asset for us.
With this, I hand you over to Gaurav Mehra, who will take us through the detailed financial performance. Thank you, and I'll be back for the question-and-answer session. Over to you, Gaurav. Thank you.
Thank you so much, Naozer. I will read out the financial results first, and then we will go for the query thereafter. So I will be reading out the quarterly results first and then we will see the year-over-year results.
So as Naozer mentioned that our -- this year goes as the year of a robust growth, both in the terms of the headcount growth as well as individual terms of the revenue. We have a headcount growth of 17% year-over-year, which is translating into the revenue growth of the 23%. Revenue for the quarter dropped at INR 108 crores compared to INR 100 crores of the last quarter, a growth of 7.9%.
On a year-over-year basis, we had a growth of 23% for the full year. Our EBITDA margin stand at INR 23.7 crores and adjusted EBITDA percentage of 22% against the last quarter of INR 21 crores and 21%. PBT for the quarter stands at INR 15.2 crores with a PBT margin of 14.1%. PAT for the quarter is INR 12 crores with a PAT margin of 11.2%.
In terms of the revenue, the growth for the quarter-to-quarter, current quarter to the last quarter, the growth for the operational revenue stands at 7.9%. The growth for the EBITDA stands at 13.1% in terms of revenues. In terms of the EBITDA margin, the growth for the quarter stand 102 bps. In terms of the PBT, the growth for quarter-to-quarter 8.3%.
We have a growth in both the sector DBS as well as into the HRO, as Naozer touched upon. We have a growth of 18.2% for the DBS business, Digital Business Services. And we had a growth of 23.6% for the HRO business for operations from the revenue.
On year-on-year basis, revenue from the operations stand at INR 390.5 crores against the INR 317.2 crores for last financial year '21, '22, a growth of 23.1%.
On financial year-over-year basis, the EBITDA for financial year '22, '23 stand at INR 88.4 crores versus the last financial year EBITDA of INR 80.2 crores, a growth of 10.2%. In terms of the EBITDA margin percentages, the EBITDA margins seen some pressure on year-over-year, as Naozer touched upon, that when we compare year-over-year, there is some cost increase happening into the CTR ratios into the employee cost, which has led to some dip into the margins when we compare to year-to-year basis.
PBT for the financial year stand at INR 64.5 crores versus INR 61.2 crores for the last financial year, a growth of 5.5%. In terms of the PAT, PAT stand at INR 48.9 crores versus INR 35.6 crores for the last financial year, a growth of 37.1%. In terms of the PAT margin, margin for the current financial year stands at 12.5% versus 11.2% for the last financial year, a growth of 128 bps.
That covers all the financial results for the period. So we can move to over to Naozer.
We are happy to now comment on the question-and-answer session. Thank you.
[Operator Instructions] First question is from the line of [ Richa ] from A&S Wealth.
Sir, am I audible?
Yes, yes. Go ahead.
Okay. So my first question was, our HRO business is a higher margin business as compared to DBS. So I wanted to understand what is the strategy for this vertical for next 2 to 3 years? Because I think currently, it accounts for 36% of our revenue. So do we expect this to increase going forward, sir?
I completely agree with you. Certain HRO business is the higher of the 2 businesses in terms of margins. We continue to make relevant investments in people and technology to ensure that we could maintain and improve the growth percentage, which we have seen in the recent past.
And a key metric, which I already clearly mentioned, this year with a targeted approach of putting up customer accounts and just some shared presence in our market, we are now clearly #1 in the HRO business in this managed service space and with being ahead competition by 20% to 30%.
The 2 back upgrades, which have been working on, finally see significant traction over the last 6 months. We are ready to go to the market with them over the next quarter or two. Our customers are excited that we are making those investments. We have customers currently, as I said, on parallel grounds runs on user acceptance testing for the HRMS platform. So when that comes in, what I can confirm is that, that will definitely see for us our ability to sort of grow the revenues of the HRO business.
As far as the margins of that business are concerned that are truly set out because there's a number of moving parts, which we are trying to improve operational efficiencies, there are the costs which are sort of coming for the new platform. And so we [indiscernible] value that comes out. But yes, I would also look at and see -- definitely, I mean, see some margin uptake over the medium term, but difficult to quantify that number at this point in time.
So would this mean that today is 36% of our revenue? So do we see it's becoming close to 50% or something, like or a major portion of our revenue over the next 2 or 3 years?
