Allsec Technologies Ltd

NSE:ALLSEC

Earnings Call Analysis

Earnings Call Transcript 2024-Q4

[Operator]

Ladies and gentlemen, good day, and welcome to Q4 FY '24 Earnings Conference Call of Allsec Technologies Limited, hosted by IIFL Securities Limited. [Operator Instructions] Please note that this conference is being recorded.

I now hand the conference over to Mr. Balaji Subramanian from IIFL Securities. Thank you, and over to you, sir.

[Balaji Subramanian]

Ladies and gentlemen, good evening, and thank you for joining us on the post Q4 FY '24 Results Conference Call for Allsec Technologies Limited. It's my pleasure to introduce the senior management team of Allsec who are here with us today to discuss the results. We have Mr. Naozer Dalal, CEO; Mr. Gaurav Mehra, CFO; and Mr. Kushal Maheshwari, Head, Investor Relations. We will begin the call with the opening remarks by the management team. And thereafter, we will open the call for a Q&A session.

I would like to now hand over the call to Mr. Kushal Maheshwari to take proceedings forward. Thank you, and over to you, Kushal.

[Kushal Maheshwari, executive]

Thank you, Balaji. Good evening, everyone, and thank you for joining Allsec Q4 FY '24 and Full Year FY '24 Earnings Call. The information, data and outlook shared by the management during the call is forward-looking, but subject to prevailing business conditions and government policies. All forward-looking statements are subject to economic growth or other risks faced by the company. The results and presentations have been uploaded on our website. Please refer to Slide #2 of Investor Presentation for the safe harbor clause.

With that safe harbor, I will now hand over the call to our CEO, Mr. Naozer Dalal for his opening statement. Over to you Naozer.

[Naozer Dalal, executive]

Thank you, Kushal. Good evening, everyone. Thank you for joining our Q4 FY '24 and full year FY '24 earnings call today. I look forward to interacting with all of you as usual. I have with me with my colleague, Mr. Gaurav Mehra, Chief Financial Officer. You'll be pleased to note that full year FY '24 has pretty much been a breakout year for Allsec in all respects, significant uptick and stellar financial performance, revenue, profitability, cash generation, completion of the projects to upgrade our key platforms, SmartPay 4 and the second version of HRMS, new customer acquisition, mining of existing accounts and good improvement in the customer Net Promoter Scores for which we do our audit and our survey year-on-year with our [ parents ] And finally, portfolio restructuring. We have completed the sales process of our local level compliances business, but as we [indiscernible].

The initiatives gained by the team has resulted in the highest ever revenue and profitability for the year FY '24. Further, the Board of Directors have recommended a final dividend of INR 22.6 crores at a rate of INR 50 per share, subject, of course, to shareholder approval at the ensuing AGM, which brings the total dividend payout for the full year at INR 68.6 crores, which will be INR 45 a share, 2.25x of the previous year.

I will now proceed with giving you a brief business overview covering our lines of businesses and follow it up with a detailed financial performance. Post that, we'll be happy to take your questions.

We start with the headline. Q4 FY '24 revenue from operations at INR 130 crores is up 8.3% quarter-on-quarter and 20.1% year-on-year, led by growth in both our businesses, CXM and EXM. While the CXM business grew at 10.4% quarter-on-quarter and 29.3% year-on-year, it was also ably supported by EXM business with a 4% growth across year-on-year and sequential basis. But important to note that the performance of EXM also includes our Stat business, which historically has had lower profitability margin and lower growth margin. So excluding that even our payroll business has grown very, very close to what our CXM business has grown, which is 6% quarter-on-quarter and 13.1% year-on-year. For the full year, the revenue grew by 20% year-on-year, with underlying business of CXM growing by 24%, EXM growing by 13.5% and of which, again, as I mentioned, payroll grew by 18%.

We added new employee records in excess of 4 lakhs in H2 and now process 1.32 million employee records at the end of March, remaining the clear market leader in the managed services space being 20% to 30% higher than competition volume. Our staff attrition was maintained at 7.2% per month for Q4, which continues to be near best in class in the domestic outsourcing industry. Our cash position and collections continue to be robust. Our collections for quarter 4 increased to INR 131.2 crores, up by INR 6.9 crores quarter-on-quarter. I'll now provide a progress update on the 2 tech projects. SmartPay 4 and new HRMS we have been working on being strategic initiatives.

We have onboarded our first customer on SP4 in this quarter. And now our full transition plan in place to migrate all our customers by the end of this financial year. We have commenced our go-to-market strategy for our upgraded HRMS, started with market reach out. We have a marketing plan, we have launched few demos and hope to get further traction on the sales in the remainder of this quarter and in the Q2.

We move to our sales achievement. We have signed EXM sales with ACV of INR 7 crores in Q4, up from INR 4 crores in Q3. For FY '24, we have achieved sales of ACV INR 27 crores, 35% higher than the previous year. We have added marquee logos, including targeted conversions of matched competitor logos. We have increased the contribution of international sales to total sales by 12% in FY '24 over FY '23 and we will further accelerate the focus on international EXM sales in FY '25. In CXM, we have added new LOBs in the health care account, which we had won in the the previous financial year and also added 2 new logos aggregating to just under INR 100 crores ACV for the year.

We continue to progress on the journey of operational and cost efficiencies we embarked upon earlier in this financial year with focus on payslips process for employees as a key metric to track and this has improved by 10% year-on-year. Higher share of international and cost savings from operational efficiencies have enabled us to improve EBITDA margins by 200 basis points over FY '23 even after absorbing salary and other inflation.

Now coming to our operational performance. Our meeting of operational KPIs remained strong for both CXM and EXM including being named as the best partner in some of our customers' league tables. We continue to provide value-added services to our customers, including, but not limited to, point automation, bundling RPA in our solutions, et cetera. We continue to receive high ratings and increasing feedback on social media, Glassdoor, AmbitionBox, a direct outcome of our continued focus on employee engagement. We also continue to encourage our employees to participate in the corporate social responsibility activities of the company.

We now turn to the detailed financial performance, for which I will ask my colleague Gaurav to brief you on the same. Thank you, and I'll be back for questions.

[Gaurav Mehra, executive]

Thank you, Naozer. Hi, good evening, all. It's a pleasure to reconnect with you all for the earnings updates. I will read Allsec Q4 and full year financial results. We continue to build upon our growth momentum and our number speaks more of that. First, I will read quarter results. On revenue front, revenue for the Q4 quarter is INR 129.7 crores, an increase of 20.1% on a Y-o-Y basis and 8.3% quarter-over-quarter basis. On Y-o-Y, CXM business grew by 29.3% and EXM business grew by 4%. On quarter-to-quarter, we had a growth of 10.4% for CXM and 4.1% for EXM business. Growth is driven by both the addition of the new logos as well as mining the existing customers, both -- across both the verticals.

Our CXM FTE grew by 9.5% on a year-over-year basis and 1.7% on a quarter-to-quarter basis. For EXM business, we won 11 new logos during the quarter for the ACV value of INR 7 crores. Our international business contribution increased by 39% for CXM during the quarter on a Y-o-Y basis and 13.3% on quarter-over-quarter. Our EXM payroll grew by 13.1% during the quarter on a Y-o-Y basis and 6.1% on quarter-over-quarter basis.

Moving to Q4 margins. EBITDA for the quarter stand at INR 35.2 crores. There has been significant EBITDA margin expansion and EBITDA grew by 43.3% on Y-o-Y basis and 15.9% on a quarter-to-quarter basis. CXM quarterly segment margin has increased by 13.2% on quarter-over-quarter basis and 77.2% on a year-over-year basis. EXM quarterly segment margin has increased by 18.1% Q-o-Q and 47.7% on a year-on-year basis. Margin growth is led by increase in international business, improvement in our productivity, which is a payslips [ for FD ] add of new logos and cost-saving measures. PAT for the quarter stands at INR 20.7 crores, an increase of 84.1% quarter-over-quarter and 71% year-over-year. PAT percentage stands at 16% for the quarter. PAT percentage is increased by 650 bps on a quarter-over-quarter basis and 480 bps on Y-o-Y basis. EPS for the quarter stand at INR 13.6, an increase of 84% quarter-over-quarter and 71% Y-o-Y.

Moving to full financial -- full year financial results. Revenue for the financial year FY '23-'24 is INR 469 crores, growth of 20.2% on Y-o-Y basis. EBITDA for the financial year is INR 116 crores, growth of 13.7% from last year. EBITDA margin increased by 200 bps on Y-o-Y and FY '24 EBITDA margin stands at 24.6%. PAT for the financial year is INR 64 crores, increased by 31% on a year-on-year basis. PAT percentage for the financial year is 13.6%, increased by 110 bps on year-on-year basis.

OCF for the financial year is INR 91 crores, an increase of 28% compared to last year. EPS for the financial year stands at INR 42, it grew of 31% on year-on-year basis.

With this, I conclude updates on the financial results and pass it back to the moderator for taking your questions. Thank you.

[Operator]

[Operator Instructions] The first question is from the line of Raghuram N.S. from Eurindia Ventures.