No. Unfortunately, as I just mentioned, we don't give quarterly statement. And there too many moving parts at this stage to even [indiscernible] that. Sorry for that.
Understood. Okay. Sir, then I also wanted to understand what type of service agreements we have with our clients. Like are these annual contracts? And how is the billing done? Is it just the fixed rate billing on an hourly basis? And if you bill them on an hourly basis, if you could share us the billing rate for each verticals, sir.
No. I'll give an overall view in terms of how it works. So typically an average or a predominant number of contracts are anywhere between 2 to 3 years. So to that extent, we don't have to spend effort in sort of, I mean, trying to renew those contracts every year because of an annuity base.
As far as the billing is concerned, the billing is again distinct in both our businesses. So I'll take the HRO business first. Within the HRO business, again, there are 2 segments. So we were processing -- and the HRMS business per FTE per month rate, which we sort of charge our customers. For the second part of the HRO business, which is the compliance business, we have largely a fixed fee per month [indiscernible] in terms of linked to the number of locations we handled. So that takes the HRO business.
On the [indiscernible] business, largely, these are FTE-based contracts where we have a fixed rate per FTE per month. We have a small percentage of contracts, which are outcome based in terms of either hourly billing or in terms of some outcomes [indiscernible] drive for our customers. So to answer your question, both businesses are very distinct kinds of billing in terms of where we operate at.
Okay. So I wasn't clear, [indiscernible] is how the billing is done. Sorry, the voice was...
Predominantly, bidding is per FTE sort of fixed train per resource deployed per month. It was a small portion of that business, it could be on a hourly and time motion basis.
Okay, okay, okay. Sir, I'll just ask one last question, and then I'll rejoin the queue. So I wanted to understand, have we lost any key accounts in FY '23?
No, not at all.
The next question is from the line of [ Arjun Shah ] from [ JC Enterprises ].
So congratulations on a good set of results and also good to interact with you. My question is, being #1 in the HRO business, what are a few digital initiatives that you're planning to take to stay ahead of all competition?
Yes. I will answer it in 2 ways. I mean, I already mentioned about the significant tech upgrade, which we are -- which we sort of have a mark a couple of quarters ago and which will see the light of day in the next 6 months. So these tech upgrades will ensure that these platforms return on new edge technologies, gives us multi-country -- multicurrency capabilities, gives us the ability to integrate the HRMS with the payroll engine, which we run. So that will happen all of that. So those are all the -- and reduce cost over a period of time in terms of running those engines. Even why that is happening, we continue to sort of ensure that we collect our customers' feedback, we remain best in class. So the previous engine, which was [ SP3 ].
I mean to give an example, we were, I think, one of the early ones in the industry who made it mobile-enabled. So I think we have mobile-enabled as early as the FY '18, FY '19, to give you one example. We continue to look at automation -- at this point, [indiscernible] automation in terms of how we collect information from customers, how we process and then how we distribute that information back to the customers, including reporting and analytics.
So I would like to summarize to say that, yes, the sales team, our operations teams remain very, very close to the customers, continue to get market feedback, and we ensure that we remain [indiscernible].
Sure This is helpful. I had one more question. So I just wanted to check how would the capital allocation policy for the next year look like, if you can just give us some color on that.
Sorry, can you repeat it what you mean by that?
I mean the capital allocation policy of the company for the coming year, if at all, there are some colors on that.
I don't know the -- the company is adequately capitalized. We continue to explore and see how do we sort of ensure that the sort of cash that we have in the balance sheet. We sort of continue to ensure the best of it. We continue to look at potential acquisition opportunities, although not very significantly advance at this point in time.
Yes, of course, we would look at acquisitions, which provide [indiscernible] to our businesses either give us access to do vertical, horizontal margin that we were able to discuss.
The next question is from the line of Sugandhi Sud from InCred Asset Management.
Congratulations on the strong momentum. I wanted to understand on margins a little bit. If I look at the headcount addition, it is largely in line with your headline growth, 1 or 2 percentage points give or take. However, the margins for both HRO and DBS compared to last year and even your own historical numbers have -- are different. So what are the one-off number of factors there? I'm sorry I could not hear you clearly when you were explaining this point earlier.
Sure. I will pick up this question. So this is Gaurav. So you see we have some pressure into the margin when we compare year-over-year, which is primarily because of the reason that we -- in this particular year, we have some one timers to be called out. So like as we mentioned in our investor presentation and those documents, like we have some demand coming from the electricity department where...