[N.S.S. Raghuram, analyst]

Yes. Just wanted to first congratulate the entire team of Allsec for delivering an amazing set of numbers, must be a very satisfying thing to get Allsec to deliver so consistently. From all of us, many congratulations. Just wanted to ask a couple of questions on both the EXM and CXM. Let me start with CXM, which has been the standout business at least over the last couple of quarters.

I remember both Naozer, you, and Mr. Pinaki Kar during the Quess conference calls -- investor calls, that there were revenue contracts very much in place for the entire expansion that was being planned in Manila. So that has obviously already concluded, and there has been growth, which has already been seemingly -- which has been successful in all quarters coming through.

How do you see the next 3 quarters in terms of the growth continuing. Mr. Pinaki Kar, I remember mentioning that for the next 3 or 4 quarters last -- this was about a couple of quarters back. There were no issues from a growth perspective. It was just going to be how well we would be able to deliver. Is that scenario continuing or do we see some kind of a plateauing of growth going forward? That was the first question that I had on CXM.

The second question was on the EBITDA margins. Obviously, because it's the growth -- the entire growth on CXM has been led by Manila and international business. We have seen the EBITDA margins clearly being ramped up very significantly. Is that something that we can expect going forward to continue and maybe even expand slightly.

Now coming to the EXM business. I had a couple of questions. Obviously, there has been some, you can say, like you mentioned Naozer that on the payroll side, the business growth has not been very low, including the compliance, the business growth has been maybe muted. But now with compliance no longer in the business profile, how do you see this business really responding in terms of growth year-on-year?

And the second question, obviously, on the EBITDA and margin side, there has been a significant increase in the EBITDA, as Gaurav also mentioned. The segment margin has increased year-on-year nearly by 47% from 26.8% to 38%. Is this something that is sustainable? How -- and what kind of a trajectory does it have going forward? So a total of 4 questions.

[Kushal Maheshwari, executive]

Thank you, Raghuram. Naozer, if you can please answer the question.

[Naozer Dalal, executive]

Sure. Yes. Thanks Raghu for your kind words, always happy to interact with you and get your feedback and [indiscernible]. Thank you.

Coming to the first question on CXM, yes, you're right, we are pretty much now full capacity -- earlier full capacity in Manila. So for our growth, we will have to sort of keep our options open in terms of whether we are more -- even more cost-effective and current accretive options in Manila or we continue to sort of grow in central Manila as we are.

So that's a conversation we are doing. Both our existing customers who are in Manila, we will continue to see how we can handle those, including trying to get new lines of business or growth in existing businesses. We have some idea in terms of how that growth can happen but of course, in mining we cannot have a full year view in advance. It's healthy quarter-on-quarter in terms of how their mining effort would happen. On the new business, what we see is that we are trying new initiatives to sort of get new customers.

We have backfill of a person in U.S. effective 1st of March, we had some bit of vacancy there, which lasted a couple of quarters till we found the right person. So he's showing some early promise. We have tied up with a local firm to do account-based marketing which means that we target SME customers, we target the 2 verticals which we want to -- where we believe we have now got a reasonable mass, which is BFSI and health care. Yes, and we believe that -- but even there, we believe that some of the revenues for the new business would only start kicking in from Q2 and not prior to that. And that is how we have also built into our plan in terms of the new business coming in from largely in the Q2 of this year.

Coming to EBITDA margin, I mean, yes, of course, as you know, the EBITDA margin of CXM also have a large -- even base of the domestic business. And of course, as you are aware, we don't -- they're not growing in the domestic business.

So therefore, whatever incremental margins come would likely come from growth in the international business including Manila or of course, we deliver international business even out of Chennai. So I think it's a mix of both. And again, there, we would continue to see as to how we can make incremental improvements in EBITDA as we going forward, largely driven by the growth percent -- growth composition into the international business.

Coming to EXM, as I've said in the previous calls also, we continue to believe that we can definitely grow in excess of 20% year-on-year, if not more. So I would say that I would put a range of between 20% and 25% in terms of where we will grow the stand-alone payroll business. And as far as EBITDA margin is concerned, I would just like to point out that the 38% margin has about 3.5% baked in there for the onetime activities which we do in Q4 on the tax vouching.

So if I -- and then some of that get directly passed into the bottom line because we have again managed that in a more cost effective manner this year. So if I adjust for that 3.5%, the quarter-on-quarter is about 1% more. And yes, so we should -- I mean, the long-term target is that we should stabilize around 35% mark without one-offs for business.

[N.S.S. Raghuram, analyst]

Okay. So obviously, one could hear the level of confidence on EXM. On CXM, the same kind of growth should be visible at least for the next 4 quarters. Obviously, there are people on training and there are people who will get deployed onto the production floor over a period of time. So is that something that one can take into account that the revenue growth will continue in a very similar kind of trend like how it happened in previous year?