Link to that -- linked to very old period.
Which is linked to very old period, not only recent one. So that's what it is impacting the margin on the year-over-year basis, yes.
And these are not only onetime. As I also mentioned in the earlier introduction, there were 2 trends in the HRO business, which has clearly impacted margins this year.
Okay. Could you repeat what those strengths are?
Yes. The 2 trends were that in FY '23, we seem to have, I mean, hired people on the basis of the contracts which we had won, but some of the transition time lines to onboard them got elongated between 3 to 6 months. So both -- and the second one was that in FY '22, we had one new product with a significantly lower average contract value -- annual average contract value compared to earlier years. So therefore, when that happens, when to actually start delivering the operations, there are certain economies of scale, which come in. And therefore, we have to carry a slightly higher cost.
Sure, and you expect these factors to reverse. Going forward, you said...
[indiscernible] doing that. So I mean some of them, we already started seeing those factors coming off, yes.
Sure. That's helpful. So in terms of that demand from the power department, where do you classify this? Is this another expansion?
Yes. It's part of the other expenses.
Sure. And also, could you give a flavor of how much of the ACV booked in the last 2 quarters has been recognized and how much is expected to be recognized over the coming 2 quarters?
I don't -- we don't have that data readily. But as I mentioned earlier, we have sort of taken -- we have booked ACVs of excess about INR 45 crores. And most of it will start getting realized in the next 2 quarters.
Sure. And if I can just ask one more question. Traditionally, the HRO business has had a significant contribution from the IT services vertical on the client side. You mentioned that you are diversifying into new verticals in both businesses. And what are the trends that you're seeing because as we know that headcount addition has not been very strong last year for the industry, i.e., industrial cloud? So how is that impacting you? And how much is your exposure there? And what are you doing to diversify?
Sure. I can give you a bit of sense, of course, being an industry leader and also obviously some of the data which we see. So as far as the industry specialization is concerned in the domestic space, because -- which I know a very large customer, a leading name in the pharma space. Yes, the health care comment, which an [indiscernible] international customer as well as these customers, which we got for our BPO businesses.
As far as the other payroll trends, which I see, we definitely saw a bit of pressure. In the e-commerce industry and the tech industry, whether it's food tech, whether it's any kind of other B2C retail pay, we definitely saw some pressure and then some headcount coming down.
Sure. Okay. And how is that going with the Quess group in terms of being able to cross-sell our services to, let's say, the insurance vertical or industry as represented by the case?
So that's been our aim for the last couple of years. We are -- we constantly review that both internally and with individuals in Quess. As I, again, mentioned briefly, I mean, the first thing I'm trying to do is also we have very, very market names. So as I mentioned, we have just on the 600 names. So the idea is also to see how we can cross-sell within our existing customer base between DBS and HRO and some of it or vice versa.
And yes, definitely, I mean, the intention of working with Quess can really be strengthened, and we do that on a regular basis. So some of that -- [indiscernible] just come in is actually coming from there. So I'll take that example. So I mentioned the pharma, which we got was actually cross-sell from under the Quess Corp company.
The next question is from the line of Shrey Loonker from Quantum State.
So Mr. Dalal, it's nice to talk to you. Just -- if you can just maybe give us your outside in view as you came into this role. How do you see the HRO space? How do you see the competitive landscape changing given the winter that's going on in the PVC world? Are you seeing some competitive pressures preceding on the ground? The other part was that how should one think about it from payslip growth perspective? How do you see the next year panning out? And maybe after that, I'll follow up with a few other few questions.
Sure. Likewise, though, I like to talk to you right now that we have an exchange. I think I made it when -- just after I joined. So I'll point this, Shrey, my outside view is that the organized employment opportunity still remains significant improvement as far as India is concerned, yes. So I think if I remember the -- some statistics right, I mean the total employment or people who are in some form of employment is about INR 50 crores in India. But a significant number of that are in the unorganized sector, yes. So the organized sector employment is a fraction of that.
Within that, I mean -- so in those -- within that, in terms of within that organized employment sector, there are 3 trends which happen. One is there are a fair number of companies who keep their payroll processes in-house and also in stores. There is almost 40% to 50% of the sort of outsourced market is with very, very small players in terms of chartered accountants or other smaller HRO players then you have a set of constituents at the large ERP companies. who I mean, who provide services on a platform basis.
So if I look at the potential opportunity and the fact that a certain amount of debt come as being the largest players in the market, I see there is enough market opportunity for us to continue to capitalize over the next couple of years. Both move from in-source to sort of outsource, so we have seen examples in our news release where the companies, who added in-source [indiscernible] to do it on a managed services basis and otherwise. And of course, moving accounts away from competition, that's another important piece. So I mean, I don't believe or I don't see any severe concern in terms of what the market opportunity represents.
And if you could just help us think forward what all this means from our perspective, assuming the tech interventions that you are doing with SmartPay and the HRMS product, excluding the impact from that, the base business growth, how should one think about it? Because this year, I believe the pace has grown at 11%, but we understand is the environment is not as conducive as it was in the prior years. Maybe if you could just give us some on-the-ground sense...
Yes. Actually, as I said, look at my inability to give a specific forward-looking numbers. But I would like to say that we would continue to be among the top quadrant in terms of companies in the HRO space and in terms of growth numbers we experience. That -- we feel confident about that we would continue to be in the top quartile of organizations in the space and the growth rates [indiscernible].
Maybe if I can add just one point in there. So as we touch upon, so in the year, we have about 121 new logos added for us into the HRO domain. And we added ACV value of close to INR 27 crores, which is about 25% of the total revenue for the HRO segment. So we are getting the good growth, adding up the new logo apart from the existing customer, which grew on their regular increase of their own employees. So that's what we see the -- and traction coming in there and the growth opportunity for us in that particular domain.
That's true, Gaurav. But Gaurav, this ACV of INR 25 crores, one should reasonably think this is itself a revenue growth outlook for next year. Is that the way one should understand this number?
[indiscernible], Shrey, because definitely, I mean, I would to like to break this down 2 parts. So on the HRO business, I mean, the actual revenue realization for a year comes reasonably close, so I would say maybe 75% to 80% of what ACV number is for. There is, of course, a timing difference. So when I reported ACV for FY '23, depending on when I can take the customer [indiscernible]. So there will be some impact there. But once the customer goes right, of course, I mean because it's linked to the number of employees we signed up with the ACV, so I think that comes close.
But on the DBS side, sometimes we see the ACV not necessarily translating into revenue for the year. And some of the factors, which come in there, could be -- for example, if we sign up a sales process, where we help our customers at a cross-sell, up sell, now that would be an intent of the customer while signing ACV. But there are many factors which change in a year, for example, in terms of the marketing budget, the sales budget, the number of processes that themselves may have. So therefore, the conversion rates for -- in terms of revenue versus ACV are lower in the BPO business, but a bit higher in the HRO business.
No, that gives good clarity. But apart from that, just to think about it further that on the competitive landscape, if there's any comment for you to offer. What are you sensing on the competitive pressure, pricing pressure that you were -- that you see on the ground?
No, I mean nothing unusual. And I think what we have serviced and tried over the last 20 years, so I mean I had no significant risk to call out on that. But yes, that said, definitely -- so I think it's a balance sheet. So when we go down the value chain in terms of the customers who have smaller number of headcount and therefore, a smaller ACV comes in, the ability to charge a life premium there is higher than when you go after a big names, who may have 30,000 FTEs, 40,000 FTEs to outsource.
So I think as a the management team, continue to sort of balance this out depending on the margins of the logo, the industry, which we want to actually sort of grow [indiscernible]. Because as I said earlier, the smaller the reward, the operational intensity of delivering that service continues to remains high. So it's that talent we need to strike between getting that extra revenue by getting 10 smaller logos versus keeping our overall margins in perspective in terms of how that smaller logos will impact us.
So we'll continue to take a call. I mean that's more a tactical strategic call, which we'll continue to take as were doing for the last so many several years. But I mean, I don't see any significant concerns in terms of -- which is very different from what we have seen in the past.
Great. And Gaurav, one question to you. Y-o-Y, we've seen a 10% growth in HRO margins. One, I could understand that it could be adverse revenue mix towards -- given that compliance outgrew your HRO, but the other argument that you've called out in the presentation is the advanced hiring and travel cost. I would appreciate if you can give us some breakup as to how to kind of -- how much is the real one-off as we should understand it? Because I believe travel cost is going to be part for the course. So if you can just help us comprehend the breakup of the margin fall. And as a result, how much of the margin can actually claw back just by virtue of one-off that exists this year?