[Naozer Dalal, executive]

Yes. I mean I believe that even for CXM as I said that the new business will start kicking largely from Q2, but for overall -- business overall, I mean, I would expect to grow again in the high teens, early 20% percentage.

[N.S.S. Raghuram, analyst]

Okay. So last year was maybe about a 30% kind of range. It's something that will moderate over the next 3, 4 quarters.

[Naozer Dalal, executive]

No. Last year also was about 23.8% for the full year growth. So yes, it should be pretty much in that ballpark if not marginally lower [indiscernible] but otherwise...

[N.S.S. Raghuram, analyst]

Similar kind of growth rates.

[Naozer Dalal, executive]

Yes. On a full year basis, yes. Difficult for me to comment on quarter-to-quarter on CXM because as I said, the new business will commence only by July, and it will be lumpy. So...

[N.S.S. Raghuram, analyst]

So this INR 100 crores that you mentioned about the ACV is that something that is still flowing through or is that something that more or less is now built into...

[Naozer Dalal, executive]

No, large chunk of it is flown through, but yes, some bit of it will flown through, so that's the way I'm looking at it. So the growth will come both from -- I mean, a full year impact, it will come from mining existing customers, and it will come from the new business which we'll acquire.

[N.S.S. Raghuram, analyst]

Last question from my side, the ACV of INR 26 crores that you mentioned new sales, that was only in Q4, right?

[Naozer Dalal, executive]

That's right. That's right, yes.

[Operator]

The next question is from the line of Harsh Kundnani from Aionios Alpha.

[Harsh Kundnani, analyst]

Congratulations to the management for a great set of numbers. Just a couple of small questions from my end. In the EXM business, we have seen new logo additions, strong new logo additions in all the 4 quarters. But just that in this particular quarter, the employee records or the payroll process, that is down or rather flattish on a quarter-on-quarter basis. Any reason for that?

And the second question, in the CXM business, I think you mentioned in the opening remarks, but just to clarify, has the health care client fully ramped up? Or there is more to come in the following quarters from that particular client?

[Naozer Dalal, executive]

Sure. Thanks, Harsh. Yes, just to quickly clarify, there are 2 reasons...

[Operator]

Sorry to interrupt, sir, I just request you to -- can you just come a little bit closer to the mic?

[Naozer Dalal, executive]

Sure. I was saying, thanks Harsh for the questions. The answer to the first question lies in 2 facts. One is a market dynamic where customers who have signed with us even say up to Q2 or Q3, in fact, do not plan to sort of lie there in Q4 just from the fact that I mean the HR teams of the organization themselves are busy, the year-end tax and the compliance and the appraisal cycles.

We also -- I mean, from our side, also, I mean, we ourselves get busy with lot of activities for our customers, including tax vouching, which I mentioned, which gives the uplift of Q4 revenues and profitability. We get into for preparation for the Form 16s in terms of checking quarter-by-quarter and ensuring the accuracy.

So that's the market dynamic where in spite of that, we added about 20,000 payslips this quarter. What is -- sorry, 10,000 payslips this quarter. What did happen was that Q3, we work for one of the leading e-com players. And in Q3, we had about a temporary headcount of almost about 20,000 to 25,000 from that e-com player and that headcount went away.

So we had some growth, but there was a larger temporary number in the Q3 results. So therefore, you see the Q4 results -- our Q4 employee record flat. On the healthcare space, yes, the -- we have largely seen the growth or the expected numbers what we were leading in the existing lines of business, I think we are -- we'll pretty much get there by this quarter. But as I mentioned, we'll continue to work with that customer also to see if there are incremental lines of business or fresh growth in those existing lines of business basis our continued superior operational delivery.

[Operator]

The next question is from the line of Darshil Jhaveri from Crown Capital.

[Darshil Jhaveri, analyst]

Some of my questions have been already answered. I just wanted to ask you in terms of the demand environment in like what we see at a macro level currently, how is it all flowing through? Do we see some resistance or how is the environment currently, sir?

[Naozer Dalal, executive]

No real comments in terms of -- I mean, either improvement or diminution in the demand environment. What we continue to see is that corporates are pretty open to doing payroll or other parts of the HR value chain outsourcing. So even corporates -- so we do see RFPs coming in where currently the payroll may be in-house, but they're happy to consider outsourcing. So we continue to see that dynamic. And no real change. As I said, I have not seen any either uptake or down take in that. So [indiscernible] pretty much stable from what we saw to the first 3 quarters.

[Darshil Jhaveri, analyst]

Okay. Okay. Perfect. And sir, I just wanted to just confirm one more thing. We are expecting around 20% growth in EXM and around high teens growth in CXM business, right, sir? And similar margins as we've done in FY '24, right, sir?

[Naozer Dalal, executive]

Yes, that's right. Yes.

[Operator]

The next question is from the line of Jyoti Singh from Arihant Capital Markets.

[Jyoti Singh, analyst]

Sir, congratulations on the strong set of numbers in this quarter. And sir, my question is on the growth side. So overall, we are expecting a similar 20% to 25% growth. And if you can guide us on the margin side, what are your expectations for the FY '25 and what margin driver for us.

And apart from this, in cash flow, there is -- actually, in balance sheet, there is a INR 8 crore asset classified as held for sale. So if you can explain on that side? And fourth question on the platform transition side that we are doing in this year. So is there any cost involved or any thing so you can explain on that side?

[Naozer Dalal, executive]

Sorry, can you repeat your question on the platform?

[Jyoti Singh, analyst]

Platform transition that we are upgrading HRMS and the remainder, we are doing transition in this year. So is -- it will cost -- it will charge costs for the customer or for us?

[Naozer Dalal, executive]

Okay. Let me go through serially Jyoti. Thanks for the question. So yes, I think growth in markets I have already covered both in my opening remarks and in my answer to the earlier question that we believe that we should be able to grow the respective businesses anywhere between 80% and 20% to 25% depending, of course, largely in terms of how the new sales pan out.

So that new U.S. sales is a key determinant in terms of where that number lands. But even on the downside, I don't expect EXM should grow lower than -- EXM should grow lower than 80% roughly I mean or thereabouts. Margins, definitely, we will maintain -- we will have to make some investments.

So again, the intention is that the higher international proportion which we have -- which we are achieving year-on-year and the operational efficiencies which we largely do in the EXM business should be able to -- or should enable us to make those investments bear both the wage and non-wage inflation and still give an uptick in the EBITDA at the end of next year, a small uptick in the EBITDA at the end of next year.

And as far as the held for sale number is concerned that largely relates to our [indiscernible] which was the sale of our local level compliance business methods, [indiscernible] our corporate services. The transaction -- at the formal financial closure of the transaction happened only on 30th April. So therefore, as for Indian accounting standards, I mean, we have to classify the UBI and the letter linked to that business as assets held for sale, and it's really that.

On your question on platform, yes, we have already, as mentioned in one of our earlier calls and the cost savings those are already in the balance sheet. And those will be amortized over an appropriate period of time, again, as per largely market practice and accounting standards.

Yes, so there are no incremental costs expected on those platforms at least for this year. Of course, if you have to make some small bolt-on investments to keep those. But I don't see anything significant at least for FY '25.

[Operator]

The next question is from the line of [ Richa Jain ] from Whitestone Financial Advisors.

[Unknown Analyst]

Sir, few questions. So one is actually just a follow-up to the earlier participant questions, but I have a little the spectrum of my questions is broader. So not just in terms of FY '25, I just want to sense from you what is your vision in terms of revenue for next 2 to 3 years for us both for EXM and CXM? And what kind of margins do we look at from a broader perspective like 3 to 4 years down the line?

And if we were to monitor this progress for us, like if you have a vision for 3 years down the line, this is the number that we want to reach. What would be the key metrics that you would want to track so that we can reach the revenue and the margin numbers for us. One was that sir?

Second, in terms of the new businesses that we have done in the CXM, could you give some sense as to which sector, what kind of clients and what kind of logos have we added? Also any logos that we have lost to competition, both for our EXM and CXM. And for both the businesses, would you be able to give a sector-wise breakup that this percentage of revenue is from health care or otherwise? And also, how important for us is the payroll piece for the overall vision that we may have for 3 years down the line. So would that be the main growth driver for us? That's all, sir.

[Naozer Dalal, executive]

Sure. Noted. Let me try to sort of answer. Richa, unfortunately, we don't give significantly forward-looking statements. So I will not be able to give you a revenue or an EBITDA number, which I can achieve maybe 4 years later. But what I will say is that, yes, we will continue to see above-market growth in both our businesses, CXM and EXM. And the growth we have achieved this year, we would try to replicate that because, of course, after having set a benchmark, I mean we wouldn't like to sort of dilute from that. But so that gives you a broad sense even in terms of where we are likely to be in the future.

As far as the new business acquisition in CXM, I think it's a mix of both. I mean as I mentioned BFSI and health care are 2 of our key logos -- sorry, key verticals in BFSI -- sorry in CXM of which BFSI is almost about 60%, 65% as of now. But with the growth in health care, which is [indiscernible] that number will come down. So -- and what we have seen this year is a mix of both. So new logos and mining of existing logos in health care, mining of existing accounts in BFSI. So that's been the composition of the new CXM business this year.