Certainly, maybe just to give you the flavor. So like the one-off we called, so that represents about 20% to 30% of the gap reflected in there. And more than that, particularly for the travel, lender comment, it's more of the sort where we are expanding our Manila facility. So there have been some kind of -- it might not be regularly to that much level. But with the expansion of the facility, there happens to be some kind of a travel where the people were traveling from here to there and with the new expansion happening into that, which has led to some kind of the incremental travel for the quarter particularly. Otherwise, we expect the travel to be -- normally to be remaining to the range of -- as a percentage of the revenue within the range in our regular trend. We don't foresee anything going beyond that.
Shrey, I think the biggest, as Gaurav mentioned, is that we are trying to see in terms of how do we sort of crunch the onboarding time lines. And I do not estimate in terms of how that would contribute. But I think out of all the factors which have depressed margin this year, that is something which is higher strategic for us to address.
The next question is from the line of [ Harsh Kanani ] from [indiscernible].
I have just a couple of small accounting-related questions. First thing is that you mentioned in your PBT that there is a one-off revenue related to tax vouching and SME licenses. Could you just quantify how much that will be?
And the second question is that there is a sharp increase in depreciation on a Q-o-Q basis. Any kind of reason that you would like to call out?
So to take up your first question, like the one-off that we have. So I don't have that number fully handy like to call out that the exact percentage. But as we mentioned in our presentation, so -- just one second. So particularly there's a one-off, we have -- that's particularly from the-- in the tax vouching and one-off kind of the active one -- like one of the activities relating to that license renewal. So that's for one of the customers, which is kind of what's -- once in a 5-year activity. It's not a kind of regular activity, which was falling into this particular quarter.
And there, relatively, the margin for that particular transactions are relatively thinner than the regular business. So that's one part of the one-off, which is impacting the margin when we compare year-over-year basis. And apart from the regular -- the other one we call out that which is from the department, so I think that we have factored fully into the P&L. We don't foresee more impact coming off from that -- in that year-over-year in the future.
And particularly, when we say that depreciation and amortizations, which have increased, so we do have investment which has gone into the noncurrent assets where there are regular purchases happen, which is more of the machines when we increased the headcount so which is including kind of the depreciation in there.
Yes. We also have an annual refresh in terms of, I mean, the older assets.
Yes.
So there is some bit of the annual refresh also sitting there.
Yes, exactly.
Okay. So just on the first point, you said that, that has -- the tax vouching [indiscernible] margins. That I understand, but any impact on the top line that you would like to call out which would help us understand what's the adjusted revenue growth?
So I mean, the tax vouching is an annual feature. I mean -- and just to sort of put a sense of what we mean by that, so there is additional effort in terms of completing the tax computation for the year leading up to [indiscernible] at the end of the year. So that -- it comes in every Q4 of every year. So that explains the difference between Q3 of this year. And again, that is pretty much part of the cost and nothing out of the ordinary investment.
The other one-off, as we said, is a demand which has been made by the Tamil Nadu Electricity Board relating to a certain electricity dispute in the 2005, 2008 range. So significantly older dispute where we are faced with legal opinion, exploring all options, whilst we have paid over some principals in that protest.
And maybe to add one more point as Naozer mentioned. So -- but the renewal is that the shop and establishment renewal, which is part of our compliance business, tax vouching is a regular activity, which falls into the fourth quarter of the financial year. So what I mean the one-off was more of the license renewal, which happens kind of depending upon the license renewal period, which is for one of our largest customer, which was falling into this particular quarter.
The next question is from [ Sacha ] from [ A&S Wealth ].
Sir, I wanted to understand, maybe you could give a sense of the industry size for both our DBS and the HRO vertical and some sense around who are our key competitors and how big is our competition in terms of revenue and margins as compared to us.
Many of the data is not publicly available, and I can really give you a trend being in the industry for many, many years. So if you look at the ASCO website, I mean they would quantify the IT/ITES space at 3-digit billion dollars. So the size at which Allsec is, I don't think that we can come to any meaningful conclusion in terms of when we're seeing the overall industry size.
As far as our competition in the international business is concerned, there are names like [indiscernible], Teleperformance. The typical usual suspects of the outsourcing industry. There are smaller names or midsized means like usual BPO, for example, who have worked in the U.S.
So that is part of the competition landscape as far as some of the U.S. customers are concerned. As far as HRO is concerned, let's go back again to sort of what I mentioned that the size -- I mean, the ability to grow that business, I think, is inherent in the way the employment is structured within the country. I mean so we'll continue to shift movement from the informal sector to the formal sector. Within the formal sector, which we advised, hopefully, we'll see movement from the smaller end payers to the more organized players.