No significant logos, lots of competition. Allsec continues to have a superior retention rate of customers, which has been track record over the years. And as far as the payroll business is concerned, yes, I think it's an extremely important business for us for 2 reasons. One is that here, we are a clear market leader. So as you will be aware, we are the #1 payroll services provider in the country. It has a direct linkage to the growth story of India and the formalization of employment, which we have seen over the past couple of years.

Thirdly, it is definitely a business which gives us high margin potential. So we would continue for these 3 reasons, continue to, I mean, look at this business very closely, make appropriate investments as required and continue to grow this business.

And so EXM currently is a larger business. But within CXM, we remain sort of, if I may, earlier which is very niche there catering to SME customers. But EXM we definitely are a market leader, and we would like to continue to participate in the business and grow business where we have leadership position.

[Unknown Analyst]

Right, right. Okay. Sir, just a follow-up. So am I right to assume that even from a 5-year vision perspective, it's the payroll business, which is going to drive the revenue and margins for us? Or do you think CXM at any point in time can become as big as payroll, which is correct?

[Naozer Dalal, executive]

No. CXM is bigger than payroll at the moment. I think there's some confusion. So our current CXM business is roughly about 2/3, 60 -- maybe next year, it may come down to maybe 60%. But this year, our CXM business is 2/3 and EXM is 1/3. So I think the more relevant question is that at what point in time can both businesses become of equal size but unfortunately, I haven't done the math. So I don't want to hazard a guess. So the right question will be as to when EXM could be as a big as CXM.

[Unknown Analyst]

Yes. What I meant was yes, sorry, I just got confused between that. Yes. Yes. So what I meant was could EXM start contributing?

[Naozer Dalal, executive]

No. As I said, I mean I don't want to hazard a number at this point. But definitely, we will continue to grow both businesses to the best extent we can. And yes, as I said, I mean to give you an indication, I mean, in 1 year, I mean, the needle between EXM and CXM has been moved by about 3% to 4% kind of thing, so that can change.

[Operator]

The next question is from the line of Raghuram from Eurindia Ventures.

[N.S.S. Raghuram, analyst]

Yes. Just a follow-up, Naozer, on the discussions that we have been having over the last couple of quarters also. Obviously, there is still even after the dividend payout, after the final dividend also, there is a significant amount of cash, which is still sitting on the books of the company. And there has been talk of expanding the health care services that service offerings that we offer to our health care clients. And maybe through organic or inorganic means. Is that something that's still on the table? I could have -- that was something that missed my mind to ask in the first go that I had.

[Naozer Dalal, executive]

No. Unfortunately, I continued to say and I have been saying that we continue to look at it -- I mean, we will have -- we'll continue to balance the niche capability acquisition, the referenceability, the market endorsement which is acquisition we get vis-a-vis what we have to pay for that acquisition.

So we were -- I mean we were looking at some assets, but which I have got concluded with other players at a much higher number what possibly we could have -- we were talking about. So I mean, it's suffice it to limit at that. But we continue to explore opportunities in the market. So what I can say is that the management is completely working on it. We continue to explore, evaluate as we get opportunities, but nothing significantly considered at this point in time.

[N.S.S. Raghuram, analyst]

Okay. But we have no -- we have not really put together an organic way of, for example, entering the RCM business or something, is that something that we haven't really seen on the ground from a team, you can say, getting a team on board kind of a perspective?

[Naozer Dalal, executive]

That remains on the table. It's just about whether we go down that route or whether we go down the acquisition route. I mean our focus last year was to see whether we can get that right acquisition. We will spend a couple of more months to explore.

If we believe that -- I mean for some reason, we're not able to go down that route, definitely, what you see is in our mind to see whether we can build this business organically, but it will take a lot more time and it will require also upfront investments, which will start paying off only later. But yes, it's definitely on -- in our mind to consider.

[Operator]

[Operator Instructions] The next question is from the line of Richa Jain from Whitestone Financial Advisors.

[Unknown Analyst]

Just 1 follow-up. Would you able to give the sector-wise breakup for the EXM business like who are the key industry for whom we do the payroll, revenue breakup in terms of percentage?

[Naozer Dalal, executive]

I don't have it readily Richa unfortunately. But IT/ITES is one of our large contributors as is manufacturing. So I mean that -- those will be our top 2. But I don't have the specific numbers.

[Unknown Analyst]

Okay. Top 2 is manufacturing basically?

[Naozer Dalal, executive]

IT/ITES and manufacturing, yes.

[Operator]

The next question is from the line of [indiscernible] Investments.

[Unknown Analyst]

Naozer, first of all, heartiest congratulations to you and the entire team on -- I think it's been some journey that we have seen in terms of the work gone in and I think really showing up in the numbers. So it's heartening to see that.

One of my questions is on the CXM front, I wanted to get a sense of what is the capacity utilization that we are looking at, especially in Manila. Can you give a sense of that?

[Naozer Dalal, executive]

No, as I said, we are [indiscernible]. So we'll have to look at -- it was one of the earlier question that I answered. You have to look at expanding as we get clear sight of -- the new business getting signed up.

[Unknown Analyst]

Understood. And how is the same on the domestic front?

[Naozer Dalal, executive]

On the domestic front, yes, we run a couple of sales processes for our leading BFSI names. So we continue to see, I mean, a bit of up and down depending on their ability to pump the sales leads. But again, no significant concern in terms of sale capacity. Again, we run fairly [ payroll ]

[Unknown Analyst]

Understood. Understood. On the EXM front, I believe you gave an understanding in terms of adjusting the current revenue growth number due to a particular event. If I missed that, can you help elaborate?

[Naozer Dalal, executive]

Sorry, can you please repeat, I missed it.

[Unknown Analyst]

Okay, I will repeat that. On the EXM front, the revenue is relatively not that buoyant in terms of the growth. And I was wondering if it's a reflection of what the market is right now? And can you help understand what the market currently looks like because we are the market leader. Clearly, our revenues might reflect more of what's happening on the market front. So can you give a sense on what the market is...

[Naozer Dalal, executive]

No, as I said, the EXM -- I mean the number this year has an element of the business which -- the large part of the business which we have now exited the statutory compliance with business, so -- when I add payroll to our statuary compliances therefore the growth seem muted because that business has actually de-grown, so between the 2 years.

So other than that, as I mentioned, the EXM, the payroll business has grown about 18% year-on-year. And I mean, that's pretty much -- it's consistent with the market growth. So as I mentioned in other question, I don't see any significant challenges in the demand environment also.

[Unknown Analyst]

Understood. My last question is on the -- I see in the presentation, we have like INR 138 crores with cash and cash equivalents on the balance sheet. I believe that is before dividends. After dividends, this comes to around INR 80 crores, as mentioned at the end of the presentation?

[Gaurav Mehra, executive]

So it will be close to INR 110 crores kind of the range.

[Unknown Analyst]

After dividends?

[Gaurav Mehra, executive]

Yes.

[Operator]

The next question is from the line of Pritesh Chheda from Lucky Investments.

[Pritesh Chheda, analyst]

How much of your growth in the last 2 years in new logos led?

[Naozer Dalal, executive]

Sorry, I didn't get you Mr. Chheda.

[Pritesh Chheda, analyst]

How much of the growth in the last 2 years is new logo driven?

[Naozer Dalal, executive]

I don't have a number readily available, but typically, on the EXM side, I mean bulk of our numbers, so I would say that maybe 90% to -- 90% of our growth on the EXM side would come from new logos because the only way old logos can give small on EXM is when the underlying headcount increases of the -- of our customers. So in that we don't see more than a 5% up and down on that. So 95% of all our sales on the EXM side comes from new logos. On the CXM side, the number varies from year to year. So in some years, we may have, I mean, upgrade number on the new sales. In other years, we may have -- I mean, existing customers giving us new lines of business which is equally challenging to manage or get.

So that number changes year-on-year. I don't -- I mean, I wouldn't want to average it out. But what we do try to do is we try to maximize whatever opportunity we get, whether it's from an existing customer or of course, we have the sales engine for the new customers.

[Pritesh Chheda, analyst]

Okay. And from the unit economics or let's say, in the last 3 years, what will be your headcount change from FY '22 to FY '24?

[Naozer Dalal, executive]

Yes. So I think -- that's a good question. So the average headcount between FY '23 and FY '24 has grown about 12%.

[Pritesh Chheda, analyst]

12%. And between '22 and '23.

[Naozer Dalal, executive]

[indiscernible] It is 15%. So we have broken the linearity in that sense. So the growth is 15% year-on-year in terms of the average. Sorry, You're saying something. You have the follow-on question, before I interrupted you, sorry for that.

[Pritesh Chheda, analyst]

The headcount increase is 15% in the year gone by, right, FY '24?

[Naozer Dalal, executive]

Yes.

[Pritesh Chheda, analyst]

And what it will be in '23 the year before that?

[Naozer Dalal, executive]

I don't have that number readily, unfortunately. .

[Pritesh Chheda, analyst]

Okay. And when you are guiding for a 20% growth even next year, we have to consider a similar headcount increase?