So I think it's a mix. It will be difficult for me to put a number in terms of what that market price is. But what I can definitely say, at this stage of growth, which we are in Allsec, I think there is tremendous market opportunity. And I don't think we should worry about whether we are -- whether it will be constrained by the availability of the market to sort of deal with for both our business.
Okay. Okay. And sir, another thing is if I look at our quarterly run rate, we've been continuously growing quarter-on-quarter our revenues. From June 2020, we were somewhere around 60 crores, 64 crores of revenue. I mean to that, we have paid up to INR 108 crores kind of revenue in this quarter. So just wanted to understand, what is the base that we can assume? Would INR 108 crores per quarter is the base run rate quarterly that we should assume? Or do you think it's going to go up every quarter sequentially. So I want to understand how should we look at it? Because we've been growing every quarter sequentially.
Yes. So again, as I said, giving any number would be a forward-looking statement. But what I would like to highlight is that in the [indiscernible], as Gaurav mentioned, and I don't have the number readily available, but there is a set of one-off there. But yes, I think I can make an overall statement that the management team will definitely endeavor to ensure that the growth momentum continues. We have made investments in people, technology in the recent past, and we'll try to capitalize in terms of how do we ensure that those investments start paying off in the near to medium term. So it is hard for me to put a number. But yes, I think, definitely, the intent is to sort of continue to sort of ensure that we sort of -- we grow revenues and we don't disappoint our stakeholders in terms of the revenues we generate.
Okay, okay. And sir, can I ask one more question?
Sure. Please go ahead.
So I wanted to also understand if you could help us know what kind of industry verticals do we cater to DBS and HR or both? And this industry actually takes the biggest pie for us in each of these vertical.
Yes. So I think in DBS, BFSI, that is banking, financial services, insurance, and just industries like fintech, I mean, is our other industry vertical. As far as DBS is concerned, as far as the HRO business is concerned, it's a mix. So we have a good mix of IT/ITES, which is one of our largest verticals. We do a lot of work for retail. We do some work for manufacturing. As I said, we have entered pharma. So -- and also the industry verticalization is a lot more wider spread and balanced with the HRO business.
The next question is from the line of Sugandhi Sud from InCred Asset Management.
So just referring to your historic margins in the payroll business that was before the indication of [indiscernible], it used to range of 40% to 42% range. And just to indicate number for the compliance business. Can I just try to reconcile the kind of margins we are reporting? Have you seen a significant like 2% to 4% HRO margins? Or is it just a quarterly blip, both in terms of the quality of nature of business or in compliance itself and the [indiscernible] compliance within the HR.
Again, I will again provide what I've been saying almost through the call that, yes, I mean, in FY '23, we have seen a blip in the HRO business margin. So we are looking at it. We are pleased of it, and we'll see in terms of how we can get some of that back. As far as the split between HRO and compliance margin is concerned, I don't have the data available.
Sure. So what are the -- apart from the logic about the size of deals and operating leverage, is that something that you've experienced this year? And is it a significant difference from how the size of our customer base was in the past? And was it more fragmented this year and not so fragmented in the past?
No. Definitely, what we acquired in FY '22 is not fragmented in the past. I don't have the past data available. But as I also mentioned that we have seen some of that, again, consolidating in FY '23. So the FY '23 average ACV is -- are more than what we hope in FY '22. And we'll continue to explore in terms of how quickly we can onboard these customers over a period of time this year.
Thank you. That was the last question for today. I now hand the conference over to management for closing comments.
Sure. So thank you once again for the opportunity and for the sort of the time given to us and some of the similar questions that was given to us. What I want to reassure, I mean everybody on this call is that these are obviously very, very exciting times for Allsec. And your company is well poised to capitalize on the market opportunities, which I sort of briefly described as also some of the investments which we have made in people, process and technology over the past few years.
We'll continue to make the right investments, yes. We'll continue to assess. We'll continue to ensure that we don't lose out on any emerging market opportunity, whether domestically or internationally for the BPO business. We continue to make the right investments to ensure that we further accelerate our growth strategy in the near future.
With this, we would like to close the call and look forward to interacting with all of you again in H2. Have a nice remainder of the day and week. Thank you so much. Thank you.
Thank you. On behalf of DAM Capital Advisors Limited, that concludes this conference. Thank you for joining us, and you may now disconnect your lines.
Thank you.
Thank you.