[Naozer Dalal, executive]

Yes, we have definitely broken the linearity. That's where your cost efficiencies and your margin improvements come in. So -- yes, so I mean I would assume a pretty much number in the same ballpark even for the growth for next year.

[Pritesh Chheda, analyst]

An incremental gross margins will also be a similar, right?

[Naozer Dalal, executive]

Yes. The incremental gross margins, of course, will again grow as a percentage also. But more importantly, because of the cost savings -- the sort of higher increase would be the EBITDA line because your gross margin actually comes down because you would have to pay a salary increment, which they will get compensated by your other costs -- the operational efficiencies in the below -- in line below the gross margin.

[Pritesh Chheda, analyst]

Okay. And my last question is, sir, what specifically are the changes because your growth acceleration, I can see is from '23? Otherwise, you were in a certain size of business. So what are the key changes that have been brought in and for the growth and incrementally also you're talking about a high growth. So if you could just share your perspective on the changes?

[Naozer Dalal, executive]

Yes. I would put to 2 or 3 key items. One is, of course, laser sharp focus on new sales. As I said, new sales also include growth from existing customers. The rigor around ensuring that we have a playbook by which we can make that replicable quarter-on-quarter, year-on-year. The second one, of course, is ensuring a laser sharp focus on costs and productivity and efficiency because as I mentioned, some of that helps us mitigate the year-on-year salary inflation, which comes in.

The third area we have looked at is the whole customer satisfaction level, yes? So we have reintroduced a very, very different governance model comprising of monthly business reviews, quarterly business reviews, getting customer feedback regularly which we have seen some results and the good increase in the Net Promoter Score, which you have seen.

So primarily, I think if you're out there selling more, if you are keeping our costs under control and if you are happy customer that's where you can get referenceability of the market, that's where you can get incremental business on the CXM side.

And lastly, an internal thing, of course, last year, we have -- I mean that's not directly seen in the numbers yet. So therefore, I wouldn't put -- that's why I'm putting the volume for and the fact that we have completed what's needed to be done on our tech platform upgrade. And of course, we will see some bit of revenues coming in from that in the future years. There is also some bit of cost savings on the payroll platform side.

[Pritesh Chheda, analyst]

How much of the INR 469 crores business comes from Indian plant?

[Naozer Dalal, executive]

So for FY '24, our overall split between domestic and international was in the region of about 57%-43%, so 57% from international customers and 43% from domestic customers.

[Pritesh Chheda, analyst]

And do you mind to share the headcount that you have at the end FY '24?

[Naozer Dalal, executive]

For what? Split between international and domestic?

[Pritesh Chheda, analyst]

No, no, no, the total headcount.

[Naozer Dalal, executive]

The total -- the average headcount, which we had -- the March end headcount was just under 6,000, but the headcount for -- through the year was about 5,500.

[Operator]

The next question is from the line of Harsh Kundnani from Aionios Alpha Investment.

[Harsh Kundnani, analyst]

Thanks for the follow-up opportunity. Just one small question from my end. Given that our key clients in EXM business are from the IT space, and that space has been facing headwinds. Has that impacted our payslip addition or payslip growth? And if these headwinds do recede in the following year, can that be a growth driver? Just wanted to understand that.

[Naozer Dalal, executive]

No. I mean, we have not seen any significant reduction in headcount of the current IT/ITES customers we serve, yes? So -- and also it's not IT, it is more ITES consulting kind of a profile, which I am loosely putting it at IT/ITES. So no, we have not seen any headwinds there. So it's pretty much fair.

And as far as new sales are concerned, we have an overall view in terms of which sector we want to sell through but again, there, we have -- I mean I have not had any feedback from the sales team that they are seeing any challenges now.

[Operator]

[Operator Instructions] As there are no questions, I now hand the conference over to Mr. Kushal Maheshwari for closing comments.

[Kushal Maheshwari, executive]

Thank you very much for your -- thank you very much to all of you for your active participation. I would like to hand over the -- yes, I would like to hand over the call to Naozer for the closing statement.

[Naozer Dalal, executive]

Thank you. Thank you, Kushal. Thank you, gentlemen and ladies for spending almost close to an hour or anywhere coming close to our scheduled completion time. But thank you, thank you for the time that you gave us today. Hugely satisfying that we are sort of on the back of the -- our best of results in FY '24 across all parameters supported by the investments we have made in the key business drivers over the past couple of years, we believe that we are well poised to capitalize on the market opportunities as they emerge in FY '25 and beyond and continue to deliver above-market financial and operational performance.

With this, we would like to close the call and look forward to interact with you again sometime in the near future. Thank you so much.

[Operator]

Thank you. On behalf of IIFL Securities Limited, that concludes this conference. Thank you for joining us, and you may now disconnect your lines. Thank you.